Opinion
Case No. 14-cr-00627-SI-1
07-28-2017
UNITED STATES OF AMERICA, Plaintiff, v. BEHNAM HALALI, et al., Defendants.
ORDER DENYING DFEENDANTS' POST-TRIAL MOTIONS
Re: Dkt. Nos. 196, 198, 199, 200, 228, 232
On July 27, 2017, the Court heard argument on defendants' post-trial motions. For the reasons set forth below, the Court DENIES the motions.
BACKGROUND
On December 16, 2014, the government filed a 25-count indictment against defendants Ernesto Magat, Behnam Halali, Kraig Jilge, Karen Gagarin and Alomkone Soundara a/k/a Alex Soundara. Dkt. No. 1. The indictment alleged that, from in or about September 2011 through February 2012, defendants "did knowingly and willfully conspire and agree with each other . . . to devise, participate in, and execute a scheme to defraud [American Income Life Insurance Company] ("AIL"), and to obtain money from AIL by means of materially false and fraudulent pretenses, representations, and promises, and by omitting and concealing material facts." Dkt. No. 1 ¶ 8. The indictment also alleged that the defendants executed the scheme by, among other things, submitting applications for life insurance on behalf of individuals who did not know that a policy was applied for or issued in their name and/or did not want a life insurance policy. Id.
On March 13, 2017, following a four week trial, a jury convicted defendants Halali, Magat, and Gagarin of conspiracy to commit wire fraud in violation of 18 U.S.C. § 1349 (Count One), wire fraud in violation of 18 U.S.C. § 1343 (Counts Two through Fifteen), and aggravated identity theft in violation of 18 U.S.C. § 1028A(a)(1) (Counts Twenty-one through Twenty-four). See Dkt. No. 187.
Jilge and Soundara pled guilty prior to trial.
Desiherey Dacuycuy Ortega was one of the 27 witnesses called by the government at trial. Ortega stated that she assisted defendants and their co-schemers with opening hundreds of bank accounts that were used in connection with the charged wire fraud and identity theft. See generally Dkt. No. 231 at 6-24. Additionally, Ortega testified regarding defendants' efforts to conceal their ownership of these accounts after AIL uncovered the fraudulent conduct. Id. at 26-57.
Magat's motion states that Ortega testified pursuant to a proffer agreement and implied grant of immunity. The record shows that Ortega testified but the government did not grant her immunity for her cooperation.
On direct examination by the government, Ortega admitted to having made false statements in the past. She admitted to drafting letters at defendant Magat's request that contained false statements. Id. at 43-53. She also admitted to lying to agents of the Federal Bureau of Investigation during their investigation of this matter. Id. at 57-58. Ortega admitted that she did not tell her supervisors that she wrote the false letters regarding Magat's accounts and that she "knew it was wrong." Id. at 58.
On May 1, 2017, counsel for Wells Fargo contacted government counsel and notified them for the first time that Wells Fargo determined that Ortega had embezzled over $40,000 from the bank while working as a branch manager in late 2016 and early 2017. Dkt. No. 228-1. On May 11, 2017, the bank's counsel sent a letter to the government detailing the findings of its investigation into Ortega's conduct. Id. The next day, the government disclosed to defense counsel the letter from Wells Fargo. Dkt. No. 237 at 5. According to that letter, on March 16, 2017, Wells Fargo identified approximately $10,000 in suspicious general ledger entries processed at the Stanford Shopping Center and Midtown Palo Alto branches in Palo Alto, California in January 2017. Dkt. No. 228-1 at 1. Wells Fargo then conducted a broader review of general ledger entries for these branches and identified a set of suspicious general ledger entries totaling $41,849.93, which were approved by Ortega and processed by multiple tellers between August 2016 and February 2017. Id. After being interviewed by the bank, Ortega admitted that she approved the entries and admitted that she withdrew the funds. Id. Wells Fargo fired Ortega on March 27, 2017. Id. at 2. None of this information was known to the parties or the jury during the trial. Id.
Now before the Court are defendants' motions for judgment of acquittal of certain counts, and defendants' motions for a new trial based upon the newly discovered evidence regarding Ms. Ortega.
LEGAL STANDARDS
I. Rule 29
Rule 29 of the Federal Rules of Criminal Procedure requires the Court, on a defendant's motion, to "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 Court's review of the constitutional sufficiency of evidence to support a criminal conviction is governed by Jackson v. Virginia, 443 U.S. 307 (1979), which requires a court to determine "whether, after viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt." Id. at 319 (emphasis in original); see also McDaniel v. Brown, 558 U.S. 120, 133 (2010). Accord United States v. Nevils, 598 F.3d 1158, 1163-64 (9th Cir. 2010) (en banc). This rule establishes a two-step inquiry:
First, a . . . court must consider the evidence presented at trial in the light most favorable to the prosecution. . . . [And s]econd, after viewing the evidence in the light most favorable to the prosecution, the . . . 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."Nevils, 598 F.3d at 1164 (quoting Jackson, 443 U.S. at 319) (final alteration in Nevils).
II. Rule 33
"Upon the defendant's motion, the court may vacate any judgment and grant a new trial if the interest of justice so requires." Fed. R. Crim. P. 33(a). The Ninth Circuit described the standard for granting a new trial in United States. v. A. Lanoy Alston, D.M.D., P.C., 974 F.2d 1206 (9th Cir. 1992), which it reaffirmed in United States v. Kellington, 217 F.3d 1084 (9th Cir. 2000):
[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. . . . If the court concludes that, despite the abstract sufficiency of the evidence to sustain the verdict, the evidence preponderates sufficiently heavily against the verdict that a serious miscarriage of justice may have occurred, it may set aside the verdict, grant a new trial, and submit the issues for determination by another jury.Kellington, 217 F.3d at 1097 (internal quotation marks and citations omitted).
However, the Court's discretion is not unconstrained. Under Rule 33, the Court should grant a new trial "only in exceptional cases in which the evidence preponderates heavily against the verdict." United States v. Showalter, 569 F.3d 1150, 1157 (9th Cir. 2009) (quoting United States v. Pimental, 654 F.2d 538, 545 (9th Cir. 1981)). "The defendant bears the burden of proving that he is entitled to a new trial under Rule 33, and before ordering a new trial pursuant to Rule 33, a district court must find that there is a real concern that an innocent person may have been convicted." United States v. McCourty, 562 F.3d 458, 475 (2d Cir. 2009).
DISCUSSION
I. Motions for judgment of acquittal
Defendants Halali, Magat and Gagarin each challenge their convictions for aggravated identity theft (Counts 21, 22 and 24), and Gagarin additionally challenges one wire fraud count (Count 10) related to Gilroy's policy.
A. Wire Fraud
Gagarin argues that she should either be acquitted or receive a new trial based on insufficient evidence of wire fraud for Count 10. Gagarin argues that "in order to find guilt pursuant to [Instructions 14 and 18], the jury would have to find that Ms. Gagarin and Ms. Gilroy intended the application to be submitted without Ms. Gilroy's intention to receive insurance." Dkt. No. 200 at 9. Gagarin argues that the jury must have disregarded the jury instructions because the evidence at trial showed that Ms. Gilroy intended to apply for insurance, she knew she was applying for insurance, she knew insurance was issued in her name, and she wanted a life insurance policy.
Instruction 18 instructed the jury on the elements of wire fraud, and Instruction 14 provided the instruction on conspiracy to commit wire fraud. Instruction 14 described the "scheme to defraud" as "among other things, submitting applications for life insurance on behalf of individuals who did not know that a policy was applied for or issued in their name and/or did not want a life insurance policy, and then shared the commissions and bonuses issued by AIL in connection with those fraudulent policies." Dkt. No. 178.
The government contends that defendant's argument is misplaced because defendant focuses on Instruction 14's language describing the scheme to defraud, which is not present in Instruction 18. The government also argues that even if the limiting language from Instruction 14 were deemed to apply to the substantive wire fraud counts, the jury's verdict is not contrary to the charged scheme. The Court agrees with this latter argument and therefore finds it unnecessary to determine whether Instruction 14 must be read in conjunction with Instruction 18.
The government argues there was sufficient evidence from which the jury could convict Gagarin of wire fraud related to Gilroy's policy. The Court agrees with the government and finds that taken in the light most favorable to the government, the evidence was sufficient to find that Gagarin was guilty of Count 10. Gilroy testified that when the application was submitted, she was unemployed and unable to pay the cost of the premiums on her own. Gilroy also testified that she instructed Gagarin to include false information regarding her employment on the application, and she admitted that she lied about her annual salary when she took the required medical exam. The evidence also showed that the premiums on Gilroy's policy were paid by an account in Gagarin's name that was also used to pay the premiums on another fraudulent policy. Ex. 564 at 5 (showing payment of premiums for policies in the name of Melissa Gilroy and Christian DeJesus). Although Gilroy testified that she wanted a life insurance policy and intended to pay for it, the jury could have disbelieved this testimony. The jury could have concluded that Gilroy falsely claimed she wanted insurance in order to cover for her cousin, Gagarin, or that Gilroy was paid to provide her information and take a medical exam, as other witnesses testified they had. Because there was ample evidence to support the wire fraud conviction, the Court also finds no basis to grant Gagarin a new trial on that charge.
Gilroy testified under a grant of immunity. Jury Instruction No. 8 directed the jury that they may "believe everything a witness says, or part of it, or none of it." Further, Jury Instruction No. 9 specifically informed the jury that Gilroy received immunity, that the jury should "consider the extent to which or whether the witness's testimony may have been influenced" by that immunity, and that the jury therefore "should examine the testimony of ... Gilroy ... with greater caution than that of other witnesses."
B. Aggravated identity theft
To convict defendants of aggravated identity theft in violation of 18 U.S.C. § 1028A, the government needed to prove that each defendant (1) knowingly transferred, possessed, or used, without legal authority, a means of identification of a real person, (2) the defendant knew that the means of identification belonged to a real person, and (3) the defendant did so in during and in relation to felony violations of 18 U.S.C. §§ 1343 or 1349 (conspiracy to commit wire fraud or wire fraud).
1. Halali
Halali argues that there was no evidence that he ever used Eleanor Hale's identification information or submitted any documents to anyone falsely identifying himself as Hale. Halali argues that the evidence showed that Hale provided her information to Betti, and that Betti is the one who wrote and submitted Hale's life insurance application to AIL.
The Court disagrees and DENIES Halali's motion for judgment of acquittal. Viewing the evidence in the light most favorable to the government, the evidence showed that Betti provided individuals' personal information to Halali, either by giving the information to him directly or by turning the information in to a submitting desk in the San Jose office. The jury could have believed that Betti provided Hale's information to Halali by leaving that information at the submitting desk. Betti also testified that the application he prepared for Hale did not include her beneficiary information, premium information, or banking information, and yet the final application submitted to AIL included this information, including the information for the Wells Fargo account that was actually owned by Halali. The evidence also showed that premium payments for Hale's policy were made from two accounts owned by Halali. There was considerable evidence from which the jury could conclude that Halali was guilty of aggravated identity theft and/or aiding and abetting aggravated identity theft.
2. Magat
Magat argues that the government did not prove that he knew that the information submitted with Mosqueda's application belonged to someone else or that Mosqueda did not authorize using her identity to buy life insurance. Magat argues that there is no evidence that when the policy was submitted he was personally involved in the application or the verification process surrounding the policy.
The Court disagrees and DENIES Magat's motion for judgment of acquittal. Several witnesses testified that Magat was involved in the "secret shopper" program in which college students from Sacramento State were recruited to take medical exams and then the information from those exams was used to submit life insurance applications without the students' knowledge or consent. Mosqueda was a student at Sacramento State, and she testified her sorority sister, who also was Magat's co-worker, recruited her to participate in the secret shopper program. Magat owned the bank account that paid for the premiums on Mosqueda's policy, and the jury could reasonably have concluded that he was paying for the premiums because Mosqueda had not authorized the application for life insurance. In addition, on November 11, 2011, Ha Nguyen used Ernesto Magat's email to send a "JUICY.xlxs" spreadsheet which listed Mosqueda's name, phony address, phony phone number, Ernesto Magat's bank account number xx6932, and a space to indicate that four months of premiums had been paid. Ha Nguyen testified that she created the spreadsheet at Magat's direction to track the "junk" or "juice" business, and that she and Ernesto Magat had discussed the contents of that spreadsheet. There was also testimony that in January 2012 as the fraudulent scheme was coming to light, Ernesto Magat changed the name on the xx6932 account to "MIA Insurance Group." The jury could reasonably conclude from all of this evidence that Ernesto Magat was guilty of aggravated identity theft and/or aiding and abetting aggravated identity theft.
3. Gagarin
Gagarin argues that the government did not prove that Gagarin "used" Melissa Gilroy's identification because Gagarin never attempted to act on Gilroy's behalf by actively employing Gilroy's identification. Gagarin argues that unlike a case involving stolen identities, here Ms. Gilroy testified that she willingly gave her information to Gagarin in order to submit a life insurance application on her behalf, and that she wanted a policy. Gagarin urges this Court to "revisit" the Ninth Circuit's decision in United States v. Osuna-Alvarez, 788 F.3d 1183 (9th Cir. 2016), and to instead follow the Sixth Circuit's decision in United States v. Medlock, 792 F.3d 700 (6th Cir. 2015).
In Osuna-Alvarez, the Ninth Circuit upheld a conviction for aggravated identity theft where the defendant used his identical twin's passport to enter the country. The defendant argued that he had his brother's permission to use the passport, and therefore that his use was not "without lawful authority." The Ninth Circuit rejected this argument, finding that the language of the statute was unambiguous:
By its terms, § 1028A explicitly covers a defendant who "uses" a means of identification "without lawful authority." This language clearly and unambiguously encompasses situations like the present, where an individual grants the defendant permission to possess his or her means of identification, but the defendant then proceeds to use the identification unlawfully. . . . Thus, regardless of whether the means of identification was stolen or obtained with the knowledge and consent of its owner, the illegal use of the means of identification alone violates § 1028a.Osuna-Alvarez, 788 F.3d at 1185-86. Gagarin argues that Osuna-Alvarez was "wrongly decided as it applies to this case" because Ms. Gilroy gave permission to Gagarin to use her identification information, and Gagarin did not use Ms. Gilroy's identity in the sense of trying to shield Gagarin's own identity when committing a crime.
Gagarin argues that this Court should adopt the narrower construction of "use" adopted by the Sixth Circuit in Medlock. In that case, the defendants operated a non-emergency ambulance company that transported Medicare patients to kidney-dialysis appointments. The defendants submitted claims for Medicare reimbursements containing the identification information of the patients, and the claims falsely stated that the patients were transported by stretcher when they were not. The government alleged that the defendants "used" the name and Medicare Identification Numbers of the patients when they submitted the reimbursement claims, and that they did so without lawful authority because the claims falsely stated that stretchers were required for transport. In addition, the government alleged that one of the defendants "used" the signature of a doctor in order to forge a medical certification.
On appeal, the Sixth Circuit reversed the convictions which were based upon using the identification of patients in the reimbursement claims. The court found that the Medlocks "misrepresented how and why the beneficiaries were transported, but they did not use those beneficiaries' identities to do so." Id. at 707 (emphasis in original). The court noted that "[t]he Medlocks did transport the specific beneficiaries whose names they entered on the forms; they lied only about their eligibility for reimbursement for the service. There was nothing about those particular beneficiaries, rather than some other lawful beneficiaries of Medicare, that entitled them to reimbursed rides." Id. at 706. In contrast, the court upheld the conviction for aggravated identity theft based upon Kathy Medlock's forging a physician's signature and thus using his identity to secure reimbursement fraudulently for unnecessary ambulance transports. Id. at 712.
The government argues that as with the sustained conviction in Medlock, there was sufficient evidence for the jury to conclude that Gagarin forged Gilroy's signature on the application. The Court agrees and DENIES Gagarin's motion for judgment of acquittal. As the government notes, Gilroy testified that she did not sign or type her name in either of the two places in which her signature appears on the application. Although Gagarin argues that she had Gilroy's authorization to submit the application, as discussed above, the jury could have concluded from the evidence that Gagarin submitted the application without Gilroy's knowledge. The evidence showed that the application contained numerous false statements with regard to Gilroy, that Gilroy was unemployed at the time the application was filed, and that Gagarin (and not Gilroy, her mother or her boyfriend) paid the premiums. On this record, the jury could have reasonably concluded that Gagarin "used" Gilroy's forged signatures as part of the wire fraud scheme. See United States v. Blixt, 548 F.3d 882, 886 (9th Cir. 2008) ("[A]s a matter of law, forging another's signature constitutes the use of that person's name for the purpose of applying the Aggravated Identity Theft statute."); see also United States v. Bercovitch, 615 Fed. App'x 416 (9th Cir. Aug. 25, 2015) (reversing dismissal of aggravated identity theft counts and holding that under Osuna-Alvarez, indictment need not allege that defendant transferred, possessed, or used another person's identification without that person's consent).
In United States v. Bercovitch, No. 3:13-cr-00662 RS, the government alleged that the defendants devised and executed a scheme to prepare and file fraudulent federal income tax returns on behalf of prison inmates, using the inmates' personal information. The district court dismissed the aggravated identity theft counts on the ground that the indictment did not allege that the defendants used the inmates' identifications without their consent. The Ninth Circuit reversed in an unpublished decision.
II. Motions for a new trial
Defendants contend that the Court should grant a new trial because of newly discovered evidence concerning Ortega's embezzlement. Defendants argue that the newly discovered evidence would have impeached Ortega's testimony regarding the Wells Fargo accounts, including how the accounts were opened and defendants' efforts to "cover up" the fraud.
Defendant Magat filed a motion for a new trial based on the newly discovered evidence, and Halali joined in that motion. Gagarin filed a separate motion for a new trial based on the newly discovered evidence, and she also argues that she is entitled to a new trial because "the jury easily could have conflated the various different allegations between the defendants and erroneously convicted Ms. Gagarin though she had no intention to commit wire fraud in submitting the application for Ms. Gilroy." Dkt. No. 225 at 9. For the reasons set forth in the prior section, the Court finds that there was sufficient evidence to convict Gagarin of wire fraud. The Court also finds that the assertion the jury could have conflated the evidence is speculative and does not warrant a new trial. --------
The Ninth Circuit has held that to prevail on a Rule 33 motion for new trial based on newly discovered evidence, a defendant must satisfy each element of a five-part test: "(1) the evidence must be newly discovered; (2) the failure to discover the evidence sooner must not be the result of a lack of diligence on the defendant's part; (3) the evidence must be material to the issues at trial; (4) the evidence must be neither cumulative nor merely impeaching; and (5) the evidence must indicate that a new trial would probably result in acquittal." United States v. Harrington, 410 F.3d 598, 601 (9th Cir. 2005) (internal citation omitted). While "[o]rdinarily, evidence impeaching a witness will not be material . . . [i]n some situations, however, the newly-discovered impeachment evidence may be so powerful that, if it were to be believed by the trier of fact, it could render the witness's testimony totally incredible." United States v. Davis, 960 F.2d 820, 825 (9th Cir. 1992). "In such a case, if the witness' testimony were uncorroborated and provided the only evidence of an essential element of the government's case, the impeachment evidence would be 'material.'" Id.
The government contends that the newly discovered evidence regarding Ortega does not warrant a new trial because it is merely impeaching and does not render Ortega's testimony totally incredible. The government also argues that Ortega's testimony was corroborated by numerous witnesses and documentary evidence, and thus did not provide the only evidence of an essential element of the government's case. The government asserts that evidence of Ortega's embezzlement is not material to any issue at trial, and that defendants have not shown that the new evidence would probably result in an acquittal.
The Court agrees with the government. As an initial matter, the Court notes that Ortega admitted in her testimony that: (1) she prepared letters for Magat which contained false statements; (2) she did not tell her supervisors about these letters and "knew it was wrong" to have prepared them; and (3) she had lied to the FBI about her interactions with defendants. See Dkt. No. 231 at 43-53, 57-8. Therefore, the jury knew that Ortega had made false statements and prepared false documents in connection with the scheme before the Court. The Court agrees with the government that it is unlikely that evidence of entirely unrelated misconduct, engaged in years after the scheme in question, would cause the jury to find Ortega's testimony "totally incredible."
Significantly, Ortega's testimony was corroborated by the testimony of other witnesses and the documentary evidence admitted at trial. Ortega's testimony regarding the opening of the bank accounts used by defendants was corroborated by the testimony of Kraig Jilge, Ha Nguyen, Alex Soundara, and Marion Magat. Id. Jilge and Nguyen both testified about defendants' efforts to change the names on the accounts. Additionally, Ortega's testimony was corroborated through various bank records (see generally Trial Ex. 1000 and records cited therein) and e-mails admitted as evidence (see, e.g., Trial Exs. 91, 98, 106, 193, 194, 216, 217, 221, 222, 930, 975, 976). Thus, Ortega's testimony did not provide the only evidence of essential elements of the government's case. The newly discovered evidence is merely impeaching, and does not warrant the grant of a new trial.
Accordingly, the Court concludes that defendants have failed to meet their burden under Harrington, and the Court DENIES defendants' motions for a new trial.
CONCLUSION
For the reasons set forth above, the Court DENIES defendants' post-trial motions.
IT IS SO ORDERED. Dated: July 28, 2017
/s/_________
SUSAN ILLSTON
United States District Judge