United States v. Abdul Khanu, 2009 U.S. Dist. Lexis 120035 (Dist. Col. Dec. 23, 2009)
Khanu was convicted of one count of conspiring to defraud the United States in violation of 18 USC 371, three counts of tax evasion under 26 USC 7201, and eighteen counts of preparing false employment tax returns under 26 USC 7206(2).
Khanu operated several nightclubs in Washington, D.C. He allegedly skimmed from the cash receipts and paid employees in cash to avoid payroll taxes. Khanu made several large cash expenditures including a swimming pool, driveway, and furniture for his home. Khanu did not testify at trial. However, the government read into evidence excerpts of testimony he had previously provided to the government.
The IRS executed a search warrant on taxpayer’s business. After the IRS executed a search warrant the business practice of paying employees cash stopped.
The CPA testified that he was unaware of various business practices of Khanu. However, he did state that he had told Khanu that money paid to promoters should not be included as the club's income. As a result, the defendant received a good faith reliance on the advice of an accountant instruction relating to that advice. The court also instructed the jury that Khanu's good faith belief was a defense to the element of willfulness, an essential element to all tax crimes.
A bulk of the government's case was presented through the IRS Agent as a summary witness. The agent testified as to the changes in Khanu's net worth and the fact that Khanu made over $3,000,000 of expenditures but, only had $778,464 available. This suggested over $2,000,000 of unreported income.
Khanu moved pursuant to Rule 29 for judgment of acquittal. The court noted that all evidence must be viewed in a light most favorable to the government and the motion must be denied if the evidence is sufficient to permit a rational trier of fact to find all of the essential elements of the crime beyond a reasonable doubt. In other words, a judgment of acquittal is warranted only when there is no evidence upon which a reasonable mind might find guilt beyond a reasonable doubt. However, the judge must not let the jury act on what would necessarily be only surmise and conjecture, without evidence.
Because the court reserved ruling on the Rule 29 motion made at the close of the government's case, the court must make its decision based upon the evidence presented at the time the motion was made.
The court also considered the evidence after the defendant's case. The court found that sufficient evidence as to each of the essential elements of the crime charged had been presented and denied the motion.
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