United States v. Singhal
2012 U.S. Dist. LEXIS 96108
D.D.C.2012Background
- Grand jury returned a ten-count indictment against Shelly Singhal, Loretta Bush, and Dennis Pelino for a conspiracy to defraud the SEC and investors through undisclosed related party transactions and insider trading exceeding $50 million.
- Indictment charges Counts 1–5 as conspiracy and mail fraud; Counts 6–9 as false statements; Count 10 as false statements against Pelino; no express SEC violation charged.
- Alleged scheme involved Xinhua Finance Limited and Xinhua Financial Network Limited, Cayman Islands entities with Tokyo and U.S. market participation, and use of nominees to disguise involvement.
- Transactions implicated include Entree Capital, Bedrock Securities/Bedford, Wire Mill/Wiremill and Hyperion, with funds and shares diverted to benefit defendants while concealing interests.
- Defendants are alleged to have caused Xinhua Finance to file SEC statements that allegedly concealed related party transactions, ownership interests, and large share dispositions.
- Court granted in part and denied in part several pretrial motions, ultimately dismissing the false statements counts (Counts Six–Nine) and the conspiracy-to-make-false-statements portion of Count One; proceeding to trial on Counts One (mail fraud), Two–Five, and Ten.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are Counts Six–Nine facially insufficient under §1001 as pleaded? | Singhal; Bush; Pelino contend Counts Six–Nine fail to allege affirmative false statements. | Defendants argue no duty to disclose or affirmative misrepresentation; inaction cannot sustain concealment theory. | Counts Six–Nine dismissed for failure to allege a duty to disclose. |
| Do Counts One–Nine survive extraterritoriality challenges under 18 U.S.C. §§ 1341 and 1001? | Prosecution asserts mailings in DC related to scheme extend jurisdiction. | Defendants cite Morrison to limit extraterritorial reach; Bowman guides criminal extraterritorial analysis. | Counts survive as to mail fraud; extraterritoriality challenge denied as moot only to extent already addressed. |
| Is the Indictment ambiguous or lacking fair notice to state mail fraud claims? | Indictment sufficiently details scheme and the four mailings under Counts Two–Five. | Indictment grammatically imperfect and misattributes actions, risking unfair notice. | Counts Two–Five survive; indictment sufficiently informs defendant of charges. |
| Is venue proper for the mail fraud and conspiracy counts? | Venue lies where mailings occurred or where conspiratorial acts were begun. | Challenge to venue given mailings outside DC. | Venue valid in DC for mail fraud and conspiracy. |
Key Cases Cited
- United States v. Reid, 533 F.2d 1255 (D.C. Cir. 1976) (mail fraud requires a scheme and a mailing in furtherance; no loss needed)
- Schmuck v. United States, 489 U.S. 705 (U.S. 1989) (mail fraud requires a mailing in furtherance of a fraudulent scheme)
- United States v. Safavian, 528 F.3d 957 (D.C. Cir. 2008) (requires a duty to disclose for concealment theories under §1001(a)(1))
- Morrison v. National Australia Bank Ltd., 130 S. Ct. 2869 (2010) (limits extraterritorial reach of §10(b); not controlling on criminal §1341 directly)
- United States v. Bowman, 260 U.S. 94 (1922) (extraterritorial reach for crimes governed by defense of fraud where perpetrated by citizens)
- United States v. Williams, 441 F.3d 716 (9th Cir. 2006) ( vagueness and understanding of proscribed conduct in mail fraud context)
- Pereira v. United States, 347 U.S. 1 (1954) (mailings need not be made by defendant; liability can attach by causing mailings)
- Crop Growers Corp. v. United States, 954 F. Supp. 335 (D.D.C. 1997) (concealment theories require duty to disclose under law)