UNITEDSTATES DISTRICT COURT
EASTERNDISTRICT OF VIRGINIA
RICHMONDDIVISION
UNITEDSTATES OF AMERICA, ) CRIMINAL ACTIONNO.
Plaintiff, )
) 3:05-CR-00202-REP-1
)
v. )
)
JAMESDOMINIC YYY, )
)
Defendant. )
____________________________________)
MOTIONFOR JUDGMENT OF ACQUITTAL OR, IN THE ALTERNATIVE, MOTION FOR NEW TRIAL ANDMEMORANDUM OF LAW IN SUPPORT THEREOF
I.INTRODUCTION
Pursuantto Fed. R. Crim. P. 29(c), Defendant, James Dominic YYY, hereby moves thisCourt to enter a Judgment of Acquittal on all counts in the supersedingindictment. As set forth below,because, even considering the evidence in the light most favorable to thegovernment, no reasonable juror could conclude the government proved all of theelements of the various counts beyond a reasonable doubt, a Judgment ofAcquittal is appropriate under Fed. R. Crim. P. 29(c).
Inthe alternative, Mr. YYY, requests the Court order a new trial pursuant to Fed.R. Crim. P. 33. The granting of anew trial is appropriate under Fed. R. Crim. P. 33 for any reason mandated bythe Òinterests of justice.Ó UnitedStates v. Scroggins, 379 F.3d 233, 253-54(5th Cir. 2004).
II.DISCUSSION
A. Counts 1-3
It is axiomatic that, in order to establish Mr.YYYÕs guilt on Counts 1-3, the government was obligated to prove, beyond areasonable doubt, that Mr. YYY wilfully evaded a Òsubstantial income tax.Ó In order to establish the Òsubstantialincome taxÓ element at trial, the government relied primarily upon thetestimony of former IRS auditor John Gordon. See 1/24/06 Tr. at 54-55. Mr.Gordon testified that he conducted an audit in order to determine the taxesowed by Mr. YYY for the tax years 1995-1997 and determined that Mr. YYY owed$321,659 for 1995, $395,906 for 1996 and $119,233 for 1997. Id.at 88. Significantly, however, Mr. GordonÕsaudit was based only upon the deposits into accounts allegedly controlled byMr. YYY. Id. at 79 (ÒI used the total of those deposits to betheir income.Ó). Moreover, Mr.GordonÕs audit did not credit Mr.YYY with most deductions for 1995 and it did not credit him with any deductionsfor 1996 and 1997 although Mr. Gordon was confident that such deductionsexisted. Id. at 78 (ÒI disallowed all the deductions becausethere was no support for those deductions.Ó); 79 (ÒIÕm pretty confident thereprobably would have been deductions.Ó); 81. Indeed, Mr. Gordon conceded on cross-examination that thefigures he presented to the jury did Ònot accurately reflect[] the tax that[the YYYs] would owe on that....Ó Id. at 92.
Forpurposes of this motion, it is imperative to determine what Mr. Gordon did notdo in arriving at the Ôtax owedÕ figures he presented to the jury. First, despite the fact that Mr. Gordonsubpoenaed bank records, he limited his subpoena to those records relating todeposits even though he could have requested records related to withdrawals inorder to determine deductions to taxable income. Id. at 101. Second, he did not review Alpha &OmegaÕs Quickbooks files or any other documents seized from the YYYÕshome. Id. at 102. The seizure took place on May 29, 2003- almost three years prior to Mr.GordonÕs testimony. As part of theseizure, the government seized: numerous bank records and canceled checks,business receipts, financial records as well as Alpha & OmegaÕs Quickbooksfile. See Attachment A (Inventory Listing of All Items Seizedat Search Warrant Site).
Inreviewing tax evasion cases using the bank deposits method of prosecution, theUnited States Court of Appeals for the Fourth Circuit, in United States v. Ayers, 673 F.2d 728 (4th Cir. 1982), relied upon the FifthCircuitÕs explanation of that method as contained in United States v.Boulet, 577 F.2d 1165 (5th Cir. 1978).
Underthis method, all deposits to the taxpayer's bank and similar accounts in asingle year are added together to determine the gross deposits. An effort ismade to identify amounts deposited that are nontaxable, such as gifts,transfers of money between accounts, repayment of loans and cash that thetaxpayer had in his possession prior to that year that was deposited in a bankduring that year. This process is called "purification." It resultsin a figure called net taxable bank deposits.
Id. 1167. In connection with this method, it Òis part of the government's duty tonegate the possibility that bank deposits or cash expenditures in the yearunder investigation originated from non-taxable sources.Ó Id. at 1168.
TheÒleads doctrine,Ó developed by the United States Supreme Court in Holland v.United States, 348 U.S. 121, 136-37 (1954),is an integral part of the governmentÕs responsibilities when attempting toprove a tax evasion case. See,e.g., United States v. Hall, 650 F.2d 994,999-1000 (9th Cir. 1981); United States v. Slutsky, 487 F.2d 832, 843 n.14 (2d Cir. 1973). Under the Òleads doctrine,Ó in order tomeets its burden of proof the government must track down Òleads reasonablysusceptible of being checked, which, if true would establish the taxpayerÕsinnocence.Ó Holland, 348 U.S. at 135-36. This includes an obligation to give a defendant credit fordeductions which the government can Òcalculate without [the defendantÕs]assistance.Ó Slutsky, 487 F.2d at 842. The governmentÕs Òinvestigationmust establish a guarantee of essential accuracy in the circumstantial proof attrial as an element of the government's burden of proving guilt beyond areasonable doubt. . . ." Id.at 840.
Indeed,the Supreme Court in Holland noted thatthere are many problems with the bank deposits method of proof in a tax evasioncase that Òmight result in a serious injusticeÓ and a shifting of the burden ofproof. Holland, 348 U.S. at 135, 138. Nevertheless, it held that the government should not bedenied this method of proof providedthat it complies with the Òleads doctrine.Ó Id. As noted by the Court, byrequiring faithful application to this doctrine, Ò[t]he practical disadvantagesto the taxpayer are lessened by the pressures on the Government to check andnegate relevant leads.Ó Id. at 139. If the government fails to follow the Òleads doctrine,Ó however, a trialcourt should not send thegovernmentÕs case to a jury because it is insufficient. Id. at 136.
Instructiveis United States v. Lenamond, 553 F.Supp. 852 (N.D. Tex. 1982). Inthat case, the defendant has been convicted by a jury for tax evasion after thegovernment used a Òbank deposits-cash expendituresÓ method of proof. Id. at 853. Nevertheless,the governmentÕs investigation failed to follow leads concerning inventorywhich would have produced deductions to any income. Id. at855-860. In granting a judgment ofacquittal following the juryÕs verdict, the Court noted that Ò[t]his is thevery type of case contemplated by HollandÓ and found that Òthe Holland protections have been violated.Ó Id. at 862, 855. First, it noted that the government wasobligated to show that it conducted Òa full and adequate investigation in abank deposits caseÓ in order for the verdict to survive a motion for a judgmentof acquittal. Id. at 860, citing, Boulet, 577 F.2d at1168. Second, it noted that Ò[t]hegovernmentÕs duty to investigate and to follow leads does apply to omitted orunderstated deductions....Ó Id. at 855 (collecting case citations).
In this case, the government itself conceded that itdid not conduct Òa full and adequate investigation.Ó Indeed, as noted above, Mr. Gordon admitted that the figureshe presented to the jury did Ònot accurately reflect[] the tax that [the YYYs]would owe....Ó See1/24/06 Tr. at. Likewise, itappears Mr. Gordon made no effort whatsoever to Ònegate the possibility thatbank deposits...in the year[s] under investigation originated from non-taxablesources.Ó[1] More importantly, the government, inthis case, cannot plausibly argue that it adhered to the Òleads doctrineÓrequired by the Supreme Court in Holland. This is certainly not a case where thedefense is arguing that the government must Òbay down rabbit tracksÓ or conducta Òbacteriophobic search for error.Ó Instead it is a case where Mr. Gordoncould have easily obtained records by subpoena and could have easily reviewedmany of Mr. YYYÕs financial records and quickbooks files that had been seizedby the government almost three years prior in order to allow the jury toaccurately assess whether there truly was a Òsubstantial taxÓ owing. In this case, as in Lenamond, the Holland protections were egregiously violated.
Insum, given the governmentÕs admitted failure to conduct a Òfull and adequateinvestigationÓ into the taxes, if any, truly owed by Mr. YYY as well as itsfailure to adhere to the Òleads doctrineÓ as announced in Holland, Mr. YYY respectfully submits that the Court shouldnot have allowed this case to go to the jury. Holland, 348U.S. at 147; Lenamond, 553 F.Supp. at 863 (ÒSince the investigation was not adequate, this case should nothave been submitted to the jury.Ó). In any event, like the defendant in Lenamond, Mr. YYY is entitled to a judgement of acquittal onthe tax counts (i.e. Counts 1-3).
B.Count 4
Count4 of the superseding indictment charges Mr. YYY with mail fraud in violation of18 U.S.C. ¤ 1341. Specifically, italleges that, on or about June 11, 2002 in the Eastern District of Virginia,Mr. YYY sent documents by United Parcel Service in furtherance of a scheme todefraud. The recipient of thedocuments is alleged to have been Countrywide Home Loans, Inc. in Plano, Texas(ÒCountrywideÓ).
ThegovernmentÕs only witness to the mail fraud count at trial was Kyle Mays who isa loan officer with Countrywide. See 1/25/06 Tr. at 246. Mr. Mays testified that he sent the YYYs a loan applicationthrough Òeither UPS or Fed ExÓ along with a returnenvelope. Id. at 252 (emphasis added). There was no testimony as to whether the return envelope wasÒpostage prepaid.Ó Mr. Mays furthertestified that the loan application was returned but he had no knowledge as tohow it was returned. Id. at 258-61.
Mr.YYY pointed out at trial that there was no proof that the YYYs did notpersonally deliver the loan application to Countrywide despite the fact thatthey were living in Virginia at the time. Id. at 355-359, 372-73. The government contended that this wasÒunlikelyÓ and that a reasonable jury could conclude that it was sent byovernight carrier.Ó Id. at 359-362. Nevertheless, there are much more fundamental flaws in the governmentÕsproof regarding Count 4.
First,although the government undertook to prove that the loan application was sentto Countrywide using United Parcel Service, its own witness stated that itcould have been sent through Òeither UPSor Fed ExÓ using the returnenvelope from the same company. Id. at 252 (emphasis added).
Second,while Mr. Mays testified that it was CountrywideÕs habit to provide a returnenvelope for the loan application, there was no evidence whatsoever that theYYYs used that method to return the application. Indeed, while Mr. YYY concedes that it was implausible thatit was returned by hand delivery, it is definitely reasonable that, because ofthe location of the UPS or Fed Ex facility or because of the costs of thesecompanies (recall that there was no testimony that postage was provided on thereturn envelope), the YYYs chose to return the loan application by UnitedStates mail. While, properlycharged, this in an of itself might be an offense, the only allegationscontained in the indictment is that the YYYs used a Òcommercial interstatecarrier.Ó
Third,the burden of proof is on the government to show venue. See, e.g., United States v. Burns, 990 F.2d 1426, 1436 (4th Cir. 1993). At the time the loan application wasreturned to Countrywide, the evidence at trial was that Mr. YYY was travelingextensively for business. Moreover, the YYYs lived relatively close to the Western District ofVirginia. In sum, it isreasonable, if not likely, to conclude that Mr. YYY mailed the loan applicationor deposited it with UPS or Fed Ex or, for that matter, the United StatesPostal Service during his travels. In short, there was absolutely no evidence offered by the government toestablish that the application was mailed from the Eastern District ofVirginia.
Fourth,there was no proof offered that ÒUPS or Fed ExÓ is a Òcommercial interstate carrier.Ó While the government might claimthis to be common knowledge, elements of a crime cannot be presumed to becommon knowledge- especially in a country where forty percent of citizenscannot name the vice president of the United States. Indeed, one might presume that citizenshave a common knowledge that large banks are federally insured, yet thegovernment is not excused from proving that when FDIC insurance is an elementof a criminal offense.
Insum, given the numerous flaws with the governmentÕs proof on Count 4, noreasonable juror could conclude that the evidence established Mr. YYYÕs guiltbeyond all reasonable doubt and, therefore, a Judgment of Acquittal should beentered on Count 4 as well.
III.CONCLUSION
For the foregoing reasons, Mr. YYY respectfullyrequests the Court enter a Judgment of Acquittal on Counts 1-4 of thesuperseding indictment and to conditionally grant him a new trialpursuant to Fed. R. Crim. P. 33(a). See Fed. R. Crim. P.29(d)(1). In the event this Courtwas to deny Mr. YYYÕs Motion for Judgment of Acquittal, Mr. YYY respectfullyrequests this Court grant him a new trial pursuant to Fed. R. Crim. P. 33(a).
Respectfullysubmitted,
F.Clinton Broden
TexasState Bar No. 24001495
Broden& Mickelsen
2707Hibernia
Dallas,TX 75204
(214)720-9552
(214)720-9594 (facsimile)
_______________________________
JenniferMarie Newman
JenniferM. Newman, P.C.
7East Franklin Street
Richmond,VA 23219
(804)421-9975
804-643-1551
Attorneysfor Defendant
JamesDominic YYY
CERTIFICATE OF SERVICE
I,F. Clinton Broden, certify that on March ___, 2006, I caused the foregoingdocument to be served by first class mail, postage prepaid, on:
G.Wingate Grant
UnitedStates Attorney's Office
600E Main St
18thFl
Richmond,VA 23219
JohnBritton Russell, Jr.
DurretteBradshaw PC
2621Promenade Pkwy
Suite102
Midlothian,VA 23113
_________________________________
F.Clinton Broden
UNITEDSTATES DISTRICT COURT
EASTERNDISTRICT OF LOUISIANA
RICHMONDDIVISION
UNITEDSTATES OF AMERICA, ) CRIMINAL ACTION NO.
Plaintiff, )
) 3:05-CR-00202-REP-1
)
v. )
)
JAMESDOMINIC YYY, )
)
Defendant. )
____________________________________)
ORDER
Upon consideration of Defendant James Dominic YYYÕsMotion for a Judgment of Acquittal, said motion is this ____ day of ______________, 2006GRANTED.
ORDEREDJames Dominic YYY is hereby acquitted of Counts 1, 2, 3 and 4 of thesuperseding indictment in this case.
FURTHERORDERED that James Dominic YYY in entitled to a conditional new trial on Counts1, 2, 3, and 4 of the superseding indictment in this case. SeeFed. R. Crim. P. 29(d)(1).
FURTHERORDERED since James Dominic YYY has now been acquitted of all counts in thesuperseding indictment he is hereby discharged and any bond is exonerated.
______________________________
ROBERT E. PAYNE
UNITEDSTATES DISTRICT JUDGE