United States v. Michel ( 2023 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA
v.
Criminal No. 19-148-1 (CKK)
PRAKAZREL MICHEL,
Defendant.
MEMORANDUM OPINION AND ORDER
(March 1, 2023)
Defendant Prakazrel Michel (“Defendant” or “Michel”), with co-Defendant Low Taek Jho
(“Low”), is charged by indictment with a variety of criminal offenses arising from three alleged
conspiracies to unlawfully launder foreign money to influence American elections and foreign
policy. The Government has moved to disqualify Defendant’s proffered expert and exclude that
expert’s testimony. Because Defendant actually proffers lay, not expert, testimony, and
Defendant’s proposed expert is not qualified to offer expert testimony in this matter, the Court
GRANTS the Government’s [190] Motion to Exclude Defense Expert.
I. BACKGROUND
For purposes of resolving the pending motion, the Court sets out pertinent
allegations in the operative indictment and the Government’s informal proffer at the Daubert
hearing. For a more detailed explanation of the material facts alleged in the operative
indictment, the Court refers the reader to its prior opinions in this case. 1
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United States v. Michel, 2022 WL 4182342 (D.D.C. Sept. 13, 2022); United States v. Michel,
2022 WL 4119774 (D.D.C. Sept. 9, 2022); United States v. Michel, 2019 WL 5790115 (D.D.C.
Nov. 6, 2019).
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A. Charged Conspiracies
In summary terms, this criminal case centers on three alleged conspiracies. First, the
Government alleges that Michel and Low allegedly “secretly funnel[ed] foreign money . . . [from]
other straw donors” to two political action committees that supported a candidate for President of
the United States (“Candidate”) during the 2012 Presidential Election, “while concealing from the
candidate, the committees, the FEC, the public, and law enforcement the true source of the money.”
Indictment at 4-5. Michel purportedly organized several straw donors, providing them funds to
themselves make individual contributions to political action committees supporting the Candidate.
This scheme was so successful that it earned Michel and Low personal access to the Candidate on
two separate occasions. See id. Throughout the conspiracy, Michel and his straw donors concealed
the true, foreign source of the contributions in violation of 52 U.S.C. §§ 30109 and 20122, 18
U.S.C. §§ 1001(a)(1) and 2, and 18 U.S.C. §§ 1519 and 2.
Second, the Indictment alleges a broad conspiracy beginning in March 2017 to assist Low
in surreptitiously lobbying the Administration of then-President Donald J. Trump to drop an
investigation into Low’s alleged graft of a Malaysian sovereign wealth fund, 1MDB. See id. at
24, 30-33. Michel and Low purportedly worked with George Higginbotham, at that time an
attorney at the United States Department of Justice, Elliott Broidy, a businessman and former
Deputy Finance Chair of the Republican National Committee, and Nickie Lum Davis, a California
businesswoman and a foreign agent operating at the behest of the People’s Republic of China.
Both Higginbotham and Broidy have pleaded guilty before this Court for their roles in this
conspiracy, Broidy to “Conspiracy to Serve as an Unregistered Agent of a Foreign Principal, in
violation of 18 U.S.C. § 371” and Higginbotham to “Conspiracy to Make False Statements to a
Bank in violation of 18 U.S.C. § 371.” Plea Agreement at 1, ECF No. 8, United States v. Broidy,
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Crim A. No. 20-0210 (CKK) (Oct. 20, 2020); Plea Agreement at 1, ECF No. 14, United States v.
Higginbotham, Crim. A. No. 18-343 (CKK) (Nov. 30, 2018). Lum Davis has also pleaded guilty,
to failure to register under FARA and aiding and abetting, in violation of 18 U.S.C. § 2 and 22
U.S.C. §§ 612 and 618(a), for her role in the conspiracy. Mem. of Plea Agreement at 2, ECF No.
15, United States v. Lum Davis, CR. No. 20-00068 LEK (Aug. 31, 2020).
Third and finally, the Government alleges that Michel conspired with Lum Davis,
Higginbotham, Broidy, Low, and a government official of the People’s Republic of China to lobby
the President of the United States and his administration to extradite a Chinese national and
dissident back to the People’s Republic of China. Id. at 34. The conspiracy with the Chinese
government began on May 18, 2017, when Michel traveled to Hong Kong to meet with his co-
conspirators and, upon his arrival, was shuttled from Hong Kong to Shenzhen, China. See id.
There, the Chinese minister allegedly told the co-conspirators that he “was having trouble
scheduling meetings with certain high-ranking United States government officials.” Id. at 34.
The Indictment describes subsequent meetings and wire transfers in August and September
2017, including in Macau, China, in which the co-conspirators allegedly discussed the structure of
additional payments from Low to further the backchannel lobbying campaign. Id. at 36-37. It also
claims Low told the co-conspirators that he was “concerned that United States banks would not
allow him to transfer large sums of money in or through the United States financial system.” Id.
at 36. Michel allegedly suggested that the money be mischaracterized as “funds for entertainment
purposes” to conceal their true source. Id.
The Indictment identifies specific emails and wire transfers that allegedly furthered the
latter two conspiracies. Id. at 30. Michel allegedly facilitated foreign payments from entities
controlled by Low, “Lucky Mark Company” (“Lucky Mark”) and “Red Rock Nine, Limited”
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(“Red Rock”), to shell companies owned by Michel, “Anicorn” and “Artemis.” See id. at 29-30;
Transcript of Daubert Hearing, ECF No. 190-1 (Jan. 20, 2023) (“Trans.”) at 14:5-10. The
Government charges Michel with then routing the funds initially deposited into Anicorn and
Artemis to “other third parties before the funds were ultimately transferred” to his co-conspirators.
Id. at 7:17. The Government claims that the “true purpose” of routing these transactions through
third parties “was to fund the [unlawful] activity” in lobbying the Trump administration in
violation of FARA “and to conceal the true source of the funds,” Low. Id. at 14:20.
These factual allegations underly Count Seven, charging Defendant with Conspiracy to
Serve as an Unregistered Agent of a Foreign Principal and a Foreign Government and to Commit
Money Laundering, in violation of 18 U.S.C. § 371. More specifically, the Government identifies
two predicate offenses: (1) “promotional” money laundering in transferring Low’s funds to
Michel’s accounts to be used for the FARA scheme, in violation of 18 U.S.C. § 1956(a)(2)(A),
and (2) “concealment” money laundering in transferring funds between Anicorn, Artemis, and
other domestic accounts, respectively, in violation of 18 U.S.C. § 1956(a)(1)(B).
B. Proposed Expert Testimony
On June 3, 2022, Defendant identified Mr. Richard Malone (“Malone”) as a proposed
expert in this matter. Defendant characterized Malone as having “conducted and supervised
hundreds of investigations including corporate and individual tax evasion, public corruption,
money laundering, white-collar fraud[,] and bank deposit analysis” in work for the Internal
Revenue Service. Def.’s Notice of Expert Witness, ECF No. 113 at 1. Defendant stated that he
would “examine the financial records and transactions provided by the [G]overnment related to
the charges brought against Defendant[.]” Id. Broadly, Defendant represented that Malone would
emphasize what he views as a lack of evidence tying (1) Low to Lucky Mark and Red Rock and,
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(2) funds transferred to and from Anicorn and Artemis being using for unlawful purposes. See
Def.’s Notice of Expert Report, ECF No. 124 at 2-4. The Government moved to disqualify
Malone, ECF No. 155, so the Court held a Daubert hearing on January 20, 2023.
There, Malone clarified the precise opinions he expected to deliver at trial. First, he
expected to testify that there was insufficient evidence from the documents he reviewed to
conclude that Lucky Mark and Red Rock were owned by, or linked to, Low. Trans. 21:14-22:9.
Second, he expected to testify that the source of the funds were “the product of [an] embezzlement
scheme or any other illegal conduct.” Id. 23:1-4. Third, he expected to testify that the bank records
he reviewed did not indicate that Defendant conspired with others to violate FARA. Id. 26:17-22.
Malone also clarified his professional background. Although he worked on domestic
money laundering investigations for the Drug Enforcement Agency, he never worked on a FARA
case, id. at 29:11-15, and he rarely, if ever, investigated international money laundering, see id. at
33:8-14. He stated that he had only read FARA’s relevant provisions once, after arriving at his
conclusions and approximately one month before the Daubert hearing. Id. at 29:21-22. He also
explained in more detail the records on which he based his conclusions. Despite admitting on
cross-examination that he would not “expect to find evidence of the intent and purpose behind in
the transactions in the bank records themselves,” id. at 34:20-35:1, he nevertheless conceded that
he reviewed nothing but bank records to arrive at his conclusions, id. at 39:24-40:7. He further
admitted that he only relied on some germane bank records, not all. See id. at 37:12-15. He also
stated that he had no knowledge of any of the co-conspirator’s financial dealings, or general
dealings with Defendant, beyond those limited bank records that he reviewed. See id. at 30:23-
31:25.
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II. LEGAL STANDARDS
Federal Rule of Evidence 702 governs the admission of expert testimony. The rule states
that: “[a] witness who is qualified as an expert by knowledge, skill, experience, training, or
education may testify in the form of an opinion or otherwise if: (a) the expert’s scientific,
technical, or other specialized knowledge will help the trier of fact to understand the evidence or
to determine a fact in issue; (b) the testimony is based on sufficient facts or data; (c) the
testimony is the product of reliable principles and methods; and (d) the expert has reliably
applied the principles and methods to the facts of the case.” Id. The trial judge has
“considerable leeway in deciding in a particular case how to go about determine whether
particular” testimony is expert testimony and, if so, reliable. See Kumho Tire Co., Ltd. v.
Carmichael, 526 U.S. 137, 152 (1999).
This inquiry is governed by the Supreme Court’s opinion in Daubert v. Merrell Dow
Pharm., Inc., 509 U.S. 579 (1993). Under Daubert, if the Court concludes that the proposed
testimony is that appropriately delivered by an expert, “the district court is required to address
two [further] questions, first whether the expert’s testimony is based on ‘scientific knowledge,’
and second, whether the testimony ‘will assist the trier of fact to understand or determine a fact
in issue.’” Meister v. Med. Eng’g Corp., 267 F.3d 1123, 1126 (D.C. Cir. 2001) (quoting
Daubert, 509 U.S. at 590). “[I]n order to qualify as ‘scientific knowledge, an inference or
assertion must be derived by the scientific method.” Id.“[T]he proponents of [expert] evidence . . . bear the burden to prove the expert testimony
is reliable” and admissible. See Arias v. DynCorp., 928 F. Supp. 2d 10, 17 (D.D.C. 2013).
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III. DISCUSSION
Malone’s proffered testimony is not expert testimony. As a threshold matter, to the extent
that Malone means to claim that Defendant lacked the requisite mental state to conspire to violate
FARA or launder funds to assist in a conspiracy to violate FARA, “an expert witness [may] not
state an opinion about whether the defendant did or did not have a mental state or condition that
constitutes an element of the crime.” Fed. R. Evid. 704(b). The locus of the proffered testimony,
however, seems merely to highlight the lack of certain information on certain documents. The
jury, however, is more than capable of noting that the names of the alleged conspirators do not
appear on the records that Malone examined. “[T]his kind of argument may be made, based on
the evidence, by lawyers in closing argument.” See Green v. Kinney Shoe Corp., 715 F. Supp.
1122, 1124 (D.D.C. 1989) (excluding proffered expert testimony that would do no more than
identify factual inference that lay jurors had capacity to identify themselves); see also, e.g., SEC
v. Lipson, 46 F. Supp. 2d 758, 764 (N.D. Ill. 1998) (“Defendant has not established that the
financial evidence he will testify about is so complicated that the jury will be unable to understand
it without repetition” by a witness with a more illustrious curriculum vitae.).
Moreover, it is unlikely that Malone, who was not familiar with FARA and has rarely, if
ever, encountered international money laundering in his professional career, is qualified to offer
any expert testimony in this case. See United States v. Beavers, 756 F.3d 1044, 1055-56 (7th Cir.
2014) (in public corruption case, excluding proposed expert testimony where expert, among other
things, “may have lacked expertise about certain germane subjects (including relevant portions of
the tax code)”); United States v. Cooks, 589 F.3d 173, 180-81 (5th Cir. 2009) (in mortgage fraud
case, error to permit federal agent to testify where they had no experience in mortgage fraud and
was unaware of basic statutes and literature in field of mortgage fraud). If his knowledge as to
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money laundering generally did qualify him as an expert in this matter, then his admission that
bank records do not generally bear on motive, plan, or intent raises the substantial problem that
these records on which he relied are not those that “experts [in the field of money laundering]
would reasonably rely on . . . in forming an opinion” on the subject of whether the accounts were,
in fact, used to launder money aimed at furthering FARA violations. See Fed. R. Evid. 703; United
States v. Scrima, 819 F.2d 996, 1002 (11th Cir. 1987) (in tax evasion prosecution, affirming trial
court’s exclusion of proffered expert testimony based on defendant’s statement concerning his
possessions of large amounts of money where there was no showing that expert accountants
reasonably rely on such statements to establish tax evasion).
Lastly, to the extent that Malone expects to testify that there is insufficient evidence for a
jury to convict Defendant on 18 U.S.C. § 371, see Trans. 43:8-9, it is eminently clear that “‘[a]n
expert witness may not deliver legal conclusions on domestic law, for legal principles are outside
the witness’ area of expertise[,]’” United States v. Robinson, 255 F. Supp. 3d 199, 206 (D.D.C.
2017) (quoting Weston v. Wash. Metro. Area Transit Auth., 78 F.3d 682, 684 n.4 (D.C. Cir. 1996)
amended on reh’g in irrelevant part 86 F.3d 216 (D.C. Cir. 1996)). Just as a medical doctor is not
qualified to give legal testimony as to whether a defendant complied with the strictures of the
Controlled Substances Act, see id. at 206-07, an accountant cannot give legal testimony as to the
ultimate question in a criminal case of whether Defendant did not launder money to further a
conspiracy to forgo FARA’s registration requirements. See also Burkhart v. Wash. Metro. Area
Transit Auth., 112 F.3d 1207, 1213 (D.C. Cir. 1997) (“expert testimony couch in terms of a ‘legal
conclusion’ is not ‘helpful to the jury’” (quoting Torres v. Cty. of Oakland, 758 F.2d 147, 150 (6th
Cir. 1985)).
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* * *
For the foregoing reasons, it is hereby
ORDERED, Government’s [190] Motion to Exclude Defense Expert is GRANTED.
SO ORDERED.
Dated: March 1, 2023
/s/
COLLEEN KOLLAR-KOTELLY
United States District Judge
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