Motion To Strike “Indictment Surplusage” Denied

admin —  March 10, 2009 — Leave a comment

Victoria l. Sprouse, a lawyer from Charlotte, North Carolina, was charged in a November 6, 2008, Superceding Indictment with perjury, conspiracy to commit money laundering, mail, wire and bank fraud. As previously reported by Mortgage Fraud Blog, the charges arose from multiple alleged mortgage fraud schemes involving Sprouse and several co-defendants.

On January 19, 2009, Sprouse filed a “Motion to Strike Prejudicial Surplusage and Misleading Allegations from the Indictment”. The United States opposed the motion. The Magistrate Judge, after having fully considered the record, denied the motion for the following reasons:

Defendant Sprouse in her motion contended that certain language in the Indictment should be stricken, specifically that the lawyers “used their law licenses to perpetuate the schemes” and that banks were “victimized.” She also objected to a section entitled “Regulatory Provisions.” She contended that any references to violations of North Carolina Bar Ethics Rules and the Good Funds Settlement Act should be stricken because they “might be confused with violations of federal law.” She alleged that all said language was “prejudicial surplusage” and misleading.

However, the Court held, Defendant Sprouse‘s status as a licensed attorney was and is relevant to the charged offenses because she allegedly engaged in the mortgage fraud schemes while functioning as a real estate closing attorney. Additionally, the court reasoned, the subject language cannot fairly be characterized as “inflammatory and prejudicial” in any meaningful way. For example, it is certainly not misleading for the Indictment to indicate that several banks incurred financial losses as a result of the mortgage fraud schemes, and thus, were “victimized.” Victimization is precisely what the United States hopes to prove at trial. The United States pointed out that there is nothing unusual or improper about denominating “victims” as such in an indictment.

Finally, the United States asserted in its opposition that the inclusion in an indictment of a section accurately explaining complex regulatory schemes is useful, relevant, and permissible. With respect to “schemes to defraud”, the United States indicated that the duty of honest services is appropriately defined by reference to state law. The “Regulatory Provisions” section of the Indictment identifies Defendant Sprouse‘s duty of honest services as a closing agent and attorney. This language in the Indictment was therefore relevant. Defendant Sprouse did not contend that the section was inaccurate in any way. An accurate reference to state rules could hardly be said to be “inflammatory.”

Although Sprouse contended that violations of state ethics rules or the law governing closing agents “might be confused with violations of federal law,” this is was found to be very unlikely. The court stated that the jury would be appropriately instructed on the elements of the relevant federal criminal charges and juries are presumed to follow their instructions. Therefore, Sprouse‘s Motion to Strike was denied.




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