Thursday, April 13, 2017

Court Rejects Dismissal of Superseding Indictment and Defraud Conspiracy Count As Substitute for Dismissed Tax Obstruction Count (4/13/17)

I previously wrote on a dismissal of a tax obstruction count in United States v. Ogbazion, 2016 U.S. Dist. LEXIS 143358 (SD OH 2016) for failure of the count to state that the defendant has intended to obstruct a pending investigation.  Opinion on Effect of Parallel Civil Proceedings, Statute of Limitations on Tax Crimes, and Kassouf (Again) (10/22/16), here.  The portion of that blog entry relevant to today's new blog is:
3. Failure to State an Offense.  The defendant moved to dismiss certain counts on the grounds that they failed to incorporate the necessary elements of the offense.  The most interesting holding on this issue relates to the Kassouf issue that I have mentioned several times in earlier blog entries, but I refer readers particularly to Second Circuit Rejects Aberrational Sixth Circuit Opinion in Kassouf on Requirements for § 7212(a) Tax Obstruction (Federal Tax Crimes Blog 10/15/16), here.  Briefly, Kassouf held that, based on analogy to the obstruction in 18 USC § 1503, here, tax obstruction under § 7212(a) requires an intent to obstruct a known IRS investigation.  Almost all courts other than the Sixth Circuit considering the issue have rejected rejected the Kassouf holding and even the Sixth Circuit has severely limited the holding.  But the holding, as limited, is still precedent in the Sixth Circuit.  The Ogbazion court is in the Sixth Circuit.  The Court thus held that, since the indictment failed to allege that critical element, as interpreted by the Sixth Circuit in Kassouf, the indictment was defective and the Count was dismissed.
After that earlier decision, there was an aborted appellate proceeding where authority to appeal the Kassouf-based dismissal was denied, the Government came back with a superseding indictment. In relevant part, the superseding indictment charged the defraud conspiracy, 18 USC § 371, here, which as readers know substantially overlap with tax obstruction, § 7212(a), here, except that the defraud conspiracy does not require a pending proceeding.  I should note that circuits other than the Sixth Circuit do not adopt the Kassouf limitation on tax obstruction, so in that sense, outside the Sixth Circuit, there is a complete overlap except that tax obstruction can be committed by a single actor (as well as multiple actors), whereas the defraud conspiracy requires two or more actors.  So, basically, what the Government did in the superseding indictment was to charge the same basic crime as the defraud conspiracy rather than as tax obstruction because it could no longer pursue the tax obstruction charge.  And, of course, the defraud conspiracy is a five-year felony, whereas tax obstruction is a three-year felony.  The defendant cried foul and moved in relevant part to dismiss the superseding indictment altogether, alleging foul as to the defraud conspiracy, or, failing that, the defraud conspiracy count.

In United States v. Ogbazion, 2017 U.S. Dist. LEXIS 54465 (SD OH 2017), here, the court denied the motion to dismiss.

As to the motion to dismiss the superseding indictment, the Court rejected the claim of vindictive prosecution.  That claim was based in part:

Here, Defendant argues that the Government's conduct in this case amounts to vindictive prosecution, as evidenced by the Government's revival of the charge dismissed in Count 1, under a different count and statute, and the enhanced penalties associated with the additional charges brought in the Superseding Indictment.  
* * * * 
Defendant alleges that the Superseding Indictment is the Government's vindictive response to the Court's prior dismissal of Count 1. Defendant argues that: 
The Superseding Indictment ... repackages and re-labels Count 1 of the Original Indictment (the "guts" of the government's case against [Defendant], previously dismissed by the Court) and re-charges it as Count 24. Indeed, save a few minor tweaks (all of which vindictively expand the extent of [Defendant's] potential criminal liability), Count 24 of the Superseding Indictment is a literal cut-and-paste of the dismissed Count 1 of the Original Indictment.
Frustrated by the Court's dismissal of the "guts" of its criminal case against [Defendant] (Count 1 of the Original Indictment) and unable to secure even internal approval to challenge such dismissal by way of proper appeal, the government simply decided to take matters into its own hands and effect a naked end-run of the Court's prior order. Quite literally, the government in the Superseding Indictment purports to re-plead criminal charges previously dismissed by this Court (and from which no appeal was ultimately taken). 
(Doc. 84 at 11). The Court fully agrees that Count 24 is—and was undoubtedly intended to be—a revival of Count 1. However, the Court finds nothing unreasonable about the Government's charging decision. 
To be clear, the Court previously dismissed Count 1 in the Indictment, finding that the Indictment failed to sufficiently allege each of the essential elements (recognized in the Sixth Circuit) of the 26 U.S.C. § 7212(a) offense and was therefore legally deficient. (Doc. 66 at 33-40). The Court further stated that "[s]uch deficiencies cannot be remedied by amending the indictment or ordering the Government to provide a bill of particulars." (Id. at 33). 
Relying heavily on the Court's statement, Defendant now argues that Count 24 of the Superseding Indictment is an impermissible amendment of Count 1, in violation of the Court's instruction. However, Defendant's argument misconstrues the Court's admonition regarding amendments. 
"[I]ndictments 'may not be amended because doing so would substitute the prosecutor's judgment for that of the constitutional body, the Grand Jury, in framing the charge against a defendant.'" United States v. Prince, 214 F.3d 740, 756 (6th Cir. 2000) (internal quotation marks and citations omitted). Thus, an indictment may be amended only by the Grand Jury, unless "'the change is merely a matter of form' ... [such as] corrections of clerical or typographical errors." United States v. Rosenbaum, 628 F. App'x 923, 929 (6th Cir. 2015) (quoting Russell v. United States, 369 U.S. 749, 770 (1962)). n5
   n5 Among "[t]he purposes underlying the rule against amendments and constructive amendments include notice to the defendant of the charges he will face at trial ... [and] of 'paramount importance,' the assurance that a group of citizens independent of prosecutors or law enforcement officials have reviewed the allegations and determined that the case is worthy of being presented to a jury for a determination of the defendant's guilt or innocence." United States v. Beeler, 587 F.2d 340, 342 (1978) (quoting United States v. Radetsky, 535 F.2d 556, 562 (10th Cir. 1976)) (emphasis added). 
As the Court made clear in its prior Order, an indictment must set forth each of the elements of the offense charged, not only to provide adequate notice to Defendant, but also to ensure that Defendant is only answering to charges properly returned by the Grand Jury. (Doc. 66 at 39-40). And, as to Count 1, the Court found that "the Indictment [was] devoid of any indication that either the Government or the Grand Jury was even aware that a charge under 26 U.S.C. § 7212(a)'s omnibus clause requires the defendant to have been aware of a pending IRS action." (Id. at 40). Thus, in stating that the Government could not simply amend the Indictment to correct the deficiency, the Court was emphasizing that the error was not "merely a matter of form," and therefore could not be remedied by the prosecutor's clarifications. (Id.) As the Court stated, "the Government's 'he knows what we meant' argument does not satisfy the requirement that the indictment clearly set forth all elements of the offense charged." (Id.) However, nothing in the Court's Order was intended to imply that the Government could not correct its error by obtaining a superseding indictment from the Grand Jury. 
The Court finds that the Government's decision to charge Count 24 was a reasonable and permissible response, in light of the dismissal of Count 1. Indeed, as Defendant notes, and as the Government would likely agree, Count 1 constituted the 'guts' of the prosecution's case. The Court sees nothing unreasonable about, and is certainly not offended by, the Government's attempt to remedy its own error. 
As the Government's decision here was not unreasonable, the Court declines to presume that the Government acted vindictively in its decision to charge Count 24.
Then, as to the motion to dismiss the defraud conspiracy, Count 24,, the Court said:
4. Dismissal of Count 24 [The Defraud Conspiracy Count]
Finally, Defendant argues that the Court should dismiss Count 24 as untimely under the applicable statute of limitations. (Doc. 84 at 35-37). Count 24 charges Defendant with conspiracy to defraud and commit wire fraud, all in violation of 18 U.S.C. § 371. (Doc. 82 at ¶ 83-120). 
"The statute of limitations period for a violation of Section 371 'is five years, which period runs from the date of the commission of the last overt act in furtherance of the conspiracy.'" United States v. Fraser, 63 F. App'x 814, 817 (6th Cir. 2003) (quoting Craft, 105 F.3d at 1127); see also 18 U.S.C. § 3282(a) ("no person shall be prosecuted, tried, or punished for any offense, not capital, unless the indictment is found or the information is instituted within five years next after such offense shall have been committed"). 
Here, the Superseding Indictment was returned on January 24, 2017. (Doc. 82). Accordingly, for the conspiracy charge under Count 24 to have been brought within the limitation period, the Government must allege that at least one overt act occurred after January 24, 2012 (i.e., five years prior to the date of the Superseding Indictment). 
Count 24 alleges that the conspiracy began in or about January 1, 2004, and continued up to and including November 6, 2013. (Doc. 82 at ¶ 84). Specifically, Count 24 includes the following overt acts, which allegedly occurred within the statute of limitations period:  
From in or about January of 2012 to in or about March of 2012, Defendants OGBAZION and WADE and other persons whose identities are known to the Grand Jury, provided a "backup" EFIN to ITS return preparer.  
(Id. at ¶¶ 119, 120). n11
   n11 Additionally, Count 24 includes another seven paragraphs alleging overt acts that continued "until in or about 2012." (Doc. 82 at ¶¶ 103, 107, 108, 111, 116, 117, 118).
However, Defendant argues that the overt acts alleged in paragraphs 119 and 120 "are a completely disingenuous attempt by the government to defeat the statute of limitations." (Doc. 84 at 35). Defendant alleges that the "two isolated incidents are not, and could not be, part of the scheme alleged in Count 24, or any scheme for that matter." (Id.) Specifically, Defendant contends: 
The chronology of the civil investigation and proceeding shows that any alleged conspiracy would have effectively ended as of November 2011, when [Defendant] became aware that he and ITS were under investigation. [Defendant] received the first document request from the IRS in the civil investigation on November 4, 2011. ... He was interviewed first on December 7, 2011 (and asked questions about the use of EFINs and the transmission of tax returns to the IRS without customer authorization). ... He was interviewed again on February 23, 2012 (and again asked questions about the use of EFINs and the transmission of tax returns to the IRS without customer authorization). ...
Simply put, the alleged jig was up before the alleged incidents in Paragraphs 119 and 120 took place. If these events did indeed occur, they were isolated incidents, completely divorced from events that occurred prior to the investigation. 
(Id. at 35-36). 
As an initial matter, in his first motion to dismiss, Defendant argued that he engaged in the civil interviews and depositions without any inclination that he may become the target of a criminal investigation or prosecution. (Doc. 45 at 7-27). n12 Assuming this to be true, Defendant may not have known that 'the jig was up' to the extent that he would have abandoned the conspiracy. Regardless, the Court is not persuaded that the alleged conspiracy necessarily had to end as soon as "the alleged jig was up." While the argument is logical, it is more appropriately saved for the jury, rather than offered as grounds for dismissal.
   n12 Notably, however, the Court stated in its Order:
Defendant's assertion that he had "no reason to believe" he might be, or may become, the target of a criminal investigation strains credibility. Moreover, the fact that Defendant had counsel present during each of his communications with the Government renders it all the more unlikely that he was as oblivious to his potential criminal exposure as he now claims.
(Doc. 66 at 11). 
Moreover, the Court cannot conclude that the overt acts in paragraphs 119 and 120 must, at best, be isolated incidents. See United States v. Fraser, 63 F. App'x 814, 818 (6th Cir. 2003) ("Proof of an overt act taken in furtherance of the conspiracy within the statute of limitations period would clearly demonstrate the continued existence of the conspiracy. However, once a conspiracy has been established, it is presumed to continue until there is an affirmative showing that it has been abandoned") (internal quotation marks and citations omitted). Whether Defendant's knowledge of the ongoing investigations constituted abandonment of the alleged conspiracy is not properly before the Court. 
In short, Count 24 sufficiently alleges overt acts occurring within the limitation period applicable to an offense under 18 U.S.C. § 371. Accordingly, dismissal is not warranted.
JAT Comment:

1.  The court's reasoning seems to be correct.  My only nitpick is that the statute of limitations for the conspiracy count is six-years rather than 5 years.  See § 6531(1), here, (providing a 6-year statute "for offenses involving the defrauding or attempting to defraud the United States or any agency thereof, whether by conspiracy or not, and in any manner;" note that § 6531(8) provides the six-year statute for offense conspiracies under 18 USC § 371).

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