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Jurisdiction: California Central District Court
Decision Date: 1/5/2015

STATES

                                                                                                                                                                                                                                                                                                                                                                                                                            FEDERAL

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        United States v. Lynch United States v. Lynch (C.D. Cal., 2015)

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        UNITED STATES OF AMERICA,
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        v.
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        SANDRA KAY LYNCH, Defendant.

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        CASE NO. : SACR 11-00209-JLS-11

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        January 5, 2015

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        UNITED STATES OF AMERICA, v. SANDRA KAY LYNCH, Defendant.

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        CASE NO. : SACR 11-00209-JLS-11

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        January 5, 2015

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        ORDER DENYING DEFENDANT'S MOTION FOR POST-VERDICT JUDGMENT OF ACQUITTAL OR A NEW TRIAL (DOC. 812)

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                Before the Court is defendant Sandra Kay Lynch's Motion for Post-Verdict Judgment of Acquittal or a New Trial. (Doc. 812. ) The Government filed an opposition (Doc. 815) but Defendant did not reply. After reviewing the papers and supporting documentation submitted by the parties, and having taken the matter under submission, Defendant's Motion is DENIED.

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        I. BACKGROUND

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                Sandra Kay Lynch ("Lynch" or "Defendant") was charged with one count of conspiracy to defraud the United States, in violation of 18 U.S.C. § 286, for agreeing to file false federal income tax returns with the Internal Revenue Service ("IRS") (Count One). (See SACR 11-209 Indictment, Doc. 1 9. ) Following a jury trial, Lynch was acquitted of this conspiracy count. (Doc. 816. ) However, Lynch was

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        Page 2

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        also charged with, and convicted of, two counts of making false, fictitious or fraudulent claims against the United States in violation of 18 U.S.C. § 287 ("section 287") (Counts Eighty-Seven and Eighty-Eight). (See Indictment 76-79. ) In particular, Lynch was charged with causing two false federal individual tax returns to be filed with the IRS, which collectively claimed nearly $750, 000 in false tax refunds. Count Eighty-Seven charged Lynch with the filing a false federal income tax return on behalf of Marva Dillon, which sought a refund of $430, 582, while Count Eighty-Eight charged her with the filing a false federal income tax return on behalf of Ronnie Pratt, which sought a refund of $315, 656. (See id. ) Lynch was also charged with aiding and abetting these two substantive offenses, pursuant to 18 U.S.C. § 2. (See id. )

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                Defendant has since moved for a judgment of acquittal, pursuant to Federal Rule of Criminal Procedure 29, on the ground that the evidence introduced at trial was insufficient for a reasonable jury to find her guilty of Counts Eighty-Seven and Eighty-Eight. (See Defendant's Memorandum of Points and Authorities at 4-5 ("Def. Mem. "), Doc. 812. ) Defendant has also moved for a new trial, pursuant to Federal Rule of Criminal Procedure 33, on the ground that she was prevented from introducing allegedly exculpatory testimony from a co-defendant, Eugene Marzette. (See id. at 6. )

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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        II. LEGAL STANDARDS

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                A. Federal Rule of Criminal Procedure 29

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                Federal Rule of Criminal Procedure 29 ("Rule 29) permits a court, upon motion by a defendant, to set aside a guilty verdict and "enter a judgment of acquittal of any offense for which the evidence is insufficient to sustain a conviction. " Fed. R. Crim. P. 29(a). The Ninth Circuit applies a two-step inquiry when a conviction is challenged based on the sufficiency of the evidence. "First, a reviewing court must consider the evidence presented at trial in the light most favorable to the prosecution. " United States v. Nevils 598 F. 3d 1158, 1164 (9th Cir. 2010) (en banc). "Second, after viewing the evidence in the light most favorable to the prosecution, the reviewing court must determine whether this evidence, so viewed, is adequate to allow 'any rational trier of fact to find the essential elements of the crime beyond a reasonable doubt. '" Id. (emphasis in original) (quoting Jackson v. Virginia 443 U.S. 307, 319, (1979)). See also McDaniel v. Brown 558 U.S. 120 132-33 (2010) (reaffirming this standard); United States v. Thongsy 577 F. 3d 1036, 1040 (9th Cir. 2009). "At this second step, however, a reviewing court may not 'ask itself whether it believes that the evidence at the trial established guilt beyond a reasonable doubt, ' only whether 'any' rational trier of fact could have made that finding. " Nevils 598 F. 3d at 1164 (quoting Jackson 443 U.S. at 318-19) (citation omitted, emphasis in original).

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                The court must bear in mind that it is the exclusive function of the jury "to resolve conflicts in the testimony, to weigh the evidence, and to draw reasonable inferences from basic facts to ultimate facts. " Jackson 443 U.S. at 319. Moreover, "cnflicting evidence is to be resolved in favor of the jury verdict, and 'all reasonable inferences are to be drawn in favor of the government. '" United States v. Corona-Verbera 509 F. 3d 1105, 1117 (9th Cir. 2007) (quoting United States v. Alvarez-Valenzuela 231 F. 3d 1198, 1201-02 (9th Cir. 2000)).

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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                B. Federal Rule of Criminal Procedure 33

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                Under Federal Rule of Criminal Procedure 33 ("Rule 33"), a new trial may be granted upon a defendant's motion when the "interest of justice so requires. " Fed. R. Crim. P. 33(a). For example, a new trial is warranted where the evidence weighs heavily against the verdict. See United States v. Alston 974 F.2d 1206 1211-12 (9th Cir. 1992). As explained by the Ninth Circuit, "'a district court's power to grant a motion for a new trial is much broader than its power to grant a motion for judgment of acquittal. ' The court is not obliged to view the evidence in the light most favorable to the verdict, and it is free to weigh the evidence and evaluate for itself the credibility of the witnesses. " United States v. Kellington 217 F. 3d 1084, 1097 (9th Cir. 2000) (alteration in original) (quoting Alston 974 F.2d at 1211).

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                The decision whether to grant a motion for a new trial lies "'within the sound discretion of the district court. '" Id. (quoting United States v. Steel 759 F.2d 706 713 (9th Cir. 1985)). However, the court's discretion is not unconstrained. The court may only grant a new trial if it finds that "the evidence preponderates sufficiently heavily against the verdict that a serious miscarriage of justice may have occurred. " Id. (quotation marks and citation omitted).

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        III. DISCUSSION

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                A. The Government's Evidence

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                The Government introduced sufficient evidence at trial that Defendant either caused the filing of the Dillon and Pratt income tax returns or aided and abetted the persons who caused those returns to be filed with the IRS. Furthermore, the Government's evidence was sufficient for a reasonable jury to find that the elements

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        Page 5

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        of a section 287 violation were satisfied as to Counts Eighty-Seven and Eighty-Eight. Pursuant to section 287, the crime of making a false statement to the United States has three elements. First, the defendant presented, or caused to be presented, a claim against the United States or an agency thereof. Second, the claim was false, fictitious or fraudulent. Third, the defendant knew that the claim was false, fictitious or fraudulent. (See Jury Instructions at 46, Doc. 817. ) The jury was also instructed that Lynch could be found criminally liable on an aiding and abetting theory if the jury found as follows:

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        (Id. at 47. )

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                Here, there was no dispute that Old Quest employees prepared Dillon's tax return, and James Tolbert, a co-conspirator charged in a related case, prepared Pratt's return. Nor was there any dispute that both tax returns contained false information in an attempt to obtain fraudulent, over-inflated tax refunds. Thus, the

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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        first and second elements of a section 287 violation were satisfied. Furthermore, the Government introduced extensive evidence that those involved in the preparation and filing of the tax returns actually knew that the returns were fraudulent. For example, Robert Meyer pled guilty and testified at trial that he told Lynch he believed the 1099-OID Program was illegal. The Government also introduced evidence that Arturo Ruiz and Francisco Mendoza, the convicted masterminds of the OID scheme, were aware that the returns prepared at Old Quest were false and fraudulent.

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                With regard to Lynch's knowledge, the Government showed that as early as July 2009, Lynch reviewed an IRS publication discussing fraudulent OID tax refund schemes. That publication warned that participation in an OID scheme could lead to criminal prosecution. In addition, the Government introduced evidence that Lynch and other Old Quest employees were aware that the IRS was sending letters to Old Quest customers warning them that their tax returns were improper, had issued various alerts regarding illegal OID refund schemes, and was rejecting the vast majority of the OID returns submitted by Old Quest. Lynch was also aware that the IRS raided the Old Quest office because it was suspected of committing tax fraud. Furthermore, Pratt testified that Lynch advised him to list his return as self-prepared because of the ongoing IRS investigation of Old Quest. Finally, the enormous refunds requested in the Dillon and Pratt returns were, in themselves, sufficient to put a trained and licensed tax preparer such as Lynch on notice that the returns were fraudulent.

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                As for aiding and abetting, although Lynch did not actually prepare the Dillon and Pratt tax returns, she contributed in various ways to their ultimate filing. The Government introduced evidence that Lynch: 1) introduced Dillon to Old Quest; 2) attended an Old Quest presentation with Dillon; 3) drove Dillon to an IRS office to collect records; 4) helped complete Old Quest paperwork on Dillon's behalf; 5)

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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        checked on, and informed Dillon of, the status of her return; and 6) reviewed Dillon's return shortly before Dillon signed it. In addition, Pratt testified that Lynch encouraged him to sign up with Old Quest and later pressured him to have an OID tax return prepared and filed.

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                B. Judgment of Acquittal

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                Defendant challenges the sufficiency of the evidence of her convictions, arguing that the acquittal on the conspiracy count precludes conviction on the substantive counts, as an aider and abettor, based on conduct that involved members of the conspiracy with whom she was tried. This is an incorrect statement of the law.

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                It is well-established that aiding and abetting and conspiracy are two separate offenses. See United States v. Van Brandy 726 F.2d 548 552 (9th Cir. 1984) (rejecting defendant's argument that his conviction for "aiding and abetting a bank robbery was fatally inconsistent with his simultaneous acquittal for conspiracy to commit bank robbery" as it was "entirely possible that the jury did not find a level of participation on defendant's part sufficient to establish that he agreed to rob the bank"). "Conspiracy requires proof of an agreement, which aiding and abetting does not. " United States v. Stozek 783 F.2d 891 894 (9th Cir. 1986) ("Even assuming inconsistent verdicts were impermissible, defendant's conviction for aiding and abetting the misapplication of bank funds is not inconsistent with his acquittal on either the conspiracy or the mail fraud charges. ") (citing Iannelli v. United States 420 U.S. 770 777 n. 10 (1975)). See also United States v. Bayer 331 U.S. 532 542 (1947) ("But the same overt acts charged in a conspiracy count may also be charged and proved as substantive offenses, for the agreement to do the act is distinct from the act itself. ") (citing Pinkerton v. United States 328 U.S. 640, 644 (1946)). "The crime of aiding and abetting occurs when a defendant associates with a criminal venture, purposefully participates in it, and seeks by his actions to make it succeed. "

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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        United States v. Pena 949 F.2d 751, 755 (5th Cir. 1991). "A person may aid and abet the commission of the crime without being a conspirator. " Id. Accordingly, a defendant such as Lynch could aid and abet another member of a conspiracy even though she was acquitted of participating in that conspiracy. See United States v. McCall 298 Fed. App'x 591, 594 (9th Cir. 2008) ("'An acquittal for conspiracy does not preclude conviction for aiding and abetting unless the acquittal results in a finding of fact in favor of the defendant which is essential to the substantive offense. '") (quoting United States v. Tierney 424 F.2d 643 645 (9th Cir. 1970) and citing Pereira v. United States 347 U.S. 1 11 (1954)).

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                Here, the jury apparently found that there was insufficient evidence that Lynch entered into an agreement to file false and fraudulent tax returns. But that same jury could have found, and presumably did find, that Lynch knew that false tax returns were being filed and that she actively assisted in those filings. The Government's evidence was sufficient for the jury to find that Lynch had, in part, caused the filing of the Dillon and Pratt tax returns or, at the very least, that she aided, counsel, commanded, induced or procured others who prepared and filed those returns, such as Old Quest's employees and James Tolbert. Because there was sufficient evidence to support Defendant's conviction on Counts Eighty-Seven and Eighty-Eight, her Rule 29 motion for a judgment of acquittal is DENIED.

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                C. New Trial

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                Defendant raises a separate argument in support of her request for a new trial, namely, that the denial of a trial continuance prevented her from introducing potentially exculpatory evidence from co-defendant Eugene Marzette. This argument has already been addressed and rejected by the Court. Lynch was originally scheduled to go to trial with co-defendant Marzette. Marzette was then granted a continuance of his trial date so that his newly appointed attorney could prepare for trial. Consequently, Lynch sought a continuance of her trial so that she

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        Page 9

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        and Marzette could be jointly tried. Lynch argues that she would have been able to present potentially exculpatory testimony from Marzette. Presumably, Marzette would have invoked his Fifth Amendment right not to testify if called to testify at a trial before his own trial. The Court denied Lynch's request for a continuance, stating as follows:

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        (5/20/13 Order at 2, Doc. 719. ) Defendant has not presented any new information to warrant reconsideration of this prior ruling. In sum, Defendant has failed to establish that this is the exceptional case where the Court should exercise its discretion to overturn the jury's verdict and order a new trial based upon the denial of her request for a continuance. Accordingly, Defendant's request for a new trial is DENIED.

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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        IV. CONCLUSION

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                For the foregoing reasons, Defendant's Motion for Post-Verdict Judgment of Acquittal or a New Trial is DENIED. Defendant will be sentenced as scheduled, on February 2, 2015, at 8: 30 a. m.

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                SO ORDERED:

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        Dated: January 5, 2015

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                JOSEPHINE L. STATON        Honorable Josephine L. Staton        United States District Judge

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        --------

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        Footnotes:

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 On the first day of trial, the Court granted the Government's motion to dismiss Counts Two through Thirty-Nine of the Indictment as to Lynch. (Doc. 791. ) Counts Two through Thirty-Nine charged all of the defendants, except for defendant Adel Alsibydes Cotton, with the filing of fraudulent income tax returns on behalf of thirty-eight individuals in violation of section 287. (See Indictment 69. )

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 Section 287 provides as follows: "Whoever makes or presents to any person or officer in the civil, military, or naval service of the United States, or to any department or agency thereof, any claim upon or against the United States, or any department or agency thereof, knowing such claim to be false, fictitious, or fraudulent, shall be imprisoned not more than five years and shall be subject to a fine in the amount provided in this title. " 18 U.S.C. § 287.

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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        --------

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        Footnotes:

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 On the first day of trial, the Court granted the Government's motion to dismiss Counts Two through Thirty-Nine of the Indictment as to Lynch. (Doc. 791. ) Counts Two through Thirty-Nine charged all of the defendants, except for defendant Adel Alsibydes Cotton, with the filing of fraudulent income tax returns on behalf of thirty-eight individuals in violation of section 287. (See Indictment 69. )

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 Section 287 provides as follows: "Whoever makes or presents to any person or officer in the civil, military, or naval service of the United States, or to any department or agency thereof, any claim upon or against the United States, or any department or agency thereof, knowing such claim to be false, fictitious, or fraudulent, shall be imprisoned not more than five years and shall be subject to a fine in the amount provided in this title. " 18 U.S.C. § 287.

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