United States District Court, D. Oregon
OPINION AND ORDER
ANN AIKEN, District Judge.
Defendant Joseph Anthony LaCoste is charged with one count of conspiracy to commit securities fraud and one count of securities fraud in violation of 18 U.S.C. § 371, 17 C.F.R. § 240.10b-5 (a), (b), and (c), and 51 U.S.C. §§ 78j (b) and 78ff (a); six counts of wire fraud in violation of 18 U.S.C. § 1343; six counts of mail fraud in violation of 18 U.S.C. § 1341; three counts of making false statements on a loan application in violation of 18 U.S.C. § 1014; one count of bankruptcy fraud in violation of 18 U.S.C. § 152(1); and one count of conspiracy to commit money laundering in violation of 18 u.s.c. §§ 1956 (a) (1) (B) (I)and 1956 (h). If convicted, defendant risks forfeiture of any property derived from proceeds traceable to the above charges pursuant to 18 U.S.C. § 981(a) (1) (c) and 28 U.S.C. § 2461 (c). The aforementioned charges are alleged against defendant in the Second Superseding Indictment that was filed on April 18, 2013.
Defendant pleads not guilty to the above charges and moves to strike certain allegations in the Second Superseding Indictment.
On February 4, 2014 the Court heard oral argument on the motion to strike. Based on arguments presented at the hearing and in the written briefs, defendant's motion is denied.
Between April 2006 and December 2007, defendant, while acting in his capacity as chief executive officer (CEO) of Willamette Development Services (WDS), obtained more than $5. 2 million from individual investors and more than $10 million from financial institutions and other sources to finance real estate projects managed by WDS. WDS was formed on May 6, 2006 for the purpose of developing residential and commercial real estate projects. Defendant was the CEO of WDS from its inception in 2006 until he was removed by a majority vote of WDS shareholders on January 28, 2008. The United States of America (the government) alleges that in a scheme to defraud investors, defendant made several false representations and omissions of material fact to investors in order to secure the financing mentioned above.
All but four of the nineteen counts brought against defendant in the Second Superseding Indictment relate to actions defendant allegedly took as the CEO of WDS. The remaining four charges brought against defendant relate to his alleged private investment activities.
According to the government, WDS solicited funds from potential investors by providing them with private placement memoranda (PPMs) that included various representations about the financial practices of defendant and WDS. WDS, through defendant, then provided promissory notes to investors for the principal and interest of their investments. The representations in the PPMs included promises of a 13 percent rate of return on investment, with a return of principal 18 to 36 months from the date of investment. The PPMs also stated that investments would be held in specific investment holding accounts until certain minimum investments were achieved.
However, defendant instead allegedly used the money that he promised would be held in specific investment accounts for nonproject purposes. In January 2008, after defendant was removed from his position as CEO of WDS, none of the promised real estate projects were completed and WDS, as well as all of the real estate projects managed by WDS, were insolvent. Consequently, individual investors lost their entire investments and the commercial lenders were able to recover only part of their investments through foreclosure actions. In 2011, defendant was indicted.
Defendant moves to strike certain allegations in the Second
Superseding Indictment on the ground that the allegations fail to state an offense as a matter of law, include unduly prejudicial character evidence, insufficiently apprise him of the nature of the charges, and fail to allow him to plead former acquittal or conviction if subsequent proceedings are taken against him for similar offenses.
A. Motion to Strike Allegations in Counts One and Two.
In Counts 1 and 2 of the Second Superseding Indictment, defendant is charged with conspiracy to commit securities fraud and securities fraud. Counts 1 and 2 allege in part that defendant knowingly conspired with Angela Marie McCoy to commit securities fraud by knowingly and willfully making untrue statements of material facts, and by omitting material facts requisite to make the statements not misleading. Furthermore, Counts 1 and 2 allege that the omissions and misstatements of material fact were made in connection with, and in furtherance ...