United States v. Lizza
| Decision Date | 02 February 2023 |
| Docket Number | 19-CR-0548(JS)(AYS) |
| Parties | UNITED STATES OF AMERICA, v. FRANK LIZZA and RAMON DE LOS SANTOS, Defendants. |
| Court | U.S. District Court — Eastern District of New York |
For Ramon De Los Santos: John F. Carman, Esq.
Frank Lizza (“Lizza”) and Ramon De Los Santos (“De Los Santos”) (collectively, the “Defendants”) are charged with participating in a multi-year scheme to avoid making payments due to benefit funds for union employees pursuant to a collective bargaining agreement. Presently before the Court are Defendants' motions to dismiss the Indictment. (De Los Santos Mot., ECF No. 38; Lizza Mot., ECF No. 39.) Defendants also move for the release of the grand jury minutes, for the Government to produce a bill of particulars, and for the Government to turnover exculpatory evidence concerning industry practices. For the reasons that follow, Defendants' motions are DENIED except for the request for particulars, which is GRANTED IN PART.
Defendants are charged by a three-count Superseding Indictment that was returned by a grand jury on December 8, 2021, which provides (1) Defendants embezzled from employee benefit plans pursuant to 18 U.S.C. § 664; (2) Defendants submitted false Employee Retirement Income Security Act (“ERISA”) remittance reports pursuant to 18 U.S.C. § 1027; and (3) Defendants submitted false written statements, namely certified payrolls to the Port Authority of New York and New Jersey (the “Port Authority”) and the United States Department of Transportation, Federal Aviation Administration (“FAA”), pursuant to 18 U.S.C § 1001. (Superseding Indictment, ECF No. 45, ¶¶ 9-15.)
According to the Indictment, Lizza was an officer of Intercounty Paving Associates LLC (“Intercounty”), a company owned by Lizza's family which provided construction and road paving services throughout New York and New Jersey. (Id. ¶ 1.) De Los Santos was an Intercounty employee between 2006 and 2019. (Id. ¶ 2.) Lizza and Intercounty's other owners also owned and operated 4L Equipment Leasing (“4L Equipment”), a corporation in the business of trucking construction materials and demolition debris to and from construction sites and landfills. (Id. ¶ 3.) 4L Equipment shared a vehicle yard in Westbury, New York, with Intercounty, and supplied trucks and drivers for Intercounty's contracts. (Id.)
In 2014, Lizza and the principals of 4L Equipment and Intercounty assisted De Los Santos in his establishment of LR Safety Consultants and Construction Services, LLC (“LR Safety”). (Id. ¶ 4.) LR Safety was “purportedly” established to truck road construction materials and demolition debris to and from construction sites and landfills; however, LR Safety owned no trucks or equipment. (Id.) As such, LR Safety used trucks and employees from 4L Equipment, and also shared an office space with 4L Equipment and Intercounty. (Id.)
De Los Santos entered LR Safety into a “standard form” collective bargaining agreement (“CBA”) with the International Brotherhood of Teamsters, Local 282 (“Local 282”) . (Id. ¶ 5.) The CBA required that any trucking work contracted by the owners of LR Safety be performed by the union members of Local 282. (Id. ¶ 6.) This required the LR Safety owners to pay a specified hourly salary and, for each hour worked by Local 282 members, to remit payments for each LR Safety employee to Local 282's welfare, pension, annuity, job training, vacation, and sick leave trust funds (the “Union Benefit Funds”). (Id.) Further, “[t]he CBA prohibited the owner of LR Safety from diverting any work to a non-union trucking company without reporting the hours worked, and making payment to, the workers and the Union Benefit Funds as required by the CBA for any work performed.” (Id.)
Beginning in 2014, Defendants, together with others, schemed to defraud the Union Benefit Funds “by arranging to split truck drivers' daily driving hours between LR Safety's union payroll and 4L's non-union payroll, in violation of the CBA.” (Id. ¶ 7.) More specifically, Defendants arranged non-union wage payments for drivers who drove to and from LR Safety's Westbury vehicle yard and construction sites. (Id.) Then, at the construction sites, the drivers were switched to the union payroll and paid union wages, which included payments to the Union Benefit Funds. (Id.) LR Safety and De Los Santos did not report the hours drivers spent before arriving at the construction sites; only the hours at the work site were reported to Local 282 and the Union Benefit Funds. (Id.) As a result, the drivers were denied union wages and the Union Benefit Funds were denied contributions for the hours that had been transferred to the non-union payroll. Further, the remittance reports LR Safety was required to submit in accordance with the CBA falsely underreported the drivers' hours, with only the hours for the drivers' traveling to and from the sites being reported. (Id. ¶ 8.)
Thereafter, between June 2014 and September 2018, De Los Santos directed the submission of certified payrolls on behalf of LR Safety to the Port Authority. (Id. ¶ 9.) These payrolls were to be reviewed by the Port Authority and the FAA. (Id.) The certifications contained in the payrolls specified that “payments of fringe benefits . . . have been or will be made to appropriate programs for the benefit of such employees.” (Id.) In addition, the certifications contained warnings, printed in capital letters immediately below the signature line, stating that a false statement in the certification may subject a contractor to criminal prosecution under 18 U.S.C. § 1001. (Id.) However, De Los Santos knew and believed LR Safety had not made, and did not intend to make, the required benefit payments to the Union Benefit Funds.
(Id.)
ANALYSIS
Pursuant to Federal Rule of Criminal Procedure (“Rule”) 12, defendants may “challenge the lawfulness of a prosecution on purely legal, as opposed to factual, grounds.” United States v. Benitez-Dominguez, 440 F.Supp.3d 202, 205 (E.D.N.Y. Feb. 24, 2020)(quoting United States v. Ahmed, 94 F.Supp.3d 394, 404 (E.D.N.Y. 2015)). “A defendant faces a high standard in seeking to dismiss an indictment, because an indictment need provide the defendant only a plain, concise, and definite written statement of the essential facts constituting the offense charged.” United States v. Taveras, 504 F.Supp.3d 272, 277 (S.D.N.Y. 2020)(quoting United States v. Smith, 985 F.Supp.2d 547, 651 (S.D.N.Y. 2014)).
Defendants jointly move to dismiss the Indictment on several grounds: (1) an employer's failure to make contributions under a CBA does not amount to a violation of 18 U.S.C. § 664; (2) 18 U.S.C. § 664 is unconstitutionally vague as applied in this case; and (3) a CBA does not require LR Safety to make payments to drivers for travel time to and from worksites. (See De Los Santos Support Memo, ECF No. 38-1, at 4-9; Lizza Support Memo, ECF No. 39-1, at 4-18.) Separately, Lizza contends that he should be dismissed from this case because neither him nor 4L Equipment are parties to a CBA. (Lizza Support Memo at 16-17.) The Court will address each of these arguments in turn.
18 U.S.C. § 664 (emphasis added). As used in Section 664, an “‘employee welfare benefit plan or employee pension benefit plan' means any employee benefit plan subject to any provision of [ERISA].” Id. Citing Rahm v. Halpin (In re Halpin), 566 F.3d 286 (2d Cir. 2009), for the proposition that contributions which an employer has failed to pay into an employee benefit plan are not considered “assets” under Section 664, Defendants contend that contractually owed, but unpaid plan contributions cannot be the object of a Section 664 charge as a matter of law. (De Los Santos Support Memo at 6; Lizza Support Memo at 14-15.) The Court disagrees.
In United States v. O'Sullivan, the Honorable Pamela K. Chen thoroughly examined this precise issue and upheld the Government's charging theory under Section 664. See United States v. O'Sullivan, No. 20-CR-0272, 2021 WL 1979074, at *2-6 . Judge Chen determined that “the Second Circuit has at least implicitly endorsed” such a charging theory because it has affirmed a conviction for aiding and abetting a Section 664 violation under analogous circumstances. Id. at *3 (citing United States v. LaBarbara, 129 F.3d 81, 88 (2d Cir. 1997)). Notably, the underlying facts of both O'Sullivan and LaBarbara are similar to the instant case, consisting of owners or managerial employees of corporate employers that were parties to CBAs who used companies that were not parties to the CBAs to avoid making contributions to benefits funds in accordance with the CBAs. See id. at *1, *3 (citing LaBarbara, 129 F.3d at 82-83, 88).
Defendants here attempt to diminish the weight of LaBarbara through their citations to Halpin; however, this argument is not persuasive. See Halpin, 566 F.3d at 291. The LaBarbara defendant argued that monies owed to the plans were not “plan assets” until paid. LaBarbara, 129 F.3d at 88. In response, the LaBarbara Court stated that “[o]nce wages were paid to [the Union's] m...
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