United States v. Hee

• Decision Date: 27 October 2015
• Docket Number: Cr. No. 14-00826 SOM
• Parties: UNITED STATES OF AMERICA, Plaintiff, v. ALBERT HEE, Defendant.
• Court: U.S. District Court — District of Hawaii

UNITED STATES OF AMERICA, Plaintiff, v. ALBERT HEE, Defendant.

Cr. No. 14-00826 SOM

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF HAWAII

October 27, 2015

ORDER DENYING (1) MOTION TO DISMISS FOR GRAND JURY ABUSE AND TO UNSEAL GRAND JURY TRANSCRIPTS AND MATERIALS, (2) MOTION FOR JUDGMENT OF ACQUITTAL, (3) RENEWED MOTION TO DISMISS, AND (4) MOTION FOR NEW TRIAL

I. INTRODUCTION.

After an eleven-day trial, the jury convicted Defendant Albert Hee of having corruptly interfered with the administration of Internal Revenue Service laws in violation of 26 U.S.C. § 7212(a) and of six counts of having filed false tax returns in violation of 26 U.S.C. § 7206(1).

The evidence at trial established that Hee had characterized millions of dollars in personal expenses as business expenses incurred by his company, Waimana Enterprises, Inc.

In the middle of trial, on July 6, 2015, Hee filed a Motion to Dismiss for Grand Jury Abuse and to Unseal Grand Jury Transcripts and Materials, arguing that the indictment should be dismissed, and his conviction overturned, because the Government had allegedly given three erroneous instructions to the grand jury. Hee also asked for more grand jury transcripts and materials, saying that the alleged errors he had discovered suggested the existence of other errors in grand jury proceedings. See ECF No. 150. That motion is denied. Hee's conviction, which required proof beyond a reasonable doubt, renders it unnecessary to examine whether the indictment, which required only probable cause, issued properly. Even if the court were to review the alleged grand jury abuse under the standard applicable when a verdict has not yet been reached, Hee's motion would still fail. Hee does not show that the alleged errors substantially influenced the grand jury's decision to indict, or that there is grave doubt that the decision to indict was free from the substantial influence of the alleged errors. Moreover, Hee fails to establish that he is entitled to additional grand jury materials.

On August 26, 2015, Hee filed a Motion for Judgment of Acquittal, arguing that there was insufficient evidence to establish criminal intent. See ECF No. 199. Because the jury could have inferred that intent from the evidence, the Motion for Judgement of Acquittal is denied.

Also before the court is Hee's Renewed Motion to Dismiss Case With Prejudice, filed on July 13, 2015, while thejury was deliberating, and Hee's Motion for New Trial, filed on August 26, 2015, after the verdict was returned. See ECF Nos. 166, 198. Both motions argue that an IRS agent improperly conducted a secret criminal investigation under the guise of a civil audit. In pretrial proceedings, this court declined to dismiss the charges based on this very argument. See ECF No. 81. To the extent Hee seeks reconsideration of the court's earlier order, the motions are denied. To the extent Hee seeks a new trial based on evidentiary rulings at trial, Hee fails to show a new trial is required in the interest of justice.

II. HEE'S MOTION TO DISMISS FOR GRAND JURY ABUSE AND TO UNSEAL GRAND JURY TRANSCRIPTS AND MATERIALS IS DENIED.

Hee argues that the charges should be dismissed because the Government allegedly provided the grand jury with erroneous instructions regarding three issues: 1) the tax treatment of a Board of Water Supply lease; 2) the handling of the cost of a Santa Clara residence; and 3) the validity of a "loan to shareholder" not evidenced by a promissory note. See ECF No. 150-1, PageID #s 1355-56.

Hee also seeks additional grand jury transcripts and materials because the allegedly erroneous instructions "strongly suggest[] additional unknown erroneous instructions, currently hidden by the Grand Jury secrecy rules." Id., PageID # 1356.

Three indictments were filed in this case. The first indictment, filed on September 17, 2014, charged Hee with one count of willfully filing a false tax return in violation of 26 U.S.C. § 7206. See ECF No. 1.

The Superseding Indictment, filed on December 17, 2014, added five more counts for the filing of false tax returns, and one count alleging corrupt interference with the administration of Internal Revenue Service laws in violation of 26 U.S.C. § 7212(a). See ECF No. 14. The Superseding Indictment also introduced allegations that Hee had failed to properly report Waimana Enterprises, Inc.'s payment of the purchase price of a Santa Clara home as personal income, and that he had falsely declared $718,559.09 of payments by Waimana, which is owned entirely by Hee, for his children's college tuition and expenses as "loans to shareholder." Id., PageID # 48. Hee filed a motion to strike these allegations, but the court denied that motion in pretrial proceedings. See ECF No. 81.

In the Second Superseding Indictment, filed on March 25, 2015, the Government omitted the allegation that the entire purchase price of the Santa Clara house should be deemed income to Hee. See ECF No. 56. Instead, the indictment alleged that Hee's use of Waimana to purchase the house was part of Hee's interference with the IRS's computation of his income and tax liability. See id., PageID # 393. Although Hee identified thehouse as an investment by Waimana, the trial evidence established that Hee's son and daughter lived in the house while attending the University of Santa Clara, which was within skateboarding distance of the house. Hee's children rented out rooms in the house to classmates without depositing the rent proceeds in Waimana's account.

The Second Superseding Indictment included new allegations that Hee had caused Waimana to claim false business expenses in connection with a Board of Water Supply lease. See id., PageID #s 393-94. Hee filed a motion to strike the Board of Water Supply allegations. See ECF No. 65. This motion was denied. See ECF No. 81. Notwithstanding the denial, the Government announced right before trial commenced that it would not pursue the Board of Water Supply allegations. See ECF No. 135. The college tuition and expenses allegations remained unchanged.

Hee's trial commenced on June 23, 2015. See ECF Nos. 178-82, 189-95. On July 6, 2015, as the trial was nearing conclusion, Hee submitted his motion concerning grand jury issues. ECF No. 150. The court discussed with the attorneys the scheduling of briefing and a hearing on the motion. See ECF No. 191. Attorneys for the Government and for Hee noted that the motion could be heard following trial, and Hee's attorney expressly stated that the trial did not need to be interruptedfor a decision on the motion. Id., PageID # 2830. Briefing and a hearing were therefore scheduled for dates following the completion of the trial. Id., PageID # 2831. With the motion awaiting further briefing, the petit jury returned a verdict of guilty beyond a reasonable doubt on all counts. See ECF No. 196.

A. This Court Denies the Motion in Light of Hee's Conviction.

Hee's motion is controlled by United States v. Mechanik, 475 U.S. 66 (1986), and United States v. Navarro, 608 F.3d 529 (9th Cir. 2010).

In Mechanik, the Court held that any error in a grand jury proceeding was rendered harmless by the petit jury's verdict of guilty. 475 U.S. at 67. The Court noted, "[T]he petit jury's verdict of guilty beyond a reasonable doubt demonstrates a fortiori that there was probable cause to charge the defendants with the offenses for which they were convicted." Id.

The Ninth Circuit applied the Mechanik standard to the very situation at issue here. In Navarro, the Ninth Circuit said that when "the error is brought to the district court's attention before the verdict, but the court did not rule on the motion to dismiss until after the jury returned a verdict . . . the conviction establishes that the error was harmless." 608 F.3d at 539; accord United States v. Hunter, 445 F. App'x 998, 1003 (9th Cir. 2011) ("Even if error in the grand jury proceedings (other than the structural errors [of race and gender discrimination])was brought to the attention of the district court prior to trial, where the motion was denied and a guilty verdict was returned, the error is rendered harmless by the verdict." (brackets in the original)); United States v. Harmon, No. 08-CR-00938-LHK, 2014 WL 2465504, at *2 (N.D. Cal. May 30, 2014) ("A grand jury is convened in order to determine whether probable cause exists to force a criminal defendant to suffer the hardship of a criminal trial. Because a trial jury is tasked with determining actual guilt, once a trial jury has found guilt beyond a reasonable doubt, it is presumed that any error during the grand jury proceedings was harmless beyond a reasonable doubt.").

A conviction does not, however, preclude dismissal of an indictment if there has been a "structural error" in proceedings. Navarro, 608 F.3d at 540. Race or sex discrimination in jury selection, for example, constitutes a structural error requiring dismissal of an indictment even after conviction. See id. at 539 (citing Ballard v. United States, 329 U.S. 187, 193 (1946), and United States v. Vasquez-Landaver, 527 F.3d 798, 802 (9th Cir. 2008)).

Although Hee brought his motion prior to conviction, the petit jury's verdict of guilty renders immaterial any alleged error in grand jury proceedings under Mechanik and Navarro. Noris the court persuaded that any of the errors alleged by Hee was structural.

Hee contends that the procedural history of this case precludes application of Mechanik. Noting that he brought the motion prior to conviction, Hee characterizes the court as having chosen to decide the motion post-trial based on the Government's representation that, "if the Defendant is convicted, 'the Court can consider the motion as a standalone request for relief independent of anything that the jury had done.'" ECF No. 207, PageID # 3801. According to Hee, this statement by the Government requires this court to reject the Mechanik standard in favor of the Bank of Nova Scotia standard, which applies to a motion to dismiss...