UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

United States of America

v. Case No. 18-cr-98-01-PB Opinion No.

Joseph A. Foistner

MEMORANDUM AND ORDER

Joseph Foistner was charged in an eleven-count superseding

indictment with bank fraud, wire fraud, and other crimes arising

out of a series of loan applications. Foistner seeks dismissal

of the indictment in its entirety on the grounds of

prosecutorial misconduct before the grand jury and vindictive

prosecution. He also argues that the indictment is defective

with respect to the bank fraud charges. The government objects.

For the following reasons, I deny Foistner’s motion.

I. BACKGROUND

A. Superseding Indictment

Foistner was an attorney licensed in Massachusetts who

owned and managed “The Law Office of Joseph A. Foistner, Esquire

& Associates, P.C.” from 2001 until 2017. He was first indicted

in June 2018. A grand jury issued a superseding indictment in

October 2018, charging Foistner with eleven counts in connection

with a series of loans he obtained, or sought to obtain, from various lenders between 2015 and 2017, as well as subsequent

false statements he made in his Chapter 7 bankruptcy

proceedings.1 Foistner is alleged to have defrauded, or

attempted to defraud, four financial institutions into lending

him or his law office millions of dollars by providing false and

fraudulent information about his law office’s income, his

personal income, and his personal finances.2 He also allegedly

defrauded another bank to loan his wife almost $400,000 by

misrepresenting his wife’s personal income and finances. In the

course of his subsequent bankruptcy proceedings, Foistner

allegedly failed to disclose that the proceeds of one of the

loans were in a bank account that he controlled. He is also

alleged to have made false statements under oath about the use

of those proceeds as the down payment on the purchase of real

property and about his connection to that property. See

Superseding Indictment, Doc. No. 17.

The government’s theory is that the false information

Foistner provided in connection with the loan applications

caused the lenders to believe that his law office was a

1 Specifically, Foistner is charged with six counts of bank fraud, one count of wire fraud, one count of money laundering, one count of making a false bankruptcy declaration, and two counts of making a false bankruptcy oath.

2 Three banks loaned to Foistner or his law office a total of $3.3 million. One loan he sought on behalf of his law office, in the amount of $4.5 million, did not close. 2 lucrative, cash-producing business that would allow him to make

monthly payments on the loans. In reality, the government

argues, the only clients of his law office were business

entities that Foistner himself controlled, which never paid him

money for his legal work. Instead, he invoiced his entities for

legal work and then treated those notes receivable as “accrued

income” when preparing his federal income tax returns. The

government takes no position on the propriety of this accounting

method for tax reporting purposes, but it argues that Foistner

realized virtually no income from his law practice, contrary to

what he led his lenders to believe.

B. Foistner’s Allegations

Foistner maintains that he is a victim of a multi-decade

conspiracy involving, among others, his former business partner

Antonia Shelzi, his former attorney James Laboe, Assistant U.S.

Trustee (“AUST”) Geraldine Karonis, Chapter 7 Trustees Stephen

Notinger, Deborah Notinger, and Victor Dahar, and New Hampshire

Superior Court Judge David Ruoff. Foistner alleges that some of

those conspirators “hired” now-retired Assistant U.S. Attorney

(“AUSA”) Robert Kinsella to bring charges against Foistner in

this case to eliminate their financial exposures resulting from

ongoing civil litigation initiated by Foistner. For purposes of

this motion, it suffices to give a brief overview of the alleged

conspiracy.

3 Foistner was a real estate developer who started a

development project in 1985 in New Boston, New Hampshire, called

Waldorf Estates. Since then, Foistner or his business entities

have been involved in over twenty lawsuits that directly or

indirectly concerned Waldorf Estates. Foistner contends that

Attorney Laboe’s law firm, Orr & Reno, P.A., represented

Foistner and his partner Shelzi in some of those lawsuits

between 1995 and 2005. Shelzi was eventually forced out of the

business venture, allegedly on account of criminal activity.

Laboe subsequently represented Shelzi in lawsuits where Foistner

or one of his entities was an adverse party. In those lawsuits,

several state judges, including Judge Ruoff, rejected Foistner’s

argument that Attorney Laboe had a conflict of interest and

should be disqualified from representing Shelzi because Orr &

Reno had previously represented Foistner. Foistner claimed that

Judge Ruoff conspired with Laboe, so he filed judicial

misconduct and criminal complaints against him, to no avail.

Meanwhile, in 1999, one of the business entities controlled

by Foistner, JFL Enterprises, filed for bankruptcy protection.

Foistner alleges that the Notingers, who served as Chapter 7

trustees under the supervision of AUST Karonis, stole $465,000

from the bankruptcy estate in the course of that proceeding.

Foistner’s resulting criminal complaints against the Notingers

4 and Karonis to the U.S. Attorney’s Office in New Hampshire and

other law enforcement agencies went unheeded.

After Foistner filed for bankruptcy protection in 2017,

Dahar, who was appointed as Chapter 7 trustee, allegedly

squandered the estate’s assets. In the meantime, AUST Karonis

permitted the Notingers and Attorney Laboe to participate in the

bankruptcy proceedings, apparently as representatives of

Foistner’s creditors. Laboe purportedly used that opportunity

to spread “lies” about Foistner’s tax filings and loan

applications, using documents that Foistner maintains are either

protected by the attorney-client privilege or forgeries made by

Shelzi. Laboe then allegedly passed those same documents onto

AUSA Kinsella, who began investigating Foistner.

Shortly before his indictment, Foistner filed another

criminal complaint against AUST Karonis, which he claims the

U.S. Attorney’s Office declined to investigate. He also

delivered over 500 documents to AUSA Kinsella that Foistner

believes contain exculpatory information, including IRS audit

letters and other tax records showing that Foistner correctly

reported his income on federal tax filings over a period of

sixteen years. Foistner claims that AUSA Kinsella did not

provide those documents to the grand jury and instead used

documents that he had illegally obtained from Attorney Laboe.

According to Foistner, Kinsella became the “Manager” of the

5 criminal conspiracy against him, “employed by Laboe” and others

to “destroy” Foistner. Doc. No. 63 at 2, 21.

II. STANDARD OF REVIEW

Foistner’s motion does not cite the rule under which he is

moving, but I assume it is Federal Rule of Criminal Procedure

12(b), which provides that “[a] party may raise by pretrial

motion any defense, objection, or request that the court can

determine without a trial on the merits.” With respect to

Foistner’s claims of prosecutorial misconduct and vindictive

prosecution, the applicable rule is Rule 12(b)(3)(A), which

allows a defendant to make a motion alleging “a defect in

instituting the prosecution,” including “selective or vindictive

prosecution.” Fed. R. Crim. P. 12(b)(3)(A). His claim that

certain counts of the indictment are defective invokes Rule

12(b)(3)(B), which provides for pretrial motions alleging “a

defect in the indictment,” including “lack of specificity” and

“failure to state an offense.” Fed. R. Crim. P. 12(b)(3)(B).

When considering a motion to dismiss an indictment, the

court must accept the allegations in the indictment as true and

construe all facts in the light most favorable to the

government. United States v. Young,

(D.

Me. 2010); see Boyce Motor Lines, Inc. v. United States,

, 343 n.16 (1952). “A court should exercise its

6 authority to dismiss cautiously, since to dismiss an indictment

‘directly encroaches upon the fundamental role of the grand

jury.’” United States v. Thomas,

, 143–44

(D. Me. 2007) (quoting Whitehouse v. U.S. Dist. Court,

, 1360 (1st Cir. 1995)).

A Rule 12(b) motion alleging a defect in an indictment does

not “provide[] an occasion to force the government to defend the

sufficiency of its evidence to be marshalled in support of

proving the charged offense.” United States v. Rodríguez-

Rivera,

(1st Cir. 2019). “[T]he question is not

whether the government has presented enough evidence to support

the charge, but solely whether the allegations in the indictment

are sufficient to apprise the defendant of the charged offense.”

United States v. Stepanets,

(1st Cir. 2018)

(internal quotation marks omitted).

III. ANALYSIS

Foistner seeks dismissal of the indictment in its entirety

on two grounds: prosecutorial misconduct before the grand jury

and vindictive prosecution. He also argues that the indictment

is defective with respect to the bank fraud counts. I examine

these arguments in turn and conclude that they have no merit.

A. Prosecutorial Misconduct

Foistner argues that prosecutorial misconduct resulted in

material misrepresentations and omissions in the evidence 7 presented to the grand jury. Specifically, Foistner faults AUSA

Kinsella for allegedly relying upon illegally obtained evidence

from Attorney Laboe and failing to disclose to the grand jury

evidence that Foistner considers exculpatory. The omitted

evidence included IRS audit letters showing that Foistner’s tax

filings for the relevant time period were accepted by the IRS

without changes, as well as Foistner’s criminal complaints

against AUST Karonis and others concerning the theft of assets

from the bankruptcy estate of his entity JFL Enterprises.

Dismissal of an indictment for prosecutorial misconduct is

an extraordinary remedy. United States v. Laboy,

(1st Cir. 1990). It is “appropriate only in cases of

‘serious and blatant prosecutorial misconduct that distorts the

integrity of the judicial process.’” United States v. Font–

Ramírez,

(1st Cir. 1991) (quoting United States

v. Giorgi,

(1st Cir. 1988)). To succeed on

a motion to dismiss an indictment on this basis, the defendant

must first show that prosecutorial misconduct occurred. Bank of

Nova Scotia v. United States,

(1988). If

that showing is made, the defendant must then establish “that

the violation substantially influenced the grand jury’s decision

to indict, or [that] there is grave doubt that the decision to

indict was free from the substantial influence of such

violations.”

(internal quotation marks omitted).

8 This “standard of prejudice is a high one.” In re United

States,

(1st Cir. 2006).

Foistner argues that AUSA Kinsella’s failure to present

exculpatory evidence to the grand jury amounts to prosecutorial

misconduct warranting dismissal of the indictment. This

argument runs headlong into Supreme Court precedent. In United

States v. Williams, the Supreme Court held that a court has no

authority to dismiss an indictment on the ground that the

government failed to disclose to the grand jury “substantial

exculpatory evidence” in its possession. See

, 37-

38, 45-47 (1992). In that case, the Tenth Circuit had affirmed

the district court’s dismissal of an indictment because the

prosecutor failed to present to the grand jury substantial

exculpatory evidence of which he was personally aware, in

violation of a Tenth Circuit rule requiring such disclosure.

See

. The Supreme Court reversed, holding that the

district court had improperly used its supervisory judicial

powers. The Court reasoned that a court may use its judicial

authority to dismiss an indictment for prosecutorial misconduct

before the grand jury only “where that misconduct amounts to a

violation of one of those few, clear rules which were carefully

drafted and approved by this Court and by Congress to ensure the

integrity of the grand jury’s functions.”

(internal

quotation marks omitted). A requirement to disclose exculpatory

9 evidence to the grand jury was not one of those rules. See

.

Central to the Court’s analysis in Williams was the grand

jury’s unique role in our constitutional system. The Court

described the grand jury as “a constitutional fixture in its own

right” that “belongs to no branch of the institutional

Government.”

(internal quotation marks omitted).

Because it functions independently of the judiciary, courts may

not invoke their supervisory power to reshape “the grand jury

institution, substantially altering the traditional

relationships between the prosecutor, the constituting court,

and the grand jury itself.”

. The Supreme Court

explained that a grand jury is not convened to assess guilt or

innocence but only to determine whether criminal proceedings

should be instituted.

. Because “neither in this

country nor in England has the suspect under investigation by

the grand jury ever been thought to have a right to testify or

to have exculpatory evidence presented,” the Court reasoned that

“[i]mposing upon the prosecutor a legal obligation to present

exculpatory evidence in his possession would be incompatible

with this system.”

.

Foistner relies on an excerpt from an internal manual for

Department of Justice (“DOJ”) prosecutors known as the “Justice

Manual” to argue that the Williams case was “overruled” by a DOJ

10 policy requiring a prosecutor to disclose to the grand jury when

he is “personally aware of substantial evidence that directly

negates the guilt of a subject of the investigation.” Justice

Manual, § 9-11.233. This argument suffers from at least two

fatal defects.

First, the Supreme Court in Williams paid no heed to a

virtually identical DOJ policy. See 504 U.S. at 69–70 (Stevens,

J., dissenting) (quoting U.S. Attorneys’ Manual, ¶ 9–11.233 at

88 (1988)). As the Seventh Circuit observed, “[t]he government

in Williams had failed to present the exculpatory evidence

despite an internal Department of Justice policy, similar to

that at issue here, requiring it to do so.” United States v.

Gillespie,

(7th Cir. 1992). Regardless of

that policy, the Supreme Court held that a prosecutor’s failure

to present exculpatory evidence to the grand jury will not cause

an indictment to be dismissed. See Williams,

.

Second, the Justice Manual provides internal DOJ guidance

to prosecutors that can neither overrule Supreme Court precedent

nor confer substantive rights on criminal defendants. See

United States v. Lopez-Matias,

(1st Cir.

2008) (holding that the U.S. Attorneys’ Manual, predecessor to

the Justice Manual, did not give rise to substantive rights and

that its violation was insufficient to give rise to sanctions).

Numerous courts have rejected attempts to circumvent Williams

11 based on alleged violations of the Justice Manual. See United

States v. Gross,

(9th Cir. 2002) (holding

that failure to disclose exculpatory evidence to the grand jury

was not a basis to dismiss the indictment because defendant “had

no constitutional right to have exculpatory evidence presented

to the grand jury, and the U.S. Attorney’s Manual did not create

enforceable rights”) (citations omitted); United States v.

Myers,

, 355–56 (6th Cir. 1997) (holding that

prosecutor’s failure to follow the U.S. Attorneys’ Manual did

not create a basis for suppressing grand jury testimony);

Gillespie, 974 F.2d at 800–01 (same). Indeed, the Justice

Manual itself notes that a failure to follow the DOJ’s policy in

this regard “should not result in dismissal of an indictment.”

§ 9-11.233. Thus, assuming, without deciding, that the evidence

Foistner delivered to AUSA Kinsella was in fact exculpatory, the

government’s failure to follow its own internal policy on

presenting such evidence to the grand jury does not justify

dismissing the indictment.3

3 Foistner also argues that the government has failed to disclose material exculpatory evidence in violation of Brady v. Maryland,

, 87–88 (1963). Brady material must be disclosed in a timely manner, United States v. Sepulveda,

(1st Cir. 1993), which, under the local rules of this district, is at least twenty-one days before trial. See LCrR 16.1(d). Considering that the trial is not scheduled to begin until May 2021, the government has not yet run afoul of Brady. In any event, except in rare and extraordinary circumstances, the customary remedy for a delay in disclosing Brady material is a 12 Foistner’s argument that the indictment should be quashed

because the prosecutor presented improperly obtained documents

to the grand jury fares no better. Foistner has presented no

evidence that AUSA Kinsella showed the grand jury any documents

he may have obtained from Attorney Laboe. The government has

represented that no documents received from Attorney Laboe or

Orr & Reno were before the grand jury. Because Foistner has

failed to refute this representation, I must accept it as true

for purposes of this motion.

Even if such evidence had been presented, however, Foistner

has not established that he is entitled to the relief he seeks.

To the extent Foistner argues that the Laboe documents included

forgeries, there is no evidence that the government was aware

they were fake or that those documents prejudiced the grand

jury. See United States v. Reyes–Echevarria,

(1st

Cir. 2003) (rejecting claim of prosecutorial misconduct before

the grand jury for lack of prejudice where the defendant failed

to establish that the challenged evidence was false and that the

prosecutor knew it was false).4

continuance, not dismissal of the indictment. See United States v. Mathur,

(1st Cir. 2010).

4 Relying on the Ninth Circuit’s decision in United States v. Basurto,

(9th Cir. 1974), Foistner also argues that the indictment violated due process because the government knew it relied on falsified evidence. Basurto held that the due process clause “is violated when a defendant has to stand trial 13 To the extent Foistner argues that the Laboe documents were

illegally obtained, dismissal of the indictment is not an

appropriate remedy. The Supreme Court has held that “[a]n

indictment returned by a legally constituted and unbiased grand

jury . . ., if valid on its face, is enough to call for trial of

the charge on the merits.” Costello v. United States,

(1956). “‘[T]he mere fact that evidence itself is

unreliable is not sufficient to require a dismissal of the

indictment,’ and . . . ‘a challenge to the reliability or

competence of the evidence presented to the grand jury’ will not

be heard.” Williams,

(quoting Bank of Nova

Scotia,

). The Supreme Court’s reluctance to

examine the quality or sufficiency of the evidence presented to

a grand jury extends even to unconstitutionally obtained

evidence. See United States v. Calandra,

, 344–45

(1974) (stating that “an indictment valid on its face is not

subject to challenge on the ground that the grand jury acted on

on an indictment which the government knows is based partially on perjured testimony, when the perjured testimony is material, and when jeopardy has not attached.” Id. at 785. The First Circuit had declined to endorse the Ninth Circuit’s holding in Basurto on several occasions. See United States v. Mangual- Corchado,

(1st Cir. 1998) (collecting cases). But even if Basurto were the law in this circuit, Foistner’s claim would fail because there is no evidence suggesting either that the government knew the Laboe documents were falsified or that those documents were sufficiently material to require dismissing the indictment. 14 the basis of . . . information obtained in violation of a

defendant’s Fifth Amendment privilege against self-

incrimination”) (citations omitted); United States v. Blue,

(1966) (“Our numerous precedents ordering the

exclusion of . . . illegally obtained evidence assume implicitly

that the remedy does not extend to barring the prosecution

altogether.”). Accordingly, even if the grand jury examined

illegally obtained evidence, dismissing the indictment is not

warranted. If the government attempts to introduce such

evidence at trial, however, Foistner may move to suppress.

B. Vindictive Prosecution

Foistner alleges that Attorney Laboe and other conspirators

hired AUSA Kinsella to bring charges against him, either as an

act of revenge or to prevent Foistner from continuing to

litigate civil cases against them. There is not a shred of

evidence in the record to support this claim.

Federal prosecutors enjoy substantial discretion in making

decisions on when to prosecute and when not to do so, and their

decisions are entitled to a presumption of regularity. United

States v. Lewis,

(1st Cir. 2008). To overcome

that presumption, a defendant alleging that he is a victim of

vindictive prosecution must either (1) produce evidence showing

actual vindictiveness, or (2) demonstrate “circumstances that

reveal a sufficient likelihood of vindictiveness to warrant a

15 presumption of vindictiveness.” United States v. Jenkins,

(1st Cir. 2008). “If the defendant creates a

presumption of vindictiveness the burden shifts to the

government to show that legitimate reasons exist for the

prosecution.” United States v. Lanoue,

(1st

Cir. 1998). Personal vindictiveness on the part of a prosecutor

can sustain a claim of vindictive prosecution. United States v.

Bourque,

(1st Cir. 1976).

Foistner has neither produced evidence of actual

vindictiveness on the part of AUSA Kinsella nor demonstrated

that the circumstances of his prosecution give rise to a

likelihood of vindictiveness. Whatever may be said of

Foistner’s complaints about the conduct of the bankruptcy

trustees or Attorney Laboe, the record before me does not

suggest that either AUSA Kinsella or anyone else at the U.S.

Attorney’s Office acted out of vindictiveness toward Foistner or

participated in a conspiracy against him. Accordingly, his

vindictive prosecution claim has no merit.5

5 Foistner also mentions, but does not develop, a claim of selective prosecution. That claim fails because Foistner has not demonstrated that he was singled out for prosecution “while others similarly situated have not generally been proceeded against because of conduct of the type forming the basis of the charge against him.” United States v. Penagaricano-Soler,

(1st Cir. 1990) (internal quotation marks omitted). Although he alludes to the government’s failure to prosecute AUST Karonis and other alleged conspirators, the 16 C. Defects in the Indictment

Foistner claims that the indictment is defective with

respect to the bank fraud charges. His principal argument is

that the government’s representation to this court that it does

not intend to show at trial that Foistner lied on his federal

income tax returns renders the indictment deficient with respect

to its allegations of fraud.

There are two constitutional requirements for an

indictment: it must set forth the elements of the offense

charged in a manner that fairly alerts the defendant to what he

is facing, and it must show the defendant to what extent he may

plead double jeopardy in any future prosecution for the same

offense. United States v. Resendiz-Ponce,

(2007). The Federal Rules of Criminal Procedure effect these

guarantees in part through the requirement that “[t]he

indictment or information must be a plain, concise, and definite

written statement of the essential facts constituting the

offense charged.” Fed. R. Crim. P. 7(c)(1). “It is generally

sufficient that an indictment set forth the offense in the words

of the statute itself, as long as those words of themselves

fully, directly, and expressly, without any uncertainty or

ambiguity, set forth all the elements necessary to constitute

crimes they allegedly committed (theft and criminal conspiracy) are not similar to the charges against Foistner. 17 the offense intended to be punished.” Hamling v. United States,

(1974) (internal quotation marks omitted). If

those requirements are met, then “an indictment, valid on its

face, returned by a legally constituted grand jury, calls for a

trial on the merits.” United States v. Rodriguez,

(1st Cir. 1984).

Foistner concedes that the indictment sets forth the

charged elements of bank fraud in a manner that accurately

reflects the relevant statutory language. Compare Doc. No. 17,

with

. He does not argue that the statutory

language fails to convey the elements of the offense clearly or

fully. Instead, he takes issue with the indictment’s allegation

that he provided “false and fraudulent information about his law

office’s income production, his personal income, and his

personal finances.” Doc. No. 17 at 2. Foistner argues that

this allegation was nullified by the government’s representation

that it does not intend to show that he falsified his federal

income tax returns. But the two are not mutually exclusive.

Even if it concedes that Foistner accurately reported his income

to the IRS, the government could still show that Foistner

mispresented his income and finances to his lenders. For

example, the government could show, as it has argued, that

Foistner misrepresented that his law office was a cash-producing

business by failing to disclose that the notes receivable that

18 formed the basis of his reported income came from entities that

he controlled or that he had no intention of collecting on those

notes. Simply put, the government need not establish tax fraud

to prove bank fraud, and the indictment does not allege

otherwise.

Foistner also argues that he could not have misrepresented

his income to the banks because a bank loan officer is the only

individual who can calculate income on a loan application. This

amounts to an attack on the sufficiency of the government’s

evidence, rather than the allegations in the indictment. “At

the indictment stage, the government need not ‘show,’ but merely

must allege, the required elements” of the offense. United

States v. Stewart,

(1st Cir. 2014). It has done

so here. Foistner is free to present the role of loan officers

as a theory of defense at trial, but it is not a basis for

dismissing the charges of bank fraud.6

6 The same is true with respect to Foistner’s argument that the statements which form the basis of the bankruptcy fraud charges are all true and correct. These are disputed facts to be resolved at trial. 19 IV. CONCLUSION

For the foregoing reasons, I deny Foistner’s motion to

dismiss the indictment (Doc. No. 63).

SO ORDERED.

/s/ Paul Barbadoro Paul Barbadoro United States District Judge

March 10, 2021

cc: Joseph A. Foistner, pro se Richard Guerriero, Esq. Charles L. Rombeau, Esq. Kasey A. Weiland, Esq. John S. Davis, Esq.

20