UNI TED STATES DI STRI CT COURT

EASTERN DI STRI CT OF LOUI SI ANA
UNI TED STATES OF AMERI CA CRI MI NAL ACTI ON
v. NO. 14- 022

PETER M. HOFFMAN, SECTI ON " F"
MI CHAEL P. ARATA,
SUSAN HOFFMAN
ORDER AND REASONS
Bef or e t he Cour t ar e t wo mot i ons t o di smi ss t he mai l f r aud,
wi r e f r aud, and conspi r acy char ges cont ai ned i n Count s 1 t hr ough 21
of t he second super sedi ng i ndi ct ment : one f i l ed j oi nt l y by Pet er
and Susan Hof f man and one f i l ed by Mi chael Ar at a. For t he r easons
t hat f ol l ow, t he mot i ons ar e DENI ED.
Background
Pet er and Susan Hof f man and Mi chael Ar at a wer e par t ner s i n
var i ous movi e- r el at ed busi ness vent ur es. One such vent ur e was t he
pur chase and r enovat i on of a di l api dat ed mansi on on Espl anade
Avenue i n New Or l eans, whi ch t hey t ur ned i nt o a post - pr oduct i on
f i l m edi t i ng f aci l i t y. Thi s f eder al whi t e col l ar cr i mi nal case
ar i ses f r omt he gover nment ' s al l egat i ons t hat - - i n connect i on wi t h
t he r enovat i on pr oj ect - - t he Hof f mans and Mr . Ar at a ( t hr ough
compani es t hey owned) commi t t ed, ai ded and abet t ed, and conspi r ed
t o commi t , mai l and wi r e f r aud by submi t t i ng f al se expense r epor t s
i n or der t o decei ve t he St at e of Loui si ana i nt o i ssui ng st at e t ax
1
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cr edi t s t hat t hey had not act ual l y ear ned and wer e not ent i t l ed t o
r ecei ve.
The backdr op of t hi s f eder al cr i mi nal case i s a Loui si ana
st at e l aw t ax cr edi t pr ogr am. I n 1992, t o encour age l ocal
devel opment of a mot i on pi ct ur e and t el evi si on i ndust r y, t he St at e
of Loui si ana enact ed t he Loui si ana Mot i on Pi ct ur e I ncent i ve Act ,
La. R. S. § 47: 6007.
1
By l aw, t he St at e pr ovi ded i ncent i ves i n t he
f or mof t ax cr edi t s f or St at e- cer t i f i ed i nf r ast r uct ur e pr oj ect s, as
wel l as f or pr oduct i on pr oj ect s.
2
I ndi vi dual s and busi nesses
maki ng mot i on pi ct ur es wer e el i gi bl e t o r ecei ve t ax cr edi t s, whi ch
wer e cal cul at ed as a per cent age of t he compani es' qual i f i ed
expendi t ur es i n Loui si ana. I nf r ast r uct ur e expendi t ur es i ncl uded t he
pur chase, const r uct i on, and use of f aci l i t i es t hat wer e di r ect l y
1
Consi der i ng t hat Loui si ana i s t hi r d i n f i l mpr oduct i on i n t he
Uni t ed St at es, i t seems t hat t hi s l egi sl at i on has pl ayed a l eadi ng
r ol e i n accompl i shi ng i t s i ndust r y devel opment obj ect i ve.
2
La. R. S. § 47: 6007 has been amended sever al t i mes. Act 456 of
2005 aut hor i zed i ncome t ax cr edi t s f or St at e- cer t i f i ed
i nf r ast r uct ur e pr oj ect s. Wi t h r espect t o t hese i nf r ast r uct ur e
pr oj ect s, Act 456 of 2005 pr ovi ded t hat i f t he t ot al base
i nvest ment was gr eat er t han $300, 000, each i nvest or was al l owed a
t ax cr edi t of 25%of t he base i nvest ment , and an addi t i onal 15%t ax
cr edi t was al l owed unt i l J anuar y 1, 2008; t he avai l abl e t ax cr edi t
t ot al ed 40%. The r el evant ver si on of t he Act f or t he pur poses of
t he cr i mi nal char ges at i ssue i n t hi s case i s t he amendment
accompl i shed by Act 456, ef f ect i ve J ul y 1, 2007. Act 456 pr ovi ded
f or t he i nf r ast r uct ur e t ax cr edi t s aut hor i zed by Act 456 of 2005
t hr ough J anuar y 1, 2009, but i mposed l i mi t s on t hose t ax cr edi t s
f or appl i cat i ons f i l ed af t er August 1, 2007: a si x- mont h deadl i ne
was i mposed and a $25 mi l l i on per pr oj ect cap on t he t ax cr edi t s
was al so i mposed. The f i l mi nf r ast r uct ur e t ax cr edi t s at i ssue i n
t hi s mat t er wer e r epeal ed i n 2009, but t he f i l m pr oduct i on t ax
cr edi t s r emai n i n ef f ect .
2
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r el at ed t o and ut i l i zed f or mot i on pi ct ur e pr oduct i on i n Loui si ana.
To qual i f y f or i nf r ast r uct ur e t ax cr edi t s, al l f unds had t o be
expended, and such expendi t ur es had t o be ver i f i ed by an
i ndependent Loui si ana Cer t i f i ed Publ i c Account ant .
Thi s t ax cr edi t pr ogr am i s admi ni st er ed by t he Of f i ce of
Ent er t ai nment I ndust r y Devel opment , an of f i ce wi t hi n t he Depar t ment
of Economi c Devel opment . The admi ni st r at i ve r evi ew and appr oval
pr ocess was descr i bed by t he Loui si ana Supr eme Cour t as f ol l ows:
To r ecei ve an i ni t i al cer t i f i cat i on l et t er f r omt he St at e appr ovi ng
a pr oj ect as a St at e- cer t i f i ed i nf r ast r uct ur e pr oj ect , an appl i cant
must f i l e an appl i cat i on f or mot i on pi ct ur e i nvest or t ax cr edi t s
wi t h t he OEI D, and obt ai n appr oval of t he pr oj ect f r om t he DED,
OEI D, and t he Depar t ment of Admi ni st r at i on. See Red St i ck St udi o
Devel opment , L. L. C. v. Loui si ana, 56 So. 3d 181, 183- 84 ( La. 2011)
( ci t i ng La. R. S. 47: 6007 ( 2005) ) . Af t er an i ni t i al cer t i f i cat i on
l et t er i s i ssued, and accept ed by t he appl i cant , t he appl i cant must
t hen submi t t o t hose same agenci es a cost r epor t of i nf r ast r uct ur e
expendi t ur es; t he r epor t must be audi t ed and cer t i f i ed by an
i ndependent cer t i f i ed publ i c account ant . I d. at 183 n. 4. Based on
t he appl i cant ' s submi ssi on, t he r el evant st at e agenci es det er mi ne
whet her t hose i nf r ast r uct ur e expendi t ur es qual i f y f or t ax cr edi t s;
i f so, t hose agenci es wi l l cer t i f y t he t ax cr edi t s based upon t he
appr oved i nf r ast r uct ur e expendi t ur es. I d. Once cer t i f i ed, t ax
cr edi t s coul d be appl i ed t o of f set agai nst t he Loui si ana t axpayer ' s
3
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i ncome t ax l i abi l i t y, or t hey may be sol d. I d.
I n r enovat i ng t he pr oper t y at 807 Espl anade Avenue
3
wi t h t he
vi si on of t ur ni ng i t i nt o a post - pr oduct i on f i l m st udi o, Pet er
Hof f man,
4
Susan Hof f man,
5
and Mi chael Ar at a,
6
t hr ough t hei r
r espect i ve compani es, avai l ed t hemsel ves of t he St at e f i l m
i nf r ast r uct ur e t ax cr edi t pr ogr am. They submi t t ed t hr ee
appl i cat i ons and suppor t i ng document s t o t he St at e f or t ax cr edi t s.
As st at ut or i l y r equi r ed, t he def endant s f i r st submi t t ed t he 807
Espl anade expendi t ur es t o audi t or s f or ver i f i cat i on. To ver i f y t he
expendi t ur es, t he audi t or s r equest ed pr oof of payment such as
i nvoi ces, bank t r ansf er s, bank st at ement s, and ot her cor por at e
3
The gover nment al l eges t hat Pet er and Susan Hof f man and
Mi chael Ar at a bought t he mansi on at 807 Espl anade Avenue on Oct ober
3, 2007.
4
Pet er M. Hof f man, t he gover nment al l eges, was t he CEO of
Seven Ar t s Ent er t ai nment , I nc. , a company i nvol ved i n t he mot i on
pi ct ur e and ent er t ai nment i ndust r y i n Cal i f or ni a. Mr . Hof f man was
al so an at t or ney and ser ved as a execut i ve i n numer ous f i nanci al
and t ax- pr ef er r ed f i nanci ngs f or over 25 year s. He al so owned,
oper at ed, and cont r ol l ed numer ous compani es af f i l i at ed wi t h Seven
Ar t s Ent er t ai nment , I nc. , i ncl udi ng Seven Ar t s Pi ct ur es, I nc. ,
Seven Ar t s Pi ct ur es Loui si ana, LLC, Seven Ar t s Fi l med Ent er t ai nment
Loui si ana, LLC, and Seven Ar t s Post , LLC.
5
Susan Hof f man, t he gover nment al l eges, was a Cal i f or ni a f i l m
pr oducer who r el ocat ed t o New Or l eans. Susan Hof f man al so owned
and oper at ed sever al compani es, i ncl udi ng Leeway Pr oper t i es, New
Moon Pi ct ur es, LLC, and Seven Ar t s Pi ct ur es Loui si ana, LLC.
6
Mi chael P. Ar at a, i t i s al l eged, was al so a Loui si ana
at t or ney and busi nessman who owned and oper at ed compani es i nvol ved
i n t he movi e and ent er t ai nment i ndust r y, i ncl udi ng Seven Ar t s
Pi ct ur es Loui si ana, LLC, Voodoo Pr oduct i on Ser vi ces, LLC, Voodoo
St udi os, LLC, and LEAP Fl i mFund I I , LLC, whi ch pur chased, sol d and
br oker ed Loui si ana f i l mt ax cr edi t s.
4
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f i nanci al r ecor ds. Based on t hi s i nf or mat i on, t he audi t or s cr eat ed
audi t r epor t s det ai l i ng t he def endant s' cl ai med expendi t ur es on 807
Espl anade. These audi t r epor t s wer e submi t t ed as par t of t he
Febr uar y 26, 2009, J anuar y 20, 2010, and J ul y 3, 2012 submi ssi ons
t o t he St at e f or f i l mi nf r ast r uct ur e t ax cr edi t s.
On J une 19, 2009 t he St at e i ssued $1, 132, 480. 80 i n t ax cr edi t s
t o Seven Ar t s Pr oduct i on Loui si ana, LLC as a r esul t of t he f i r st
appl i cat i on, t he Febr uar y 26, 2009 submi ssi on. Mr . Ar at a pai d cash
t o t he par t ner shi p f or t hese t ax cr edi t s, at a di scount ed pr i ce,
t hr ough hi s company LEAP Fi l mFund I I , LLC, t hen, t he gover nment
cl ai ms, sol d t he t ax cr edi t s t o l ocal busi nesses and i ndi vi dual s
f or pr of i t . The St at e di d not i ssue t ax cr edi t s based on t he
J anuar y 20, 2010 and J ul y 3, 2012 appl i cat i ons.
On Febr uar y 6, 2014 a gr and j ur y r et ur ned a si x- count
i ndi ct ment , char gi ng Pet er Hof f man and Mi chael Ar at a wi t h
conspi r acy ( Count 1) , as wel l as ai di ng and abet t i ng, and act ual l y
commi t t i ng wi r e f r aud ( Count s 2 - 6) , i n vi ol at i on of 18 U. S. C. §§§
371, 2, 1343.
7
Af t er f i r st super sedi ng on Apr i l 3, 2014,
8
t he
7
Pet er Hof f man f i l ed a mot i on f or bi l l of par t i cul ar s, whi ch
was deni ed by Magi st r at e J udge Knowl es on Apr i l 28, 2014.
8
Thi s super sedi ng i ndi ct ment f i l ed on Apr i l 3, 2014 char ged
Susan Hof f man f or t he f i r st t i me, and added addi t i onal char ges
agai nst t he ot her def endant s: conspi r acy ( Count 1) , wi r e f r aud and
ai di ng and abet t i ng agai nst Pet er Hof f man and Mi chael Ar at a ( Count s
2 - 5) , wi r e f r aud and ai di ng and abet t i ng agai nst al l t hr ee
def endant s ( Count s 6 - 17) , mai l f r aud and ai di ng and abet t i ng
agai nst al l t hr ee def endant s ( Count 18) , and f al se st at ement s
agai nst Mi chael Ar at a onl y ( Count s 19 - 22) .
5
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gover nment f i l ed a 25- count second super sedi ng i ndi ct ment on May
15, 2014, char gi ng t he Hof f mans and Mr . Ar at a wi t h conspi r i ng t o
commi t , commi t t i ng, and ai di ng and abet t i ng, wi r e and mai l f r aud,
i n vi ol at i on of 18 U. S. C. §§§§ 371, 1343, 1341, and 2, and al so
char gi ng Mr . Ar at a wi t h maki ng f al se st at ement s t o f eder al agent s.
9
Wi t h r espect t o Count 1, whi ch al l eges conspi r acy t o use t he
mai l or wi r es i n f ur t her ance of t he def endant s' scheme t o def r aud,
t he gover nment al l eges 37 speci f i c over t act s, and char ges t hat t he
def endant s accompl i shed t hei r conspi r acy, and t ook st eps t o conceal
f r om t he St at e t hei r scheme, when t hey: 1) . pr epar ed and f i l ed
mat er i al f al se and mi sl eadi ng t ax cr edi t appl i cat i ons, f r audul ent l y
cl ai mi ng t hat cer t ai n expendi t ur es had been made t o 807 Espl anade
when t hose expendi t ur es had not been made; 2) . pr epar ed and
submi t t ed t o t he audi t or s and t o t he St at e mat er i al l y f al se and
mi sl eadi ng i nt er nal account i ng books and r ecor ds and payment
r ecei pt cer t i f i cat i ons t o make i t appear as i f cer t ai n expendi t ur es
had been made and cer t ai n i t ems had been pai d f or and r ecei ved when
t hose expendi t ur es had not been made and t hose i t ems had not been
pai d f or or r ecei ved; 3) . pr epar ed and submi t t ed t o t he audi t or s
and t he St at e mat er i al l y f al se and mi sl eadi ng i nvoi ces i n suppor t
of f r audul ent expendi t ur es; 4) . conduct ed mat er i al l y f al se and
9
Count 1 al l eges conspi r acy, Count s 2- 5 al l ege wi r e f r aud as
agai nst onl y Messr s. Hof f man and Ar at a, Count s 6- 20 al l ege wi r e
f r aud agai nst al l t hr ee def endant s, Count 21 al l eges mai l f r aud,
and Count s 22 - 25 char ge onl y Mi chael Ar at a wi t h maki ng f al se
st at ement s t o f eder al agent s i n vi ol at i on of 18 U. S. C. § 1001.
6
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mi sl eadi ng ci r cui t ous bank t r ansf er s of money t o make i t appear
t hat cer t ai n i t ems wer e pai d f or when t hose i t ems had not been pai d
f or ; and 5) . pr epar ed and submi t t ed t o t he audi t or s pr oof s of
payment t hat wer e mat er i al l y f al se and mi sl eadi ng i n t hat onl y
out goi ng money t r ansf er s wer e di scl osed t o t he audi t or s when t he
money had act ual l y been i mmedi at el y r et ur ned t o t he or i gi nal bank
account and t hose r et ur n money t r ansf er s wer e not di scl osed t o t he
audi t or s.
As t o t he wi r e f r aud char ges ( Count s 2 - 5 agai nst Pet er
Hof f man and Mi chael Ar at a and Count s 6 - 20 agai nst al l t hr ee
def endant s) , t he gover nment al l eges:
Begi nni ng on or about Mar ch 1, 2006, and cont i nui ng unt i l
on or about J ul y 3, 2012, i n t he East er n Di st r i ct of
Loui si ana and el sewher e, t he def endant s, Pet er Hof f man,
Mi chael Ar at a, Susan Hof f man . . . di d knowi ngl y and
wi l l f ul l y devi se and i nt end t o devi se a scheme and
ar t i f i ce t o def r aud and t o obt ai n money and pr oper t y by
means of f al se and f r audul ent pr et enses, r epr esent at i ons
and pr omi ses by submi t t i ng and causi ng t o be submi t t ed
mat er i al l y f al se, mi sl eadi ng and f r audul ent i nf or mat i on
t o t he audi t or s and t o t he St at e of Loui si ana f or t he
pur pose of obt ai ni ng i nf r ast r uct ur e t ax cr edi t s r el at i ve
t o 807 Espl anade. Al l i n vi ol at i on of Ti t l e 18, Uni t ed
St at es Code, Sect i ons 1343 and 2.
Wi t h r espect t o t he mai l f r aud char ge ( Count 21) , t he gover nment
al l eges:
On or about Febr uar y 3, 2010 . . . t he def endant s, Pet er
Hof f man, Mi chael Ar at a, Susan Hof f man . . . f or t he pur pose
of execut i ng and at t empt i ng t o execut e, and i n
f ur t her ance of , t he scheme and ar t i f i ce t o def r aud set
f or t h i n par agr aph 2 of Count s 6 t hr ough 20 above, di d
knowi ngl y send and cause t o be sent , del i ver ed, and moved
by pr i vat e commer ci al i nt er st at e car r i er s cor r espondence
dat ed Febr uar y 2, 2010, addr essed t o an audi t or f or t he
7
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St at e of Loui si ana wi t h at t ached exhi bi t s, cor por at e
agr eement s, and i nvoi ces f or pr oj ect management ,
equi pment consul t i ng, and of f i ce r ent . Al l i n vi ol at i on
of Ti t l e 18, Uni t ed St at es Code, Sect i ons 1341 and 2.
Ther e i s al so a not i ce of f r aud f or f ei t ur e i n t he second
super sedi ng i ndi ct ment , i n whi ch t he gover nment seeks f or f ei t ur e of
pr oper t y, i ncl udi ng " [ a] t l east $1, 132, 480. 80 i n Uni t ed St at es
Cur r ency and al l i nt er est and pr oceeds t r aceabl e t her et o. " The
def endant s now seek di smi ssal of Count s 1 t hr ough 21 of t he second
super sedi ng i ndi ct ment , whi ch char ges t hem wi t h conspi r acy t o
commi t mai l and wi r e f r aud, as wel l as commi t t i ng and ai di ng and
abet t i ng mai l and wi r e f r aud.
10
I .
A.
The def endant s move t o di smi ss Count s 1 t hr ough 21 of t he
second super sedi ng i ndi ct ment pur suant t o Feder al Rul e of Cr i mi nal
Pr ocedur e 12( b) ( 3) ( B) on t he gr ound t hat t he i ndi ct ment f ai l s as a
mat t er of l aw t o st at e of f enses agai nst t he Uni t ed St at es.
The Si xt h Amendment of t he U. S. Const i t ut i on pr ovi des, i n
par t , t hat " [ i ] n al l cr i mi nal pr osecut i ons, t he accused shal l enj oy
t he r i ght . . . t o be i nf or med of t he nat ur e and cause of t he
accusat i on. " U. S. CONST. amend. VI . Thi s guar ant ee i s i mpl ement ed
10
Mi chael Ar at a does not pr esent l y r equest di smi ssal of t he
f al se st at ement char ges agai nst hi m, cont ai ned i n Count s 22 - 25 of
t he second super sedi ng i ndi ct ment .
8
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by Rul e 7 of t he Feder al Rul es of Cr i mi nal Pr ocedur e
11
and by case
l i t er at ur e. The U. S. Cour t of Appeal s f or t he Fi f t h Ci r cui t
i nst r uct s t hat :
An i ndi ct ment i s l egal l y suf f i ci ent i f ( 1) each count
cont ai ns t he essent i al el ement s of t he cr i me char ged, ( 2)
t he el ement s ar e descr i bed wi t h par t i cul ar i t y, and ( 3)
t he i ndi ct ment i s speci f i c enough t o pr ot ect t he
def endant agai nst a subsequent pr osecut i on f or t he same
of f ense.
Uni t ed St at es v. Cooper , 714 F. 3d 873, 877 ( 5
t h
Ci r . 2013) ( i nt er nal
quot at i ons and ci t at i on omi t t ed) , cer t . deni ed, 134 S. Ct . 313
( 2013) .
12
Al t hough each el ement of t he char ged of f ense must be
al l eged, " t he l aw does not compel a r i t ual of wor ds" ; t he
suf f i ci ency of an i ndi ct ment " depends on pr act i cal , not t echni cal ,
consi der at i ons. " Uni t ed St at es v. Rat cl i f f , 488 F. 3d 639, 643 ( 5
t h
Ci r . 2007) ( ci t at i on omi t t ed) .
" [ T] he pr opr i et y of gr ant i ng a mot i on t o di smi ss an i ndi ct ment
. . . by pr et r i al mot i on i s by- and- l ar ge cont i ngent upon whet her t he
i nf i r mi t y i n t he pr osecut i on i s essent i al l y one of l aw or i nvol ves
det er mi nat i ons of f act . I f a quest i on of l aw i s i nvol ved, t hen
11
Rul e 7( c) ( 1) pr ovi des t hat " [ t ] he i ndi ct ment or i nf or mat i on
must be a pl ai n, conci se, and def i ni t e wr i t t en st at ement of t he
essent i al f act s const i t ut i ng t he of f ense char ged and must be si gned
by an at t or ney f or t he gover nment . . . . "
12
St at ed di f f er ent l y, see al so Uni t ed St at es v. Caval i er , 17
F. 3d 90, 92 ( 5
t h
Ci r . 1994) ( ci t i ng Uni t ed St at es v. Ar l en, 947 F. 2d
139, 144 ( 5
t h
Ci r . 1991) , cer t . deni ed, 503 U. S. 939 ( 1992) ) : " An
i ndi ct ment i s suf f i ci ent i f i t cont ai ns t he el ement s of t he char ged
of f ense, f ai r l y i nf or ms t he def endant of t he char ges agai nst hi m,
and i nsur es t hat t her e i s no r i sk of f ut ur e pr osecut i on f or t he
same of f ense. "
9
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consi der at i on of t he mot i on i s gener al l y pr oper . " Uni t ed St at es v.
Font enot , 665 F. 3d 640, 644 ( 5
t h
Ci r . 2011) ( quot i ng Uni t ed St at es
v. Fl or es, 404 F. 3d 320, 324 ( 5
t h
Ci r . 2005) ( i nt er nal quot at i on
mar ks and ci t at i ons omi t t ed) ) . When def endant s chal l enge an
i ndi ct ment on t he gr ound t hat i t f ai l s t o st at e an of f ense, t he
Fi f t h Ci r cui t i nst r uct s t hat t he Cour t must " t ake t he al l egat i ons
of t he i ndi ct ment as t r ue . . . t o det er mi ne whet her an of f ense has
been st at ed. " I d. ( ci t at i ons omi t t ed) .
B.
" The st ar t i ng pl ace f or any det er mi nat i on of whet her t he
char ged conduct [ i s] pr oscr i bed by [ a cr i mi nal ] st at ut e i s a
r eadi ng of t he l anguage of t he char gi ng i nst r ument and t he st at ut e
i t sel f . " Rat cl i f f , 488 F. 3d at 643 ( ci t at i ons omi t t ed) . The mai l
and wi r e f r aud st at ut es, 18 U. S. C. § 1341 and § 1343,
13
pr ohi bi t t he
13
The mai l f r aud st at ut e, 18 U. S. C. § 1341, pr ovi des:
Whoever , havi ng devi sed or i nt endi ng t o devi se any scheme
or ar t i f i ce t o def r aud, or f or obt ai ni ng money or
pr oper t y by means of f al se or f r audul ent pr et enses,
r epr esent at i ons, or pr omi ses, . . . f or t he pur pose of
execut i ng such scheme or ar t i f i ce or at t empt i ng t o do so,
[ uses t he mai l s or causes t hem t o be used] , shal l be
f i ned under t hi s t i t l e or i mpr i soned not mor e t han t went y
year s, or bot h.
The wi r e f r aud st at ut e, 18 U. S. C. § 1343, pr ovi des:
Whoever , havi ng devi sed or i nt endi ng t o devi se any scheme
or ar t i f i ce t o def r aud, or f or obt ai ni ng money or
pr oper t y by means of f al se or f r audul ent pr et enses,
r epr esent at i ons, or pr omi ses, t r ansmi t s or causes t o be
t r ansmi t t ed by means of wi r e . . . i n i nt er st at e or f or ei gn
commer ce, any wr i t i ngs, si gns, si gnal s, pi ct ur es, or
10
Case 2:14-cr-00022-MLCF-DEK Document 161 Filed 07/18/14 Page 10 of 27
use of t he mai l ( or use of wi r es) f or " any scheme or ar t i f i ce t o
def r aud, or f or obt ai ni ng money or pr oper t y by means of f al se or
f r audul ent pr et enses, r epr esent at i ons, or pr omi ses. " Uni t ed St at es
v. McMi l l an, 600 F. 3d 434, 447 ( 5
t h
Ci r . 2010) ( ci t at i on omi t t ed) ,
cer t . deni ed, 131 S. Ct . 504 ( 2010) .
14
" To suf f i ci ent l y char ge t he
of f ense of mai l [ or wi r e] f r aud, t he i ndi ct ment must al l ege t hat
( 1) t he def endant devi sed or i nt ended t o devi se a scheme t o
def r aud, ( 2) t he mai l s [ or wi r es] wer e used f or t he pur pose of
execut i ng, or at t empt i ng t o execut e, t he scheme, and ( 3) t he
f al sehoods empl oyed i n t he scheme wer e mat er i al . " I d. ( quot i ng
Rat cl i f f , 488 F. 3d at 643- 44) .
The second super sedi ng i ndi ct ment i nt r oduces t he st at e
i nf r ast r uct ur e t ax cr edi t pr ogr amand expl ai ns:
I ndi vi dual s and busi nesses t hat appl i ed t o t he St at e f or
f i l mi nf r ast r uct ur e t ax cr edi t s wer e ent i t l ed t o r ecei ve
an amount equal t o 40% of t hei r qual i f i ed and audi t ed
f i l mi nf r ast r uct ur e expendi t ur es. Once t hi s amount was
cer t i f i ed by t he St at e of Loui si ana, t he appl i cant s coul d
t hen sel l t he cer t i f i cat i on t o l ocal busi nesses and
i ndi vi dual s, who woul d t hen use t he t ax cr edi t
cer t i f i cat i ons t o of f set t axes t hat t he busi nesses and
i ndi vi dual s woul d ot her wi se have owed t o t he St at e of
Loui si ana. Such sal e of t ax cr edi t s pr ovi ded a
si gni f i cant sour ce of cash f or f i l m- r el at ed t axes.
sounds f or t he pur pose of execut i ng such scheme or
ar t i f i ce, shal l be f i ned under t hi s t i t l e or i mpr i soned
not mor e t han 20 year s, or bot h.
14
The mai l and wi r e f r aud st at ut es ar e, i n r el evant par t ,
i dent i cal and, t hus, anal yt i cal l y i nt er changeabl e. See Pasquant i no
v. Uni t ed St at es, 544 U. S. 349, 355 n. 2 ( 2005) .
11
Case 2:14-cr-00022-MLCF-DEK Document 161 Filed 07/18/14 Page 11 of 27
The gover nment t hen al l eges t hat , af t er t he def endant s pur chased
807 Espl anade, t hey appl i ed f or i nf r ast r uct ur e t ax cr edi t s f r omt he
St at e; i n so doi ng, t hey submi t t ed t hei r cl ai med expendi t ur es on
807 Espl anade t o audi t or s and t hen t o t he St at e. Af t er t hei r f i r st
of t hr ee appl i cat i ons f or t ax cr edi t s, i t i s al l eged t hat :
On or about J une 19, 2009, t he St at e of Loui si ana i ssued
appr oxi mat el y $1, 132, 480. 80 i n t ax cr edi t s as a r esul t of
t he Febr uar y 26, 2009 submi ssi on. MI CHAEL ARATA pai d
cash t o t he par t ner shi p f or t hese t ax cr edi t s, at a
di scount ed pr i ce, t hr ough hi s company LEAP Fi l mFund I I ,
LLC. MI CHAEL ARATA t hen sol d t he t ax cr edi t s t o l ocal
busi nesses and i ndi vi dual s f or pr of i t . The St at e of
Loui si ana di d not i ssue t ax cr edi t s t o t he 807 Espl anade
par t ner shi p as a r esul t of t he J anuar y 20, 2010 and J ul y
3, 2012 submi ssi ons.
The wi r e and mai l f r aud scheme i s set f or t h i n Count s 1 t hr ough 21,
whi ch al l ege t hat t he def endant s:
di d knowi ngl y and wi l l f ul l y devi se and i nt end t o devi se
a scheme and ar t i f i ce t o def r aud and t o obt ai n money and
pr oper t y by means of f al se and f r audul ent pr et enses,
r epr esent at i ons and pr omi ses by submi t t i ng and causi ng t o
be submi t t ed mat er i al l y f al se, mi sl eadi ng and f r audul ent
i nf or mat i on t o t he audi t or s and t o t he St at e of Loui si ana
f or t he pur pose of obt ai ni ng f i l m i nf r ast r uct ur e t ax
cr edi t s r el at i ve t o 807 Espl anade.
15
Al t hough t he f i r st el ement of a mai l or wi r e f r aud char ge may be
char ged by a var i et y of schemes, t he key, i ndeed t he cent r al f or m
of scheme al l eged i n t hi s case i s t he depr i vat i on of " money or
pr oper t y. " I t i s t he gover nment ' s accusat i on concer ni ng
15
Thi s i s t he oper at i ve pr ovi si on of t he second super sedi ng
i ndi ct ment ; t hi s scheme i s ar t i cul at ed i n par agr aph 2 of Count s 6
t hr ough 20; Count s 1 and 21 expr essl y i ncor por at e i t . Count s 2
t hr ough 5 al l ege t he same scheme but al l ege i t onl y wi t h r espect t o
Pet er Hof f man and Mi chael Ar at a.
12
Case 2:14-cr-00022-MLCF-DEK Document 161 Filed 07/18/14 Page 12 of 27
f r audul ent l y get t i ng " money or pr oper t y" t hat t he def endant s t ar get
as l egal l y i nsuf f i ci ent . At odds her e i s whet her t he f i l m t ax
cr edi t s at i ssue ar e, i n l aw, " money or pr oper t y. " Or somet hi ng
el se. The case l i t er at ur e pr esent s a chal l enge t o common sense.
I I .
A.
The def endant s ur ge t he Cour t t o di smi ss Count s 1 t hr ough 21
of t he second super sedi ng i ndi ct ment on t he gr ound t hat t he
gover nment does not suf f i ci ent l y al l ege of f enses f or wi r e f r aud,
mai l f r aud, or conspi r acy t o commi t wi r e and mai l f r aud wi t h
r espect t o t he def endant s' appl i cat i ons f or t ax cr edi t s under t he
St at e' s f i l mi nf r ast r uct ur e t ax cr edi t pr ogr am. I n par t i cul ar , t he
def endant s cont end t hat t he al l eged scheme t o obt ai n t ax cr edi t s
f r om t he St at e of Loui si ana f ai l s as a mat t er of l aw because i t
f ai l s i n l aw t hat t he def endant s sought t o obt ai n " money or
pr oper t y" i n t he hands of t he St at e; uni ssued t ax cr edi t s, t he
def endant s ar gue, ar e not " money or pr oper t y" f or t he pur pose of
t he mai l and wi r e f r aud st at ut es. They i nvoke Cl evel and v. Uni t ed
St at es, 531 U. S. 12, 26 ( 2000) and Uni t ed St at es v. Gr i f f i n, 324
F. 3d 330, 354 ( 5
t h
Ci r . 2003) .
I n Cl evel and, t he def endant s wer e char ged wi t h a scheme t hat
i nvol ved maki ng f al se st at ement s i n appl i cat i ons t o obt ai n vi deo
poker l i censes f r om t he St at e of Loui si ana. 531 U. S. at 15.
Consi der i ng whet her " f or pur poses of t he f eder al mai l f r aud
13
Case 2:14-cr-00022-MLCF-DEK Document 161 Filed 07/18/14 Page 13 of 27
st at ut e, a gover nment r egul at or par t s wi t h ' pr oper t y' when i t
i ssues a l i cense[ , ] " t he Supr eme Cour t hel d t hat t he mai l f r aud
st at ut e " does not r each f r aud i n obt ai ni ng a st at e or muni ci pal
l i cense of t he ki nd her e i nvol ved, f or such a l i cense i s not
' pr oper t y' i n t he gover nment r egul at or ' s hands. " I d. at 20. " I t
does not suf f i ce, " t he hi gh cour t i nst r uct ed, " t hat t he obj ect of
t he f r aud may become pr oper t y i n t he r eci pi ent ' s hands; f or
pur poses of t he mai l f r aud st at ut e, t he t hi ng obt ai ned must be
pr oper t y i n t he hands of t he vi ct i m. " I d. at 15. Al t hough t he
Supr eme Cour t acknowl edged t hat " Loui si ana has a subst ant i al
economi c st ake i n t he vi deo poker i ndust r y" ,
16
t he Cour t
never t hel ess obser ved t hat " t he St at e' s cor e concer n i s
r egul at or y" , and t hat " t he [ g] over nment nowher e al l eges t hat
Cl evel and def r auded t he St at e of any money t o whi ch t he St at e was
ent i t l ed by l aw. " I d. at 20- 22, 24 ( obser vi ng t hat " t he St at e di d
not deci de t o vent ur e i nt o t he vi deo poker busi ness; i t deci ded
t ypi cal l y t o per mi t , r egul at e, and t ax pr i vat e oper at or s of t he
games. " ) .
17
16
Loui si ana col l ect ed an upf r ont pr ocessi ng f ee or r enewal f ee
f r om appl i cant s, as wel l as a devi ce oper at i on f ee, and, most
subst ant i al l y, a f i xed per cent age of net r evenue f r omeach gami ng
devi ce. I d. at 22.
17
Not abl y, t he Supr eme Cour t al so " r esi st [ ed] t he
[ g] over nment ' s r eadi ng of [ t he mai l f r aud st at ut e] as wel l because
i t i nvi t es us t o appr ove a sweepi ng expansi on of f eder al cr i mi nal
j ur i sdi ct i on i n t he absence of a cl ear st at ement by Congr ess. " I d.
at 24 ( not i ng t hat t he st at e vi deo poker st at ut e i mposes cr i mi nal
penal t i es f or maki ng f al se st at ement s on l i cense appl i cat i ons) .
14
Case 2:14-cr-00022-MLCF-DEK Document 161 Filed 07/18/14 Page 14 of 27
Rel yi ng on Cl evel and, t he Fi f t h Ci r cui t l at er hel d t hat , f or
t he pur pose of mai l and wi r e f r aud, uni ssued t ax cr edi t s ar e not
pr oper t y of t he st at e. Uni t ed St at es v. Gr i f f i n, 324 F. 3d 330, 354
( 5
t h
Ci r . 2003) . I n Gr i f f i n, t he Texas Depar t ment of Housi ng and
Communi t y Af f ai r s was r esponsi bl e f or al l ocat i ng pot ent i al f eder al
t ax cr edi t s as i ncent i ves f or devel oper s t o bui l d housi ng
devel opment s i n whi ch cer t ai n r ent al uni t s wer e set asi de f or
occupancy by l ow- i ncome r esi dent s at a r educed r ent . I d. The
def endant s wer e char ged wi t h vi ol at i ng t he mai l f r aud st at ut e by
par t i ci pat i ng i n an el abor at e scheme t hat i nvol ved mai l i ng a " pr e-
appl i cat i on not i f i cat i on" t o a ci t y i n Texas, f or t he pur pose of
def r audi ng t he Texas Depar t ment of Housi ng and Communi t y Af f ai r s,
t he St at e of Texas, Uni t ed St at es, i n or der t o obt ai n f eder al t ax
cr edi t s f or t wo of t hese l ow- i ncome housi ng devel opment s. I d. at
354- 55. I nvoki ng Cl evel and, def endant Gr i f f i n ar gued t hat " t ax
cr edi t s ar e l i ke l i censes i n t hat t hey do not exi st unt i l t hey ar e
i ssued. " I d. at 352. The Fi f t h Ci r cui t agr eed, det er mi ni ng t hat
" [ u] ni ssued t ax cr edi t s have zer o i nt r i nsi c val ue. Ther ef or e, t ax
cr edi t s ar e not pr oper t y when t hey ar e i n t he TDHCA' s possessi on.
As a r esul t , sect i on 1342 does not r each f r aud i n obt ai ni ng t he
al l ocat i on of t ax cr edi t s i n t hi s case. " I d. at 354. Because t he
Hof f mans and Ar at a cont end t hat Gr i f f i n condemns t he mai l and wi r e
f r aud char ges agai nst t hem, and t he gover nment count er s t hat
Gr i f f i n does not appl y, t he cont ext of t he scheme al l eged i n
15
Case 2:14-cr-00022-MLCF-DEK Document 161 Filed 07/18/14 Page 15 of 27
Gr i f f i n i s si gni f i cant :
The t ax cr edi t s at i ssue der i ve f r omCongr ess' Tax Ref or m
Act of 1986. Each year , st at e and l ocal agenci es ar e
gr ant ed l ow- i ncome housi ng t ax cr edi t s by t he Uni t ed
St at es Tr easur y Depar t ment . Local ent i t i es t hen
r eal l ocat e t hese t ax cr edi t s t o qual i f i ed l ow- i ncome
pr oj ect s. TDHCA [ t he Texas Depar t ment of Housi ng and
Communi t y Af f ai r s] i s t he onl y ent i t y i n t he St at e of
Texas wi t h t he aut hor i t y t o r eal l ocat e t ax cr edi t s under
t hi s pr ogr am. Once t ax cr edi t s have been al l ocat ed, t hey
cannot be t r ansf er r ed f r om t he pr oper t y t o whi ch t hey
wer e al l ocat ed. I f t he t ax cr edi t s cannot be used
because t he pr oper t y t o whi ch t hey wer e al l ocat ed does
not become a l ow- i ncome r esi dence, t he f eder al gover nment
r ecl ai ms t he t ax cr edi t s. The t ax cr edi t s ar e not
act ual l y i ssued on a pr oj ect i nvol vi ng new const r uct i on,
as was t he case f or t he Gol den Oaks pr oj ect , unt i l t he
r ent al uni t s act ual l y have been const r uct ed and pl aced i n
ser vi ce at r educed r ent f or l ow- i ncome occupant s. Once
t he t ax cr edi t s have been i ssued on a pr oper t y, t he owner
can sel l l i mi t ed par t ner shi p i nt er est s i n t he pr oper t y so
t hat i nvest or s can t ake advant age of t he t ax cr edi t s
al l ocat ed t o t hat pr oj ect .
I d. at 354. The Fi f t h Ci r cui t not ed t hat , i n admi ni st er i ng t he
pr ogr am, t he TDHCA col l ect s upf r ont f ees such as appl i cat i on and
commi t ment f ees and t hat , af t er t he t ax cr edi t s have been i ssued,
moni t or i ng f ees ar e col l ect ed. I d. at 355. Never t hel ess, t he
Fi f t h Ci r cui t r ecogni zed t hat " [ b] eyond t hose f ees . . . TDHCA does
not der i ve any benef i t , gai n, or i ncome f r omt he t ax cr edi t s whi l e
i t possesses t hem. " I d. Focusi ng on t he st at e' s r egul at or y power
t o i ssue t he t ax cr edi t s, t he Fi f t h Ci r cui t obser ved:
[ T] he benef i t t hat t he St at e of Texas r ecei ves f r omt hose
f ees i s mi nut e compar ed t o t he benef i t t hat i s r eal i zed
f r omt he cr eat i on of af f or dabl e r ent al housi ng, whi ch i s
t he goal of t he t ax cr edi t pr ogr am. Unquest i onabl y, t hat
benef i t i s not r eal i zed when t he t ax cr edi t s have been
al l ocat ed t o t he St at e f or di st r i but i on. Rat her , t hat
benef i t i s r eal i zed onl y af t er t he t ax cr edi t s act ual l y
16
Case 2:14-cr-00022-MLCF-DEK Document 161 Filed 07/18/14 Page 16 of 27
have been i ssued i nt o t he devel oper s' possessi on so t hey
can be sol d t o i nvest or s who can use t hemt o of f set t hei r
f eder al i ncome t ax obl i gat i ons. I n sum, t he onl y
pr oper t y t he St at e has i n t he t ax cr edi t s i s pur el y
abst r act or t heor et i cal , even af t er t he ent i r e
t r ansact i on bet ween t he St at e and a devel oper i s
compl et ed. Uni ssued t ax cr edi t s, t her ef or e, do not
amount t o economi c pr oper t y as cont empl at ed by sect i on
1341 whi l e t hey ar e i n t he TDHCA' s possessi on.

I d.
Li ke t he t ax cr edi t s i n Gr i f f i n, t he def endant s ar gue, t he
uni ssued t ax cr edi t s i n t he power of t he St at e of Loui si ana ar e not
pr oper t y and, t her ef or e cannot be t he obj ect of a mai l or wi r e
f r aud scheme. Because t he onl y obj ect al l eged by t he gover nment i s
" obt ai ni ng f i l m i nf r ast r uct ur e t ax cr edi t s r el at i ve t o 807
Espl anade" , t he def endant s ur ge t he Cour t t o di smi ss Count s 1
t hr ough 21 f or f ai l ur e t o st at e a f eder al of f ense. The gover nment
count er s t hat t he def endant s sweepi ngl y mi sappl y Cl evel and and
Gr i f f i n. The Cour t agr ees.
The gover nment cont ends t hat , unl i ke t he st at e i nt er est s i n
Cl evel and and Gr i f f i n, Loui si ana' s i nt er est i n t he f i l m
i nf r ast r uct ur e t ax cr edi t s i s not mer el y r egul at or y; t hat t he t ax
cr edi t s her e f unct i onal l y i mpl i cat e t he t ax r evenue of t he St at e of
Loui si ana. Mor eover , t he i ndi ct ment al l eges t hat , once t he t ax
cr edi t s wer e cer t i f i ed, t hey had an i mmedi at e cash val ue as t hey
wer e t r ansf er abl e and abl e t o be sol d on t he open mar ket . Thus,
t he gover nment cor r ect l y submi t s, t he obj ect of t he def endant s'
scheme was ent i r el y about " money or pr oper t y" , i ncl udi ng t he f unds
17
Case 2:14-cr-00022-MLCF-DEK Document 161 Filed 07/18/14 Page 17 of 27
of i nvest or s who woul d pur chase t he t ax cr edi t s f r omt he def endant s
and, ul t i mat el y, t he r evenue of t he St at e of Loui si ana.
18

I n suppor t of i t s cont ent i on t hat t he r i ght t o t ax r evenue i s
" pr oper t y" f or t he pur poses of t he mai l and wi r e f r aud st at ut es,
t he gover nment i nvokes t he post - Cl evel and ( and Gr i f f i n) Supr eme
Cour t case of Pasquant i no v. Uni t ed St at es, 544 U. S. 349, 355
( 2005) . I n Pasquant i no, a case cl oser t o t he r evenue st r eam i n
t hi s case, t he pet i t i oner s wer e i ndi ct ed f or and convi ct ed of
f eder al wi r e f r aud f or t hei r scheme t o smuggl e l i quor i nt o Canada
af t er pr e- or der i ng i t by t el ephone f r om t he Uni t ed St at es and
f ai l i ng t o decl ar e t he goods t o Canadi an cust oms of f i ci al s when
cr ossi ng t he bor der . 544 U. S. at 353. The Supr eme Cour t opt ed t o
r esol ve a Ci r cui t spl i t r egar di ng " whet her a pl ot t o def r aud a
f or ei gn gover nment of t ax r evenue vi ol at es t he f eder al wi r e f r aud
st at ut e. " I d. at 354. I n hol di ng t hat t he pet i t i oner ' s conduct
i ndeed f el l wi t hi n t he l i t er al t er ms of t he wi r e f r aud st at ut e, t he
18
Fi nal l y, t he gover nment submi t s t hat t he St at e of Loui si ana
i s not t he onl y possi bl e vi ct i m; al t hough t he wi r e and mai l f r aud
st at ut es r equi r e a vi ct i m, t he vi ct i m need not be named i n t he
i ndi ct ment ; and t her e i s no r equi r ement t hat t he vi ct i mwho l oses
money or pr oper t y i n a mai l or wi r e f r aud conspi r acy must al so be
t he par t y t hat was decei ved t he by t he def endant s' scheme. See,
e. g. , Uni t ed St at es v. Hat ch, 926 F. 2d 387, 392 ( 5
t h
Ci r . 1991) ( " The
f ocus of t he mai l f r aud st at ut e i s upon t he use of t he mai l t o
f ur t her a scheme t o def r aud, not upon any par t i cul ar ki nd of
vi ct i m" ) , cer t . deni ed, 500 U. S. 943 ( 1991) ; accor d Uni t ed St at es
v. Val enci a, No. 04- 515, 2006 WL 3716657, at *4 ( S. D. Tex. Dec. 14,
2006) , af f ' d, 600 F. 3d 389 ( 5
t h
Ci r . 2010) ; see al so Uni t ed St at es
v. Howar d, 619 F. 3d 723, 727 ( 7
t h
Ci r . 2010) ( " even i f an i ndi ct ment
names par t i cul ar vi ct i ms, t he gover nment need not pr ove i nt ent t o
har mt hose named vi ct i ms" ) .
18
Case 2:14-cr-00022-MLCF-DEK Document 161 Filed 07/18/14 Page 18 of 27
Supr eme Cour t obser ved:
Canada' s r i ght t o uncol l ect ed exci se t axes on t he l i quor
pet i t i oner s i mpor t ed i nt o Canada i s " pr oper t y" i n i t s
hands. Thi s r i ght i s an ent i t l ement t o col l ect money
f r ompet i t i oner s, t he possessi on of whi ch i s " somet hi ng
of val ue" t o t he Gover nment of Canada. . . . Val uabl e
ent i t l ement s l i ke t hese ar e " pr oper t y" as t hat t er m
or di nar i l y i s empl oyed. Had pet i t i oner s compl i ed wi t h
t hi s l egal obl i gat i on, t hey woul d have pai d money t o
Canada. Pet i t i oner s' t ax evasi on depr i ved Canada of t hat
money, i nf l i ct i ng an economi c i nj ur y no l ess t han had
t hey embezzl ed f unds f r om t he Canadi an t r easur y. The
obj ect of pet i t i oner ' s scheme was t o depr i ve Canada of
money l egal l y due, and t hei r scheme t her eby had as i t s
obj ect t he depr i vat i on of Canada' s " pr oper t y. "
I d. at 355 ( i nt er nal ci t at i ons omi t t ed) .
I nt er est i ngl y, t he gover nment al so i nvokes Uni t ed St at es v.
Leahy, 464 F. 3d 773 ( 7
t h
Ci r . 2006) , r eh' g en banc deni ed, and cer t .
deni ed, Duf f v. Uni t ed St at es, 552 U. S. 811 ( 2007) . I n Leahy, t he
Ci t y of Chi cago passed an or di nance t o gr ant an advant age t o sel ect
busi nesses owned by mi nor i t i es and women; t he def endant s obt ai ned
Mi nor i t y Busi ness Ent i t y st at us ( MBE st at us) by submi t t i ng
f r audul ent i nf or mat i on on cer t i f i cat i on appl i cat i ons t o t he Ci t y of
Chi cago. 464 F. 3d at 778, 787. The def endant s wer e char ged wi t h
" hat ch[ i ng] and execut [ i ng] a pl an t o obt ai n f r audul ent l y over $100
mi l l i on i n cont r act s and subcont r act s f r omt he ci t y of Chi cago by
l yi ng about [ t wo compani es' ] owner shi p st r uct ur e. " I d. at 787. I n
r ej ect i ng t he def endant s' ar gument t hat cer t i f i ed MBE st at us was
l i ke t he l i censes i ssued i n Cl evel and, t he Sevent h Ci r cui t not ed
t hat
19
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[ T] he scheme pr eci sel y and di r ect l y t ar get ed Chi cago' s
cof f er s and i t s posi t i on as a cont r act ual par t y. . . ; her e
t he f r aud was commi t t ed bot h agai nst Chi cago as r egul at or
and al so agai nst t he ci t y as pr oper t y hol der . The
cer t i f i cat i ons wer e necessar y st eps, but t hey wer e not
t he obj ect of t he l ong- r angi ng f r aud. That obj ect was
money, pl ai n and si mpl e, t aken under f al se pr et enses f r om
t he ci t y i n i t s r ol e as pur chaser of ser vi ces.
I d. at 788.
By way of r epl y, t he def endant s ar gue t hat t ax evasi on cases
l i ke Pasquant i no ar e di st i ngui shabl e because t he gover nment her e
does not expl i ci t l y al l ege t hat t he St at e was depr i ved of t ax
r evenue. And def endant s suggest t hat Leahy i n f act suppor t s t hei r
posi t i on because t he obj ect of t he f r aud i n t hat case was act ual
money by way of ci t y cont r act s, not MBE st at us, whi ch, l i ke an
i nt angi bl e t ax cr edi t , i s not pr oper t y but somet hi ng t hat i s l at er
par l ayed i nt o pr oper t y. The gover nment ' s pr esent al l egat i ons do
not i mpl i cat e Pasquant i no, Fount ai n, and Leahy, t he def endant s
i nsi st , because t he gover nment onl y al l eges as t he obj ect of t he
f r aud t he i nf r ast r uct ur e t ax cr edi t s. The gover nment seeks t o
i mper mi ssi bl y amend t he i ndi ct ment , t he def endant s' ar gument goes,
by addi ng new, unchar ged obj ect s, namel y def r audi ng i nvest or s who
pur chased t ax cr edi t s and avoi di ng t axes and depr i vi ng t he St at e of
i t s t ax r evenue, br i ngi ng i nt o pl ay t he Fi f t h Amendment t o t he
Const i t ut i on.
19
19
Af t er Gr i f f i n but bef or e Pasquant i no, t he Second Ci r cui t
addr essed whet her t axes owed t o t he gover nment const i t ut ed
pr oper t y f or t he pur pose of t he wi r e f r aud st at ut e. Fount ai n v.
Uni t ed St at es, 357 F. 3d 250, 257 ( 2d Ci r . 2004) , cer t . deni ed, 544
20
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B.
Havi ng ar t i cul at ed t he cont our s of t he di sput e and t he
per t i nent case l i t er at ur e, t he Cour t t ur ns as i t must t o t he
al l egat i ons of t he second super sedi ng i ndi ct ment and, i n
par t i cul ar , t he obj ect of t he f r aud al l eged by t he gover nment . The
gover nment al l eges i n t he second super sedi ng i ndi ct ment t hat t he
def endant s devi sed a scheme t o def r aud, and t o obt ai n money and
pr oper t y, by means of f al se pr et enses and r epr esent at i ons, and
usi ng t he mai l and wi r es t o execut e t he f r audul ent scheme, " by
submi t t i ng and causi ng t o be submi t t ed mat er i al l y f al se, mi sl eadi ng
and f r audul ent i nf or mat i on t o t he audi t or s and t o t he St at e of
Loui si ana f or t he pur pose of obt ai ni ng i nf r ast r uct ur e t ax cr edi t s
r el at i ve t o 807 Espl anade. " The obj ect of t he def endant s' mai l and
wi r e f r aud and t hei r conspi r acy was t o " obt ai n[ ] i nf r ast r uct ur e t ax
cr edi t s. " These t ax cr edi t s, i t i s al l eged, had a cash val ue;
U. S. 1017 ( 2005) . I n Fount ai n, t he def endant , an al l eged
par t i ci pant i n a ci gar et t e- smuggl i ng scheme t o avoi d Canada' s hi gh
t obacco t axes, was char ged wi t h and convi ct ed of conspi r acy t o
l aunder t he pr oceeds of t he wi r e f r aud scheme. 357 F. 3d at 252.
The Second Ci r cui t hel d t hat " t axes owed t o t he gover nment – even
i f not yet col l ect ed – ar e pr oper t y i n t he hands of t he
gover nment . " I d. at 257. The Second Ci r cui t di st i ngui shed Gr i f f i n
as demonst r at i ng t hat " t ax cr edi t s ar e qui t e di f f er ent f r omr un- of -
t he- mi l l sal es and i ncome t axes. " I d. at 259 ( ci t i ng Uni t ed St at es
v. Gr i f f i n, 324 F. 3d 330 ( 5
t h
Ci r . 2003) , and not i ng t hat " [ a] n
ent i t y t hat – even i mpr oper l y – obt ai ned t he r i ght t o such t ax
cr edi t s woul d have t o f ul f i l l i t s obl i gat i ons t o t he St at e and
woul d not accr ue a t ax advant age wi t hout i ncur r i ng a r eci pr ocal
dut y. " ) . Thi s Cour t sees no f unct i onal di f f er ence bet ween t ax
r evenues and t ax cr edi t s, whi ch al so f ocus a gover nment ' s r evenue
st r eam.
21
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based on t he def endant s' f i r st appl i cat i on seeki ng t ax cr edi t s,
" [ t ] he St at e i ssued $1, 132, 480. 80 i n t ax cr edi t s. " And, t he
gover nment al l eges: " MI CHAEL ARATA pai d cash t o t he par t ner shi p f or
t hese t ax cr edi t s, at a di scount ed pr i ce, t hr ough hi s company LEAP
Fi l m Fund I I , LLC. MI CHAEL ARATA t hen sol d t he t ax cr edi t s t o
l ocal busi nesses and i ndi vi dual s f or pr of i t . "
20

The Cour t f i nds t hat t he mai l and wi r e f r aud st at ut es
cr i mi nal i ze t he def endant s' al l eged scheme t o obt ai n i nf r ast r uct ur e
t ax cr edi t s; t hose t ax cr edi t s r epr esent val uabl e economi c
ent i t l ement s, t hey ar e i nt i mat el y i nt er t wi ned wi t h t he St at e' s t ax
r evenue scheme, and ar e, t her ef or e, pr oper t y of t he St at e.
Pasquant i no compel s t hi s concl usi on.
J ust l i ke t he pl ot t o def r aud Canada of i t s t ax r evenue, t he
def endant s her e ar e char ged wi t h schemi ng t o def r aud Loui si ana
21
of
t ax cr edi t s, i ndi sput abl y al l eged by t he gover nment t o be a
val uabl e ent i t l ement . See Pasquant i no, 544 U. S. at 355- 56 ( " Thi s
r i ght i s an ent i t l ement t o col l ect money f r om pet i t i oner s, t he
possessi on of whi ch i s ' somet hi ng of val ue' t o . . . Canada" ) .
20
To t he ext ent t he def endant s ur ge t he Cour t t o consi der i n
i sol at i on t he gover nment ' s al l egat i ons t hat t he obj ect of t he f r aud
was " t o obt ai n t ax cr edi t s, " t he Cour t must i nst ead be mi ndf ul t hat
t he suf f i ci ency of an i ndi ct ment " depends on pr act i cal , not
t echni cal , consi der at i ons. " Uni t ed St at es v. Rat cl i f f , 488 F. 3d
639, 643 ( 5
t h
Ci r . 2007) ( ci t at i on omi t t ed) .
21
Cl ear l y t he f act t hat t he al l eged vi ct i mi s t he St at e i s of
no moment . " The f act t hat t he vi ct i mof t he f r aud happens t o be
t he gover nment , r at her t han a pr i vat e par t y, does not l essen t he
i nj ur y. " I d. at 356.
22
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" Val uabl e ent i t l ement s l i ke t hese, " t he Supr eme Cour t hel d, " ar e
' pr oper t y' as t hat t er mor di nar i l y i s empl oyed. " See i d. at 356
( quot i ng Bl ack' s Law Di ct i onar y def i ni t i on of pr oper t y as
" ext end[ i ng] t o ever y speci es of val uabl e r i ght and i nt er est " ) .
The Supr eme Cour t ' s wor ds ar e equal l y vi t al her e:
Had pet i t i oner s compl i ed wi t h t hi s l egal obl i gat i on, t hey
woul d have pai d money t o Canada. Pet i t i oner s' t ax
evasi on depr i ved Canada of t hat money, i nf l i ct i ng an
economi c i nj ur y no l ess t han had t hey embezzl ed f unds
f r omt he Canadi an t r easur y. The obj ect of pet i t i oner s'
scheme was t o depr i ve Canada of money l egal l y due, and
t hei r scheme t her eby had as i t s obj ect t he depr i vat i on of
Canada' s " pr oper t y. "
I d. Looki ng t o t he or di nar y meani ng of " pr oper t y" and t o t he
common l aw, t he Supr eme Cour t embr aced t ax r evenue as an
ent i t l ement t o money, a pr oper t y r i ght , r easonabl y acknowl edgi ng
" t he economi c equi val ence bet ween money i n hand and money l egal l y
due. " I d. at 357. Canada was depr i ved of i t s t ax r evenue. The
Cour t sees no di f f er ence bet ween t hat and a f r audul ent l y acqui r ed
st at e t ax cr edi t t hat depr i ves a st at e of i t s r evenue.
The def endant s her e ar e char ged wi t h maki ng decept i ve bank
t r ansf er s and submi t t i ng f i ct i t i ous i nf r ast r uct ur e expendi t ur es t o
swi ndl e t he St at e i nt o cedi ng a val uabl e ent i t l ement ot her wi se
l egal l y due t o i t . See i d. J ust l i ke Canada' s r i ght t o uncol l ect ed
exci se t axes i s " pr oper t y" i n i t s hands, t he St at e' s ent i t l ement
wi t h r espect t o t ax cr edi t s i s " a st r ai ght f or war d ' economi c'
i nt er est . " Agai n, t he Cour t under scor es t hat t her e i s si mpl y no
f unct i onal di f f er ence bet ween t ax r evenue ( a di r ect sour ce of
23
Case 2:14-cr-00022-MLCF-DEK Document 161 Filed 07/18/14 Page 23 of 27
i ncome gai ned t hr ough t axat i on) and t ax cr edi t s ( a cash- val ued sum
deduct ed f r om an amount ot her wi se owed t o t he st at e) . As a
pr act i cal mat t er , by r educi ng a t axpayer ' s t ax l i abi l i t y, and
cr eat i ng an advant age i n f avor of a t axpayer , t ax cr edi t s, i f
f r audul ent l y obt ai ned, wr ongf ul l y r esul t i n a cor r espondi ng l oss of
r evenue f or t he St at e; r evenue ot her wi se owed t o t he St at e. I n
( al l egedl y) f r audul ent l y depr i vi ng t he St at e of t ax cr edi t s, t hen,
t he def endant s " i nf l i ct [ ed] an economi c i nj ur y no l ess t han had
t hey embezzl ed f unds f r omt he [ St at e] t r easur y. " See i d. at 356.
Thi s r esul t does not of f end Cl evel and. I ndeed, Pasquant i no
cl ar i f i es Cl evel and, r easonabl y obser vi ng t hat t he St at e' s i nt er est
i n al l ocat i ng a vi deo poker l i cense t o appl i cant s i s f ar di f f er ent
f r omt he qui nt essent i al economi c i nt er est a sover ei gn has i n i t s
ent i t l ement t o t ax r evenue. See i d. at 356- 57. So, t oo, her e.
Whi l e " [ t ] her e was no suggest i on i n Cl evel and t hat t he def endant
ai med at depr i vi ng t he St at e of any money due. . . " , her e, t he
gover nment al l eges t hat t he def endant s cheat ed t he St at e i nt o
i ssui ng t ax cr edi t s, t her eby l osi ng out on r evenue t o whi ch i t was
ot her wi se l egal l y ent i t l ed. See i d. at 357.
Nor does Gr i f f i n condemn t he gover nment ' s al l egat i ons her e.
Put t i ng asi de t hat t he panel i n Gr i f f i n deci ded t hat case year s
bef or e Pasquant i no, t he def endant s' r el i ance on Gr i f f i n i s
under mi ned by t he cont ext ual f act ual di ssi mi l ar i t i es t o t he case
her e. As expl ai ned above, Gr i f f i n i nvol ved mi sr epr esent at i ons
24
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cont ai ned i n a " pr e- cer t i f i cat i on l et t er " , i n whi ch def endant s
sought a r i ght t o l at er appl y f or f eder al t ax cr edi t s; no t ax
cr edi t s coul d be i ssued unt i l pr oof was submi t t ed conf i r mi ng t hat
t he housi ng was bui l t and t he uni t s wer e r ent ed t o l ow- i ncome
i ndi vi dual s. 324 F. 3d at 354- 55. The Texas agency was engaged i n
t he mer el y mi ni st er i al admi ni st r at i ve t ask of det er mi ni ng whet her
t o al l ocat e t he f eder al l ow i ncome housi ng t ax cr edi t s; ot her t han
col l ect i ng some appl i cat i on and moni t or i ng f ees i n per f or mance of
i t s r egul at or y power t o i ssue t he t ax cr edi t s, t he St at e' s t ax
r evenue was not i mpl i cat ed. I d. at 355. These r eal i t i es of t he
f eder al f ai r housi ng t ax cr edi t pr ogr aml ed t he Fi f t h Ci r cui t t o
concl ude t hat t he uni ssued t ax cr edi t s wer e not pr oper t y i n t he
st at e agency' s possessi on. I d. at 354. " As a r esul t , " t he Fi f t h
Ci r cui t hel d, " sect i on 1341 does not r each f r aud i n obt ai ni ng t he
al l ocat i on of t ax cr edi t s i n t hi s case. " I d.
22
The ear l y st age
22
The Fi f t h Ci r cui t r ecogni zed t hat " [ b] eyond [ cer t ai n nomi nal
f ees . . . TDHCA does not der i ve any benef i t , gai n, or i ncome f r om
t he t ax cr edi t s whi l e i t possesses t hem. " I d. at 355. Ot her t han
per haps a nod t o Cl evel and and i t s " i n t he vi ct i m' s hands" gl oss on
t he money- or - pr oper t y r equi r ement , t he " whi l e i t possesses t hem"
qual i f yi ng l anguage used by t he Fi f t h Ci r cui t seems unnecessar y.
The St at e of Texas never st ood t o benef i t , or l ose, f r omal l ocat i ng
t ax cr edi t s. Thi s i s so because even when t he ent i r e t ax cr edi t
pr ogr amappl i cat i on r an i t s cour se f r ompr e- appl i cat i on l et t er t o
compl et ed pr oj ect wi t h l ow- i ncome t enant s, t he t ax cr edi t s wer e
used t o of f set federal i ncome t ax obl i gat i ons. That i s why " t he
onl y pr oper t y i nt er est t he St at e [ had] " i n t he t ax cr edi t s i n
Gr i f f i n " [ was] pur el y abst r act or t heor et i cal , even af t er t he
ent i r e t r ansact i on bet ween t he St at e and a devel oper i s compl et ed. "
I d. Not so her e. The St at e of Loui si ana' s r evenue i s di r ect l y
vul ner abl e wi t h r espect t o i t s own st at e i nf r ast r uct ur e t ax
cr edi t s.
25
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i n t he t ax cr edi t appl i cat i on pr ocess; t he st at e agency' s mer e
r egul at or y r ol e i n al l ocat i ng f eder al t ax cr edi t s; and, most
not abl y, t he f act t hat t he t ax cr edi t s wer e not di r ect ed at t he
r evenue of t he St at e of Texas ar e di st i ngui shi ng f eat ur es t hat make
Gr i f f i n i nappl i cabl e t o t hi s case.
I n concl usi on, because t he obj ect of t he al l eged f r aud - -
i nf r ast r uct ur e t ax cr edi t s - - i s i ndeed " pr oper t y" i n t he hands of
t he St at e, Count s 1 t hr ough 21 of t he second super sedi ng i ndi ct ment
st at e an of f ense f or mai l and wi r e f r aud.
23
Accor di ngl y, t he
def endant s' mot i ons t o di smi ss ar e DENI ED.
24
23
The def endant s al so ur ge t he Cour t t o di smi ss Count 1, t he
conspi r acy count , i n whi ch t he gover nment al l eges t hat t he
def endant s conspi r ed wi t h each ot her t o commi t mai l and wi r e f r aud.
Because t he gover nment has adequat el y al l eged t he of f enses of wi r e
and mai l f r aud, and because t he def endant s do not advance
i ndependent gr ounds f or di smi ssi ng t he conspi r acy char ge, i t al so
st ands.
24
The Hof f mans advance a l i t any of ot her gr ounds f or di smi ssi ng
t he second super sedi ng i ndi ct ment . They cont end t hat ( a) t hey
l acked f ai r not i ce t hat t hei r conduct coul d l at er be const r ued as
i l l egal ; ( b) t he gover nment cannot al l ege an i nt ent t o har mbecause
Loui si ana r ecei ved t he benef i t s cont empl at ed under t he Act , gi ven
t hat t he def endant s opened t hei r post - pr oduct i on f i l mst udi o; ( c)
t he f eder al gover nment ' s pr osecut i on under t he f eder al mai l and
wi r e f r aud st at ut es usur ps t he St at e' s aut hor i t y t o pol i ce i t s own
t ax mat t er s and of f ends f eder al i sm pr i nci pl es; and ( d) a mer e
f ai l ur e t o di scl ose i s not f r aud unl ess t her e i s a dut y t o di scl ose
t he i nf or mat i on subj ect t o t he di sput e. The gover nment count er s
t hat t hese ar gument s do not pr ovi de i ndependent gr ounds f or
di smi ssi ng a f eder al i ndi ct ment , and r equi r e t he Cour t t o exami ne
f act ual mat t er s out si de t he i ndi ct ment , whi ch i s i nappr opr i at e on
a mot i on t o di smi ss t he i ndi ct ment . The Cour t agr ees. The second
super sedi ng i ndi ct ment suf f i ci ent l y al l eges t he el ement s of t he
char ged of f enses and f ai r l y i nf or ms t he def endant s of t he char ges
agai nst t hem. Not hi ng mor e i s r equi r ed. These col l at er al i ssues
26
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New Or l eans, Loui si ana, J ul y 18, 2014
______________________________
MARTI N L. C. FELDMAN
UNI TED STATES DI STRI CT J UDGE
r ai sed by t he Hof f mans ar e pr i mar i l y f act - dr i ven i ssues t hat ar e
pr emat ur e and i l l - sui t ed f or det er mi nat i on on a mot i on t o di smi ss
t he i ndi ct ment .
27
Case 2:14-cr-00022-MLCF-DEK Document 161 Filed 07/18/14 Page 27 of 27

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