United States v. Hamdan
| Decision Date | 22 May 2020 |
| Docket Number | CRIMINAL ACTION NO. 19-60-WBV-KWR SECTION: D (4) |
| Parties | UNITED STATES OF AMERICA v. IMAD FAIEZ HAMDAN, ET AL. |
| Court | U.S. District Court — Eastern District of Louisiana |
Before the Court is a Motion to Dismiss Counts 2 Through 72 Of the Indictment; Rule 12(b), filed by defendants, Imad Faiez Hamdan ("Hamdan") and Ziad Odea Mousa ("Mousa") (collectively, "Defendants").1 The Government opposes the Motion,2 and Defendants have filed a Reply.3 After careful consideration of the parties' memoranda and the applicable law, the Motion to Dismiss is DENIED.
The defendants in this case, Hamdan and Mousa, owned and operated more than 30 food stores, convenience stores, and gas stations that operated under the name "Brothers Food Mart" in the State of Louisiana.4 Defendants operated all of the locations of Brothers Food Mart under a central management system.5 On October 10, 2019, the Government filed a 74-Count Superseding Indictment against Defendants.6 Pertinent to the instant Motion, Defendants are charged in Count 2 with conspiracy to defraud the United States by evading paying federal income andemployment taxes7 through underreporting wages paid to employees by Brothers Food Mart, including undocumented workers and store managers.8 Defendants are charged in Counts 3 through 50 with failure to withhold, account for, and pay to the IRS certain trust fund taxes on behalf of the employees of Brothers Food Mart.9 In Counts 51 through 72, Defendants are charged with aiding and assisting the preparation of false individual income tax returns for taxpayers other than themselves.10
On November 15, 2019, Defendants filed the instant Motion to Dismiss Counts 2 through 72 under Fed. R. Crim. P. 12(b).11 Defendants assert that the Government is unable to prove that they had the requisite criminal intent to commit the violations alleged because "it is unquestioned fact" that Hamdan overpaid his personal income taxes for all pertinent years over and above the amount of alleged employment and income tax losses alleged in Counts 2 through 72 of the Superseding Indictment.12 Defendants claim that for the years 2009 through 2014, Hamdan overpaid his federal income taxes in the gross amount of $5,222,675.00, which should have been appliedto offset the $3,419,539.00 underpayment of employment taxes, trust fund taxes and the amounts of false tax returns alleged in the Superseding Indictment.13 Defendants also argue that the Government cannot prove that Defendants willfully conspired to unjustly enrich themselves and others in light of the fact that Hamdan voluntarily overpaid his income taxes to such an extent that the Government owes him a substantial refund.14
Defendants further assert that the Government should be estopped from pursuing Counts 2 through 72 because any convictions would violate Defendants' constitutional rights, as well as principles of equity and fairness.15 Defendants claim that, in the case of any overpayment of tax, 26 U.S.C. § 6402 authorizes the IRS to apply the overpayment to a number of taxpayer obligations and requires the IRS, subject to certain exceptions, to credit and offset any balance due by the person who made the tax overpayment.16 Defendants argue that by enacting this statute and others, the Government has assured the taxpayer who underpays one tax, but overpays another, that his overpayment will exonerate him against any liability with respect to an internal revenue tax.17 Defendants claim that the Government now seeks to hold them criminally responsible for the same conduct for which the Government previously assured them the promise of protection and compensation under the law, in violation of their due process rights, their rights to a fair trial andtheir rights to effective assistance of counsel under the Fifth and Sixth Amendments of the Constitution.18
Defendants assert that the Fifth Circuit requires proof of the following five elements for an equitable estoppel claim: (1) affirmative misconduct by the Government; (2) the Government was aware of the relevant facts; (3) the Government intended its act or omission to be acted upon; (4) the party seeking estoppel had no knowledge of the relevant facts; and (5) the party seeking estoppel suffered substantial injury when it reasonably relied on the government's conduct.19 Defendants argue that all five requirements are met in this case because the Government enacted tax laws and then failed or refused to follow those laws, the Government was aware of Hamdan's overpayment of taxes prior to filing the Superseding Indictment, the Government intended for taxpayers to rely upon the tax setoff laws, and the Defendants reasonably relied upon the tax setoff laws.20 Defendants also argue that the doctrine of unjust enrichment shields them from criminal responsibility in this case because the Government has been enriched by Hamdan's overpayment of his personal income taxes to the tune of approximately $1.8 million without any justification for keeping the overpayment.21
The Government opposes the Motion, pointing out that although Defendants fail to invoke a specific provision of Fed. R. Crim. P. 12(b), based on their allegationthat the Government is unable to prove criminal intent, Defendants' argument appears to be that the tax counts fail to state an offense under Rule 12(b)(3)(B)(v).22 The Government asserts that, when evaluating whether all or part of an indictment fails to state an offense, courts must take the allegations of the indictment as true and determine whether an offense has been stated.23 The Government argues that a defendant may not challenge an indictment, sufficient on its face, on the ground that the allegations are not supported by adequate evidence.24 Under this standard, the Government asserts that intent is quintessentially a question for the jury, and whether Defendants acted willfully is an issue that must be determined at trial.25
Even assuming, for the sake of argument, that Hamdan overpaid his personal income taxes, that his overpayment exceeded all of the underpayments caused by the Defendants' crimes, and that the law allows him to apply the personal overpayment to those underpayments, the Government argues that it would not be categorically precluded from proving willfulness at trial, and that a jury could reasonably conclude that Defendants' arguments are not credible and/or that Hamdan was an incompetent criminal who wanted to cheat the Government, but did it poorly.26 The Government also argues that Defendants' argument regarding offset has no bearing on whether the tax counts of the Superseding Indictment fail to state an offensebecause willfulness is a question for the jury and tax loss is not an element of any of the offenses.27
Turning to the merits of Defendants' offset argument, the Government first asserts that Defendants failed to allege sufficient facts to show that Hamdan overpaid his personal taxes in excess of the other taxes owed in relation to the Defendants' crimes.28 The Government next argues that the statute of limitations for Hamdan to claim a tax refund has expired, and that no credit or refund is allowed where, as here, the limitations period has expired unless the taxpayer timely filed a claim for refund.29 The Government asserts that Hamdan has not made a formal or informal claim for refund.30 Finally, the Government claims that, pursuant to Supreme Court and Fifth Circuit precedent, equity does not provide relief from the foregoing bar to Hamdan's claim for refund and offset.31 The Government asserts that equitable recoupment likewise cannot circumvent the bar of an expired statute, and that it can only be raised in a timely-filed civil action.32
The Government further argues that equitable estoppel does not apply because it is well settled that the United States cannot be estopped in the same manner as private litigants since, "When the Government is unable to enforce the law because the conduct of its agents has given rise to an estoppel, the interest of the citizenry asa whole in obedience to the rule of law is undermined."33 The Government further argues that Defendants cannot meet any of the five requirements of equitable estoppel, noting that Defendants failed to articulate any affirmative misconduct on the part of the Government, which requires an affirmative misrepresentation or affirmative concealment of a material fact.34 The Government claims that Defendants' assertion that the Government failed to offset Hamdan's individual income tax overpayment with Brothers Food Mart's delinquent employment tax liabilities is insufficient because, at most, it only asserts an inaction on the part of the Government.35 The Government asserts that the remaining factors for equitable estoppel are not met because: (1) Defendants are not entitled to the offset they describe, as there is no Congressional intent for the IRS to allow for improper tax offsets; (2) Defendants were well aware of the relevant facts in this case, since they went to great lengths to conceal from the IRS the proper tax assessments for Hamdan and Brothers Food Mart; and (3) there was no affirmative act of misconduct by the Government, so Defendants cannot claim any injury from relying upon any act of the Government.36
Finally, the Government argues that it was not unjustly enriched, and that Defendants have failed to establish that Hamdan overpaid his personal income tax in excess of what is owed in employment taxes by Brothers Food Mart.37 TheGovernment also asserts that Defendants cannot satisfy the five elements of unjust enrichment, and that even if Hamdan overpaid his personal income tax, any enrichment to the Government was caused by Hamdan when he filed false tax returns to hide his criminal conduct.38 The Government contends that Hamdan cannot claim the Government was unjustly enriched because of his deceptive tax planning.
In their Reply brief, Defendants re-urge the arguments made in...
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