UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NORTH CAROLINA EASTERN DIVISION NO.

UNITED STATES OF AMERICA ) ) v. ) ) STEPHEN A. LaROQUE ) 4:12-CR-88-1H(2)

GOVERNMENTS RESPONSE IN OPPOSITION TO DEFENDANTS MOTION TO DISMISS COUNTS ONE THROUGH EIGHT

The United States of America, by and through the United States hereby Dismiss Attorney responds Counts for in 1-8 the Eastern to District the of North Carolina, Motion to

opposition of the

Defendants Superseding

Second

Indictment

(Indictment).

The Government requests the Court to deny the

Defendants motion and in support of this position respectively shows unto the Court the following: SUMMARY OF ARGUMENT Counts One through Four of Indictment charge that the

Defendant (i) embezzled, (ii) stole, (iii) obtained by fraud, (iv) intentionally misapplied, and (v) converted without proper authority, property of a federally-funded nonprofit named East Carolina Development Corporation (ECDC) in violation of 18 In

U.S.C. Sections 666(a)(1)(A) and 2 (Section 666 Charges).

addition to properly tracking the language of the statute, the

1

Case 4:12-cr-00088-H Document 45 Filed 04/29/13 Page 1 of 22

Indictment clearly informs the Defendant, in detail, regarding the factual bases supporting the Section 666 Charges. For example, the Indictment contains factual allegations

regarding the Defendants false statements to the Boards of ECDC and Piedmont Development Corporation (PDC) in connection with the nature of the compensation packages that he presented for approval, the amount of deferred compensation that he claimed was owed to him in 2009, 1 and the identity of the true

beneficiary of loans he proposed to make to his wholly-owned company, LaRoque Management Group (LMG). Indictment sets forth the improper and In addition, the unauthorized board

actions that the Defendant undertook in order to facilitate his theft of ECDC funds. The Indictment also alleges, in detail,

the manner in which the Defendant misapplied, stole, embezzled, and unlawfully converted $300,000 in ECDCs funds to his own personal use. 2

As noted in detail below, the Defendants claim that he was owed deferred compensation by ECDC and PDC prior to January 22, 2009, is absolutely false. This position, which the Defendant makes again in footnote 2 of his motion, is contradicted by the financial records maintained by each entity during such period. The Defendant funneled the proceeds from sham loans to LMG, which was used as a straw borrower, to purchase a personal interest in an ice rink, to reduce his wifes indebtedness to the seller of the ice rink, to buy a rental house in Kinston, and to purchase a refurbished 1997 Olympia Ice Resurfacer for the ice rink. 2
2

Case 4:12-cr-00088-H Document 45 Filed 04/29/13 Page 2 of 22

The

Defendant,

ignoring

the

language

contained

in

the

Indictment, claims that due to his complete control of the ECDC and PDC Boards, he was legally entitled to use all ECDCs and PDCs assets for his personal use. Based on this theory, the

Defendant claims that he is entitled to judgment of acquittal akin to Rule 29 judgment. Although the Defendant is entitled to challenge the

sufficiency of the Indictment, he is not entitled to seek a Rule 29 judgment of acquittal based on what he anticipates will be proven at trial by the Government. As to the sufficiency of the

Indictment, the legal and factual allegations contained in the Indictment establish that Counts 1-8 were properly charged.

Consequently, the Court should deny the Defendants motion. STATEMENT OF FACTS I. The Defendant embezzled, stole, fraudulently obtained, intentionally misapplied, and unlawfully converted $300,000 from a federally-funded nonprofit during the period from January 2009, through May of 2010. 3

During the two-year period from October 1, 2007, through September 30, 2009, ECDC, a federally-funded 4 non-profit, paid

As noted in the Indictment, the Defendant also engaged in a cover-up of his criminal activity through at least mid-2012. The Defendant, in footnote 1 of his Motion, appears to dispute the federally-funded nature of ECDC. However, regardless of whether 3
4

Case 4:12-cr-00088-H Document 45 Filed 04/29/13 Page 3 of 22

the

Defendant

$302,800

in

wages

and

$31,065.11

in

expense

reimbursements.

The Defendant paid himself his $302,800 salary

during this period in the form of 12 ECDC paychecks (in various denominations), each of which was co-signed by the Defendant and his wife on behalf of ECDC. penny of the $302,800 was left in in It is indisputable that not one salary ECDCs and bank $31,065.11 accounts in as expense deferred

reimbursements

compensation owed to the Defendant. none of the $966,795 in salary

It is equally clear that and $69,374.12 in expense

reimbursements that the Defendant arranged for ECDC to pay him during the years leading up to October 1, 2007, was left in ECDCs bank accounts as deferred compensation owed to the

Defendant. 5

the funds in ECDCs bank accounts consist of disbursements received directly from the USDA (defined in the Regulations as Federal Funds) or principal and interest repaid by ECDCs borrowers (defined in the Regulation as Revolved Funds), each category of funds is covered by the USDA Regulations. Furthermore, regardless of the semantics engaged in by the Defendant, it is indisputable that as of late 2012, ECDC and PDC owed the USDA more than $5,000,000 in federal loans which are serviced by the USDA. Consequently, it is the Governments position that ECDC, while a private nonprofit corporation, is federally funded. A review of ECDCs board minutes, audited financial statements, Form 990 Tax Returns, semi-annual financial statements, budgets, USDA loan applications reflect absolutely no deferred compensation owed to the Defendant. Likewise, a review of the same documents from PDC show that the Defendant took neither compensation, nor earned deferred compensation, for servicing the hand full of loans that PDC was able to make during its history. 4
5

Case 4:12-cr-00088-H Document 45 Filed 04/29/13 Page 4 of 22

On January 2, 2009, the Defendant and his wife executed an ECDC paycheck to the Defendant in the sum of $50,000. This

money was used by the Defendant, in part, to pay the $16,452 in credit card charges that he had incurred the previous month at a jewelry store located just outside of Washington, DC. 6 During

the weeks leading up to January 22, 2009, the Defendant was also contemplating filing lawsuits against two of his brothers

(neither of whom ever served on ECDC or PDC Boards) regarding, among other things, their alleged failure to make proper

financial distributions to the Defendant under their mothers probate estate and a testamentary trust set up at the time of her death in mid-2008. 7 On January 22, 2009, the Defendant summoned a former

director to attend an ECDC board meeting without following the written notice requirements contained in ECDCs Bylaws. This

was the first director, other than the Defendant, his wife, and his brother, to attend an ECDC board meeting since April of
Copies of the receipts from the Defendants $16,452 in jewelry purchases are attached as Exhibits 1 and 2. On April 20, 2009, the Defendant filed two complaints against two of his brothers. The first Complaint alleged that they had breached their fiduciary duties to him under their mothers estate and testamentary trust. See Complaint attached as Exhibit 3. The second Complaint sued two of his brothers for alleged defamation of the Defendants character. See Complaint attached as Exhibit 4. This dispute delayed the Defendants receipt of distributions under his mothers estate and testamentary trust. 5
7 6

Case 4:12-cr-00088-H Document 45 Filed 04/29/13 Page 5 of 22

2007.

The Defendant reinstalled the former director and then the audit for FY 2006-2007 which reflected no

reviewed

deferred compensation owed to the Defendant. 8

The Defendant then

briefly described a new management contract which he falsely described as reaffirming his previous contractual relationship with ECDC. contract According to the minutes, the motion to approve the unanimously. In light of the Defendants

passed

failure to comply with proper notice requirements, the false information he provided to the Board regarding the nature of the contract, and the fact that conflicted parties (including the Defendant) voted on the contract, it is the Governments

position that the contract was not properly authorized by ECDCs Board. The Defendant and his wife executed a fraudulent

management contract between ECDC and the Defendant later in the day. See ECDC Agreement at Exhibit 6. Immediately installed ECDC following director the ECDC and Board the meeting, the newly a

left

Defendant

commenced

meeting of the PDC Board, which consisted of himself, his wife, and his brother. The Defendant did not provide written notice

of this meeting, which was the first PDC Board meeting to occur since late 2007. The Defendant reviewed the audit for FY 2006-

Attached as Exhibit 5 are the minutes from the January 22, 2009, ECDC Board Meeting. 6

Case 4:12-cr-00088-H Document 45 Filed 04/29/13 Page 6 of 22

2007 (which reflected no deferred compensation owed to the him) and then briefly described described as a management his contract which he

falsely

reaffirming

previous

contractual

relationship with PDC. 9 approve the contract

According to the minutes, the motion to passed unanimously, with the Defendant

abstaining. proper

In light of the Defendants failure to comply with requirements, the false information that he

notice

provided to the Board regarding the nature of the contract, and the fact that conflicted parties were allowed to vote on the contract, it is the Governments position that the contract was not properly authorized. The Defendant and his wife executed a fraudulent management contract between PDC and the Defendant

later in the day. II.

See PDC Agreement at Exhibit 8.

Notwithstanding the Defendants bold statements to the contrary, he was not owed hundreds of thousands of dollars of deferred compensation from ECDC and PDC prior to the January 22, 2009, Board Meetings.

The terms of the ECDC and PDC management contracts proposed to their Boards on January 22, 2009, obligate these nonprofit entities to pay the Defendant significantly more money for the preceding himself. decade than the generous sum he had actually paid

In fact, such contracts, if valid, would have created

Attached as Exhibit 7 are the minutes from the January 22, 2009, PDC Board Meeting. 7

Case 4:12-cr-00088-H Document 45 Filed 04/29/13 Page 7 of 22

accounts payable owed by ECDC and PDC to the Defendant in the aggregate sum of between $200,000 and $300,000. In footnote 2

of his Motion, the Defendant boldly asserts to the Court that he was in fact owed this deferred compensation money based on valid and effective contracts entered at the very inception of each nonprofit. In other words, the Defendant represents to the

Court the same thing he represented to the ECDC and PDC Boards on January 22, 2009, that the new contracts entered on January 22, 2009, merely affirmed his past compensation arrangements

with ECDC and PDC.

Notwithstanding the Defendants continued

assertion of this position, the facts show otherwise. The Defendant argues that the Governments own

investigation revealed that he was owed deferred compensation based on valid and effective contracts that he entered with ECDC and PDC at the outset of the operation of each entity. Defendant further represents to the Court that based on The the

terms of such contracts he was entitled to a yearly salary equal to three percent of the assets held by those organizations

annually. of a

In other words, $30,000 per year for each $1 million assets, simply regardless sitting of in whether a bank such asset or

nonprofits of

consisted

money

account

outstanding loans which the Defendant would have had to service.

Case 4:12-cr-00088-H Document 45 Filed 04/29/13 Page 8 of 22

There are three fatal flaws in the Defendants position. First, the Defendant fails to mention that contracts revealed by the Governments investigation consist of unsigned copies of

three contracts that were provided by the Defendant in response to a Grand Jury subpoena. Exhibits inability 9, to 10, and 11. actual See unsigned contracts attached as In addition to the only Defendants the first

locate

signed

copies,

unsigned contract, which provides the Defendant with a salary of $18,000 Board. 10 Next, the Defendants claim that the unsigned contracts for 1998-99 fiscal year, was actually approved by a

entitled him to a yearly salary of three percent of the assets held by those organizations annually is false. contracts actually state that the The unsigned annual

Defendants

compensation shall be Three per cent (3%) of the total program assets being administered (emphasis added). 11 and 11 at 3. See Exhibits 10

As to the PDC contract, although the PDC Board minutes dated April 29, 2004, indicate that the Defendant would prepare a contract and have it reviewed by PDCs directors, no further reference to such a contract is contained in PDCs minutes. A copy of the partially signed PDC Board minutes dated April 29, 2004, which was provided to the Government by the Defendant in response to a Grand Jury subpoena, is attached as Exhibit 12. In the ECDC and PDC contracts executed on January 22, 2009, the Defendant changed the computation of his annual salary to Three percent (3%) of ECDCs [PDCs] assets. See Exhibits 6 and 8 at 3. 9
11

10

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Finally, the Defendants argument that he was owed hundreds of thousands of dollars of deferred compensation from ECDC and PDC in the years leading up to January 2009, is contradicted by all of ECDC and PDCs financial records for such periods,

including Form 990 Tax Returns signed by the Defendant on behalf of ECDC and PDC. III. The Defendants Theft of $300,000 under the Guise of ECDC Loans to LMG. During ECDCs fiscal years 2007-08, 2008-09, and 2009-10, the Defendant and his wife continued to co-sign paychecks to the Defendant for his normal ECDC salary. 12 The Defendant cashed

each of these checks, leaving no deferred compensation owed to him from ECDC. However, notwithstanding his lucrative salary

during such period, the Defendants lifestyle was such that from mid-2009 to mid-2010 the Defendant needed an additional $300,000 to cover personal expenses. The Defendant solved this cashflow

shortage through the theft of $300,000 from ECDC. In order to access the $300,000, on June 19, 2009, the Defendant, without providing proper written notice, held Board
Unlike the earlier unsigned contracts, the January 2009 contracts also provide the Defendant with additional compensation in the form of a half of all collected loan fees and ten percent of any profit. Id. Finally, in the January 2009 contracts the Defendant broadened his entitlement to reimbursable expenses. The Defendant arranged for ECDC to pay him $135,000 in 2007-08, $167,800 in 2008-09, and $141,225 in 2009-10. 10
12

Case 4:12-cr-00088-H Document 45 Filed 04/29/13 Page 10 of 22

meetings for ECDC and PDC. meeting, were the

The only directors attending each his wife, and his brother.

Defendant,

According to the minutes from each meeting, which are attached as Exhibits 12 and 13: Mr. Stephen LaRoque asked the Board to approve a loan to LaRoque Management Group, Inc. (LMG) based on earned income not yet distributed to LMG. A brief discussion followed and a motion to approve the loan was made by . . . [LaRoque=s brother] and seconded by . . . [LaRoque=s wife]. The 13 motion passed unanimously. During each meeting the Defendant withheld from his brother the amount of purported LMG loan, the fact that the purpose of the loan was to invest in an ice rink in Greenville (a location that did not qualify for IRP loans), and the fact that LMG was

serving as a straw borrower with the funds actually being used by the Defendant to personally purchase assets. There was also

no discussion regarding the fact that each of the directors who voted on the action had a conflict of interest that should have prevented them from participating in the vote. 14

The Government does not concede that this vote constituted proper authorization. In addition to the lack of proper written notice, it is clear that each of the three directors were prohibiting from voting due to conflicts of interest, leaving no directors left to vote on the matter. At the time of the vote, LaRoque was the sole owner of LMG, LaRoque=s brother had a business relationship with LMG, and the loan to 11
14

13

Case 4:12-cr-00088-H Document 45 Filed 04/29/13 Page 11 of 22

Based on ECDC Boards loan approval, the Defendant made four withdrawals (totaling $300,000) from ECDCs bank account, under the guise of loans to LMG. The first fictitious loan, in

the sum of $150,000, occurred on June 26, 2009, and was used by the Defendant to buy a personal interest in an ice skating rink in Greenville, named Bladez on Ice, from his wife. 15 The

labyrinth of transactions that the Defendant engaged in on June 26, 2009, in order to conceal his personal purchase of a portion of his wifes skating rink is as follows: (a) Friday, June 26, 2009. Defendant and his wife executed ECDC check number 2634, in the sum of $150,000, payable to LMG, with the following reference in the memo space of the check: ALoan to Contractor@ (see Exhibit 15 at 1); Friday, June 26, 2009. Defendant deposited the $150,000 check into LMG=s account at the Kinston Plaza branch of RBC Centura (see Exhibit 15 at 2); Friday, June 26, 2009. Defendant executed LMG check number 1861, in the sum of $141,500, payable to Bladez on Ice, with the following reference in the memo space of the check: APurchase Ownership Interest in Business@ (see Exhibit 15 at 3); Friday, June 26, 2009. Defendant used the $141,500 check to purchase an AOfficial Check@ at RBC Centura Kinston Plaza branch made payable to

(b)

(c)

(d)

LMG was intended to be used by the Defendant to purchase half of his wife=s remaining interest in Bladez on Ice.
15

A photograph of Bladez on Ice is attached as Exhibit 14. 12

Case 4:12-cr-00088-H Document 45 Filed 04/29/13 Page 12 of 22

Bladez on Ice in the sum of $141,500 (see Exhibit 15 at 4); (e) Friday, June 26, 2009. Defendant then traveled to a Wachovia Bank branch in Kinston and deposited the $141,500 AOfficial Check@ into Bladez on Ice=s bank account (see Exhibit 15 at 5); Friday, June 26, 2009. Bladez on Ice issued check number 1017, in the sum of $96,500, made payable to the Defendants wife, with the following reference in the memo space of the check: ALoan Repayment@ (see Exhibit 15 at 6); and Friday, June 26, 2009. Bladez on Ice issued check number 1018, in the sum of $44,000, made payable to the Carrier Corp. (see Exhibit 15 at 7). January from 6, 2010, the by Defendant the received and a $50,000 wife.

(f)

(g)

On paycheck

ECDC,

cosigned

Defendant

his

Notwithstanding his receipt of this paycheck, by January 29, 2010, the Defendant was in need of an additional $50,000 to help pay-off the remaining amount owed on the note signed by his wife in connection with her original purchase of Bladez on Ice. Defendant solved this cash shortage by making a The

fictitious

$50,000 loan to LMG and then having LMG apply the funds to the Bladez on Ice note. As was the case with the $150,000

fictitious loan, LMG received no interest in Bladez on Ice in connection with this transaction. Attached as Exhibit 16 are

the checks and a deposit slip relating to this fictitious loan.

13

Case 4:12-cr-00088-H Document 45 Filed 04/29/13 Page 13 of 22

The third fictitious loan, in the sum of $50,000, occurred on March 5, 2010, and was used by the Defendant to help fund his purchase of a house to rent to his wifes step daughter. photograph Although of the rental was house is attached from as Exhibit bank A 17.

the

$50,000

withdrawn

ECDCs

account

under the guise of a loan to LMG, the rental house was deeded in the Defendant and his wifes names. Attached as Exhibit 18 are

the checks and a deposit slip relating to this fictitious loan. On paycheck April from 14, ECDC, 2010, the Defendant by the received and a $20,000 wife.

cosigned

Defendant

his

Notwithstanding his receipt of this paycheck, by early May 2010 the Defendant was in need of additional funds in order to

replace Bladez on Ices 1974 Zamboni Ice Resurfacer.

To solve

this cash shortfall, the Defendant made a fourth fictitious loan to LMG in the sum of $50,000. expenses relating to the The money was used to fund the on a used Olympia Ice

purchase

Resurfacer. 16

LMG did not receive any ownership interest in the Attached as Exhibit 19 are the checks

Olympia Ice Resurfacer.

and a deposit slip relating to this fictitious loan.

16

On May 7, 2010, the Defendant executed a $4,500 LMG check in payment of a rental ice resurfacer and a $20,000 LMG check as a down payment on a 1997 Olympia Ice Resurfacer that would be ready for delivery in August. On August 10, 2010, the Defendant executed a $21,000 LMG in full payment of the amount owed on the rebuilt ice resurfacer. 14

Case 4:12-cr-00088-H Document 45 Filed 04/29/13 Page 14 of 22

During

the

remainder

2010

the

Defendant

executed

(with

either his wife or brother cosigning) the following additional ECDC paychecks to himself: (a) May 28, 2010 $10,000; (b) June

28, 2010 - $15,000; (c) July 7, 2010 - $15,000; (d) July 29, 2010 - $1,225; (e) August 11, 2010 - $15,000; (f) September 1, 2010 - $15,000; (g) October 1, 2010 14,000; (h) November 1, 2010 10,000; and (i) December 1, 2010 - $10,000. IV. Defendants Frantic Efforts to Cover Up his Theft of $300,000 from ECDC.

In April of 2010, the Defendant was corresponding with the North Carolina Board of Elections (NC-BOE) regarding $28,000 in loans LMG had made to his 2008 campaign committee. By this

date, the Defendant had made $250,000 in fictitious loans to LMG. During an email exchange with the NC-BOE Investigator, the Does LMG receive In

Defendant was asked the following question:

any fund from the non-profit organizations [ECDC and PDC]? response to this inquiry, the Defendant wrote as follows: I have a management contract with the two non-profit organizations to manage both of them in all aspects with the primary responsibility including Administration, Marketing, Loan Packaging and Loan Servicing. LMG performs loan underwriting for another non-profit organization on an as needed basis for a fee. In the fall of 2010, the Defendant ran for the

North

Carolina House seat for North Carolina District 10.

15

During the

Case 4:12-cr-00088-H Document 45 Filed 04/29/13 Page 15 of 22

campaign his opponent published mailed campaign fliers stating that the Defendant uses Federal Government loans to finance his businesses. . . . In response to this and other statements the

Defendant filed a Complaint suing his opponent for defamation of character. Although the Defendant was elected to the seat on During civil discovery with a in discovery purported

November 2, 2010, the lawsuit continued. the Defendant which refused might to have ECDC

comply

request

have

revealed

the

$300,000

loans to LMG.

After a contempt order was issued by a state

court requiring ECDC to comply with the discovery request, the Defendant continued to have ECDC ignore the contempt order.

ECDC would ultimately pay $40,796.75 in legal fees and $17,250 in contempt fines as a result of this decision. In mid-2011, a reporter from an Internet Publication began making inquiries regarding the manner in which the Defendant compensated articles, himself over the years. that he After would some respond negative to the

the

Defendant

stated

reporter at a press conference on August 16, 2011, in Kinston. The day before the press conference the Defendant held ECDC and PDC Board meetings during which the Defendant, his wife, and his brother added three new persons to each board. After adding the

new members to each Board, the Defendant requested each of the newly constituted Boards to affirm
16

his

January

22,

2009

Case 4:12-cr-00088-H Document 45 Filed 04/29/13 Page 16 of 22

contracts. 17

The Defendant did not disclose the existence of the At the press disclose LMG or the his

$300,000 in purported loans owed to ECDC by LMG. conference existence the of next day of the the Defendant purported did not to

$300,000

loans

additions to ECDC and PDCs Board the day before. In early September 2011, the Defendant and other related entities were served with federal Grand Jury subpoenas. As

described in the Indictment, within sixty days of receiving the Grand Jury subpoenas the Defendant went to great lengths to

unwind many of the financial transactions that he had undertaken in order to conceal his theft of $300,000 from ECDC. See

Introduction to Indictment at 175-80.

During this same period,

the Defendant amended a number of tax returns in an attempt to cover up his crimes. See Introduction to Indictment at 181-82. DISCUSSION Counts One through Four of the Indictment charge the

Defendant with looting two defenseless nonprofit entities that each received federal funding. 18 alleges
17

Specifically, the Indictment violated 18 U.S.C. Section

that

the

Defendant

Unlike on January 22, 2009, the Defendant, his wife, and his brother abstained from voting on the new contracts. Counts Five through Eight contain money laundering charges corresponding to the financial transactions engaged in by the Defendant after his theft of ECDCs property. 17
18

Case 4:12-cr-00088-H Document 45 Filed 04/29/13 Page 17 of 22

666(a)(1)(A) when he: (i) embezzled, (ii) stole, (iii) obtained by fraud, (iv) intentionally misapplied, and (v) converted

without proper authority, a total of $300,000 from ECDC. Although the Defendant is certainly entitled to challenge the legal sufficiency of the Section 666 counts contained in the Indictment, such a challenge must be reviewed in the context of the Indictment itself. According to the Fourth Circuit:

To pass constitutional muster, an indictment must (1) indicate the elements of the offense and fairly inform the defendant of the exact charges and (2) enable the defendant to plead double jeopardy in subsequent prosecutions for the same offense. United States v. Williams, 152 F.3d 294, 299 (4th Cir. 1998). Generally, an indictment is sufficient if it alleges an offense in the words of the statute . . . . 187 F.3d 426, 427 (4th Cir. 1999). Indictment properly tracks the United States v. Wicks, In the present case, the language of Section

statutory

666(a)(1)(A) and also contains factual allegations informing the Defendant of the conduct that the Government alleges to violate such law. The Defendant attempts to sidestep the Indictment, which sufficiently charges the Section 666 violations, by basing his challenge on facts summarized by the Government in its response to the Defendants motions to dismiss the Section 1001 charges
18

Case 4:12-cr-00088-H Document 45 Filed 04/29/13 Page 18 of 22

(which allege fraud by the Defendant against the USDA, not ECDC) and motion to strike surplusage. After picking and choosing

between portions of the Governments responses to such motions, the Defendant summarizes the Section 666 Counts against him as follows: Counts 1 through 4 of the Indictment allege that Mr. LaRoque stole money from or defrauded ECDC, not by defrauding the board members, but by obtaining permission from the board of directors of ECDC for each transaction allegedly comprising the illegal scheme. See Defendants Motion at 1. It appears that this tortured

reading of the allegations contained in the Section 666 Counts was intended to bolster the Defendants attempt to benefit from a factual comparison with United States v. Graham, 269 Fed.

Appx. 281 (4th Cir. 2008), an unpublished opinion attached as Exhibit 20. However, a close reading of Graham shows that the

case does not benefit the Defendant. In Graham, the Fourth Circuit reversed a conviction of the defendant, after a bench trial, for stealing money from a nonprofit where the board had authorized the defendant to have the nonprofit buy out his properly accrued sick leave. Defendants reasons. sufficiency reliance First, of in on this case the is misplaced for The

several not of the the

Graham

defendant but the

attacked

the

Indictment,
19

sufficiency

Case 4:12-cr-00088-H Document 45 Filed 04/29/13 Page 19 of 22

evidence presented by the Government at trial. Second, in Graham the nonprofit entities

Id. at 284-85. had legitimately

operating boards 19 and it does not appear from the record that the defendant voted on his own compensation requests. 285. been Id. at

Third, the sick leave that Graham sought to cash out had properly accrued . . . during his tenure at the

nonprofits.

Id. at 287.

In the present case, notwithstanding

the Defendants repeated statements to the contrary, all of the financial records for ECDC and PDC show that the Defendant did not have deferred compensation owed to him prior to January of 2009. Based on the guidance provided by the Fourth Circuit in Williams, 152 F.3d at 299, the Section 666 Counts in the

Indictment sufficiently charge the Defendant and any attempt to dismiss the counts as insufficiently charged should be denied. To the extent that the Defendant is seeking relief akin to a Rule 29 judgment of acquittal, this request should also be

denied because such an avenue of attack is not available to the

In Graham, the Government argued that the defendant had undue influence of a board consisting of a number of independent directors who happened to be elderly. In the present case, the Government alleges not that the Defendant exercised undue influence over a board of independent directors, but that the Defendant and his family had actually seized control of the Board thereby making any board actions on Defendants compensation package improper. 20

19

Case 4:12-cr-00088-H Document 45 Filed 04/29/13 Page 20 of 22

Defendant until the Government has been given the opportunity to present its case. 20 CONCLUSION WHEREFORE, the Government respectfully requests that the

Court deny the Defendants motion to dismiss Counts One through Nine. Respectfully submitted, this 29th day of April, 2013. THOMAS G. WALKER United States Attorney

BY: /s/ Dennis M. Duffy DENNIS M. DUFFY Assistant U.S. Attorney 310 New Bern Avenue, Suite 800 Raleigh, North Carolina 27601 Telephone: (919) 856-4530; Fax: (919) 856-4487 E-mail: dennis.duffy@usdoj.gov NC Bar No. 27225

The present case is clearly distinguishable from United States v. Bongiorno, 2006 WL 1140864 (S.D.N.Y. May 1, 2006) and United States v. Izurietai, 710 F.3d 1176 (11th Cir. 2013), each of which dealt with the complicated interplay between regulatory violations in Security Exchange Commission and Food and Drug Administration cases. 21

20

Case 4:12-cr-00088-H Document 45 Filed 04/29/13 Page 21 of 22

CERTIFICATE OF SERVICE This is to certify that I have this 29th day of April, 2013, served a copy of the foregoing upon the defendant in this action either electronically or by depositing a copy of the same in the United States mail in a postpaid envelope addressed as follows: Mr. Joseph A. Cheshire V Mr. Elliot S. Abrams Cheshire Parker Schneider & Bryan, PLLC 133 Fayetteville Street Raleigh, North Carolina 27602

THOMAS G. WALKER United States Attorney

BY:

s/ Dennis M. Duffy DENNIS M. DUFFY Assistant U.S. Attorney 310 New Bern Avenue, Suite 800 Raleigh, North Carolina 27601 Telephone: (919) 856-4530; Fax: (919) 856-4487 E-mail: dennis.duffy@usdoj.gov NC Bar No. 27225

22

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