Petition for Writ of Certiorari — Abboud v. United States (No. 06-348)
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06-348 SEP 7- 2006
No. OFFICE OF THE CLERK
Hn the
Supreme Court of the Anited States
MICHEL ABBOUD,
Petitioner,
7.
UNITED STATES OF AMERICA,
Respondent.
On Petition for a Writ of Certiorari to the United
States Court of Appeals for the Sixth Circust
PETITION FOR WRIT OF CERTIORARI
James R. WILLIS, Eso.
Oulo Rec. 0032463
Counsel of Record
THe 113 Sr. Craik BurLpina, N.E.
Suire 530
CLEVELAND, OH 44114-1214
(216) 523-1100
(216) 737-7412 Fax
Counsel for Petitioner
Becker Gallagher Legal Publishing, Inc. 800.890.5001
i
QUESTIONS PRESENTED FOR REVIEW
I
WHETHER A REVIEWING COURT, CAN DESPITE
NUMEROUS FLAWS IT DETECTED IN THE SEARCH
WARRANT AFFIDAVIT AND THE WARRANT ITSELF,
NONETHELESS ON THE BASIS OF SEVERAL AD HOC
RESULT-ORIENTED REASONING PATTERNS,
APPROVE AND VALIDATE THE GENERAL
EXPLORATORY SEARCHED THAT WERE
ACTUALLY MADE OF CERTAIN HOMES AND
PREMISES?
Il
WHERE THE “MOTION TO-SUPPRESS” RAISES
FACTUAL ALLEGATIONS RELATIVE TO CONTENT
OF THE SEARCH WARRANT AFFIDAVIT, THE
SEARCH WARRANT ITSELF AND THE
UNREASONABLE INTENSITY OF THE SEARCH; AS
WELL AS, THE WHOLESALE SEIZURES MADE, CAN
THE TRIAL COURT DENY AN EVIDENTIARY
HEARING - -ESPECIALLY WHEN ONE IS EXPRESSLY
REQUESTED?
iil
WAS DUE PROCESS DENIED THE ACCUSED WHEN
THE COURT REFUSED TO EXPRESSLY LIMIT
CERTAIN EVIDENCE, WHICH, IF ADMISSIBLE AT
ALL, WAS NOT ADMISSIBLE AS SUBSTANTIVE
PROOF - - AS IT WAS?
IV
GIVEN THE APPELLATE COURT DETERMINED
COUNSEL FOR THE GOVERNMENT WAS GUILTY OF
MISCONDUCT IN CONNECTION WITH A VICIOUS,
VERY PERSONAL, ARGUMENT DIRECTED AT THE
APPELLANT (AN ARAB-AMERICAN IN THE POST 9-
11 WORLD), CAN THE COURT IN THE POST 9-11
WORLD MAKE THE ARBITRARY DETERMINATION
THAT SUCH CONDUCT WAS NOT FLAGRANT AND
REFUSE TO REVERSE THE CONVICTION?
V
GIVEN THE PETITIONER AND HIS CO-DEFENDANT
WERE GIVEN UNLIMITED ACCESS TO THE FUNDS
CENTRALIZED IN THE BANK FRAUD CHARGES,
CAN IT BE SAiD UNDER THE PECULIAR FACTS
HERE, THE FUNDS WERE }) ".EGALLY “KITED,”
WHICH MADE FOR THE BA®® FRAUD CHARGES
THE PETITIONER WAS CONVICTED OF?
i,
GIVEN THE ABSENCE OF ANY PROOF THOSE
ACCUSED HEREIN SOUGHT TO DEFRAUD OR
OTHERWISE CHEAT THE BANKS, FROM WHOM
THE GOVERNMENT CHARGED THEY STOLE
CREDIT (ACTUALLY REPAID BEFORE THOSE
CHARGES WERE BROUGHT), CAN IT
NONETHELESS BE SAID THEY WERE GUILTY OF
“BANK FRAUD” IN VIOLATION OF 18 U.S.C., §1344?
iil
Vil
WHETHER THE EVIDENCE PRODUCED AGAINST
THIS PETITIONER WAS SUFFICIENT TO SUPPORT A
FINDING OF GUILT BEYOND A REASONABLE
DOUBT.
iV
TABLE OF CONTENTS
PAGE
Questions Presented For Review ..............eeee. i
re re errr re viii
UE cc vecary ceneeeeke dene éieesouueus 1
Statement Of The Grounds On Which The Jurisdiction Of
Pee ee I 5 ox ooh hoc oe Seka eaenes 1
Constitutional And Statutory Provisions ............ 1
Statement Of The Case and Facts ............eee0. 2
Arguments Relied On For Allowance Of Writ ....... 6
Argument No. I:
WHERE THE REVIEWING COURT MAKES
APT DETERMINATIONS, DESPITE GLOWING
ENDORSEMENTS BY THE AFFIANT, THE
MAGISTRATE AND THE DISTRICT JUDGE,
THAT THE AFFIDAVIT FOR THE SEARCH
WARRANT AND THE WARRANT ITSELF
WERE SERIOUSLY FLAWED, CAN THE
COURT NONETHELESS IN THE WAKE OF
SEVERAL AD HOC, RESULT ORIENTED
REASONING PATTERNS APPROVE AND
VALIDATE THE GENERAL AND
EXPLORATORY SEARCHES THAT WERE IN
FACE CO SEE civ ctecscewesenctientes 7
Argument No. II:
WHERE IN A MOTION TO SUPPRESS A
DEFENDANT RAISES FACTUAL
ALLEGATIONS THAT ARE SUFFICIENTLY
DEFINITE, SPECIFIC AND DETAILED TO
ENABLE THE COURT TO CONCLUDE THERE
ARE MATERIAL ISSUES OF FACT GOING TO
THE FACIAL SUFFICIENCY OF THE
AFFIDAVIT AND THE VALIDITY OF THE
SEARCHES AND SEIZURES MADE, AN
EVIDENTIARY HEARING MUST BE HELD... 16
Argument No. ITI:
DUE PROCESS IS VIOLATED WHEN
EVIDENCE OF OTHER CRIMES, WRONGS,
AND ACTS ARE ADMITTED AS SUBSTANTIVE
PES Sc eee ned ereredecnenecectcoentacene 17
Argument IV:
GIVEN COUNSEL FOR THE GOVERNMENT
WAS FULLY AWARE THAT CERTAIN
EVIDENCE WAS NOT PROPERLY ADMITTED
AS SUBSTANTIVE PROOF, COUNSEL’S HEAVY
RELIANCE IN HER SUMMATION ON THIS
EVIDENCE AS “SUBSTANTIVE PROOF” AND
AS “CHARACTER EVIDENCE” WAS DEEMED
MISCONDUCT, THE COURT’S OPINION THAT
COUNSEL’S ACTIONS WERE NOT FLAGRANT
CANNOT SURVIVE MEANING SCRUTINY. ... 20
Vi
Argument V:
GIVEN THE PETITIONER, AND HIS CO-
DEFENDANT, WERE GRANTED UNLIMITED
ACCESS TO THE FUNDS CENTRALIZED IN
THE BANK FRAUD CHARGES INVOLVING
ONE BANK (NCB),AND THIS IN THE WAKE OF
THE ZERO BALANCE ACCOUNTS SYSTEM
SET UP BY THE BANK ITSELF: CAN IT BE
SAID THAT THE CHECKS WRITTEN ON
THESE PARTICULAR ACCOUNTS WERE
KITED, i.e., THE BANK WAS “TRICKED” INTO
EXTENDING THE CREDIT INVOLVED IN THIS
AUTHORIZED USE OF THESE PARTICULAR
DANE FPUNEMS. ccccceseceve eave vndeneemnbaye
Argument VI:
IN THE ABSENCE OF PROOF OF INTENT TO
DEFRAUD, OR OTHERWISE “CHEAT” THE
BANKS INVOLVED, A VERDICT FINDING THE
ACCUSED GUILTY OF “BANK FRAUD” IS NOT
SUPPORTED BY SUFFICIENT EVIDENCE. ..
Argument VII:
WHERE, AS HERE, THE EVIDENCE IS
INSUFFICIENT TO SUPPORT THE
CONVICTION, HERE OF MONEY
LAUNDERING, THE COURT IS REQUIRED TO
REVERSE THE CONVICTION. ..............
er a a a hi ee a
22
. 24
28
Vii
Appendix
Appendix “A” - Order of The United States Court of
Appeals For The Sixth Circuit Denying Petition For
Rehearing En Banc filed June 9, 2006 .......... la
Appendix “B” - Opinion of The United States Court of
Appeals For The Sixth Circuit filed
Pe a as hee eee ee ee kaa awe ed 3a
Appendix “C” - Order of The United States District
Court For The Northern District of Ohio, Denying
Motion to Suppress, filed April 7, 2003 ....... 78a
Vili
TABLE OF AUTHORITIES
PAGE
Illinois v. Gates, 462 U.S. 213 (1983) ............. 9,12
Ornelas v. United States, 517 U.S. 690 (1969) ....... 16
Shepard y. United States, 290 U.S. 96 (1933) ........ 20
State v. Lapase, 57 N.H. 245 (1876) ........ a ee 23
United States vy. Abboud,
438 F. 3d S54 (G” Cie, TORS) nc ccsccccccces. passim
United States v. Crutchfield,
26 F. Beh 1096 CEN Cas FD occ ccccccccccccese 20
United States v. Merriweather,
76. Be GTO is ew ccetccc ccc cccccess 18
United States v. Sanders,
929 F. 28 1466 (107 Cir. 1991) 2... ccc csccccess 30
United States v. Spikes,
156 ©. Be Pre Sac eccccscccccccess 11
United States v. Stahl, 616 F. 2d 30 (2" Cir. 1980) ... 22
United States v. Stone,
954 FF F187 Ge cece ccccccsesss 26, 28
ix
RULES, STATUTES AND OTHER AUTHORITIES
ABA Standards of Criminal Justice (3d. Ed. 1993),
DD cedetéveccondusescoccssidveraveonveweseens 22
Federal Rules of Evidence, Rule 401 ............... 18
Federal Rules of Evidence, Rule 403 ............... 18
Federal Rules of Evidence, Rule 404(a) ............ 20
Federal Rules of Evidence, Rule 404(b) ... 18, 19, 20, 23
BS Unasted Beaten Ce, S5EE .ccccccccccevvcess 2, 6, 11
18 United States Code, §922(g)(1) ..............005. 2
18 United States Code, §1343 ......... ‘ieewes 2, 6, 11
18 United States Code, §1344 ............... 13, 26, 28
18 United States CG EI 6 ce eek 2
18 United States Code, §1344(2) ................... 2
18 United States Code, §1956 ........... : ccawa 2%
18 United States Code, $1957 ......ccccccccces 2, 6, 11
Be Ses Bes CORE, SI 46 6b 0 sv dncseatinest<s 2
26 United States Code, §7206(1) ................... 2
Pg a Rs rr ae nn 6
X
28 United States Code, §7203 .............00.. 2, 6, 11
28 United States Code, §7206(1) .............. 2, 6,11
28 United States Code, §7206(2) (beeen eee ees 2, 6, 11
ze United States Code, SUZS7(3) co cccccccccccccccces 1
United States Constitution, AmendmentIV .......... 2
United States Constitution, Amendment V ........... 2
J
To The Honorable, The Chief Justice And Associate
Justices Of The Supreme Court Of The United States:
The petitioner, Michel Abboud, respectfully prays that a
Writ of Certiorari issue to review the judgment of the United
States Court of Appeals for the Sixth Circuit, entered in this
case on November 29, 2005, and made final by order of that
Court on June 9, 2006 when that Court denied our Motion For
Rehearing and Rehearing En Banc. (See Appendix “‘A,” at p.
1a.)
OPINIONS BELOW
The Opinion of the Court of Appeals (Appendix “B,” at p.
3a) is formally reported as United States v. Abboud, 438 F.
3d 554 (6" Cir. 2005). The District Court Order denying the
_ Motion to Suppress is Appendix “C,” at p. 78a.
JURISDICTION
The judgment of- the Sixth Circuit was entered on
November 29, 2005. A seasonably filed Motion For
Rehearing and Rehearing En Banc was denied on June 9,
2006. This Petition For Writ Of Certiorari is being filed
within ninety (90) days of that date. This Court’s jurisdiction
is invoked under 28 U.S.C., §1257(3).
CONSTITUTIONAL AND STATUTORY PROVISIONS
The principal provisions of the Constitution involved-are:
Amendment IV:
“The right of the people to be secure in their
persons, houses, papers, and effects, against
unreasonable scarches and seizures, shall not be
violated, and no Warrants shall issue, but upon
probable cause, supported by Oath or affirmation, and
particularly describing the place to be searched, and the
persons or things to be seized.”
Amendment VY:
“No person ... shall be compelled in any criminal
case to be a witness against himself...”
STATEMENT OF THE CASE AND FACTS _
Michel Abboud (and his brother Elie Abboud), were jointly
indicted in a Superceding Indictment. They were charged with
21 Counts of Bank Fraud’ (18 U.S.C., §§1344[1] & {2]), 43
Counts of Money Laundering (18 U.S.C., § 1957), and also
with Income Tax Violations (26 U.S.C., $7203). Michel was
separately charged with a failure to file tax return violation (26
U.S.C., §7206{1]). Additionally, Petitioner was indicted for
two (2) weapons charges (18 U.S.C., §922[g][1]), which were
severed and scparately tried. Michel Abboud was convicted on
all offenses.
On the search and seizure issues involved in this case, the
Sixth Circuit’s Opinion is seriously flawed. It starts with the
Court crediting the affiant with representing there was a
probable cause basis for the issuance of this warrant as it was
written. Here, it was said:
The face of the warrant application only listed one
crime, violation of 18 U.S.C. § 1344, on which the
séarch warrant was based. The problem, however, is
the affidavit incorporated to support the finding of
probable cause for this single crime also listed
additional offenses for which the affiant also found
probable cause: violations of 18 U.S.C. §§ 341, 1343,
1956, 1957, and violations of 28 U.S.C. §§ 7201, 7203,
7206(1), 7206(2). Abboud, at 17a.
This Opinion despite holding that no probable cause was
shown for all offenses enumerated above, shows the Court
' The “Bank Fraud” charges in this case involved the National City Bank
(NCB) of Cleveland and Parkview Federal Bank (PVF). The Tr. references
are to the Transcript.
3
somehow convinced itself that the warrant was only issued for
Bank Fraud. Distilled, this finding must be viewed as a
rejection of the District Court’s thesis on the basis of which it
viewed our Fourth Amendment challenges as being unfounded.
It was said:
The point is that we can only speculate as to whether
the magistrate found probable cause with respect to the
additional violations listed in the affidavit. This Court
will not uphold a search warrant based on such tenuous
ground. Abboud, at 23a.
Given this cogent thesis, what makes that Court’s rejection
of our contentions seriously flawed is the further fact that the
Court conceded it was arguable that the “Magistrate” had
simply “rubber stamped” the warrant. This was said after
endorsing the trial Court’s failure to grant us a Hearing
(Abboud, at 24a, n. 4). The fact that we never had an
opportunity to maker any type of showing obviously did not
phase the Court even slightly. And, this despite the fact that
reviewing courts are not supposed to substitute its judgment for
that of the trier-of-the-facts.
The critical facts related to the “check kiting”(i.e., bank
fraud) charges distill from a very simple scenario. Specifically,
the Record shows (in testimony provided by Walter Ryder, an
employee of the Abbouds who testified as a Government
witness), that as to National City Bank (NCB), that the Bank
“itself put the system into play” (Tr., p. 598). It was said:
A: Basically ... [the Bank] said . . . that each of the
individual disbursement accounts . . . the checks
would be written on those accounts. When those
checks came to be presented, they would pay
against the disbursement account and would send us
a report every day, and we would be able to see the
total amount clearing and make a deposit into the
main account to cover that.
Q: And did they also discuss with you the idea that
4
there was some float in there that would enure to
the benefit of the Abbouds?
A: Yes, because the disbursement accounts were
drawn out of National City in Ashland and would
be an additional day of float... . the answer was
yes, they did. ...
* K
Q: And, certainly, they were aware the checks were
coming from Park View to your knowledge?
a; See
Q: And did they ever complain to you during this
entire period of time about what was happening
insofar as the zero balances and how the checking
accounts were being funded? Did they ever
complain to you about that?
A: No. (Tr., pp. 598-601.) (Also see id., pp. 607-
612.)
How these zero balance accounts worked can be gleaned from
this testimony: aoe
Q: ... is it my understanding that on a zero balance
account, the person whose account it is does not
have to make the deposit to cover the checks until
they are informed by the bank that the checks have
been presented for payment?
A: As long as the zero account has controlled
disbursement services.
Q: And the Abbouds have that, is that correct?
A: That’s correct.
* * *
Q: Isn’t it true, when the Abbouds set it up, it was
with the understanding that when they were
notified the check had hit the zero balance
account and they had to make a deposit, they
would be doing it with Parkview Federal
checks?
5
A: Yes. Tr., pp. 828-829. (Also see Id., pp. 831-
832.)
Postured by this salient testimony, it seems clear that only the
Government saw something illegal in these routine
transactions. To be sure, the Record here also shows what was
done at Parkview Federal, the other bank, was likewise done
with full awareness by the bank. This proof flows from the
fact that the Abbouds were depositing customer checks, money
orders cashed in their check cashing business, and cash. These
deposits included checks that had been post-dated that were
involved in their “Cash Advance” program. (Abboud, at 66a-
66b.)
The various checks here referred to were routinely
deposited with Parkview Federal Bank (PVF), where the
Abbouds were very substantial depositors, creditors and
owners, in the sense they owned a considerable quantity of the
Bank’s own stock. The Bank was also shown to have had a
Certificate of Deposit valued at “$500,000 plus” (Tr., pp. 859-
860). And, while the Bank had mortgages on most of the
Abbouds’ properties, the properties represented, with reference
to their banking activities with PVF, a superabundance of
equity that was sufficient to underwrite any shortages. Simply
put, the Bank was satisfied the Abbouds’ holdings were
sufficient to collateralize all of their transactions - - and indeed
they said so (Id., pp. 853-854). (Also see Tr., pp. 1010-1011.)
Here Schimmelman (an executive a PVF) testified he was to be
notified if the Abbouds did not make deposits to cover their
accounts when they went negative. |
Granted, the Abbouds would routinely write checks on the
zero balance accounts at NCB, these would be deposited in
PVF to cover shortages in their PVF accounts. And, the
Abbouds were allowed to make use, again with the Banks’
knowledge and apparent acquiescence, of what was described
as “carryover.” This method resulted in deposits being made
and not being charged until the next day, which obviously was
6
an advantage the Abbouds made use of. (Tr., pp. 576-582.)
ARGUMENTS RELIED-ON FOR ALLOWANCE OF
WRIT
In analyzing the Petitioner’s various contentions, that were
said to show the Affidavit and warrant were sufficiently flawed
to require the suppression called for in the Motion to Suppress,
it seems Clear enough that the Court of Appeals’ thesis simply
cannot be squared with its dispositive rationales on the Fourth
Amendment issues. Reference here is to certain clear and
unambiguous findings, that were made by the Court. Indeed,
the Court aptly concluded “the warrant application only listed
one crime .. . [Bank Fraud], on which the search warrant was
based” (Abboud, at 19a). This the Court then recognized as
a problem because the affiant had “listed” in his Affidavit
additional offenses for which he (the affiant) also found
“probable cause” - - ie., “violations of 18 U.S.C., §§341,
1343, 1956, & 1957 and violations of 28 U.S.C., §§7202, 7203,
7206(1), & 7206(2).” (Abboud, at 19a.) Finding the warrant
flawed, it was stated:
... this Court cannot determine whether the Magistrate
in this case found probable cause for all the violations
listed in the Affidavit or for only the violations listed on
the face of the warrant . . . (Id., 21a.)
What compounds the Fourth Amendment issues all the
moreso is this further quote, that:
With respect to the additional violations contained in
the affidavit but not on the face of the warrant a police
office could not reasonably rely on the affidavit to
validate a search for evidence of these additional
violations. The natural reading of the face of the
warrant was that the affidavit was incorporated only for
the purpose of establishing probable cause for bank
fraud. Moreover, the warrant was unclear as to
whether the magistrate did indeed find probable cause
7
for these additional violations. Law enforcement may
not take advantage of the warrant’s equivocal posture to
illegally seize evidence. . . .With respect to bank fraud
in any year beside 1999, the affidavit’s lack of probable
cause was obvious to the reasonably trained officer.
The affidavit only listed suspicions of check kiting in
these other years. Id., 40a. (Emphasis supplied.)
To be sure then, counsel is not merely confounded further
by the above quotes, actually he is dumb-founded by them. For
how could the Court trivialize the categorical statement
likewise made by them, that no “police officer could . . . rely on
the affidavit to validate a search for evidence of the additional
violations” and still reject our thesis: that the search was
unconstitutional.
ARGUMENT NO. I
WHERE THE REVIEWING COURT MAKES APT
DETERMINATIONS, DESPITE CONTRARY
ENDORSEMENTS BY THE AFFIANT, THE
MAGISTRATE AND THE DISTRICT JUDGE, THAT
THE AFFIDAVIT FOR THE SEARCH WARRANT AND
THE WARRANT ITSELF WERE SERIOUSLY
FLAWED, CAN THE COURT NONETHELESS IN THE
WAKE OF SEVERAL AD HOC, RESULT ORIENTED
REASONING PATTERNS APPROVE AND VALIDATE
THE GENERAL AND EXPLORATORY SEARCHES
THAT WERE IN FACT CONDUCTED.
Simply put, given the issue here as to the reasonableness of
the Magistrate’s conclusion (even when it is inferred, the case
here) that one would keep accouterments and the like that could
be related to the dated “bank fraud” charges centralized in the
Affidavit, the issue was one that deserved being very
specifically corrected on appeal. It was not. Surely that cannot
end the matter. ‘
Because this is so, in our judgment the following
arguments, are dispositive.
A: Since Probable to Search Pertains to the Occurrence
of a Specific Crime (Or Crimes) the Affidavit
Submitted in Quest of a Warrant Must be Examined
to Determine Whether it Set Forth a Constitutionally
Sufficient NEXUS Between the Thing Sought and
Specific Criminality.
A fair distillation of the Fourth Amendment issues in this
case are exposed in their gross proportions from the Opinion
rendered below. Therein, the Court simply ignores the
significance of our request for a Hearing. For a Hearing would
have allowed us to present evidence bearing on certain critical
and dispositive issues raised in the Motion (e.g., those raised in
Ti 7, 9, 12-14, 16, 19-20, 22 and 25-26 of the Motion itself).
Thus it is again being contended that the Affidavit for the
warrant was insufficient on its face, and that it authorized the
general and exploratory searches that were indeed conducted.
It is also being said that illegal and improper seizures were
made. These could have been demonstrated at a Hearing.
Also, it should be noted, and reckoned with, is that the
Affidavit for the warrant to search the Petitioner’s home and his
business premises, for evidence of any Federal crime, was
based on the assumption that there was probable cause to
believe such evidence, although incapable of being
“particularized,” could be located that would tend to prove that
our Petitioner had not only “kited” some checks years before
(i.e., in 1999), and that he had also committed these other
crimes identified in the Affidavit. Significant here, as can be
inferred from the Opinion here being challenged, the affiant
somehow was able to artificially elevate into probable cause to
search a collection of “nebulous, unclad representations,”
which were brazenly coupled with a plethora of naked and
unclad assertions related to the numerous crimes that were
denominated in his Affidavit. (Abboud, at 21a-23a.)
Significant here, the trial Judge was convinced, indeed he said
9
so, that the warrant actually authorized the expansive search the
officers conducted because: the search warrant incorporated the
“Affidavit, which contains nine statutes/criminal offenses”
(Apx. “C,” at p. 4).
Obviously, as put by the Court it was alright to search for
and actually seize every piece of paper on the premises, even
the home premises. This was so because “‘it is reasonable to
believe the evidence of the bank fraud [said to have been
committed two (2) years before and other possible federal
crimes] could be found” on the premises of the businesses
associated with the bank accounts in question. (Abboud, 24a-
25a & 3a-4a.)
The bottom line here is that the failures of the warrant to
limit the searchers to anything that was particularly described
in the warrant (itself) drained, both, the particularity
requirement of the Fourth Amendment and the probable cause
requirement of all their intended significance. Thus, it can be
said this requirement, for all practical purposes, was effectively
nullified.
Simply put then, it seems clear eneugh that any analysis of
the probable cause and the particularity issues must begin with
resolving our query as to whether there were any items that
were particularly described and whether a connection existed
between those items and the “Bank Fraud” charges. Distilled,
the inquiry the District Court and the Sixth Circuit were
required to make focuses on whether the Magistrate who issued
the warrant “had a substantial basis for concluding that a search
would uncover evidence of wrongdoing,” Illinois v. Gates, 462
U.S. 213, at 236 (1983)
B: Where The Affiant Willfully Fails To Include In His
Affidavit Facts That Arguably Could Have Impacted
On The Decision To Issue The Warrant, The Issue Is
One That Cannot Be Resolved On The Basis Of A
General Principled Analysis.
Here, it is beyond dispute the affiant was aware, as was
10
argued in the Motion, that despite the effort to show the
Parkview Federal Bank had loss millions of dollars, the reality
was that institution did not lose a dime. Also, the affiant was
aware National City Bank was only owed a token amount and
even that sum was fully collateralized.
Given then that the “Bank Fraud” charges referred to in the
Affidavit had all supposedly occurred in (a three month span
of) 1999, and given that the Affidavit did not disclose the
Banks involved were fully aware of, and approved in advance
(all the banking transactions), and given further the banking
activities that supposedly made for the alleged “kite” were
covered by overdraft protection, were collateralized and were
a part of a system the banks themselves installed, validated and
knowingly profited from, surely these showings made for facts
and circumstances that were simply not fully reckoned with by
the Courts below. Thus, it follows that these were issues that
could not be resolved, and subsumed as they were in the trial
Court’s rote determination that the Affidavit was facially
sufficient. The same can be said for the ad hoc, result-
oriented, reasoning patterns indulged in by the Sixth Circuit,
that arguably impelled its unwillingness to disapprove of the
wrongs visited on this Petitioner in the wake of these searches.
Here too, it should be noted: the affiant did not claim to
have had any meaningful, or even slight, experience in the
investigation of financial crimes. Yet, he was heralded as being
a seasoned FBI agent (Abboud, at.27a). The Record, of
course, shows this was virtually a new assignment for him.
Indeed, we actually have the Sixth Circuit’s artificially
extolling his “meager” experiences as of the critical date here.
Likewise, of significance to any analysis of the facial
sufficiency of the Affidavit is the Court’s statement that “the
warrant authorized search for records from January 1996 to
May 2002. Yet, despite this statement, in the wake of the legal
wizardry that was resorted to, the warrant was nonetheless held
to be valid with respect to Bank Fraud for a three month period
1]
in 1999.” (Abboud, at 35a).
Indeed, it is out belief, there was no basis for any belief that
physical proof of any identifiable crimes would be in
Petitioner’s home or in his business places. The bottom line
then is there was literally no way any officer executing this
warrant could reasonably know what items could be seized and
which items should not be seized. Of course, had there been a
Hearing, the proof would have showed the officers acted as
though they were empowered to make the wholesale seizure
they made. This is so despite the Sixth Circuit’s assurances
that: “a police officer could not reasonably rely on the Affidavit
to validate a search for evidence of [other] . . . violations” (id.,
p. 40a), i.e., the “additional offenses for which the affiant also
found probable cause: violations of 18 U.S.C., §§341, 1343,
1956, 1957, and violations of 28 U.S.C., §§7201, 7203,
7206(1), 7206(2).” (Id., p. 19a.)
Significant here, our belief is that the Government cannot
have it both ways. The Court can not say in one breath the
affiant was this seasoned agent, whose expertise the Magistrate
rightly relied on in issuing the search warrant (Abboudt p.
26a-28a), and in another breath say no officer could have
reasonably relied on this warrant as it pretains to other crimes
(id., p. 39a-41a).
C: Information In An Affidavit For A Search Warrant
Must Be Based On Facts So Closely Related To The
Time The Warrant Is Issued To Justify A Search - -
Otherwise It Is Stale And The Search Cannot Be
Validated.
In United States v. Spikes, 158 F. 3d 913 (6" Cir. 1998),
our Court had aptly determined that any “question of staleness
depends on the inherent nature of the crime” (id., p. 923). And,
it was said that such things as to the “character of the crime,”
the things to be seized and the places to be searched were
relevant considerations. Indeed, in emphasizing this narrow
point the Court was told the Affidavit referred to bank
12
transactions that had occurred more than two years before.
And, it was contended that the affiant would be unable to
respond when asked: what on earth could he possibly believe
would be secreted in Petitioner’s home. Despite the cogency
of these showings the District Court opined “the Affidavit
expressly incorporated, by reference on the cover of the
warrant, tax crimes up to the date of the search as well as
more recent bank fraud, mail and wire fraud violations”
(Apx. “C,” at n.4.) The Court’s stated position concerning the
warrant having been effectively “incorporated” in the Affidavit
was repudiated. (See Abboud, 20a-22a.) Here, of course, the
problem with the District Court’s flawed incorporation
conclusion that its presence could very well have been what
caused the Magistrate to issue this warrant. And, it could be
that absent its presence the Court could have ruled otherwise.
D: A Valid Warrant It Must Describe The Items
Searched for With Particularity, The Items To Be
Searched For And Seized.
Here, the argument was made that where the Affidavit only
identifies, some broad general category of things to be seized
and leaves the determination to the searching officers whether
any particular item falls in that category, the warrant is
defective. Having said that the bottom line here is that the
issuance of this beleagued warrant also offended a basic
concept that the warrant must be sufficiently definite to enable
the searchers to identify the property it authorizes them to
search for. See Illinois v. Gates, 462 U.S. 213 (1983). Gates
emphasizes the Magistrate’s “action cannot be a mere
ratification of the bare conclusions of other crimes. Id., p. 239.
Here,-the Sixth Circuit, in what can only be an indication
that the Court was truly confounded by certain of our
contentions, actually indulged itself in a result-oriented
reasoning pattern that actually justified the opposite result:
Three scenarios exist as to the magistrate’ s treatment of
the additional violations listed in the affidavit but not
13
on the face of the warrant and found that the
government had shown probable cause for each of the
additional violations. She then either felt that the
incorporation clause was sufficient to incorporate these
additional violations or she failed to recognize that the
additional violations were not listed on the face of the
warrant. Under scenario two, the magistrate reviewed
the additional violations and found that the government
had not shown probable cause for any of the additional
violations on 18 U.S.C. § 1344. She then noticed that
the face of the warrant only listed that violation, and
that the incorporation clause only pertained to the
probable cause for that violation. She signed the
warrant, believing that the basis of the warrant was
solely the violation of 18 U.S.C. §1344. Under
scenario three, the Imagistrate did not review the
additional violations and the asserted probable cause in
the affidavit because the face of the warrant only listed
18 U.S.C. § 1344.
k * *
The point is that we can only speculate as to whether
the magistrate found probable cause with respect to the
additional violations listed in the affidavit. This Court
will not uphold a search warrant based on such tenuous
ground. Abboud, at 21a-22a.
What the above sermon magnifies, is the fact that the
Affidavit is yet to be said to have set forth probable cause to
conduct the expansive searches that were in fact made. In
failing to do so, the Court ignores the awesome fact that it had
specifically had concluded the extensive references to “third
party suspicions of criminal activity on the defendant’s part . .
. by its nature does not rise above mere suspicion insufficient
to sustain a finding of probable cause” (id., 24a-26a).
So postured, what makes the inclusion of the averments
here referred to (that were respectfully dated in 2000, March,
14
2001, July 2001, January 2002, April 2002, and May 2002
[ibid}) so critical, is that it clearly makes for a circumstance
bearing on the Court’s further conclusion that although “the
warrant authorized search for records from January 1996 to
May 2002,” as they saw it “the warrant was only valid with
respect to bank fraud for a three month period in 1999" (id.,
35a), which made the warrant “over broad in this respect”
(ibid).
E: The Court Is Required To Revisit A Ruling Made On
The Motion To Suppress When The Facts Developed
During The Trial Show The Necessity For Such
Action.
Central to this issue was the following testimony rendered
by the affiant:
Q: And isn’t it true [your Affidavit] represented to the
magistrate that you believed or concluded . . . that
{Mr.] Male and Mr. Schimmelman had withheld
information intentionally from National City Bank
and the FBI?
A: There was suspicion of that, yes.
* *
Q: And you also told him that Mr. Male had devised a
scheme to recoup losses to Parkview Federal while
representing to the FBI that there was no loss?
A: That's correct.
* * *
Q: And you also told the Magistrate . . . that Mr. Male
had not provided those guidelines to either of the
Abbouds. Is that correct?
A: Yes.
* * *
Q: Other than the allegations I just made, you made
several allegations to the Magistrate in support of
the affidavit with respect to inappropriate conduct
by Mr. Swaney and Mr. Schimmelman, correct?
15
A: Yes.
***
Q: And as result .. . [you calculated that despite] all
these assumptions with respect to Male and Swaney
and Schimmelman [charges] were, in fact, not
going to be brought .. ..?
A: That’s correct .. .we determined they were not...
[properly characterized in the Affidavit].
Tr., pp. 1427-1431. (Emphasis supplied.) With the above
testimony as a given, counsel argued:
... The agent has just recanted a lot of the critical
averments the Magistrate relied on in issuing that
search warrant, and J think the Court has to revisit that
issue in light of this officer’s testimony. Id., p. 1439.
(Emphasis supplied.)
Significant here, counsel incorporated the entirety of the
questions, of which those quoted above are only a segment, as
providing the specificity required as support for our
revisitation Motion (id., pp. 1440-1441). The Court summarily
denied our Motion (ibid). This the Court did despite the fact
that the Court had to also be aware of the following segment of
testimony (id., pp. 841-842), in which Swaney’s (a high
executive at the Bank), disputed a segment of the Affidavit:
Q: When the search warrants were executed . . .[at the
Bank] did you have an opportunity to read the
affidavit that was attached to the search warrant?
* * *
A: Yes.
Q: And did you have a problem with what was
contained in the affidavit?
A: Yes.
Q: In fact, did you have a problem that in the affidavit
it contained conclusions by Special Agent Morgan
that you and Mr. Mu» «nd Mr. Schimmelman had
16
intentionally withheld information from the FBI
and from National City Bank; isn’t it true that you
disagree with that?
A: Yes.
So that our position will be crystal clear on this point, our
view is that where, as here, the Judge learns facts during the
trial which contradict facts he relied on in denying a Motion to
Suppress, he should revisit the issue in the light of those new
facts.
ARGUMENT NO. II
WHERE IN A MOTION TO SUPPRESS A DEFENDANT
RAISES FACTUAL ALLEGATIONS THAT ARE
SUFFICIENTLY DEFINITE, SPECIFIC AND
DETAILED TO ENABLE THE COURT TO CONCLUDE
THERE ARE MATERIAL ISSUES OF FACT GOING TO
THE FACIAL SUFFICIENCY OF THE AFFIDAVIT AND
THE VALIDITY OF THE SEARCHES AND SEIZURES
MADE, AN EVIDENTIARY HEARING MUST BE HELD.
In Ornelas vy. United States, 517 U.S. 690 (1969), this
Court determined the ultimate question, as to whether the facts
considered by the Court before it endorsed the search was a
mixed question of fact and law and should be subject to an
independent appellate review. Here, of course, it could not be
any Clearer that given the very specific allegations made in the
Motion to Suppress, there is really no way all of those issues
should have been resolved as they were, without a hearing.
This is particularly so with reference to certain very specific
averments that were challenged. Also, issues raised as to the
execution of the warrant and the wholesale seizures
consummated were not resolved. This is so, despite the fact
that these officers seized anything and everything they saw fit.
17
ARGUMENT NO. Iil
DUE PROCESS IS VIOLATED WHEN EVIDENCE OF
OTHER CRIMES, WRONGS, AND ACTS ARE
ADMITTED AS SUBSTANTIVE PROOF.
Evidence is only admissible under the ambit of Rule 404(b)
when deemed admissible on the Record as being relevant to
some purpose other than the character of the defendant or his
propensities. To be sure, no one can possibly argue against the
proposition that the testimony concerning the monies the
Abbouds paid (if you can believe the Government’s evidence)
“under the table” as salary to two of the Government’s
witnesses (and arguably others), showed they committed
countless uncharged federal tax crimes. On the other hand, it
is likewise clear none of the evidence here referred to was
relevant (Rule 401, Federal Rules of Evidence) to the charges
in this case. Indeed, if it was relevant, its probative value was
outweighed by its truly devastating prejudice. See Evidence
Rules 403 and 404(b). But, even more important, the fact that
more than one motion for a mistrial was made in relation to this
evidence is compellingly significant.
This follows, as counsel-opposite conceded, because the
law in our Circuit was clear. Indeed, in United States v.
Merriweather, 78 F. 3d 1070 (6" Cir. 1996), our Court had
actually held that where (as here) a defendant objects to the
introduction of extraneous acts testimony, the prosecution must
State the specific purposes for offering the extraneous acts
evidence was being offered. Of no mean significance here,
Rule 404(b) actually forbids what was done here, i.e., the
introduction of evidence regarding other crimes and the like
when the purpose was to show the character of an accused and
to show that he acted in conformity with that character in
committing the acts charged.
Simply put then, the trial Court failed to pay any heed
whatsoever to our contention that the assailed evidence was not
admissible for any purpose, and that if admissible an instruction
18
was required. So postured, it is compellingly significant that
the Court did not make the findings required of him by Rule
404(b). And, he failed to so instruct the jury. Again, it should
be noted it was for this reason the defense more than once
moved for a mistrial. —— reaihes
To be sure, as the Court noted, there was testimony about
receiving payroll payments “under the table,” or unreported to
the Internal Revenue Service. (Abboud, at 49a-50a.) To be
sure, it should be understood, the Record here does show the
defense repeatedly and adamantly, object (in vain) to the
Government’s production of segments of this evidence (Tr., —
pp. 623-625, 1144-1145 & 1440-1442). What is significant
about the various requests, for limiting instructions, is that a
point was reached where the Government seemed clearly to
understand that perhaps such an instruction ought to be given.
At least this is the spin counsel would put on certain statements
(quoted below) made by counsel-opposite.
Next, it should be further noted that counsel’s concern over
the egregious impact of this evidence was such that he was
moved to incorporate all his objections, and expressed
concerns, in a “Motion for a Mistrial.” Surely this effort was
magnified by the prosecutor’s statement. For here, we were
given proof positive that counsel was aware this evidence was
repeatedly being assailed and was not substantive proof. If it
were otherwise there is no way counsel-opposite would have
advised the Court that: “there is Sixth Circuit law an instruction
should be made every time 404(b) evidence is given and at the
end of the trial... ..” (Tr., pp. 1441-1443.) Later, the
Government argued this so-called 404(b) evidence “showed
that defendants were motivated by greed to avoid their financial
obligations to the IRS .. . [hence] such evidence was
admissible to show their motives in avoiding their tax
obligations in their personal lives.” Our point here, is
magnified by the Sixth Circuit agreeing the Government’s
wilful misuse of this evidence was misconduct. (Abboud,
19
53a-56a.) Yet, despite this condemnation of counsel, the
Court’s harmless error essay barely came short of giving her
absolution.
The sad truth about the quoted statement is that even if this
proof was indeed admitted for this limited purpose, the grim
fact is no one bothered to tell this to the jury. Also, the
brazenness of counsel’s reference to facts designed to besmirch
the Petitioner’s character and “personal” life can be regarded as
persuasive proof that shows not only counsel’s disdain for Rule
404(a) and 404(b), but an apparent belief she cou'd make such
a devastating argument with impunity.
In our view, the Sixth Circuit seems clearly to have ignored
the fact of the emphasis placed on the egregious references to
the Petitioner’s character and his family. See United States v.
Crutchfield, 26 F. 3d 1098 (11" Cir. 1994). Also, it seems
clear enough counsel fully intended, all along, that this proof
should be regarded as negatively impacting on the Petitioner’s
character. Proof this is so will inexorably flow from counsel’s
failed effort to show this assailed proof, and the arguments
made on the basis thereof, did not amount to “character
assassination.”
Given the evidence here being assailed, one is reminded of
what was once Said by a sage from a bygone, but enlightened,
era. Indeed, it was Justice Cardoza, who wrote that: “a trial
becomes unfair if testimony . .. [admitted for one purpose] may
be used . . . as though admitted for a different purpose,
unavoided and unsuspected.” Shepard vy. United States, 290
U.S. 96, at 103 (1933). This tenet makes a point that is most
compelling.
20
ARGUMENT NO. IV
GIVEN THE COURT AGREED COUNSEL’S
RELIANCE, IN HER SUMMATION, ON CERTAIN
EVIDENCE THAT WAS NOT PROPERLY ADMITTED
AS SUBSTANTIVE PROOF TO ASSAIL THE
ACCUSED’S CHARACTER AND OTHERWISE
PERSONALLY DENIGRATE HIM WAS DEEMED
MISCONDUCT, THE CONCLUSION THAT HER ACTS
‘WERE FLAGRANT CANNOT SURVIVE MEANINGFUL
SCRUTINY.
Hopefully it is being understood that the contention being
made here is not limited to the naked fact that the assailed
segments of counsel’s summation were egregiously flawed and
worked to deny our Petitioner a fair trial. Indeed, it is also
being said, particularly in view of counsel’s awareness the
assailed proof did not qualify as substantive proof, that
counsel’s actions were correctly viewed as outright misconduct.
(Abboud, at 53a-56a.) Here, she argued:
Michel achieved the ultimate dream, he was shopping
at Saks Fifth Avenue, sending the children to Hathaway
Brown. It was a good life, but with the American
dream comes responsibilities, and one of the
responsibilities is to file tax returns. The Abbouds
could not be bothered to do that.
We know this was an intentional failure because they
had filed in the past. They knew what their obligations
were, and we also know it because they were cheating
- ona weekly basis with their payroll. Now, that’s not
charged in this case, but it does give you evidence of
what was going on in their minds when they decided
not to file their returns. Tr., pp. 1685-1686.
(Emphasis supplied.)
Clearly the facts as to: (1) whether the Defendant “cheated”
on his taxes, as was said by the prosecutor during her
peroration, “on a weekly basis;” (2) whether the Defendant sent
21
his wife “shopping at Sax Fifth Avenue;” and (3) whether he
sent his children to an exclusive girls’ school (as was likewise
argued by counsel for the Government), were arguments
counsel could not possibly believe she could make with
impunity. This follows because prosecutors, even those for the
Government, are forbidden to use arguments calculated to
flame the passions and prejudices of the jury. Here, of course,
it cannot be said the prosecutor’s comments were not willfully —
crafted.
Further, given the argument that Michel Abboud had
cheated on a “daily basis” on his taxes, even if what was said
about his wife and children was true, who can deny that
counsel’s statements created an unacceptable risk that these
impermissible remarks produced elements of irrationality into
the jury’s decision making process. Here, we have the fact that
“the prosecutor should not make arguments calculated to appeal
to the prejudices of the jury,” ABA Standard, 3-5.8.
Undeniably then, the real vice in counsel’s peroration is that
this was not a mere appeal to a class of bias, the prosecutor
equated the Petitioner’s ability to provide well for his family
with greed, immorality and evil. In so doing, counsel went out
of her way to demonize the accused about things “that had
absolutely nothing to do with defendant’s guilt or innocence.”
United States v. Stahl, 616 F. 2d 30, at 32 (2" Cir. 1980).
Simply put, this was an intemperate appeal to any possible
class bias possessed by the jurors. Arguably, as we see it, the
prosecutor’s colorful and abusive rhetoric was relied on to not
only denigrate the accused, but to form an artificial barrier to
any possible acquittals. We submit these derogatory
insinuations were all the more offensive because it is beyond
dispute that statements of this type have a unique capability to
remain in the juror’s minds and influence their deliberations.
Stull another consideration truly applicable here, is the fact
that being an Arab-American, Michel Abboud was particularly
susceptibie to this type of vicious argument. Indeed, it is this
22
fact that causes us to fully contend the possibility exists these
comments which were not impromptu, were part of an
intentional appeal to an insidious prejudice.
Now, one might ask: why is it the prosecutor cannot make
arguments like the one assailed here? Seemingly it would
make sense to argue, as counsel did, that if Michel Abboud
cheated on his taxes, indeed on a “daily basis,” and yet was able
to do the things it was said he did for his wife and children,
then it makes sense that he probably committed the crimes
charged in the indictment. The answer as to why this type of
argument cannot be made is “plain and decisive: the law is
otherwise.” State v. Lapase, 57 N.H. 245, 275, 299 (1876).
While the trial Court was quite satisfied (and indeed said
so) that Michel Abboud was not wronged by the substantive
admission of what is now being said was 404(b) evidence, the
impact of this evidence cannot be limited to its admission for
the undisclosed purpose belatedly told us (and not the jury),
was the basis for its admission. Indeed, there is really no way
one can overlook the fact of the prosecutor’s summation, in
which she dwelt heavily on this impermissible evidence. For
uS, it is at once clear the only purpose for which this evidence
was even offered was to show Michel Abboud “was an even
worse person” than the Government’s evidence bearing on the
charges may have shown him to be. And, it was offered to
show he was guilty of even more criminal acts than he was
actually charged with - - in fact counsel for the Government
made this precise point.
ARGUMENT NO. V
GIVEN THE PETITIONER, AND HIS CO-DEFENDANT,
WERE GRANTED UNLIMITED ACCESS TO THE
FUNDS CENTRALIZED IN THE BANK FRAUD
CHARGES INVOLVING ONE BANK (NCB),AND THIS
IN THE WAKE OF THE ZERO BALANCE ACCOUNTS
SYSTEM SET UP BY THE BANK ITSELF: CAN IT BE
23
SAID THAT THE CHECKS WRITTEN ON THESE
PARTICULAR ACCOUNTS WERE KITED, ie., THE
BANK WAS “TRICKED” INTO EXTENDING
PETITIONER THE CREDIT INVOLVED.
Significant to the sufficiency issues, is the following
testimony:
Q: Mr. Swaney, after Mrs. Curschman brought to your
attention this alleged check kite, the procedures at
the bank were changed, isn’t that true?
* * *
A: Ultimately they were, yes.
**k *
Q: During the remainder of 1999, 2001, 2002 the
Abbouds continued to make deposits at the bank
and get cash, immediate access to cash, isn’t that
true?
* * *
Q: A.d, it would be fair to say, would it not, that one
of the major concerns discussed in those meetings
was the issue of collateral] by the Abbouds for the
various amounts that the bank clatmed were owed?
A: The issue was collecting the shortage, not the
collateral. Collateral was not an issue.
** +
Q: Allright. You viv ved the collateral just as a means
by which to collect that which you felt was
outstanding?
A: If we needed to use it, yes.
* * *
Q: Well, it was a fact, was it not, that Parkview was
charging the Abbouds approximately 7, $8,000 a
month in fees for the cash that they were using?
* * *
A: Partly for the cag they were using. Again, when
you're culling the overdraft amount, the other part
24
of the charge was the pass-through from National
City Bank, our correspondent bank for wiring bad
checks [cashed by the Abbouds at their stores and
deposited]. Tr., pp. 888-893.
The significance of Swaney’s testimonial references to
comments made by him as to these tapes of two of the bank’s
board meetings that had occurred “in September *99" is quite
compelling. Here he summarizes the Bank’s understanding of
the Abbouds’ “check cashing business.” (ibid).
ARGUMENT NO. VI
IN THE ABSENCE OF PROOF OF INTENT TO
DEFRAUD, OR OTHERWISE “CHEAT” THE BANKS
INVOLVED, A VERDICT FINDING THE ACCUSED
GUILTY OF “BANK FRAUD” IS NOT SUPPORTED BY
SUFFICIENT EVIDENCE.
Regardless of the spin counsel conjures up to say, with
reference to what, and when, the Abbouds were confronted by
the Bank, one thing is clear. Here, counsel must reckon with
the fact that John Schimmelman (the Bank exccutive) did not
testify that he accused the Abbouds of check kiting. Here his
testimony is clear cut, what Schimmelman testified to was: “I
told him that / thought it looked like it might be kiting, and if it
was it was not legal, and it had to stop.” (Tr., p. 997.)
Predictably the Government will again make the effort to
show that the Abboud were indeed relies on the flawed
assertion that the Abbouds were indeed told they were “kiting,”
or misconstrues Schimmelman’s testimony to show (as the trial
Court did) that the “Abbouds” were in fact told that what they
were doing was illegal, the Government’s thesis is fatally
flawed. Indeed, it can no more survive meaningful scrutiny
than can the trial Court’s ill-advised reliance on this asserted
fact as the basis for its dispositive conclusion, on this issue.
Now, as we understand it, to convict the Defendant of Bank
Fraud, 18 U.S.C., $1344, it seems clear that the Government
25
was required to prove they knowingly executed “a scheme to
defraud.” Obviously, as the jury was told, one acts with the
intent to defraud if he acted with the specific intent to deceive,
i.e., for the purpose of causing some financial loss (in this
instance) to the Banks, or for the purpose of bringing some
financial gain to himself. Of course, proof of intent to cheat, or
the lack of any such intent, can arise from the circumstances
surrounding the relationship the parties had with each other.
Here, of course, it is clear National City was aware of the
Abboud’s method of doing business. Indeed, it is beyond
dispute that it was National City that actually crafted, installed
and gave the system (used and relied on by the Abbouds) to the
Abbouds. :
In short, the testimony is undisputed that it was National
City who made it possible for the “float,” centralized in this
_ case, so far as their bank was concerned, to inure to the benefit
of the Abbouds. Thus, the Bank was fully aware how all the
possible aspects of this “float” was to be used, and was used,
for years. So postured, it cannot be said with impunity the
utilization of National City’s Ashland, Ohio affiliate, which the
Bank engineered in order to give the Abbouds this extra day,
was done without the knowledge of the Bank. Nor can it be
said the Abbouds “cheated” National City whenever they relied
on the float.
As to Parkview, the Record here, as well, shows the upper
hierarchy of the Bank was personally and intimately aware that,
for years, the Abbouds were over-drafting their accounts. So
postured, it is also significant that this Record is devoid of
proof that either, Parkview or National City were “tricked” out
of any money. Significant here, in United States v. Stone, 954
F. 2d 1187 (6" Cir. 1992). There the Court noted the check
kite scheme involved was characterized by not being —
“authorized . . . or known to the Bank.” Id., pp. 1192-1193.
Given the Abbouds had the benefit of these zero balance
accounts at National City, and the Bank routinely accepted
26
outside deposits to bring the balance back to zero, an event that
regularly occurred and was approved by the Bank, the question
then is: where is the proof that the people at National City, who
put the system in, and milked it to their benefit for years, were
tricked in any way by the Abbouds? As we see it, there is a
difference between the conduct of the Abbouds and that of
people who engage in kiting checks. Simply put, a check kiter
acts without the knowledge of the Bank. And, there was
nothing done or said by the Abbouds, with reference to
National City, that was surreptitious or hidden; hence, clearly
what they did was not illegal.
As to Parkview, the evidence is clear from John Male (the
Chief Executive Officer), and the other Bank officials who
testified in this case, that they actually approved, and
knowingly profited from, the Abbouds’ banking practices.
(Tr., pp. 965-967) Indeed, it could not be any clearer that
Parkview was fully aware that the various accounts with which
we are concerned were constantly, and unabatedly, in an
overdraft status. (Tr., pp. 1001-1005.) Further, these bankers
also knew ; it that most of the monies used to fund all Of the
Abbouds’ accounts were checks collected in their businesses - -
checks drawn on other financial institutions, cash and the
cverdraft protection, which they sold the Abbouds. Here, in
addition to overdraft protection (Id., pp. 1005 & 1031), the -
Bank was satisfied that their right to off-set, which they could
look to if they ever feared their funds were at risk (id., pp.
1040-1042). This they believed sufficiently protected them.
Obviously then, it is disingenuous for the Government (or
anyone else) to ignore, as they surely will continue to do, that
the Bank itself was insulated from the knowledge of its
officers. Likewise significant here is the fact that clearly the
officials absolutely knew that the Abbouds’ Parkview accounts
were virtually in a perpetual state of overdraft. (Id., 1001-
1005.) Again, the Bank provided the Abbouds instant credit
and charged them for it. It is this awesome fact that points to,
27
and magnifies, the critical flaws in the Government’s proof and
Sixth Circuit’s rationale. Reference here is to the
Government’s failure to show that the various officers who
allowed this practice to continue, and allowed these overdrafts,
were simply “tricked” in some way. It also puts in dispute the
Court’s flawed rationale that the Abbouds’ collateral was
iimited to $500,000.00 (Abboud, p. 70a-71a). The point here
is worth repeating. Despite the Sixth Circuit’s repeated use of
the $500,000.00 figure, the testimony is different. (Tr., pp.
853-854.) Also see id., pp. 883-893, there Swaney testified
that “collateral was not an issue.” (Ibid.)
Next, we deal with certain givens: mere overdrafts do not
rise to the level of a fraud on the Banks, or a misapplication of
their funds under 18 U.S.C., §1344. Again, the Abbouds were
allowed by the Banks tadeal with them in the manner that they
did. This was done for years. Indeed, unlike, the situation in
United States v. Stone, 954 F. 2d 1187 (6" Cir. 1992),
everything that was done here can be characterized as
“authorized . . . or known to the Bank” (id., pp. 1192-1193).
Also, the overdraft activity and the extravagant fees generated
for the Bank were shown by the evidence to be part and parcel
of a lucrative banking policy.
Given then, the absence of any proof the money practices
indulged in by the Abbouds, which the Banks implemented,
were utilized in an effort to defraud the Bank was designed to
cause actual losses to the Bank, it follows the Government’ s
case is truly glaringly flawed. Simply put, there was a gross
failure here to prove the Abbouds had a specific intent to
deceive or cheat the Bank. So postured, certain things are
worth repeating. The banking activities of the Abbouds, and
the activity in their accounts; as well as, their relationships with
other banks, were openly recorded in the records of Parkview,
and arguably National City as well. Their records showed these
things were routinely discussed at Parkview Savings by its
officers and dealt with on a daily basis at these Banks.
28
To be sure, aspects of these daily contacts were recorded in
bank documents, and they were fully and thoroughly discussed
by the bank officers and their Board of Directors. Indeed, these
records were shown to be available at all times to the officer
and the directors. These records were likewise available to the
Bank Regulators and bank employees during the entire time of
the relationship - - i.e., a relationship that had lasted for years.
So postured, it borders on being ludicrous and would be
absolutely flawed for anyone - - including the Government, to
insist the actions of the Abbouds, which had for years actually
been discussed, approved and ratified, were unknown to the
Bank. Given the Bank profited mightily from their
relationship, how were they cheated?
ARGUMENT NO. VII
WHERE, AS HERE, THE EVIDENCE IS INSUFFICIENT
TO SUPPORT THE CONVICTION, HERE OF MONEY
LAUNDERING, THE COURT IS REQUIRED TO
REVERSE THE CONVICTION.
The convictions here for money laundering should have
been reversed because there was insufficient evidence_for the
jury to conclude that Michel Abboud’s actions constituted the
underlying bank fraud or money laundering. Simply put,
evidence is sufficient only if a rational trier of fact could have
found the essential elements of the crime beyond a reasonable
doubt. ,
The money laundering charges in this indictment were
based on the fact that the funds involved in the various banking
transactions centralized in the charges made in the indictment
were laundered. As to this, the law it quite clear. In order to
convict on these laundering charges the Government was
required to prove (1) that Michel Abboud not only conducted
the transactions involved, which is conceded, (2) that he knew
the funds involved were the proceeds of unlawful activity, and
(3) that he knew the transactions were designed to conceal or
29
disguise the nature, location, source, ownership and control of
the proceeds involved.
_ To begin with, our contention is Michel Abboud could not
be guilty of money laundering if he was not guilty of bank
fraud. This follows because in that event the money would not
be proceeds of an illegal activity. The money could not have
been laundered. On the other hand, even if the jury found that
a “bank fraud” occurred, to be guilty the proof must still
establish the accused knew the money was in fact being
Jaundered. Here it is significant, as we see it, that there was a
total lack of proof any of the banking transactions here
involved were performed for the purpose of concealing or
disguising the nature, source, or ownership of the funds. This
follows because clearly the checks drawn on the banks
involving the instant credit, or the overdraft protected
transactions, were not concealed. Indeed, as the Sixth Circuit
determined, the routine deposits, which formed the basis for the
laundering charges included checks, money orders, and the like
that were collected by the Abbouds in their business. The
banks were privy to all aspects of these transactions. Indeed,
the Banks profited by way of fees, interest, and the like, for the
use of their money, and most assuredly were not being
“tricked” - - an essential element of the bank fraud charge. So
postured, even if the Abbouds’ methods in dealing with the
Banks, in the manner with which we are concerned, served to
“launder” funds (as the Government charges), still there is no
evidence Michel Abboud knew these transactions were for the
purpose of laundering the funds. See United States v.
Sanders, 929 F. 2d 1466, at 1471 (10 Cir. 1991). There it
was held that the Government failed to show the accused made
an effort to conceal anything from the Banks.
Further, it is clear that the purpose of the Money
Laundering statute is to reach commercial transactions intended
(at least in part) to disguise the fact that the funds involved
were the product of illegal activity. What, of course, is most
30
critical here is the fact that all the money transactions involved
in the money laundering charges, indeed in even the bank fraud
charges, were open and notorious - - at least as much as the
typical bank transactions can be.
CONCLUSION
To be sure, the following quote from the Sixth Circuit
Opinion is truly perplexing to counsel. Here, the Court
reasoned that even if the search warrant in this case is held to
be defective, the fact is any inappropriate seizures were “based
on reasonable, good faith reliance on the warrant” And, that
would be dispositive. The problem counsel has with that thesis
is “reasonable good faith reliance” on a defective warrant is a
finding of fact which should only be made in the wake of a
resolution of contentions the parties are allowed to make. And
this on the basis of the evidence. Given the Government has
the burden of proof, and given the Government is yet to
concede the search warrant was defective, it hardly seems fair
that the Sixth Circuit could resolve an issue, the Petitioner not
only did not know existed, but they had no input in its
resolution.
To be sure then, at the very least this case should be
remanded for factual findings relative to the good faith issue,
as well as others that clearly have been shown to exist. Not the
least would be the issues that surface from the general seizures
that were made on an admittedly flawed search warrant. Also,
it should not be overlooked that the Sixth Circuit, after
extolling the expertise of the affiant and crediting hin with
having assured the Magistrate that probable cause existed, then
oraculated for us that no “police officer could . . . reasonably
rely on the Affidavit to validate a search for-evidence of these
additional violations” (Abboud, at 40a), these officers acted in
good faith (ibid) and the Petitioner was not prejudiced because
the Court say. so.
Respectfully submitted,
JAMES R. WILLIS, ESQ.
Reg. No. 0032463
Counsel of Record
The 113 St. Clair Building
113 St. Clair Avenue, N.E., Suite 530
Cleveland, Ohio 44114-1214
(216) 523-1100
(216) 737-7412 (Fax)
ATTORNEY FOR PETITIONER,
MICHEL ABBOUD
la
APPENDIX A
a —————
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
No. 04-3943
[Filed June 9, 2006]
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
MICHEL F. ABBOUD,
)
)
)
)
V. )
)
)
)
Defendant-Appellant. )
)
BEFORE: SILER and CLAY, Circuit Judges; and JULIAN
COOK,” District Judge.
ORDER
The court having received a petition for rehearing en
bar~ and the petition having been circulated not only to the
original panel members but also to all other active judges of
* Hon. Julian A. Cook, Jr., Senior United States District Judge for
the Eastern District of Michigan, sitting by designation.
2a
this court, and no judge of this court having requested a vote
on the suggestion for rehearing en banc, the petition for
rehearing has been referred to the original panel.
The panel has further reviewed the petition for rehearing
and concludes that the issues raised in the petition were fully
considered upon the original submission and decision of the
case. Accordingly, the petition is denied.
ENTERED BY ORDER OF THE COURT
/s/ Leonard Green
Leonard Green, Clerk
3a
APPENDIX B
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
Nos. 04-3942/04-3943
- [Filed February 17, 2006]
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
ELIE F. ABBOUD (04-3942) and MICHEL
ABBOUD (04-3943),
Defendants-Appellants.
a
Before: SILER and CLAY, Circuit Judges; COOK, District
Judge.”
OPINION
CLAY, Circuit Judge. Defendants Elie F. Abboud and
Michel Abboud appeal the July 13, 2004 order of the United
* The Honorable Julian A. Cook, Jr., United States District Judge
for the Eastern District of Michigan, sitting by designation.
4a
States District Court for the Northern District of Ohio
convicting and sentencing Defendants for bank fraud in
violation of 18 U.S.C. § 1344(1); money laundering in
violation of 18 U.S.C. § 1957; conspiracy to commit money
laundering in violation of 18 U.S.C. § 371; and failure to file
income tax return in violation of 26 U.S.C. § 7203.
Additionally, the order convicted and sentenced Defendant
Michel Abboud for filing a false income tax return in
violation of 26 U.S.C. § 7206. For the reasons set forth
below, we AFFIRM the convictions on all counts, but we
VACATE Defendants’ sentences and REMAND to the
district court for resentencing.
I. BACKGROUND
A. PROCEDURAL HISTORY
On June 14, 2002, a federal grand jury indicted
Defendants Elie Abboud and Michel Abboud on twenty-seven
counts of bank fraud, one count of conspiracy to commit bank
fraud, forty-four counts of money laundering, and one count
of conspiracy to commit money laundering. On December 11,
2002, a federal grand jury returned a superseding indictment
that added tax charges for both Defendants and firearm
charges against Defendant Michel Abboud. Specifically, the
grand jury charged Defendant Elie Abboud with failure to file
an income tax return in 1999 and 2000. The grand jury
charged Defendant Michel Abboud with filing a false tax
return in 1999, and failure to file a tax return in 2000.
The district court granted Defendant Michel Abboud’s
motion to sever the firearm counts from the other counts.
Defendant Michel Abboud made a pretrial motion to
suppress evidence seized from his home and his businesses.
Sa
On April 7, 2003, the district court denied Defendant’s
motion. With respect to Defendant’s request for an
evidentiary hearing, the district court found that Defendant
did not allege disputed issues of fact. Instead, Defendant made
“general conclusions” and arguments “entirely legal in
nature.” (J.A. at 235.) The district court also found that the
warrant was supported by sufficient probable cause for the
crimes of bank fraud, money laundering, and tax violations.
The district court found that the warrant also met the
particularity requirement with respect to the items to be
seized. The district court ruled that the warrant was not stale,
as it described ongoing criminal activity. With respect to
seizure of items outside of the scope of the warrant, the
district court reasoned that, from a practical perspective, law .
enforcement officers could not be expected to sift through all
documents to exclude those outside the scope of the warrant,
and that, in any case, the warrant was not general in nature.
With respect to Defendant’s claim of omissions from the
search warrant, the district court ruled that Defendant could
not prove deliberateness or recklessness in connection with
the omissions, and even if the omissions were included in the
search warrant, probable cause would have still existed.
On September 5, 2003, the government made a motion in
limine to prevent Defendants from presenting evidence of
selective prosecution at trial. The district court granted the
motion.
On January 20, 2004, the government gave notice of its
intent to offer Rule 404(b) evidence. The district court
admitted this evidence.
On February 17, 2004, the jury found Defendants guilty
on all counts. Defendants filed a motion for a judgment of
acquittal, a motion for a new trial, and a motion for arrest of
6a
judgment. On May 7, 2004, the district court denied these
motions.
With respect to the motion for a judgment of acquittal, the
district court first rejected Defendants’ claim of multiplicity.
Defendants’ claim was that they were impermissibly indicted
for each transaction of the bank fraud scheme. The district
court found that Defendants had waived the argument, as they
had not made a proper pretrial motion. [n addition, the district
court found that the argument was substantively incorrect, as
the statute allowed separate counts for each transaction in the
scheme.
The district court also found evidence sufficient to support
the convictions of bank fraud, money laundering, and tax
violations. The district court rejected Defendants’ argument
that the banks had allowed the practices at issue and that
Defendants had acted in good faith. The district court found
that the money laundering statute did not require concealment
on the part of Defendants. The district court also found that
Defendants failed to raise any issues with respect to the tax
violations.
The district court further ruled that the introduction of
Rule 404(b) “other acts” evidence without a_ limiting
instruction did not require a judgment of acquittal.
The district court reaffirmed its position as to its decision
to deny Defendant Michel Abboud’s motion to suppress.
The district court rejected Defendants’ contention that
expert witness testimony was improperly admitted. The
district court found that Defendants’ arguments went to the
weight and not to the admissibility of the evidence.
7a
With respect to the motion for a new trial, the district
court reaffirmed its decision to exclude Defendants’ evidence
that they were the target of selective prosecution. Specifically,
Defendants alleged that they were targeted because of their
Arab descent in the post-September 11 landscape. The district
court found that Defendants did not make a selective
prosecution claim via a pretrial motion, and that selective
prosecution was not a matter for the jury.
With respect to the motion for arrest of judgment, the
district court found that the government charged and proved
Defendant Michel Abboud’s guilt with respect to his filing of
a false tax return.
On July 13, 2004, the district court sentenced each
Defendant to ninety-seven months of imprisonment, three
years of supervised release, and charged criminal monetary
penalties. Defendants timely filed _— of appeal.
|
B. FACTS |
1. Defendants’ Business Practices
Defendants are brothers who own various “corner stores”
that sell groceries and money orders, and offer check cashing
services.
Donald Slusher (“Slusher”) worked for Defendants from
1994 to 1996. During his employment, Defendants would
instruct Slusher to deposit checks from their accounts into,
other accounts controlled by them. Defendants controlled
seven or eight bank accounts. Slusher deposited the checks
into the various accounts in order to|\cover checks written the
previous day from the accounts. In other words, Defendants
would write a check from Account | on Day |. Defendants
8a
would then have Slusher deposit a check from Account 2 on
Day 2 into Account 1 to cover the check from Day 1.
Defendants determined the check amounts and in which
accounts to deposit which checks. Slusher believed that the
practice was check kiting.’ Slusher had access to the check
registers, and he found that the balances in the accounts were
“very, very low.” (J.A. at 536-37.)
Walter Ryder (“Ryder”) also worked for Defendants,
from 1990 or 1991 to 1999. When Slusher left in 1996, Ryder
inherited Slusher’s banking responsibilities. Defendants kept
a separate book to track the true account balances versus the
account balances shown by the banks, and Ryder was
responsible for maintaining and informing Defendants of this
difference. While the account-balances given by the banks
were usually positive, the actual balances tracked by Ryder
were usually negative.
Defendants gave instructions to Ryder similar to those
given to Slusher. For example, Ryder would “tell [Defendant
Elie Abboud] what the balance at National City [Bank] was,
what needed to be deposited, based on what was clearing that
day, and I would ask what we should deposit that day.” (J.A.
at 555.) Defendant Elie Abboud would then tell Ryder to
deposit a certain amount of money from Parkview Federal
' Check kiting is a systematic scheme to defraud, whereby
nonsufficient checks are traded or cross deposited between two or
more checking accounts in order to artificially inflate the bank
account balances. This is accomplished by using the float time in
the bank system. Once bank accounts are artificially inflated,
checks that would normally be returned for nonsufficient funds are,
in fact, paid or honored by the issuing banks.
(J.A. at 820-21.)
9a
Bank (“PVF”) accounts into the National City Bank (“NCB”)
accounts. Ryder would then deposit various forms of checks,
such as customer checks, rent checks, and checks drawn from
Defendants’ other accounts into the PVF accounts.
Ryder was also responsible for maintaining “Elie’s Special
Report,” which was a summary of the accounts in terms of
bank balance, outstanding checks, and actual book balance.
This report showed that although Defendants’ accounts had
positive bank balances, they had negative actual balances. For
example, on September 1, 1998, the bank balance was
positive $1.3 million, but the actual balance was negative $2.3.
million.
In July of 1999, Defendants told Ryder that PVF had a
policy change that disallowed Defendants from depositing
PVF checks into PVF accounts. As a result, Defendants
instructed Ryder to use accounts at other banks to make
deposits into the PVF accounts.
2. Policy of the Banks
Defendants had zero balance accounts in connection with
a controlled disbursement system with NCB. The zero balance
accounts entailed a system that had two types of accounts: a
main account, and separate disbursement accounts.
Defendants could write checks drawn from the disbursement
accounts. In turn, the disbursement accounts would draw
from the main account. If the main account was negative, then
NCB would ask Defendants to cover the negative amount.
Defendants had zero balance accounts with PVF as well,
although with a different system. Defendants had specific
accounts with PVF for use with their check cashing business.
The mechanics of such an account was that Defendants would
10a
deposit customer checks that they had cashed into an account
on Day 1. PVF would then give “instant credit” to
Defendants, so that they could withdraw the full amount of
the checks deposited on Day 1, even though PVF had not
received credit from those checks. On Day 2, PVF would find
out which checks deposited were actually good and which
were returned by the computer. As a result, a possibility
existed that Defendants’ account would be negative, if
Defendants had withdrawn on Day | an amount that was
greater than the actual amount credited on Day 2.
PVF allowed these accounts to become negative, because
it had $500,000 in collateral from Defendants. If the account
was negative, Defendants on Day 2 had to deposit funds
sufficient to place the balance at zero.
PVF also charged a fee for the “instant credit” given to
Defendants on Day |. This was in connection with expenses
in handling the accounts and for the time value of money.
Defendants also had zero balance accounts with Star
Bank. The policy was similar to that of the NCB controlled
disbursement system in that there was a main account and
disbursements accounts. Defendants could have a negative
balance on the main account, so long as they corrected the
negative balance at the bank’s request.
3. Investigation by the Banks
Elizabeth Curschman (“Curschman”) was an assistant
compliance officer at PVF. On June 29, 1999, Curschman
noticed that Defendants’ accounts had checks being held for
insufficient funds in the amount of $547,000. Curschman then
noticed that Defendants paid funds into the account to cover ~
these checks. Two days later, Curschman noticed two
lla
accounts where checks were being held for insufficient funds,
also in large amounts. Curschman also noticed these checks
were from one PVF account to another PVF account, so-
called “on-us” checks. Curschman expressed her concern to
John Schimmelman (“Schimmelman”), the checking account
supervisor at PVF. The two then organized a meeting with
Defendants to discuss the problem.
At the meeting, Schimmelman asked Defendant Elie
Abboud to explain the heavy transactions for the accounts.
Defendant Elie Abboud could not offer an explanation.
Schimmelman noted that the actual negative balance on PVF
accounts was approximately $1.5 million. Schimmelman
instructed Defendants to separate their checks so that on-us
checks would be processed directly against the accounts.
Schimmelman stated that the transactions looked like check
kiting, and if check kiting was occurring, it had to stop.
Defendant Elie Abboud stated that he had not been involved
in the business recently, and that he would look into the
situation. Defendants also said that they had brought in money
and would bring in more to cover the balance.
After this meeting, Curschman continued to monitor
Defendants’ accounts. Curschman reported that Defendants
began to use checks from other banks to continue to cover the
negative balances. In her opinion, the problem had not
stopped.
Because of the continuing problem, John Male, president
and CEO of PVF, held a meeting with Defendants in the
beginning of September 1999. He told Defendants that he
viewed the activity as check kiting, and the activity had to
stop. The audit committee of PVF met twice to discuss the
situation. Curschman noticed more check kiting activity on
September 30, 1999.
12a
On October 4, 1999, PVF officials held a meeting with
Defendants. Defendants stated that they “had not presented an
accurate picture of their finances” and needed an additional
$1.8 million to cover the actual negative balances of the
accounts. PVF officials decided to lock out Defendants’
accounts. PVF also submitted a suspicious activity report
(“SAR”) to the FBI.
On October 7, 1999, James Muraco (“Muraco”), a NCB
vice president, noticed an overdraft of almost $1.3 million on
Defendants’ accounts. Muraco set up a meeting with
Defendants. Defendant Elie Abboud stated that he had just
started to notice the shortage in the accounts two months
prior. Muraco concluded that the overdraft was the result of
“phony checks” being deposited into the NCB accounts.
Muraco contacted Chris Feczko (“Feczko”), an NCB internal
investigator, and told him about his suspicion that Defendants
were engaged in check kiting. Feczko noticed several “red
flags” that indicated check kiting, such as the cycling of
checks between accounts.
On October 12, 1999, Muraco and Feczco held a meeting
with Defendant Elie Abboud. The purpose of the meeting was
to determine if there was ar: explanation for the activity, and
to see if there was criminal activity occurring. At the meeting, '
Defendant Elie Abboud stated that the bookkeeping functions
of the business had been entrusted to employees, and that he
did not know how the situation had gotten out of hand. He
also stated that he was the one who discovered the problem,
and that he went to PVF to try to solve the problem. NCB
also filed a SAR.
13a
4. Investigation by the FBI
After the FBI received SARs from PVF ari NUB, the FBI
began an investigation of Defendants. The FBI subpoenaed
bank records and analyzed those records usine the Check
Kiting Analysis Software (“CKAS”).
Special Agent Randall Wolverton testified as an expert
witness at Defendants’ trial. He testified as to the general
nature of a check kiting scheme. He testified that he had
examined Defendants’ records and the results of the CKAS
analysis, and he found that Defendants had engaged in check
kiting from June 1999 to August 1999. He based this opinion
on the disproportionate volume of checks written between
Defendants’ accounts in comparison with third party checks.
He also based his opinion on the disparity between
Defendants’ check transaction volume and Defendants’ sales
volume. Finally, Wolverton based his opinion on the
substantial differences between the bank balance and the
actual balance of the accounts.
Special Agent David Morgan testified as to the “bleeding”
of the kite, whereby Defendants would extract funds from the
artificially inflated accoun:s. He testified specifically with
respect to the transactions from June 1999 to August 1999.
Defendants were making cash withdrawals, loan payments,
and money order payments with the money from the check
kite.
Defendant Elie Abboud stipulated that in 1999 and 2000
he had income in excess of the statutory threshold so that he
was required to file a tax return for those years.
14a
Defendant Michel Abboud stipulated that in 2000 he had
income in excess of the statutory threshold so that he was
required to file a tax return for that year.
The government presented evidence that Michel Abboud
did not report gambling winnings on his income tax return for
1999. The government also presented evidence that Defendant
Michel Abboud did not report income from his businesses in
that year.
Il. DISCUSSION
A. THE DISTRICT COURT DID NOT ERR WHEN IT
REJECTED DEFENDANTS’ MULTIPLICITY
CLAIM
1. Preservation of the Issue
Under Federal Rule of Criminal Procedure 12(b}(2), a
defense or objection “based on defects in the indictment or
information,” other than jurisdictional objections, must be
raised by pretrial motion. If a defendant does not make such
a motion, the defense or objection is waived, but the court
may grant relief from the waiver for cause. Fed. R. Crim. P.
12(f).
A conflict exists in this Court’s precedent on the issue of
whether a defendant who does not raise a claim of multiplicity
before trial waives the claim not only with respect to the error
in the indictment but also to the error affecting substantive
rights. One line of cases has found that where a defendant
fails to make a pretrial motion claiming multiplicity in the
indictment, the defendant waives not only the claim based on
the technical correctness of the indictment, but also the claim
of multiplicity based on substantive rights, such as duplicative
15a
sentencing. The seminal case for this line is United States v.
Woods, 544 F.2d 242 (6th Cir. 1976). There, the defendants
argued that they had been incorrectly indicted and convicted
of multiple counts of narcotics possession, when all of the
narcotics seized were at the same location and from the same
shipment.’ Jd. at 250-51. The Court found that because the
defendants had not made a pretrial objection to the
indictment, their claims, including the claims of improper
multiple sentences, were waived. Jd. at 251. This view has
been the more prevalent in the recent jurisprudence of this
Court. See United States v. Hart, 70 F.3d 854, 859-60 (6th
Cir. 1995); United States v. Colbert, 977 F.2d 203, 208 (6th
Cir. 1992) (finding waiver of the defendant’s claim of
improper multiple sentences for multiple counts of perjury).
Under the opposing line of cases, this Court has found that
waiver of a claim of error of multiplicity in the indictment
was not a waiver of a claim of error affecting substantive
rights. This line is rooted in United States v. Rosenbarger,
536 F.2d 715 (6th Cir. 1976). The defendant in that case was
a felon, and police found three guns in his home. /d. at 718.
He was convicted for three counts of being a felon in
possession of a firearm. /d. at 717. The Court vacated the
convictions and sentences for two counts, because it found
- multiple gun possession amounted to only one violation of
being a felon in possession of a firearm, unless the firearms
were stored at different locations or acquired at different
times. /d. at 721. The government argued that the defendant
? The indictment separated the narcotics counts by the varying
strength of the narcotics in hydrochloride form. For example,
Count 12 charged possession of cocaine hydrochloride with a
strength of 15.8, and Count 15 charged possession of cocaine
hydrochloride with a strength of 32.7. /d. at 250 n.4
l6a
waived his multiplicity challenge by failing to make a pretrial
motion. /d. The Court responded:
The Government maintains that Fed. R. Crim. P. 12
should be applied in this case. Rule 12, provides, inter
alia, that if the defense of multiplicity is not raised
prior to trial, it is waived. The argument that one
waives his right to object to the imposition of multiple
sentences by his failure to object to the multiplicitous
nature of an indictment is a non sequitur. Rule 12
applies only to objections with regard to the error in
the indictment itself, the effect of Rule 12 is that
dismissal of a miultiplicitous indictment is not
required; however, if sentences are imposed on each
count of that multiplicitous indictment the defendant is
not forced to serve the erroneous sentence because of
any waiver.
Id. at 721-22 (emphasis supplied). Although the defendant in
Rosenbarger could not object to the indictment, he could
object to the resulting substantive error of multiple sentences
in violation of the Double Jeopardy Clause. This view has
been acknowledged by the Court, both in the multiplicity
‘context, see Moody v. United States, 580 F.2d 238, 239 (6th
Cir. 1978), and in the duplicity context, see United States v.
Adesida, 129 F.3d 846, 849 (6th Cir. 1997) (holding that a
defendant who fails to object to a duplicitous indictment, /.e. ,
an indictment that charges two crimes under the same count,
waives his challenge as to the technical error in the indictment
but not to the substantive error with respect to his right to a
unanimous jury verdict for each crime).
These two lines of cases directly conflict and cannot be
- reconciled. Because this Court decided Rosenbarger before
Woods, Rosenbarger controls. See Salmi v. Secretary of
17a
Health & Human Services, 774 F.2d 685, 689 (6th Cir. 1985)
(“A panel of this Court cannot overrule the decision of
another panel. The prior decision remains controlling
authority unless an inconsistent decision of the United States
Supreme Court requires modification of the decision or this
Court sitting en banc overrules the prior decision.”).
The question then becomes whether Defendants made any
substantive objections to the multiplicity in the indictment. In
both the motion for judgment on acquittal and the briefs
before this Court, Defendants only object to the form of the
indictment: “It is clear that rather than charge the Defendants
in one count . . . the Government instead charged separate
and distinct transactions as separate counts.” (J.A. at 294.)
Defendants never claim violation of a substantive right, such
as sentences in violation of double jeopardy. As a result,
Defendants waived their claim of multiplicity with respect to
the indictment.
2. Analysis
Even assuming Defendants did not waive the claim of
multiplicity, the claim lacks merit. Section 1344 of Title 18 of
the United States Code makes illegal each execution or
attempted execution of bank fraud. The circuits have been
consistent in the determination that each check in a check
kiting scheme is an execution or attempted execution, and
thus each check may be charged in a separate count. United
States v. Sirang, 70 F.3d 588, 596 (11th Cir. 1995); United
States v. Schwartz, $99 F.2d 243, 248 (3d Cir. 1990); and
United States v. Poliak, 823 F.2d 371, 372 (9th Cir. 1987).
In an unpublished opinion, this Court affirmed that view.
United States v. Lucas, 68 F.3d 475, 1995 WL 598403, at *4-
5 (6th Cir. Oct. 10, 1995) (unpublished decision). We
likewise find that each check in a check kiting scheme is an
18a
execution or attempted execution of bank fraud and may be
charged in a separate count.
B. THE DISTRICT COURT DID NOT ERR IN
DENYING DEFENDANT’S MOTION TO SUPPRESS
1. Preservation of the Issue
Defendant Elie Abboud did not join Defendant Michel
Abboud’s motion to suppress. A motion to suppress evidence
must be made before trial. Fed. R. Crim. P. 12(b)(3)(C). If
a defendant does not make such a motion, he waives the
claim. Fed. R. Crim. P. 12(f). As a result, Defendant Elie
Abboud waived his claim with respect to the evidence in
question in Defendant Michel Abboud’s motion to suppress.
Thus, we consider this claim only with respect to Defendant
Michel Abboud.
2. Standard of Review
When reviewing a district court’s denial of a motion to
suppress, the Court reviews factual findings for clear error
and legal conclusions de novo. United States v. Gillis, 358
F.3d 386, 390 (6th Cir. 2004) (citing United States v. Harris,
192 F.3d 580, 584 (6th Cir. 1999)).
3. Analysis
a. Incorporation of the Affidavit
The instant case presents a unique issue with respect to the _
incorporation of the affidavit into the search warrant. The
application for the search warrant in this case stated:
I David P. Morgan being duly sworn depose and say:
19a
I am a Special Agent of the Federal Bureau of
Investigation and have reason to believe that on the
property of premises known as ATTACHMENT A
in the Northern District of Ohio there is now
concealed a certain person or property, namely SEE
ATTACHMENT B
which is
Property that constitutes fruits, evidence, and
instrumentalities of crimes against the United States,
concerning violation of Title 18 United States code,
Section 1344. The facts to support the finding of
Probable Cause are as follows: See attached Affidavit
hereby incorporated by reference as if fully restated
herein.
(J.A. at 128.) The face of the warrant application only listed
one crime, violation of 18 U.S.C. § 1344, on which the
search warrant was based. The problem, however, is the
affidavit incorporated to support the finding of probable cause
for this single crime also listed additional offenses for which
the affiant also found probable cause: violations of 18 U.S.C.
§§ 341, 1343, 1956, 1957 and violations of 26 U.S.C.
§§ 7201, 7203, 7206(1), 7206(2).
The question then becomes whether the warrant, in this
specific form, was valid for a search for evidence of all of
these crimes, as opposed to valid only with respect to
evidence of a violation of 18 U.S.C. § 1344. The district
court answered in the affirmative: “[Tjhe affidavit, expressly
incorporated by reference on the cover of the warrant, sets
forth evidence of tax crimes up to the date of the search, as
well as more recent bank fraud and mail and wire fraud
—_—_—— Ss
20a
violations.” In response, Defendant erroneously claims that
the search warrant does not contain an incorporation clause at
all. The government does not even address the issue of
incorporation in its brief to this Court.
We disagree with the district court and find that the
incorporation clause was insufficient to incorporate the
additional violations into the search warrant, and, as a result,
the search warrant was only valid for evidence with respect to
18 U.S.C. § 1344. The Court’s jurisprudence with respect to
incorporation of an affidavit into a search warrant almost
exclusively addresses the particularity or prebable cause
requirement of a search warrant. See, e.g., United States v.
Watkins, 179 F.3d 489, 494 (6th Cir. 1999) (incorporation of
an affidavit to provide sufficient particularity of place
searched); and United States v. Blakeney, 942 F.2d 1001,
1024 (6th Cir. 1991) (incorporation of an affidavit to provide
probable cause). This Court has not addressed whether an
affidavit incorporated for the purpose of supporting probable
cause of a single violation may also be incorporated to
establish probable cause for additional violations not listed on
the face of the warrant but for which the affiant professes
probable cause.’ Despite the lack of directly controlling case
law, several factors: militate in favor of disallowing such a
broad incorporation of the affidavit.
The natural reading of the search warrant is that the
affidavit was incorporated only to show probable cause for
violation of 18 U.S.C. § 1344. There is absolutely no
* The dearth of case law on this point in all likelihood stems from
the fact that law enforcement officers customarily list on the face of
the search warrant all of the violations for which they seek
evidence.
2la
indication on the face of the warrant that the affidavit was
incorporated to show probable cause for the additional
violations. We could foresee an incorporation clause that
would have such effect; for example, if the face of the
warrant stated, “See attached Affidavit hereby incorporated
for the violations and underlying probable cause that
constitute the basis of the search warrant.” The search
warrant in this case, however, only states:
Property that constitutes fruits, evidence, and
instrumentalities of crimes against the United States,
concerning violation of Title 18 United States code,
Section 1344. The facts to support the finding of
Probable Cause are as follows: See attached Affidavit
hereby incorporated by reference as if fully restated -
herein.
(J.A. at 128.) The affidavit is only referenced to establish
probable cause for a violation of 18 U.S.C. § 1344.
More importantly, this Court cannot determine whether
the magistrate in this case found probable cause for all of the
violations listed in the affidavit or for only the violation listed
on the face of the warrant. The government bears the burden
of showing probable cause in connection with a search
warrant. Fed. R. Crim. P 41(c); United States v. Weaver, 99
F.3d 1372, 1377 (6th Cir. 1996). Only if the magistrate finds
probable cause can she issue a search warrant. Fed. R. Crim.
P. 41(c); Weaver, 99 F.3d at 1377. In this case, the only
certainty is that the magistrate found probable cause with
respect to the violation of 18 U.S.C. § 1344.'
* Of course, a possibility exists that the magistrate “rubber
stamped” the warrant, in which case the entire warrant would be
22a
Three possible scenarios exist as to the magistrate’s
treatment of the additional violations listed in the affidavit.
Under scenario one, the magistrate reviewed the additional
violations listed in the affidavit but not on the face of the
warrant and found that the government had shown probable
cause for each of the additional violations. She then either felt
that the incorporation clause was sufficient to incorporate
these additional violations or she failed to recognize that the
additional violations were not listed on the face of the
warrant. Under scenario two, the magistrate reviewed the
additional violations and found that the government had not
shown probable cause for any of the additional violations but
had shown probable cause for violation of 18 U.S.C. § 1344.
She then noticed that the face of the warrant only listed that
violation, and that the incorporation clause only pertained to
the probable cause for that violation. She signed the warrant,
believing that the basis of the warrant was solely the violation
of 18 U.S.C. § 1344. Under scenario three, the magistrate did
not review the additional violations and the asserted probable
cause in the affidavit because the face of the warrant only
listed 18 U.S.C. § 1344.
We cannot say that one scenario is more likely than the
others. The government may argue that Attachment B, listing
items to be seized, indicates that the magistrate found
probable cause with respect to the other violations; for
example, the list includes “[{c]opies of all tax returns prepared
on behalf of the above mentioned businesses and individuals,”
(J.A. at 119), so that the list evidences that the magistrate
invalid. United States v. Frazier, 423 F.3d 526, 537 (6th Cir.
2005). Defendant, however, has the burden to show such
miscouduct, United States v. Rodriguez-Suazo, 346 F.3d 637, 649
(6th Cir. 2003), and he has not produced any such evidence.
23a
found probable cause with respect to the tax violations. This
item, however, can also be construed as evidence of a
violation of 18 U.S.C. § 1344, bank fraud. In other words,
the government sought these income tax returns not to show
the individual Defendants violated income tax laws, but to
show disparities between paper and actual wealth as evidence
of the check kiting scheme. In fact, all of the evidence of
these additional crimes could also be construed as evidence of
bank fraud.
The point is that we can only speculate as to whether the
magistrate found probable cause with respect to the additional
violations listed in the affidavit. This Court will not uphold a
search warrant based on such tenuous ground.
We are sympathetic to the argument that, in practical
terms, Defendant was on notice of the additional violations
and the evidence for these additional violations overlapped
with the evidence of the violation of 18 U.S.C. § 1344. This
argument, however, misses the point in that notice of
evidence to be seized does not cure a lack of a probable cause
determination.
We also recognize that the exclusionary rule is meant to
deter police snisconduct: “The exclusionary rule was adopted
to deter uniawful searches by police, not to punish the errors
of magistrates and judges.” J/llinois v. Gates, 462 U.S. 213,
263, 103 S. Ct. 2317, 76 L. Ed. 2d 527 (1983) (White, J.,
concurring in the judgment). The government may argue that
the magistrate erred when she did not clearly state for which
violations she had found probable cause. We are more
inclined to view the case as one of applicant error; the
applicant simply forgot or otherwise failed to list the
additional violations on the face of the warrant. As the party
seeking the search warrant, the applicant maintains the
24a
responsibility of clearly setting out the violations for which he
is searching for evidence. Specifically listing the additional
violations on the face of the warrant would have required a
minimal effort, and the resulting clarity would have made
such effort worthwhile.
-Moreover, while the record does not indicate any
misconduct on the part of law enforcement in this case, a less
than imaginative mind could conjure a scenario where law
enforcement purposely placed hidden violations in the
affidavit in order to bootstrap these violations to the
magistrate’s probable cause determination. A better rule
would be to require the applicant to list the violations on the
face of the search warrant or, if incorporating an affidavit, to
require the applicant to make clear with the incorporation
clause on the face of the application that the affidavit contains
the relevant violations.
As a result, we find that the magistrate approved the
search warrant only with respect to the violation of 18 U.S.C.
§ 1344.
b. Probable Cause
The Fourth Amendment requires probable cause for
searches and seizures. U.S. Const. amend. IV. “Probable
> We will proceed with the following caveat: although the warrant
was not approved for the independent search of evidence for the
additional violations, it does not follow that all evidence of these
additional violations found during the search must be suppressed.
As stated, supra, an overlap exists between evidence lawfully
obtained through a search based on violation of 18 U.S.C. § 1344
and evidence of the additional- violations. We will explain the
ultimate consequences below.
- a
25a
cause has been defined as ‘reasonable grounds for belief,
supported by less than prima facie proof but more than mere
suspicion.’” United States v. Padro, 52 F.3d 120, 122-23 (6th
Cir. 1995) (quoting United States v. Bennett, 905 F.2d 931,
934 (6th Cir. 1990)). “To demonstrate probable cause to
justify the issuance of a search warrant, an affidavit must
contain facts that indicate a fair probability that evidence of a
crime will be located on the premises of the proposed
search.” United States v. Frazier, 423 F.3d 526, 531 (6th Cir.
2005) (internal quotations and citation omitted). Probable
cause is based on the totality of the circumstances; it is a
“practical, non-technical conception that deals with the factual
and practical considerations of everyday life.” Jd. (internal
quotations and citation omitted). When reviewing probable
cause, the Court may only look within the four corners of the
affidavit. /d. (citation omitted). Additionally, the Court should
give great deference to a magistrate’s determination of
probable cause. United States v. Allen, 211 F.3d 970, 973
(6th Cir. 2000) (quoting Spinelli v. United States, 393 U.S.
410, 419, 89S. Ct. 584, 21 L. Ed. 2d 637 (1969)) (en banc).
i. The Violation
Because we find that the magistrate approved the warrant
only with respect to bank fraud, we will limit our probable
cause analysis to that violation. The affidavit stated more than
sufficient probable cause for the charge of bank fraud in
1999. The FBI conducted a check kiting analysis for a three-
month period in 1999. The analysis revealed that during the
three months, Defendants made $300 million in deposits to
their various accounts, and 85% of these deposits were kited
-funds. This analysis demonstrates probable cause for check
kiting violations in 1999.
26a
On the other hand, the affidavit does not establish
probable cause for bank fraud via check kiting in subsequent
years.° The affidavit lists the following evidence:
(1) In 2000, Metropolitan Bank filed a Suspicious Activity
Report (“SAR”) concerning Defendants’ accounts.
(2) In March 2001, Curschman noted suspicious activity with
respect to Defendants’ accounts.
(3) In July 2001, a security officer at FirstMerit Bank became
suspicious of activity in Michel Abboud’s account.
(4) In January 2002, Curschman discovered Michel Abboud
was using a bank account in violation of previously
established guidelines. ,
(5) In April 2002, PVF filed a SAR concerning Defendants’
accounts.
(6) In May 2002, Merchant Express Money Order
(“MEMO”) severed its relationship with Defendant Elie
Abboud, and MEMO incurred a loss.
Even when considered cumulatively, the above-referenced
evidence does not meet the threshold of probable cause. Most
of the evidence recites a third party’s suspicion of criminal
activity on Defendants’ part. This evidence by its nature does
° We recognize’. the indictment only charged the defendants with
bank fraud with respect to the three-month period in 1999. This
fact, however, is irrelevant as to whether the affidavit stated
probable cause for seizure of evidence of bank fraud outside of this
period.
27a
not rise above mere suspicion insufficient to sustain a finding
of probable cause.
ii. Nexus with the Location Searched
The probable cause inquiry of whether an individual
committed a crime is related but distinct from the probable
cause inquiry for a search warrant. Blakeney, 942 F.2d at
1025. “To demonstrate probable cause to justify the issuance
of a search warrant, an affidavit must contain facts that
indicate a fair probability that evidence of a crime will be
located on the premises of the proposed search.” Frazier, 423
F.3d ai 531. Defendant’s argument that there was no nexus
between the locations searched, his home and his businesses,
and the evidence sought is w.thout merit. One does not need
Supreme Court precedent to support the simple fact that
records of illegal business activity are usually kept at either a
business location or at the defendant’s home. Likewise,
personal financial records are also usually stored at a person’s
home or place of business.
Defendant's claim that these were conclusory statements
based on the affiant’s “meager experience” misses the mark;
the affiant is a seasoned FBI Special Agent whose primary
concentration is in financial crimes. Certainly his insight as to
the probable location of the evidence of the crimes in this case
cannot be denigrated as “pathetic averments,” as Defendant
so states. (Michel Abboud Def.’s Br. 14.) Quite the contrary,
the magistrate correctly relied on the affiant’s experience in
his assessment of the probable location of the evidence.
c. Staleness
The probable cause required for a search warrant “‘is
concerned with facts relating to a presently existing
28a
condition.’” United States v. Spikes, 158 F.3d 913, 923 (6th
Cir. 1998) (quoting W. LaFave, Search and Seizure § 3.7 at
338 (3d ed. 1996)). “Thus, the critical question is whether the
information contained in the affidavit, when presented to the
. . . Judge, established that there was a fair probability that
fevidence] would still be found at [the location of the
search}.” /d. In other words, a warrant is stale if the probable
cause, while sufficient at some point in the past, is now
insufficient as to evidence at a specific location.
The staleness inquiry is tailored to the specific
circumstances in each case. Id. (citing Sgro v. United States,
287 U.S. 206, 210-11, 53 S. Ct. 138, 77 L. Ed. 260 (1932)).
“[T}he length of time between the events listed in the affidavit
and the application for the warrant; while clearly salient, is
not controlling.” /d. It is possible that even if a substantial
amount of time had elapsed between “a defendant’s last
~ reported criminal activity” and the issuance of the warrant,
the warrant had not become stale. /d.
This Court has outlined several factors to consider when
analyzing staleness:
(1) “the character of the crime (chance encounter in the night
or regenerating conspiracy?)”
(2) “the criminal (nomadic or entrenched?)”
(3) “the thing to be seized (perishable and easily transferrable
or of enduring utility to its holder?)”
(4) “the place to be searched (mere criminal forum of
convenience or secure operational base?).”
29a
Id. (quoting Andresen v. State, 24 Md. App. 128, 331 A.2d
78, 106 (Md. Ct. Spec. App. 1975)).
As explained above, the affidavit set forth sufficient
probable cause with respect to bank fraud in 1999 but not
with respect to any subsequent year. The question then
becomes whether this probable cause had become stale, as the
magistrate issued the warrant in 2002. By applying the factors
listed above, we find that the probable cause was not stale
when the magistrate issued the warrant.
i. The Character of the Crime
The bank fraud alleged in the affidavit was not a one-time
occurrence but was rather a systematic transfer of funds
between accounts held by Defendants. According to the FBI
analysis for the period of June 1, 1999 to August 31, 1999,
Defendant Michel Abboud alone was the signer of 1,276
checks involved in the check kite, with a total value of about
$ 89 million.
The Court has found that “[e]vidence of ongoing criminal
activity will generally defeat a claim of staleness.” United
States v. Greene, 250 F.3d 471, 481 (6th Cir. 2001). In
Greene, the magistrate issued a search warrant on January 8,
1999. Id. at 475. The search warrant was based on
information supplied by an informant, who had last purchased
narcotics at the defendant’s house in February 1997; however,
he had purchased narcotics at least twelve times at the
defendant’s house. /d. at 476. The Court found that the
continuous and ongoing nature of the illegal activity was a
sufficient answer to the defendant’s claim of staleness. /d. at
481.
30a
Likewise, in this case, the affidavit stated that Defendant
Michel Abboud engaged in bank fraud numerous times during
a three-month period in 1999. While the affidavit did not list
sufficient probable cause for any time after 1999, so as to
establish a continuous criminal enterprise from 1999 to the
issuance of the warrant in 2002, this Court’s jurisprudence
suggests that ongoing criminal activity at a given time may be
sufficient to defeat a claim of staleness. See id. at 481; see
also United States v. Canan, 48 F.3d 954, 959 (6th Cir.
1995) (finding ongoing activity at the defendant’s house four
years prior to the issuance of the search warrant was sufficient
to defeat a claim of staleness).
ii. The Criminal
The affidavit supported the fact that Defendant was
entrenched. Defendant owned multiple convenience stores in
the Cleveland area. Defendant owned a home in the area.
There was no indication that Defendant moved from place to
place, so as to decrease the probability of finding evidence at
a given location.
iii. The Thing to be Seized
The search warrant sought almost exclusively business and
personal financial records from Defendant. This Court has
found that old business records could reasonably be expected
to be found at the defendant’s home or place of business.
United States v. McManus, 719 F.2d 1395, 1400-01 (6th Cir.
1983). In McManus, the magistrate issued a search warrant on
January 7, 1985 in comnection with tax violations for the
years 1977, 1978, and 1979. In finding that the warrant was
not stale, the Court stated, “It certainly would be reasonable
for a magistrate to conclude that on January 7, 1980,
defendant’s business records for the years 1977, 1978, and
3la
1979 would be found at either his place of business or his
residence. . . . ‘[Business records] are . . . the sort which
could be reasonably expected to be kept there for long periods
of time.’” Id. at 1401 (quoting United States v. Freeman, 685
F.2d 942, 952 (Sth Cir. 1982)).
This Court has found that business records are a type of
evidence that defy claims of staleness. See United States v.
Word, 806 F.2d 658, 662 (6th Cir. 1986); United States v.
Brownderville, 1999 U.S. App. LEXIS 18343, No. 98-1374,
1999 WL 618067, at *4 (6th Cir. Aug. 2, 1999); see also
United States v. Singh, 390 F.3d 168, 182 (2d Cir. 2004);
United States v. Farmer, 370 F.3d 435, 439-40 (4th Cir.
2004); United States v. Ninety-Two Thousand Four Hundred
Twenty-Two Dollars and Fifty-Seven Cents, 307 F.3d 137,
148 (3d Cir. 2002).
We agree that in this case, the magistrate was correct in
believing that business and financial records with respect to
1999 would still be at Defendant’s home or businesses in
2002. As the Third Circuit viewed the situation, “where the
items to be seized are created for the purpose of preservation,
as are business records, the passage of time is . . . less
significant.” /d.
iv. The Place to be Searched
The affidavit requested the search of Defendant’s home
and businesses. The bank fraud alleged centered around
Defendant’s check cashing transactions conducted at these
business locations. Furthermore, the affiant stated that
business records were usually kept at home. These locations
are not “mere criminal foruim!s] of convenience;” but rather,
the locations are at the heart of the criminal charge.
32a
vy. Conclusion
All factors weigh against a claim of staleness. We are
especially persuaded by the fact that by nature one keeps
business and financial records for extended periods of time.
The entire point in creating such records is for preservation.
As a result, the warrant was not stale.
d. Omission of Material Facts
Defendant claims the affiant omitted material facts from
the affidavit, thus skewing the magistrate’s probable cause
calculus. We disagree.
In Franks v. Delaware, the Supreme Court created
procedural protections for a defendant who claimed that the
affidavit supporting the probable cause of a search warrant
contained intentional or reckless falsehoods. The Court stated
that it presumed the validity of the affidavit in support of the
search warrant. 438 U.S. 154, 171, 98 S. Ct. 2674, 57 L.
Ed. 2d 667 (1978). The burden is on the defendant to show
such falsehoods in the affidavit. /d. If the defendant meets this
burden, then the question becomes whether the affidavit is
sufficient to support probable cause without the falsehoous.
/d. If it is sufficient, then the warrant is valid. /d. at 171-72.
If it is insufficient, then the defendant is entitled to a hearing
concerning the probable cause in the affidavit. /d. at 172.
This Court has interpreted Franks to include omissions. Hale
v. Kart, 396 F.3d 721, 726 n.4 (6th Cir. 2005) (citing Mays
v. City of Dayton, 134 F.3d 809, 815 (6th Cir. 1998)).
Defendant claims three omissions: (1) PVF had not lost
the millions of dollars as claimed in the affidavit; (2)
Defendants’ accounts were fully collaterized; and (3) the
banks involved knew of and approved of Defendants’ actions.
33a
We agree with the government that the evidence contained
in (1) and (2) was not omitted in the affidavit. With respect to
(1), paragraphs 20-23 of the affidavit detailed transfers made
by Defendants to cover the negative balances in their checking
accounts. With respect to (2), paragraph 17 of the affidavit
stated that PVF had a positive equity position against
Defendants’ collaterized real estate and that PVF also held
$500,000 of stock belonging to Defendants.
We agree with Defendant that the affidavit did not state
that the banks involved knew of and approved of Defendant’s
actions with respect to the check kiting system. As explained,
infra, however, we disagree with Defendant’s contention that
the banks in fact approved of the check kiting scheme. As a
result, no harm occurred from this fact’s omission from the
affidavit, and Defendant was not entitled to a Franks hearing.
e. Particularity
The Fourth Amendment requires that a search warrant
“particularly describ[e] the place to be searched, and the
persons or things to be seized.” U.S. Const. amend. IV. This
requirement prevents a “‘general order to explore and
rummage through a person’s belongings.’” Blakeney, 942
F.2d at 1026 (quoting United States v. Cook, 657 F.2d 730,
733 (Sth Cir. 1981)). “The degree of specificity required
depends on the crime involved and the types of items sought.”
Id. (citing United States v. Henson, 848 F.2d 1374, 1383 (6th
Cir. 1988)).
In this case, law enforcement sought business and
financial records in connection with bank fraud. In a business
fraud case, the authorization to search for general business
records is not overbroad. United States v. Henson is
instructive in this regard. There, the defendants were charged
34a
and convicted of mail fraud and giving, or causing to give, a
false odometer statement. 848 F.2d at 1376. The defendants
were involved in a scheme of purchasing late model, high
mileage cars and then tampering with the odometers. /d. The
search warrant authorized the search for “any and all
records” in connection with the businesses utilized in the
scheme, as well as the records of the individual defendants.
Id. at 1382.
This Court upheld the validity of the warrant:
In the instant case, although the warrant uses generic
terms, [the law enforcement officer] could not have
known at the time he applied for the warrant what
precise records and files would contain information
concerning the odometer-tampering scheme. “Where
the precise identity of the goods cannot be ascertained
at the time the warrant is issued, naming only the
generic class of items will suffice.” The description in
the warrant is directed toward items likely to provide
information concerning the [defendants] involvement
in the . . . scheme and therefore did not authorize the
officers to seize more than what was reasonable under
the circumstances.
Id. at 1383 (citation omitted). In this case, the warrant was
specific in terms of the items to be seized; for example, it
listed “[l]ogs or ledgers that reflect the recording of banking
activity,” “[aJll bank statements, deposit slips, withdrawal
slips, official checks, money orders, cancelled checks, wire
transfers and other documents for any and all bank accounts,”
and other specific forms of records. (J.A. at 118-21.)
Moreover, like in Henson, the law enforcement agents in this
case could not have known the precise documents and records
Defendants utilized in the check kiting scheme. The items
35a
listed in the warrant were items “likely to provide
information” about Defendants’ check kiting scheme. A more
specific alternative did not exist to the search warrant’s list of
items to be seized.
The problem, however, is the time frame the warrant
allowed with respect to these records. The warrant authorized
search for records from January 1996 to May of 2002;
however, the warrant was valid only with respect to bank
fraud for a three-month period in 1999, see supra. The only
reference to 1996 in the affidavit is the fact that Defendants
first began a relationship with the head teller at PVF’s
Rockside branch in that year, a trivial fact. The first
documented suspicion began on June 29, 1999. The FBI
conducted a check kiting analysis for a three-month period in
1999. As stated, supra, insufficient evidence is listed in the
affidavit to support probable cause for any subsequent years.
The warrant was overbroad in this respect. “Failure to
limit broad descriptive terms by relevant dates, when such
dates are available to the police, will render a warrant
overbroad.” United States v. Ford, 184 F.3d 566, 576 (6th
Cir. 1999) (citations omitted). Here, law enforcement knew
that the evidence in support of probable cause in the affidavit
revolved only around a three-month period in 1999; the
authorization to search for evidence irrelevant to that time
frame could well be described as “rummaging.”’
’ We do not find that the search warrant was only valid for records
from June, July, and August of 1999. A degree of flexibility is
required, because evidence that dated from outside of the time
period mv be relevant to the activity within the time period. For
example, evidence of continued check kiting in September and
October in 1999 after warnings from bank officials would be
evidence of bad faith; however, evidence from 1996 or 2002 is
Se
36a
The question then becomes what relief Defendant is
entitled to from this overbroad warrant. The Court has held
that the entire warrant need not be invalidated: “Our finding
of overbreadth . . . does not require suppression of all of the
items seized pursuant to the warrant. We believe the proper
approach to this dilemma is to sever the infirm portion of the
search warrant from the remainder which passes constitutional
muster.” Blakeney, 942 F.2d at 1027. Thus, all evidence
seized irrelevant to the three-month period in 1999 should
have been suppressed, while evidence relevant to this period
should be upheld.
Defendant’s problem, however, is that he was only
charged with and convicted of bank fraud for the three-month
period in 1999. As a result, Defendant cannot show prejudice
from the overbreadth of the warrant. The properly seized
evidence, along with the government’s evidence from other
sources, proved beyond a reasonable doubt that Defendant
had committed bank fraud for the three-month period in 1999.
Of most significance, Defendant never denied committing the
acts that constituted the bank fraud; his defense was that the
bank officials allowed the acts in question and that his actions
ws “e in good faith. See infra. This defense was not negated
by the introduction of the illegally seized evidence, but
instead was negated only by the testimony of the bank
officials. As a result, the introduction of evidence seized
pursuant to the overbroad portion of the warrant was harmless
error.
Clearly irrelevant.
37a
f. Reexamination of the Motion to Suppress
Defendant urges this Court to reexamine the district
court’s decision on the motion to suppress. His argument is
based on his perceived inconsistency between the affidavit and
the affiant’s testimony at trial, and testimony at trial that
contradicted the affidavit.
We disagree with Defendant that the affiant’s testimony at
trial contradicted the affidavit. In his testimony, the affiant
expressly affirmed what he stated in the affidavit; he testified
that when hé spoke to the magistrate, he stated that he
believed or concluded that certain bank officials intentionally
withheld information, and that one bank official devised a
scheme to recoup the losses of Defendants’ scheme without
informing the FBI of any losses. The affiant later testified that
charges were not brought against these bank officials.
The cogency of Defendant’s argument is somewhat
suspect; Defendant seems to be asserting that because charges
were not brought against the bank officials, the affiant was
less than forthright in his statements to the magistrate that the
bank officials were withholding information from the FBI. If
this is the case, then Defendant’s argument fails; the fact that
the bank officials were not prosecuted does not necessarily
mean that the affiant lied to the magistrate when he stated that
he suspected dishonesty on the part of the bank officials. In
fact, Defendant’s own cross-examination insinuated that these
charges were not brought because of the bank officials’
cooperation with Defendant’s prosecution, not because the
charges were baseless.
Defendant then relies on the trial testimony of Keith
Swaney, an officer at PVF, where Swaney stated that he
disagreed with the affiant’s statement in the affidavit that the
38a
bank officials intentionally withheld information from the
FBI. Again, Defendant stems to argue that the affiant lied to
the magistrate. As explained above, to obtain a Franks
hearing, Defendant has the burden to prove the falsehoods
made in the affidavit. The mere fact that a bank official
disagreed with the affidavit is insufficient to meet this burden.
g. Evidentiary Hearing
Defendant challenges the district court’s refusal to hold an
evidentiary hearing in connection with the motion to suppress.
The district court based its decision on the fact that
Defendant’s arguments were “entirely legal in nature,” and
thus did not require a hearing.
The district court’s decision was correct. An evidentiary
hearing is required “only if the motion is sufficiently definite,
specific, detailed, and non-conjectural to enable the court to
conclude that contested issues of fact going to the validity of
the search are in question.” United States v. Downs, 1999
U.S. App. LEXIS 835, No. 96-3862, 1999 WL 130786, at *3
(6th Cir. Jan. 19, 1999) (citing United States v. Unimex, Inc..,
991 F.2d 546, 551 (9th Cir. 1993)) (emphasis supplied).
In his brief in support of his motion to suppress,
Defendant for the most part did not contest factual issues; he
contested the legal conclusions drawn by the magistrate from
the facts. Under subpoint I, Defendant argued that the facts
were insufficient to support probable cause; this contests a
legal conclusion. Under subpoint II, Defendant argued that
the affidavit omitted material information; however, as
explained, supra, this argument was simply incorrect and did
not require an evidentiary hearing. Under subpoint III,
Defendant argued that the probable cause was stale; this too
was a Challenge to a legal conclusion. Under subpoints IV, V,
39a
and VI, Defendant argued that the warrant was overbroad,
another legal challenge. Defendant did not contest any facts,
nor did he offer previously unheard facts. Simply put,
Defendant did not agree with the magistrate’s legal decision
based on the facts. This type of disagreement is not resolved
through an evidentiary hearing. As a result, the district court
did not err in its decision not to grant an evidentiary hearing.
h. Good Faith Execution of a Search Warrant
Even if a search warrant is defective, the Court will not
suppress evidence seized pursuant to such warrant if the
seizure was based on reasonable, good faith reliance on the
warrant. United States v. Frazier, 423 F.3d 526, 533 (6th Cir.
2005) (citing United States v. Leon, 468 U.S. 897, 905, 104
S. Ct. 3405, 82 L. Ed. 2d 677 (1984)). The Supreme Court
explained the mechanics of the good faith exception:
[O]ur good-faith inquiry is confined to the objectively
ascertainable question whether a reasonably well
trained officer would have known that the search was
illegal despite the magistrate’s authorization. In
making this determination, all of the circumstances--
including whether the warrant application had
previously been rejected by a different magistrate--
may be considered.
Leon, 468 U.S. at 922-23 n.23. The rationale behind the
exception is that the exclusionary rule is meant to deter
unlawful police conduct. See supra. This policy of deterrence
is not served by the exclusion of evidence seized in good faith
by the police. Leon, 468 U.S. at 918-19.
On the other hand the good faith exception does not apply
in the following specific circumstances: “1) the supporting
40a
affidavit contained knowing or reckless falsity; 2) the issuing
magistrate wholly abandoned his or her judicial role; 3) the
affidavit is ‘so lacking in probable cause as to render official
belief in its existence entirely unreasonable;’ or 4) where the
officer’s reliance on the warrant was neither in good faith nor
objectively reasonable.” Frazier, 423 F.3d at 533 (quoting
Leon, 468 U.S. at 923).
With respect to the additional violations contained in the
affidavit but not on the face of the warrant, a police officer
could not reasonably rely on the affidavit to validate a search
for evidence of these additional violations. The natural
reading of the face of the warrant was that the affidavit was
incorporated only for the purpose of establishing probable
cause for bank fraud. Moreover, the warrant was unclear as
to whether the magistrate did indeed find probable cause for
these additional violations. Law enforcement may not take
advantage of the warrant’s equivocal posture to illegally seize
evidence.
With respect to bank fraud in any year besides 1999, the
affidavit’s lack of probable cause was obvious to the
reasonably trained officer. The affidavit only listed suspicions
of check kiting in these other years.
i. Prejudice
The ultimate question then becomes what harm Defendant
has suffered from the iilegality of the warrant. The record is
less than clear as to what evidence seized through the warrant
was actually used at Defendant’s trial. See Blakeney, 942
F.2d 1001, 1027 (hiking that the defendant did not suffer
prejudice when the evidence illegally seized was not
introduced at trial). For purposes of this analysis, we will
presume the widest use of the illegal evidence.
4la
As stated earlier, the warrant was only valid with respect
to bank fraud, and only bank fraud in 1999. This means that
evidence with respect to the year 2000 should have been
suppressed, possibly implicating Defendant’s conviction for
violation of 26 U.S.C. § 7203, failure to file an income tax
return in 2000. Unfortunately for Defendant, he stipulated to
the fact that he did in fact make the threshold amount
~ triggering the requirement to file a tax return. His only
defense was lack of intent, which was negated by the
government without use of any evidence seized via the
overbroad search warrant. See infra. As a result, the
admission of any of this illegal evidence would have been
harmless error with respect to Defendant’s conviction for this
charge.
Also, with respect to Defendant’s conviction for violation
of 26 U.S.C. § 7206, filing a false income tax return in 1999,
the conviction rested on two forms of evidence: (1) evidence
of a failure to report gambling income, and (2) evidence of a
failure to report income from his businesses. The evidence
listed in (1) was not seized pursuant to the warrant, and the
evidence seized in (2) could properly be characterized as
evidence of bank fraud legally obtained under the warrant.
The evidence seized with respect to the 1999 bank fraud
charges was valid; therefore, the Court affirms these
convictions. Furthermore, the evidence for the 1999 money
laundering charges completely overlapped with the evidence
for the 1999 bank fraud charges. The evidence of transfers in
the amount of $ 10,000 or more for the relevant period show
both the “bleeding” of the check kite, which is relevant
evidence to the charges of bank fraud, and money laundering
in violation of 18 U.S.C. § 1957. Because the jury only
considered legally obtained evidence with respect to money
laundering, the convictions stand. Likewise, the evidence of
42a .
bank fraud and conspiracy to commit money laundering
completely overlap, and this conviction stands.
C. WHETHER THE DISTRICT COURT ERRED IN
GRANTING THE GOVERNMENT’S MOTION IN
LIMINE THAT PREVENTED DEFENDANTS FROM
PRESENTING EVIDENCE OF SELECTIVE
PROSECUTION
1. Preservation of the Issue
Federal Rule of Criminal Procedure 12(b){1) requires that
“[dJefenses and objections based on defects in the institution
of the prosecution” must be raised by a pretrial motion. Rule
12(f) states that failure to make such a pretrial motion resuits
in waiver of the defense or objection; however, the Court
may grant relief from the waiver for cause. Fed. R. Crim. P.
12(f).
Here, Defendants did not make a 12(b)(1) motion based
on selective prosecution before trial and thus waived the
issue. Therefore, the district court did not err in preventing
Defendants from presenting evidence of this waived defense
at trial.
2. Standard of Review
This Court reviews the district court’s evidentiary rulings
for an abuse of discretion. United States v. Taplin, 954 F.2d
1256, 1258 (6th Cir. 1992) (citation omitted).
3. Analysis
As stated above, Defendants waived the defense of
selective prosecution. Independent of the waiver, the district
43a
court’s motion in limineé was correct because the defense of
selective prosecution is a matter that is independent of a
defendant’s guilt or innocence, so it is not a matter for the
jury. As the Third Circuit stated: |
By both tradition and constitutional mandate the jury
is given the responsibility of determining guilt or
innocence according to instructions of law delivered’.
by the court. The question of discriminatory
prosecution relates not to the guilt or innocence of
appellants, but rather addresses itself to a
constitutional defect in the institution of the
prosecution.
United States v. Berrigan,482 F.2d 171, 175 (3d Cir. 1973).
Thus, a “defense” of selective prosecution is a matter for the
court, not the jury.
We wholeheartedly agree with Defendants’ argument that
cross-examination plays a vital role in the adversarial system
of our country, and the ability to show bias, motive, or
prejudice on the part of a witness is an integral part of cross-
examination. Defendants, however, seem to conflate the
concepts of witness bias and selective prosecution. Witness
bias speaks to “‘the reliability of the witness.’” Delaware v.
Van Arsdall, 475 U.S. 673, 680, 106 S. Ct. 1431, 89 L. Ed.
2d 674 (1984) (quoting Davis v. Alaska, 415 U.S. 308, 318,
94 S. Ct. 1105, 39 L. Ed. 2d 347 (1974)). When one exposes
bias, motive, or prejudice of a witness, one is calling into
question the credibility of that witness’ testimony. Selective
prosecution is a separate and distinct claim that the defendant
has been unconstitutionally selected for prosecution.
44a
Defendants made clear in the memorandum in opposition
of the motion in limine that the cross-examination sought was
to establish selective prosecution:
In fact, Defendant’s goal sought from the full cross-
examination of the witnesses is to support his defense
that, for a number of years he had conducted his
business activities with bank direction and approval
and without governmental interference or objection;
that, prior to September 11, 2001, the SAR of
November, 1999, led to no criminal prosecution; and,
that subsequent to September 11, 2001, the
Government, in violation of Defendant’s constitutional
rights, initiated the instant matter as a result of
Defendant’s ethnicity.
(J.A. at 262.) Surprisingly, Defendants fully admitted that the
purpose of the cross-examination was not to test the reliability
of the witnesses, but instead to present a defense of selective
prosecution. As stated earlier, selective prosecution is not an
issue for the jury, so the district court correctly granted the
motion in limine.
D. WHETHER THE DISTRICT COURT ERRED IN ITS
TREATMENT OF 404(b) EVIDENCE THAT
DEFENDANTS PAID EMPLOYEES “UNDER THE
TABLE” ;
1. Standard of Review
This Court reviews the district court’s legal determination
that the evidence was admissible for a legitimate purpose de
novo. United States v. Merriweather, 78 F.3d 1070, 1074 (6th
Cir. 1996) (citing United States v. Johnson, 27 F.3d 1186,
1190 (6th Cir. 1994)). The Court reviews the district court’s
45a
determination that the probative value was not substantially
outweighed by the unfairly prejudicial effect for abuse of
discretion. /d.
2. Analysis
The district court did not err when it admitted evidence
that Defendants paid employees under the table.
a. Legal Framework
Federal Rule of Evidence 404(b) states:
Evidence of other crimes, wrongs, or acts is not
admissible to prove the character of a person in order
to show action in conformity therewith. It may,
however, be admissible for other purposes, such as
proof of motive, opportunity, intent, preparation,
plan, knowledge, identity, or absence of mistake or
accident, provided that upon request by the accused,
the prosecution in a criminal case shall provide
reasonable notice in advance of trial, or during trial if
the court excuses pretrial notice on good cause shown,
of the general nature of any such evidence it intends
to introduce at trial.
Moreover, even if the “ other acts” evidence js relevant, if the
probative value is substantially outweighed by its unfair
prejudice, the district court may exclude the evidence. Fed.
R. Evid. 403.
This Court has outlined a four-step process for the
admission of Rule 404(b) evidence. First, the proponent of the
evidence must identify the specific purpose of the “other acts”
evidence. Merriweather, 78 F.3d at 1076. Second, the district
46a
court must de<:de whether the identified purpose is at issue in
the case. Jd. at 1076-77. Third, if the purpose is at issue, the
district court must weigh the probative value against the
danger of unfair prejudice. /d. at 1077. Finally, if the district
court admits the evidence, it must then clearly instruct the
jury as to the specific purpose for which the jury may
consider the evidence. /d.
b. The Evidence Presented
The government offered the testimony of two employees
of Defendants. They testified that they received their wages
in the form of legitimate checks and cash, as “under the
table” payments.
c. Application to This Case
i. Purpose
The government’s purpose in offering evidence that
Defendants paid employees “under the table” was to show
willfulriess, motive, and absence of mistake.
ii. Whether the Purpose was in Issue
The violations of failing to file a tax return and filing a
false tax return require strict willful conduct. See 26 U.S.C.
$§ 7203, 7206. As explained by this Court:
The word “wilifully,” as used in this statute, means a
voluntary, intentional violation of a known legal duty.
In other words, the defendant must have acted
voluntarily and intentionally and with the specific
intent to do something he knew the law prohibited,
that is to say, with intent either to disobey or to
47a
disregard the law. Negligent conduct is not sufficient
to constitute willfulness.
United States v. Tarwater, 308 F.3d 494, 510 (6th Cir. 2002)
(emphasis supplied). Because of the complexity of the tax
system, tax law is one of the few areas where the Supreme
Court has held that ignorance cf the Jaw is a defense. Cheek
v. United States, 498 U.S. 192, 199-200, 111 S$. Ct. 604, 112
L. Ed. 2d 617 (1991). If the defendant has a good faith belief
that he was not violating tax law, the defendant cannot be
found guilty of a tax violation, even if the good faith belief is
unreasonable. /d. at 202.
In this case, willfulness and absence of mistake were in
issue with respect to the tax violations. During pretrial
discussions, Defendants presented a good faith defense in that
the failure to file and the underreporting were caused by
sloppy bookkeeping and the illness of an employee.
The government sought to present evidence of “under the
table” payments to attack Defendants’ good faith defense. The
record is clear that Defendants knew of their tax obligations
with respect to the payment of employees, as Defendants
partially complied by paying a portion of the salaries by
checks with proper withholdings. Defendants admit that “they
committed countless uncharged federal tax crimes.” (Elie
Abboud Def.’s Br. 29.) The government’s implication was
that because Defendants had willfully violated tax laws with
respect to payment of employees, Defendants also willfully
violated tax laws with respect to the failure to file and the
underreporting.
The government also sought to present the evidence to
show motive. The government’s theory was that Defendants’
motive in perpetrating the check-kiting scheme was based on
48a
cash flow problems Defendants were experiencing. The
implication was that Defendants’ under the table payments
were evidence of this cash flow problem.
iii. Probative Value Versus Unfair Prejudice
The government argued that evidence that Defendants
willfully violated the tax laws with respect to the payment of
employees was probative as to Defendants’ willfulness in
connection with the failure to file a tax return and the
underreporting of income. We agree.
In United States v. Jerkins, the Court found that the
district court did not abuse its discretion when, in a tax
evasion case in connection with the sale of illegal drugs, it
admitted evidence that the defendant had made late filings
with respect to his 1969, 1970, and 1971 tax returns. 871
F.2d 598, 604 (6th Cir. 1989). The Court found that for
“other- acts” evidence, “the prior acts generally must be
relevant to a matter at issue and must be substantially similar
to, and near in time to, the offense charged in the
indictment.” /d. In that case, the Court found that the failure
to file tax returns and the evasion of income tax were
sufficiently similar in nature and occurred in close proximity
to each other. In this case, the acts of payroll tax violations
and income tax return violations are substantially similar so
that the district court did not abuse its discretion in the
admission of the evidence.
With respect to prejudice, the testimony provided by the
government’s witnesses was sufficiently succinct so as to
minimize prejudice. Testimony from former employee Donald
Slusher was limited to two questions concerning the form of
his payment. Likewise, testimony from former employee
Walter Ryder was limited to four questions concerning the
49a
form of his payment, and the line of questioning concerning
the record keeping of the payroll disbursements was
sufficiently limited.
Defendants contend that the district court did not properly
weigh the evidence in accordance with Rule 403 in that the
court did not offer an explanation on the record for its
decision. The failure of the district court to make findings on
the record with respect to its 404(b) decision does not
necessitate remand. If Defendants requested the district court
to make such findings on the record, then the district court
must do so. United States v. Acosta-Cazares, 878 F.2d 945,
950 (6th Cir. 1989) (citing United States v. Robinson, 700
F.2d 205, 213 (Sth Cir. 1983)). The record does not show
that Defendants made such a request at any point; as a result,
their claim must fail.
iv. Limiting Instruction
Defendants’ key argument with respect to the district
court’s 404(b) decision is that the district court did not offer
a limiting instruction to the jury, so that the evidence was
used as substantive evidence of guilt against Defendants. In its
decision denying Defendants’ motion for a new trial, the
district court stated, “Defendants requested a limiting
instruction under Federal Rule of Evidence 404(b) which was
denied by the Court. They contend that the Court erred by
allowing the introduction of this evidence without a limiting
instruction and that the Jury could have considered it as
50a
substantive evidence* tending to prove the income tax charges
....” (A. at 368.)
The district court’s conclusion that “admission of this
evidence without a limiting instruction does not require an
entry of judgment of acquittal,” (J.A. at 369), was not
entirely correct. As stated, supra, the district court must give
a limiting instruction with 404(b) evidence. If the error was
not harmless, then we cannot sustain the tax convictions.
Strangely, although the district court stated in its decision
denying a new trial that it did not give limiting instructions
with respect to the 404(b) evidence, in fact the district court
gave such instructions. When the evidence was introduced at
trial, the district court told the jury:
Ladies and gentlemen of the jury, you have heard
testimony that the . . . Defendants committed some
acts other than the ones charged in the indictment.
You cannot consider this testimony as evidence that
the Defendants committed the crimes that they are on
trial for now. Instead you can only consider it in
deciding whether . . . they acted willfully or not by
mistake or by accident.
You may also consider it in connection with the
Defendants’ motives. These Defendants are on trial
only for the crimes charged in the indictment, not of
other acts. Do not return a guilty verdict unless the
® We note that 404(b) evidence, if admissible, is substantive
evidence; in this case, the 404(b) evidence was substantive evidence
of intent, lack of mistake, and motive.
Sla
Government proves the crime charged beyond a
reasonable doubt.
(J.A. at 539-40.) At the end of the case, the district court
repeated its instruction:
You have heard testimony that the Defendants
committed some acts other than the ones charged in
the indictment. You cannot consider this testimony as
evidence that either of the Defendants committed the
crimes that each is on trial for now.
Instead, you can only consider it in deciding whether
it evidences proof of motive, opportunity, intent,
preparation, plan, knowledge, identity, or absence of
mistake or accident.
Remember that the Defendants are on trial only for
the crimes charged in the indictment, no other acts.
Do not return a guilty verdict unless the Government
proves the crimes beyond a reasonable doubt.
(J.A. at 1008.) The record-clearly indicates that the district
court gave the proper limiting instructions to the jury not
once, but twice. Defendants’ reliance on the district court’s
language in its decision to deny a new trial is understandable
but misplaced. Having complied with this Court’s
requirements, the district court’s admission of 404(b)
evidence was not error.
52a
E. THE GOVERNMENT ENGAGED _IN
PROSECUTORIAL MISCONDUCT IN_ ITS
CLOSING ARGUMENT, BUT THE MISCONDUCT
WAS NOT FLAGRANT
1. Standard of Review
Because Defendants did not object to the alleged
misconduct at trial, this Court reviews for plain error. United
States v. Wright, 343 F.3d 849, 861 (6th Cir. 2003) (citing
United States v. Collins, 78 F.3d 1021, 1039 (6th Cir. 1996)).
“*To establish plain error, a defendant must show (1) that an
error occurred in the district court; (2) that the error-was
plain, i.e., obvious or clear; (3) that the error affected
defendant’s substantial rights; and (4) that this adverse impact
seriously affected the fairness, integrity or public reputation
of the judicial proceedings.’” /d. (quoting United States v.
Koeberlein, 161 F.3d 946, 949 (6th Cir. 1998)).
2. Analysis
a. Legal Framework
The claim of prosecutorial misconduct involves a two-step
inquiry. First, the Court must determine if the government’s
Statements were improper. United States v. Cobleigh, 75 F.3d
242, 247 (6th Cir. 1996) (quoting United States v. Carroll, 26
F.3d 1380, 1384-90 (6th Cir. 1994)). If the statements were
improper, the Court must decide whether the statements were
flagrant. Jd. (quoting Carroll, 26 F.3d at 1385). The
flagrancy inquiry requires examination of four factors:
(1) whether the remarks tended to mislead the jury or
to prejudice the accused [including whether the trial
S3a
judge gave an appropriate cautionary instruction to the
jury);
(2) whether they were isolated or extensive;
(3) whether they were deliberately or accidentally
placed before the jury; and
(4) the strength of the evidence against the accused.
Id. (alteration in the original) (quoting Carroll, 26 F.3d at
1385). If the statements were not flagrant, the Court will
reverse only if “‘(1) the proof against the defendant was not
overwhelming, (2) opposing counsel objected to the conduct,
and (3) the district court failed to give a curative
instruction.’” /d. (quoting United States v. Brown, 66 F.3d
124, 127 (6th Cir. 1995)).
b. The Reference to “Under the Table” Payments
In its closing remarks, the government stated, “[t]hey
knew what their obligations were, and we also know it
because they were cheating on a weekly basis with their
payroll. Now, that’s not a charged offense, but it does give
you evidence of what was going on in their minds when they
decided not to file their returns.” (J.A. at 1006-07.)
Defendants argue this statement “created an unacceptable risk
that these impermissible remarks produced elements of
irrationality into the jury’s decision making process.” (Michel
Abboud Def.’s Br. 38.) We disagree.
Defendants propose an odd rule: even if evidence is
properly admitted as relevant to guilt or innocence, the
government may not refer to this evidence a single time in
closing remarks. The fact is that the evidence of under the
table payments was relevant to establish intent, absence of
mistake, and motive. Defendants’ statement that “the
prosecutor went out of her way to make a derogatory
54a
argument about things ‘that had absolutely nothing to do with
defendant’s guilt or innocence,’” (J.A. at 38-39 (quoting
United States v. Stahl, 616 F.2d 30, 32 (2d Cir. 1980)), is
wrong; the evidence went directly to guilt or innocence. As
the Second Circuit reasoned, “because this evidence was
properly admitted, it was not misconduct for the prosecutor
to refer to it in summation.” United States v. Von Foelkel,
136 F.3d 339, 341 (2d Cir. 1998).
Moreover, the reference to the payments was made once,
and the government properly stated the limitation on the
evidence. The statement simply was not made to “flame the
passions and prejudices of the jury.” (Michel Abboud Def.’s
Br. 38.)
c. The Reference to Defendant’s Wealth
In its closing arguments, the government referred to
Defendant Michel Abboud’s expensive home, his recent
purchase of a Mercedes Benz, the fact that he shopped at an
expensive department store, and the fact that he sent his
children to an elite private school. Defendant accuses the
government of inciting class bias.
We find that the statements were improper. The
government contends that Defendant first raised the issue of
wealth as evidence of lack of motive to commit bank fraud,
and that the government merely rebutted this contention by
showing that Defendant’s “lavish” lifestyle would establish
motive to commit bank fraud. Had the government made the
comments in closing arguments to show motive for bank
fraud, the comments would have been proper. See, e.g.,
United States v. Derman, 211 F.3d 175, 179-80 (1st Cir.
2000), superseded by statute on other grounds (finding no
misconduct where the prosecution used evidence of the
5Sa
defeidant’s wealth as motive to commit a crime, and where
the defendant had first placed this motive in issue).
The government, however, did not comment about
Defendant’s wealth in connection with the motive to commit
bank fraud; the comments were directed towards Defendant’s
tax violations. In its brief, the government attempts to sidestep
this issue by claiming that Defendant’s wealth was in fact a
motivation for his tax violations. The problem is that the
government did not argue this point in closing:
Michel achieved the ultimate dream. He was shopping
at Sax [sic] Fifth Avenue, sending his children to
Hathaway Brown. It is a good life, but with the
American dream comes responsibilities, and one of
those responsibilities is to file your tax returns. The
Abbouds could not be bothered to do that.
(J.A. at 1006-07.) The picture painted by the government was
not that Defendant needed to commit tax violations to support
his lifestyle; instead, the government juxtaposed the fact that
Defendant was wealthy with the fact that he did not file his
taxes and left the jury to use its imagination. The government
did not connect Defendant’s wealth to any issue relevant to
Defendant’s guilt or innocence with respect to the tax
violation; its statements in this regard were therefore
improper.
The statements, however, were not flagrant. Addressing
the factors listed, supra, in order, (1) the purpose of the
remarks was. to prejudice Defendant; the thinly veiled
implication was that Defendant was the stereotypical wealthy
individual attempting to avoid his tax responsibilities. (2) The
statements about Defendant’s wealth were isolated: the
government did not make “repeated attempts” to make
56a
Defendant’s wealth an issue. Sizemore v. Fletcher, 921 F.2d
667, 671 (6th Cir. 1990). (3) The statements were part of a
deliberate strategy; it was no accident that the government
made several consecutive statements concerning Defendant’s
wealth. (4) As to the strength of the evidence on this charge,
Defendant stipulated to failing to file a false tax return and
filing a false tax return; his only defense was lack of intent,
which the government attacked with the 404(b) evidence. See
supra. An error by Defendant’s counsel may be the most
telling. Defendant challenged the sufficiency of evidence for
the tax charges at trial in his motion for judgment of acquittal;
however, Defendant’s counsel inexplicably did not remove a
drafting note in the supporting brief in connection with the
argument against the tax convictions, which stated, “[NO
SUPPORT IN RECORD/NO LEGAL AUTHORITY/DO
YOU REALLY WANT TO ARGUE THIS EVEN THOUGH
THERE WAS A_ STIPULATION?}” (J.A. at 309.)
Apparently, Defendant’s counsel conceded that the evidence
against Defendant was sufficient to support the conviction,
and that there was no evidence or legal authority to prove
otherwise.
From these factors, Defendant has not shown flagrancy in
the government’s closing argument, especially because of the
Defendant’s admission of committing the underlying conduct.
This is not a case where “the prosecutor’s actions ‘so infected
the trial with unfairness as to make the resulting conviction a
denial of due process.’” Hill v. Brigano, 199 F.3d 833, 847
(6th Cir. 1999) (quoting Donnelly v. DeChristoforo, 416 WS.
637, 643, 94S. Ct. 1868, 40 L. Ed. 2d 431 (1974)). Because
the government’s conduct was not flagrant, and because
Defendant did not object at trial, this Court will not vacate the
conviction for failure to file a tax return on this ground.
sn
57a
F. THE DISTRICT COURT DID NOT ERR IN
ADMITTING THE EXPERT TESTIMONY OF
WOLVERTON
1. Preservation of the Issue
With respect to the introduction of Wolverton’s testimony,
Defendant Elie Abboud made two objections at trial: (1) “the
data upon which [Wolverton] based his opinion was neither
collected by him nor prepared by him;” and (2) “[Wolverton]
did not render an opinion based on a reasonable degree of
banking certainty ... .” (J.A. at 956-57.) Defendant Michel
Abboud adopted Defendant Elie Abboud’s arguments on
appeal. (Michel Abboud Def.’s Br. 61.)
2. Standard of Review
For the two objections made at trial, this Court reviews
the admission of the expert testimony for abuse of discretion.
Conwood Co., L.P. v. U.S. Tobacco Co., 290 F.3d 768, 781
(6th Cir. 2002). This Court reviews issues first raised on
appeal with respect to the admissibility of the expert testimony
for plain error. United States v. Swafford, 385 F.3d 1026,
1031 (6th Cir. 2004).
3. Analysis
a. Objections Made at Trial
i. Collection and Preparation of the Data
Defendants contend that Wolverton’s testimony was
improperly admitted because he did not collect the data and he
did not prepare the data used in his expert opinion. This
argument ignores Federal Rule of Evidence 703, which states,
58a :
“the facts or data in the particular case upon which an expert
bases an opinion or inference may be those perceived by or
made known to the expert at or before the hearing.”
(emphasis supplied). Wolverton testified that he had reviewed
the underlying materials that contained the information
inputted into the CKAS system. As a result, Wolverton could
properly form an expert opinion based on this evidence.
ii. Reasonable Degree of Banking Certainty
We are unclear as to what Defendants meant by the phrase
“reasonable degree of banking certainty.” If Defendants’
argument was that Wolverton did not express his expert
opinion in terms of probability or certainty, we disagree.
When asked for his conclusion as to whether check kiting
occurred from June 1999 to August 1999, Wolverton testified
that his conclusion was that check kiting had occurred, and
“that the check kite caused a risk of loss to the banking
system and caused an actual loss to the banking system.”
(J.A. at 824.) Wolverton did testify that he would not offer an
opinion with respect to the time period of 1996 to 1999,
because he did not have the underlying checks for that time
period; however, Wolverton expressed the relevant opinion
with respect to Defendants’ convictions in absolute and
certain terms.
b. Arguments First Raised on Appeal
i. Wolverton’s Limited Testimonial
Experience
According to Defendants, “[a]lthough [Wolverton] had
previously testified as an expert in money laundering and
bank fraud cases, he had not testified in any case involving
59a
the money order, check cashing or grocery business.” (J.A.
at 23.)
We agree with the government that Defendants’ argument
“misses the point: Wolverton was proffered as an expert in
check kiting, not as an expert in grocery or check cashing
businesses.” (Pl.’s Br. 83.) As a check kiting expert,
Wolverton had extensive experience: he testified as a check
kiting expert at 13 trials, and he has worked on 60 to 80
check kiting cases. Admission of Wolverton’s testimony based
on his experience was not error, let alone plain error.
ii. Manual Analysis
Defendants claim that Wolverton did not conduct a manual
analysis in addition to the CKAS report in order to confirm
that report’s results. While Woiverton did not conduct a
manual confirmation of the CKAS report, this fact is
irrelevant. The testimony we as follows:
Q. You know [the CKAS analysis] is not perfect by
now, correct? :
A. It is not perfect? It is a system that I trust, and it is
a system that works, and it is a system that is
reliable.
Q. But wouldn’t you say that standing alone you
could not rely upon the conclusions derived from
that to determine whether or not someone was
involved in check kiting?
A. I think you can get a pretty good idea from
looking at that, but I would go farther.
60a
Q. In fact, in other cases, even when there was just --
instead of a lot of checks like in this case there
was just a handful of checks, you, after having
gone through the CKAS analysis, would still go
ahead and do it manually, correct?
A. Correct.
Q. You couldn’t do it in this case, could you?
A. I could do a lot of things in this case. I would nct want to
attempt to put this type of information on accounting
spreadsheets. ;
(J.A. at 886-87.) Defendants’ argument seems to be that
because Wolverton did not manually confirm the CKAS
results, these results are somehow suspect; however, this
ignores the fact, raised by Defendants, that this manual
confirmation only occurred when “instead of a lot of checks
like in this case there was just a handful of checks.” (J.A. at_
887 (emphasis supplied).) Here, when the check kiting
scheme was complex, manual confirmation was not standard
procedure. Plain error did not occur in this respect.
ili. Failure to Include the Income of Some of
Defendants’ Businesses
Defendants quibble with the fact that the income from
certain businesses of theirs was not accounted for in
Wolverton’s analysis. As the government notes, this is
because many of these businesses failed to file tax returns.
Moreover, the purpose of accounting for income from these
businesses is to compare that income to the volume of
deposits; if there is a disproportionate amount of deposits,
61a
then this is an indication of check kiting.’ In this case, there
was a severe disproportion between Defendants’ income and
their deposits. Defendants have not shown that the income not
accounted for would have been so significant as to alter the
proportion such that its omission would have constituted plain
error.
iv. Carryover
Defendants also argue that the CKAS report did not take
into account the fact that the banks allowed a negative balance
with the carryover feature. As explained, infra, the fact that
the banks allowed a negative balance with the carryover
feature did not mean that the banks authorized check kiting.
Furthermore, the primary purpose of the CKAS report was to
compare deposits of third party checks with deposits from
accounts of Defendants. The fact that the banks allowed one
day of float on the accounts does not change the fact that
92.38% of Defendants’ deposits came from their own
accounts, and only 7.62% of their deposits came from third
parties.
Defendants’ basic contention is that they were allowed to
run negative balances; they point to the fact that “they had
run a negative balance for 665 consecutive days as of
November 29, 1999. This was not considered in the CKAS
calculations.” (J.A. at 27.) No party disputes the fact that
Defendants could run a negative balance. The question is
whether Defendants were kiting checks; here, the ability to
run a negative balance would be irrelevant. If Defendants had
® De
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