USA v. Damra

• Decision Date: 15 September 2010
• Docket Number: No. 08-4540.,08-4540.
• Citation: 621 F.3d 474
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Fayez DAMRA, aka Alex Damra, Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

621 F.3d 474

UNITED STATES of America, Plaintiff-Appellee,

v.Fayez DAMRA, aka Alex Damra, Defendant-Appellant.

No. 08-4540.

United States Court of Appeals,Sixth Circuit.

Argued: June 15, 2010.

Decided and Filed: Sept. 15, 2010.

Rehearing and Rehearing En Banc Denied Oct. 26, 2010.

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ARGUED: Richard L. Stoper, Jr., Rotatori Bender Co., L.P.A., Cleveland, Ohio, for Appellant. James V. Moroney, Jr., Assistant United States Attorney, Cleveland, Ohio, for Appellee. ON BRIEF: Richard L. Stoper, Jr., J. Timothy Bender, Rotatori Bender Co., L.P.A., Cleveland, Ohio, for Appellant. James V. Moroney, Jr., Assistant United States Attorney, Cleveland, Ohio, for Appellee.

Before: KEITH, BOGGS, and McKEAGUE, Circuit Judges.

OPINION

McKEAGUE, Circuit Judge.

Fayez “Alex” Damra (“Damra”) was convicted of evading corporate income tax in violation of 26 U.S.C. § 7201 and of, together with his brother, Fawaz Damra (“Fawaz”), conspiring to defraud the United States in violation of 18 U.S.C. § 371. He now appeals his conviction and sentence. We affirm Damra's conviction, but-as the district court incorrectly sentenced Damra at offense level 16 instead of level 15-vacate Damra's sentence and remand for resentencing at the correct offense level.

I.

During the late summer or early fall of 2004, Special Agent Gary Rasoletti of the Criminal Division of the IRS was assigned to a financial investigation of Fawaz, then the Imam of the Islamic Center of Cleveland. In June of 2004, Fawaz had been found guilty of unlawfully obtaining citizenship in violation of 18 U.S.C. § 1425 by making false statements in a citizenship application and interview. See United States v. Damrah, 412 F.3d 618, 620 (6th Cir.2005). In September of 2004, the district court sentenced Fawaz to serve two months in prison, and ordered that Fawaz's citizenship be revoked pursuant to 8 U.S.C. § 1451(e); we affirmed Fawaz's conviction on March 15, 2005. Id. In reviewing Fawaz's tax returns, Rasoletti noticed that for a single year (1999) Fawaz had filed a Schedule C reporting $100,000 of income received as a consultant for a software company. (Fawaz paid $18,239.15 of income tax on this $100,000.) Rasoletti determined that the funds had come from Applied Innovation Management (“AIM”), a California company controlled by Damra. Rasoletti then contacted Mir Ali, Fawaz's regular tax-return preparer; Rasoletti also arranged for Ron Gesell, another IRS investigator, to carry a subpoena seeking AIM records to Damra, who was then operating in Las Vegas.

The Investigation of Fayez Damra

When Gesell served the subpoena on October 7, 2004, Damra agreed to answer questions. At trial, Gesell testified that Damra stated that: he was the youngest of nine children; his parents lived in Jerusalem; he himself had come to the United States in the early 1980s; he was not a citizen, but had a green card; and he had graduated in 1987 from Purdue University with majors in computer engineering and mathematics, and had received a master's degree from Purdue in 1989 in aerospace engineering. In addition, Gesell testified, Damra stated that: (1) he had founded AIM in 1993 with a partner named Robert Sparkman; (2) he and Sparkman had found approximately 25 investors (including Fawaz) who each invested between $15,000 and $20,000 in the business; (3) the investors were bought out in 1998 or 1999 for approximately three to four times what they had invested; and (4) in February of 2000 Damra had moved AIM from California to Las Vegas. (In fact, in 2000 Damra closed the California corporation AIM and founded Eigen Software in Las Vegas. Eigen did business as AIM.) Damra then reportedly told Gesell that between 1999 and 2002 he, Damra, had sent approximately $25,000 to his father by sending it to Fawaz, who would forward it on to Jerusalem. Because he thought Fawaz was skimming, Damra reportedly began sending the money directly. Damra reportedly explained that he had lent Fawaz small amounts of money in 1995 and had given Fawaz's wife $4,000 in 2004 to pay for dental work for Fawaz's children.

Following Gesell's interview, James Moroney, an Assistant United States Attorney (AUSA) in Cleveland, received a letter dated November 5, 2004 from Wolfe Thompson, an attorney acting for Damra and AIM. In the letter, Thompson reported that Damra had located two checks (totaling $10,500) payable to Fawaz from AIM “representing gifts from Fayez (Alex) Damra to his brother.” (App'x at 294.) The gifts “were accounted for by the corporation as compensation paid to Fayez (Alex) Damra for consultant services rendered to the company.” (App'x at 294.)

On January 11, 2005, Moroney received a follow-up letter from Damra stating that he was terminating Thompson's involvement and would “answer every question in detail” himself. (App'x at 216.) Damra then discussed his relationship with Fawaz:

[T]he reason I'm involved in this matter is due to my disgruntle [ sic ] brother “Fawaz Damra”. This man has caused more pain in my life than any one man deserves and this proves it. I say this because it is in summary what this is all about. I have told the agents, and Wolfe what [ sic ] the money that Fawaz received from me or the company is my own money that is intended for my sick father that I worship.... His faith in me proved to me that he was right. I have achieved in life more than the whole clan combined. Fathers know their gifted off spring.... As for my brothers and the rest of the family, they use my father as bribery and guilt to help him due to the fact I can't be with him. They skimmed and stole from me numerous times as I tried to provide for him and them. I know that because every time I ask any of them including “Fawaz” I get a different story. At the time my only option was to provide a few dollars was Fawaz [ sic ] due to his offer that this is no excuse for me not to send the money. When my family started telling me about the amount I know I gave Fawaz and what arrived it is a whole different number.

(App'x at 216-17.) “I have to meet with you ... as soon as possible,” Damra concluded. ( Id.)

On February 7, 2005, both Rasoletti and Moroney met with Damra in Cleveland. At trial, Rasoletti testified that during this interview, Damra stated that: (1) in 1993, Sparkman, Damra's partner, had resigned from AIM after Damra caught him embezzling; (2) Fawaz had invested between $20,000 and $40,000 in AIM, which money Damra thought Fawaz had gotten by skimming from his mosque; and (3) in 1999, Damra paid Fawaz two to three times the value of the original investment. Damra also reportedly explained that, in 1999, he had hired Fawaz as a consultant, because Fawaz had contacts with Arab businessmen. Despite not bringing in any business, Fawaz reportedly called Damra later in the year seeking $60,000 in compensation. Rasoletti testified that Damra stated that he ultimately sent Fawaz $100,000 as a “divorce payment” after “receiving a phone call from the family in the West Bank guilting him into paying Fawaz.” (Trial Tr. at 524-25.) Damra split the funds into two checks of $50,000 apiece for Fawaz and Fawaz's wife, Nesreen, because “that's what Fawaz requested.” (Trial Tr. at 526.) Damra then deducted the $100,000 as a consulting expense.

Together with Gesell, Rasoletti met with Damra for a third time in Las Vegas on April 21, 2005. According to Rasoletti's later testimony, at this meeting Damra made numerous damaging admissions, stating that: (1) he had made payments from AIM to family members in the Middle East to get his brothers off of his back, but had no business dealings there; (2) he sent checks from AIM to his brother Nader Damra because “he could afford to,” but that “he now understands he just can't write checks to anybody”; (3) some checks to Nader were marked “business development” because his brother wanted to start a new business, and others were marked “consulting” although Nader was not an AIM consultant; (4) a $32,000 check to “Al Adhamieh General Trade” was actually a check to Nader, though Damra had falsely told his accountant that the check was for “software development”; and (5) “I mishandled the money, there is abuse here.” ( Id. at 528-31, 537.) Rasoletti testified that he then explained to Damra that, because Damra's 1997 and 1998 tax returns showed that Damra made only $20,000 a year, Rasoletti believed that Damra must be getting the money to write these checks out of his company. In response, Rasoletti testified, Damra “just kind of shook his head and said yes.” ( Id. at 532.) Finally, Rasoletti testified, Damra stated that Fawaz “had not done $5 of work for AIM” and was not qualified to be an AIM consultant. ( Id. at 533-34.) “I will accept responsibility,” Damra reportedly stated; “this is not right.” ( Id. at 533.) Damra added that “it was a gray area” whether his actions were in violation of the law. ( Id. at 534.) Rasoletti also testified that he showed Damra two checks totaling $32,000 (classified as consulting expenses) written from AIM to Charles Schwab setting up a personal account for Damra, and that Damra was surprised.

The Indictment and Pretrial Proceedings

On July 25, 2006, a grand jury indicted Damra and Fawaz on three counts: Count 1 alleged that Damra and Fawaz had conspired to defraud the United States in violation of 18 U.S.C. § 371 for the purpose of obstructing the IRS's lawful government functions; Count 2 alleged that Damra alone had committed corporate tax evasion under 26 U.S.C. § 7201 by filing a fraudulent 1999 Form 1120 for AIM and by causing funds paid from AIM to Fawaz to be falsely reported as Schedule C gross receipts on Fawaz's 1999 Form 1040; and Count 3 alleged that Fawaz alone had aided and abetted in the preparation of a fraudulent Form 1040. Damra and Fawaz were arraigned on August 21, 2006. At the time, Fawaz was in ICE custody in Monroe, Michigan, and-having...