United States v. Rankin

422 F.Supp.3d 564

UNITED STATES of America,

v.Drew RANKIN et al., Defendants.

No. 3:18-cr-00272 (JAM)

United States District Court, D. Connecticut.

Signed November 15, 2019

Douglas P. Morabito, Sarah P. Karwan, U.S. Attorney's Office, New Haven, CT, for Plaintiff.

Christopher M. Barrett, Craig A. Raabe, Izard, Kindall & Raabe, LLP, West Hartford, CT, William H. Paetzold, Moriarty, Paetzold & Sherwood, LLC, Glastonbury, CT, Hubert J. Santos, Trent Alan LaLima, Law Offices of Hubert J. Santos, Thomas J. Murphy, James John Healy, Cowdery & Murphy, LLC, Hartford, CT, Michael S. Bonnano, Geraghty & Bonnano, LLC, New London, CT, William F. Dow, III, Jacobs & Dow, LLC, Kenneth Rosenthal, Law Office of Kenneth Rosenthal, New Haven, CT, Michael Q. English, Tony Miodonka, Finn Dixon & Herling LLP, Stamford, CT, for Defendants.

OMNIBUS RULING RE DEFENDANTS' MOTIONS TO DISMISS THE INDICTMENT AND FOR OTHER RELIEF

Jeffrey Alker Meyer, United States District Judge

A federal grand jury has returned an indictment charging the five defendants in this case with conspiring to and misappropriating funds for personal purposes. The five defendants were officers or directors of the Connecticut Municipal Electric Energy Cooperative (CMEEC), a public corporation created to provide low-cost electric power for certain member towns. The indictment alleges that the five defendants misused funds of CMEEC and the member towns for trips to the Kentucky Derby and to a luxury golf resort in West Virginia.

Defendants now move to dismiss the indictment and for other relief. They principally argue that the trips at issue were lawful "corporate retreats" and that the Government has overreached by criminalizing conduct that is allowed under state law. They also accuse the Government of a wide range of misconduct during the investigation of the case. One of the defendants moves for a severance, and all of the defendants seek bills of particulars.

I will mostly deny defendants' motions. I conclude that the indictment on its face validly alleges that the five defendants conspired to and misappropriated funds for personal purposes, notwithstanding their fact-based arguments that they acted for valid corporate purposes. I also conclude that there is no merit to defendants' claims that the indictment should be dismissed due to any misconduct by the Government. Lastly, I conclude there are no grounds for severance or for the grant of a bill of particulars.

BACKGROUND

The indictment alleges the following facts. CMEEC was "a cooperative public corporation created under the laws of the State of Connecticut to permit municipal electric utilities in Connecticut to join together for the purpose of furnishing efficient, low cost and reliable electric power in the municipalities' areas of operation." Doc. #1 at 1 (¶ 1). "CMEEC provided wholesale electric power to the Member Towns, who, in turn, provided electricity to residential and commercial ratepayers in their respective towns through each CMEEC Member's municipal utility." Id. at 1-2 (¶ 1). "CMEEC's purpose was to allow the Member Towns to provide electricity at a cheaper cost to their ratepayers than if the Member Towns were purchasing wholesale electric power on their own." Id. at 2 (¶ 1).

CMEEC's various "members" included several towns and taxing districts in Connecticut. Id. at 1 (¶ 1). Each of these "member towns" were "owners" of CMEEC, and each "executed an agreement through its respective municipal electric utility outlining the terms and conditions under which the CMEEC Members participated together in CMEEC." Id. at 2 (¶ 2).

CMEEC "was managed in its day-to-day activities" by a board of directors "made up of representatives from each Member Town." Id. at 3 (¶ 5). CMEEC's bylaws specified that CMEEC's chief executive officer was responsible for the preparation each year of a general administrative budget that would include all necessary expenses, and the board of directors was required to vote on CMEEC's budget approvals and revisions. Id. at 4 (¶ 7).

According to CMEEC's membership agreement, "all revenues less incurred expenses received by CMEEC" were designated as "CMEEC Margin." Id. at 4 (¶ 8). The CMEEC margin was required to be allocated and/or disbursed each month to each of the member towns to help keep their electricity costs stable for ratepayers. Ibid.

The five defendants in this case are:

• Drew Rankin, CMEEC's chief executive officer;

• James Sullivan, CMEEC's chairperson of the board of directors and a board representative from one of the member towns (the City of Norwich);

• John Bilda, a board representative from the City of Norwich;

• Edward DeMuzzio, CMEEC's board secretary and a board representative from another member town (the City of Groton); and

• Edward Pryor, CMEEC's chief financial officer.

Id. at 4-5 (¶¶ 9-14).

According to the indictment, the five defendants joined in a criminal conspiracy from 2014 to 2017 "to conduct the business and affairs of CMEEC for their personal, pecuniary and financial benefit, and for the personal, pecuniary and financial benefit of their family members, friends, and associates." Id. at 6-7 (¶¶ 16-17). Defendants allegedly "planned, organized and directed lavish trips outside of the State of Connecticut including trips to the Kentucky Derby in Louisville, Kentucky, and to a luxury golf resort in West Virginia," and "[t]hese trips did not relate to CMEEC business, CMEEC Member business, and the furnishing of efficient, low-cost and reliable electric power to the Member Towns and their ratepayers." Id. at 7 (¶ 19).

The indictment goes on to list various aspects of defendants' conduct that were additional "parts" of this conspiracy:

• Source of funds for the trips— that the defendants "paid for the trips with CMEEC funds and CMEEC Member funds," id. at 7 (¶ 20);

• Lack of required approval by and disclosures of trip costs to board of directors— that defendants "did not seek the approval of the CMEEC Board of Directors for these trips and did not include the costs for the trips as budget expenses in the annual general administrative budgets proposed to and approved by the CMEEC Board of Directors," id. at 7-8 (¶ 21);

• Misappropriation of funds for trips from CMEEC margin account —that defendants "directed that the funds used in part and in whole to pay for the trips come from the CMEEC Margin account, in violation of the CMEEC Membership Agreement, without a vote of the CMEEC Board of Directors and without the written consent of the Member Towns as required by the Membership Agreement," id. at 8 (¶ 22);

• Misleading description of trip expenses— that defendants "directed that the funds used in part and in whole to pay for the trips be designated as ‘board expenses’ and ‘delegation related expenses’ in reports concerning the CMEEC Margin account," ibid. (¶ 23);

• Lack of disclosure of trips to non-participating CMEEC employees— that defendants "did not disclose to CMEEC employees, including senior-level employees, the fact of the trips, and encouraged those invited to the trips not to discuss the trips with non-attendees," ibid. (¶ 24); and

• False statements about trips— that "when the fact of the trips became public knowledge, [some of the defendants] made false statements about the trips to representatives of Member Towns and to the press, including misleading statements about the purpose of the trips, the identities of those attending the trips, and the funds used to pay for the trips," ibid. (¶ 25).

The indictment then alleges dozens of overt acts in furtherance of the conspiracy. Id. at 9-17 (¶¶ 26-61). These allegations focus on four different trips from 2015 to 2016—two to the Kentucky Derby and two to a luxury golf resort in West Virginia as described below.

Kentucky Derby trip—April/May 2015

The first trip was to the Kentucky Derby for several days in late April and early May 2015. The arrangements for this trip began in June 2014 when defendant Rankin (who was CMEEC's chief executive officer) executed a purchase order for more than $200,000 to pay for the trip without identifying the trip expenses in any budget presented to the CMEEC board of directors. Id. at 9 (¶ 27). Defendant Pryor (who was CMEEC's chief financial officer) directed that a new "contra-margin" account be created for the costs of the Kentucky Derby trips to come from the CMEEC margin account, allegedly in violation of the CMEEC membership agreement and without a vote of the CMEEC board of directors or consent of the member towns. Ibid. (¶ 28).

About 30 people were invited to take part in the 2015 Kentucky Derby trip, including all of the defendants except DeMuzzio, and guests including certain CMEEC board members, employees, friends, and associates. Id. at 9-10 (¶ 31). Among the invitees were defendant Sullivan's brother, sister-in-law, and his minor son. Ibid. The trip costs included a charter plane from Connecticut to Kentucky, event tickets, hotel rooms, food, and gift bags. Id. at 9 (¶ 27), 11 (¶ 35).

In a pamphlet prepared for the attendees, Rankin described the trip as a "2015 Strategic Retreat: Members and Guests Appreciation Celebration," adding "[a]re you ready for some genuine Kentucky Experience and Derby Fun?" Id. at 10 (¶ 32). The pamphlet described the trip as dedicated to "tak[ing] a few moments to celebrate and honor you as dedicated and awesome Board Members and your Strategic Guests/Partners." Ibid. The total cost for this trip was about $294,917, all paid for "with Member Towns' funds from the CMEEC Margin account." Id. at 11 (¶ 35).

West Virginia golf trip—August 2015

The second trip was to a luxury golf resort in West Virginia in August 2015 about three months after the Kentucky Derby trip. Id. at 11-12 (¶¶ 39-43). This trip included only the defendants Rankin, Sullivan, Bilda, and DeMuzzio. Before the trip, Rankin emailed Sullivan, Bilda, and DeMuzzio describing the trip as one to "evaluate the location" for another strategic retreat. Id. at 11-12 (¶ 39). Sullivan (who...