NOT PRECEDENTIAL – NOT FOR PUBLICATION
IN THE DISTRICT COURT OF THE VIRGIN ISLANDS
DIVISION OF ST. CROIX
UNITED STATES OF AMERICA, 
and 
THE PEOPLE OF THE VIRGIN ISLANDS,
Plaintiffs,
v.
JAMES A. AUFFENBERG, JR.,
AUFFENBERG ENTERPRISES OF
ILLINOIS, INC., PETER G. FAGAN,
JAMES W. FERGUSON, III, J. DAVID
JACKSON, KAPOK, INC., KAPOK
MANAGEMENT, L.P., ST. CLAIR I, LLC,
ST. CLAIR II HOLDINGS VI, LLC,
Defendants.
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CRIM. NO. 2007-0047
MEMORANDUM OPINION
Finch, J.
THIS MATTER comes before the Court on the Motion to Dismiss Counts 1, 20 and 21 of
the Superseding Indictment, pursuant to Rule 12(b)(3) of the Federal Rules of Criminal
Procedure.  Defendant James A. Auffenberg, Jr. asserts that the Government has failed to plead
an essential element of the offense of wire fraud.  
Auffenberg and others face charges of conspiracy to commit wire fraud and wire fraud
against the United States in violation of 18 U.S.C. § 1343 in Counts 1 and 20, respectively, and
conspiracy to defraud the Virgin Islands Economic Development Commission (EDC) and Bureau
of Internal Revenue, which is prohibited under 14 V.I.C. § 843 in Count 21.  Auffenberg
challenges these charges on the grounds that the alleged scheme to defraud is not a scheme to
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deprive another of money or property.  
“To prove mail or wire fraud, the evidence must establish beyond a reasonable doubt (1)
the defendant's knowing and willful participation in a scheme or artifice to defraud, (2) with the
specific intent to defraud, and (3) the use of the mails or interstate wire communications in
furtherance of the scheme.” United States v. Hedaithy, 392 F.3d 580, 590 (3d Cir. 2004)
(quotation omitted).  “Additionally, the object of the alleged scheme or artifice to defraud must
be a traditionally recognized property right.”  Id.
The Superseding Indictment describes the scheme as one that “caused the Virgin Islands
to lose substantial gross receipt taxes . . . and substantial United States income taxes to which the
Virgin Islands was entitled.”  Superseding Indictment, ¶ 13.  The scheme “in like manner caused
the United States to lose substantial income taxes which were evaded.”  Id.   Although the
Superseding Indictment emphasizes that Defendants made false statements to representatives of
the EDC to obtain a beneficiary certificate which granted certain tax reduction benefits, the Court
cannot disregard the allegations that the Virgin Islands and United States both lost tax revenues
through the successful implementation of that scheme.  
The Supreme Court case of Cleveland v. United States, 531 U.S. 12 (2000), upon which
Auffenberg relies, is distinguishable in that, although the case similarly involved fraudulent
procurement of a license, “the Government nowhere allege[d] that [defendant] defrauded the
State of any money to which the State was entitled by law.”  Id. at 22.  Instead, the Supreme
Court case of Pasquantino v. United States, 544 U.S. 349 (2004) controls.  In Pasquantino, the
Court held that uncollected taxes are a valuable entitlement to the taxing authority, and therefore
constitute “‘property’ as that term ordinarily is employed.”  Id. at 355-56. 
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Because the Superseding Indictment alleges that the scheme deprived the Virgin Islands
and the United States of taxes to which they were entitled, it, in essence, alleges a scheme to
deprive another of money or property.  Thus, Auffenberg has not shown that any of the elements
necessary to prove conspiracy to commit wire fraud or wire fraud are missing from the
Superseding Indictment.  Therefore, the Court denies Auffenberg’s motion to dismiss Counts 1,
20, and 21 of the Superseding Indictment. 
ENTER:
DATE:
February 7, 2008
________/s/____________________
RAYMOND L. FINCH
DISTRICT JUDGE
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