United States v. Verclas
| Decision Date | 03 January 2019 |
| Docket Number | Case No.: GJH-18-160 |
| Parties | UNITED STATES Plaintiff, v. KATRIN VERCLAS Defendant. |
| Court | U.S. District Court — District of Maryland |
Defendant Katrin Verclas has been charged by grand jury indictment with one count of Major Fraud under 18 U.S.C. § 1031 ("Major Fraud Act" or "the Act"). Presently pending before the Court is Defendant's Motion to Dismiss the Indictment. ECF No. 29. A hearing was held on July 23, 2018. ECF No. 38. Because the Indictment does not allege that Verclas committed an essential conduct element of Major Fraud in the District of Maryland, venue is improper, and Defendants' Motion to Dismiss is granted in part.
In December 2009, a Bureau within the State Department issued a Request for Proposal ("RFP") inviting applicants to submit grant proposals to "support and promote global internet freedom." ECF No. 1 ¶ 3. The RFP specified that only U.S. non-profit organizations with status under 26 U.S.C. § 501(c)(3), comparable international organizations, and universities were eligible to apply. Id. ¶ 4.
The Indictment asserts that Verclas defrauded the United States by submitting a grant application that falsely represented that her Delaware-based corporation MobileActive Corp ("MobileActive") was a New York non-profit organization with the legal authority to apply for the grant. Id. ¶ 5-6, 11. Verclas also claimed falsely that MobileActive "had the financial capability to ensure proper planning, management, and completion of the proposed project." Id. ¶ 12. When she submitted the grant application on January 22, 2010, she falsely certified to the "truth and accuracy of the [application's] information." Id. ¶ 6. Verclas operated MobileActive from offices in New York. Id. ¶ 5.
Based on Verclas's fraudulent application, the State Department awarded MobileActive a grant of $1,411,000 on September 20, 2010. ECF No. 1 ¶ 7. After the State Department awarded the grant, Verclas falsely certified that MobileActive would perform work under the grant and "adhere to certain terms, conditions, and regulations." Id. ¶ 14. These terms required Verclas to submit quarterly financial and progress reports as well as final financial and progress reports. Id. ¶ 9. After withdrawing $560,000 of the awarded funds, Verclas sought an extension to complete work under the grant, which the State Department approved. Id. ¶ 16. Ultimately, Verclas failed to perform work under the grant: she did not use the services of companies to which the grant allocated money, transferred grant funds to her personal account, "fil[ed] false and misleading quarterly reports," and did not submit a required audit. Id. ¶¶ 18-21.
To distribute the awarded funds to MobileActive, the State Department used a Payment Management System located in Rockville, Maryland. Id. ¶ 8. Despite failing to perform work under the grant, Verclas withdrew a total of $1,222,000 using the Payment Management System between October 2010 and August 2012. Id. ¶ 17. Defendant used much of the withdrawn funds for "personal expenses and expenses unrelated" to the grant. Id. ¶ 19.
On March 26, 2018, over seven years after Verclas submitted the grant application, the United States obtained a grand jury indictment charging Defendant with a violation of 18 U.S.C. § 1031, the Major Fraud Act. The Act criminalizes: "knowingly execut[ing], or attempt[ing] to execute, any scheme or artifice with the intent - (1) to defraud the United States; or (2) to obtain money or property by means of false or fraudulent pretenses, representations, or promises" related to a federal grant or contract with a value of $1 million or more. 18 U.S.C. § 1031(a).
The Government alleges that Defendant "knowingly execut[ed] a scheme and artifice with the intent to defraud the United States and to obtain money and property by means of material false and fraudulent pretenses, representations, and promises, in connection with a grant, contract, subcontract, and other form of Federal assistance valued at $1,000,000 or more." ECF No. 1 ¶ 10. The Defendant committed the alleged crime during the pendency of the non-declared Afghanistan war, and the Government returned its indictment before the formal termination of those hostilities. ECF No. 36 at 5, n. 2; Authorization for Use of Military Force resolution, Pub. L. 107-40 (Sept. 18, 2001).
Defendant filed a Motion to Dismiss the Indictment, ECF No. 29, arguing that the Indictment does not properly allege that Defendant committed Major Fraud in the District of Maryland and venue is therefore improper; that the Government failed to return its Indictment within the Major Fraud Act's seven-year statute of limitations; and that the Indictment fails to state an offense. Each of these arguments will be addressed in turn.
Defendant argues that the Indictment should be dismissed for improper venue because it does not allege facts showing that Verclas committed the charged offense in the District ofMaryland. The Constitution requires that "[t]he trial of all crimes . . . shall be held in the state where the said crimes shall have been committed." U.S. Const. art. III, § 2, cl. 3. The Sixth Amendment similarly requires that with "all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial, by an impartial jury of the State and district wherein the crime shall have been committed." U.S. Const. amend. VI. The Federal Rules of Criminal Procedure likewise prescribe that "[u]nless a statute or these rules permit otherwise, the government must prosecute an offense in a district where the offense was committed." Fed. R. Crim. P. 18.
Where, as here, Congress has not prescribed specific venue requirements for the offense charged, venue is "determined from the nature of the crime alleged and the location of the act or acts constituting it." United States v. Ebersole, 411 F.3d 517, 524 (4th Cir. 2005) (quoting United States v. Cabrales, 524 U.S. 1, 6-7 (1998)). The inquiry into the place of the crime may yield more than one appropriate venue, including a venue in which the defendant has never set foot. United States v. Bowens, 224 F.3d 302, 309 (4th Cir. 2000). "[A]ny offense against the United States begun in one district and completed in another, or committed in more than one district, may be inquired of and prosecuted in any district in which such offense was begun, continued, or completed." 18 U.S.C. § 3237(a).
The inquiry into venue has two parts. First, the Court must "identify the conduct constituting the offense," United States v. Smith, 452 F.3d 323, 334 (4th Cir. 2006) (quoting United States v. Rodriguez-Moreno, 526 U.S. 275, 279 (1999), because venue is limited "to the place of the essential conduct elements of the offense." Bowens, 224 F.3d at 309 (emphasis in original). Second, the Court determines where the criminal conduct took place. Smith, 452 F.2d at 334.
In determining the essential conduct elements courts may "analyz[e] the key 'verbs' or actions sanctioned by the statute[.]" United States v. Sterling, 860 F.3d 233, 241 (4th Cir. 2017) (quoting Rodriguez-Moreno, 526 U.S. at 279-80 (1999)). "Acts which are merely 'preparatory' to the underlying offense and its essential conduct, however, cannot provide a basis for venue." Id. at 241. Similarly, acts which occur only in furtherance of the crime or after a crime is complete cannot provide a basis for venue because they are not essential to the underlying offense. United States v. Jefferson, 674 F.3d 332, 367 (4th Cir. 2012) (); United States v. Harris, No. 3:12-CR-170, 2013 WL 1790140, at *2 (E.D. Va. Apr. 26, 2013) ().
Jefferson is instructive. There, the defendant contended that venue over his honest services wired fraud offense was not proper in the Eastern District of Virginia because the wire transmission underlying that count involved a call made from Ghana to Louisville, Kentucky. Jefferson, 674 F.3d at 364. The Government argued that the underlying fraudulent scheme devised by the defendant involved the deprivation of honest services in the Eastern District of Virginia, thus making venue there appropriate. Id. at 365. However, in deciding the issue, the Fourth Circuit analyzed the essential conduct elements of the wire fraud statute and determined that the "scheme to defraud is clearly an essential element, but not an essential conduct element, of wire (or mail) fraud." Id. at 366 (emphasis in original). Indeed, the court determined that devising a scheme is not conduct at all but is "'simply a plan, intention, or state of mind, insufficient in itself to give rise to any kind of criminal sanctions.'" Id. (quoting United States v.Ramirez, 420 F.3d 134, 145 (2d Cir. 2005)). "Rather, 'the essential conduct prohibited by [the wire fraud statute] is the misuse of wires as well as any acts that cause such misuse.'" Id. at 366 (quoting United States v. Pace, 314 F.3d 344, 349 (9th Cir. 2002)). Thus, because the essential conduct, the actual wire transmission, did not involve the Eastern District of Virginia, venue was improper there. Id.
Here, under the Major Fraud Act, it is a crime to "knowingly execute[], or attempt[] to execute any scheme or artifice with the intent - (1) to defraud the United States; or (2) to obtain money by means of false or fraudulent pretenses, representations, or promises" related to a federal grant or contract with a value of $1 million or more. 18 U.S.C. § 1031(a). Similar to the element of wire fraud requiring a scheme to defraud analyzed in Jefferson, the intent clause of the...
To continue reading
Request your trial