United States v. Neumann

• Decision Date: 17 August 2022
• Docket Number: 21 Cr. 439 (NSR)
• Parties: UNITED STATES OF AMERICA, v. JOSEPH NEUMANN, Defendant.
• Court: U.S. District Court — Southern District of New York

UNITED STATES OF AMERICA, v. JOSEPH NEUMANN, Defendant.

No. 21 Cr. 439 (NSR)

United States District Court, S.D. New York

August 17, 2022

OPINION & ORDER

NELSON S. ROMAN, UNITED STATES DISTRICT JUDGE:

The Government charged Defendant Joseph Neumann with a five-count indictment for aiding and assisting in the preparation of false and fraudulent U.S. individual tax returns, in violation of 26 U.S.C. § 7206(2), for failure to file tax returns, in violation of 26 U.S.C. § 7203, and for conspiracy to operate an unlicensed money transmitting business (an offense under 18 U.S.C. § 1960), in violation of 18 U.S.C. § 371. (Indictment, ECF No. 1.)

Presently before the Court is Defendant's motion seeking to (1) dismiss Count Five of the Indictment; (2) suppress evidence recovered from consensual recordings by a Cooperating Witness (“CW”) and wiretaps; (3) sever Counts One through Four from Count Five; (4) compel the Government to produce certain discovery materials; and (5) compel the Government to produce any recordings, transcripts, and translations that it intends to use at trial 90 days before its commencement. (ECF No. 33.) For the following reasons, the Court DENIES Defendant's motion in its entirety.

BACKGROUND

On July 6, 2021, a Grand Jury sitting in this District returned a five-count indictment against Defendant based on the Government's allegations that he participated in two interconnected schemes to defraud the Internal Revenue Service (“IRS”) of taxes from 2014 to 2018. (Indictment, ECF No. 1.)

The Government first charges Defendant with two counts of aiding and assisting in the preparation of false and fraudulent individual income tax returns, in violation of 26 U.S.C § 7206(2). (Indictment ¶¶ 1-3.) Specifically the Government alleges that in the individual income tax returns he filed for 2015 and 2016, Defendant reported only a portion of the more than $2.5 million in payments he received from a pharmacy located in Rockland County, New York as income earned for consulting services. (Id. ¶ 2.) The Government claims Defendant willfully, knowingly, and frequently caused his tax return preparer to omit income he received on his 2015 and 2016 tax returns, substantially understating his total income as set forth below:

COUNT

FILING DATE

TAX YEAR

UNREPORTED INCOME

TAX LOSS

ONE

10/01/2016

2015

$1,268,765

$368,888

TWO

09/28/2017

2016

$843,332

$229,632

(Id. ¶ 3.)

The Government next charges Defendant with two counts for failure to file individual income tax returns for the years of 2017 and 2018 despite receiving a total of more than $1.7 million in income in those years, in violation of 26 U.S.C. § 7203. (Id. ¶¶ 4-6.) The Government alleges that Defendant knowingly and willfully failed to make returns and supply information, as required by law and regulations as set forth below:

TTNRFPORTFD

COUNT

FILING DATE

TAX YEAR

UNREPORTED INCOME

TAX LOSS

THREE

2017

04/17/2018

$473,993

$205,828

FOURT

2018

07/15/20202

$1,045,575

$441,694

(Id. ¶ 6.)

The Government lastly charges Defendant with one count of conspiracy to operate an unlicensed money transmitting business (an offense under 18 U.S.C. § 1960), in violation of 18 U.S.C. § 371. (Id. ¶¶ 7-10.) The Government alleges that from at least September 2014 to August 2016, Defendant knowingly and willfully conspired and agreed with others to transmit approximately $6 million that he and others believed to be stolen, using real estate companies and charities under their control, which failed to comply with the money transmitting business registration requirements set forth in federal law and regulations. (Id. ¶¶ 8-9.)

Specifically, the Government claims that in July 2015, Defendant met with others at his residence in Monsey, New York and discussed an arrangement in which he would accept cash from a third party and then write a check payable to an entity designated by the third party, all in exchange for a fee of ten percent of the amount of cash. (Id. ¶ 10.) In accordance with that arrangement, on July 24, 2015, Defendant first accepted $15,031 in cash from the third party and gave that third party a check for approximately that same amount. On November 3, 2015, Defendant next accepted $165,280 in cash from the third party and gave that third party two checks in the total amount of $150,280, while retaining the difference of $15,000 as his fee for laundering the cash. On December 24, 2015, Defendant lastly accepted $247,500 in cash from the third party and gave that third party two checks in the total amount of $225,000 while retaining the difference of $22,500 as his fee for laundering the cash. (Id.)

On July 8, 2022, Defendant filed the instant motion (ECF No. 33), along with supporting exhibits (Bove Aff., ECF No. 35; Bove 2d Aff., ECF No. 36) and a memorandum in support (“Motion,” ECF No. 34). The Government filed its opposition on July 29, 2022. (“Response in Opposition,” ECF No. 39.) Defendant then filed a reply on August 12, 2022. (“Reply,” ECF No. 40.)

DISCUSSION

By his motion, Defendant asks the Court:

1. To dismiss the violation of 18 U.S.C. § 1960 charged in Count Five of the Indictment;

2. To suppress consensual recordings obtained during the investigation by a cooperating witness (the “CW”) due to the failure to preserve exculpatory evidence relating to entrapment and, in the alternative, for a hearing on this issue;

3. To suppress wiretap evidence based on a lack of probable cause and minimization failures, for a Franks hearing, and to dismiss Count Five based on a violation of 18 U.S.C. § 2517(5) in connection with the government's use of wiretap evidence in grand jury proceedings;

4. To the extent Count Five is not dismissed, to sever the § 1960 charge from the tax offenses charged in Counts One through Four pursuant to Rule 8(a);

5. To compel the production of information and evidence, pursuant to Brady v. Maryland and Rule 16(a)(1)(E)(i), relating to entrapment and due process issues concerning investigative techniques; and

6. To require the government to produce 90 days prior to trial designations relating to any recordings that survive these motions, along with final versions of the corresponding transcripts and translations, which the government intends to offer in its case-in-chief at trial.

(Mot. at 4.) The Government opposes all of Defendant's requests, contending they are without merit. (Resp. in Opp'n at 7.) The Court addresses the parties' arguments according to the order above.

I. Whether Dismissal of Count Five of the Indictment is Warranted for Insufficiency

Defendant first argues that as alleged, Count Five of the Indictment stretches 18 U.S.C. § 1960 past its breaking point because he was neither operating a “money transmitting business” in connection with the four private exchanges of checks for cash with the named third party (i.e., the CW), nor offering services “on behalf of the public.” (Mot. at 8.) Alternatively, Defendant argues that insofar as Count Five satisfies the bare minimum under Federal Rule of Criminal Procedure 7, the statutory terms are ambiguous under the circumstances, as the IRS itself has as much acknowledged in publicly available guidance, for which the charge is still unsound under the rule of lenity and fair notice principles. (Id. at 8-9.)

In opposition, the Government contends that Count Five is sufficient under Second Circuit precedent because it tracks the language of the relevant criminal statutes, 18 U.S.C. §§ 371 and 1960(b). (Resp. in Opp'n at 21-23.) It further contends that, contrary to Plaintiff's argument, the evidence the Government will present at trial will meet the elements in § 1960 that he conspired to operate a money transmitting business based on the alleged transactions with the CW, and that he also had fair notice that he could be persecuted under that statute based on his conduct in this case. (Id. at 23-28.) After due consideration, the Court agrees with the Government.

A. Standard

There are “two constitutional requirements for an indictment: first, that it contains the elements of the offense charged and fairly informs a defendant of the charge against which he must defend, and, second, that it enables him to plead an acquittal or conviction in bar of future prosecutions for the same offense.” United States v. Resendiz-Ponce, 549 U.S. 102, 108 (2007) (internal quotation mark omitted). “[A]n indictment need do little more than to track the language of the statute charged and state the time and place (in approximate terms) of the alleged crime.” United States v. Vilar, 729 F.3d 62, 80 (2d Cir. 2013). Although the language of the statute may be used in the description of the offense, the description “must be accompanied with such a statement of the facts and circumstances as will inform the accused of the specific [offense], coming under the general description, with which he is charged.” Hamling v. United States, 418 U.S. 87, 117-18 (1974).

Under Federal Rule of Criminal Procedure 12(b)(3)(B), a Court may dismiss an indictment if it suffers from deficiencies enumerated therein. Proving a defect, however, is a laborious task because of the low sufficiency threshold requirement which requires only that an indictment contain a “plain, concise, and definite written statement[s] of the essential facts constituting the offense[s] charged.” Fed. R. Crim. P. 7(c)(1). “[C]ommon sense and reason prevail over technicalities.” United States v. Sabbeth, 262 F.3d 207, 218 (2d Cir. 2001); see also Resendiz-Ponce, 549 U.S. 102, 107 (2007) (“While detailed allegations might well have been required under common-law pleading rules, they surely are not contemplated by Rule 7(c)(1), which provides that an indictment ‘shall be a plain, concise, and definite written...