United States v. Wellington
| Decision Date | 12 August 2022 |
| Docket Number | 1:21-cr-00853-WJ |
| Parties | UNITED STATES, Plaintiff, v. DAVID WELLINGTON and JERRY SHROCK, Defendants. |
| Court | U.S. District Court — District of New Mexico |
THIS MATTER comes before the Court on Defendant Wellington and Defendant Shrock's Joint Motion to Dismiss the Indictment (Doc. 41). Having reviewed the parties' pleadings and the applicable law, the Court GRANTS IN PART AND DENIES IN PART the Motion.
On May 27, 2021, a criminal complaint instituted before U.S Magistrate Judge Jerry H. Ritter charged Defendant Jerry Shrock with a violation of 18 U.S.C. § 371, Conspiracy to Commit Tax Evasion and Defraud the United States. Doc. 1. The Complaint alleged a timeframe for the charge as 2006 until June 2, 2015. Id. On June 18, 2021, Defendant Shrock waived his right to have probable cause for the complaint determined in a preliminary hearing. Doc. 7.
On June 23, 2021, a grand jury returned an indictment as to both Defendant Shrock and Defendant David Wellington. Doc. 13. In Count One, the indictment charged both defendants with Conspiracy to Defraud the United States, contrary to 18 U.S.C. § 371, between January 28 2005, and March 14, 2017. Id. at 3. In Count Two, the indictment charged Defendant Wellington with Operation of an Unlicensed Money Transmitting Business, contrary to 18 U.S.C. § 1960, from about November 28, 2006, until August 28, 2017.
On May 4, 2022, the defendants filed a Joint Motion to Dismiss the Indictment. Doc. 41. In their Motion, the defendants ask the Court to dismiss Count One of the indictment, arguing it is barred by the statute of limitations. Defendant Wellington further asks the Court to dismiss Count Two of the indictment for “failure to set forth elements,” and due to the statute of limitations. The defendants also request that the Court dismiss the two forfeiture allegations. The United States requests that the Court deny the Motion as to Count 1, Count 2, and Forfeiture Allegation 2, and grant the Motion as to Forfeiture Allegation 1.
The elements the government is required to prove in a § 371 conspiracy are set forth in Tenth Circuit Criminal Pattern Jury Instruction 2.19:
First: the defendant agreed with at least one other person to violate the law.
Second: one of the conspirators engaged in at least one overt act furthering the conspiracy's objective.
Third: the defendant knew the essential objective of the conspiracy.
Fourth: the defendant knowingly and voluntarily participated in the conspiracy.
Fifth: there was interdependence among the members of the conspiracy; that is, the members, in some way or manner, intended to act together for their shared mutual benefit within the scope of the conspiracy charged.
Importantly to this Motion, proof of an overt act is a required element in conspiracies charged under 18 U.S.C. § 371.
Defendants base their argument on the statute of limitations for conspiracies. Whether the statute of limitations had expired prior to the issuance of the indictment is a legal issue to be decided by the Court. Saunders v. Senkowski, 587 F.3d 543, 547 (2d Cir. 2009); see also United States v. Alessi, 599 F.2d 513, 515 (2d Cir. 1979). In reviewing a motion to dismiss the indictment on statute of limitations grounds, courts “test the indictment solely on the basis of the allegations made on its face, and such allegations are to be taken as true.” United States v. Kemp & Assocs., Inc., 907 F.3d 1264, 1268 (10th Cir. 2018) (citation omitted). An indictment alleging a conspiracy in violation of 18 U.S.C. § 371 must allege at least one overt act. In the Tenth Circuit, a conspiracy indictment “must allege that the conduct constituting the conspiracy fell within the statute of limitations[.]” United States v. Stoner, 98 F.3d 527, 533 (10th Cir. 1996), adhered to in part on reh'g, 139 F.3d 1343 (10th Cir. 1998). Where the accuracy of a date is not at issue, but there is a question as to which date should be used as the accrual date for the purpose of measuring the limitations period, there is a question of law, not fact. See United States v. Florez, 447 F.3d 145, 150 (2d Cir. 2006). When the indictment alleges that “the conspiracy was at work within the limitations period and that during that period, the conspiracy was neither a project still resting in the minds of the conspirators nor a fully completed operation no longer in existence,” the indictment is not subject to dismissal on its face. Stoner, 98 F.3d at 534 (quotations omitted). Unless a defendant affirmatively withdrew from a conspiracy, “any of his co-conspirators' overt acts-not just his own acts-may be used to satisfy the statute of limitations as to him. United States v. Thompson, 518 F.3d 832, 858 (10th Cir. 2008). The overt act itself need not be “criminal in character”; the “function of the overt act in a conspiracy prosecution is simply to manifest that the conspiracy is at work[.]” Yates v. United States, 354 U.S. 298, 334, 77 S.Ct. 1064, 1085, 1 L.Ed.2d 1356 (1957), overruled on other grounds by Burks v. United States, 437 U.S. 1, 98 S.Ct. 2141, 57 L.Ed.2d 1 (1978) (citation omitted).
There is no evidence that this was the situation in the case at bar, and as such, this argument fails.
In normal times, the applicable statute of limitations for conspiracy under Count 1 is 6 years. 26 U.S.C. § 6531. That statute provides that, “for offenses involving the defrauding or attempting to defraud the United States or any agency thereof, whether by conspiracy or not, and in any manner,” the period of limitation shall be 6 years. 26 U.S.C. § 6531. If this statute of limitations is applicable, the government would have to prove that one of the conspirators engaged in at least one overt act furthering the conspiracy's objective within the six-year statute of limitations. See United States v. Thompson, 518 F.3d 832, 857 (10th Cir. 2008) (“For the conspiracy count, the government was required to prove that, within the statute of limitations period, one of the conspirators committed an overt act in furtherance of the conspiracy.” (citing Grunewald v. United States, 353 U.S. 391, 396-97 (1957)). The indictment in this case was filed on June 23, 2021. Thus, defendants argue that overt acts occurring six years before the indictment (prior to June 23, 2015) cannot form the basis for the indictment. Separately, Defendant Wellington argues that the statute of limitations is 5 years because the crime was charged under 18 U.S.C. § 371, not under Title 26 which is the internal Revenue Code. He asserts that 18 U.S.C. § 3282(a) forms the 5-year statute of limitations.
Nevertheless, these statutes of limitations do not always apply. The statutes of limitations applicable to frauds against the United States are suspended under the Wartime Suspension of Limitations Act (WSLA) at certain times. The statute provides:
When the United States is at war or Congress has enacted a specific authorization for the use of the Armed Forces, as described in section 5(b) of the War Powers Resolution (50 U.S.C. § 1544(b)), the running of any statute of limitations applicable to any offense (1) involving fraud or attempted fraud against the United States or any agency thereof in any manner, whether by conspiracy or not, .. shall be suspended until 5 years after the...
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