United States v. Taylor

• Citation: 232 F.Supp.3d 741
• Decision Date: 02 February 2017
• Docket Number: Criminal No. 15–248
• Parties: UNITED STATES of America v. Donald R. TAYLOR, Defendant.
• Court: U.S. District Court — Western District of Pennsylvania

232 F.Supp.3d 741

UNITED STATES of America

v.Donald R. TAYLOR, Defendant.

Criminal No. 15–248

United States District Court, W.D. Pennsylvania.

Signed February 2, 2017

Robert S. Cessar, United States Attorney's Office, Pittsburgh, PA, for United States of America.

MEMORANDUM OPINION

Nora Barry Fischer, U.S. District Judge

I. INTRODUCTION

This is a white collar criminal case arising from an alleged fraud on the United States Department of Transportation's Disadvantaged Business Enterprise Program ("DBE Program") by Century Steel Erectors ("CSE") and WMCC, Inc., and their respective principals. (Docket No. 1). In this case, the Government has charged one of the owners of CSE, Defendant Donald Taylor, with fourteen separate criminal offenses. (Docket No. 1). The Government generally maintains that Defendant and CSE used WMCC, Inc., a certified disadvantaged business entity, ("DBE"), as a "front" to obtain 13 federally funded highway construction contracts requiring DBE status, and that CSE performed the work on the jobs while it was represented to agencies and contractors that WMCC would be performing the work. (Id. ). The Government contends that WMCC did not perform a "commercially useful function" on the jobs as the DBE regulations require and that CSE personnel did the actual work, taking great efforts to conceal from general contractors and government entities that CSE and its personnel were doing the work. (Id. ). According to the Government, WMCC's principal, Watson Maloy,¹ was paid a relatively nominal "fixed-fee" for permitting use of WMCC's name on each of these subcontracts. (Id. ).

At issue in this Memorandum Opinion are Defendant's Motion to Dismiss the Indictment and his Motion to Suppress Evidence, both of which are opposed by the Government.² (Docket No. 33). The Motions have been fully briefed. (See Docket Nos. 33, 35, 40, 44, 46, 51, 52). The Court held a motion hearing on December 12, 2016, at which time the parties presented a joint stipulation of facts, (Docket No. 48), and a stipulated exhibit, (Docket No. 49–2), and the attorneys presented oral argument as to the pending motions, (Docket No. 53). After careful consideration of the parties' arguments and for the following reasons, Defendant's Motions to Dismiss and to Suppress Evidence [33] are DENIED.

II. RELEVANT PROCEDURAL HISTORY

The grand jury returned its Indictment in this case on November 19, 2015. (Docket No. 1). Defendant is charged with fourteen separate offenses: (Count 1) one count of conspiracy to defraud the United States in violation of 18 U.S.C. § 371 ; (Counts 2–3) two counts of wire fraud in violation of 18 U.S.C. § 1343 ; (Counts 4–11) eight counts of mail fraud in violation of 18 U.S.C. § 1341 ; (Count 12) one count of money laundering conspiracy in violation of 18 U.S.C. § 1956(h) ; and (Counts 13–14) two counts of engaging in monetary transactions derived from unlawful activity in violation of 18 U.S.C. §§ 1957(a) and 2. (Id. ). Given the complexity of the matter, the Court granted Defendant several extensions of time to file pretrial motions. (Docket Nos. 13, 16, 18, 28).

Defendant filed his Omnibus Pretrial Motion and supporting Brief on July 27, 2016. (Docket Nos. 33, 35). After receiving extensions of time from the Court, the Government filed its response on October 17, 2016. (Docket No. 40). The Court granted Defendant leave of court to submit a reply brief and he did so on November 7, 2016. (Docket No. 44). The Government then filed its sur-reply on November 15, 2016. (Docket No. 46). The Court held a motion hearing on December 12, 2016. (Docket Nos. 49, 53). At the hearing, the parties requested the opportunity to file supplemental briefs on matters raised at the hearing, and such request was granted by the Court. (Docket No. 49). Thereafter, the Government filed its supplemental brief on December 13, 2016, (Docket No. 51), with Defendant filing his response to same on December 19, 2016, (Docket No. 52). The official transcript of the motion hearing was produced and filed with the Court on January 6, 2017. (Docket No. 53). In light of these submissions, the pending motions are now fully briefed and ripe for disposition.

III. MOTION TO DISMISS

The Court first turns to Defendant's Motion to Dismiss the Indictment wherein he seeks to dismiss the charges for a host of different reasons, all of which are opposed by the Government. (Docket Nos. 33, 35, 44, 52). Briefly, Defendant argues that Count One must be dismissed because he has been purportedly mischarged under the "defraud clause" of 18 U.S.C. § 371, in that the allegations do not support a charge that he defrauded the United States. (Id. ). He contends that the DBE program is administered through state and county entities, such that he could not have defrauded the United States, which he believes merely provides funding to the states to administer the DBE program. (Id. ). Defendant also argues that the Indictment must be dismissed because the underlying federal regulations, 49 C.F.R. § 26.55(c), that support the counts against him are allegedly void for vagueness as applied to the facts at issue. (Id. ). More specifically, he challenges the definition of "commercially useful function" set forth in the regulations and also contends that Congress improperly delegated its duties to the Executive branch in promulgating the regulations at issue. (Id. ). The Government counters that the charge at Count One is supported by the allegations in the Indictment which make clear that the charge is for defrauding the United States' DBE program rather than the state and county entities. (Docket Nos. 40, 46, 51). The Government adds that the challenged regulations are neither unconstitutionally vague nor were they promulgated in violation of the principles of separation of powers. (Id. ).

A. Allegations in the Indictment³

The Indictment alleges the following. Defendant was the president and owner of CSE. (Docket No. 1 at ¶ 1). He had authority and oversight over all projects being performed by CSE. (Id. ). CSE was a non–DBE steel erection and precast concrete erection subcontractor based in Dravosburg, Pa. (Id. ). CSE was owned by Defendant and operated by him and Darlaine Taylor, vice president. (Id. ). T.L. was the controller for the company, managing the finances of CSE and reporting directly to Defendant, starting in July of 2011. (Id. at ¶ 2). Watson Maloy was the president and sole owner of WMCC, a certified DBE. (Id. at ¶ 3).

The Indictment details the federal government's establishment of the DBE Program through the DOT and its sub-agency, the Federal Highway Administration, ("FHWA"), and outlines the associated statutes and regulations governing same. (Id. at ¶ 4). The FHWA provides billions of dollars annually in federal funding to state departments of transportation for the construction and maintenance of the federal highway system. (Id. ). The DBE Program is structured to increase the participation of DBEs in these federally funded highway construction projects, setting a goal of ten-percent participation. (Id. at ¶¶ 4–5). Pertinent here, the Pennsylvania Department of Transportation ("PennDOT") and the Pennsylvania Turnpike Commission ("PTC") receive federal funds from FHWA for federally funded highway projects and, as a result of same, are required to establish goals and objectives in administering the DBE Program. (Id. ). State and local authorities are also delegated the responsibility to administer the program by, among other things, certifying entities as DBEs; tracking the usage of DBEs on federally funded highway projects through the award of credits to general contractors on specific projects; and reporting compliance with the participation goals to the federal authorities. (Id. at ¶¶ 4–15).

Between January 2012 and February 2014, "WMCC received 13 federally-funded subcontracts totaling approximately $2.34 million under PennDOT's and PTC's DBE program and WMCC was paid a total of $1.89 million." (Id. at ¶ 12). These subcontracts were between WMCC and a general contractor, and required WMCC to furnish and erect steel and/or precast concrete on federally funded Pennsylvania highway projects. (Id. ). Under PennDOT's program, the entire amount of WMCC's subcontract with the general contractor, including the cost of materials and labor, was counted toward the general contractor's DBE goal because WMCC was certified as a DBE and "ostensibly performed a commercially useful function in connection with the subcontract." (Id. ).

The grand jury charges that Defendant and other persons known to it, agreed to "defraud the United States by impeding, impairing, obstructing, and defeating the lawful governmental function of the USDOT in the implementation, execution and administration of the DBE program." (Id. at ¶ 13). The stated purpose of the conspiracy was for Defendant and his co-conspirators to enrich themselves by using WMCC as a "front" company to fraudulently obtain the profits on DBE subcontracts slotted for legitimate DBE's and to increase CSE profits by marketing CSE to general contractors as a "one-stop shop" which could not only provide the concrete or steel beams, but also erect the beams and provide the general contractor with valuable DBE credits. (Id. at ¶ 14).

The manner and means of the conspiracy is extensively detailed in ¶ 15 of the Indictment. Among other things:

• the conspirators used WMCC as a front company, where funds were passed to CSE in order to obtain the appearance of DBE participation on subcontracts WMCC was awarded under the programs which in reality were performed by CSE personnel;

• under Defendant's direction and authority, CSE personnel found, negotiated, coordinated, performed, managed, and supervised the subcontracts awarded to WMCC and paid WMCC a fixed-fee for use of its name so that CSE could obtain the profits;

• CSE estimators/project managers, found the jobs, prepared bids, mailed, faxed and negotiated the actual contracts;

• CSE engineers,

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