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United States v. McLellan

United States District Court, D. Massachusetts

February 27, 2018

ROSS MCLELLAN, Defendants.

          ORDER ON MOTIONS TO DISMISS (DOC. NOS. 135, 136, 139, AND 148)

          Leo T. Sorokin, United States District Judge.

         The government has charged defendant Ross McLellan with conspiring to commit, and committing, securities fraud and wire fraud when he was an executive for State Street Bank. Doc. No. 282.[1] McLellan has filed four motions seeking dismissal of various combinations of the charges against him.[2] The government has opposed each motion. After careful consideration, the motions are DENIED for the reasons set forth below. For purposes of this Order, familiarity with the facts alleged in the Superseding Indictment is assumed.[3]


         “Defendants challenging the sufficiency of an indictment bear a heavy burden.” Perry, 37 F.Supp.3d at 550 (citing United States v. Troy, 618 F.3d 27, 34 (1st Cir. 2010)). The question presented by a motion seeking dismissal of a lawfully returned criminal indictment “is not whether the government has presented enough evidence to support the charge, but solely whether the allegations in the indictment are sufficient to apprise the defendant of the charged offense.” United States v. Savarese, 686 F.3d 1, 7 (1st Cir. 2012); accord United States v. Stepanets, 879 F.3d 367, 372 (1st Cir. 2018). Because dismissal of an indictment “directly encroaches upon the fundamental role of the grand jury, ” the circumstances under which a trial court properly may invoke its authority in this regard are “extremely limited.” Whitehouse v. U.S. Dist. Court, 53 F.3d 1349, 1360 (1st Cir. 1995). Generally, an indictment is sufficient if it “describes all of the elements of the charged offense using the words of the relevant criminal statute.” United States v. Wells, 766 F.2d 12, 22 (1st Cir. 1985) (citing Hamling v. United States, 418 U.S. 87, 117 (1974)); see Stepanets, 879 F.3d at 372 (“An indictment need not say much to satisfy these requirements . . . .”).

         “[A] court must deny a motion to dismiss [a criminal indictment] if the motion relies on disputed facts.” Stepanets, 879 F.3d at 372. Where a defendant's motion to dismiss depends “on disputed facts that [he] want[s] found in [his] favor, ” such as “contested facts surrounding the commission of the alleged offense, ” the “situation . . . calls for a trial, not a dismissal on pretrial motions, ” as “no court may consider [such facts] before trial.” Id. at 375 (quotation marks omitted).

         McLellan's arguments depend on viewing this case through the lens he prefers and considering an array of facts not contained within the four corners of the Superseding Indictment. E.g., Doc. No. 139 at 5 & n.3 (attaching a chart analyzing certain transactions at issue and arguing that the alleged victims “received precisely” what they “bargained for”: “the successful completion of the desired transition at or below the agreed-upon cost”). The Court, however, may not consider such information in resolving a motion to dismiss in a criminal action.[4] United States v. Ngige, 780 F.3d 497, 501-03 (1st Cir. 2015).


         A. Motion to Dismiss Counts Two and Three and So Much of Count One as Charges Conspiracy to Commit Securities Fraud, to Exclude Evidence of Extraterritorial Transitions and Transactions, and Motion for Related Discovery (Doc. No. 148)

         In his first motion, McLellan argues that a “majority of the securities transactions at issue were conducted entirely extraterritorially and hence fall outside the scope of” the relevant securities laws and regulations. Doc. No. 148 at 2, 24-25. Likewise, he argues any fraud alleged is foreign, not domestic, and is therefore also beyond the reach of the wire fraud statute. Id. McLellan's “extraterritoriality” motion is DENIED.

         The parties disagree about whether the criminal statutes at issue here apply extraterritorially. As to the securities laws, the Court need not resolve that dispute to rule on McLellan's motion. Even assuming those laws do not reach purely extraterritorial conduct, the Superseding Indictment, on its face, alleges conduct that falls squarely within the reach of 15 U.S.C. § 78j(b) and 17 C.F.R. § 240.10b-5. E.g., Doc. No. 282 at ¶¶ 12(d), 17-18, 24, 28, 34-38 (referencing “securities traded in the United States, ” “U.S. securities, ” “U.S. equities trades, ” “U.S. trades, ” and various actions taken by traders located in the United States); see Morrison v. Nat'l Austl. Bank Ltd., 561 U.S. 247, 269-70 (2010) (adopting “transactional test” under which reach of securities laws depends on “whether the purchase or sale is made in the United States, or involves a security listed on a domestic exchange”).[5] McLellan's arguments to the contrary rely on facts beyond the charging documents-facts to which the government has not stipulated for present purposes, and which the government has not agreed are appropriately considered now. The Court may not dismiss charges (or determine, now, that conduct was extraterritorial) on the basis of such facts.[6] Stepanets, 879 F.3d at 372, 375.

         Insofar as the original two wire fraud charges are concerned, [7] McLellan's argument fares no better. Addressing the extraterritorial application of a criminal statute with language similar to 18 U.S.C. § 1343, the First Circuit concluded that Congress had indicated an intent to reach conduct beyond the United States by “explicitly appl[ying]” the statute “to transmissions between the United States and a foreign country.” United States v. Lyons, 740 F.3d 702, 718 (1st Cir. 2014). However “cursory” McLellan believes the First Circuit's analysis in Lyons was, this Court is guided by it. The wire fraud statute explicitly references transmissions “in interstate or foreign commerce, ” § 1343 (emphasis added), and the two transmissions at issue here were either made or received by McLellan in the United States, Doc. No. 282 at ¶ 54. Under these circumstances, there is no basis for dismissing the charges alleging wire fraud based on extraterritoriality.

         Besides dismissal, McLellan requests: 1) that the conspiracy charge be narrowed to exclude any allegations regarding the “Irish Corporation” and the “Dutch Pension Fund” transitions; 2) that all evidence regarding the same two transitions be excluded at trial; 3) that evidence relating to “extraterritorial transactions that formed part of the remaining four transitions” be excluded at trial; and 4) that the government be required “to specify the basis for its categorization of each transition and securities transaction as domestic.” Doc. No. 148 at 24-25. Each of these requests is DENIED. The Superseding Indictment contains no specific factual allegations regarding the “Irish Corporation” or the “Dutch Pension Fund” transitions. As such, there are no allegations to strike or narrow at this time.

         Requests to exclude evidence of extraterritorial transitions (or extraterritorial transactions within a larger transition) are premature. The Court is not presently in a position to assess-and the government surely does not share-McLellan's view that such evidence is “irrelevant to proof of the offenses charged, ” id. at 25, let alone to engage in the weighing required by Federal Rule of Evidence 403. Challenges such as these can be presented via motion in limine before the trial, when the Court will consider the relevance and admissibility, including pursuant to Rule 404(b), of such evidence.

         Finally, the Court perceives no basis upon which to allow McLellan's request for specifics regarding the government's theory of why each transition and/or transaction is “domestic, ” which the government aptly characterizes as ...

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