United States v. Khanu ( 2009 )

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UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA,
Plaintiff,
V' Criminal Action No. 09-087 (CKK)
ABDUL KARIM KHANU,
Defendant.
MEMORANDUM OPINION
(October 13, 2009)
Bef0re the Court is Defendant’s [14] Motion to Dismiss Certain Counts in the Indictment
on the basis of selective prosecution. Defendant seeks to dismiss Counts One through Five,
Seven, and Sixteen through Twenty-Two.l For the reasons explained below, the Court shall deny
Defendant’s Motion.
I. BACKGROUND
Defendant Abdul Karim Khanu is charged with one count of conspiring to defraud the
United States in violation of 18 U.S.C. § 371, three counts of attempted tax evasion in violation
of 26 U.S.C. § 7201 , and eighteen counts of aiding and assisting in the preparation of filing false
corporate income and employment tax returns in violation of 26 U.S.C. § 7206(2). The charges
in the indictment pertain to Defendant’s operation of several nightclubs in Washington, D.C. that
were owned wholly or in part by Defendant. The indictment alleges that from at least November
' The Court shall not address any issues related to the other counts in the indictment
against Defendant.
1997 through December 2003, Defendant owned 24% cfa corporation called TAF, Inc. ("TAF"),
which was co-owned by three unindicted co-conspirators. Indictment $l 5. TAF operated a
nightclub first known as DC Live and later renovated and reopened as VIP. Ia'. {[ 6. Defendant
separately formed a corporation called Abdul Productions Il, Inc. for the purpose of running
another nightclub called Platinum. Id. W 7-8. Defendant initially owned 80% of Abdul
Productions Il, Inc. and, by 2002, owned l0O%. ]d. Tl 7. The indictment alleges that Defendant
and the co-owners of TAF conspired to skim cash from TAF’s gross receipts so that the
employees of TAF could be paid wages in cash, avoid paying employment taxes on those wages,
assist the employees in avoiding paying income taxes, and concealing their own income and
avoid income taxes. Id. W 12-13. The indictment further alleges that Defendant skirnmed cash
from both TAF and Abdul Productions Il, Inc. and prepared false corporate and individual
income tax returns. Ia’. w 25-38. The indictment alleges these events took place from on or
about 1998 through 2004. Id. il lO.
II. LEGAL STANDARD AND DISCUSSION
A selective prosecution claim asks the Court to exercise judicial power over a core
Executive function-the enforcement of criminal laws. A prosecutor’s discretion is, however,
subject to constitutional limits such as the equal protection component of the Fifth Amendment’s
Due Process Clause, which prohibits a prosecutor from making decisions based on race, religion,
or other arbitrary classifications. United States v. Armstrong, 517 U.S. 456, 464 (1996). "In
order to dispel the presumption that a prosecutor has not violated equal protection, a criminal
defendant must present ‘clear evidence to the contrary."’ Armstrong, 517 U.S. 456, 465 (l 996)
(quoting United States v. Chemz``cal Foundatz``on, Inc., 272 U.S. l, l4-l5 (1926)). The defendant
must show both (l) that he was singled out for prosecution from others similarly situated and (2)
that his prosecution was motivated by a discriminatory purpose. United States v. Palfrey, 499 F.
Supp. 2d 34, 39 (D.D.C. 2007). "[T]he standard is a demanding one." Armstrong, 517 U.S. at
463. To obtain discovery, the defendant must put forth "some evidence tending to show the
existence of the essential elements" of a selective prosecution claim. Ia’. at 468-69; see also
Attorney General v. Irish People, Inc., 684 F.2d 928, 932 (D.C. Cir. l982) (holding that
defendant must make a colorable showing as to both selectivity and improper motivation).
A. Selectivity
On the issue of selectivity, Defendant claims that he alone, as a practicing l\/luslim, is
being singled out for prosecution among the four co-owners of the nightclubs, the other three of
whom are Ethiopian Christians.z Defendant argues that these three co-owners of TAF are
similarly situated to Defendant because they are alleged in the indictment to be co-conspirators.
Specifically, Defendant and the unindicted co-conspirators are all alleged to have conspired to
skim cash from TAF’s gross receipts to pay employees in cash, conceal their income from tax
authorities, fail to report cash wages paid to employees, and file false corporate tax returns. See
Indictment M ll-l6. Despite engaging in similar conduct, however, only Defendant was charged
with conspiracy (Count One), tax evasion (Counts Two through Four), aiding and assisting in the
preparation and filing of false corporate income tax returns for TAF (Counts Five and Seven) and
2 Defendant relies on an affidavit from his cousin to identify the religious beliefs of all
four alleged co-conspirators. See Def.’s Mem. Law Supp. Mot. Dismiss Certain Counts in the
Indictment ("Def.’s l\/Iem."), Ex. l (Aff. of Maweyia Deen). The government asserts that it has
no basis for knowing the religious faiths of the parties but assumes that Defendant has accurately
identified them. See Gov’t’s Opp’n to Def.’s Mot. Dismiss Certain Counts in the Indictment
("Opp’n") at l n.l. The Court assumes without deciding that Defendant’s characterization of the
parties’ religious beliefs is accurate.
false quarterly employment tax returns for TAF (Counts Sixteen through Twenty-Two).3
Because the other three co-owners could have been charged based on these allegations in the
indictment," Defendant claims he was singled out for prosecution.
The Government responds that even if the unindicted co-conspirators could have been
charged with the same offenses as Defendant based on the indictment, they are not similarly
situated to Defendant. See Opp’n at 3. The Government notes that the indictment alleges that
Defendant, unlike his co-conspirators: operated two separate nightclubs and committed tax
crimes at both; was deeply involved in the skimming operation and exercised complete control
over nightclub operations; and had a higher profile in the nightclub industry. See ia’. at 3-4.
Defendant disputes these claims, noting that the other three co-conspirators had a greater share of
ownership in TAF than he did and that one of them also initially owned 20%of Club Platinum,
Defendant’s other nightclub, and had previously owned two other nightclubs in D.C., making
him more prominent in the industry than Defendant. See Def.’s Reply to Gov’t’s Opp’n to Mot.
to Dismiss Certain Counts in the Indictment ("Reply") at 2-3. Defendant also disputes that he
had full operational control of the nightclub during the relevant time period. Ia’.
"A similarly situated offender is one outside the protected class who has committed
roughly the same crime under roughly the same circumstances but against whom the law has not
been enforced." United States v. Lewis, 517 F.3d 20, 27 (lst Cir. 2008) (citing Armstrong, 517
U.S. at 469). In considering whether persons are similarly situated for equal protection purposes,
3 The other counts in the indictment pertain to activities in which the three co-
conspirators were not involved, i.e., Abdul Productions II, Inc.
4 'l``he possible exception to this argument is co-conspirator Lemma, who died before
Defendant was indicted. See Def.’s Mem. at 3 n.l.
4
a court must examine all relevant factors, including relative cu1pability, the strength of the case
against particular defendants, willingness to cooperate, and the potential impact of a prosecution
on related investigations. United States v. Olvis, 97 F.3d 739, 744 (4th Cir. 1996); see also
United States v. Hasiz``ngs, 126 F.3d 310, 315 (4th Cir. l997) (quoting Olvz``s, 97 F.3d at 744)
("[D]efendants are similarly situated when their circumstances present no distinguishable
legitimate prosecutorial factors that might justify making different prosecutorial decisions with
respect to them."), cited with approval in Branch Ministries v. Rossotti, 211 F.3d 137, 145 (D.C.
Cir. 2000).
The Court finds that Defendant has not met his burden to show that his alleged co-
conspirators are similarly situated. The Government’s contention that it indicted Defendant
because he was more involved and took a leadership role in the conspiracy is supported both by
the facts alleged in the indictment, which the Court must accept as true when considering a
motion to dismiss, see United States v. Lattimore, 215 F.2d 847, 851 (D.C. Cir. 1954), and by the
written agreement among the co-conspirators, attached to the Government’s brief in opposition,
showing that Defendant had substantial control over TAF’s operations. See Opp’n, Ex. A
(Agreement).§ For example, according to the indictment, Defendant (but not his co-conspirators)
improperly recorded skimmed cash on TAF’s books as personal loans to and from himself rather
than corporate receipts, further hiding his skimming from tax authorities and making it more
difficult for the lRS to track his tax liabilities. Indictment ‘[l 20. Furthermore, the Agreement
signed by the four co-owners of TAF in January 2002 naming Defendant as President of TAF
explicitly provided Defendant with operational control of the enterprise:
5 Defendant does not dispute the authenticity of this document. See Def``.’s Reply to
Gov’t’s Opp’n to Mot. Dismiss Certain Counts in the Indictment at 2-3.
5
The President shall have the sole and exclusive right to manage the operation of the Club,
and is solely responsible for making all decisions pertaining to the day to day operations
of the business, free from interference from the other officers and shareholders, and will
be solely responsible for all personnel decisions, which will include hiring, training, and
terminating all employees of the business. ln other words, it is the intention of the parties
that the President shall have total responsibility for the operation of the Club.
Agreement 11 4. Although Defendant correctly notes that the Agreement provided that the other
co-owners would have input and oversight over club operations, see Reply at 3, the Agreement
clearly established Defendant as the manager of the club from January 2002 forward, which is a
time period relevant to every count in the indictment. l\/loreover, the indictment alleges that
Defendant took a leadership role in the skimming scheme from January 2002 forward in which
Defendant would keep any skimmed cash in excess of regularly-scheduled stipend payments to
his co-conspirators. indictment il 23(h). Defendant is also not similarly situated from his co-
conspirators because he opened a second nightclub and is alleged to have committed tax crimes
at both clubs, unlike the other co-owners of TAF, who were only involved in one club’s
operations during the investigatory period. ln addition, Defendant does not dispute that he
opened a third nightclub, H20, during the course of the government’s investigation. See Opp’n at
4.6 This gave him the highest profile in the nightclub industry among the four co-owners.
Accordingly, Defendant has not shown that he was singled out for prosecution among other
similarly situated individuals.
B. Discriminatory Purp0se
Even if Defendant could show that he was singled out for prosecution, he must further
6 Defendant maintains that one of the other co-conspirators, Mr. Hidaru, was also
involved in two other nightclubs. See Reply at 2. However, that involvement occurred prior to
his involvement with TAF. Ia'. Thus, when the govemment was conducting its investigation,
Defendant clearly had a higher profile based on the number of clubs he was currently operating.
6
show that his prosecution was motivated by a discriminatory purpose. ln other words, Defendant
must show that the Government is prosecuting him "because of ’ his religion. See Wayte v,
United States, 470 U.S, 598, 610 (1985). Because direct evidence of discrimination is rarely
available, a defendant may use statistical disparities and other indirect evidence to show bias or
discriminatory motive. See Brarzch Mirzistries, Inc. v. Richardson, 970 F. Supp. ll, 17 (D.D.C.
1997). However, "statistical proof normally must present a ‘stark’ pattern to be accepted as the
sole proof of discriminatory intent under the Constitution." McCleskey v. Kemp, 481 U.S. 279,
293 (1987) (quoting Arlingion Heights v. Metro. Hous. Dev. Corp., 429 U.S. 252, 266 (1977)).
Moreover, such statistical evidence must be directly related to the issues facing the decision-
maker. For example, in McCleskey v. Kemp, the petitioner challenged his death sentence on the
ground that Georgia’s death penalty was administered in a racially discriminatory manner, and he
proffered statistical evidence showing that the rates at which black and white defendants received
the death penalty were significantly different. See 481 U.S. at 286-87. However, he did not offer
any "evidence specific to his own case that would support an inference that racial considerations
played a part in his sentence." Id. at 292-93. The Court held that the broad statistical disparities
were too far removed from the specific decisions made at trial to justify an inference of
discrimination. See id. at 294-95; see also Armstrong, 517 U.S. at 470 (holding that a statistical
study assessing discrimination in sentencing generally did not provide evidence of selective
prosecution in that particular case). "To prevail under the Equal Protection Clause, [petitioner]
must prove that the decisionmakers in his case acted with discriminatory purpose." 481 U.S. at
292.
Defendant’s evidence of discriminatory purpose consists of press articles and reports
from non-profit groups describing government profiling of Muslims, predominantly by the FBI,
7
in the wake of the September 11, 2001 terrorist attacks, as well as the fact that Defendant, the
only Muslim among his co-conspirators, appears to have been the only one actually investigated
for tax crimes.7 See Def.’s Mem. at 4-7. According to the reports cited by Defendant, the FBI
was specifically engaged in religious profiling of Muslims during the time that Defendant’s
searches occurred and has continued heightened surveillance against Muslims to this day. See ia’.
Defendant asserts that "there was a federal policy in place that had a discriminatory effect
motivated by a discriminatory purpose." Icl. at 6-7.
Even if Defendant’s allegations of govemment profiling of Muslims are accepted as true,
however, they do not provide any evidence "that the decisionmakers in his case acted with a
discriminatory purpose." See McCleskey, 481 U.S. at 292. Defendant’s allegations of religious
profiling overwhelmingly focus on the FBl and investigations related to terrorism, not tax
evasion (except where related to potential terrorist activities). See Reply at 3-4. None of
Defendants’ "evidence" is targeted at the IRS, which Defendant does not dispute is the agency
with exclusive jurisdiction over tax crimes and the investigation here. See Opp’n at 6. Nor are
there allegations targeted at prosecutors in either the U.S. Attorney’s Office or the Justice
Department’s Tax Division, who have been primarily responsible for charging Defendant in this
case. See Reply at 3-4; Opp’n at 7. Although Defendant claims to have suffered from a
government-wide discriminatory focus on l\/luslims, his supporting evidence is too far removed
from the actual prosecuting authorities in this case to allow the Court to infer a discriminatory
purpose. "Because discretion is essential to the criminal process, we would demand
7 Defendant cites the fact that only Defendant’s private residence was searched and that
the Government admitted in discovery that it did not possess two of the co-conspirators’
individual tax returns. See Reply at 5 n.3.
exceptionally clear proof before we would infer that the discretion has been abused." McCleskey,
481 U.S. at 297,
Moreover, as the Government points out, Defendant has not proven that his prosecutors
were aware of his religious affiliation "ln order to selectively prosecute on the basis of religion,
the govemment must have knowledge or at least suspect that an individual belongs to a particular
sect." United States v. Napper, 574 F. Supp. 1521, 1524 (D.D.C. 1983). Defendant contends
that "[w]hile the current prosecutors may have not knowledge of Mr. Khanu’s religious
affiliation, the government submitted no evidence that the investigators and prosecutors involved
in the indictment of this case had no such knowledge." Reply at 1 n.l. However, he does not
even identify prior investigators who may have had such knowledge. Id. lt is Defendant’s
burden to make out his selective prosecution claim, and he has failed to even allege that those
prosecuting and investigating him were aware of his religious affiliation. Therefore, Defendant
has failed to show some evidence that his prosecution was motivated by a discriminatory
purpose.
In addition, because Defendant has not shown some evidence of either prong of his
selective prosecution claim, he is also not entitled to discovery on this matter.
III. CONCLUSION
For the foregoing reasons, the Court shall DENY Defendant’s [14] Motion to Dismiss
Certain Counts in the Indictment based on the present record. An appropriate order accompanies
this Memorandum Opinion.
~'/" ‘ 4 d ,1
Date: October 13, 2009 ' l\ '
COLLEEN KOLLAR-KCTEL!LY
United States District Judge