United States v. Ogbazion
| Decision Date | 17 October 2016 |
| Docket Number | Case No. 3:15-cr-104 |
| Parties | UNITED STATES OF AMERICA, v. FESUM OGBAZION, et al., Defendant. |
| Court | U.S. District Court — Southern District of Ohio |
UNITED STATES OF AMERICA,
v.
FESUM OGBAZION, et al., Defendant.
Case No. 3:15-cr-104
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF OHIO WESTERN DIVISION AT DAYTON
October 17, 2016
Judge Timothy S. Black
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS
This criminal case is before the Court on Defendant Fesum Ogbazion's motion to dismiss (Doc. 45) and the parties' responsive memoranda (Docs. 49, 52).
On August 25, 2015, Defendant Ogbazion, along with co-defendant Kyle Wade, were charged in a twenty-three count Indictment with: engaging in a corrupt endeavor to obstruct and impede the due administration of the Internal Revenue Code, in violation of 26 U.S.C. § 7212(a) (Count 1); conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349 (Count 2); wire fraud, in violation of 18 U.S.C. § 1343 (Counts 3-7); money laundering, in violation of 18 U.S.C. § 1956(a)(1)(A)(ii) (Counts 8-13); bank fraud, in violation of 18 U.S.C. § 1344 (Count 14); tax evasion, in violation of 26 U.S.C. § 7201 (Count 15); and failure to collect and pay over payroll tax, in violation of 26 U.S.C. § 7202 (Counts 16-23). (Doc. 6).1
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Defendant formerly owned and operated ITS Financial, LLC ("ITS Financial"). (Doc. 6, ¶ 3). ITS Financial was headquartered in Dayton, Ohio, and was the national franchisor of Instant Tax Service ("ITS"), a nationwide tax preparation franchise business started by Defendant in 2004 and marketed by ITS Financial throughout the United States. (Id.) ITS was purported to be the fourth largest tax preparation company in the United States.
Defendant was also the founder and sole-owner of TCA Financial, LLC ("TCA"), which served as the holding company for ITS Financial. (Doc. 6, ¶ 4). Defendant was also the founder and sole-owner of Tax Tree, LLC ("Tax Tree"), an entity formed in 2010 to raise capital from private investors in order to fund ITS loan products, including Instant Cash Loans ("ICL") and Refund Anticipation Loans ("RAL"), which were marketed nationwide to ITS customers. (Id. at ¶¶ 5, 21). Tax Tree also served as a clearinghouse for tax refunds issued by the Internal Revenue Service ("IRS"). (Doc. 45 at 6). Defendant was also the sole-owner and operator of TaxMate, LLC ("TaxMate"). (Doc. 6, ¶ 6).
In November 2011, Defendant learned that the IRS's civil division was investigating ITS and its affiliated companies. (Doc. 45 at 6). Defendant cooperated in the investigation, appearing for several interviews and depositions, as well as providing requested documents to assist the IRS attorneys and agents. (Id. at 8-14). On March 28, 2012, Defendant Ogbazion, along with ITS Financial, TCA, and Tax Tree (collectively, the "Civil Defendants"), were named in a civil enforcement action brought by the Department of Justice ("DOJ") Tax Division, on behalf of the United States, pursuant to
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26 U.S.C. §§ 7402 and 7408 of the Internal Revenue Code. United States v. Fesum Ogbazion, et al., No. 3:12-cv-0095 (S.D. Ohio, Mar. 28, 2012).2
In the civil action, the Government sought to permanently enjoin the Civil Defendants "from preparing or directing or assisting in the preparation of federal tax returns, from engaging in and facilitating tax fraud, and from engaging in any other conduct that substantially interferes with the administration or enforcement of the tax laws, including the conduct described in this complaint." (Civil Doc. 1, ¶ 11). On June 17, 2013, the civil case proceeded to a ten-day bench trial before this Court. (Civil Doc. 98).
Ultimately, on November 6, 2013, a civil judgment was entered in favor of the Government (Civil Doc. 142) and an Order of Permanent Injunction was issued against the Civil Defendants (Civil Doc. 143). On November 21, 2014, the Sixth Circuit affirmed this Court's injunction on appeal, and a mandate was issued on January 13, 2015. (Civil Doc. 156). Several months later, and approximately one and a half years after the civil action was fully resolved in the district court, the Government commenced the instant criminal case against Defendant Ogbazion. (Doc. 6).
Pursuant to Fed. R. Crim. P. 12(b)(1), "[a] party may raise by pretrial motion any defense, objection, or request that the court can determine without a trial on the merits." A defendant may bring a motion to dismiss under Rule 12 in order to assert, inter alia, defects in instituting the prosecution or a defect in the indictment. Id. If the Court finds
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that "the indictment is legally deficient, the proper result is dismissal of the indictment." United States v. Landham, 251 F.3d 1072, 1080 (6th Cir. 2001). Alternatively, the Court may "order[] the Government to submit a bill of particulars to supplement the allegations in the indictment ...." United States v. Jones, 542 F.2d 661, 666 (6th Cir. 1976). The Court "may ordinarily make preliminary findings of fact necessary to decide questions of law ... so long as the trial court's conclusions do not invade the province of the ultimate factfinder." United States v. Craft, 105 F.3d 1123, 1126 (6th Cir. 1997). However, "courts evaluating motions to dismiss do not evaluate the evidence upon which the indictment is based." Landham, 251 F.3d at 1080.
Defendant argues that the Indictment should be dismissed, in whole or in part, or alternatively, that certain evidence should be suppressed, because: (1) the Government abused parallel civil proceedings to prosecute Defendant in this criminal case; (2) Counts 16 and 20, as well as parts of Counts 1 and 15, are barred by the applicable statutes of limitations; and (3) the Indictment fails to state an offense as to Count 1, as well as Counts 8 through 13. (Doc. 45 at 1).
A. Parallel Proceedings
1. Dismissal of the Indictment in its Entirety
Defendant first asserts that the Government "abused parallel proceedings in using an IRS civil investigation and a criminal investigation into an ITS franchisee to obtain information and self-incriminating testimony from [Defendant], knowing full well that [Defendant] would be targeted in a federal criminal prosecution." (Doc. 45 at 7).
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Defendant argues that, because the Government acted in bad faith and exploited Defendant's cooperation in the civil investigations to subsequently prosecute him criminally, the Indictment should be dismissed, either in whole or in part. (Id.) Specifically, if the Indictment is not dismissed in its entirety, Defendant argues that Count 14, as well as Counts 15 through 23, should be dismissed due to the Government's bad faith conduct. (Id.) Alternatively, Defendant asserts that if the counts are not dismissed, any evidence obtained as a result of the parallel proceedings should be suppressed. (Id.)
As a threshold matter, "[t]here is nothing improper about the government undertaking simultaneous criminal and civil investigations ...." United States v. Stringer, 535 F.3d 929, 933 (9th Cir. 2008).3 Indeed, "[t]he Supreme Court has held that the government may conduct parallel civil and criminal investigations without violating the due process clause, so long as it does not act in bad faith." Id. at 936 (citing United States v. Kordel, 397 U.S. 1, 11 (1970)). Therefore, evidence obtained from civil proceedings may be used in a subsequent criminal prosecution unless Defendant demonstrates that the Government acted in bad faith, thereby rendering the use of such evidence "[a] violation of the Constitution ... [or a] departure from the proper administration of criminal justice." Kordel, 397 U.S. at 11-13; United States v. Scrushy,
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366 F. Supp. 2d 1134, 1139 (N.D. Ala. 2005); United States v. Teyibo, 877 F.Supp. 846, 855 (S.D.N.Y. 1995).
The Supreme Court recognized certain instances where the Government's use of evidence obtained through a civil investigation may amount to bad faith:
[W]here the Government has brought a civil action solely to obtain evidence for its criminal prosecution or has failed to advise the defendant in its civil proceeding that it contemplates his criminal prosecution; ... where the defendant is without counsel or reasonably fears prejudice from adverse pretrial publicity or other unfair injury; [... or] any other special circumstances that might suggest the unconstitutionality or even the impropriety of th[e] criminal prosecution.
Kordel, 397 U.S. at 11-12 (footnotes omitted). In short, courts only find bad faith "where the government made affirmative misrepresentations or conducted a civil investigation solely for the purposes of advancing a criminal case," or where the Government has otherwise engaged in some form of fraud, trickery, or deceit. Stringer, 535 F.3d at 937-41 (collecting cases) (emphasis added).
However, "[t]he mere failure of a revenue agent (be he regular or special) to warn the taxpayer that the investigation may result in criminal charges, absent any acts by the agent which materially misrepresent the nature of the inquiry, do not constitute fraud, deceit and trickery." United States v. Marra, 481 F.2d 1196, 1203 (6th Cir. 1973) (quoting United States v. Prudden, 424 F.2d 1021, 1033 (5th Cir. 1970) (internal quotation marks omitted)). The record must show "some affirmative misrepresentation to establish the existence of fraud, and this showing must be clear and convincing." Marra, 481 F.2d at 1203 (emphasis in original). "In the absence of a clear showing that the
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taxpayer has been tricked or deceived by the government agents into providing incriminating information, the documents and statements obtained by the Internal Revenue agents are admissible." United States v. Allen, 522 F.2d 1229, 1233 (6th Cir. 1975).4
In large part, Defendant argues that the IRS, by soliciting his cooperation with an investigation classified as "civil" in nature, and by not expressly confirming that a criminal prosecution was probable or imminent, essentially duped him into handing over evidence that the Government now intends to use to...
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