The opinion of the court was delivered by: Judge Algenon L. Marbley
Magistrate Judge Terence P. Kemp
Defendant James Dierker has moved to dismiss the indictment against him and for production of the testimony and documents presented to the grand jury that returned the indictment. For the reasons described below, the Court DENIES both of Dierker's motions.
A. The Alleged Fraud at NCFE
Dierker served as a senior executive at National Century Financial Enterprises, Inc. ("NCFE"), a now defunct healthcare financing company based in Dublin, Ohio. Dierker and several of his NCFE colleagues were indicted in May 2006 in connection with numerous charges of securities fraud, wire fraud, and money laundering, among other things. The grand jury returned a twenty-seven count superceding indictment on July 10, 2007.
NCFE financed healthcare providers by purchasing the providers' accounts receivable. NCFE raised the capital to buy the accounts receivable by selling asset-backed bonds to large institutional investors, such as pension funds and investment firms, through its subsidiaries, NPF VI, Inc. and NPF XII, Inc. The Government alleges that NCFE told investors that the receivables served as collateral for the NPF VI and NPF XII bonds. Because the bonds were supposedly backed by the receivables, investors were led to believe that the bonds were safe and reliable. In truth, contends the Government, between 1995 and 2002, Defendants engaged in a scheme to defraud whereby they advanced investor funds to healthcare providers without getting qualified receivables in return. This converted the investors' bonds from what they believed to be highly secure assets to risky unsecured loans to the healthcare providers. The Government alleges that Defendants' scheme created shortfalls in the NPF VI and NPF XII accounts-since Defendants were outlaying cash to the healthcare providers without getting receivables in return-that Defendants concealed from investors through a variety of ploys, including falsifying their financial data. Further, the Government contends that Defendants Lance Poulsen, Donald Ayers, and Rebecca Parrett engaged in self-dealing. These three Defendants allegedly held undisclosed ownership interests in the healthcare providers funded by NCFE, and in that capacity, i.e., as owners of the healthcare providers, misappropriated the investor funds advanced by NCFE.
B. Dierker's Alleged Role in the Fraud Scheme
Dierker served as the Associate Director of Marketing and later Vice President of Client Development at NCFE. According to the indictment, "[h]e was responsible for developing and managing the relationship between NPF VI and NPF XII and healthcare providers." Dierker is charged in five counts of the superceding indictment for improperly advancing investor funds totaling $1.39 million to California Psychiatric Management Services ("CPMS") on two occasions without purchasing the required amount of accounts receivable. The Government alleges that Poulsen, Ayers, and Parrett held ownership interests in CPMS.
A. Dierker's Motion to Dismiss
Dierker argues that the charges against him should be dismissed because the Government either failed to adequately investigate the facts surrounding his allegedly fraudulent conduct or deliberately ignored those facts. Had the Government let the evidence speak for itself, Dierker says that it is "virtually impossible to believe" that the grand jury would have indicted him. That evidence, he argues, shows that when he authorized the fund transfers to CPMS, he was acting pursuant to a federal bankruptcy court order which appointed NPF X, another NCFE subsidiary, as a Debtor-In-Possession ("DIP") lender for CPMS. CPMS filed a bankruptcy petition in 2000. Dierker says that consistent with the bankruptcy court's order, the DIP financing for CPMS was supposed to come from NPF X, which did not contain investor dollars, and therefore was not subject to the same use restrictions-the purchase of accounts receivable-as NPF XII.
Of course, the indictment does not charge Dierker with improperly advancing funds out of NPF X, but with improperly advancing funds out of NPF XII. Again, Dierker claims that the Government failed to put the relevant facts before the grand jury, namely, facts establishing that he served merely in a ministerial capacity in requesting the fund transfers to CPMS from NCFE's Funding Department, and that it was beyond the scope of his authority and control to verify that the transfers were made out of NPF X, rather than NPF XII. Dierker also argues that Bank One, as Trustee of NPF ...