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United States v. Birks

March 30, 2009

UNITED STATES OF AMERICA
v.
FREDERICK J. BIRKS AND ROBERT BEURET DEFENDANTS.



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

[re Docket Item 76]

OPINION

I. INTRODUCTION

The Court is presented with Defendant Robert Beuret's ("Defendant Beuret") motion to dismiss the Third Superseding Indictment ("TSI"), which charges Defendant Beuret and Defendant Frederick Birks ("Defendant Birks") with conspiracy to defraud the United States under 18 U.S.C. § 371 [Docket Item 76].*fn1

Defendant Beuret offers two reasons why the Court should dismiss the TSI: (1) he argues that the TSI is untimely; and (2) he maintains that even if the TSI is timely, it does not sufficiently allege venue in the District of New Jersey and must be dismissed for that reason. The Court finds, for the reasons explained below, that the TSI is timely under United States v. Friedman, 649 F.2d 199 (1981), because the statute of limitations was tolled with the filing of the Second Superseding Indictment ("SSI") in this case, and that venue is sufficiently alleged.

II. ALLEGATIONS

Given the procedural posture of this case, no evidence has been presented and the only facts are those alleged in the SSI and the TSI. Both allege that for much of the year 2002, Defendants Beuret and Birks were engaged in a conspiracy to defraud the United States by (1) willfully employing "manipulative and deceptive devices and contrivances in connection with the purchase and sale of securities," and (2) knowingly and wilfully making untrue statements of material fact or omitting necessary facts when submitting a registration statement, Form S-8, filed under the Securities Act. (SSI ¶ 2; TSI ¶ 2.) An object of the conspiracy was "to issue free-trading eContent stock to John P. Serubo, pursuant to a materially false and fictitious Form S-8 registration statement, in order to compensate John P. Serubo and others who worked with him, including [Defendant Birks] and co-conspirators Anthony Castore and P.P., for illegal stock promotion activities regarding eContent's publically-traded stock."*fn2 (SSI ¶ 3; TSI ¶ 3.)

Though similar in many ways, the allegations in the TSI are not identical to the allegations in the SSI. First, in the SSI the last alleged overt act in furtherance of this conspiracy occurred on September 20, 2002, while in the TSI the last alleged overt act was on November 6, 2002. (SSI ¶ 26; TSI ¶ 30.) Second, in the SSI John P. Serubo received the aforementioned free-trading eContent stock on June 3, 2002, and the fraudulent Form S-8 authorizing the issuance of those stock was executed on June 7, 2002. (SSI ¶¶ 15, 20.) The TSI, however, alleges that the Form S-8 was executed on June 26, 2002, and that Serubo received the stock on July 1, 2002. (TSI ¶¶ 25-26.) Third, the TSI includes four new overt acts, two of which were allegedly perpetrated by Defendant Beuret. (TSI ¶¶ 12, 13, 29, 30.) Fourth, the TSI explains how the Form S-8 was materially false. (TSI ¶ 15.)

III. PROCEDURAL HISTORY

A. Motion to Dismiss Second Superseding Indictment

As is already evident, there have been four indictments issued in this case, but Defendant Beuret was not joined as a defendant until the SSI. On September 18, 2007, the grand jury returned the SSI. Defendant Beuret subsequently moved to dismiss the SSI for lack of venue, joined by Defendant Birks and the late Cornelia Eldridge. Defendants argued, in part, that because two of three alleged overt acts that occurred in New Jersey happened after John Serubo received the free-trading eContent stock (what Defendants characterized as the sole object of the conspiracy), they could not be in furtherance of the conspiracy and thus, Defendants urged, were not sufficient to allege proper venue in New Jersey. In response, the Government objected to Defendants narrow reading of purpose of the conspiracy as described in the SSI, but also sought to correct an error in that indictment, stating that evidence showed the eContent stock was issued, instead, on or about June 26, 2002 and that John Serubo received the stock on July 1, 2002. Thus, the Government asked for an opportunity to "amend" the SSI to correct this error.

The Court, in response to these various requests, declined to rule on Defendants' motion to dismiss, but also refused to permit the Government to amend the SSI to correct the error in dates unless the matter was presented to a grand jury. United States v. Birks, No. 07-153, 2008 WL 4104570 (D.N.J. Sept. 2, 2008). The Court found that the date on which Mr. Serubo received the eContent stock was too important to the allegations of conspiracy to permit the Government to merely amend the SSI to include these new dates. Id. at *4-6. The Court nevertheless gave the Government an opportunity to obtain a third superseding indictment to the correct the problem. Id. at *6. Moreover, the Court declined to rule on Defendants' motion to dismiss while there was confusion as to the date an object of the conspiracy was obtained. Id.

B. Motion to Dismiss Third Superseding Indictment

On November 20, 2008, the grand jury returned the TSI. Defendant Beuret, this time without his co-defendant, moved to dismiss the TSI as untimely and for failure to sufficiently allege venue. Defendant Beuret argues that the TSI, undisputedly untimely if taken alone, does not benefit from tolling due to the SSI because (1) the SSI was not validly pending at the time the TSI was issued, and (2) the TSI impermissibly broadens the charges in the SSI and so cannot relate back to that earlier indictment. Even if the TSI is timely, Defendant Beuret argues that it also fails to allege venue and should be dismissed on that ground. On January 29, 2009, the Court heard oral argument on the matter and reserved decision.

IV. DISCUSSION

Defendant Beuret challenges the TSI on its face. Thus, the Court proceeds with certain basic principles in mind. It is well established that "[a]n indictment returned by a legally constituted and unbiased grand jury... if valid on its face, is enough to call for trial of the charge on the merits." Costello v. United States, 350 U.S. 359, 363 (1956); United States v. Fisher, 871 F.2d 444, 451 (3d Cir. 1989). An "'indictment is sufficient if it, first, contains the elements of the offense charged and fairly informs the defendant of the charge against which he must defend, and, second, enables him to plead an acquittal or conviction in bar of future prosecutions for the same offense.'" United States v. Destio, 153 Fed. App'x. 888, 892 (3d Cir. 2007) (quoting Hamling v. United States, 418 U.S. 87, 117 (1974)). In considering a motion to dismiss an indictment, the Court "accepts as true the factual allegations set forth in the indictment." United States v. Besmajian, 910 F.2d 1153, 1154 (3d Cir. 1990).

A. Timeliness of Third Superseding Indictment

There is no dispute that the TSI, without the benefit of tolling, is untimely. The statute of limits for the one count of conspiracy in violation of 18 U.S.C. § 371 is five years. 18 U.S.C. § 3232. The TSI was handed down on November 20, 2008, more than five years after the last alleged overt act on November 6, 2002. Nevertheless, under Friedman, the statute of limitations may be tolled by the filing of a preceding indictment. 649 F.2d at 203 (citing United States v. Grady, 544 F.2d 598 (2d Cir. 1976)). The Third Circuit has adopted the doctrine that "a valid indictment tolls the statute of limitations and that return of a superseding indictment prior to the dismissal of the original indictment does not violate the statute of limitations if the superseding indictment does not substantially alter the charge." Friedman, 649 F.2d at 203; United States v. Oliva, 46 F.3d 320, 324 (3d Cir. 1995). The Friedman/Grady rule consequently consists of two necessary elements: (1) the preceding indictment relied upon must have been validly pending at the time the superseding indictment was issued; and (2) the superceding indictment cannot materially broaden or substantially amend the charges. See Friedman, 649 F.2d at 203-04; Grady, 544 F.2d at 601-02; United States v. Rutkoske, 506 F.3d 170, 175 (2d Cir. 2007). Defendant Beuret argues that neither element is present here. The Court will address each in turn.

1. Was the Second Superceding Indictment Validly Pending?

Defendant Beuret argues that the SSI was not validly pending because it did not adequately allege venue and because the SSI was also untimely. The overt acts alleged to establish venue in New Jersey and to bring the charge within the five-year statute of limitations, according to Defendant Beuret, did not further the alleged object of the conspiracy. The Government first responds that any potential problems with venue or timeliness have no impact on whether the SSI was "validly pending" for purposes of the Friedman/Grady analysis. The Government further insists that Defendant Beuret's arguments rely on an unreasonably narrow interpretation of the SSI and that the Government is not required to allege venue and timeliness with the level of detail that Defendant Beuret demands. This particular area of law is undeveloped in this circuit, and there is no appeals court opinion, published or unpublished, interpreting Friedman, nor is there a district court opinion, published or unpublished, considering the meaning of "validly pending."*fn3 Nevertheless, it is unnecessary for the Court to resolve this question, for the Court finds that under any meaning of "validly pending," the SSI was validly pending when the TSI was handed down, as now discussed.

In order to address both parties' arguments it is necessary to interpret the SSI to determine what object or objects of the conspiracy are alleged. To do so, the Court finds guidance from the Third Circuit in United States v. Knox Coal Co., 347 F.2d 33 (1965). In Knox Coal, the defendant argued that the conspiracy count did not "fully and clearly set forth the purpose of the conspiracy" such that the indictment was not sufficient. 347 F.2d at 38. To determine the object of the conspiracy, the appeals court looked to both the charging paragraph and all the listed means and method by which the conspiracy had been ...


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