United States v. Desu

UNITED STATES OF AMERICA v. RAO DESU

Criminal No. 18-613 (MAS)

UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY

September 21, 2020

NOT FOR PUBLICATION

MEMORANDUM OPINION

This matter comes before the Court upon Defendant Rao Desu's ("Defendant") Motion for Judgment of Acquittal or, In the Alternative, for a New Trial (ECF No. 118); Defendant's Supplemental Brief in Further Support of His Motion for Judgment of Acquittal or, In the Alternative, for a New Trial¹ (ECF No. 121); and Defendant's Additional Argument² (ECF No. 123-1). The United States of America (the "Government") opposed. (ECF No. 130.) Defendant replied. (ECF No. 134.) The parties submitted additional briefing. (ECF Nos. 135, 136.) The Court, having carefully considered the parties' submissions, decides the matter without oral argument pursuant to Local Civil Rule 78.1, which is applicable to criminal cases under Local Criminal Rule 1.1. For the reasons stated below, the Court denies Defendant's Motion.

I. BACKGROUND

Defendant was indicted on October 10, 2018, and charged with six counts: (1) two counts of conspiracy to impede and impair the functions of the United States Internal Revenue Service ("IRS") by skimming cash and substantially understating the income from Heights Pharmacy(Count One) and Arthur Avenue Pharmacy (Count Two) in violation of 18 U.S.C. § 371; and (2) four counts of aiding and assisting in subscribing to false personal or business federal tax returns to the IRS in violation of 26 U.S.C. § 7206(2):

• Defendant's Form 1040 from the 2011 tax year (Count Three);

• Defendant's Form 1040 from the 2012 tax year (Count Four);

• Arthur Avenue Pharmacy's Form 1120S from the 2012 tax year (Count Five); and

• Heights Pharmacy's Form 1120S from the 2012 tax year (Count Six).

(See generally Indictment, ECF No. 1.)

Trial began on October 7, 2019. (Trial Tr.³ ("Tr.") 1:10.) The Government's evidence at trial consisted of testimony from witnesses, such as an IRS Special Agent (the "Government's Summary Witness"), Defendant's accountant, and alleged co-conspirators Darshna Desai ("Desai") and Manish Pujara ("Pujara"), as well as various records, including pharmacy cash register tapes, coded deposit slip receipts, records purporting to contemporaneously track the amount of the cash skim, bank statements, accounting documents, tax returns, summary charts, and a recording of a conversation Defendant had with Desai. After the Government rested, Defendant moved for a judgment of acquittal on all counts. (Tr. 1148:23, 1150:18-1151:1.) The Government opposed. (Tr. 1151:5-1155:10.) The Court reserved its decision on the motion. (Tr. 1155:18.)

Defendant put on his case, which consisted of testimony from fact, character, and expert witnesses, as well as several exhibits, including various bank and tax records. Defendant rested on October 18, 2019. (Tr. 1719:13.) On October 21, 2019, the jury began its deliberations and returneda verdict of guilty on all six counts the same day. (Tr. 1719:17-1720:2.) Defendant now moves for acquittal on all counts or, in the alternative, for a new trial pursuant to Federal Rules of Criminal Procedure 29 and 33.

II. MOTION FOR ACQUITTAL

A. Legal Standard

"Under Rule 29, a defendant who asserts that there was insufficient evidence to sustain a conviction shoulders 'a very heavy burden.'" United States v. Tiangco, 225 F. Supp. 3d 274, 278-79 (D.N.J. 2016) (quoting United States v. Anderson, 108 F.3d 478, 481 (3d Cir. 1997)). The Court "cannot substitute its judgment for that of the jury." Id. at 279. Rather, the Court "must view the evidence, and all reasonable inferences therefrom, in the light most favorable to the prosecution, resolving all credibility issues in the prosecution's favor." Id. "Having done so, the [C]ourt must uphold the conviction if 'any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt.'" Id. (quoting Jackson v. Virginia, 443 U.S. 307, 319 (1979)) (emphasis in original).

B. Sufficiency of Evidence

At the end of the Government's case-in-chief, Defendant moved for acquittal on all counts, arguing that "no reasonable jury who [ha]s heard the evidence here could find that the testimony that has been put in is remotely plausible." (Tr. 1150:18-1151:1.) Defendant now "renews the motion for judgment of acquittal that he made at the close of the Government's case." (Def.'s Moving Br. 1, ECF No 118; Def.'s Suppl. Br., ECF No. 121.)

1. A rational juror could have found that the Government proved all elements of Counts One and Two beyond a reasonable doubt.

The Government must prove four elements beyond a reasonable doubt for a jury to find Defendant guilty of conspiracy to defraud the United States under 18 U.S.C. § 371. First, two ormore parties must agree to defraud the United States. 18 U.S.C. § 371; United States v. Rankin, 870 F.2d 109, 113 (3d Cir. 1989); see Third Circuit Model Criminal Jury Instructions § 6.18.371B. Second, Defendant must have been a party to that agreement. 18 U.S.C. § 371; Rankin, 870 F.2d at 113; see Third Circuit Model Criminal Jury Instructions § 6.18.371B. Third, Defendant must have joined the agreement or conspiracy knowing of its objective to defraud the United States. Third Circuit Model Criminal Jury Instructions § 6.18.371B. Fourth, a member of that group must have made an overt act to further that goal. 18 U.S.C. § 371; Rankin, 870 F.2d at 113; see Third Circuit Model Criminal Jury Instructions § 6.18.371B.

The following evidence introduced at trial supports the first two elements of both Counts One and Two: Both Pujara and Desai testified that Defendant designed and orchestrated the cash skims at Arthur Avenue Pharmacy and Heights Pharmacy, respectively, and that Defendant directed them to set aside the cash proceeds from the pharmacy sales instead of depositing the proceeds into the bank. (Tr. 208:17-209:22, 733:18-20, 790:24-791:8, 820:22-821:7.) Furthermore, the Government introduced years-worth of cash register z tapes and register reports that showed daily cash sales occurring at each pharmacy. (GX213-226, GX246.1-246.36, GX436.) The Government also introduced deposit slips from the Arthur Avenue Pharmacy bank account to demonstrate no cash was deposited into the account during the conspiracy, (GX455), and deposit slips from the Heights Pharmacy bank account to demonstrate the small amount of cash deposited into that account, (GX 227-245). The Court finds that, for both Counts One and Two, there was ample evidence presented at trial for a rational juror to conclude two or more people had an agreement and Defendant was one of those parties.

As to the third element, Pujara and Desai testified on the conspirators' understanding that cash income did not appear in the pharmacy bank records; the pharmacy accountants were not toldabout the skimmed cash; and the cash income did not appear on the pharmacies' and conspirators' tax returns. (Tr. 209:8-14, 231:11-233:7, 463:3-465:8, 465:11-18, 789:12-790:2, 790:19-792:8.) The Court finds, consequently, that a rational juror could have concluded that Defendant shared a unity of purpose with each of the co-conspirators.

As to the fourth element, Pujara and Desai testified that the tax returns for both pharmacies did not reflect the skimmed cash and that the conspirators each filed false individual tax returns. (Tr. 231:11-233:7, 465:3-467:6, 469:3-5, 470:11-16, 789:12-790:2, 790:19-792:8.) Thus, the Court finds a rational juror could have concluded that a member of the conspiracy committed an overt act. For these reasons, a rational juror could have found that the Government proved all elements of Counts One and Two beyond a reasonable doubt.

2. A rational juror could have found that the Government proved all elements of Counts Three through Six beyond a reasonable doubt.

The Government must prove four elements beyond a reasonable doubt for a jury to find Defendant guilty of filing false statements in tax returns under 26 U.S.C. § 7206(2). First, Defendant must aid or assist in, or procure, counsel, or advise the preparation of federal income tax returns that are subsequently filed with the IRS. 26 U.S.C. § 7206(2); United States v. Gambone, 314 F.3d 163, 174 (3d Cir. 2003); see UNITED STATES DEPARTMENT OF JUSTICE TAX DIVISION, CRIMINAL TAX MANUAL § 13.04 (2012). Second, those tax returns must be false in any material matter. 26 U.S.C. § 7206(2); Gambone, 314 F.3d at 174. A material matter is any matter that would impact the Government's ability to accurately calculate an individual's tax liability or refund. Third Circuit Model Criminal Jury Instructions § 6.26.7206-3. Third, Defendant must not believe that the returns were true and correct as to those material matters. Third Circuit Model Criminal Jury Instructions § 6.26.7206-4. Finally, Defendant must act willfully. 26 U.S.C. § 7206(2); Gambone, 314 F.3d at 174; see UNITED STATES DEPARTMENT OF JUSTICE TAXDIVISION, CRIMINAL TAX MANUAL § 13.04 (2012). Willfulness in a tax setting means "intentional action with bad purpose; that is, a deliberate commission of the specified violation with the idea of evading taxes and with the intention of getting away with it." United States v. La Haye, 548 F.2d 474, 475 (3d Cir. 1977).

Counts Three through Six charge Defendant with aiding and assisting in the preparation of false federal income tax returns. (Indictment 15.) First, Defendant's tax preparer testified that accounting documents and tax returns were prepared from pharmacy bank statements endorsed by Defendant; those corporate tax returns then flowed through to Defendant's personal tax returns. (Tr. 447:14-16, 448:2-4, 463:3-467:6.) Second, evidence was introduced that the corporate and personal tax returns did not include cash income that was not deposited in the pharmacy bank accounts. (Tr. 209:8-14, 463:3-465:8, 465:11-18; 789:12-790:2, 790:19-792:8, 1128:12-16, 1128:23-1129:1.) Third, evidence was introduced that Defendant knew the tax...