Bingo! A Defense Win Limits Broad Use of Mail Fraud Statute

April 5, 2017

Bingo GameBy: Sara Kropf

The only thing I like better than seeing a defense lawyer win is seeing a friend who is a defense lawyer win.

A friend of mine, Jay Nanavati, led a case to victory in the Northern District of West Virginia, persuading the judge to dismiss all 53 counts of the indictment against his client.

It’s a win for Jay and his client—and the other co-defendants—but since the court’s opinion limits the government’s broad use of the mail fraud statue, it’s a win for all of us too.

The case is about bingo in West Virginia, so you know it’s going to be good.

The Background

In September 2016, Brent Jackson and six other co-defendants were indicted in a 53-count indictment for mail fraud (15 counts), conspiracy to launder money (1 count), substantive money laundering (36 counts), and illegal gambling (1 count). They were all affiliated with Kids Against Drugs of WV Inc., which did business as “Big Bucks Bingo,” or other companies who received money from bingo games operated by Big Bucks Bingo.

The government alleged the following in support of its mail fraud counts:

  1. Big Bucks Bingo operated charitable bingo, super bingo, and raffle occasions for two charitable organizations, FOP#83 and the Berkeley County Humane Society.
  2. To operate these games, Big Bucks Bingo obtained an annual permit from the West Virginia Tax Commissioner.
  3. Big Bucks Bingo did not follow West Virginia law with respect to operating these games.
  4. Big Bucks Bingo kept 90% of the proceeds of the games and gave 10% of the proceeds to the charities.
  5. Big Bucks Bingo was not itself a charitable organization.

The conspiracy to commit money laundering was not very elaborate. (It’s almost as if they weren’t hiding anything.)

According to the government, the money from the bingo games went into a bank account for Kids Against Drugs of WV and then transferred to the bank account for a company called S&B Berkeley LLC, and then transferred to an entity called Berkeley Plaza LLC. Some of the bingo proceeds also went to the bank account of a separate Maryland corporation.

I know, I know, you were expecting Cayman Islands or Swiss accounts or something a little more elaborate. But the money laundering statute (18 U.S.C. § 1956) requires very little, only that

Whoever, knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity, conducts or attempts to conduct such a financial transaction which in fact involves the proceeds of specified unlawful activity—


(i) with the intent to promote the carrying on of specified unlawful activity; or

(ii) with intent to engage in conduct constituting a violation of section 7201 or 7206 of the Internal Revenue Code of 1986; or

(B) knowing that the transaction is designed in whole or in part—

(i) to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity; or

(ii) to avoid a transaction reporting requirement under State or Federal law.

If you put money in the bank that is from a crime, and your purpose of putting it in the bank was to help the illegal activity or hide the illegal activity, then that’s money laundering.

The First Dismissal

In November 2016, the court dismissed count 53—the gambling count. It held that the indictment did not allege enough facts to satisfy each element of the statute at issue (18 U.S.C. § 1955), explaining:

Here, the only facts included in count fifty-three of the indictment are the Defendants’ names and an allegation that the charged conduct took place continuously, from in or about September 2007 until June 16, 2014. Notably, count fifty-three does not incorporate by reference any preceding paragraphs, part of section of the indictment.

There’s minimal pleading, and then there is ridiculous bare bones pleading. Count 53 was squarely in the latter category. That’s just not enough to survive a motion to dismiss. The government has to give you some idea of what you allegedly did wrong.

The court refused to dismiss counts 1-52, but it did grant the defendants’ motion for a bill of particulars.

The Second (and Final) Dismissal

In February 2017, the defense filed a short-but-sweet, 7 1/2-page motion to dismiss. Think about that for a second. Jay won a complete dismissal of the entire case with less than eight pages.

Omit needless words, right?

The court granted the motion on March 24, 2017.

An indictment must allege facts showing all of the elements of an offense. It’s not a high bar, and motions to dismiss indictments are regularly denied.

For mail fraud, the government had to allege that the defendants (1) knowingly participated in a scheme to defraud and (2) mailed, or caused to be mailed anything “for the purpose of executing such scheme.”

Again, not a high bar. The government just didn’t meet it here.

The court first engaged in a lengthy discussion of the difference between an actionable scheme to defraud (using deception to cause injury) and simply deceiving someone (tricking someone, but not necessarily causing harm). It also explained that the mail fraud statute does not reach fraud unless it is related to tangible property, not some intangible right.

With that background, the court summarized the government’s theory of the case:

The scheme and artifice described in the indictment alleges (1) multiple violations of the West Virginia Code and (2) a highly unequal proceeds-sharing arrangement where Kids Against Drugs misrepresented itself as a charity.

First, the court held that after Cleveland v. United States, 531 U.S. 12 (2000), violating West Virginia law to obtain bingo licenses does not equal mail fraud.

Second, the court addressed whether FOP#83 and the Berkeley County Humane Society were defrauded when they received only 10% of the proceeds from the games.

The court said this fact doesn’t satisfy the standard for mail fraud:

Accordingly, upon careful consideration of the indictment, this Court finds that the allegations in the indictment, if proven, would not permit a jury to conclude that the defendants committed mail fraud in violation of 18 U.S.C. § 1341. The indictment fails to adequately allege a scheme and artifice to defraud. There is no allegation that the Defendants contemplated, intended, or could foresee injury, or did in fact injure, anyone.

In other words, there may have been deceit, but there was no scheme to defraud under the statute. The charities received 10% of the proceeds and the defendants’ failure to give them 100% was not fraud.

Third, the victims (BOP#83 and the Berkeley County Humane Society) did not have a property right to the truth. It is not sufficient to allege that the defendants lied to the victims.

Fourth, the indictment did not properly allege an injury to the victims:

There is no allegation that the charities were injured in any way. In fact, the charities benefited from the scheme by receiving a portion of the proceeds they otherwise would not have received had the Defendants not used their charities to obtain licenses. The misrepresentation in the instant case is not material and does not go to the heart of the bargain as to any arrangement between the Defendants and the charities. Accordingly, the indictment fails to demonstrate a scheme or artifice to defraud. Whatever the criminal conduct described in the indictment may be, it is not federal mail fraud.

Because the money laundering relied upon the mail fraud to establish illegal conduct, the court also dismissed those counts as well.

One Caveat

The court dismissed the case without prejudice. So, in theory, the government could choose to amend the indictment and try again. That last sentence quoted above suggests that the judge may not think too highly of the defendants and what they allegedly did.

Let’s hope the government realizes that it has now lost two motions to dismiss in the same case. It might be time to move along.

Here’s a LINK to the decision. Opinion and Order Dismissing Indictment – WV bingo case

Published by Kropf Moseley

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