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U.S. v. DWYER

June 9, 2005.

UNITED STATES OF AMERICA,
v.
JAMES M. DWYER, Defendant.



The opinion of the court was delivered by: JEROME SIMANDLE, District Judge

OPINION

Following a seven week trial, on November 29, 2004, a jury convicted Defendant James M. Dwyer on all counts charged by the Government in the Second Superseding Indictment ("Indictment"): six counts of bank fraud, two counts of wire fraud, one count of material false statements to a financial institution, and one count of bankruptcy fraud. Following return of the guilty verdict, the sentencing phase of trial commenced on December 1, 2004, at which time the same Jury was asked to consider several sentencing factors under the Federal Sentencing Guidelines. On December 2, 2004, the Jury found several of those factors to be applicable.*fn1 [EDITORS' NOTE: THIS PAGE CONTAINED FOOTNOTES.] Defendant has moved for a judgment of acquittal under Rule 29, Fed.R.Crim.P.,*fn2 or, alternatively, for a new trial under Rule 33, Fed.R.Crim.P.*fn3 Defendant submits that the following errors warrant such relief: (1) the admission of evidence of loans obtained by Dwyer from Jersey Shore Savings Bank in 1990 and 1991; (2) the Court's failure to dismiss the bank fraud charge contained in Count 2 of the Second Superseding Indictment; (3) the Court's failure to dismiss Count 3 of the Second Superseding Indictment charging Defendant with making a material false statement to a financial institution; (4) admission of statements of certain out-of-court declarants; (5) the Court's permitting summary testimony of FBI Agent Pennock; (6) the Court's denying Defendant's motion to strike Count 10 charging Dwyer with bankruptcy fraud, Dwyer's motion to strike the testimony of Michael Hoffman, and Defendant's request to preclude Assistant United States Attorney from representing the Government; (7) the Court's denying Defendant's motion to strike the Second Superseding Indictment; (8) the Jury instruction at the guilt phase of trial stating that all of the means and methods used by the United States to collect the evidence presented were lawful; (9) the Court's instruction to the Jury at the sentencing phase of trial that it not treat Mr. Dwyer's companies as legally distinct entities; (10) the Court's failure to strike Counts 1 and 7 of the Second Superseding Indictment charging Dwyer with bank fraud; and (11) insufficiency of evidence supporting judgment of conviction. I. DISCUSSION

  A. 404(b) Evidence of 1990 and 1991 Jersey Shore Savings Bank Loans

  Defendant first argues that the Court erred in admitting evidence under Rule 404(b), Fed.R.Evid., pertaining to loans obtained by Dwyer from Jersey Shore Savings Bank ("Jersey Shore") (now Washington Mutual Bank) in 1990 and 1991. (Def. Br. at 1.) The Court's reasoning underlying its decision to admit such evidence was articulated in a Memorandum Opinion filed by the Court on October 18, 2004 and it is not necessary to repeat the specifics again here. Briefly, though, as stated in its Opinion, contrary to Defendant's suggestion now, the evidence pertaining to those loans was admitted not for its proof of Dwyer's propensity for bank fraud but, rather, for its probative value in showing that "he had previously submitted bogus financial information to a bank to obtain loans under the cover of a forged independent accountant's letterhead and signature." (Slip Op. at 10.) Moreover, the Court correctly predicted in its decision that Defendant at trial would likely seek to distance himself from the knowledge of the false financial submissions made in connection with the charged loans, such as by laying blame on Michael McKeever; and, that Mr. Dwyer personally committed these similar acts in 1990 and 1991 prior to his hiring Mr. McKeever pointed in favor of admitting the disputed evidence. (Id.)

  B. Count 2 of the Second Superseding Indictment

  Count 2 of the Second Superseding Indictment charges Dwyer with fraudulently obtaining a loan from National Penn Bank ("NatPenn") in violation of 18 U.S.C. §§ 1344 and 2. Defendant now claims that for the following reasons the Government failed to prove that claim as a matter of law: first, the construction loan obtained from NatPenn actually consisted of two loans; second, the pre-sale requirement (whereby NatPenn required a certain number of pre-sale agreements prior to approving the construction loan to Dwyer) applied only to the "revolver" component of the that loan; and finally, NatPenn never made any loan advance under the revolver component. (Def. Br. at 4.)

  First, Defendant maintains that the NatPenn construction loan consisted of two loans and, that NatPenn never made any loan advance under the revolver component. Thus, Defendant now argues, the pre-sale agreements were not relevant and any evidence relating thereto should not have been admitted. (Def. Br. at 4.) The Government argues in opposition that the evidence of the forged pre-sale agreements was material, as illustrated by the testimony of NatPenn's senior Vice President, Dennis Moyer. Specifically, Moyer testified that the bank would not have made the construction loan to Dwyer if the pre-sale agreements contained forged signatures, the checks supplied by the purported purchasers had not been deposited, or the purported pre-sales contained numerous contingencies other than mortgage contingencies. (Govt. Br. at 5-6.)

  Second, Dwyer argues that the pre-sale requirement applied only to the revolver portion of the loan. The Government disputes this argument, citing the commitment letter signed by Dwyer in which NatPenn required that Defendant have the pre-sales prior to closing the loan, as well as the testimony of Dennis Moyer that NatPenn would not have closed the loan but for the pre-sales. For that reason, the Government argues, even if the Court were to accept Defendant's allegation that the pre-sales had related strictly to the revolver portion of the loan, NatPenn still would not have loaned any money to Dwyer. (Govt. Br. at 6.)

  Finally, Defendant argues that the final sentence of paragraph 8 in Count 2 should have been stricken.*fn4 First, Defendant argues that, contrary to paragraph 8(1), each of the pre-sale buyers "wrote and signed" checks in the amount of 10% of the gross sales price. Even if true, however, Defendant's argument is flawed — that paragraph states that a minimum deposit "was never actually received." (emphasis added).

  Second, Dwyer maintains that paragraph 8(2) "makes no sense at all" and, thus, "no reasonable Jury could possibly understand what was being charged by that statement." (Def. Br. at 5.) As noted above, that portion of Count 2 provides that the purported pre-sales were not "bona fide sales" because "a rescission period on the purported presales did not exist as the purported purchasers' deposit money was fully refundable at any time." This is not hard to understand. The sales were not bona fide because they had no reality — the "buyer" could rescind at any time and the checks would be returned.

  Finally, defendant argues that paragraph 8(3) should have been stricken as the evidence showed that "NatPenn did not require the checks to be deposited into a NatPenn escrow; that its officials knew and approved of the title company that held the deposit checks; and that its senior loan officer, Joe Walker, authorized the title company to hold those checks uncashed rather than to deposit them." (Def. Br. at 5.) The Government responds that "Dwyer's self-serving statement that Joe Walker . . . authorized him to hold the checks rather than cash them, is irrelevant in the context of a Rule 29 motion where all factual disputes are resolved in favor of the Government." (Govt. Br. at 5 n. 1.) And, Moyer's testimony revealed that the bank required the check to be held on deposit. That testimony, according to the Government, is consistent with the terms of the purchase agreements. Furthermore, the documentation requested by the bank to verify that the deposit checks were deposited into an interest bearing bank account were falsified. (See Govt. Ex. 99.) The Court agrees.

  In any event, the Government contends, as to all of Defendant's arguments relating to Count 2, the false financial information provided to NatPenn in connection with the construction loans is, in and of itself, sufficient to sustain the conviction. (Govt. Br. at 6.) The Court again agrees and denies Defendant's motion as to Count 2. C. Count 3 of the Second Superseding Indictment

  Defendant Dwyer additionally moves for judgment of acquittal on Count 3, charging Defendant with "knowingly and willfully mak[ing] a material false statement in applications for advances" on the NatPenn Construction loan, for the purpose of influencing NatPenn to advance Construction Loan draws, in violation of 18 U.S.C. §§ 1014 and 2. Specifically, the charge states in Count 3, ¶ 5 that Dwyer

 
signed Draw Requisitions which stated that all of the Construction Loan advances had been used for the authorized purpose of paying for work on the Linwood Business Campus construction project, when, in fact, all advances had not been used for that construction project.
The text of Count 3, ¶ 2 also alleged that "the Draw Requisition contained a signed statement by defendant James M. Dwyer that all Construction Loan advances had been used to pay for work on the Linwood Business Campus project." The actual language of the Draw Requisitions pertaining to Count 3, which Mr. Dwyer signed for each of the loan draws, contains a printed statement as follows:

  The undersigned contractor certifies that, to the best of the contractor's knowledge, information and belief, the work covered by this application for payment has been completed in accordance with the Contract Documents, that all amounts had been paid by the Contractor for Work for which previous Certificates of Payment were issued and payments received from the Owner, and that current payment shown here is now due. 1. Defendant's Argument in Support of Judgment of Acquittal as to Count 3

  Defendant Dwyer asserts that "there is an obvious variance" between the language contained in the Second Superseding Indictment and that contained in the above statement signed by Dwyer. (Def. Br. at 6.) The defense argues that there is no evidence that Dwyer made any such statement (that "all of the Construction Loan advances had been used for the authorized purpose of paying for work on the Linwood Business Campus construction project") because the Draw Requisition contained no such statement. Moreover, Defendant points out that the statement "cannot properly be interpreted without reference to all of the `Contract Documents.'" (Id. at 8.) And, according to Dwyer, the Government failed to introduce Exhibits D22 and D36, allegedly "the most important" such documents. (Id.)

  In any event, Defendant argues, Mr. Dwyer signed the form containing that statement in his capacity as president of the corporation that was the Contractor for the job. And, because the statement is a certification to the Owner from the Contractor, he argues they could not have been made by Mr. Dwyer in his individual capacity, since his company was also the owner of the project. (Id. at 7.) Indeed, Dwyer now argues, the Contractor and Owner as identified in the above statement are "legal entities separate and distinct from Mr. Dwyer." (Id. at 8.) This aspect of Defendant's argument lacks merit, since there was ample evidence from which the Jury could conclude that Mr. Dwyer acted for his own benefit as sole proprietor or owner of these entities, and alternatively because he was also charged with aiding and abetting the violation of § 1014 in count 3.

  Defendant argues that his Due Process rights were violated by the variance between the Indictment's charge and the proof at trial. Further, Defendant argues that the rule of lenity requires that critical ambiguities be resolved in favor of Defendant, and that judgment of acquittal should be entered as to Count 3. 2. Government's Opposition to Dwyer's Motion for Judgment of Acquittal on Count 3

  In opposition, the Government argues that (1) there is no variance between the substance of the language in Count 3 and the facts adduced at trial and, in any event, Defendant has suffered no prejudice; and (2) the rule of lenity does not apply here.

  First, the Government argues that the substance of the two statements at issue is identical in that they both stand for the proposition that "the loan amounts had been used `for work' on the Linwood project." (Govt. 12/7/04 Ltr. at 2.) According to the Government, by signing the Draw Requisitions, Dwyer acknowledged that all draw money currently applied for would be used to pay the billings for work completed by the Linwood project subcontractors. (Id.) Moreover, although "[t]he indictment does not specifically state that Dwyer made the false statement at issue directly to NatPenn," it does "state? that Dwyer made the false statements and that they influenced the bank." (Govt. Br. at 7.) And, that statement was included with each draw application package submitted to NatPenn.

  In any event, the Government argues, Dwyer was not prejudiced by any variance between the statements as he was not surprised by "the facts adduced at trial regarding the operative language contained in the Draw Requisitions" and, thus, was able to properly defend against the charges in Count 3. Moreover, as the allegations contained in Count 3 set forth the crime and documents Dwyer utilized in connection therewith, there is no double jeopardy concern. (Govt. Br. at 8.)

  Finally, according to the Government, the rule of lenity is a rule of statutory construction that is only applicable when a criminal statute or sentencing guideline is ambiguous. See United States v. R.L.C., 503 U.S. 291, 305 (1992); United States v. Batchelder, 442 U.S. 114, 121-22 (1979); United States v. Bass, 404 U.S. 336, 347-48 (1971). Thus, the rule is "simply irrelevant" here. (Govt. Br. at 9.) The Court agrees that the rule of lenity does not apply in interpreting language of an indictment. 3. A Judgment of Acquittal on Count 3 Will Be Entered

  The Indictment charges that the "materially false statement" in Dwyer's applications for loan advances was "that all of the Construction Loan advances had been used for the authorized purpose of paying for work on the Linwood Business Campus construction project," when the fact was that "all advances had not been used for that construction project." (Count 3, ¶ 5.) The essence of Count 3, contained in ¶ 2 and repeated in ¶ 5, was that Dwyer falsely stated that all Construction Loan advances had been used to pay for work on the project. The Government introduced ample proof at trial that the advances had been at least partially diverted from paying for the ...


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