Court Opinion

ID: 4094493
Source: CourtListenerOpinion
Date Created: 2016-11-01 19:01:13.10703+00
Date Added: 2024-06-11T14:36:48.648714
License: Public Domain

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION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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