Alabama Mail Fraud Convictions Reversed by Court of Appeals sitting in Atlanta

The United States Court of Appeals for the Eleventh Circuit, which sits several blocks from our offices here in Atlanta, reversed some of the convictions in a federal fraud prosecution that were brought against a defendant in Alabama. The reversal of some of the charges was because the indictment failed to allege the necessary facts for one type of federal fraud. This issue about what is needed in federal fraud indictments arises in many such cases we handle. It is refreshing to see the court make prosecutors indict such cases correctly, or else face the consequences.

The case is United States v. Suzanne Schmitz, and it was published on March 4, 2011. We have gotten a little behind in our blogging here, and over the next couple of weeks we will try to catch up by posting some entries from earlier this year.

In the Schmitz case, the defendant was charged with two varieties of fraud, mail fraud and fraud involving a program that received federal funds. The mail fraud charges were OK, appropriately setting out facts to support what we call the “scheme to defraud.” However, the counts alleging that Ms. Schmitz defrauded a program that got some money from federal funds fared less well. These charges merely alleged that she worked for the program, that she got her salary each year by engaging in fraud, and that such conduct violated the specific law in question.

On the one hand, indictments that set out the language of a law sometimes are good enough. However, the indictment also needs to set out sufficient facts and circumstances so that the defendant knows what he or she must defend against. Here, the part of the indictment involving federal funds fraud failed to allege any such facts.

The prosecutors in the Schmitz case had a fallback position. There is another set of rules that tell judges to look at the indictment “as a whole” and give it a “common-sense construction.” The prosecutors in Schmitz argued that by looking at the mail fraud charges (which, as mentioned above, were pled correctly) a person could understand what was charged in the counts alleging federal funds fraud. The Eleventh Circuit rejected this argument. While one part of an indictment can “inform” the meaning of other portions, this does not mean that one part can be simply read into that other portion of the indictment. The better practice is to have explicit cross-references between the various parts of a complex indictment, so that the defendant knows exactly what he or she must defend against.

We are currently involved in a case with somewhat similar issues. We filed a series of pretrial motions in an attempt to force the prosecutors to tell us exactly what we must defend against. In one way we were successful, in that the government went back and got a new indictment that included some of the material we suggested had been missing from the earlier version. The Schmitz decision is a lesson to those prosecutors who fail to plead fraud cases with the appropriate particularity.