United States District Court, W.D. Texas, Austin Division
RODRIGUEZ UNITED STATES DISTRICT JUDGE.
and Cynthia Herman are married and reside together within the
Western District of Texas. From 2005 through 2015, the
Hermans owned and operated Cindy's Gone Hog Wild, a
restaurant and bar in Travis County, Texas. The Hermans
incorporated the business and reported its income and
expenses on IRS Forms 1120.
addition to Cindy's Gone Hog Wild, from about 2009 to
about 2014, the Hermans owned and operated two restaurants in
Bastrop County, Texas: Cindy's Downtown and Hasler
Brothers Steakhouse. The Hermans operated those two
businesses under Cindy's Downtown, LLC, which reported
its income and expenses on the Hermans' IRS Forms 1040.
Count One of the Indictment the Government alleges that the
Hermans conspired to defraud the United States in violation
of 18 U.S.C. § 371. In support of this allegation, the
Government alleges that the Hermans concealed the true income
of their businesses by depositing only a portion of the
businesses' cash receipts into their business bank
accounts and reported as income to their tax return preparer
only those smaller amounts. The Government also alleges that
the Hermans caused tax deductions for business expenses to be
overstated by paying various personal expenses with business
funds. The Government also alleges that the Hermans regularly
paid third-parties, adding those individuals to the payroll
of Cindy's Downtown, LLC, even though those persons
performed no work for the company.
Count Two of the Indictment, the Government alleges that the
Hermans filed a false IRS Form 1040 for the 2010 tax year in
violation of 26 U.S.C. § 7206(1). The Government alleges
that the gross receipts from Cindy's Downtown, LLC were
substantially more than the reported amount of $1, 033, 815,
and the incurred total expenses were substantially less than
the reported amount of $413, 427.
Count Three, the Government alleges that the Hermans filed a
false 2011 return. Count Four alleges that the Hermans filed
a false 2012 return. Count Five alleges that Michael Herman
filed a false 2010 return for Cindy's Gone Hog Wild, Inc.
Count Six alleges that Michael Herman filed a false 2011
return for Cindy's Gone Hog Wild, Inc. Count Seven
alleges that Michael Herman filed a false 2012 return for
Cindy's Gone Hog Wild, Inc.
motions to preclude the Government from introducing expert
testimony through its case agent Daniel Fannin (docket nos.
70, 72 and 77)
argue that Special Agent Fannin is not qualified to render
expert testimony in this case. Alternatively, the Defendants
argue that having the case agent serve in these dual
capacities is prejudicial. In addition, the Defendants argue
that allowing the case agent to testify as an expert in this
case will allow impermissible hearsay to be injected into the
trial, because Special Agent Fannin's summaries
incorporate statements of third parties. Lastly, the
Defendants argue that the failure to clearly distinguish
between fact and expert testimony will likely confuse the
Government contends that although Special Agent Fannin is
also a CPA, his expected testimony should not be viewed as
expert testimony. The Government “plans to call SA
Fannin to testify at trial to summarize voluminous bank and
point-of-sale records of the defendants' businesses. This
will lead to SA Fannin's computations summarizing the
gross receipts the Hermans underreported on the tax returns
related to their businesses, in addition to summarizing
records reflecting the Hermans' use of business receipts
to pay for personal expenses. SA Fannin will further testify
as to the tax consequences of the Herman's
actions.” Defendants' objections to the use of any
“summary” evidence lack merit and are overruled.
See United States v. Echols, 574 Fed.Appx. 350, 356
(5th Cir. 2014) (allowing case agent's testimony and Fed.
E. Evid. 1006 material). In this case the Government
repeatedly states it will not be offering SA Fannin as an
expert witness, even though it could under United States
v. Moore, 997 F.2d 55 (5th Cir. 1993). His expected
testimony is not impermissible, and the motion is denied. SA
Fannin, however, may not opine on the tax consequences of the
Hermans' actions, except to indicate what line numbers on
the tax returns or schedules are incorrect. Accordingly,
Defendants' motions to preclude Fannin from testifying
and motions in limine to exclude Fannin from offering
“summary” evidence is granted in part and denied
in part (docket no. 70, 72 and 77).
Motions to Dismiss Counts 2 and 3 (docket nos. 71 and
move the court to dismiss counts 2 and 3 arguing they allege
more than one crime and are defective on grounds of
duplicity. They argue “both counts each allege two
false statements that are conceptually distinct and require
distinct proof.” Specifically, they appear to complain
that each count alleges that gross sales were under-reported
and total expenses were under-reported. Defendants'
motions are denied. The Government charged only one crime in
each count of the indictment. As stated by the Eighth
Circuit, “[t]here may be more than one piece of
evidence to support each count, but that certainly does not
make the counts duplicitous.” United States v.
Fairchild, 819 F.3d 399, 412 (8th Cir. 2016). The
motions are denied (docket nos. 71 and 74).
Motions to Dismiss Count One of the Indictment for Failure to
State a Claim (docket nos. 73 and 76)
argue that Marinello v. United States, 138 S.Ct.
1101 (2018) mandates the dismissal of count one. In
Marinello, the Supreme Court interpreted 26 U.S.C.
§ 7212(a) and concluded that “to secure a
conviction under the Omnibus Clause [of that statute], the
Government must show (among other things) that there is a
‘nexus' between the defendant's conduct and a
particular administrative proceeding, such as an
investigation, an audit, or other targeted administrative
action.” Id. at 1109. “In addition to
satisfying this nexus requirement, the Government must show
that the proceeding was pending at the time the defendant
engaged in the obstructive conduct or, at the least, was then
reasonably foreseeable by the defendant.” Id.
at 1110. Defendants argue that “it is now clear that
with regard to ‘obstruction conviction[s], the
government would need to prove beyond a reasonable doubt that
a person, acting with corrupt intent, engaged in obstructive
conduct with a sufficient nexus to a pending or contemplated
proceeding.'” Defendants further argue that the
Indictment fails to include this essential element. This
Court rejects Defendants' argument for the same reasons
as stated by the Court in United States v. Flynn,
No. CR 16-347 ADM/KMM, 2019 WL 135701, at *7 (D. Minn. Jan.
8, 2019). The limitations on the substantive offense of 26
U.S.C. § 7212(a) do not apply to Klein
conspiracies charged under the general conspiracy statute of
18 U.S.C. § 371. See also United States v.
Parlato, No. 15-CR-149-FPG, 2019 WL 988450, at *2
(W.D.N.Y. Mar. 1, 2019) (declining to apply
Marinello to a statute the Supreme Court did not
consider). The motions are denied (docket nos. 73 and 76).
Motions in Limine ...