1

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

UNITED STATES OF AMERICA, )

)

Plaintiff, )

)

v. ) No. 12 CR 409

)

ERIC A. BLOOM and CHARLES K. ) Judge Ronald A. Guzman

MOSLEY, ) Magistrate Judge Finnegan

)

Defendants. )

REPORT AND RECOMMENDATION

Defendants Eric A. Bloom and Charles K. Mosley have been charged with 18 

counts of: wire fraud in violation of 18 U.S.C. § 1343; investment adviser fraud in 

violation of 18 U.S.C. §§ 80b-6(1) and (2), 80b-17, and 2; and false statements to an 

employee benefit plan in violation of 18 U.S.C. §§ 1027 and 2. In this motion, which the 

district judge referred to this Court for a Report and Recommendation, Defendant Bloom 

seeks an order requiring the government to provide him with a bill of particulars. For the 

reasons set forth here, this Court recommends that the motion for a bill of particulars be 

granted in part and denied in part.

BACKGROUND

Defendant Bloom was the Chief Executive Officer and part owner of Sentinel 

Management Group, Inc., a corporation that managed short-term cash investments of 

futures commission merchants, commodity pools, hedge funds, at least one pension 

fund, and other entities and persons. (Doc. 1, Count 1 ¶ 1). Sentinel filed for bankruptcy 

on August 17, 2007. Three days later, on August 20, 2007, the Securities and 

Exchange Commission (“SEC”) filed a civil enforcement action against Sentinel (No. 07 
C 4684). Shortly thereafter, on October 11, 2007, the Sentinel bankruptcy trustee filed 

a complaint against Sentinel, Bloom, Mosley and others, alleging that these defendants:

promised Sentinel customers that their money would [be] placed in safe, 

liquid and conservative investments; used customer property as collateral 

for credit Sentinel obtained in its own name; engaged in risky trading 

strategy inconsistent with what they told their customers; prepared and 

distributed false account statements; and failed to disclose those material 

facts to Sentinel’s customers, resulting in customer losses of hundreds of 

millions of dollars.

(Doc. 44, at 2).

On January 28, 2008, Bloom’s counsel in this case, Theodore T. Poulos and 

Terence H. Campbell, filed appearances in the bankruptcy case, at which time they 

received access to a password-protected document database created and maintained 

by the bankruptcy trustee. That searchable database contains “a massive number of 

Sentinel’s business records, including records containing the information the defendant 

currently seeks from the government.” (Id. at 2-3).

On June 16, 2008, the SEC amended its complaint to add Bloom and Mosley as 

defendants. The detailed 27-page indictment alleges “conduct similar to the conduct 

alleged in the bankruptcy complaint.” (Id. at 3). Attorneys Poulos and Campbell filed 

appearances on Bloom’s behalf in June 2008 and litigated against the SEC over the 

next four years, including preparing briefs in opposition to summary judgment.1

 By the 

time discovery was completed in January 2011, the parties had deposed 28 witnesses, 

including three experts, and reviewed hundreds of thousands of documents from the 

Bank of New York alone, and hundreds of thousands from Sentinel. (Case No. 07 C 

4684, Doc. 194 ¶ 2). The SEC case was stayed after Bloom and Mosley were indicted 

 1 The civil case filed by the SEC, as well as a separate civil enforcement action filed by 

the Commodities Futures Trading Commission (“CFTC”) on 4/28/2008, are pending before 

Judge Kocoras. 
3

on May 31, 2012 in this criminal case, charged once again with conduct similar to that 

alleged in the bankruptcy complaint. To date, the government has produced 

voluminous discovery, including Jencks Act information. All discovery was “on 

searchable compact disks that were accompanied by a hard copy index of the 

materials.” (Id. at 4). 

DISCUSSION

A bill of particulars is necessary when “an indictment lacks sufficient detail to 

allow a defendant to prepare for trial, avoid prejudicial surprise, or protect himself 

against double jeopardy.” United States v. Linder, No. 12 CR 22-1, 2012 WL 3264924, 

at *2 (N.D. Ill. Aug. 9, 2012). See also United States v. Blanchard, 542 F.3d 1133, 1140 

(7th Cir. 2008) (“[T]he key question [in a bill-of-particulars analysis] is whether the 

defendant was sufficiently apprised of the charges against him in order to enable 

adequate trial preparation.”). “An indictment that includes each of the elements of the 

charged crime, the time and place of the defendant’s conduct which constitutes a 

violation, and a citation to the statute provides sufficient notice for the defendant to 

prepare for trial.” Id. (citing United States v. Fassnacht, 332 F.3d 440, 446 (7th Cir. 

2003)). Even where such information is not found in the indictment, a bill of particulars 

is not required when “the information a defendant needs to prepare his defense is 

available through some other satisfactory form, such as discovery.” United States v. 

Hernandez, 330 F.3d 964, 975 (7th Cir. 2003) (internal quotations omitted).

In determining whether to require a bill of particulars, a court should consider that 

“a defendant is not entitled to know all the evidence the government intends to produce, 

but only the theory of the government’s case.” United States v. Kendall, 665 F.2d 126, 
135 (7th Cir. 1981) (internal quotations omitted). The decision whether to require a bill 

of particulars “rests within the sound discretion of the district court.” Hernandez, 330 

F.3d at 975. 

False Statements: Bloom first requests the government to provide the “details of 

each allegedly false or fraudulent statement it intends to prove at trial” including the 

dates of each statement and the identity of the persons to whom the statements 

allegedly were made. (Doc. 38, at 3, 11). Specifically, Bloom asks the government to 

provide the following particulars:

The alleged false statements regarding “the risks associated with investing 

with Sentinel” including the dates of the statements and the identity of the 

persons to whom these allegedly false statements were made;

The alleged false statements regarding “the use of customers’ funds and 

securities” including the dates of the statements and the identity of the 

persons to whom these allegedly false statements were made;

The alleged false statements regarding “the value of customers’ 

investments” including the dates of the statements and the identity of the 

persons to whom these allegedly false statements were made; and

The alleged false statement[s] regarding “the profitability of investing with 

Sentinel” including the dates of the statements and the identity of the 

persons to whom these allegedly false statements were made. 

(Id. at 5). Without this information, Bloom argues that he will need to comb through 

millions of documents and communications between Sentinel and its many customers 

over an almost five-year period “attempting to divine which of those statements gives 

rise to the charges against him.” (Doc. 46-1, at 3). 

This Court agrees with the government that the indictment, together with the 

pretrial discovery already in Bloom’s possession, provide sufficient information about 

the alleged false statements to allow for trial preparation, avoid prejudicial surprise, and 
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bar a second prosecution for the same offenses. As for the indictment, it alleges in 

paragraph 3 that the defendants falsely represented “the risks associated with 

investing with Sentinel, the use of customers’ funds and securities, the value of 

customers’ investments, and the profitability of investing with Sentinel.” More detail is 

provided in other paragraphs of the indictment. For example, paragraph 1(k) identifies 

specific misrepresentations in Sentinel’s marketing material:

The essence of Sentinel’s service is preservation of capital and liquidity in 

even the most turbulent of market conditions. Sentinel has constructed a 

fail-safe system that virtually eliminates risk from short term investing;

Sentinel buys only the highest quality and most liquid securities . . . . 

Sentinel’s objective is to achieve the highest yield consistent with 

preservation of principal and daily liquidity, not simply ‘the highest yield’;

Sentinel accounts are protected by something stronger than insurance: 

federal law . . . . Unlike FDIC insurance, which covers only the first 

$100,000 . . ., there is no financial limit on the protection offered by fiduciary 

law; 

(Doc. 1 ¶ 1(k)).

According to the indictment, the first two statements above are false because the 

defendants “employed an undisclosed trading strategy for the House Portfolio that 

included extensive leverage, and a high concentration of illiquid and high-risk 

securities, that was inconsistent with the representations to customers.” (Id. ¶ 5). In 

addition, the indictment alleges:

The use of their customers’ securities as collateral allowed the defendants 

to borrow more money than Sentinel otherwise could, subjected the 

customer securities to potential legal claims by creditors, and allowed the 

defendants to employ leverage to the extent that Sentinel itself, and all of 

the customer portfolios, were at increased risk of adverse market 

movements and insolvency.
(Id.). Ultimately, the government argues, “Sentinel’s excessive use of leverage, 

created by the use of customer securities as collateral and by the purchase of risky, 

illiquid securities did in fact cause Sentinel to become insolvent causing massive 

customer losses.” (Doc. 44, at 9).

The indictment further alleges that the defendants made false statements about 

the value of customer investments because they “on a daily basis caused false and 

misleading account statements to be created and distributed to customers. . . .” (Doc. 

1, Count 1 ¶ 8). “These account statements reported returns earned by customers 

without disclosing that the returns actually had been allocated by the defendants, and 

were not the result of the market performance of the customers’ particular portfolios.” 

(Id.). The account statements were also false as to the value of the investments 

because they “did not disclose that the securities had been and were being used as 

collateral for Sentinel’s loan from BoNY [the Bank of New York]” and because “many of 

them, particularly those issued in July and August 2007, contained incorrect securities 

and inflated values of certain securities listed on the statements.” (Id.). As the 

government further explains in its response, the interest rate returns allegedly were 

“arbitrarily determined” by the defendants and others at their direction. (Doc. 44, at 

10). 

While the government is not required to identify the specific documents that it will 

offer at trial as evidence of the false statements, the response to the motion provides 

certain examples of such documents that already have been produced during 

discovery. One of these is a marketing document that defendant Bloom allegedly 

caused to be given to a Canadian investor less than two months before Sentinel went 
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bankrupt (Bates-numbered SEC_001-003107). This presentation stressed the safety 

and security of Sentinel investments, and made other alleged misrepresentations, 

including that customer funds were “held in segregated, bankruptcy proof accounts.” 

(Id.).

Another example is an account-opening document in which Bloom allegedly 

“acknowledged that Sentinel was a ‘discretionary investment advisor’ for the customer, 

claimed that the customer’s funds would be held in a custodial account for the benefit 

of the customer, and claimed that ‘Sentinel shall not own nor have any interest in funds 

or securities in the account or of any other funds or securities in which Client has a 

beneficial interest.’” (Id. at 11). Bloom further affirmed in these documents that the 

customer’s funds would be invested in Sentinel’s “125 Portfolio”–the portfolio 

containing only the highest-rated securities. (Bates-numbered AUSA_Fortis00000033–

37). According to the government, all of these statements were false in that the 

customer’s funds were used as collateral for Sentinel’s own loan, which went into 

default, and which caused the customer’s assets to be encumbered by Sentinel’s own 

creditor, as clearly alleged in the indictment. (Id.).

In a final example, the government points out that it produced a document known 

as a “seg letter,” (Bates-numbered AUSA_Fortis00000435), in which Bloom 

acknowledged that the funds in two specific Sentinel accounts were required by federal 

law to be segregated for the benefit of commodity clients of the customer, yet the funds 

were used as collateral for Sentinel’s own loan. The government contends that Bloom 

signed many such “seg letters” for Sentinel customers. (Id. at 12).
In his reply brief, Bloom expresses appreciation for the three examples of false 

statements but states that “to the extent the government intends to prove any other 

false statements, it should be ordered to identify them.” (Doc. 46-1, at 3). What Bloom 

essentially is seeking to learn is the specific evidence that the government will offer at 

trial to prove the charges. It is well settled that a defendant does not have a 

constitutional right to know the details of how the government will prove its case. 

Kendall, 665 F.2d at 135 (“The defendant’s constitutional right is to know the offense 

with which he is charged, not to know the details of how it will be proved.”); United 

States v. Cansler, 419 F.2d 952, 954 (7th Cir. 1969) (The purpose of the bill [of 

particulars] is to adequately inform a defendant as to the indictment against him and is 

not to supply the defendant with a list of the government’s witnesses.”); United States 

v. Glecier, 923 F.2d 496, 500-02 (7th Cir. 1991) (“[T]he district court’s refusal to order 

the government to [submit a bill of particulars] was not a clear abuse of discretion in 

light of the extensive pre-trial disclosure that did take place.”); United States v. 

Johnson, 504 F.2d 622, 628 (7th Cir. 1974) (generalized showing of prejudice 

insufficient to justify a bill of particulars). Since Bloom has sufficient information to 

understand the nature of the false statement charges and prepare for trial, this Court 

recommends that the motion for a bill of particulars as to these charges be denied.2

 

That said, given the complexity of the charges, the massive volume of discovery, and 

the almost five-year duration of the alleged scheme, the Court recommends that the 

government be required to provide defendants with a preliminary exhibit list (and 

periodic updates) long before trial. 

 2 As discussed later in this Opinion, however, this Court is recommending that the 

government provide more particulars concerning the allegations of securities that were 

“incorrect” or had “inflated” values.
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Misappropriated Securities: Bloom next focuses on the allegations in 

paragraphs 4 and 5 of Count 1 (incorporated in Counts 2-18) that he “misappropriated 

securities belonging to customer portfolios by using them as collateral for a loan that 

Sentinel obtained from BoNY to purchase millions of dollars worth of high-risk, illiquid 

CDOs from Firm 1 and Firm 2 for the benefit of Sentinel’s House Portfolio.” (Doc. 1, 

Count 1 ¶ 4; Counts 2-18 ¶ 1). Bloom asks the government to identify:

the specific securities that Bloom allegedly misappropriated by using them as 

collateral for the BoNY loan and the date of each such misappropriation; and

for each security identified in response to (a) above, identify each 

corresponding “high-risk illiquid CDO” purchased from Firm 1 and Firm 2 for 

the benefit of Sentinel’s House Portfolio.

(Doc. 37, at 6).

Bloom notes that there is no dispute that Sentinel pledged hundreds of millions in 

securities to secure a daily overnight loan from BoNY but contends that “only a portion 

of the loan was used for the benefit of the House Account, while other portions of the 

loan were used for the benefit of the investor portfolios, in which case certain ‘customer 

securities’ could be properly pledged for loan.” (Doc. 38, at 3). Bloom points out that 

Sentinel’s internal records “allocated certain portions of the loan to the various portfolios 

and a certain portion of the loan to the House Account.” (Doc. 41-1, at 6). “Thus, the 

mere fact that some portfolio assets were pledged as security for the loan does not 

demonstrate that the investor portfolio assets were pledged as security for the House’s 

portion of the loan.” (Id.) (emphasis in original). Bloom observes that “[n]either the SEC 

nor the CFTC could ever point to any specific ‘customer security’ that was improperly 

pledged, and the indictment suffers the same defect.” (Id.). Bloom therefore asks the 

government to identify which securities were “pledged improperly for the benefit of 
Sentinel’s House Account. ... as opposed to being properly pledged for the benefit of 

the those [sic] customers.” (Doc. 46-1, at 8-9).

The government states that the specific securities allocated to the House account 

are listed in Sentinel’s “Active and Matured” report and in other Sentinel business 

records and are available in the bankruptcy trustee’s document database. (Doc. 44, at 

12-13).3 Bloom says this report merely shows Sentinel’s “entire securities holdings and 

identifies the portfolio in which each security was designated,” but provides “no 

information whatsoever as to which securities were pledged as collateral on a daily 

basis.” (Doc. 46-1, at 8).

To the extent that Bloom seeks to know what the Sentinel and BoNY documents 

illustrate concerning which securities were pledged on a daily basis and how, this 

information is already available to him. Bloom also is aware of what the testimony will 

be of certain BoNY and Sentinel witnesses on this topic. Indeed, Bloom relied on all of 

this evidence in successfully opposing summary judgment on this issue in the SEC 

lawsuit. In denying summary judgment, the district judge stated: “[T]here is a genuine 

issue of material fact as to whether Sentinel improperly pledged client securities to 

collateralize the BoNY loan for the benefit of the House Portfolio.” SEC v. Sentinel, 

2012 WL 1079961, at *7 (N.D. Ill. Mar. 30, 2012).4

 Bloom’s extensive analysis of the 

evidence and defense of the allegations in the SEC lawsuit (see Doc. 250, at 14-18) 

persuades the Court that Bloom has sufficient information to understand the nature of 

 3

 The government also argues that Bloom already knows which securities were pledged 

as collateral for the Bank of New York loan. (Doc. 44, at 12). Bloom denies this. (Doc.46-1, at 

8). Even assuming the defendant’s pre-existing knowledge may properly be considered by the 

Court (the government cites no authority for this), this Court declines to do so here in light of the 

factual dispute that exists.

4 Bloom suggested that the Court review this particular opinion as background when 

considering the motion for a bill of particulars. (Doc. 38, at 2). 
11

the misappropriation charges and defend himself. What he really is seeking to know is 

how the government will overcome his theory of defense as articulated in the SEC 

litigation.

As for the information about the CDOs, Bloom argues that “[e]very security 

Sentinel purchased was consistent with the stated investment portfolio guidelines at the 

time of its purchase” and the indictment “fails to specify a single security out of the 

billions in securities Sentinel purchased that was in any way contrary to stated 

investment guidelines.” (Doc. 38, at 3). The government responds that the defendant’s 

own records show what CDOs Sentinel bought from Firm 1 and Firm 2, as do the 

pleadings in certain civil lawsuits involving those firms in which Bloom was also a party.5

 

(Doc. 44, at 13). Again, the Court finds that the indictment and discovery -- not to 

mention information obtained through related civil lawsuits -- provide sufficient notice of 

the facts and charges to allow Bloom to prepare a defense and he already has 

articulated one. The Court therefore recommends that the motion for a bill of particulars 

as to these charges be denied.

Misleading Account Statements: Bloom lastly complains that the indictment 

contains “bald assertions” that the defendants “falsely represented the interest earned 

by Sentinel’s portfolios, the value of particular securities in those portfolios and the risk 

associated with investing in them.” (Doc. 38, at 3). Bloom observes that the indictment 

“fails to identify a single false interest rate, let alone specify how or why any stated 

interest rate was false.” (Id. at 3-4). Similarly, Bloom contends that the indictment fails 

 5 According to the government, the bankruptcy trustee filed civil lawsuits against Firm 1 

(08CV6587) and Firm 2 (09CV193). Both firms then filed third party complaints against Bloom. 
to identify a “single security with a falsely stated value, let alone allege the purported 

true value of any such security.” (Id.). He requests the following particulars: 

the account statements referenced in ¶¶ 3 and 8 of Count 1 and ¶ 2 of 

Count 20;

the “incorrect securities” by each daily account statement;

the securities listed with “inflated values” and the nature and extent of the 

“inflated values” by each daily account statement; and

each security on the August 13, 2007 customer statement referenced in ¶ 2 

of Count 20 that was listed with false market values and the nature and 

extent of the “false market values”.

(Doc. 37, at 6).

The government argues that Bloom is not entitled to this “wish list” and already 

has access to the information that he seeks from attending depositions of former 

employees and from telephone recordings that were produced to him. (Doc. 44, at 13-

14). This evidence, the government contends, reveals that “all of the statements for the 

time period identified in the indictment are false.” (Id.) (emphasis in original). The 

government further responds that “in the last weeks of Sentinel’s operation the 

defendants allocated to Sentinel’s SEG 3 customers illiquid CDOs that neither 

Sentinels’ repo counterparties nor the Bank of New York would accept as collateral due 

to their low quality.” (Id.). Three specific daily account statements that illustrate this are 

identified in the government’s response. The government objects to providing more 

information (likening Bloom’s request to civil interrogatories) and aptly notes that 

counsel for Bloom have been investigating and litigating the issues arising from 

Sentinel’s collapse for nearly five years so any claim that they must resort to 

“guesswork” to defend the charges “rings hollow.” (Doc. 44, at 15).
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 This Court agrees with the government with one exception. Paragraph 8 of 

Count 1 of the indictment states: “The daily account statements were also misleading in 

that many of them, particularly those issued in July and August 2007, contained 

incorrect securities and inflated values of certain securities listed on the statements.” 

(Doc. 1). As it stands now, the government appears focused on the account 

statements in the last weeks of Sentinel’s operation but the indictment leaves open the 

possibility that Bloom will be confronted with account statements from years earlier. If 

the government is intending to offer evidence of misleading daily account statements 

prior to July 2007, this Court recommends that it be required to identify these account 

statements that allegedly reflect incorrect securities and securities with inflated values 

by time period or in some other fashion. 

Further, as to all such account statements (whether before or after July 2007), 

the Court recommends that the government be required to identify the specific 

securities that allegedly were “incorrect” or inflated in value on the account statements. 

In its response to the motion the government suggests that the securities were incorrect 

and inflated because they were “low-quality” or “illiquid” rather than “investment grade.” 

(Doc. 44, at 14-15). Since these terms are somewhat ambiguous, and neither the SEC 

nor the CFTC alleged that Sentinel purchased securities that were below “investment 

grade”, Bloom requires more particulars, namely, the identity of the securities that the 

government believes to be incorrect or inflated in value—in order to prepare a defense. 

For the reasons stated above, this Court recommends that Bloom’s motion for a 

bill of particulars be granted in part and denied in part. Further, the Court recommends 

that the government be required to provide a preliminary exhibit list (and periodic 
updates) to the defendants long before trial. Pursuant to Fed. R. Civ. P. 72(b), specific 

written objections to this Report and Recommendation may be served and filed within 

fourteen (14) days from the date that this order is served. Failure to file objections with 

the Honorable Ronald A. Guzman within the specified time will result in a waiver of the 

right to appeal all findings, factual and legal, made by this Court in the Report and 

Recommendation.

ENTER:

Dated: January 2, 2013 __________________________

SHEILA FINNEGAN

United States Magistrate Judge