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US v Ghavami Statute of Limitations Opinion July 2012

US v Ghavami Statute of Limitations Opinion July 2012

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II
UNITED STATES DISTRICT
COURT
SOUTHERN DISTRICT OF
NEW
YORK
-------------------------------x
UNITED STATES OF AMERICA-
v.
PETER GHA V AMI, GARY HEINZ, andMICHAEL WELTYDefendants.
-------------------------------x
KIMBA
M.
WOOD,
U.S.DJ.:
USDSSDNY
DOCUMENT
ELECTRONICALLY FILED
DOC#:
____________
_
DATE
FILED:
'::}-13-/1-
_
,
-J
lO
Cr. 1217 (KMW)
OPINION
&
ORDER
Defendants Peter Ghavami ("Ghavami"), Gary Heinz ("Heinz"), and Michael Welty("Welty") (collectively, "Defendants") are charged in a six-count Superseding Indictment(,'Indictment") with engaging in various conspiracies and schemes to defraud municipal bondissuers, the United States Department
of
the Treasury ("Treasury"), and the Internal RevenueService ("IRS") by manipulating the bidding process for municipal bond investment agreementsand other municipal finance contracts, in violation
of
18
U.S.C. §§
371,1343,
and 1349.Defendants have jointly filed the following motions:(1)Motion for a Bill
of
Particulars; (2)Motion to Dismiss Counts One Through Five as Untimely; (3) Motion for Relief as to CountsOne, Two, and Four as Multiplicitous; and (4) Motion to Dismiss Counts Two and Four Basedon the
Ex Post Facto
and Due Process Clauses.
(See
Dkt Nos. 98-101.) Additionally, Welty andGhavami move to sever Count Six, which charges only Heinz with witness tampering, inviolation
of
18
U.S.C. § ISI2(b).
(See
Dkt. Nos. 102-103.) For the following reasons, the CourtDENIES Defendants' motions.
1 
 
I.
FACTUAL BACKGROUND 
Municipal bonds are issued by governmental or quasi-governmental entities to raisemoney for operating funds or specific projects,
or
to refinance outstanding municipal debt.(Indictment
~
13.) Municipal bond issuers typically invest some or all
of
the
bond proceeds ininvestment products, which are sold to them by major financial institutions, including banks,investment banks, insurance companies, and financial services companies (collectively,"providers").
(Id.
~~
15-16.) The returns on municipal bonds are usually tax-exempt; tomaintain tax-exempt status, an issuer will usually select a provider through a
bonafide
competitive bidding procedure that is designed to comply with federal tax law and Treasuryregulations.
(Id.,r
17.) An issuer will often hire a third-party broker to conduct the biddingprocess and ensure compliance with Treasury and IRS regulations.
(Id.
~
18.)At all times relevant to the Indictment, Defendants were employed at a financial servicescompany ("FSC") that served as both a provider and a broker
of
municipal investment products.
I
Ghavami served as a managing director and co-head
of
FSC'
s municipal bond reinvestment andderivatives ("MRD") desk, and Heinz and Welty were vice presidents and marketers
on
theMRD desk.Counts One and Two charge all three Defendants with conspiracy to commit wire fraudin connection with
FSC's
role as a provider
of
investment agreements. Count One alleges thatthe Defendants conspired to defraud municipal bond issuers, the Treasury, and the IRS bymanipulating the bidding process for investment agreements and other municipal financecontracts by horizontally colluding with their counterparts at other providers, in violation
of
18
1
FSC is an unnamed co-conspirator in the Indictment, as is the financial institution that whollyowns the FSC, referred to in the Indictment as Financial Institution
A.
All unnamed coconspirators will be referred to in this Opinion
&
Order by the pseudonyms assigned to them inthe Indictment.2 
 
U.S.C.
§
371. Count Two alleges that the Defendants conspired to defraud municipal bondissuers, the Treasury, and the IRS by vertically colluding with a third-party broker to manipulateand control the bidding process in exchange for kickback payments to that broker, in violation
of
18
U.S.C.
§
1349.Counts Three through Five relate to FSC's role as a broker
of
investment agreements.Count Three is a substantive wire fraud charge against all three Defendants; it alleges thatDefendants committed wire fraud by accepting a kickback, disguised as a hedge fee, from acertain provider, Financial Institution D, in exchange for steering an investment agreement(hereinafter, the "Mass I Transaction") to Financial Institution D, in violation
of
18
U .S.C§ 1343. Count Four alleges that Heinz and Welty conspired to commit wire fraud bymanipulating the bidding process for multiple investment agreements in favor
of
a certainprovider, Provider B, in exchange for Provider B entering into hedging transactions, known asswaps, with Financial Institution A at inflated rates, in violation
of
18
U .S.C.
§
1349. CountFive is a substantive wire fraud charge against Heinz only; it alleges that Heinz committed wirefraud by steering an investment agreement to Financial Institution C at an artificially determinedprice level, in violation
of
18
U.S.C. § 1343.Count Six is a witness tampering charge against Heinz only; it alleges that Heinzwillfully obstructed an investigation into the Mass I
Transaction-the
basis for the charge inCount
Three-in
violation
of
18
U .S.c. § 1512(b)(1) and (3).
II. DEFENDANTS' MOTION FOR A BILL OF PARTICULARS
All three Defendants move the Court to order the Government to identify, with respect toeach transaction related to Counts One, Two, and Four that is listed in the preliminary Bill
of
3 

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