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United States v. Michael

United States District Court, W.D. Kentucky, Louisville

May 2, 2017



          Charles R. Simpson III, Senior Judge

         This matter is before the court on motion of the defendants, Philip E. Michael, II (“Michael”) and Meds 2 Go Express Pharmacy, Inc. (“Meds 2 Go”), to dismiss Counts 4, 5 and 9 of the Second Superseding Indictment (“SSI”).[1], [2]

         The SSI charges Michael, Meds 2 Go, and Euton Laing, [3] with Mail Fraud Conspiracy (Count 4), Wire Fraud Conspiracy (Count 5), and Conspiracy to Commit Money Laundering (Count 9). The defendants have moved to dismiss these counts for insufficiency of the indictment, citing Hamling v. United States, 418 U.S. 87, 177 (1974) and Russell v. United States, 369 U.S. 749, 761 (1962).

         An indictment must provide a “plain, concise, and definite written statement of the essential facts constituting the offense charged.” Fed.R.Crim.P. 7(c). The purpose of an indictment is “to inform the defendant of the nature of the accusation against him.” Russell, 369 U.S. at 767 (quoting United States v. Hess, 124 U.S. 483, 487 (1888)). “The Federal Rules of Criminal Procedure, 18 U.S.C.A., were designed to eliminate technicalities in criminal pleading and are to be construed to secure simplicity in procedure. Rule 2, F.R.Crim.Proc.” United States v. Debrow, 346 U.S. 374, 376 (1953). As explained by the Supreme Court as early as 1895, an indictment need not be a literary work of art:

T]he true test is, not whether it might possibly have been made more certain, but whether it contains every element of the offense intended to be charged, and sufficiently apprises the defendant of what he must be prepared to meet, and, in case any other proceedings are taken against him for a similar offense, whether the record shows with accuracy to what extent he may plead a former acquittal or conviction. Evans v. U.S., 153 U.S. 584, 587, 588, 14 Sup. Ct. 934; Batchelor v. U.S., 156 U.S. 426, 15 Sup. Ct. 446.

Cochran v. United States, 157 U.S. 286, 290, 15 S.Ct. 628, 630, 39 L.Ed. 704 (1895).

         The indictment must be read as a whole, accepting the factual allegations as true, and construing those allegations in a practical sense with all the necessary implications. United States v. Reed, 77 F.3d 139, 140 n. 1 (6th Cir.1996) (en banc). An indictment is to be construed liberally in favor of its sufficiency. United States v. Davis, 306 F.3d 398, 411 (6th Cir.2002). United States v. McAuliffe, 490 F.3d 526, 531 (6th Cir. 2007). The Sixth Circuit further discussed challenges similar to those made by the defendants in this case:

Here, defendant contends that Counts One and Two of the indictment, which allege violations of the mail fraud statute, 18 U.S.C. § 1341, do not adequately set forth two of the requisite elements of that offense: (1) that defendant acted willfully with an intent to defraud, and (2) that a “material” misrepresentation was made. The mail fraud statute prohibits the use of the mails by any person “having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises....” 18 U.S.C. § 1341. “Mail fraud consists of (1) a scheme or artifice to defraud; (2) use of mails in furtherance of the scheme; and (3) intent to deprive the victim of money or property.” United States v. Turner, 465 F.3d 667, 680 (6th Cir.2006). Materiality of falsehood is a requisite element of mail fraud. Neder v. United States, 527 U.S. 1, 25, 119 S.Ct. 1827, 144 L.Ed.2d 35 (1999). The misrepresentation “must have the purpose of inducing the victim of the fraud to part with the property or undertake some action that he would not otherwise do absent the misrepresentation or omission.” United States v. Daniel, 329 F.3d 480, 487 (6th Cir.2003). A misrepresentation “is material if it has a natural tendency to influence, or is capable of influencing, the decision of the decision-making body to which it was addressed.” Neder, 527 U.S. at 16, 119 S.Ct. 1827 (internal citation and quotation marks omitted).
The requisite intent to defraud requires “an intent to deceive or cheat for the purpose of either causing a financial loss to another or bringing about a financial gain to oneself.” Sixth Circuit Pattern Jury Instruction 10.01(2)(E); see also United States v. Frost, 125 F.3d 346, 371 (6th Cir.1997). With regard to both elements *532 at issue, an indictment is not fatally insufficient for its failure to allege these elements in haec verba, if the facts alleged in the indictment warrant the inference of such elements, i.e., materiality and intent to defraud. United States v. McGough, 510 F.2d 598, 602 (5th Cir.1975) (materiality); United States v. Hoag, 823 F.2d 1123, 1126 (7th Cir.1987) (intent to defraud).

United States v. McAuliffe, 490 F.3d at 531-32. As the mail and wire fraud statutes contain the same challenged language, the same analysis applies to both Counts 4 and 5. Carpenter v. United States, 484 U.S. 19, 25, n. 6 (1987). To the extent that the defendants' challenge to the count of money laundering conspiracy relies upon the sufficiency of the mail and wire fraud counts, its success rises and falls with the arguments concerning Counts 4 and 5 addressed below.

         Additionally, the defendants urge with respect to money laundering conspiracy that the allegations in the SSI “fail to allege facts showing that the funds were ‘proceeds' before they were transferred.” DN 38-1. While the United States is tasked with proving that the alleged laundered funds constituted “proceeds” of specified unlawful activity, it need not prove its case in the indictment. Rather, the United States must give sufficient notice of the crime it intends to prove. The SSI provides more than adequate notice of the crime charged in Count 9, as it alleges time, place, and manner of the alleged conspiracy to commit money laundering. Count 9 alleges that beginning in about May of 2004 and continuing until at least December 2012, Michael, Meds 2 Go, and Laing knowingly conspired together and with others known and unknown to knowingly transport, transmit, and transfer funds and monetary instruments in a series of transactions of a value exceeding $10, 000 from Hong Kong to a place within the United States with intent to promote the carrying on of mail fraud, wire fraud, and Controlled Substances Act offenses. SSI, DN 78, p. 25. With respect to Meds 2 Go and Michael particularly, there are transfers of funds specifically described in the SSI wherein Michael and Meds 2 Go are alleged to have received payments for prescription drug orders filled by Meds to Go. The SSI then states that beginning about November 2006 and continuing until at least July 2012, Michael, Meds 2 Go, and Laing conspired to conduct financial transactions involving proceeds of specified unlawful activity with the intent to promote the carrying on of such specified unlawful activity, or which was designed in part to conceal and disguise the nature, location, source, and control of the proceeds, and to engage or cause others to engage in interstate or foreign transactions in criminally derived property of a value greater than $10, 000. SSI, DN 78, pp. 26-26. As Count 9 of the SSI sufficiently alleges that the defendants conspired to conduct financial transactions which involved proceeds of specified unlawful activity and incorporates the prior paragraphs containing allegations of specific monetary transfers on specific dates, the defendants' challenge to the sufficiency of the allegations in Count 9 of the use of “proceeds” is without merit.

         Michael and Meds 2 Go challenge the sufficiency of Counts 4 and 5 on the ground that these counts do not allege that the defendants made a material false statement which caused a loss to any victim. Approaching each of these elements separately, the defendants contend that there was no false statement, no allegation that any such statement was material, that the patients were not “victims, ” and did not lose any money because they got what they ordered.

         As noted herein, the indictment must be read as a whole. The SSI adequately alleges the elements of mail and wire fraud inasmuch as Michael, Laing, and Meds 2 Go are alleged to have knowingly and willfully conspired together and with others known and unknown to commit mail and wire fraud, whereby they agreed to engage in a scheme to sell, distribute, and dispense prescription drugs over the Internet without issuance of a valid prescription. SSI, DN 78, p. 7, ¶ 23. The transactions were completed over the Internet and purchases made by credit card, and the drugs were dispensed and shipped via UPS, FedEx, and USPS to the customer. Id.; SSI, ¶¶ 23, 56, 57.

         The United States urges, somewhat simplistically, in their brief that “the factual allegations in the Second Superseding Indictment…describe how [the defendants] schemed to defraud customers of their money, by intentionally misleading customers to believe that the prescription drugs purchased from the RX Limited websites were legally prescribed and ...

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