USA v. Steven Fenzl. No. 11-2459.
Fenzl is part-owner of Company U, an Illinois corporation engaged in the business of refurbishment and repair of refuse disposal containers. The government alleges that Fenzl engaged in a scheme to defraud the City of Chicago (the "City") of money and property related to bids submitted for, and the performance of, Specification No. 17390A (the "Contract"), to repair and refurbish the City's refuse disposal containers.
According to the indictment, in addition to submitting a bid for Company U, Fenzl orchestrated the submission of "sham" bids by three other companies with "materially false and fraudulent" documents. In addition to the bid rigging scheme, the indictment also alleges that Fenzl "fraudulently" obtained the Contract, in part, by certifying that Company U would subcontract for goods or services from a certified Minority Business Enterprise ("MBE") and a certified Women Business Enterprise ("WBE"), when in fact Defendants did not actually obtain such goods or services.
On August 24, 2009, Fenzl filed a motion to strike portions of the indictment arguing that alleged violations related to subcontracting with a MBE and WBE under the Contract did not constitute "a cognizable scheme to defraud the City of `money or property' under the federal [mail and wire] fraud statutes."
Currently before the Court is Fenzl's motion to dismiss the indictment in its entirety. (R. 65, Fenzl's Mot.) Fenzl asserts that there is no actionable mail or wire fraud because "there is no allegation here that the City [] suffered any pecuniary harm, nor that the alleged scheme contemplated pecuniary harm to the City" as required by Skilling v. United States, 130 S.Ct. 2896 (2010).
When considering a motion to dismiss, a court assumes all facts in the indictment are true and "must view all facts in the light most favorable to the government." United States v. Yashar, 166 F.3d 873, 880 (7th Cir.1999). The court should assess whether the government can produce evidence at trial that a defendant "conceivably" violated a given statute. United States v. Segal, 299 F.Supp.2d 840, 844 (N.D.Ill.2004).
The court should dismiss the indictment only if the government's "inability to produce sufficient evidence `so convincingly appears on the face of the indictment that as a matter of law there need be no necessity for such delay.'"
To convict a defendant of mail fraud under 18 U.S.C. § 1341, the government must prove: "(1) that the defendant knowingly devised or participated in a scheme to defraud or obtain money or property by means of materially false pretenses, representations, promises, or omissions as described in the indictment; (2) that the defendant did so knowingly and with the intent to defraud; and (3) that the defendant used the United States mail as a carrier." United States v. Thyfault, 579 F.3d 748, 751 (7th Cir.2009).
"The elements of wire fraud under 18 U.S.C. § 1343 directly parallel those of the mail fraud statute, but require the use of an interstate telephone call or electronic communication made in furtherance of the scheme." United States v. Leahy, 464 F.3d 773, 787 (7th Cir.2006).
Fenzl argues that the Supreme Court's recent decision in Skilling "compels the conclusion that some form of tangible, pecuniary harm must befall the victim in order to constitute a mail or wire fraud under §§ 1341 or 1343."
Fenzl's reliance on Skilling is misplaced as he has not been charged with honest-services fraud under § 1346. Fenzl points to language in the Skilling opinion where, in providing a history of the development of the "honest-services" doctrine, the Supreme Court distinguishes honest-service fraud from schemes in which the victim suffers loss of money or property.
Nothing in the cited language, however, suggests that the Court was inserting additional elements or limitations to the traditional mail or wire fraud statutes. See Skilling, 130 S.Ct. at 2926-27. As the law stands, the government does not need to establish pecuniary harm or economic loss as an element of the alleged offenses. See, e.g., Leahy, 464 F.3d at 786-87
Accordingly, dismissal of the indictment is not warranted.
Defendants-appellants Thomas Rybicki, Fredric Grae, and the law firm of Grae, Rybicki & Partners, P.C. appeal from the January 27, 2000 judgments of the district court, following a jury trial, convicting them of mail and wire fraud and conspiracy to commit mail fraud, in violation of 18 U.S.C. §§ 1341, 1343, and 371, based on their practice of making payments through middlemen or expediters to insurance company adjusters in return for more favorable settlements in personal injury lawsuits.
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