United States v. Lingat

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UNITED STATES OF AMERICA, Plaintiff, v. JOEL LINGAT and JOSEPH EUGENE LEMAY, Defendants.

No. 1:21-cr-573-MKV

United States District Court, S.D. New York

July 30, 2024

OPINION AND ORDER DENYING RENEWED RULE 29 MOTIONS FOR ACQUITTAL

MARY KAY VYSKOCIL UNITED STATES DISTRICT JUDGE

After a nine-day jury trial, the defendants, Joel Lingat and Joseph Eugene Lemay, were each convicted of one count of conspiracy to defraud the United States, specifically, the Internal Revenue Service (“IRS”), in violation of Title 18, United States Code, Section 371. Defendants now move pursuant to Rule 29 of the Federal Rules of Criminal Procedure for a judgment of acquittal. [ECF Nos. 177, 178]. As discussed below, the Defendants' motions are DENIED because the sole argument they set forth is directly foreclosed by binding Second Circuit and Supreme Court precedents.

BACKGROUND

In August 2022, a grand jury returned a superseding indictment S2, charging Lingat and Lemay each with a single count of conspiracy to defraud an agency of the United States, in violation of Title 18, United States Code, Section 371. [ECF No. 71 (the “Indictment”)]. The Indictment alleged that from in or about 2010 through late 2016, a moving-company named Moishe's Moving paid its movers off-the-books, without making any payroll tax contributions as part of a scheme to defraud the United States by avoiding payment of taxes. The Indictment further alleged that the scheme was carried out through the use of sham companies that purportedly employed laborers working at the direction and under the control of Moishe's Moving. Defendants, in various managerial roles at Moishe's Moving, allegedly directed and oversaw these practices.

On April 2, 2024, the Defendants' joint trial began. On April 10, 2024, after the Government had called ten witnesses, and introduced well over 80 exhibits, defense counsel for Lingat joined by defense counsel for Lemay made a motion pursuant to Rule 29 of the Federal Rules of Criminal Procedure seeking a judgment of acquittal, arguing that the sole conspiracy charge against each Defendant under 18 U.S.C § 371 (also called a “Klein conspiracy,” defined below) could not stand because the Indictment did not also charge Defendants with the underlying substantive crime of payroll tax evasion. Trial Tr. 842-9.

In support of its Rule 29 motion, defense counsel raised the Second Circuit decision United States v. Coplan, 703 F.3d 46 (2d Cir. 2012), arguing that despite “g[iving] a continuing imprimatur to the Klein conspiracy prosecutions in this district, [Coplan] expressed extreme doubt as to the continued validity of this doctrine but believed that it was constrained by the doctrine of stare decisis to continue that position.” Trial Tr. 842:7-21. Defense counsel went on to explicitly recognize that in light of Coplan, the Klein conspiracy doctrine remains “the law of the Circuit” despite “believ[ing] that Coplan will be overruled.” Trial Tr. 845:4-5. First, the Court noted for the record that “at no point, throughout the several years that this case has been pending and the indictment was known to [defense counsel], did [they] raise this issue” until trial had already commenced. Trial Tr. 845:6-8. After reviewing the standard for granting a Rule 29 motion on the record, the Court denied Defendants' Rule 29 motions, finding that based on the evidence presented by the Government, and construing all evidence in the light most favorable to the Government, reasonable jurors could find Defendants guilty beyond a reasonable doubt. See Trial Tr. 845:15-23.

In charging the jury at the end of the case, the Court explained that “the indictment charges that the defendants entered into a conspiracy or an agreement to defraud an agency of the United States, that is the Internal Revenue Service.” Trial Tr. 1312:16-19. The Court additionally provided “a preliminary word about what this case is not about.” Trial Tr. 1313:7-8. Specifically, the Court emphasized that “[t]his case [] has nothing to do with the actual collection of any taxes that may be due to the government.” Trial Tr. 1313:11-12. The Court explained that “[t]he sole count in the indictment charges each defendant with participating in a conspiracy,” which “is separate and distinct from the violation of any specific federal law, which the law refers to as a substantive crime.” Trial Tr. 1313:24-25, 1314:4-6 (emphasis added). The Court further explained that the jury “may find the defendant guilty of conspiracy to commit an offense even though the substantive crime or crimes, which were the object of the conspiracy, were not actually committed, were not successful or were impossible to achieve.” Trial Tr. 1314:8-12. Notably, defense counsel consented to all of these instructions in advance at the charging conference, never objected to them during the trial, and, in fact, these charges were primarily jointly proposed by the parties.

Ultimately, on April 15, 2024, the jury convicted each of the Defendants of one count of conspiracy to defraud the United States, in violation of Title 18, United States Code, Section 371. [ECF No. 154]. The Defendants now move for a judgment of acquittal pursuant to Rule 29, seeking reconsideration of the Court's denial of their Rule 29 motions at the close of the Government's case. [ECF Nos. 177, 177-5 (“Rule 29 Mem.”), 178].^[1]

LEGAL STANDARD

The Court may enter a judgment of acquittal pursuant to Rule 29 on a count of conviction only if “no rational trier of fact could have found the defendant guilty beyond a reasonable doubt.” United States v. Gu, 8 F.4th 82, 86 (2d Cir. 2021) (citing United States v. Pierce, 785 F.3d 832, 837-38 (2d Cir. 2015)). Accordingly, Defendants “bear[] a heavy burden, as the standard of review is exceedingly deferential” to the jury's verdict. Gu, 8 F.4th at 86 (quoting United States v. Brock, 789 F.3d 60, 63 (2d Cir. 2015) (internal quotation marks omitted). Moreover, on a Rule 29 motion for a judgment of acquittal made after a verdict has been reached, the evidence at trial must be viewed in the light most favorable to the Government. United States v. Barret, 848 F.3d 524, 535 (2d Cir. 2017). “Viewing the evidence in the light most favorable to the Government means ‘crediting every inference that the jury might have drawn in favor of the Government.' ” United States v. Eppolito, 543 F.3d 25, 45 (2d Cir. 2008) (quoting United States v. Temple, 447 F.3d 130, 136 (2d Cir. 2006)).

In a conspiracy case, such as this, the deference accorded a jury's verdict is “especially important” because “a conspiracy by its very nature is a secretive operation, and it is a rare case where all aspects of a conspiracy can be laid bare in court with the precision of a surgeon's scalpel.” Barret, 848 F.3d at 534 (internal quotation marks and citations omitted).

DISCUSSION

Defendants set forth a single argument in support of their Rule 29 motions. Defendants do not challenge the sufficiency of the proof with respect to specific elements of the crimes of which they were convicted. Instead, they argue that the sole conspiracy charge against each of them under 18 U.S.C. § 371 cannot stand because the Indictment did not also charge them with the underlying substantive crime of payroll tax evasion. In effect, the Defendants challenge the legal validity of the Klein conspiracy doctrine, recognizing that it is supported by Second Circuit precedent, but arguing that such precedent ultimately will likely be overturned.

I. History of the Klein Conspiracy Doctrine

By way of brief background, the Klein conspiracy doctrine at issue here is the progeny of two seminal Supreme Court cases, Haas v. Henkel, 216 U.S. 462 (1910) and Hammerschmidt v. United States, 265 U.S. 182 (1924), which helped shape how federal courts interpret the word “defraud” in Section 371, the federal “conspiracy to defraud the United States” statute. In Haas, the Supreme Court held that “it is not essential that such a conspiracy shall contemplate a financial loss or that one shall result. The statute is broad enough in its terms to include any conspiracy for the purpose of impairing, obstructing, or defeating the lawful function of any department of government.” 216 U.S. at 479. Fourteen years later, in Hammerschmidt, the Supreme Court “attempted to retrench from the expansive reading of Section 371 in Haas . . . holding that ‘[t]o conspire to defraud the United States means primarily to cheat the government out of property or money, but it also means to interfere with or obstruct one of its lawful governmental functions by deceit, craft or trickery, or at least by means that are dishonest.' ” United States v. Coplan, 703 F.3d 46, 60 (2d Cir. 2012) (quoting Hammerschmidt, 265 U.S. at 188) (emphasis in original).

Over thirty years after Hammerschmidt, the Second Circuit issued its opinion in United States v. Klein, 247 F.2d 908, 916 (2d Cir. 1957). In Klein, the defendants were charged with tax evasion and a Section 371 “defraud conspiracy” in connection with their whiskey selling business. Id. at 915-16. The district court entered judgments of acquittal on the substantive tax evasion counts, and the jury subsequently convicted on the remaining Section 371 conspiracy count. On appeal, relying on both Haas and Hammerschmidt, the Second Circuit upheld the Section 371 convictions, sanctioning the so-called “Klein conspiracy” theory whereby defendants may be prosecuted under the general Section 371 conspiracy statute without also being prosecuted for the underlying substantive crime. Id. Thus, in order to prove a Klein conspiracy, the Second Circuit has held that the Government must show “(1) that [the] defendant entered into an agreement (2) to obstruct a lawful function of the...