US v. Russotti, 91 Cr. 799 (PKL).

• Decision Date: 02 December 1991
• Docket Number: No. 91 Cr. 799 (PKL).,91 Cr. 799 (PKL).
• Citation: 780 F. Supp. 128
• Parties: UNITED STATES of America v. John RUSSOTTI, Defendant.
• Court: U.S. District Court — Southern District of New York

780 F. Supp. 128

UNITED STATES of America v. John RUSSOTTI, Defendant.

No. 91 Cr. 799 (PKL).

United States District Court, S.D. New York.

December 2, 1991.

Otto G. Obermaier, U.S. Atty., S.D.N.Y., New York City (Benjamin E. Rosenberg, of counsel), for U.S.

Corbin, Silberman & Sanseverino, New York City (Marc J. Gottridge, of counsel), for defendant.

ORDER AND OPINION

LEISURE, District Judge:

Defendant John Russotti ("Russotti") has moved this Court to dismiss a one-count Information in which the United States of America (the "Government") charges Russotti with violating 18 U.S.C. § 2314 and § 2. For the reasons stated below, Russotti's motion is denied.

Background

The facts relevant to this motion are not in dispute.¹ In September 1990, Russotti requested that accounts payable personnel at his former employer, The Home Insurance Company ("Home Insurance"), issue a check for $837.30 (the "$837.30 check"), payable to the order of Reynolds, Rappaport & Kaplan ("RR & K"). RR & K is a Massachusetts law firm to which Home Insurance owed no debt. As a result of Russotti's request, the $837.30 check was signed by two employees of Home Insurance who were authorized to sign such checks, and was delivered to Russotti. The signatures on the $837.30 check were genuine, and the check contained no forged signatures. Russotti caused the check to be transported from New York to RR & K in Massachusetts. RR & K received the $837.30 check and deposited it by October 15, 1990.

The $837.30 check was one of five checks, totalling $125,904.71, that Russotti admits causing Home Insurance to issue between September 1990 and November 1990 to payees who were not entitled to such payments. The other four checks were all made payable to an entity in whose name Russotti had opened a bank account in New York. The government does not allege that Russotti violated any federal law either by causing these four checks to be issued or by transporting them, entirely within New York. Russotti has since, through counsel, tendered full restitution of $125,904.71 to Home Insurance.

The Information charges Russotti with violating 18 U.S.C. § 2314, which provides in part that:

Whoever, with unlawful or fraudulent intent, transports in interstate or foreign commerce any falsely made, forged, altered, or counterfeited securities or tax stamps, knowing the same to have been falsely made, forged, altered, or counterfeited ... Shall be fined not more than $10,000 or imprisoned not more than ten years, or both.

Under 18 U.S.C. § 2311, the term "securities," as used in 18 U.S.C. § 2314, includes "any ... check." The Government's theory of the case against Russotti is that he violated 18 U.S.C. § 2314 by causing a "falsely made" security — the $837.30 check, made payable to RR & K, which was a false payee — to be transported in interstate commerce, from New York to Massachusetts. The Government relies on the Supreme Court's December 1990 decision in Moskal v. United States, ___ U.S. ___, 111 S.Ct. 461, 112 L.Ed.2d 449 (1990), which held that a "genuine" security containing false information is a "falsely made" security for purposes of 18 U.S.C. § 2314.

Discussion

I. Second Circuit Law Prior to December 1990

Second Circuit cases decided prior to the Supreme Court's Moskal decision indicate that a "genuine" security containing false information — as opposed to, for example, a forged document — was not considered "falsely made" for purposes of 18 U.S.C. § 2314. In United States v. Brown, 246 F.2d 541 (2d Cir.1957), the defendant was convicted of the transportation of "falsely made securities" in foreign and interstate commerce in violation of 18 U.S.C. § 2314. The "securities" were four separate drafts, accompanied by supporting documents. The supporting documents included bills of lading and assayer's certificates that were forged, and genuine insurance certificates that included false information. The Second Circuit reversed the conviction and dismissed the indictment, in part on the grounds that "the phrase `falsely made' as used in the statute relates to the execution of ... a security rather than to whether its content be true or false." Id. at 542. The Court went on to state that "manifestly, none of the drafts, taken by themselves, were sic falsely made within the meaning of the statute since they were just what they did on their face appear to be, genuine drafts executed by the actual drawer, the defendant." Id.

An earlier decision, United States ex rel. Starr v. Mulligan, 59 F.2d 200 (2d Cir. 1932), provides further support for the proposition that the Second Circuit did not consider a "genuine" security containing false information to be a "falsely made" security. Mulligan involved a statute with language very similar to 18 U.S.C. § 2314. Former 18 U.S.C. § 73 (now 18 U.S.C. § 495) provided in part that

Whoever shall falsely make, alter, forge, or counterfeit ... any deed, power of attorney, order, certificate, receipt, contract, or other writing, for the purpose of obtaining or receiving ... from the United States, or any of their officers or agents, any sum of money ... shall be fined ... and imprisoned.

The Court held that "it has been authoritatively established" that this statutory provision "is limited to the false making, that is, the forging, of writings," and does not cover "writings genuine in execution but false in statements of fact they contain." Id. at 201.

In its brief on the instant motion, the Government has cited a subsequent district court decision, United States v. Green, 293 F.Supp. 999 (S.D.N.Y.1966), in which the Court (after a bench trial) found the defendant guilty under 18 U.S.C. § 2314. The Court concluded that the defendant's conduct — creating a fictitious personality and signing the name of that personality on checks that he cashed — constituted forgery and was covered by 18 U.S.C. § 2314. The Court went on to state that:

Even assuming the activity herein did not amount to a forgery, it nonetheless did, in my opinion, constitute a false making, and since I do not subscribe to the view that forgery and false making are synonymous, nor to the view that they are to be read conjunctively, but rather disjunctively, I find that the statute was in any event violated.

Id. at 1003 (footnotes omitted). While this passage does contradict the Second Circuit's holding in Brown, it is not accurate for the Government to argue that Brown and Mulligan "have not been regarded as binding" in the Second Circuit. First, it is axiomatic that a district court cannot simply take a position contrary to that of its circuit court and regard the circuit court's interpretation of a given statute as not binding. Second, the Green decision does not refer to or otherwise cite either Brown or Mulligan. And, as Russotti has demonstrated (through diligent research), neither the Government's brief nor the defendant's brief in Green brought Brown or Mulligan to the attention of the district judge; it is therefore conceivable that the Green Court simply overlooked the Second Circuit precedent relating to the interpretation of "falsely made" in 18 U.S.C. § 2314.

In light of the Second Circuit's decisions in Brown and Mulligan, and notwithstanding the subsequent district court decision in Green, it is readily apparent that the Second Circuit's pre-Moskal interpretation of 18 U.S.C. § 2314 had been that a "genuine" security containing false information was not considered a "falsely made" security. The Second Circuit considered "falsely made" to refer to the execution of a document, rather than the falsity of the contents of the document.

II. The Supreme Court's Moskal Decision

In Moskal v. United States, ___ U.S. ___, 111 S.Ct. 461, 112 L.Ed.2d 449 (1990), the defendant was indicted and convicted under 18 U.S.C. § 2314 for receiving two "washed" motor vehicle titles, which were "genuine" vehicle titles that incorporated false odometer readings.² On appeal to the Third Circuit, the defendant argued that the washed titles were "genuine" and thus not "falsely made," but the Third Circuit disagreed, and held that documents that are validly issued but contain material false information are "falsely made" for purposes of 18 U.S.C. § 2314. United States v. Davis, 888 F.2d 283, 285 (3d Cir.1989) (per curiam) (Lumbard, Cardamone & Mahoney, JJ., sitting by designation), aff'd sub nom., Moskal v. United States, ___ U.S. ___, 111 S.Ct. 461, 112 L.Ed.2d 449 (1990). The Third Circuit opinion recognized the split of authority that had developed on this issue, with some courts concluding that "falsely made" related to the genuineness of the document, and not the falsity of its contents, and other courts concluding that documents that were validly issued but contained false information were "falsely made" for purposes of 18 U.S.C. § 2314.³ The Third Circuit opinion adopted the latter view and affirmed the conviction.

The Supreme Court granted certiorari, and affirmed the Third Circuit decision. The Supreme Court held that a security that is "genuine" — i.e., is precisely what it purports to be — but contains false information is a "falsely made" security for purposes of 18 U.S.C. § 2314. The Court first rejected the defendant's argument that because it is possible to interpret the phrase "falsely made, forged, altered, or counterfeited securities" to apply only to forged or counterfeited securities, the rule of lenity should have resolved the issue in his favor. The Court stated that, based on the language and structure, legislative history, and motivating policies of the statute, 18 U.S.C. § 2314 unambiguously applied to the defendant's conduct. Moskal, 111 S.Ct. at 465. The Court also stated that to exclude from the scope of 18 U.S.C. § 2314 any security that was genuine would essentially equate "falsely made" with "forged" or "counterfeited," thus violating the established principle that "a court should `"give effect, if possible, to every clause and...