USA v. Brown et al

UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
SOUTHERN DIVISION
UNITED STATES OF AMERICA,
Plaintiff,
vs.
LOREN BROWN and RANDY L. GARRISS,
Defendants.
4:17-CR-40058
MEMORANDUM OPINION AND ORDER
ADOPTING REPORT AND
RECOMMENDATION,DENYING
MOTION TO SUPPRESS,DENYING
MOTION TO DISMISS,DENYING
MOTION TO MODIFY TEXT ORDER
On July 6, 2017, Randy Garriss was indieted on Conspiraey to Defraud the United States,
in violation of 18 U.S.C. § 371 and Impeding the Internal Revenue Serviee, in violation of 26
U.S.C. § 7212(a). Doe. 1. Pending before the Court are a Motion to Suppress, Doe. 151, a Motion
to Dismiss Indietment, Doc. 175, and Motion to Modify the Text Order at Doc. 130, Doc. 197—
all filed by Mr. Garriss. For the following reasons, Mr. Garriss's motions are denied.
I. Motion to Suppress
On August 23, 2019, Mr. Garriss filed a motion to suppress seeking to "suppress any and
all evidence obtained by administrative process after referral was made to the Department of
Justice for criminal investigation." Doc. 151. Title 26, section 7602(c)(1) of the United States
Code provides:
No summons may be issued under the Title, and the Secretary may not begin any
action . . . to enforce any summons, with respect to any person, if a Justice
Department referral is in effect with respect to such person.
U.S.C. § 7602(c)(1).
Magistrate Judge Duffy ordered the Government to respond to "whether there ever was
any evidence obtained by administrative process after a criminal investigation referral was made."
Doc. 155.
The Government responded to Judge Duffy's order and stated in its brief that"we believe
there is no evidence in this case that was obtained by administrative process after the referral was
made to the [DOJ]." Doe. 156. The Government also opposed Mr. Garriss's motion because(1)
the Defendant had not specified any evidence he believed falls within the category that he has
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identified; and (2) even if there were such evidence, the Defendant has cited no authority that
would support suppression. Doc. 156 at 2. The Government argues that "as the moving party, at
a minimum it is defendant's burden to come forth with some evidence and argument to support his
position that evidence, statements, or a witness identification should be suppressed." Doc. 156 at
2(quoting United States v. Edwards, 563 F.Supp.2d 977, 994(D. Minn. 2008)("[E]ven in those
circumstances where the Government has the ultimate burden of persuasion. Defendant has the
initial burden of making a prima facie showing ofillegality.")).
Judge Duffy issued a Report and Recommendation recommending to the Court that the
motion to suppress be denied as moot given the Government's beliefthat no evidence was obtained
by administrative process after a criminal investigation referral was made. Doc. 157.
Mr. Garriss filed an objection to the Report and Recommendation. Doc. 161. Therein, Mr.
Garriss states that he cannot determine what evidence may have been obtained by administrative
process after a criminal investigation referral was made because the Government had not disclosed
when referral for criminal prosecution was made to the Department of Justice. Doc. 161. Mr.
Garriss has represented that in the many pages of discovery produced, there are many documents
that were obtained administratively. Doc. 161 at 1.
Before the ruling on the Motion to Suppress, on October 7, 2019, the Court ordered the
Government to file with the Court within ten (10) days of the date of the order, the date Mr.
Garriss's case was referred to the Department of Justice for criminal prosecution and ordered Mr.
Garriss to file a supplement to his motion to suppress within twenty(20)days after the Government
filed its response, identifying what evidence he seeks to suppress. On October 15, 2019, the
Government filed a response to the Court's order, stating that the Department of Justice, Tax
Division, referred the case to the U.S. Attorney's Office, District of South Dakota, for criminal
prosecution on March 17, 2017. Doc. 185. On November 4, 2019, Mr. Garriss responded to the
Government's disclosure of the date of referral of this case for criminal prosecution. Doc. 188.
Therein, Mr. Garriss did not identify what evidence he sought to suppress, but rather stated that he
"has reason to believe that he was being criminally investigated with respect to matters
surrounding the Nelsons (alleged co-conspirators) years prior to the dates submitted by [the
Government]." Doc. 188 at 2. Mr. Garriss has not identified any summonses in this case that may
have been issued after the referral was made for criminal prosecution in this case, nor has he
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identified any evidence that he seeks to suppress. Accordingly, this Court adopts the report and
recommendation issued by Judge Duffy, Doc. 157, and denies Mr. Garriss's motion to suppress.
Doc. 151.
II. Motion to Dismiss Indictment
On September 27, 2019, Mr. Garriss moved to dismiss both count 1 and count 2 of the
indictment charging him with Conspiracy to Defraud the United States, in violation of 18 U.S.C.
§ 371 and Impeding the Internal Revenue Service, in violation of26 U.S.C. § 7212(a). Doc. 175.
In evaluating a motion to dismiss, the Court accepts the facts alleged in the Indictment as
true. United States v. Halseth, 342 U.S. 277, 279 (1952). An indictment adequately states an
offense if:
it contains all of the essential elements of the offense charged, fairly informs the
defendant of the charges against which he must defend, and alleges sufficient
information to allow a defendant to plead a conviction or acquittal as a bar to a
subsequent prosecution. An indictment will ordinarily be held sufficient unless it
is so defective that it cannot be said, by any reasonable construction, to charge the
offense for which the defendant was convicted.
United States v. Hernandez, 299 F.3d 984, 992(8th Cir. 2002)(citation omitted). An indictment
is normally sufficient ifits language tracks the statutory language. Hamling v. United States, 418
U.S. 87,117(1974).
A facially valid indictment ordinarily will survive a motion to dismiss for failure to state
an offense without further inquiry. See United States v. Ferro, 252 F.3d 964, 968 (8th Cir. 2001).
A court cannot dismiss an indictment based on "predictions as to what the trial evidence will be;"
instead it must give the Government the opportunity to present its evidence. Id. (quoting United
States V. DeLaurentis, 230 F.3d 659,661 (3d Cir. 2000)).
A. Motion to Dismiss Count 1, Conspiracy to Defraud the United States
Count 1 ofthe Indictment against Mr. Garriss charges him with violating 18 U.S.C. § 371
by conspiring with others to defraud the Internal Revenue Service ("IRS") in the function of
ascertaining, computing, assessing, and collecting income taxes owed by Theodore "Ted" Nelson
and Steven "Steve" Nelson, also known as a Klein conspiracy. Doc. 1. The Eighth Circuit has
held that "[t]o convict a defendant of a.Klein conspiracy, the government must show the existence
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of an agreement to defraud the IRS and an overt act by one of the conspirators in furtherance of
the agreement's objectives." United States v. Fletcher, 322 F.3d 508, 513 (8th Cir. 2003).
Conspiracy to defraud the United States does not require proofofan agreement to violate a specific
federal statute or regulation. United States v. Gjerde, 110 F.3d 595, 601 (8th Cir. 1997). Fraud
covered by the statute "reaches 'any conspiracy for the purpose of impairing, obstructing or
defeating the lawful function of any department of Government.'" Tanner v. United States, 483
U.S. 107,126(1987)(quoting Dennzs v. United States, 384 U.S. 855(1966)). "Defrauding" under
§ 371 means obstructing the operation of any government agency by any "deceit, craft or trickery,
or at least by means that are dishonest." Hamfnerschmidt v. United States, 265 U.S. 182, 187
(1924); United States v. Murphy,957 F.2d 550, 553(8th Cir. 1992).
In his motion to dismiss, Mr. Garriss argues that an "[ajgreement to conspire to defraud
and impede the collection of taxes" owed by Ted Nelson and Steven Nelson "presume[s] the
existence oftaxes due and owing to the IRS." Doc. 175 at 3,100. Mr. Garriss contends that a tax
deficiency due and owing by Ted Nelson and Steve Nelson is an essential element of the charges
against him. Mr. Garriss argues that because the federal government is without legal authority to
tax the Nelsons,"[tjhere is no tax deficiency" and both counts ofthe indictment must therefore be
dismissed. Doe. 175 at 100.
"A conspiracy to fimstrate or obstruct the IRS's function of ascertaining and collecting
income taxes falls clearly within the ban of section 371." United States v. Rosengarten, 857 F.2d
76, 78(2d Cir. 1988)(citing United States v. Klein, 347 F.2d 908, 915-19(2d Cir. 1957); United
States V. Everett,692 F.2d 596,599(9th Cir. 1982)). In order to convict a defendant ofconspiracy
to defraud the United States under § 371, the Government need not prove an underlying tax
deficiency due and owning by Ted and Steve Nelson. The Eighth Circuit Court of Appeals has
n stated that:
It is clear that a conspiracy to 'defraud the United States' within the meaning of 18
U.S.C. § 371 need not result in a monetary loss to the federal government. To
conspire to defraud the Untied States means primarily to cheat the government out
ofproperty or money,but it also means to interfere with or obstruct one ofits lawful
governmental functions by deceit, craft or trickery, or at least by means that are
dishonest. It is not necessary that the government shall be subjected to property or
pecuniary loss by the fraud, but only that its legitimate official action and purpose
shall be defeated by misrepresentation, chicane or the overreaching of those
charged with carrying out the governmental intention.
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United States v. Anderson, 579 F.2d 455, 458 (8th Cir. 19778)(citing Hammerschmidt v. United
States, 265 U.S. 182(1924); Dennis v. United States, 384 U.S. 855, 861 (1966)); see also United
States V. Tajideen, 319 F.Supp.3d 445, 459 (B.C. Cir. 2018); United States v. Puerto, 730 F.2d
627, 630-31 (11th Cir. 1984). The Court understands that Mr. Garriss takes issue with whether
the Government's taxing authority is in fact "lawful." Specifically, Mr. Garriss argues that the
United States Congress and the IRS lack the constitutional authority to impose an income tax
because it is a "direct" tax that has not been apportioned among the several States ofthe Union in
violation of Article I, Section 9, clause 4 of the United States Constitution. Doc. 175 at 56-57.
This argument has been repeatedly held to be fidvolous and "devoid of any arguable basis in law."
Ficalora v. Commissioner, 151 F.2d 85, 87 (2d Cir. 1984); also Charczuk v.
Commissioner, 771 F.2d 471, All-lh (10th Cir.1985); Lovell v. United States, 755 F.2d 517, 519
(7th Cir. 1984)("All individuals, natural and unnatural, must pay federal income tax on their wages
... .").
The Indictment in this case alleges that Loreii Brown and Mr. Garriss:
did unlawfully, voluntarily, intentionally, and knowingly conspire, combine,
confederate, and agree together ... to defraud the United States for the purpose of
impeding, impairing, obstructing, and defeating the lawful government functions
ofthe Internal Revenue Service ... in the ascertainment, computation, assessment,
and collection of revenue, to wit: income taxes owed by Theodore "Ted" Nelson
and Steven "Steve" Nelson.
Doc. 1. Additionally, the Indictment alleges numerous over acts committed by one or more ofthe
co-conspirators in furtherance ofthe conspiracy. The Court concludes that Count 1 ofIndictment
contains all the essential elements of the crime charged and is facially valid. Accordingly, Mr.
Garriss's motion to dismiss Count 1 ofthe Indictment is denied.
B. Motion to Dismiss Count 2,Impeding the Internal Revenue Service
Count 2 of the Indictment against Mr. Garriss charges him with violating 26 U.S.C. §
7212(a). The Internal Revenue Code provision that Mr. Garriss is charged with violating in Count
2 of the Indictment has two substantive clauses. See Marinello v. United States, 138 S.Ct. 1101,
1104(2018). The first clause, which the Supreme Court has referred to the as the "Officer Clause,"
forbids.
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corruptly or by force or threats of foree (including any threatening letter or
eommunieation) endeavor[ing] to intimidate or impede any offieer or employee of
the United States acting in an official capacity under [the Internal Revenue Code].
Id. at 1104-05. The second clause, whieh the Supreme Court has referred to as the
"Ominibus Clause," forbids,
corruptly or by force or threats of force (ineluding any threatening letter or
eommunieation) obstruct[ing] or imped[ing], or endeavor[ing] to obstruct or
impede, the due administration of[the Internal Revenue Code].
Id.(quoting 26 U.S.C. § 7212(a)).
In order to prove a violation of 26 U.S.C. § 7212(a), the government must prove that the
defendant: 1) corruptly or by force or threats offoree; 2)endeavored; 3)to obstruet or impede the
administration of the Internal Revenue Code. See United States v. Williams, 644 F.2d 696, 699
(8th Cir. 1981),superseded by statute on other grounds. Tax Reform Aet of 1984,Pub. L. No. 98-
369, 159, 98 Stat. 494, 696, as recognized in United States v. Brooks, 174 F.3d 950, 956(8th Cir.
1999)). Whether or not a tax defieiency is due and owed by the Nelsons is not an essential element
ofthis erime and is no basis upon which this Court may dismiss Count 2 ofthe Indictment. To the
extent that Mr. Garriss argues that Congress's and the IRS's taxing authority is unconstitutional,
the Court has already rejeeted this argument above. See also Grain v. Commissioner ofInternal
Revenue, 747 F.2d 1417, 1417-18 (5th Cir. 1984) ("The eonstitutionality of our income tax
system—^including the role played within that system by the Internal Revenue Service and the Tax
Court—^has long been established.").
Mr. Garriss's motion to dismiss Count 2 of the Indictment is denied.
III. Motion to Modify the Text Order at Docket 130
Sinee his indictment and initial appearanee on the pending charges, Mr. Garriss has filed
multiple motions and other pleadings pertaining to discovery. On February 27, 2019, Magistrate
Judge Veroniea Duffy entered a text order denying Mr. Garriss's motion for reconsideration ofhis
his motion to compel at doeket 79 as moot and without prejudice. Doe. 130. On February 27,
2019, the Court ordered that,
[i]f any discovery issues remain after Mr. Garriss has reviewed the diseovery
provided per the stipulation at Doeket 135, Mr. Garriss shall notify Mr. Kolbeck
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who will contact Mr. Haak in an attempt to resolve. If a resolution cannot be
reached between the parties then Mr. Garriss should file a motion with the court.
Doc. 130.
On September 17,2019, Mr. Garriss filed a Renewed Motion to Compel Diseovery without
conferring with the Government,Doc. 160, and on September 30,2019,the Court entered its Order
denying the Renewed Motion to Compel,Doc. 180.
In his Motion to Modify Text Order, Mr. Garriss moved the Court to modify its text order
at Doe. 130"so as to allow Garriss' direct request by contaeting the government via motion." Doc.
197. Mr. Garriss appears to argue that communicating with stand-by counsel regarding discovery
issues is incovenient and that it does not matter whether the discovery requests are presented by
eounsel beforehand or directly by motion, because, Mr. Garriss alleges, that the Government
objects to the disclosure regardless. Doc. 197 at 1. The Government contends that since entry of
the text order at Doc. 130 on February 27,2019,the Government has not received communieation
fi-om Mr. Kolbeek regarding the Defendant's specific discovery requests. Doc. 198 a 3. Mr.
Garriss has had ample opportunity to provide Mr. Kolbeek with specific discovery requests during
this time and has ample time to do so prior to his trial scheduled for May 11, 2020.
The Court denies Mr. Garriss's motion to modify text order at Doe. 130. The Court agrees
with the Government that allowing Mr. Garriss to file a motion to eompel diseovery without first
engaging in good faith efforts with the Government to resolve the dispute is contrary to the spirit
and purpose ofD.S.D. Grim. 16.1. See Fed. R. Civ. P.72(stating the a districtjudge must consider
timely objections and modify or set aside any part of an order on a pretrial matter referred to a
magistratejudge that is "elearly erroneous or contrary to law"). Additionally, the Court concludes
that Mr. Garriss's objeetions to Judge Duffy's February 27, 2019, order are well beyond the 14-
day time period prescribed by Rule 72(a) ofthe Federal Rules of Civil Proeedure.
Accordingly, it is hereby ORDERED:
1) The Report and Recommendations on the Motion to Suppress, Doe. 157, is hereby
adopted by the Court and Mr. Garriss's Motion to Suppress,Doc. 151,is DENIED; Mr.
Garriss has not identified any evidence that may have been obtained by the Government
pursuant to administrative summonses issued after the criminal referral was made in
this ease; and
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2) The Motion to Dismiss Indictment, Doc. 175,is DENIED.
3) The Motion to Modify Text Order, Doc. 197, is DENIED.
Dated this 27th day of January, 2020.
BY THE COURT:
matthtwwvThft;
ifi.	IOaVJUXJuul
i^rence L. Piersol
ATTEST: United States District Judge
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