United States District Court, S.D. Ohio, Western Division
ORDER DENYING DEFENDANT'S MOTION TO DISMISS THE
Timothy S. Black United States District Judge
criminal case is before the Court on Defendant Fesum
Ogbazion's motion to dismiss the superseding indictment
(Doc. 84) and the parties' responsive memoranda (Docs.
formerly owned and operated ITS Financial, LLC (“ITS
Financial”). (Doc. 6 at ¶ 3). ITS Financial was
headquartered in Dayton, Ohio, and was the national
franchisor of Instant Tax Service (“ITS”), a
nationwide tax preparation franchise business started by
Defendant in 2004 and marketed by ITS Financial throughout
the United States. (Id.) ITS was purported to be the
fourth largest tax preparation company in the United States.
was also the founder and sole-owner of TCA Financial, LLC
(“TCA”), which served as the holding company for
ITS Financial. (Doc. 6 at ¶ 4). Defendant was also the
founder and sole-owner of Tax Tree, LLC (“Tax
Tree”), an entity formed in 2010 to raise capital from
private investors in order to fund ITS loan products,
including Instant Cash Loans (“ICL”) and Refund
Anticipation Loans (“RAL”), which were marketed
nationwide to ITS customers. (Id. at ¶¶ 5,
21). Tax Tree also served as a clearinghouse for tax refunds
issued by the Internal Revenue Service (“IRS”).
(Doc. 45 at 6). Defendant was also the sole-owner and
operator of TaxMate, LLC (“TaxMate”). (Doc. 6 at
November 2011, Defendant learned that the IRS's civil
division was investigating ITS and its affiliated companies.
(Doc. 45 at 6). Defendant cooperated in the investigation,
appearing for several interviews and depositions, as well as
providing requested documents to assist the IRS attorneys and
agents. (Id. at 8-14). On March 28, 2012, Defendant
Ogbazion, along with ITS Financial, TCA, and Tax Tree
(collectively, the “Civil Defendants”), were
named in a civil enforcement action brought by the Department
of Justice (“DOJ”) Tax Division, on behalf of the
United States, pursuant to 26 U.S.C. §§ 7402 and
7408 of the Internal Revenue Code. United States v. Fesum
Ogbazion, et al., No. 3:12-cv-0095 (S.D. Ohio, Mar. 28,
civil action, the Government sought to permanently enjoin the
Civil Defendants “from preparing or directing or
assisting in the preparation of federal tax returns, from
engaging in and facilitating tax fraud, and from engaging in
any other conduct that substantially interferes with the
administration or enforcement of the tax laws, including the
conduct described in this complaint.” (Civil Doc. 1 at
¶ 11). On June 17, 2013, the civil case proceeded to a
ten-day bench trial before this Court. (Civil Doc. 98).
on November 6, 2013, a civil judgment was entered in favor of
the Government (Civil Doc. 142) and an Order of Permanent
Injunction was issued against the Civil Defendants (Civil
Doc. 143). On November 21, 2014, the Sixth Circuit affirmed
this Court's injunction on appeal, and a mandate was
issued on January 13, 2015. (Civil Doc. 156). Several months
later, and approximately one and a half years after the civil
action was fully resolved in the district court, the
Government commenced the instant criminal case. (Doc. 6).
on August 25, 2015, Defendant Ogbazion, along with
co-defendant Kyle Wade, were charged in a twenty-three count
Indictment with: engaging in a corrupt endeavor to obstruct
and impede the due administration of the Internal Revenue
Code, in violation of 26 U.S.C. § 7212(a) (Count 1);
conspiracy to commit wire fraud, in violation of 18 U.S.C.
§ 1349 (Count 2); wire fraud, in violation of 18 U.S.C.
§ 1343 (Counts 3-7); money laundering, in violation of
18 U.S.C. § 1956(a)(1)(A)(ii) (Counts 8-13); bank fraud,
in violation of 18 U.S.C. § 1344 (Count 14); tax
evasion, in violation of 26 U.S.C. § 7201 (Count 15);
and failure to collect and pay over payroll tax, in violation
of 26 U.S.C. § 7202 (Counts 16-23). (Doc.
February 9, 2016, Defendant filed a motion to dismiss the
Indictment. (Doc. 45). Specifically, Defendant argued that
the Indictment should be dismissed, in whole or in part, or
alternatively, that certain evidence should be suppressed,
because: (1) the Government abused parallel civil proceedings
to prosecute Defendant in this criminal case; (2) Counts 16
and 20, as well as parts of Counts 1 and 15, are barred by
the applicable statutes of limitations; and (3) the
Indictment fails to state an offense as to Count 1, as well
as Counts 8 through 13. (Id. at 1). On October 17,
2016, this Court issued an Order only granting
Defendant's motion as to the dismissal of Count 1,
finding that “the Indictment fail[ed] to set forth an
element of the 26 U.S.C. § 7212(a) omnibus clause
offense, [and was therefore] legally deficient and must be
dismissed.” (Doc. 66 at 40). Defendant's motion was
denied in all other respects. (Id. at 43).
November 14, 2016, the Government filed a notice of
interlocutory appeal as to the Court's dismissal of Count
1. (Doc. 70); United States v. Fesum Ogbazion, No.
16-4298 (6th Cir. 2016). During a status conference on
November 21, 2016, the Government clarified that its Notice
of Appeal was filed protectively, and that Department of
Justice (“DOJ”) officials were still considering
whether the appeal may proceed. (Min. Entry & Not. Order,
Nov. 21, 2016). A determination in that regard was
anticipated by January 2017. (Id.)
the DOJ's appellate review process ultimately took longer
than anticipated. On December 22, 2016, the Government filed,
in the Court of Appeals, an unopposed motion for a thirty-day
extension of time, until February 2, 2017, to file its
opening brief. (App. Doc. 12). The Court of Appeals granted
the motion. (App. Doc. 13). On January 24, 2017, the
Government moved for an additional extension until March 3,
2017 to file its opening brief. (App. Doc. 14). This time,
Defendant opposed the motion, arguing that “further
delay of [the interlocutory appeal] creates a very murky
picture that prejudices [Defendant's] ability to
adequately defend himself in the underlying case
….” (App. Doc. 15 at 4). Regardless, the Court
of Appeals granted the Government's second motion for an
extension of time. (App. Doc. 16). However, the Government
learned shortly thereafter that the Solicitor General had
elected not to pursue the appeal. (Doc. 85 at 13).
Accordingly, on February 3, 2017, the Government filed a
motion to voluntarily dismiss the appeal (App. Doc. 17),
which the Court of Appeals granted (App. Doc. 18).
on January 24, 2017 (i.e., shortly before dismissal
of the appeal), the Government filed a thirty-one count
Superseding Indictment in the criminal case. (Doc.
Specifically, the Superseding Indictment includes Counts 2
through 23 of the initial indictment, but also adds the
following charges as to both Defendants Ogbazion and Wade:
conspiracy to defraud the United States and to commit wire
fraud, in violation of 18 U.S.C. § 371 (Count 24); and
wire fraud, in violation of 18 U.S.C. § 1343 (Counts
25-32). As to the conspiracy charge (Count 24), the
Government alleges that from January 1, 2004 through November
6, 2013, Defendant engaged in a multi-object conspiracy
involving: (1) defrauding the United States by impeding,
impairing, obstructing and defeating the lawful government
functions of the IRS; and (2) devising a scheme and artifice
to defraud ITS customers, by means of false and fraudulent
pretenses, using wire communications in interstate and
foreign commerce. (Doc. 82 at ¶ 84). As to the wire
fraud charges (Counts 25-32), the Government alleges that
from January 24, 2012 through November 6, 2013, Defendant
devised a scheme and artifice to defraud and to obtain
increased income tax return preparation fees from ITS
customers, using wire communications in interstate and
foreign commerce. (Id. at ¶ 122).
February 17, 2017, Defendant filed the motion to dismiss the
superseding indictment, currently at issue before the Court.
(Doc. 84). The motion has been fully briefed and is now ripe
STANDARD OF REVIEW
to Fed. R. Crim. P. 12(b)(1), “[a] party may raise by
pretrial motion any defense, objection, or request that the
court can determine without a trial on the merits.” A
defendant may bring a motion to dismiss under Rule 12 in
order to assert, inter alia, defects in instituting
the prosecution or a defect in the indictment. Id.
If the Court finds that “the indictment is legally
deficient, the proper result is dismissal of the
indictment.” United States v. Landham, 251
F.3d 1072, 1080 (6th Cir. 2001). Alternatively, the Court may
“order the Government to submit a bill of particulars
to supplement the allegations in the indictment
….” United States v. Jones, 542 F.2d
661, 666 (6th Cir. 1976).
Court “may ordinarily make preliminary findings of fact
necessary to decide questions of law … so long as the
trial court's conclusions do not invade the province of
the ultimate factfinder.” United States v.
Craft, 105 F.3d 1123, 1126 (6th Cir. 1997). However,
“courts evaluating motions to dismiss do not evaluate
the evidence upon which the indictment is based.”
Landham, 251 F.3d at 1080.
argues that the Court should exercise its supervisory power
to dismiss the Superseding Indictment in its entirety, with
prejudice, based on the Government's alleged misconduct
and vindictive prosecution. (Doc. 84 at 19-28).
Alternatively, Defendant argues that certain counts of the
Superseding Indictment are legally deficient and should be
dismissed. (Id. at 28-38).
Dismissal of the Superseding Indictment in its
asserts that the Government has run afoul of his
constitutional rights- namely his right to due process-by
responding vindictively to the Court's dismissal of Count
1. (Doc. 84 at 19-28). Therefore, Defendant urges the Court
to exercise its supervisory power to dismiss the Superseding
Indictment, in its entirety, for vindictive prosecution.
process prohibits an individual from being punished for
exercising a protected statutory or constitutional
right.” United States v. Poole, 407 F.3d 767,
774 (6th Cir. 2005) (citing United States v.
Goodwin, 457 U.S. 368, 372 (1982)). However, “the
Due Process Clause is not offended by all possibilities of
increased punishment …., but only by those that pose a
realistic likelihood of ‘vindictiveness.'”
Blackledge v. Perry, 417 U.S. 21, 27 (1974).
“[a] defendant alleging prosecutorial vindictiveness
must show either ‘actual vindictiveness' or a
‘realistic likelihood of vindictiveness.'”
United States v. Roach, 502 F.3d 425, 443 (6th Cir.
2007) (quoting United States v. Dupree, 323 F.3d
480, 489 (6th Cir. 2003)). “Actual vindictiveness is
demonstrated by ‘objective evidence that a prosecutor
acted in order to punish the defendant for standing on his
legal rights.'” Id. (quoting
Dupree, 323 F.3d at 489). Conversely, to show a
‘realistic likelihood of vindictiveness, ' the
defendant must show: “(1) exercise of a protected
right; (2) the prosecutor's ‘stake' in the
exercise of that right; (3) the unreasonableness of the
prosecutor's conduct; and, presumably, (4) that the
prosecution was initiated with the intent to punish the
[defendant] for the exercise of the protected right.”
Dupree, 323 F.3d at 489.
defendant shows that “‘the prosecutor has some
stake in deterring the [defendant's] exercise of his
rights and [that] the prosecutor's conduct was
somehow unreasonable, ' then the district court may
find that there is a ‘reasonable likelihood of
vindictiveness' and may presume an improper vindictive
motive.” United States v. LaDeau, 734 F.3d
561, 566 (6th Cir. 2013) (quoting Bragan v.
Poindexter, 249 F.3d 476, 482 (6th Cir.2001)) (emphasis
added). “The government bears the burden of rebutting
the presumption with ‘objective, on-the-record
explanations' such as ‘governmental discovery of
previously unknown evidence' or ‘previous legal
impossibility.'” Id. (quoting
Bragan, 249 F.3d at 482).
Defendant argues that the Government's conduct in this
case amounts to vindictive prosecution, as evidenced by the
Government's revival of the charge dismissed in Count 1,
under a different count and statute, and the enhanced
penalties associated with the additional charges brought in
the Superseding Indictment. (Doc. 84 at 19-28). Additionally,
Defendant alleges that he has been substantially prejudiced
by the deprivation of trial preparation time, caused by the
delay during the Government's (now abandoned)
interlocutory appeal. (Id.)
the Court finds that Defendant has not shown the Superseding
Indictment to be a product of prosecutorial vindictiveness.
Critically, as set forth below, the Court cannot conclude
that the Government acted unreasonably or that the additional
charges and enhanced penalties were intended to punish
the issue of prejudice, while insufficient to warrant
dismissal of the Superseding Indictment, raises other
concerns that this Court must address.
Reasonableness of the Government's Response
alleges that the Superseding Indictment is the
Government's vindictive response to the Court's prior
dismissal of Count 1. Defendant argues that:
The Superseding Indictment … repackages and re-labels
Count 1 of the Original Indictment (the “guts” of
the government's case against [Defendant], previously
dismissed by the Court) and re-charges it as Count 24.
Indeed, save a few minor tweaks (all of which vindictively
expand the extent of [Defendant's] potential criminal
liability), Count 24 of the Superseding Indictment is a
literal cut-and-paste of the dismissed Count 1 of the
Frustrated by the Court's dismissal of the
“guts” of its criminal case against [Defendant]
(Count 1 of the Original Indictment) and unable to secure
even internal approval to challenge such dismissal by way of
proper appeal, the government simply decided to take matters
into its own hands and effect a naked end-run of the
Court's prior order. Quite literally, the government in
the Superseding Indictment purports to re-plead criminal
charges previously dismissed by this Court (and from which no
appeal was ultimately taken).
(Doc. 84 at 11). The Court fully agrees that Count 24 is-and
was undoubtedly intended to be-a revival of Count 1. However,
the Court finds nothing unreasonable about the
Government's charging decision.
clear, the Court previously dismissed Count 1 in the
Indictment, finding that the Indictment failed to
sufficiently allege each of the essential elements
(recognized in the Sixth Circuit) of the 26 U.S.C. §
7212(a) offense and was therefore legally deficient.
(Doc. 66 at 33-40). The Court further stated that
“[s]uch deficiencies cannot be remedied by amending the
indictment or ordering the Government to provide a bill of
particulars.” (Id. at 33).
heavily on the Court's statement, Defendant now argues
that Count 24 of the Superseding Indictment is an
impermissible amendment of Count 1, in violation of the
Court's instruction. However, Defendant's argument
misconstrues the Court's admonition regarding amendments.
‘may not be amended because doing so would substitute
the prosecutor's judgment for that of the constitutional
body, the Grand Jury, in framing the charge against a
defendant.'” United States v. Prince, 214
F.3d 740, 756 (6th Cir. 2000) (internal quotation marks and
citations omitted). Thus, an indictment may be amended only
by the Grand Jury, unless “‘the change is merely
a matter of form' … [such as] corrections of
clerical or typographical errors.” United States v.
Rosenbaum, 628 F. App'x 923, 929 (6th Cir. 2015)
(quoting Russell v. United States, 369 U.S. 749, 770
Court made clear in its prior Order, an indictment must set
forth each of the elements of the offense charged, not
only to provide adequate notice to Defendant, but
also to ensure that Defendant is only answering to
charges properly returned by the Grand Jury. (Doc. 66 at
39-40). And, as to Count 1, the Court found that “the
Indictment [was] devoid of any indication that either the
Government or the Grand Jury was even aware that a charge
under 26 U.S.C. § 7212(a)'s omnibus clause requires
the defendant to have been aware of a pending IRS
action.” (Id. at 40). Thus, in stating that
the Government could not simply amend the Indictment to
correct the deficiency, the Court was emphasizing that the
error was not “merely a matter of form, ” and
therefore could not be remedied by the prosecutor's
clarifications. (Id.) As the Court stated,
“the Government's ‘he knows what we
meant' argument does not satisfy the requirement that the
indictment clearly set forth all elements of the offense
charged.” (Id.) However, nothing in the
Court's Order was intended to imply that the Government
could not correct its error by obtaining a superseding
indictment from the Grand Jury.
Court finds that the Government's decision to charge
Count 24 was a reasonable and permissible response, in light
of the dismissal of Count 1. Indeed, as Defendant notes, and
as the Government would likely agree, Count 1 constituted the
‘guts' of the prosecution's case. The Court
sees nothing unreasonable about, and is certainly not
offended by, the Government's attempt to remedy its own
Government's decision here was not unreasonable, the
Court declines to presume that the Government acted
vindictively in its decision to charge Count 24.
Punishment for Exercising a Constitutionally Protected
Defendant argues that the Government is attempting to punish
him for exercising a protected right, evidenced by the
additional charges and enhanced penalties under the
Government responds that the additional charges “are
based on evidence newly acquired since presentment of the
initial Indictment, some of which pre-dates the Court's
dismissal of Count One.” (Doc. 85 at 11).
Particularly, evidence obtained in or about October 2016
during a related criminal trial in the Western District of
Missouri, United States v. Semere Tsehaye, 4:16cr69-
CDP. See Exhibit A - Judgement Order. Tsehaye was
convicted on two counts of tax evasion, in violation of 26
U.S.C. § 7201, relating to his failure to report and pay
federal income taxes on income earned, in large part, from
his operation of ITS franchises in St. Louis and Kansas City
in 2010 and 2011. During the Tsehaye trial, ITS's former
comptroller, Peter Samborsky testified under a grant of
statutory immunity pursuant to 18 U.S.C. § 6001 et seq.
On September 27, 2016 the Court in Tsehaye entered an Order
compelling Samborsky to testify. See Exhibit B. As
part of Samborsky's Compulsion Order, the Government
interviewed Samborsky on October 25, 2016 and again on
January 12, 2017. See Exhibits C and D. It was
during these interviews that the Government first identified
the specific financial institutions Defendant used to receive
and disburse ITS's tax return preparation fees in 2012
and 2013 - which in turn form the basis of Counts Twenty-Five
through Thirty-Two, and a significant part of Count
Twenty-Four, of the Superseding Indictment returned on
January 24, 2017.
(Id. at 3-4). Additionally, the Government argues
that it “was actively pursuing this [new] evidence
prior to the Court's dismissal of Count One, and is
likely to have brought the [additional]
charges regardless of how the Court ruled on Defendant's
First motion to Dismiss.” (Id.
at 11) (emphasis added).
Defendant's reply, he argues that the “newly
acquired” evidence was actually known by, or at the
very least, was readily available to the Government at the
time of the first Indictment. (Doc. 86 at 8). Specifically,
Defendant asserts that, “the government's assertion
that it only recently learned of the specific financial
institutions used by the Defendant and his businesses is
patently false, ” and that the information has been
within the Government's possession since February 2012.
(Id.). Thus, Defendant argues that the
Government's decision to expand ...