Court Rules on Pretrial Motions for Venue, Evidence and Other Matters (12/25/15)

In United States v. Barrett, 2015 U.S. Dist. LEXIS 171727 (ED NY 2015), here, the defendant was charged with submitting false claims to the U.S., money laundering, tax perjury at the individual and corporate levels, and aiding and assisting at the corporate level.  The principal locus of the non-tax offenses was the Eastern District of New York (EDNY).  The defendant resided and filed his tax returns from the Southern District of New York (SDNY) and his tax return preparer did his work from SDNY.  The tax omissions related to the income allegedly at the center of the nontax crimes.  Asserting improper venue in EDNY, the defendant initially moved to transfer the tax counts to SDNY, and then moved to dismiss the tax counts.  In this opinion, the Court rejects the venue assertions as, on the facts, premature at this stage and deals with some other issues related to the evidence and bill of particulars.  I will address certain points here.

Prior to moving to the issues, there is an interesting cryptic statement of the nature of the allegations based on an undercover operation with respect to certain drug stores defendant directly or indirectly owned.  The indictment charge the defendant ""submitted and caused the submission of claims for reimbursement to Medicare and Medicaid for drugs purportedly dispensed from [the drug stores] which were in fact never dispensed to Medicare or Medicaid beneficiaries."  A key part of the evidence:

Three undercover patients entered Economy Drug with prescriptions that [4]  also allowed for refills. (Id.; see also Gov't Resp. at 2.) After defendant properly filled and billed the initial subscriptions, the undercover agents did not request or receive refills of their prescriptions. (Indictment P 25.) The government contends that defendant nevertheless billed Medicaid for the additional refills. (Id.)

1.  Venue.

Venue for tax crimes is generally where the defendant resides, signs the return or files the return.  However, 18 USC § 3237(b), here, provides that, where venue

is based solely on a mailing to the Internal Revenue Service, and prosecution is begun in a judicial district other than the judicial district in which the defendant resides, he may upon motion filed in the district in which the prosecution is begun, elect to be tried in the district in which he was residing at the time the alleged offense was committed.

But, the provision further provides that the motion must be filed within 20 days after arraignment.  That was the first problem with the motion.  It was filed five months after arraignment on the initial indictment.

The second problem was that venue was not based solely on mailing to the IRS as expressly required for the provision to apply.

The third problem was the false returns at the heart of the tax counts were related to the nontax counts having their principal locus in EDNY precluded the court from determining at this stage that venue could not be in EDNY.  If venue is contested, the Government has to prove proper venue at trial, so here the court denied the motion without prejudice to the issue being raised at the end of the government's case-in-chief pursuant to FRCrP 29(a).  For those not generally familiar with venue concepts in a criminal trial, I cut and paste some of the court's discussion:

In a federal criminal case, venue "is controlled by a complex interplay of constitutional provisions, statutes, and rules." 2 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 301 (4th ed. 2015) [hereinafter Wright & Miller]. Because appropriate venue in criminal proceedings was of serious concern to the Nation's founders, the Constitution "twice safeguards the defendant's venue right." United States v. Cabrales, 524 U.S. 1, 6 (1998); see U.S. Const. art. III, § 2, cl. 3 ("Trial of all Crimes . . . shall be held in the State where the said Crimes shall have been committed."); U.S. Const. amend. VI ("In all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial, by an impartial jury of the State and district wherein the crime shall have been committed."). 

Those venue rights are also reflected in the Federal Rules of Criminal Procedure. See Fed. R. Crim. P. 18 ("[T]he government must prosecute an offense in a district where the offense was committed."). Further highlighting the significance of venue is the requirement that venue be proper with respect to each count when a defendant is charged with multiple offenses. See United States v. Beech—Nut Nutrition Corp., 871 F.2d 1181, 1188 (2d Cir. 1989). The purpose of these legal protections is to insulate criminal defendants from the "bias and inconvenience that may attend trial in a forum other than one in which the crime was committed." United States v. Rowe, 414 F.3d 271, 277 (2d Cir. 2005). 

Many crimes are committed only in a single district. In that scenario, venue is not generally in dispute. See United States v. Ramirez, 420 F.3d 134, 139 (2d Cir. 2005) ("When a crime consists of a single, non-continuing [11]  act, the proper venue is clear: The crime is 'committed' in the district where the act is performed." (internal quotation marks and citation omitted)). Other offenses, however, occur in multiple districts. n3 In those circumstances, 18 U.S.C. § 3237(a), the venue statute discussed above, often referred to as the "continuing offense" statute, provides guidance:
   n3 The court recognizes that the indictment charges that the defendant committed the acts underlying the Tax Counts within the Southern District. Yet, as established in the government's submission, the charged conduct also occurred in and is interconnected with conduct in the Eastern District. 

[A]ny offense against the United States begun in one district and completed in another, or committed in more than one district, may be inquired of and prosecuted in any district in which such offense was begun, continued, or completed. 

18 U.S.C. § 3237(a). Circuit courts, including the Second Circuit, have held that both 26 U.S.C. § 7206(1) and § 7206(2) are "continuing offenses" within the meaning of 18 U.S.C. § 3237(a). See United States v. Rooney, 866 F.2d 28, 31 (2d Cir. 1989) ("We have held that the continuing offense statute applies to section 7206(1) prosecutions . . . ."); see also United States v. Shyres, 898 F.2d 647, 657 (8th Cir. 1990) ("[B]ecause the continuing offense statute . . . applies to section 7206(1), venue also lies 'in any district in which such offense was begun, continued, or completed.'"); United States v. Slutsky, 487 F.2d 832, 839 (2d Cir. 1973) (same); United States v. Hirschfeld, 964 F.2d 318, 321 (4th Cir. 1992) (same with respect to § 7206(2)). 

The Second Circuit, having recognized that "there is no single defined policy or mechanical test to determine constitutional venue," United States v. Reed, 773 F.2d 477, 481 (2d Cir. 1985), applies a "substantial contacts" test to evaluate the propriety of venue in any particular district. The substantial contacts test looks to "the site of the defendant's acts, the elements and nature of the crime, the locus of the effect of the criminal conduct, and the suitability of each district for accurate factfinding . . . ." Rowe, 414 F.3d at 278 (internal quotation marks and citation omitted). n4
   n4 Contrary to defendant's suggestion otherwise (Def. Reply at 2), multiple courts have applied the "substantial contacts" test in evaluating the propriety of venue for tax prosecutions. See United States v. Martino, No. 00—CR-389, 2000 WL 1843233, at *2-3 (S.D.N.Y. Dec. 14, 2000); United States v. Strawberry, 892 F. Supp. 519, 521 (S.D.N.Y. 1995). Defendant is correct, however, that the Second Circuit has "alternately applied and ignored the substantial contacts test." United States v. Coplan, 703 F.3d 46, 80 (2d Cir. 2012) (collecting cases) 

In a tax prosecution under § 7206(1) or § 7206(2), venue "may lie not only where the return was made and subscribed, but also where filed, or where the preparer received information from the defendant even though the defendant signed and filed the returns elsewhere." Rooney, 866 F.2d at 31 (internal quotation marks and citation omitted); United States v. Marrinson, 832 F.2d 1465, 1474-75 (7th Cir. 1987); see also United States v. Pace, 314 F.3d 344, 352 (9th Cir. 2002) ("The act of making a tax return commences when one prepares and furnishes information material to the return and continues until that information is received by the IRS. For such continuing offenses, venue is proper in any district in which the continuing conduct has occurred."). With respect to a § 7206(2) offense, venue is appropriate in any district in which any of the aiding or assisting took place. See Hirschfeld, 964 F.2d at 321. 

Finally, the government bears the burden of proving the propriety of venue, see United States v. Tzolov, 642 F.3d 314, 318 (2d Cir. 2011), but need only do so by a preponderance of the evidence. See United States v. Rommy, 506 F.3d 108, 118-19 (2d Cir. 2007). Circumstantial evidence can be sufficient. United States v. Conteh, 2 F. App'x 202, 203-04 (2d Cir. 2001) (unpublished) ("Venue may be proven by circumstantial evidence." (citing United States v. Gargiso, 456 F.2d 584, 588 n.5 (2d Cir. 1972))); Shyres, 898 F.2d at 657-58; 20A Fed. Proc., L. Ed. § 48:1592 ("[T]he absence of direct proof of venue will not defeat a conviction where an inference of venue may be drawn from circumstantial evidence."). n5
   n5 Defendant's original motion to transfer venue pursuant to Fed. R. Crim. P. 21 placed the burden on him to establish grounds to do so. See United States v. Stein, 429 F. Supp. 2d 633, 645 (S.D.N.Y. 2006). However, without explanation, defendant's reply requests that his initial motion to transfer the Tax Counts to the Southern District be converted into a motion to dismiss them for improper venue under Fed. R. Crim. P. 12(b)(3)(A)(i). "Where venue is challenged on a pre-trial motion to dismiss, the Government's burden is limited to showing that the indictment alleges facts sufficient to support venue." United States v. Peterson, 357 F. Supp. 2d 748, 751 (S.D.N.Y. 2005).

The Court then focused on the context of the particular issue here.  There was some issue over the scope of language in an earlier case, United States v. Rooney, 866 F.2d 28, 31 (2d Cir. 1989), but the Court found that the governing cases "indicate that the range of actions establishing venue and criminal tax liability is broad" and that the it was probable that the Government could prove venue by the required preponderance of the evidence.  The Court noted in this regard that, given the underlying facts, trying the case in EDNY was equally convenient as in SDNY, just next door so to speak.

2.  The Back Door Motion in Limine

Guarding against the possibility of losing the venue issue, the Government made a protective motion that it be allowed to present evidence of the tax crimes even if the tax counts cannot be tried in the EDNY case.  The Court decided to rule on the motion, reasoning:

Should defendant successfully renew his motion at a later time to dismiss the Tax Counts for lack of venue, however — thereby raising the specter of the tax-related evidence affecting other issues in the trial — the court will rule now on the government's pending motion in limine to introduce evidence regarding the Tax Counts.

For purposes of ruling on the motion, the Court assumed "assume[d] that the Tax Counts are not properly venued in the Eastern District."

The Government claimed and the Court agreed that the tax crimes arose out of the "same transaction or series of transactions" as the money laundering from health care fraud and was inextricably intertwined with the evidence of that nontax conduct.  The Court did carve out the possibility that, if the tax counts were dismissed, it would instruct the jury to disregard the tax year 2010 counts that temporally preceded the charged nontax conduct.

The Court found that the evidence, so admissible, was not prejudicial or confusing so as to be not admitted pursuant to FRE 403, here.

Finally, the Court held that evidence of the tax crimes was admissible under FRE 404(b), here, "would tend to show that defendant sought unlawfully to conceal or disguise fraudulently obtained income from taxation, from which a jury could find that defendant knew the proceeds at issue in the health care fraud, false claims, and money laundering counts derived from illegal activity."

3. Bill of Particulars.

The defendant asked for a bill  of particulars identifying unindicted co-conspirators and certain facts related to the duration and scope of the alleged conspiracy.  This is a standard request.  A threshold issue was that conspiracy was not charged, so none of the nonparty actors were described in the charging document as unindicted co-conspirators.  The Court nevertheless treated the allegations regarding the nonparty actors as being equivalent to co-conspirators (n1):

n1 Although the indictment does not charge a conspiracy, it repeatedly alleges that defendant operated "together with others." (See Indictment PP 25, 30, 32, 34, 36.) Accordingly, the court will occasionally refer to these other individuals as "unindicted co-conspirators."

The Court granted the motion.

4.  Case-in-Chief Documents.

I just cut and paste the Court's discussion:

Defendant next requests identification of documents the government plans to use at trial. Defendant relies on United States v. Turkish, 458 F. Supp. 874, 882 (S.D.N.Y 1978), for the proposition that where the government provides thousands of documents to a defendant in advance of trial and where the trial will likely involve substantial reliance on documents, the government has an obligation to identify the documents on which it will rely in its case-in-chief. 

The reasoning of Turkish, however, has been called into serious question by subsequent cases, and has never been adopted by the Second Circuit. See Nachamie, 91 F. Supp. 2d at 569 ("The Turkish court cited no authority for its conclusion that the Government had an obligation to identify the documents it intended to use in its case-in-chief, and it mistakenly relied on another district court case . . . which merely held that the Government had a duty to produce such documents."); see also United States v. Ferguson, 478 F. Supp. 2d 220, 243-44 (D. Conn. 2007); United States v. Kaplan, No. 02-CR-883, 2003 WL 22880914, at *20-21 (S.D.N.Y. Dec. 5, 2003) (denying motion for identification of government's case in chief documents as not required under current version of Rule 16); Reddy, 190 F. Supp. 2d at 571 ("It is clear that [Fed. R. Crim. P. 16(a)(1)(E)] does not require the government to identify specifically which documents it intends to use as evidence. It merely requires that the government produce documents falling into the three enumerated categories." (citation omitted)). n20
   n20 The court recognizes the problems associated with "document dumps" in white collar criminal cases. Commentators have recognized the dangers created where the government produces a large body of discovery material. See Robert G. Morvillo et al., Motion Denied: Systematic Impediments to White Collar Criminal Defendants' Trial Preparation, 42 Am. Crim. L. Rev. 157, 160 (2005); see generally Sara Kropf et al., The "Chief" Problem with Reciprocal Discovery Under Rule 16, Champion, September/October 2010. Some of these commentators have also recognized the inconsistencies in the case law. See Sheila Sawyer, Is 'It's in There Somewhere' Enough? Defining the Scope of the Government's Brady Obligations in 'High-Volume Discovery' Prosecutions, 24 White-Collar Crime Rep. 1, 4 (2009) ("Some older district court decisions have . . . required the government to separate its discovery production into the categories identified in Rule 16. More recent decisions, however, have rejected the holdings of those cases as inconsistent with the plain language of Rule 16." (footnotes omitted)). Ultimately, the court "has no license to rewrite the Federal Rules of Criminal Procedure. While it might be wise for the Advisory Committee on Criminal Rules to consider an amendment that would require a party to identify those documents it intends to use in its case-in-chief, no such requirement now exists in the plain language of the Rule." Nachamie, 91 F. Supp. 2d at 570. 

Even assuming the court has the authority to require the government to identify the documents it plans to use in its case-in-chief, the court would not use its discretion to order the government to identify these documents at this time. The indictment itself contains information about the specific prescriptions alleged to have been improperly filled, and the government has represented that it provided defendant additional information in later productions. From that information, defendant should be able to identify the most relevant documents. In addition, although the government has stated that it will identify the documents it intends to introduce two weeks before trial (Gov't Resp. at 11), the court's pretrial order directs the parties to exchange a list of exhibits 45 days before trial. The request for identification of the government's case-in-chief documents 60 days in advance of trial is denied.

Focus on the document dump issue in footnote 20.  This is a real problem in terms of the defendant's counsel being able to discover exculpatory evidence in large document cases.  Note that the requirements of Brady are more extensive than the requirements of Rule 16, so sensitive to this issue.