Government’s Response to Defendant’s Objections to the Magistrate Judge’s Report, Recommendation and Order — No. 1:22-cr-00034 (Dkt. 69, W.D.N.Y.)

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The Government's Response to Defendant's Objections to the Magistrate Judge's Report, Recommendation and Order, Document 69, filed September 19, 2023 in United States v. Hormoz Mansouri, 22-CR-34 (Case 1:22-cr-00034-LJV-MJR), in the U.S. District Court for the Western District of New York. The government asks the court to adopt in its entirety Magistrate Judge Michael J. Roemer's report and recommendation (Docket No. 58) denying the motion to dismiss the indictment. It describes the PPP and EIDL programs, states that the March 10, 2022 indictment has 40 counts citing Title 18, United States Code, Sections 1343, 1344, 1349 and 1957, and argues that the charged scheme sought money and property rather than a right-to-control theory.

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“Government’s Response to Defendant’s Objections to the Magistrate Judge’s Report, Recommendation and Order — No. 1:22-cr-00034 (Dkt. 69, W.D.N.Y.).” Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/government-s-response-to-defendant-s-objections-to-the-magistrate-judg-a4bba2bad7/, SHA-256 ff29a9876aaace41bca4e833211938f2fdf0bcab4d677257f3956c9e90c40768.

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Case 1:22-cr-00034-LJV-MJR Document 69 Filed 09/19/23 Page 1 of 13

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NEW YORK

UNITED STATES OF AMERICA

v. 22-CR-34

HORMOZ MANSOURI,

Defendant.

GOVERNMENT’S RESPONSE TO DEFENDANT’S OBJECTIONS TO THE
MAGISTRATE JUDGE’S REPORT, RECOMMENDATION AND ORDER

THE UNITED STATES OF AMERICA, by and through its attorney, Trini E. Ross,

Attorney for the United States for the Western District of New York, Michael DiGiacomo,

Assistant United States Attorney, of counsel, hereby submits its response to the defendant’s

objections (“Objections”) to the Report, Recommendation and Order (“R&R”) of Magistrate

Judge Michael J. Roemer [see Docket No. 58]. Judge Roemer correctly denied the defendant’s

motions to dismiss the indictment and therefore this Court should adopt/affirm Judge

Roemer’s Report, Recommendation and Order in its entirety.

FACTS

The defendant operated the following business in the Western District of New York:

HLM Holding LLC, EI Team Inc., NPTS Inc., 2060 Sheridan Drive LLC, 212 Holden

Avenue LLC, 350 Old Niagara Falls Boulevard LLC, 47 East Amherst LLC, and

3600 Harlem Road LLC. EI Team, Inc., and NPTS Inc., were the two entities operated by

Mansouri that had employees and therefore the only two entities that qualified to apply for

PPP and EIDL loans.
Case 1:22-cr-00034-LJV-MJR Document 69 Filed 09/19/23 Page 2 of 13

i. The Paycheck Protection Program (PPP)

In or around March 2020, The Coronavirus Aid, Relief, and Economic Security

(“CARES”) Act was enacted. The CARES Act was designed to provide emergency financial

assistance to millions of Americans who were suffering the economic effects caused by the

COVID-19 pandemic.

One source of relief provided by the CARES Act was the authorization of billions of

dollars in forgivable loans to small businesses for job retention and certain other expenses,

through a program referred to as the Paycheck Protection Program (“PPP”).

In order to obtain a PPP loan, a qualifying business had to submit a PPP loan

application, signed by an authorized representative of the business. The PPP loan application

required the business (through its authorized representative) to acknowledge the program

rules and make certain affirmative certifications in order to be eligible to obtain the PPP loan.

In the PPP loan application, the small business (through its authorized representative) needed

to state, among other things, its: (a) average monthly payroll expenses; and (b) number of

employees. This information was material as it was used to calculate the amount of money

the small business was eligible to receive under the PPP. In addition, businesses applying for

a PPP loan were required provide documentation in support of their payroll expenses. The

amount of a PPP loan was calculated by taking the average monthly payroll provided by the

borrower and multiplying that number by 2.5. The intended purpose behind the formula was

to provide the business with approximately 10 weeks of payroll.

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PPP loan applications were processed by a participating lender. If a PPP loan

application was approved, the participating lender funded the PPP loan using its own monies,

which were 100% guaranteed by the SBA.

A business that obtained a PPP loan was required to use the money on certain

permissible expenses, such as payroll costs, interest on mortgages, rent, and utilities. The

loan allowed the interest and principal on the PPP loan to be entirely forgiven if the business

used the loan proceeds on authorized expenses.

ii. Economic Injury Disaster Loan (EIDL)

A second source of relief provided by the CARES Act was funding to the SBA for the

Economic Injury Disaster Loan (“EIDL”) Program. The EIDL program was designed to

provide economic relief to businesses that were currently experiencing a temporary loss of

revenue due to COVID-19. The program provided low interest loans to pay for expenses that

could have been met had the pandemic not occurred, including payroll, paid sick leave for

employees, increased production costs due to supply chain disruptions, and business

obligations such as debts, rent and mortgage payments. EIDL loans were funded based on

revenue minus cost of goods sold. In addition to the EIDL program loans, small businesses

could request an EIDL Advance from $1,000 up to $10,000, based on the number of

employees indicated on the EIDL application. The EIDL Advance was a grant and therefore

did not have to be repaid.

Like the PPP loan, to obtain an EIDL, a qualifying business had to submit a loan

3
Case 1:22-cr-00034-LJV-MJR Document 69 Filed 09/19/23 Page 4 of 13

application signed by an authorized representative of the business. As with the PPP

loan, the EIDL application required the business (through its authorized representative) to

acknowledge the program rules and make certain affirmative certifications to be eligible to

obtain these loans. Unlike a PPP loan, EIDL loans were processed and funded directly from

the SBA, not through a participating lender.

iii. The Defendant’s Scheme to Defraud

With MANSOURI’s knowledge and at his direction Mansouri directed two of his

employees work together and submit multiple EIDL and PPP loan applications, that

contained materially false, fraudulent pretenses, representations and promises and in support

of the applications, create and submit false and fictitious documents which included a

fraudulent IRS form.

Only two of Mansouri’s entities had employees (EI Team and NPTS) while the

remaining entities were holding companies with no employees. Each of the PPP loan

applications submitted on behalf of the Mansouri controlled entities and at Mansouri’s

direction inflated or completely fabricated the average monthly payroll. In fact six of the eight

entities that sought and obtained PPP loans did not have actual employees or payroll

expenses.

As noted above, EIDL applications were funded based on revenue minus cost of

goods sold. At Mansouri’s direction each application submitted on behalf of Mansouri’s

4
Case 1:22-cr-00034-LJV-MJR Document 69 Filed 09/19/23 Page 5 of 13

controlled entities, falsely represented revenues and cost of goods sold. For example, EIDL

loan applications were submitted for holding companies that had no cost of goods sold.

The false information submitted in support of both the PPP and EIDL applications was

material since the lenders relied on this information when considering whether to fund a loan

application. This false information caused multiple federally insured financial institutions

and the SBA to send, through interstate wires, funds to bank accounts controlled by

MANSOURI in the Western District of New York. MANSOURI would then routinely

transfer the funds back and forth through numerous bank accounts, often times in excess of

$10,000, in an attempt to conceal or disguise the nature, location, source, ownership, or

control of the proceeds.

On or about March 10, 2022, a Grand Jury sitting in the Western District of New York

returned a 40 Count Indictment charging Mansouri with violating Title 18, United States

Code, Sections 1343 (wire fraud); 1344 (bank fraud); 1349 (conspiracy to commit wire fraud

and bank fraud) and 1957 (engaging in monetary transactions in property derived from

specified unlawful activities). The indictment also contained two forfeiture allegations for

funds seized from Mansouri-controlled bank accounts and for a Mansouri-owned vehicle

(Dkt. 14).

The indictment returned by the grand jury was a detailed speaking indictment which

charged a traditional wire fraud, bank fraud and money laundering theory.

5
Case 1:22-cr-00034-LJV-MJR Document 69 Filed 09/19/23 Page 6 of 13

On October 31, 2022, the defendant filed an omnibus motion seeking various relief to

include dismissing the indictment claiming “certain elements necessary to be included in each

of the counts of the indictment were not pled (Dkt. 32, ¶ 36).

On December 12, 2022, the government responded to the defendant’s omnibus motion

setting forth the law and corresponding facts as to why the indictment was sufficiently pled

(Dkt. 35, pgs. 8-13).

On January 9, 2023, the defendant filed a reply to the government’s response. The

defendant’s reply continued to argue the indictment should be dismissed for the reasons raised

in their omnibus motion and then, for the first time, raised the argument the indictment fails

to allege the scheme contemplated depriving another of or money or property since the

applications did not guarantee the loan (Dkt. 41, pgs. 3-5).

On March 8, 2023, the parties appeared before the Court for oral argument. After

hearing oral argument, the Court required further briefing on whether the indictment needs

to allege a deprivation of property. The Court also requested the government provide

information regarding the status of each of the loans obtained by the defendant.

On May 17, 2023, the Government and Defendant submitted supplemental

memoranda (Dkt. 55; 56). On May 31, 2023, the Government submitted a reply (Dkt. 57).

On June 29, 2023, Magistrate Judge Roemer issued a Report, Recommendation and Order

denying the defendant’s motion to dismiss the indictment (Dkt. 58). On August 29, 2023, the

6
Case 1:22-cr-00034-LJV-MJR Document 69 Filed 09/19/23 Page 7 of 13

defendant filed objections to the Report, Recommendation and Order claiming the

Mansouri’s Indictment is premised on the right-to-control theory recently invalidated by the

United States Supreme Court (Dkt. 68). The following constitutes the Government’s

response.

STANDARD OF REVIEW

The district court reviews any specific objections to a report and recommendation on

a dispositive issue, such as a motion to suppress, under a de novo standard. Fed. R. Crim. P.

59(b)(3); see also 28 U.S.C. § 636(b)(1) (“A judge of the court shall make a de novo

determination of those portions of the report or specified proposed findings or

recommendations to which objection is made.”). “To trigger the de novo review standard,

objections to a report and recommendation must be specific and clearly aimed at particular

findings in the magistrate judge's proposal.” United States v. Sun, 604 F. Supp. 3d 76, 79

(W.D.N.Y. 2022) (internal quotation marks omitted). Moreover, “it is established law that a

district judge will not consider new arguments raised in objections to a magistrate judge's

report and recommendation that could have been raised before the magistrate but were not.”

United States v. Gladden, 394 F. Supp. 3d 465, 480 (S.D.N.Y. 2019) (quoting Hubbard v. Kelley,

752 F. Supp. 2d 311, 313 (W.D.N.Y. 2009)). Finally:

[P]ursuant to Rule 72(b) and (c) of this Court's Local Rules of
Civil Procedure, written objections shall specifically identify the
portions of the proposed findings and recommendations to
which objection is made and the basis for each objection ...
supported by legal authority, and must include a written
statement either certifying that the objections do not raise new
legal/factual arguments, or identifying the new arguments and
explaining why they were not raised to the Magistrate Judge.
Failure to comply with these provisions may result in the district
judge's refusal to consider the objections.

7
Case 1:22-cr-00034-LJV-MJR Document 69 Filed 09/19/23 Page 8 of 13

See United States v. Lucas, No. 17-CR-129-EAW-JJM, 2018 WL 6313469, at *7 (W.D.N.Y.

Sept. 7, 2018), report & recommendation adopted, No. 1:17-CR-00129 EAW, 2018 WL 5118654

(W.D.N.Y. Oct. 22, 2018), aff'd, No. 19-3937-CR, 2021 WL 3700944 (2d Cir. Aug. 20, 2021).

ARGUMENT

I. The Magistrate Correctly Rejected the Defendant’s Argument that the Mansouri
Indictment is Analogous to the “Right-To-Control” Theory Repudiated by The
Supreme Court

Defendant Mansouri argues that when he lied about having employees, overstated the

number of employees, falsely represented cost of goods sold, created and submitted false and

fictitious documents in support of the loan applications, so he could obtain money he was not

entitled to receive, that scheme amounted to nothing more than a deprivation of economic

information to the lending institutions. This argument is without merit.

The wire fraud statute prohibits using interstate wires to effect “any scheme or artifice

to defraud, or for obtaining money or property by means of false or fraudulent pretenses,

representations, or promises.” Two elements of this crime are that the defendant engage in a

“scheme or artifice to defraud,” and that the “object of the fraud ... be ‘[money or] property’

in the victim's hands,” Cleveland v. United States, 531 U.S. 12, 26, 121 S.Ct. 365, 148 L.Ed.2d

221 (2000). Here the defendant’s conduct satisfies both elements.

In Ciminelli v. United States, 598 U.S. 306, 143 U.S. 1121 (2023), and Kelly v. United

States, 140 S.Ct. 1565, 1573 (2020) the Supreme Court held that in order to sustain a

conviction for wire fraud, money or property must be the object of the fraud.

8
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As the Supreme Court has stated, the interpretation of the phrase “money or

property”, relies on giving the words their ordinary meaning. Pasquantino v. United States, 544

U.S. 349, 355-356 (2005). In Pasquantino, the object of petitioner’s scheme was to deprive a

government of money legally due, recognizing that “fraud at common law included a scheme

to deprive a victim of his entitlement to money.” 544 U.S. at 356.

Ciminelli involved a scheme whereby two political operatives devised a scheme in

order to tailor Fort Schuyler’s bid process to smooth the way for LPCiminelli to receive major

Buffalo Billion contracts by designating LPCiminelli as a “preferred developer,” thereby

giving them priority status to negotiate for specific projects. Ciminelli then jointly worked

with the political operatives in order to develop a set of requests for proposal (RFPs) that

effectively guaranteed LPCiminelli’s selection as a preferred developer. Ciminelli, and others

were indicted for, as relevant here, wire fraud in violation of 18 U. S. C. §1343 and conspiracy

to commit the same under §1349. In the operative indictment and at trial, the Government

relied “solely” on the Second Circuit’s “right-to-control theory” of wire fraud. The Supreme

Court rejected the “right-to-control theory” to support a fraud conviction based on intangible

interests unconnected to property. Ciminelli @ 315-316.

Here, unlike Ciminelli the object of Mansouri’s fraud was obtaining money and

property that belonged to the lenders and the SBA, through false pretenses, representations

and promises. Applying the ordinary meaning of “obtain” establishes that the defendant

acquired and retained the money or property that belonged in the hands of lenders and the

SBA. The submitted applications, that contained blatant and willful misrepresentations, along

9
Case 1:22-cr-00034-LJV-MJR Document 69 Filed 09/19/23 Page 10 of 13

with the falsely created documents was the mechanism the defendant used to deprive the

lenders and the SBA of their money and property. So, the defendant’s argument that the loan

applications do not involve traditional property interests is unavailing as it misconstrues the

allegations contained in the indictment. See, United States v. Jesenik, 3:20-CR-228, 2023 U.S.

Dist. LEXIS 850080, 5-6 (D.Or. May 15, 2023) (“The object of the alleged scheme was not

‘control’ or ‘information’, but money itself. And Ciminelli says nothing about federal criminal

liability for such schemes, which are the archetypal subject of federal fraud prosecutions.”)

(Dkt. 58 pg. 13).

In addition, Mansouri’s argument further misapprehends the Ciminelli holding because

Ciminelli does not reach the question of whether the facts in that case could have supported a

conviction under a traditional property fraud theory, rather than depriving the victim of

valuable economic information for deciding to whom the contracts would be awarded. See

Ciminelli, 143 S. Ct. at 1129; see also United States v. Bankman-Fried, No. 22-CR-0673 (LAK),

2023 WL 4194773, at *7 (S.D.N.Y. June 27, 2023) (rejecting defendant's reliance on Ciminelli

in motion to dismiss wire and bank fraud charges “because each of those counts tracks the

relevant statutory language and sufficiently alleges a scheme to obtain money or property”);

United States v. Runner, No. 18-CR-0578(JS), 2023 WL 3727532, at *2 (E.D.N.Y. May 30,

2023) (“Defendant cannot use Ciminelli as a shield to prevent the Government from

introducing the misrepresentations or omissions underlying the alleged scheme to defraud

under the guise of construing those same deceptions as exclusively relevant to a victim's

property interest to ‘mere information’ to render them unactionable.”).

10
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II. The Magistrate Correctly Rejected the Defendant’s Argument that the Banks and
the SBA Never Suffered a Risk of Property Loss

The defendant argues that since EIDL and PPP loans were SBA, guaranteed the

financial institutions could not have suffered any financial harm thereby constituting a

deprivation of property. (Dkt 68 pg.7-8). This argument is also meritless as the United States

Supreme Court has rebutted such arguments when interpreting the fraud statutes.

The Supreme Court has found a defendant can be convicted of bank fraud even if the

bank does not suffer monetary loss because the bank fraud statute “while insisting upon ‘a

scheme to defraud,’ demands neither a showing of ultimate financial loss nor a showing of

intent to cause financial loss.” Shaw v. United States, 580 U.S. 63, 67 (2016) see also Loughrin

v. United States, 573 U.S. 351 366 n.9 (2014) (rejecting the argument that the bank fraud statute

requires the government to prove the defendant’s scheme created a risk of financial loss to the

bank.)

And as for the mail fraud statute, 18 U.S.C. § 1341, the Second Circuit has also

addressed the meaning of the "scheme or artifice for obtaining money or property", holding

a "defendant does not need to literally 'obtain' money or property to violate the

statute." Porcelli v. United States, 404 F.3d 157, 162 (2d Cir. 2005). Porcelli was convicted of

failing to collect state sales tax on gasoline sales and of filing fraudulent state sales tax returns,

thereby depriving New York State of $ 5 million in tax revenue. Id. at 158. He sought to have

his conviction overturned because he had not actually obtained any money or property from

the State of New York during the course of his offense. Id. at 161. The Second Circuit

rejected this argument, and in so doing, agreed with the Third Circuit that- "'a mail fraud

11
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violation may be sufficiently found where the defendant has merely deprived another of a

property right.'" Id. at 162 n.5 (quoting United States v. Hedaithy, 392 F.3d 580, 602 n.21 (3d

Cir. 2004)). For purposes of establishing this element under § 1343, therefore, it is sufficient

that a defendant's scheme was intended to deprive another of property rights, even if the

defendant did not physically "obtain" any money or property by taking it from the

victim. See id. at 162; see also United States v. Greenberg, 835 F.3d 295, 306 (2d Cir. 2016)

(“[T]he Government need not prove “that the victims of the fraud were actually injured,” but

only “that defendants contemplated some actual harm or injury to their victims.”)

The Second Circuit in United States v. Males, 459 F.3d 154 (2d Cir. 2006), upheld a wire

fraud conviction under 18 U.S.C. § 1343 of a defendant who had represented to an FBI agent,

who had posed as a potential investor, that he worked for a firm called the Bailey Group and

promised the agent “exorbitant returns” on his investments if the agent (a) agreed to allow

the defendant to freeze or reserve the agent’s account in favor of the Bailey Group and (b)

allowed Bailey Group’s traders to be signatories on the account. On appeal, the defendant

argued that he could not be convicted for intending to freeze the agent’s account temporarily

without transferring any money to himself or removing any money from the account

permanently. The Second Circuit rejected this argument, thereby affirming the conviction

and held that “[f]or the purposes of establishing this element under §1343… it is sufficient that

a defendant’s scheme was intended to deprive another of property, even if the defendant did

not physically ‘obtain any money or property by taking it from the victim.’” The mere fact

that such a deprivation may have been intended to be only temporary was of no moment. As

the court concluded “The requirement under § 1343 is that the defendant devise a scheme or

12
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artifice for obtaining money or property is satisfied where a defendant fraudulently obtains

the use of another person’s money or property for a period of time, using it for his own

personal profit, and depriving the owner of the ability to do so.” Males at 158-159.

Here, Mansouri doesn’t refute that he obtained money or property that belonged to

the lending institutions and the SBA, through false pretenses, representations and promises.

He also doesn’t refute that he used the money for his own personal expenditures, to include

funding his campaign account for Erie County Comptroller. Since the law neither requires a

showing of ultimate financial loss nor a showing of intent to cause financial loss the

Magistrate correctly rejected this argument.

CONCLUSION

For the aforementioned reasons and those contained in the Report, Recommendation

and Order, this court should adopt the Report, Recommendation and Order (Dkt. 58) in its

entirety, thereby denying the defendant’s motion to dismiss the indictment.

DATED: Buffalo, New York, September 19, 2023.

TRINI E. ROSS.
United States Attorney

BY: s/MICHAEL DIGIACOMO
Assistant United States Attorney
United States Attorney’s Office
Western District of New York
138 Delaware Avenue
Buffalo, New York 14202
(716) 843-5700 ext. 885
Michael.Digiacomo@usdoj.gov

TO: Herbert L. Greenman, Esq.

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