Opinion
Case No. 98-CR-278 ST
October 5, 2000.
REPORT AND RECOMMENDATION
Defendant, Terrence Dunne, was indicted in this case by a superseding indictment on April 29, 1999. Count V is the sole charge against Dunne (File Entry 26). It charges that Dunne, as a certified public accountant, made materially false, fictitious and fraudulent statement, by certifying that the financial statements of the PanWorld Minerals International for the year ending December 31, 1993 were in accordance with generally accepted accounting principles (GAAP) and audited in accordance with Generally Accepted Auditing Standards (GAAS), when Dunne knew such was not the case. The certification of the financial statements was apparently made in a document PanWorld Minerals sent to the Securities Exchange Commission. The indictment alleges this "as a matter within the jurisdiction of the SEC." The superseding indictment does not set forth the date for the certification and whether the matter was submitted or made directly to the SEC by Dunne, but as later shown it was not sent by Dunne to the SEC. The indictment alleges the conduct in the count occurred "On or about May 4, 1994." The count charges a violation of 18 U.S.C. § 1001.
The defendant, Dunne, made a motion, on December 2, 1999, to dismiss the indictment contending the charge against Dunne is barred by the statute of limitations (File Entry 51). The motion itself does not specify the basis for the claim and does not comply with Rule DUCrimR 12-1(b); DUCivR 7-1.
A memorandum was filed by Dunne in support of the motion. It includes supporting documentation for the motion and an affidavit from Dunne (File Entry 52, Exhibit A).
On December 8, 1999 a second superseding indictment was returned adding four other defendants (File Entry #53). Count five of the second superseding indictment is the same as to defendant Dunne as it was in the first superseding indictment.
The government has filed a response to Dunne's motion to dismiss (File Entries 57,58). The government's response to the motion (File Entry #58) contends the motion should be denied because the indictment, on its face, alleges the offense was committed within five years of the indictment. The indictment alleges the offense occurred on May 4, 1994 and the indictment was returned April 29, 1999. If those dates, in fact are correct, the prosecution would not be barred because the indictment was returned within five years as required by 18 U.S.C. § 3282 ("five years next after such offense shall have been committed."). The indictment is sufficient on its face.
The government's memorandum refers to United States v. Stoner, 98 F.3d 527, 533 (10th Cir. 1996), in support of its position. However, Stoner does not provide support for the government. The charge in Stoner was conspiracy and the issue was as to when the last overt act was committed. The charge against Dunne is not conspiracy, but a false material statement under 18 U.S.C. § 1001. There is no overt act issue, rather the issue is when the last element of the offense was completed and thus when the offense was "committed" for purposes of 18 U.S.C. § 3282.
In addition, the opinion in Stoner was vacated and withdrawn on the statute of limitations issue, so it has no precedential value, United States v. Stoner, 139 F.3d 1343 (10th Cir. 1998, per curiam).
The second position of United States (File Entry 58) is that the defendant's "false statement" was "republished" when it was included in the annual report of PanWorld Minerals, Inc. and submitted to the Securities and Exchange Commission. This contention must fail because it is not the conduct charged in the indictment. Such a theory of the case is a variance from the indictment and would base prosecution on facts outside the indictment, Cole v. Arkansas, 333 U.S. 196 (1948) (defendant may not be convicted on facts not within the charge), and would broaden the indictment beyond that returned by the grand jury, which is prohibited. Ex parte Bain, 121 U.S. 1 (1887); Stirone v. United States, 361 U.S. 212 (1960). This is not a proper contention, such as the situation where the theory of prosecution narrows the proof over that of the indictment. United States v. Miller, 471 U.S. 130 (1985). Rather the government's argument is an expansion over the charge. It would involve a variance affecting the "substantial rights" of Dunne. Berger v. United States, 295 U.S. 78 (1935). The indictment may not be broadened except by the grand jury itself. United States v. Wright, 932 F.2d 868 (10th Cir. 1991). Dunne could not adequately anticipate the government's position from the allegations of the indictment. United States v. Moore, 198 F.2d 793, 796 (10th Cir. 1999); United States v. Stoner, 98 F.3d 527, 536 (10th Cir. 1996).
The panel opinion in Stoner, on the issue of variance, remains proper precedent.
A variance occurs when the government relies on facts different from those alleged in the indictment. Dunn v. United States, 442 U.S. 100, 105 (1979); Berger, supra; United States v. Edwards, 69 F.3d 419, 432 (10th Cir. 1995); United States v. Ailsworth, 138 F.3d 843, 847-48 (10th Cir. 1998); United States v. Johnston, 146 F.3d 785, 791 (10th Cir. 1998). Consequently, to accept the government's second contention of republication, to overcome the statute of limitations issue either on the motion to dismiss or at trial, is impermissible.
Going Beyond the Face of the Indictment
From the defendant Dunne's submission on the statute of limitations, it is apparent he is asking the court to go beyond the face of the indictment and consider other facts in a challenge to the indictment. Generally, such a challenge to the grand jury finding is impermissible. Costello v. United States, 350 U.S. 359 (1956). A defendant, normally, may not move to dismiss an indictment by offering opposing evidence. See also United States v. Knox, 396 U.S. 77, 83 n. 7 (1969); United States v. Kilpatrick, 821 F.2d 1456, 1462 n. 2 (10th Cir. 1987); United States v. Self, 2 F.3d 1071,1082 (10th Cir. 1993); United States v. LaHue, 998 F. Supp. 1182 (D. Kan. 1998) aff'd 170 F.3d 1026 (10th Cir.). However, in United States v. Hall, 20 F.3d 1084 (10th Cir. 1994) the court said there were times where factual issues are not disputed by the government that facts beyond the indictment may be considered on a motion to dismiss. The Court of Appeals said that normally a court should refrain from considering evidence "outside the indictment when testing its legal sufficiency." Id. p. 1087. The court then said:
Notwithstanding these general principles, this circuit has upheld a pretrial dismissal under Rule 12(b) based on the insufficiency of the evidence where the underlying facts were essentially undisputed and the government failed to object to the district court's resort to evidence beyond the four corners of the indictment.
The court cited to United States v. Wood, 6 F.3d 692 (10th Cir. 1993) which was a prosecution under 18 U.S.C. § 1001 and for obstruction of justice under 18 U.S.C. § 1503.
* * *
Although we recognize that the preferred approach in testing the sufficiency of an indictment cautions against consideration of the strengths and weaknesses of the government's case through fact-finding pretrial hearings, King, 581 F.2d at 801-02, we read Brown and Wood as authority which allows a district court to dismiss charges at the pretrial stage under the limited circumstances where the operative facts are undisputed and the government fails to object to the district court's consideration of those undisputed facts in making the determination regarding a submissible case. Under this scenario, a pretrial dismissal is essentially a determination that, as a matter of law, the government is incapable of proving its case beyond a reasonable doubt. We note, however, that such a scenario is not likely to recur and we caution both the trial courts and counsel that the procedure here employed is indeed the rare exception.
See also United States v. Ailsworth, 873 F. Supp. 1450 (D.Kan. 1994).
In this case, the government did not object to the evidence presented by defendant, and at hearing on this matter contended the evidence did not support dismissal. Because this issue involves the statute of limitations and the circumstances are essentially undisputed, "it is permissible, and desirable" to resolve this matter on the record where "the facts are essentially undisputed." United States v. Brady, 820 F. Supp. 1346,1358 (D. Utah, 1993) aff'd 13 F.3d 334 (10th Cir.). Therefore, it is appropriate to address Dunne's statute of limitations claim.
Dunne's Submission
In Dunne's motion and memorandum to dismiss the indictment, it is represented that he is a licensed Certified Public Accountant in the State of Washington and was engaged by PanWorld Minerals International (Pan World) to perform the financial statement audit of the PanWorld for the calendar year ending December 31, 1993. PanWorld is a publicly traded company under the jurisdiction of the Securities and Exchange Commission (SEC) and registered under the Securities Exchange Act of 1934. Financial statements and the audit prepared by Dunne were to be included in PanWorld's 10-K report to be submitted to the SEC on March 31, 1994. The due date was subsequently extended to April 15, 1994. Dunne completed and signed the audit report on April 11, 1994 with a certification to compliance with Generally Accepted Accounting Principles (GAAP) and audited in conformity with Generally Accepted Auditing Standards (GAAS). Dunne has provided an affidavit that the report and financial statements were sent to PanWorld on April 11, 1994 by overnight delivery with United Parcel Services.
PanWorld did not file the financial statements with the SEC by April 15, 1994, but mailed the reports to the SEC on April 29, 1994. They were received on or about May 4, 1994. The reports and statements were consented for inclusion in the Registration Statement on Form S-8 for PanWorld on May 21, 1994 and October 24, 1994. Dunne's charge in the superseding indictment was filed April 29, 1999. Based on the circumstances, defendant Dunne asserts the applicable limitations expired prior to the indictment.
In Dunne's memorandum he states PanWorld made the mailing to the SEC on April 29, 1994. At hearing on the motion the April 28, 1994 date was referenced but then corrected. The April 29th date is therefore accepted since counsel for Dunne admitted the 29th date.
The Limitation Period
18 U.S.C. § 3282 provides for the limitations period in this case and states:
Except as otherwise expressly provided by law, no person shall be prosecuted, tried, or punished for any offense, not capital, unless the indictment is found or the information is instituted within five years next after such offense shall have been committed.
The appropriate time period in limitation began to run from the time the offense alleged in this case was "committed" which is when the crime is complete. United States v. Payne, 978 F.2d 2117 (10th Cir. 1992); United States v. Torres-Lopez, 851 F.2d 520 (1st Cir. 1988); United States v. Gilbert, 136 F.3d 1451(11th Cir. 1998). Each element of the crime must have occurred before the limitation period started. United States v. Lutz, 154 F.3d 581 (6th Cir. 1998); Payne, supra, p. 1179.
The statute of limitations is to be liberally interpreted in criminal cases in favor of repose. United States v. Marion, 404 U.S. 307 (1971); United States v. Dolan, 120 F.3d 856 (8th Cir. 1997); United States v. Rivera-Ventura, 72 F.3d 277 (2nd Cir. 1995); United States v. Meador, 138 F.3d 986 (5th Cir. 1998).
The statute of limitations begins to run on the day following the day on which the last event giving rise to the cause of action occurred. United States v. Guerro, 694 F.2d 898, 901 (2nd Cir. 1982) citing to Burnet v. Willingham Loan Trust Co., 282 U.S. 437,439 (1931). See United States v. Stokes, 947 F. Supp. 546, 550 (D. Mass. 1996), reversed other grounds 124 F.3d 39 (1st Cir. 1997); United States v. Joseph, 765 F. Supp. 326 (E.D. 1991). The issue in this case is as to when, within the allegations of the indictment, the last element of the offense charged against Dunne was committed. 18 U.S.C. § 1001
The United States v. Hauk, 980 F.2d 611, 613 (10th Cir. 1992) (last overt act within a conspiracy); United States v. Payne, 978 F.2d 1177, 1181 (1992) (period beyond last act had run).
The offense, under 18 U.S.C. § 1001, charged in this case was complete in either April or May, 1994. The statute applicable is 18 U.S.C. § 1001, as it existed at that time.
The statute was amended September 13, 1994 and again October 11, 1996. These amendments are inapplicable in this case. However, the applicable provisions, pertinent to this case have not been changed by the amendments.
The applicable statute reads:
Whoever, in any matter within the jurisdiction of any department or agency of the United States knowingly and wilfully falsifies, conceals or covers up any trick, scheme or device a material fact or makes any false fictitious or fraudulent statement or representation or makes or uses any false writing or document knowing the same to contain any false, fictitious or fraudulent statement or entry shall be [punished].
The indictment (File Entry # 53) charges that the defendant "did make a materially false, fictitious, and fraudulent statement and representation."
The courts are uniform on the elements of the offense for a violation of 18 U.S.C. § 1001. In United States v. Harrod, 981 F.2d 1171,1175 (10th Cir. 1992), the court said:
To support a conviction for making a false statement to a government agent in violation of 18 U.S.C. § 1001, the government must prove "that (1) the defendant made a statement; (2) the statement was false, fictitious, or fraudulent as the defendant knew; (3) the statement was made knowingly and willfully; (4) the statement was within the jurisdiction of the federal agency; and (5) the statement was material."
See also United States v. Irwin, 654 F.2d 671, 675-76 (10th Cir. 1981); United States v. Kingston, 971 F.2d 481 (10th Cir. 1992); United States v. Fitzgibbon, 619 F.2d 874, 879 (10th Cir. 1980); United States v. Wood, 958 F.2d 963, 972 (10th Cir. 1992). This standard comports with the conclusion of Courts of other circuits. United States v. Steele, 723 F.2d 1313, 1318-19 (6th Cir. 1991); United States v. Carrier, 654 F.2d 559 (9th Cir. 1981); United States v. Lange, 528 F.2d 1280 (5th Cir. 1976).
In this case, two of the listed elements relate to the time when the offense was "committed." The first is the time when the false statement was made. From defendant's unopposed factual representations, the false statement was at least "made" by April 11, 1994 when defendant Dunne submitted the original and copies of his audit report and financial statements to PanWorld Minerals. There is no indication there was any subsequent amendment of the documents. It appears that if the last element of the offense were the making of the statement, the limitations period must have expired on April 12, 1999.
However, there is a requirement that the false statement must be as to a matter within the jurisdiction of an agency of the United States. Therefore, whether the matter was within the agency jurisdiction when made is the final element and it must be determined when that element occurred. Statements as to matters with SEC schedules are statements within the jurisdiction of that agency. United States v. Bilzerian, 926 F.2d 1285 (2d Cir. 1991). There must, however, be a sufficient nexus between the statement and the regulatory authority of the SEC and the statement. See United States v. DiFonzo, 603 F.2d 1260 (7th Cir. 1979).
A person making a false statement to the SEC may be prosecuted under 18 U.S.C. § 1001 even though there is a specific provision of the Securities Exchange Act for making false statements to the SEC. United States v. Wiles, 102 F.3d 1043 (10th Cir. 1996).
When Dunne mailed his documents to PanWorld there was as yet no nexus to bring the matter within the jurisdiction of the SEC. PanWorld could have rejected Dunne's material. The SEC was not yet involved. It was PanWorld that is the entity within SEC supervision and Dunne's conduct alone was not then within the jurisdiction of the SEC.
The government contends that United States v. Zwego, 657 F.2d 248, 257 (10th Cir. 1981) supports its position that the statute of limitations had not run when the superseding indictment was returned. Zwego was a prosecution under 18 U.S.C. § 1014. The court did not discuss the statute of limitation but discussed venue and said it could exist where the false statement was received by the bank. This is a very generalized statement and not directly apropos to the limitation issue. Venue analysis is different than the last element analysis, and in that respect, the ratio decadendi of Zwego is not applicable to this case. An offense under 18 U.S.C. § 1014 requires the making of the false statement or report with the purpose of influencing the action of the bank. No such element exists under 18 U.S.C. § 1001. Of course, the statement under § 1014 need not be presented directly to the institution. United States v. Lentz, 524 F.2d 69 (5th Cir. 1975). However, in Reass v. United States, 99 F.2d 752 (4th Cir. 1938) the court said merely assembling of the material with misrepresentations could have no effect. Only when the material was communicated to the lending institution did the crime take place.
In United States v. Davis, 953 F.2d 1482 (10th Cir. 1992) the court held defendant could be convicted under 18 U.S.C. § 1014 where the defendant's false appraisal report was made and received by the bank one year after the subject loan was made and the bank sought the appraisal as to continuation of the loan. The issue was really a question of whether reliance was necessary. Consequently, the government's reliance on venue cases and others under 18 U.S.C. § 1014 is not proper in this case. Those arguments do not inform this issue.
United States v. Warnick, 815 F.2d 1341 (10th Cir. 1987) (extension for republication is a separate offense) and United States v. Jordan, 890 F.2d 247 (10th Cir. 1989) (second delivery) decided under 18 U.S.C. § 1014, and in which the statute of limitation was considered, are not helpful because they dealt with the "republication" doctrine which has been determined to be outside the scope of this indictment. Jordan dealt with a second submission and that is not pertinent here. 890 F.2d at 250. See also United States v. Davoudi, 172 F.3d 1130, 1133 (9th Cir. 1999). This court's analysis does not pass on whether a superseding indictment in this case invoking republication would relate back. See Warnick, supra.
Under 18 U.S.C. § 1001 it is well settled that the false statement need not be made directly to the government agency. The contact may be indirect. United States v. Lawson, 809 F.2d 1514, 1518 (11th Cir. 1987) (jurisdiction where statement made to a city housing authority which was a contractual agent of the United States); United States v. Lewis, 587 F.2d 854, 857 (6th Cir. 1978) (per curiam) (false statement made to state welfare agency receiving federal funds). Although, the Supreme Court has construed the "jurisdiction" element broadly, United States v. Rodgers, 466 U.S. 475, 479-80 (1984), the federal agency must have a right to the information before the matter is within the jurisdiction of the agency. United States v. Deffenbaugh Industries, 957 F.2d 749, 753-54 (10th Cir. 1992) (if no right to request information, no jurisdiction under 18 U.S.C. § 100).
In United States v. Wolf, 645 F.2d 23, 25-26 (10th Cir. 1981) the court held a false statement made to a private oil company was within § 1001 because of a specific federal regulation for the information where it was reasonable to assume the false statement would be forwarded and used by the agency); United States v. Wright, 988 F.2d 1036, 1038-39 (10th Cir. 1993) (false statement need not be made to the federal agency, false turbidity data within the EPA's authority). It should be observed in these cases the information was directly related to a duty the person making the declaration owed the agency. See United States v. Meuli, 8 F.3d 1481 (10th Cir. 1993) (statements to bank officers who would contact IRS); United States v. Malsom, 779 F.2d 1228 (7th Cir. 1985); United States v. Candella, 487 F.2d 1223 (2d Cir. 1973).
Based on these authorities it is apparent that a point must exist when the nexus between the statement and the agency brings the statement within the jurisdiction of the agency although not received by it. It must be such that the agency interest and therefore the potential for deceit has become involved. This is not the case from the mere preparation of documents pursuant to a private contract, as in this case. There must be some utilization of the false information by the person or entity under a duty to submit the statement to the agency. Here PanWorld, not Dunne, was the obligated party. Therefore, the offense was not complete until PanWorld's conduct brought the matter within the jurisdiction of the SEC.
Statute of Limitations Precedent Under 18 U.S.C. § 1001
In United States v. Smith, 740 F.2d 734 (9th Cir. 1984) the court addressed when the statute of limitations expired under 18 U.S.C. § 1001. The defendants in Smith, like the situation of the defendant in this case, were hired researchers who provided data to a pharmaceutical company for submission to the Food and Drug Administration. The data defendants provided was contained and incorporated in submitted reports. The government's contention was that defendants in Smith caused the pharmaceutical company to submit a false report. Id. p. 736. The court rejected the contention that the government must actually receive the report before the offense is complete. Id. The court said "The offense is complete when the false statement is submitted." Id. This was when the report was "mailed" by the third person pharmaceutical company. The court also rejected the "venue" cases as being controlling authority. The opinion does not state why the mailing is the last element. It is assumed this is the point at which the matter enters the jurisdiction of the agency. The report would likely be received. It is a commitment to the false statement. The mailing of the statement is an act complete in relation to the agency jurisdiction.
In United States v. Del Percio, 657 F. Supp. 849 (W.D. Mich. 1987) the court adopted Smith and said the limitations period began to run when the offense was complete, which was when the false statements were mailed. Id. p. 858.
A slightly broader approach was adopted in United States v. Lutz, 154 F.3d 581, 586 (6th Cir. 1998). The court said:
The statute of limitations begins to run when the crime is complete. Toussie v. United States, 397 U.S. 112, 115, 90 S.Ct. 858, 25 L.Ed.2d 156 (1970). A crime is complete when each element of the crime has occurred. United States v. Smith, 740 F.2d 734, 736 (9th Cir. 1984). In the Smith case, on which both parties rely, the Ninth Circuit held that in offenses involving the submission of false statements to the government in violation of 18 U.S.C. § 1001, the offense is complete when the false statement is submitted. Id. Lutz claims that this means that her crime was complete when she submitted the initial application forms to the lender. However, no offense has occurred under the statute unless a false statement is made regarding a matter within the jurisdiction of a federal agency. See id. at 737. A matter is within the jurisdiction of a federal agency for purposes of § 1001 when the agency has the power to exercise authority in a particular situation. United States v. Rodgers, 466 U.S. 475, 479, 104 S.Ct. 1942, 80 L.Ed.2d 492 (1984). At the time Lutz submitted the forms to the lending institution certifying that she had held face-to-face interviews, HUD did not yet have jurisdiction because the final loan application package had not yet been submitted to it. Furthermore, HUD had no authority over the lending institution at this point with regard to whether or not the institution would accept the loan. Therefore, the matter was not within HUD's jurisdiction, and thus the crime was not complete. Because all of the final loan packages were submitted to HUD after June 11, 1991, Lutz's indictment was not barred by the statute of limitations.
This position appears compatible with Smith and possibly an expansion by applying a standard of receipt or control by the agency as to the time the offense is committed.
However, applying the conclusion of Smith, De Percio, and Lutz to Dunne's case as the construction most related to his claim of response, his motion fails. He expressly stated PanWorld Minerals mailed Dunne's false statements to the SEC on April 29, 1994. The statute of limitations began to run April 30, 1994, Guerrero, supra p. 8. The indictment was returned April 29, 1999. Therefore, the indictment was within five years of the completed offense and the limitations period under 18 U.S.C. § 3282.
If the expanded analysis of Lutz, supra, were to be applied, the statute clearly would not have run until May 4, 1999.
Conclusion
The motion of defendant Terrance Dunn, to dismiss the indictment against him because of the claim of the running of the statute of limitations should be DENIED.
Copies of the foregoing Report and Recommendation are being mailed to the parties who are hereby notified of their right to object to the same. The parties are further notified that they must file objections to the Report and Recommendation, with the clerk of the court, pursuant to 28 U.S.C. § 636(b), within ten (10) days after receiving it. Failure to file objections may constitute a waiver of those objections on subsequent appellate review.