United States v. Preston Harrison ( 2016 )

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 16a0589n.06
Case No. 15-3936
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT FILED
Nov 01, 2016
DEBORAH S. HUNT, Clerk
UNITED STATES OF AMERICA, )
)
Plaintiff-Appellee, )
) ON APPEAL FROM THE UNITED
v. ) STATES DISTRICT COURT FOR
) THE SOUTHERN DISTRICT OF
PRESTON HARRISON, ) OHIO
)
Defendant-Appellant. )
)
)
BEFORE: GRIFFIN, WHITE, and DONALD, Circuit Judges.
BERNICE BOUIE DONALD, Circuit Judge. Defendant Preston Harrison
(“Harrison”) challenges his convictions for conspiracy to commit wire fraud, money laundering,
conspiracy to commit money laundering, conspiracy to defraud the United States, and filing a
false income tax return. Harrison raises one issue on appeal: whether the district court
improperly denied his motion for a judgment of acquittal. Specifically, whether there was
sufficient evidence to support Harrison’s convictions. Because Harrison’s arguments against
sufficiency of the evidence are unconvincing, we AFFIRM.
I. FACTS
Harrison and his business partner, Thomas Jackson (“Jackson”), founded Imperial
Integrative Health and Research Development, LLC (“Imperial”) in 2009. (Appellant Br., at 14.)
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Harrison was the president and founder of Imperial, while Jackson was the founder and CEO.
(R. 139, PageID # 3573.) Imperial developed and began marketing OXYwater, a sports drink
which they touted as being “oxygen-and mineral-enhanced.” (Appellant Br., at 14.) To this end,
Harrison and Jackson began seeking investors to contribute capital for OXYwater and Imperial.
In 2010, Harrison and Jackson met with Robert Smith (“Smith”), who at the time owned
a consulting company. (R. 140, PageID # 3670–72.) During the meeting with Smith, Jackson
told Smith that OXYwater was oxygen-enhanced and Harrison did not disagree. (R. 140,
PageID # 3675–76.) Harrison and Jackson also told Smith that their goal was “to raise capital
and get it to a point where they believe it could be acquired.” (R. 140, PageID # 3674.) Harrison
and Jackson told Smith that their goal was to raise $8.5 million. (R. 140, PageID # 3674.) Smith
initially joined Imperial as a consultant on the Private Placement Memorandum (“PPM”)—the
document that provided an overview of the company, how funds would be raised, and how much
each share would cost—and business plan for OXYwater; however, he subsequently took on the
more formal role of Chief Financial Officer (“CFO”) of Imperial where he focused primarily on
recruiting investors for OXYwater. (R. 140, PageID # 3676–77.) In addition to other suggested
changes to the PPM, Smith recommended that Harrison and Jackson increase their start-up
amount to $9.5 million. (R. 140, PageID # 3683.) Smith also invested his own money in
Imperial. (R. 140, PageID # 3676.)
The PPM, which was given to a number of Imperial’s investors, contained information
which was subsequently proven to be false. The PPM listed as National Sales Manager Daniel
Couts, a former employee of Coke and Vitaminwater; the PPM also listed Kevin Waddle,
Michael Skelton, and Matthew Godsey, all former Coke and Vitaminwater employees, as
members of the OXYwater sales team, and also included their resumes. (R. 139, PageID #
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3574–76.) None of these individuals, however, were ever employed by or associated with
Imperial. The PPM further included a section on celebrity endorsements that listed OXYwater’s
official endorsers as well-known athletes Manny Pacquiao and Gregory Jennings. (R. 142,
PageID # 4278–80.) These athletes were never affiliated with OXYwater or Imperial. Even
further, the PPM indicated that in the first year, Jackson would receive a salary of $90,000 and
Harrison a salary of $60,000. (R. 139, PageID # 3585–86.) These numbers were subject to
increase in subsequent years. In reality, Jackson and Harrison were never officially on
Imperial’s payroll; instead, they appropriated significantly higher amounts for personal use.
Finally, the PPM stated that the funds raised would be used for marketing, inventory, payroll,
office warehouse lease, and to purchase machinery and commercial vehicles for local delivery to
retail accounts. (R. 139, PageID # 3580–81.) While some of the funds were used for legitimate
business purposes, bank records, however, indicated that monies from Imperial accounts were
also used by Jackson and Harrison for personal expenses. Based on the representations in the
PPM and other oral communications, Harrison and Jackson received approximately $9.3 million
in investments for Imperial and OXYwater. (R. 143, PageID # 4485.)
Over a series of transfers in 2011, Jackson—the only one of the two with access to
Imperial’s bank accounts—wired over one million dollars of investor money from Imperial into
an account listed under the name of Forever Now, LLC (“Forever Now”). (R. 143, PageID #
4490–92.) Forever Now was an Ohio LLC with a business description that termed it a “child
development” company. (R. 142, PageID # 4343.) Harrison and his wife, Lovena, were the sole
signatories on the account, and the Ohio Secretary of State records listed Qaylea Harrison, the
Harrisons’ daughter who was six or seven years old at the time, as the registered agent of Forever
Now. (R. 143, PageID # 4511–12, 4514–15.) The Harrisons used the Forever Now account as
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their personal bank account, paying for personal assets and a number of home-improvement
projects out of the account. (R. 143, PageID # 4457–59, 4464–67, 4477, 4480.) Despite the
amount received in the Forever Now account, the Harrisons filed a joint tax return in 2011
claiming a total income of approximately $23,000, (R. 143, PageID # 4507), and Forever Now
did not file a tax return in 2011. (R. 143, PageID # 4511.)
In 2012, the Federal Bureau of Investigation (“FBI”) and the Internal Revenue Service
(“IRS”) began investigating Harrison and Jackson. (R. 143, PageID # 4447.) As part of this
investigation, IRS Agent David Gosiewski reviewed bank transactions from Imperial’s accounts
and the Forever Now account, and executed search and seizure warrants at the Harrisons’
residence. (R. 143, PageID # 4449–50.) The warrant on the Harrisons’ home resulted in the
seizure of a Cadillac Escalade and a BMW 750, both of which could be traced directly to the
Forever Now account, as well as the $520,000 in cash that remained in the Forever Now account.
(R. 143, PageID # 4450.) Additionally, a review of the bank activity on the Forever Now
account indicated that Lovena made a significant number of cash withdrawals, each time for an
amount just under $10,000. (R. 142, PageID # 4344–45.) The FBI and IRS also executed search
warrants at the warehouse/corporate location for Imperial, which included a search of specific
email addresses and business records. (R. 143, PageID # 4450, 4452.) The business records
retrieved included banking records, sales figures, invoices, etcetera. (R. 143, PageID # 4452.)
For example, information pulled from the computers located at Imperial’s office revealed total
sales of $307,000 in 2012, (R. 143, PageID # 4454), as compared to the $1.3 million in sales for
August 2012 that was reported to investors. (R. 140, PageID # 3842.)
In May 2014, a federal grand jury indicted Harrison, Jackson, and Lovena on various
counts of wire fraud, money laundering, and tax fraud. At trial, the jury heard testimony from
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twenty government witnesses, including investors Kendrick Gregory, Aaron Stumpf, Joseph
Crispin, Shaun Stonerook, William Culman, and Shaffer Smith—commonly known by his stage
name, “Ne-Yo.” Following the government’s case, the defense rested without presenting any
proof. (R. 144, PageID # 4632.) The jury convicted Harrison of one count of wire fraud
conspiracy, in violation of 18 U.S.C. § 1349; one count of money laundering conspiracy, in
violation of 18 U.S.C. § 1956(h); twelve counts of money laundering, in violation of 18 U.S.C. §
1957; one count of conspiracy to defraud the United States, in violation of 18 U.S.C. § 371; and
one count of filing a false tax return, in violation of 26 U.S.C. § 7206(1). The district court
sentenced him to 83 months in prison and ordered restitution in the amount of $8,840,706 to the
victims, and $375,985.15 to the IRS.
II. SUFFICIENCY OF THE EVIDENCE
Harrison argues that the government did not present sufficient evidence from which a
rational jury could conclude that he committed money laundering or that he conspired with
Jackson to commit wire fraud or money laundering. Harrison also challenges the sufficiency of
the evidence with respect to his conviction for filing a false tax return and conspiring with his
wife to do so. For the reasons below, we disagree.
A.
We review de novo a district court’s denial of a motion for judgment of acquittal. United
States v. Vichitvongsa, 819 F.3d 260, 270 (6th Cir. 2016). In reviewing whether the evidence
presented is sufficient to support a jury verdict, “the relevant question is whether, after viewing
the evidence in the light most favorable to the prosecution, any rational trier of fact could have
found the essential elements of the crime beyond a reasonable doubt.” Jackson v. Virginia,
443 U.S. 307, 319 (1979) (citation omitted) (emphasis in original). We will “reverse a judgment
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for insufficient evidence ‘only if the judgment is not supported by substantial and competent
evidence upon the record as a whole.’” United States v. Stewart, 729 F.3d 517, 526 (6th Cir.
2013) (quoting United States v. Wettstain, 618 F.3d 577, 583 (6th Cir. 2010)). In so doing, we
will not re-weigh the evidence, consider the credibility of the witnesses, or substitute our
judgment for that of the jury. United States v. Gunter, 551 F.3d 472, 482 (6th Cir. 2009)
(citation omitted).
B.
Harrison first argues that the government provided insufficient evidence to support his
conviction of conspiracy to commit wire fraud. To establish conspiracy to commit wire fraud
under 18 U.S.C. § 1349, the government must demonstrate that “two or more persons conspired,
or agreed, to commit the crime of [wire fraud] and that the defendant knowingly and voluntarily
joined the conspiracy.” United States v. Rogers, 769 F.3d 372, 377 (6th Cir. 2014) (citation
omitted). 18 U.S.C. § 1343 criminalizes the act of wire fraud, and requires proof that a
defendant: (1) devised or willfully participated in a scheme to defraud; (2) used or caused to be
used an interstate wire communication in furtherance of the scheme; and (3) intended to deprive
a victim of property or money. Id. at 377 (citing United States v. Faulkenberry, 614 F.3d 573,
581 (6th Cir. 2010)). A finding of conspiracy does not require proof of formal agreement; a
mere tacit understanding among the participants is sufficient. See United States v. Hamilton, 263
F.3d 645, 652 (6th Cir. 2001).
Initially, Harrison highlights the fact that although he was convicted of conspiracy to
commit wire fraud, the jury ultimately acquitted him of all substantive counts of wire fraud.
(Appellant Br., at 44.) Harrison argues that this bolsters his contention that he did not conspire
with Jackson. This argument is not as persuasive as Harrison would perhaps prefer, if only
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because both the Supreme Court and this Court have upheld such so-called “inconsistent
verdicts” where a defendant has been acquitted of a predicate felony, but convicted of the
compound felony. See United States v. Powell, 469 U.S. 57, 67–69 (1984); see also United
States v. Chilingirian, 280 F.3d 704, 710–11 (6th Cir. 2002); United States v. Bischoff, Nos. 97-
1980, 97-1983, 1999 WL 644340, at *1–2, *5 (6th Cir. Aug. 19, 1999) (finding that there was
sufficient evidence to convict the defendant of conspiracy to commit wire fraud, even though she
was acquitted of wire fraud).
The remainder of Harrison’s argument asserts that the evidence presented at trial
overwhelmingly points to Jackson as the fraudster, and that the government did not introduce
any evidence of communications between Harrison and Jackson to show complicity in the
conspiracy, that no evidence was presented to indicate that Harrison drafted the PPM or was
even aware of its contents, or that Harrison was aware of the representations made to investors
concerning former Vitaminwater employees. According to Harrison, the extent of his
involvement was that his name was listed as co-founder and president of Imperial, “and that
investor money ended up in the Forever Now account on which he and his wife were the sole
signatories.” (Appellant Br., at 46.)
We have held that “[t]he existence of a conspiracy ‘may be inferred from circumstantial
evidence that can reasonably be interpreted as participation in the common plan.’” United States
v. Martinez, 430 F.3d 317, 330 (6th Cir. 2005) (quoting United States v. Avery, 128 F.3d 966,
971 (6th Cir. 1997)). That there was circumstantial evidence sufficient to support Harrison’s
conviction is clear. The jury heard testimony at trial that while the majority of the
communication on behalf of Imperial was with Jackson, Harrison’s involvement in Imperial was
never in question. For example, investor Joseph Crispin testified that he never doubted
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Harrison’s involvement with OXYwater because “[e]verything that was presented was that they
were a team . . . I felt like [] I didn’t have to communicate with [Harrison], because [Jackson and
Harrison] went together for the company.” (R. 141, PageID # 4070.) The jury also heard
testimony from investor William Gregory who testified that while he rarely spoke to Harrison, he
knew what his role was. (R. 140, PageID # 3655–56.) Further, testimony from Daniel Couts, a
former Vitaminwater employee who was falsely listed as being employed by Imperial, informed
the jury that he was first contacted by Harrison, (R. 141, PageID # 4075–79), talked to Harrison
more than Jackson, (R. 141, PageID # 4078–79), told Harrison that he was not interested in
joining OXYwater, (R. 141, PageID # 4080–81), and forwarded the names and resumes of
possible Vitaminwater recruits—some of whom ended up falsely listed in the PPM as OXYwater
employees—to only Harrison. (R. 141, PageID # 4081–83.)
Further, Smith, former CFO and investor recruiter for Imperial, testified that while he did
not have much contact with Harrison after he joined, Harrison initially emailed him “pretty much
all” the documents, (R. 140, PageID # 3682), told him that Vitaminwater people were joining
their team, (R. 140, PageID # 3686), and along with Jackson, provided him with information
concerning management compensation. (R. 140, PageID # 3690.) Also important, Smith
testified that in the initial meeting pitching OXYwater, Harrison and Jackson gave a “joint
presentation” outlining the benefits of OXYwater, and Harrison did not disagree with Jackson’s
statements about the “oxygen enhanced” attributes of OXYwater. (R. 140, PageID # 3675–76.)
While none of these statements individually constitute smoking-gun evidence of
conspiracy, collectively, they are certainly sufficient to allow a jury to infer the existence of a
conspiracy. A reasonable juror could conclude that Harrison’s “behind the scenes” role, as
investor Aaron Stumpf testified he believed, (R. 140, PageID # 3753), was intentional, rather
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than proof of his lack of complicity in the fraud. It was within the jury’s province to draw this
reasonable inference, see Jackson, 443 U.S. at 319, and we will not usurp that role.
C.
Harrison next challenges his conviction for money laundering and conspiracy to commit
money laundering. Relying on essentially the same reasoning he uses to challenge his conviction
for wire fraud conspiracy, Harrison argues that he played no role in communicating with
Imperial’s investors and had no reason to know that the money that was transferred into the
Forever Now account was illegally obtained. (Appellant Br., at 49.) In sum, Harrison argues
that his convictions are based solely on “guilt by association.” (Appellant Br., at 50.)
To establish a money laundering conspiracy in violation of 18 U.S.C. § 1956(h), the
government must prove that: (1) two or more persons conspired to commit the crime of money
laundering; and (2) the defendant knowingly and voluntarily joined the conspiracy. United
States v. Prince, 618 F.3d 551, 553–54 (6th Cir. 2010). The crime of money laundering itself
punishes an individual who “knowingly engages or attempts to engage in a monetary transaction
in criminally derived property of a value greater than $10,000 and is derived from specified
unlawful activity.” 18 U.S.C. § 1957(a).
As previously noted, the government produced sufficient evidence to allow the jury to
reasonably conclude that Harrison, along with Jackson, defrauded Imperial’s investors. The
government further produced evidence that Jackson transferred money on many occasions to the
Forever Now account which the Harrisons used for their personal expenses. (R. 143, PageID #
4490.) One such transfer was the $600,000 transfer from Imperial to the Forever Now account
on July 11, 2011. (R. 143, PageID # 4491–92.) Even further, the evidence presented at trial
indicated that the Harrisons spent in excess of $73,000 installing a pool in their home, (R. 143,
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PageID # 4457–59), $47,000 on a Cadillac Escalade, (R. 143, PageID # 4477), $38,887 on a
BMW, (R. 143, PageID # 4480), and nearly $10,000 on jewelry. (R. 143, PageID # 4467.)
These expenses, among others, were paid for directly from the Forever Now account which, the
evidence indicated, was funded directly from the money invested in OXYwater.
Importantly, Harrison does not claim that he had no knowledge of the existence of the
Forever Now account, the amount contained in the account, or the source of the money. (See
Appellant Br., at 48–50.) Rather, Harrison acknowledges using the account as his personal bank
account, but argues that he did not know the money was being obtained by fraud. Having
concluded that the jury had sufficient evidence to find the existence of a wire fraud conspiracy,
this argument is unpersuasive. There was ample evidence presented at trial for a jury to
conclude that Harrison knew that the money being transferred from Imperial into his Forever
Now account was derived from fraudulent representations made to investors.
D.
Finally, Harrison challenges his tax-fraud-conspiracy and tax-fraud convictions.
Harrison argues that the government did not produce sufficient evidence to show that it was he
and not his wife that prepared the tax return. Under 26 U.S.C. § 7206(1), any person who
“[w]illfully makes and subscribes any return, statement, or other document, which contains or is
verified by a written declaration that it is made under the penalties of perjury, and which he does
not believe to be true and correct as to every material matter” is guilty of tax fraud. Conspiracy
to defraud the United States under 18 U.S.C. § 371 requires proof “that there was an agreement
between two or more persons to act together in committing an offense, and an overt act in
furtherance of the conspiracy.” United States v. Damra, 621 F.3d 474, 498 (6th Cir. 2010)
(citation omitted).
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Agent Gosiewski testified at trial that the Harrisons reported an income of approximately
$23,000 on their joint tax return for 2011. (R. 143, PageID # 4507.) The tax return reported the
income as coming from Aunt Venas Daycare and listed Harrison’s occupation as “none.” (R.
143, PageID # 4507–08.) Based on this reported income, the Harrisons claimed an earned
income credit and a child tax credit totaling $8,360, which allowed them to receive a refund of
$5,238. (R. 143 PageID # 4508–09.) The jury also heard testimony that because many of the
transfers made to Forever Now from Imperial were dubbed “salary,” those amounts should have
been reported as income. (R. 143, PageID # 4510.) Even further, testimony at trial indicated
that Forever Now did not file a tax return in 2011. (R. 143, PageID # 4511.)
Harrison does not dispute that the money in the Forever Now account was not included in
his and Lovena’s joint 2011 tax return. Rather, Harrison points out that the return was submitted
electronically using Personal Identification Numbers (“PINs”), and that Agent Gosiewski
testified that there is no way to know who actually submitted the electronic return. (R. 143,
PageID # 4510–11, 4557.) Based on this, Harrison argues that there is insufficient evidence to
support the conclusion that he rather than his wife actually prepared and filed the return, and that
“assuming Lovena prepared and filed the return,” there is insufficient evidence to conclude that
Harrison “was aware of its contents and joined his wife’s deception.” (Appellant’s Br., at 50–
52.) At trial, however, Agent Gosiewski testified regarding electronic tax returns and explained
that PINs are used in place of actual signatures,1 and that Harrison and his wife had individual
PINs, although they used the same sequence of digits for their individual PINs. (R. 143, PageID
# 4510–11, 4556.) He further testified that the return listed Harrison as the taxpayer and Lovena
1
A tax document filed using an electronic signature “shall be treated for all purposes (both civil
and criminal, including penalties for perjury) in the same manner as though signed or
subscribed.” 26 U.S.C. § 6061(b)(1).
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as the taxpayer’s spouse, (R. 143, PageID # 4540, 4556), that the person who is listed as the
taxpayer is ordinarily the person who prepared the return, (R. 143, PageID # 4557), and that the
electronic filer is informed that declarations on a return are made under penalty of perjury. (R.
143, PageID # 4510–11.) This evidence, coming from an experienced special agent with the
Criminal Investigation Division of the IRS, was more than sufficient for a rational jury to find
that Harrison willfully filed a false return.2
In challenging the conspiracy to defraud the United States charge, Harrison argues that
there is no support for this conviction because of the absence of evidence concerning interaction
or communications between him and his wife with respect to filing a false return. Unfortunately
for Harrison, his reliance on whether there was direct evidence of an agreement or a record of
communications between him and his wife to commit tax fraud is misplaced. As we have
previously noted, “a defendant’s agreement to participate in a conspiracy can be inferred.”
Damra, 621 F.3d at 496 (citation omitted). Agent Gosiewski testified to the existence of Aunt
Venas daycare as a registered business with Lovena listed as the registered owner. (R. 143,
PageID # 4546.) He also testified that the return reflected the profit and loss of the daycare. (R.
143, PageID # 4546.) Based on the evidence that both Harrison and his wife were listed on the
return, the return was electronically signed by both of them and listed Harrison as the taxpayer
and Lovena as the spouse, and Harrison was aware of the large amounts of money coming into
the family unit for cars and other personal expenses, the jury’s decision to infer a conspiracy here
was rational and well supported by the evidence.
2
This Court has already affirmed Lovena Harrison’s tax-fraud and tax-fraud conspiracy
convictions arising out of the return. Order Affirming Convictions, United States v. Lovena E.
Harrison, No. 15-3925, at 3 (6th Cir. Apr. 6, 2016) (per curiam) (unpublished) (concluding that
“[a] rational trier of fact could have found beyond a reasonable doubt that Harrison ‘made and
subscribed’ the return” based on the presence of her PIN). Both PINs were on the return, and the
same conclusion applies here.
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III. CONCLUSION
Harrison expends considerable energy pointing fingers at his wife, Lovena, and Imperial
co-founder, Jackson. The jury did not credit this attempt to deflect responsibility, and when we
view the evidence in the record as a whole, we find no reason to reverse. The district court did
not err in denying the motion for acquittal. We AFFIRM.
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