United States v. Chang

1

UNITED STATES OF AMERICA, v. MANUEL CHANG, Defendant.

No. 18-CR-00681 (NGG)

United States District Court, E.D. New York

May 31, 2024

MEMORANDUM & ORDER

NICHOLAS G, GARAUF1S, UNITED STATES DISTRICT JUDGE.

Defendant Manuel Chang (“Defendant” or “Chang”) is charged with three conspiracy counts: Conspiracy to Commit Wire Fraud, in violation of 18 U.S.C. § 1349 (Count One); Conspiracy to Commit Securities Fraud, in violation of 18 U.S.C. § 371 (Count Two); and Conspiracy to Commit Money Laundering, in violation of 18 U.S.C. § 1956(h) (Count Three). (See Superseding (S-2) Indictment (“Indictment”) (Dkt. 524) ¶¶ 56-61.) These charges stem from an alleged scheme whereby Defendant and co-conspirators defrauded investors to obtain over $2 billion in loans for purported maritime projects in Mozambique. (Id. ¶¶ 23-26.)

Currently before the court is Defendant's motion to dismiss the Indictment, motion to compel production of certain materials,^[1] and motion to strike certain phrases from the Indictment. (See Def.'s Not. of Mot. to Dismiss (Dkt. 542).) For the reasons discussed below, Defendant's pretrial omnibus motion is DENIED in its entirety.

I. BACKGROUND

A. Chang's Indictment^[2]

The Indictment alleges that Defendant Chang and co-conspira-tors defrauded investors through a series of financial transactions in which they fraudulendy obtained and defaulted on over $2 billion in loans, harming investors worldwide. (Indictment ¶ 23.) To facilitate the alleged scheme, three Mozambican state-owned entities-Proindicus, S.A. (“Proindicus”), Empresa Mocambicana de Atum, S.A. (“EMATUM”), and Mozambique Asset Management (“MAM”)-were created. (Id. ¶ 2.) Each company was owned and controlled by the Government of Mozambique. (Id.) These companies were purportedly created to undertake three maritime projects in Mozambique: Proindicus was to perform coastal surveillance, EMATUM was to engage in tuna fishing, and MAM was to build and maintain shipyards. (Id.)

Proindicus, EMATUM, and MAM each contracted with Privinvest Group (“Privinvest”), an Abu Dhabi, United Arab Emirates-based holding company, to complete the maritime projects for Mozambique. (Id. ¶¶ 2, 8, 24.) Between 2013 and 2016, Proindicus, EMATUM, and MAM borrowed a combined $2 billion through loans guaranteed by the Mozambican government. (Id. ¶ 23.) These loans were arranged by two investment banks and sold to investors worldwide, including to investors in the United States. (Id.) Over the course of these transactions, however, Defendant and co-conspirators conspired to defraud those investing in the maritime projects through various misrepresentations and omissions relating to, among other things: “(i) the use of loan proceeds; (ii) bribe and kickback payments to Mozambican government officials and bankers; (iii) the amount and maturity dates of debt owed by Mozambique, including the existence of the Proindicus and MAM loans; and (iv) Mozambique's ability and intention to pay back the investors.” (Id.)

The contracts for each of the three projects stated that the loan proceeds were to be used exclusively for the respective maritime projects. (Id. ¶ 24.) Instead, Chang and his co-conspirators diverted portions of loan proceeds to themselves, Mozambican officials, and others for personal enrichment. (Id.) In furtherance of this scheme, Privinvest charged inflated prices for the equipment and services it provided to carry out the maritime projects so that some portion of the loan proceeds could be used to pay bribes and kickbacks for those involved in the scheme. (Id. ¶ 25.) In doing so, Chang and his co-conspirators used the U.S. financial system to seek and secure investors physically present in the United States, to cause sellers physically present in the United States to sell investments in the loans, and to send and receive U.S.-dollar denominated payments through U.S.-based wire transfers. (Id. ¶ 26.)

Chang was the Minister of Finance for Mozambique from approximately February 2005 through January 2015 (id. ¶ 3), and played an important role in furthering the scheme. Acting in his official capacity, Chang signed loan guarantees on behalf of the Republic of Mozambique for each of the projects-the Proindicus loan and related increase (id. ¶¶ 32, 34), the EMATUM loan (id. ¶ 39), and the MAM loan. (Id. ¶ 48.) Signing these guarantees bound Mozambique to repay the entirety of the loans if any of the companies were to default. In return for his signatures, Chang received at least $5 million in bribes and kickback payments from Privinvest. (Id. ¶¶ 26, 44, 46, 51.)

In 2015, all three entities and the Republic of Mozambique encountered problems servicing the debt they had amassed resulting, in part, from the Proindicus, EMATUM, and MAM loan financings in 2013 and 2014. (Id. ¶ 52.) To “hide from the public and [the International Monetary Fund (“IMF”)] the near bankruptcy of the project companies” and further conceal discovery of the fraudulent scheme, co-conspirators proposed an exchange of EMATUM loan participation notes for Eurobonds (“Eurobond Exchange” or “Exchange”). (Id. ¶ 53.) The Exchange was designed to exchange EMATUM loan participation notes set to mature in 2020 for Eurobonds issued directly by the Mozambican government that would mature in 2023. (Id.) To ensure investors participated in the Exchange, co-conspirators, together with others, prepared documents that contained false and misleading information regarding the project loans, the related loan proceeds, and Mozambique's creditworthiness. (Id. ¶ 54.) After the Exchange, between May 2016 and March 2017, Proindicus, EMATUM, and MAM each defaulted on their loans and missed more than $700 million in payments. (Id. ¶ 55.)

B. Procedural History

On December 19, 2018, Chang and seven co-defendants were indicted by a grand jury in the Eastern District of New York. (See Original Indictment (Dkt. 1).) On December 29, 2018, Chang was arrested while on a layover in an airport in South Africa. (See Indictment and Detention Use Order (Dkt. 22) ¶¶ 4-5.) Following Chang's arrest, the United States, pursuant to its extradition treaty with South Africa, submitted a formal request seeking Chang's extradition from South Africa to the United States regarding the instant offense. (See M&O Denying Mot. to Dismiss on Speedy Trial Grounds (Dkt. 523) at 4.) See also United States v. Allam, No. 18-CR-00681 (NGG), 2023 WL 8828888, at *2 (E.D.N.Y. Dec. 21,2023). However, both Chang and the Government of Mozambique contested extradition to the United States, spurring years of litigation proceedings. Allam, 2023 WL 8828888, at *2-3.

During this time, three co-defendants, Detelina Subeva, Andrew Pearse, and Surjan Singh, pleaded guilty. (See Min. Entries dated 5/20/2019 (Dkt. 77); 07/19/2019 (Dkt. 117); 09/06/2019 (Dkt. 160).) Co-defendant Jean Boustani proceeded to trial and was acquitted on all charges by a jury verdict on December 2, 2019. (See Boustani Jury Verdict (Dkt. 370).) Four and a half years after his initial arrest in South Africa, Chang was finally extradited to the United States on July 12,2023. Allam, 2023 WL 8828888, at *3.

C. Chang's Motion

On February 21, 2024, the Defendant moved to dismiss the Indictment on a number of grounds and for other relief, arguing that: (1) Counts One and Two must be dismissed following the Supreme Court's decision in. Ciminelli v. United States, 598 U.S. 306 (2023); (2) Count Two fails to allege a proper domestic application of securities fraud; (3) Counts One and Two fail to allege wire and securities fraud conspiracies; (4) Count Three fails for lack of extraterritorial jurisdiction and failure to state a claim for conspiracy to commit money laundering; (5) all three counts violate due process; (6) all three counts are duplicitous; and (7) prosecution of a foreign official violates long-standing principles regarding foreign sovereigns. (Defs Mem. in Supp. of Mot. to Dismiss (“Mot.”) (Dkt. 543) at 1-4.) Defendant Chang also moves this court to compel the Government to produce certain documents and communications and to strike certain language from the Indictment. (Id. at 57-60.) The Government opposed the motion on April 22, 2024. (Gov't Opp. (Dkt. 560).) Defendant filed his reply on May 6, 2024. (Reply (Dkt. 563).) This court heard oral argument on Defendant's motion on May 23, 2024. (See Min. Entry dated 5/23/2024.)

II. LEGAL STANDARD

“[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). “[A]n indictment is sufficient if it, first, contains the elements of the offense charged and fairly informs a defendant of the charge against which he must defend, and, second, enables him to plead an acquittal or convictions in bar of future prosecutions for the same offense.” United States v. Alfonso, 143 F.3d 772, 776 (2d Cir. 1998) (quoting Handing v. United States, 418 U.S. 87, 117 (1974)).^[3] In the Second Circuit, this generally requires an indictment to “do little more than [] track the language of the statute charged and state the place and time (in approximate terms) of the alleged crime.” United States v. Walsh, 194 F.3d 37, 44 (2d Cir. 1999). “[C]ommon sense and reason are more important than technicalities” and the indictment “need not be perfect.” United States v. Stringer, 730 F.3d 120,124 (2d Cir. 2013).

Defendants may raise pretrial challenges to the sufficiency and specificity of an indictment “if the basis for the motion is reasonably available and the motion can be determined without a trial on the merits.” See Fed. R. Crim. P. 12(b) (3) (B)(iii), (v). “In deciding a prettial motion to dismiss, the Court must accept the Government's factual allegations as true, and the...