United States District Court, D. Nevada
MIRANDA M. DU, District Judge.
After a trial of approximately six (6) weeks in length on 20 counts, the jury returned a verdict of guilty on all counts against Defendants Weston J. Coolidge ("Coolidge") and Alan L. Rodrigues ("Rodrigues"), and all but two counts (counts 8 and 14) against Defendant Joseph Prokop ("Prokop"). (Dkt. no. 450.) Defendants have filed the following post-trial motions: (1) Coolidge's Motion for New Trial (dkt. no. 464), which Rodrigues and Prokop joined (dkt. nos. 465, 468); (2) Rodrigues' Motion for New Trial (dkt. no. 466), which Prokop joined (dkt. no. 469); (3) Rodrigues' Motion for Acquittal (dkt. no. 470), which Prokop joined (dkt. no. 471); and Prokop's Motion for Judgment of Acquittal and/or New Trial (dkt. no. 467). The Court grants the motions to join. (Dkt. nos. 465, 468, 469, 471.) The Court will address these motions in turn below.
II. RELEVANT BACKGROUND
The relevant facts supporting the Indictment are as follows. Dan Porter and Oryan Management and Financial Services ("Oryan") created a shopping website called "Tax Break 2000" ("the Product"). They sold the Product directly and through other vendors. The Indictment focuses on the distribution and sale of the Product through one such vendor, National Audit Defense Network ("NADN"). NADN ultimately became the exclusive seller of the Product for Oryan. NADN provided clients with tax-related services, including preparation of income tax returns. Rodrigues was NADN's general manager, Coolidge was NADN's chairman and president, and Prokop was Oryan's national marketing director. Prokop was the liaison between Oryan and NADN, and he trained NADN's staff to sell the Product. Defendants claimed the Product would allow customers to claim legitimate income tax credits and deductions under the Americans with Disabilities Act ("ADA") and the Internal Revenue Code ("IRC").
The Indictment alleges that Defendants: (1) created the Product as not accessible to disabled persons so that Defendants could sell modifications to each customer; (2) told customers that purchasing the modifications entitled them to lawful income tax credit and deductions; (3) chose a sale price for the modifications that maximizes the income tax credit and deductions; (4) induced customers to sign promissory notes ("the Note" or "the Notes") for 80% of the purchase price of the modifications with no expectation that customers would pay the Notes; (5) created false IRS Forms 1099 to give the appearance that the Products sold were generating commission income to pay off the Notes; (6) prepared tax returns on customers' behalf that claimed tax credits and business expense deductions related to the Product for which Defendants knew the customers were not eligible; and (7) mailed said tax returns to customers. (Dkt. no. 1 at ¶¶ 14-20, 41, 45.)
III. LEGAL STANDARD
A. New Trial Under Fed. R. Crim. P. 33
Pursuant to Federal Rule of Criminal Procedure 33(a), "[u]pon the defendant's motion, the court may vacate any judgment and grant a new trial if the interest of justice so requires." Although determining whether to grant a motion for a new trial is left to the district court's discretion, "it should be granted only in exceptional cases in which the evidence preponderates heavily against the verdict." United States v. Pimentel, 654 F.2d 538, 545 (9th Cir. 1981) (citation and internal quotation marks omitted). Moreover, the defendant bears the burden of persuasion. United States v. Endicott, 869 F.2d 452, 454 (9th Cir. 1989). Such an extraordinary remedy is appropriate, for example, when a court makes an erroneous ruling during the trial and that, but for that erroneous ruling, the outcome of the trial would have been more favorable to the defendant. See United States v. Butler, 567 F.2d 885, 891 (9th Cir. 1978).
B. Acquittal Under Fed. R. Crim. P. 29
The test for denial of a judgment of acquittal pursuant to Federal Rule of Criminal Procedure 29 is the same as the test for reviewing a claim that the evidence is insufficient to support a conviction. See, e.g., United States v. Tucker, 641 F.3d 1110, 1118-19 (9th Cir. 2011); United States v. Abner, 35 F.3d 251, 253 (6th Cir. 1994). A criminal defendant's challenge to the constitutional sufficiency of evidence to support a criminal conviction is governed by Jackson v. Virginia, 443 U.S. 307, 319 (1979). Jackson requires a court, upon such a motion, to construe the evidence "in the light most favorable to the prosecution" to determine whether " any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt." Id. (emphasis in original).
IV. COOLIDGE'S MOTION FOR NEW TRIAL (Dkt. No. 464)
Coolidge's Motion is based on the contention that: (1) the Court erroneously permitted the Government's expert witness, Evelyn Kay Fall, to testify as to Defendants' intent; (2) Fall improperly assessed the credibility of witnesses; and (3) the Court erroneously admitted evidence relating to Coolidge's association with Oryan Management, Inc. ("OMI"). The Court will address each argument below.
A. Claim Regarding Fall's Testimony Of Defendants' Intent
The scope of Fall's testimony was the subject of a pre-trial motion. The Court determined that Fall would be allowed to testify to the Internal Revenue Code, her opinion of which claimed deductions were not allowed given her understanding of the IRC. (Dkt. no. 374.) In making this ruling, the Court rejected Defendants' argument that Fall should not be permitted to testify as to which claimed deductions were not allowed. In United States v. Clardy, 612 F.2d 1139, 1153 (9th Cir. 1942), which involved the deductibility of interest where the Government contended that the claimed interest payment was a sham, the court found that while "the opinion on the deductibility of the interest was intimately related to the question of [Defendant]'s guilt or innocence, it was still admissible." The court reasoned that under Federal Rule of Evidence 704 "testimony in the form of an opinion or inference otherwise admissible is not objectionable because it embraces an ultimate issue to be decided by the trier of fact." See id. (internal citation omitted). Additionally, the court concluded that any potential prejudice was dispelled by the court's instruction to the jury regarding the weight given to expert testimony. See id. In light of Clardy, this Court concluded that, the jury would be instructed on the weight given to expert testimony and Defendants would have the opportunity to cross-examine Fall. However, the Court agreed with Defendants that Fall should not be permitted to testify as to Defendants' state of mind, including Defendants' intent in counseling taxpayers.
Coolidge contends that Fall did indeed testify as to Defendants' collective intent. However, the cited testimony does not support Coolidge's argument. In the first cited testimony, Fall testified as to the amount of disabled access credit claimed - $5, 000 taken off the tax filer's tax liability - and claimed expense deductions - $821 assuming a 15% tax rate - on a given tax filing, resulting in certain tax benefit to the taxpayer and loss to the IRS - $5, 821. (Dkt. no. 464 at 5; dkt. no. 457 at 86.) Fall then extrapolated this information to quantify the potential tax loss to the IRS based on the number of Products sold by NADN during the period of the Indictment. (Dkt. no. 457 at 85; Exh. 338.) Fall offered a straightforward calculation based on admitted evidence and certain assumptions. On cross-examination by Coolidge's counsel, Fall explained that one assumption she made was that for each Product sold, the tax filer would have claimed the full $5, 000 disabled access credit. (Dkt. no. 458 at 14.) Fall further admitted on cross-examination that her testimony related to potential tax loss to the IRS, but she did not know the actual tax loss. ( Id. at 15.) Fall's testimony did not touch upon or even implicate Defendants' state of mind relating to the Product or marketing of the Product or their good faith belief that the Product was legal.
Coolidge further argues that Fall's testimony regarding Defendant's intent was compounded by the Court's admission of a piece of summary evidence - entitled "Summary of Total Potential Tax Loss" (Government Exh. 338) - as demonstrative evidence. (Dkt. no. 457 at 84.) However, as the Court found when admitting Exh. 338, the summary merely offers a mathematical calculation of the total potential tax loss based on the number of Products sold by NADN and the amount of claimed disabled access credit and claimed business expenses. Fall explained the calculation during her testimony. ( Id. at 84-89.) Exh. 338 does not suggest nor would a reasonable jury infer that the summary calculation evidences Defendants' state of mind.
B. Claim Regarding Fall's Assessment of Witness Credibility
Coolidge argues that Fall improperly intruded into the province of the jury by assessing the credibility of other witnesses. The Court finds that the cited testimony does not support Coolidge's argument.
Coolidge argues that, on cross-examination by Rodrigues' counsel, Fall implicitly suggested that certain witnesses were not credible by testifying that she did not consider their testimony in reaching her opinion. For example, Coolidge relies on the following cross-examination of Fall by Rodrigues' counsel:
Q: So you've already concluded that no matter what these people say about what they intended to do, or even what they did with respect to marketing this, that it wasn't enough, in your opinion, for any of these taxpayers to qualify for ...