Decision & Order — United States v. Mansouri (Dkt. 77, W.D.N.Y.)

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A decision and order in United States v. Hormoz Mansouri, 22-CR-34-LJV-MJR, in the U.S. District Court for the Western District of New York, filed December 5, 2023 as Document 77. It recites that Mansouri was indicted for conspiracy to commit wire fraud and bank fraud for submitting fraudulent applications for PPP and EIDL loans through entities he controlled, and that on June 29, 2023 Judge Roemer's report, recommendation and order found that his motions to dismiss and to strike should be denied. Reviewing the objections, the court concludes that the fact that the losses were reimbursable does not require dismissal of the indictment. It runs 10 pages.

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Case 1:22-cr-00034-LJV-MJR Document 77 Filed 12/05/23 Page 1 of 10




UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK


 UNITED STATES OF AMERICA,


       v.
                                                       22-CR-34-LJV-MJR
 HORMOZ MANSOURI,                                      DECISION & ORDER

              Defendant.




                                    BACKGROUND


      The defendant, Hormoz Mansouri, was charged by indictment with one count of

conspiracy to commit wire fraud and bank fraud in violation of 18 U.S.C. § 1349; twelve

counts of bank fraud in violation of 18 U.S.C. §§ 1344(2) and 2; nineteen counts of wire

fraud in violation of 18 U.S.C. §§ 1343 and 2; and eight counts of money laundering in

violation of 18 U.S.C. § 1957(a). Docket Item 14. The case was assigned to this Court,

and on March 10, 2022, this Court referred the case to United States Magistrate Judge

Michael J. Roemer for all purposes under 28 U.S.C. § 636(b)(1)(A) and (B). Docket

Item 16.

      On October 31, 2022, Mansouri filed an omnibus motion seeking, inter alia, to

dismiss the indictment, to strike language from the indictment, and to obtain various

discovery and disclosures. Docket Item 32. On December 12, 2022, the government

responded to the omnibus motion, Docket Item 35, and on January 9, 2023, Mansouri

replied, Docket Item 41. Judge Roemer heard oral argument on March 8, 2023, see

Docket Item 48, and the parties submitted supplemental briefing on May 17, 2023,

      Case 1:22-cr-00034-LJV-MJR Document 77 Filed 12/05/23 Page 2 of 10




Docket Items 55, 56. On June 29, 2023, Judge Roemer issued a Report,

Recommendation, and Order (“RR&O”) finding that Mansouri’s motions to dismiss and

to strike should be denied. Docket Item 58 at 3-24. Judge Roemer also resolved the

non-dispositive motions and discovery issues. Id. at 24-34.

      On July 13, 2023, Mansouri objected to the RR&O, Docket Item 59, and he filed

a memorandum of law in support of his objections on August 29, 2023, Docket Item 68.

On September 19, 2023, the government responded, Docket Item 69, and on October

12, 2023, this Court heard oral argument, Docket Item 72. The Court requested

additional submissions, and those submissions were filed on October 25, 2023, see

Docket Item 75 (Mansouri’s submission), and November 6, 2023, see Docket Item 76

(government’s submission).


                                 LEGAL PRINCIPLES


      A district court may accept, reject, or modify the findings or recommendation of a

magistrate judge. 28 U.S.C. § 636(b)(1); Fed. R. Crim. P. 59(b)(3). The court must

review de novo those portions of a magistrate judge’s recommendation to which a party

objects. 28 U.S.C. § 636(b)(1); Fed. R. Crim. P. 59(b)(3).

      This Court has carefully and thoroughly reviewed the RR&O; the record in this

case; and the objections, response, reply, and supplemental briefing. Based on that de

novo review, the Court accepts and adopts Judge Roemer’s recommendation to deny

the defendant's motions to dismiss and to strike.




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                                         FACTS


       Between around April 2020 and February 2021, Mansouri was the owner,

majority owner, managing partner, managing member, managing sole member, or sole

member of seven limited liability companies (“LLCs”) and two corporations. 1 Docket

Item 14 at ¶¶ 2-9, 25-26. The indictment alleges that through two of his employees and

on behalf of those entities, Mansouri submitted multiple fraudulent applications for loans

under the Paycheck Protection Program (“PPP”) 2 and Economic Injury Disaster Loan

(“EIDL”) 3 program, both established by the Coronavirus Aid, Relief, and Economic

Security Act (“CARES Act”). See generally id. at ¶¶ 11-17, 24-40; Docket Item 69 at 2-

5. More specifically, the indictment alleges that the loan applications included materially

false and fraudulent information, pretenses, representations, and promises supported


       1 The LLC companies are HLM Holding LLC; 2060 Sheridan Drive, LLC; 212

Holden Avenue LLC; 350 Old Niagara Falls Boulevard LLC; 47 East Amherst LLC; and
3600 Harlem Road LLC. Docket Item 14 at ¶¶ 2-7. The two corporations are EI Team
Inc. and NPTS Inc. Id. at ¶¶ 8-9.
       2 The PPP specifically provided forgivable loans to small businesses for job

retention and other expenses incurred during the Covid 19 pandemic. Docket Item 14
at ¶¶ 11-14. To obtain a PPP loan, a qualifying business had to submit an application
that included certain affirmative certifications, including such information as the average
monthly payroll expenses and number of employees. Id. at ¶ 12. PPP loan
applications were processed by a participating lender, which, pending approval, would
fund the loan using its own monies guaranteed by the Small Business Administration.
Id. at ¶ 13. The PPP loan proceeds were supposed to be used only for certain
permitted expenses, and the interest and principal were eligible for forgiveness only if
the business spent the money on these items within a designated period of time and
used a certain portion for payroll expenses. Id. at ¶ 14.
       3 The EIDL program was designed to provide economic relief to businesses

suffering a temporary loss of revenue due to COVID-19. Docket Item 14 at ¶¶ 15-17.
The EIDL program provided low interest loans to pay for certain expenses, including
payroll; paid sick leave for employees; increased production costs; and business
obligations such as debts, rent, and mortgage payments. Id. at ¶ 16.

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by false and fictitious documents created by Mansouri or his employees. Docket Item

14 at ¶¶ 24-40; Docket Item 69 at 4-5.

       According to the indictment, the PPP loan applications inflated or fabricated the

average monthly payroll of each entity; in fact, the indictment says, only the two

corporations had employees, and the other entities were holding companies with no

employees or payroll expenses. Docket Item 14 at ¶¶ 29-31; Docket Item 69 at 4.

Likewise, the indictment alleges that the EIDL applications falsely represented revenues

and cost of goods sold. Docket Item 14 at ¶¶ 32-33; Docket Item 69 at 4-5. And the

indictment alleges that the false information submitted in support of both sets of

applications was material because the lenders relied on that information when deciding

whether to make the requested loans. Docket Item 14 at ¶ 27; Docket Item 69 at 5.

       The indictment charges that based on the fraudulent and false information in the

applications, multiple federally insured financial institutions sent funds to bank accounts

controlled by Mansouri. Docket Item 14 at ¶¶ 35-38; Docket Item 69 at 5. And it

charges that Mansouri then moved the funds through numerous banks accounts to

disguise the nature, location, source, ownership, or control of the proceeds—thus

laundering the money derived from the illegal activity.4 Docket Item 14 at ¶¶ 39-40;

Docket Item 69 at 5.




       4 The indictment also included forfeiture allegations for funds seized from bank

accounts and for a vehicle controlled or owned by Mansouri. Docket Item 14 at ¶¶ 41-
42.



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                                       DISCUSSION


       The RR&O recommends 5 that Mansouri’s motions to dismiss and to strike be

denied. Docket Item 58 at 3-24. For the reasons that follow, this Court accepts those

recommendations and denies the motions to dismiss and to strike.

       Federal Rule of Criminal Procedure 7 provides that an indictment “must be a

plain, concise, and definite written statement of the essential facts constituting the

offense charged . . . .” Fed. R. Crim. P. 7(c)(1). An indictment must set forth “all of the

essential elements of the crime.” United States v. Gonzalez, 686 F.3d 122, 127 (2d Cir.

2012) (citations omitted). Each element must be included, but the Second Circuit

generally has found an indictment sufficient when it “tracks the language of the statute.”

United States v. Frias, 521 F.3d 229, 235-36 (2d Cir. 2008).

       Mansouri objects on two grounds. First, he argues that the indictment should be

dismissed because his case is analogous to Ciminelli v. United States, 598 U.S. 306

(2023), a recent decision in which the Supreme Court rejected a “right-to-control” theory

of wire fraud. See Docket Item 68 at 6-9. He says that Judge Roemer erred by relying

on pre-Ciminelli cases to conclude that Mansouri committed fraud simply by virtue of

false representations. Id. Second, Mansouri argues that his actions do not qualify as

wire or bank fraud because the banks and financial institutions that he allegedly

defrauded suffered no actual loss of property. Id. More specifically, he says that



       5 Mansouri did not object to Judge Roemer’s recommendation that his motion to

strike be denied; the Court therefore adopts that recommendation without addressing
the issue. The RR&O also resolved certain non-dispositive motions and discovery
issues. Neither side appealed those portions of the RR&O, and the Court therefore
does not address them further.

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however false or misleading his statements and representations may have been, they

were not intended to, and in fact did not, cause any actual injury to any specific lender

because the Small Business Administration (“SBA”) fully funded the PPP and EIDL

program and reimbursed any losses. Id.

       For the reasons that follow, both arguments lack merit.


I.     Ciminelli

       Ciminelli involved a scheme by political operatives to tailor a state-funded bidding

process so that LPCiminelli (Ciminelli’s construction company) was virtually guaranteed

to be designated a “preferred developer.” 598 U.S. at 309-10. That status, in turn,

ensured that LPCiminelli would be chosen for construction projects that were part of the

lucrative “Buffalo Billion” program. Id. The government in that case relied exclusively

on the “right-to-control” theory: that the defendant schemed to deprive a victim of

potentially valuable economic information necessary to make discretionary economic

decisions. Id. at 310-311.

       The Supreme Court rejected that theory as “unmoored” from the text of the

federal fraud statutes, which are “limited in scope to the protection of property rights.”

Id. at 314-15 (citation omitted). It held that the wire fraud statute reaches only traditional

property interests such as money and that those interests do not include the right to

information needed to make discretionary economic decisions. Id. at 316.

       Mansouri argues that the charges against him likewise involve the deprivation of

economic information—not money or other property. See Docket Item 68 at 3; Docket

Item 75 at 4. But as discussed thoroughly in the RR&O, Mansouri’s alleged scheme,

unlike the one in Ciminelli, involved false statements designed precisely to obtain


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money, fitting well within the realm of “traditional property interests” identified by the

Supreme Court. Docket Item 58 at 13. As Judge Roemer noted, “the object of

[Mansouri]’s fraud in this case was money belonging to the financial lenders and the

SBA,” and the “applications containing material misrepresentations were the means

[Mansouri] used to deprive the lenders and the SBA of their money and property.” Id.

       Indeed, unlike the Ciminelli indictment, the indictment here says nothing about

depriving the lenders or the SBA of their “right to control” property. See United States v.

Pierre, 2023 WL 4493511, at *15 (S.D.N.Y. July 12, 2023) (citations omitted) (similarly

rejecting a defendant’s reliance on Ciminelli in a healthcare fraud conspiracy case).

And Ciminelli’s discussion was limited to the “right-to-control” theory, as that was the

only theory on which the government relied; the Supreme Court said “nothing about

federal criminal liability for [] schemes” whose object was money itself, “the archetypal

subject of federal fraud prosecutions.” United States v. Jesenik, 2023 WL 3455638, at

*2 (D. Or. May 15, 2023) (citing Shaw v. United States, 580 U.S. 63, 67 (2016)); see

also United States v. Greenlaw, 84 F.4th 325, 347 n.11 (5th Cir. 2023) (rejecting

defendant’s appellate arguments based on Ciminelli because the government did not

rely on the “right-to-control” theory at trial).

       For those reasons and for the reasons in the RR&O, Ciminelli simply is not

relevant to the sufficiency of the indictment here.

II.     Harm and Injury

       The federal mail and wire fraud statutes prohibit using the mail or a wire

communication to execute “any scheme or artifice to defraud” or to obtain “money or

property by means of false or fraudulent pretenses, representations, or promises.” 18



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U.S.C. §§ 1341, 1343. The wire fraud statute requires proof of a “scheme or artifice to

defraud.” See United States v. Greenberg, 835 F.3d 295, 305-06 (2d Cir. 2016)

(quoting 18 U.S.C. § 1343). But the government need not prove “that the victims of the

fraud were actually injured”; proof that the defendants made false or fraudulent

statements and “contemplated some actual harm or injury to their victims” will suffice.

Id. (citing, inter alia, United States v. Novak, 443 F.3d 150, 156 (2d Cir. 2006)).

       Mansouri argues that because the loans he sought were guaranteed by the SBA,

the financial institutions who loaned the money could not have suffered any financial

loss or loss of property and that the indictment therefore is insufficient. Docket Item 68

at 3-4, 6-9. But as the RR&O discusses, both the Supreme Court and the Second

Circuit have frequently rejected similar arguments in fraud cases. Docket Item 58 at 13-

14.

       For example, in Shaw v. United States, 580 U.S. 63 (2016), the Supreme Court

noted that it had never interpreted the bank fraud statute as “requiring that the victim

bank ultimately suffer financial harm, or that the defendant intend that the victim bank

suffer such harm.” Id. at 68; cf. Loughrin v. United States, 573 U.S. 351, 366 n.9 (2014)

(citations and internal quotation marks omitted) (defendant’s argument that the

government must prove the scheme created a risk of financial loss “fits poorly with our

prior holding that the gravamen of § 1344 [bank fraud] is the scheme, rather than the

completed fraud, and that the offense therefore does not require damage or reliance.”). 6



       6 As the Supreme Court observed in Loughrin, the absence of such an element

“appears calculated to avoid entangling courts in technical issues of banking law about
whether the financial institution or, alternatively, a depositor would suffer the loss from a
successful fraud.” 573 U.S. at 366 n.9 (citations omitted).

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Likewise, as Judge Roemer observed, the Second Circuit has found that a defendant

may be held criminally liable for a scheme to defraud even if the defendant timely repaid

the loan or the fraud was not “completed.” Docket Item 58 at 14 (citing cases). And as

Judge Roemer also noted, numerous courts outside the Second Circuit have found

fraudulent PPP loan applications similar to those here sufficient to support wire and

bank fraud indictments. Id. at 14-15 (collecting cases).

       Mansouri argues that some cases on which the RR&O relies are no longer good

law because Ciminelli “change[d] the landscape.” Docket Item 68 at 6. But this Court is

not persuaded, primarily because, as already discussed, Ciminelli is far different. And

other courts also have rejected similar requests to expand Ciminelli’s holding and to

dismiss indictments for failure to allege a valid property right. See, e.g., United States v.

Bankman-Fried, 2023 WL 4194773, at *8 (S.D.N.Y. June 27, 2023) (declining to dismiss

defendant’s bank fraud conspiracy charge in light of Ciminelli because statute does not

require that the alleged scheme to obtain money or property create a risk of financial

loss to the bank); Greenlaw, 84 F.4th at 346-47 (post-Ciminelli case citing Shaw and

upholding fraud convictions despite no evidence of actual loss because the “success of

the scheme is immaterial”).

       Taken to its logical conclusion, Mansouri’s argument would preclude fraud

indictments whenever the loss to the defrauded institutions was covered by insurance or

was otherwise reimbursable. That has never been the law. See Shaw, 580 U.S. at 68;

Greenlaw, 84 F.4th at 346. Therefore, and because actual loss is not necessary for a

fraud conviction, see Loughrin, 573 U.S. at 466 n.9; Shaw, 580 U.S. at 67, the fact that

the losses here were reimbursable does not require dismissal of the indictment.



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