Opinion
No. CR 03-1661-TUC-CKJ.
August 24, 2006
ORDER
Pending before the Court is Defendant's Motion to Dismiss — Due Process Violation [Doc. # 53]. The government has filed a response and Defendant has filed a reply. Counsel presented oral argument to the Court on August 4, 2006, and this Court took the matter under advisement. For the reasons stated below, the motion is denied.
Factual Background
The government prosecuted the promoters behind the Anderson Ark Associates ("AAA") tax shelter program in the Western District of Washington. The Seattle indictment charged (in count one) the defendants with conspiracy to defraud the IRS. Count two charged some defendants with conspiracy to commit wire and mail fraud relating to the charging of loan fees to investors associated with the Look Back program. Counts three through sixty-seven charged various defendants with adding and assisting in the filing of materially false tax returns. The indictment also charged the principals of AAA with substantive wire fraud counts. Defendant Scott Francis Creasia ("Creasia") was alleged to have been one of the investors (the Seattle indictment identifies Creasia's 1998 and 1999 tax returns as among those the promoters caused to be filed in furtherance of the fraud).
The government alleges in this case that Creasia used three different schemes in under-reporting his total income on his 1998 and 1999 forms.
(1) Sham limited liability corporation (for tax years 1998 and 1999) — purportedly Creasia was a 25% owner of Plumb Plumbing, LLC, while Sawtooth, a AAA-controlled Nevada trust, was a 75% owner. However, Sawtooth did not pay Creasia for the interest in the business and Creasia did not make any income distributions to Sawtooth. Because Creasia's tax forms stated that 75% of the income had been distributed to Sawtooth, Creasia only reported 25% income.
(2) Skimming (for tax years 1998 and 1999) — Creasia is alleged to have deposited income of Plumb Plumbing directly into his personal bank account and failed to report that income on any tax returns.
(3) Look Back program (for tax year 1998) — Creasia is alleged to have taken out a loan from a AAA Costa Rican entity and invested the money as a guaranteed payment to partners; the guaranteed payments resulted in a loss and Creasia declared 95% of the loss and carried it back to 1996 and 1997 — Creasia eliminated his tax liability for 1998, and received refunds for previously paid taxes for 1996 and 1997, which Creasia then declared.Motion to Dismiss — Speculative
The government's response refers to years 1997 and 1998, but the indictment states 1998 and 1999.
Creasia asserts that his due process rights have been violated by the prosecution using inherently contradictory theories to convict different defendants. Stumpf v. Mitchell, 367 F.3d 594 (6th Cir. 2004), reversed Bradshaw v. Stumpf, 545 U.S. 175 (2005) (prosecutor's theories were not inconsistent and defendant did not show how guilty plea had been affected). Creasia asserts that the prosecution cannot allege in one case that a person was defrauded and in another case allege that the person had knowledge of the fraud.
The government asserts that Creasia's motion is speculative because his motion relies on the false premise that the government intends to act in bad faith and present false information at trial. Nguyen v. Lindsay, 232 F.3d 1236, 1240 (9th Cir. 2000). Creasia asserts that the Court must decide every pretrial motion before trial unless it finds good cause to defer a ruling. Fed.R.Crim.P. 12(d). Creasia asserts that the Court can determine if the indictment in this case contradicts the Seattle prosecution.
Where the issue presented is not segregable and falls within the province of the finder of fact, determination of the issue must be deferred. United States v. Shortt Accountancy Corp., 785 F.2d 1448, 1452 (9th Cir. 1986); see also United States v. Lewis, 368 F.3d 1102 (9th Cir. 2004); United States v. Nukida, 8 F.3d 665 (9th Cir. 1993). The issue presented is segregable in that it addresses the conduct of the government, not just what evidence may be presented against Creasia. See e.g., United States v. Johnson, 377 F.Supp.2d 689 (N.D.Iowa 2005) (similar motion decided pretrial). The Court will decide the motion prior to trial.
Motion to Dismiss — Due Process Violation
The government asserts that Creasia is expecting false information to be presented at trial. Creasia is not necessarily arguing that false information will be presented, but that the evidence will contradict the prior theory. The government asserts that Creasia's guilt is consistent with the Seattle prosecution. Creasia was not identified as a victim in the Look Back program and was not identified as a victim on the restitution list. The government alleges that Creasia was not victimized by the accountant, Creasia did not believe he was liable for the loan, and Creasia knew the loan was a sham (Creasia never received money from the loan or made any payments on the loan). The essence of the tax cheating was Creasia's creation of a sham partner — Creasia created a sham partner but retained 100% of the income. Creasia also allegedly skimmed from the plumbing business. For a due process violation, the theories must directly contradict — manipulated evidence and argument of inconsistent motives would support a finding of a due process violation. Shaw v. Terhune, 353 F.3d 697 (9th Cir. 2003), opinion amended and superseded 380 F.3d 473 (2004). Unless evidence that Creasia specifically was lied to or defrauded was presented by the government in the Seattle case, the theories don't contradict: although the conduct of the Seattle promoters may have caused some investors to act unknowingly, unless there was specific evidence of such conduct as to Creasia, it does not contradict the theory of this case.
The Court finds that a due process violation has not been shown at this time. If the evidence presented at trial supports a finding that the theories directly contradict, Creasia may re-urge his motion.
Admissibility of Seattle Defendants' Conduct
The Court has heard partial oral argument on this issue on August 23, 2006, and will hear further argument on August 25, 2006. The Court continues to take this issue under advisement.
Accordingly, IT IS ORDERED the Motion to Dismiss — Due Process Violation [Doc. # 53] is DENIED.