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United States v. Flynn

United States District Court, D. Minnesota

August 11, 2017

United States of America, Plaintiff,
v.
Scott Phillip Flynn, Defendant.

          David MacLaughlin and Benjamin Langner, Assistant United States Attorneys, counsel for the government

          Earl P. Gray, Earl Gray Defense, and Paul C. Engh, counsel for Mr. Flynn

          REPORT AND RECOMMENDATION

          KATHERINE MENENDEZ, UNITED STATES MAGISTRATE JUDGE

         The government has charged Scott Phillip Flynn with conspiracy to defraud the United States, tax evasion, and filing false tax returns. Mr. Flynn has moved to dismiss the indictment, arguing that the substantive charges against him are barred by the statute of limitations. Mot. to Dismiss, ECF No. 22. Mr. Flynn also moves to suppress statements he made to law enforcement agents during a February 23, 2012 search of his home. Mot. to Suppress, ECF No. 31. For the reasons set forth below, the Court recommends that both motions be denied.

         I. Motion to Dismiss

         Mr. Flynn “moves for an Order dismissing the substantive offenses of this case because the statute of limitations has lapsed.”[1] Mot. to Dismiss at 1. Ordinarily, the charges against Mr. Flynn would be subject to a six year statute of limitations. 26 U.S.C. § 6531. However, the government argues that the six year deadline was extended by two years, nine months, and one day due to operation of a federal statute, 18 U.S.C. § 3292, which allows the government additional time to bring charges in cases requiring international investigation if certain conditions are met. Mr. Flynn's Motion to Dismiss challenges the legal sufficiency of two ex parte applications filed under that statute for suspension of the statute of limitations in this case.

         A. 18 U.S.C. § 3292

         The statute of limitations for tax evasion and filing false tax returns is six years. 26 U.S.C. § 6531. However, 18 U.S.C. § 3292 provides that the statute of limitations may be suspended for a maximum of three years to allow time for international investigation if certain conditions are met. Section 3292 reads in pertinent part:

(a)(1) Upon application of the United States, filed before return of an Indictment, indicating that evidence of an offense is in a foreign country, the district court before which a grand jury is impaneled to investigate the offense shall suspend the running of the statute of limitations for the offense if the court finds by a preponderance of the evidence that an official request has been made for such evidence and that it reasonably appears, or reasonably appeared at the time the request was made, that such evidence is, or was, in such foreign country. . . .
(b) Except as provided in subsection (c) of this section, a period of suspension under this section shall begin on the date on which the official request is made and end on the date on which the foreign court or authority takes final action on the request.
(c) The total of all periods of suspension under this section with respect to an offense-
(1) shall not exceed three years; and
(2) shall not extend a period within which a criminal case must be initiated for more than six months if all foreign authorities take final action before such period would expire without regard to this section.
(d) As used in this section, the term “official request” means a letter rogatory, a request under a treaty or convention, or any other request for evidence made by a court of the United States or an authority of the United States having criminal law enforcement responsibility, to a court or other authority of a foreign country.

18 U.S.C. § 3292.

         The Eighth Circuit Court of Appeals has not interpreted § 3292, but courts in other federal appellate courts have. “A plain reading of § 3292 demonstrates that a district court's decision to suspend the running of a statute of limitations is limited to two considerations: 1) whether an official request was made; and 2) whether that official request was made for evidence that reasonably appears to be in the country to which the request was made.” United States v. Broughton, 689 F.3d 1260, 1273 (11th Cir. 2012). A request for suspension of the statute of limitations must be accompanied by “something with evidentiary value-that is, testimony, documents, proffers, and other submissions bearing some indicia of reliability-tending to prove that it is reasonably likely that evidence of the charged offense is in a foreign country.” United States v. Trainor, 376 F.3d1325, 1332 (11th Cir. 2004); see also DeGeorge v. U.S. Dist. Ct. for Cent. Dist. of Cal., 219 F.3d 930, 937 (9th Cir. 2000) (“[T]he government has some burden to establish, as opposed to being able to merely assert without support, that the foreign evidence it seeks meets the section's requirements.”).

         B. The § 3292 Applications

         In this case, the government filed two separate applications to suspend the running of the statute of limitations based upon investigation in two countries: Australia and Costa Rica. Both applications were granted by judges in the District of Minnesota.

         The 2013 Application

         On October 11, 2013, counsel for the government, Assistant United States Attorney David MacLaughlin, presented an Ex Parte Application for Suspension of Running of Statute of Limitations to United States District Judge John R. Tunheim. Gov't's Ex. B. The 2013 Application was supported by a declaration of the government's counsel that mirrored the averments in the ex parte application itself. See Ex. B at 4-6 (10/11/2013 Decl. of David MacLaughlin). In the 2013 Application, the government asserted that a grand jury was impaneled in the District of Minnesota to conduct an investigation of Mr. Flynn and several other individuals for possible criminal offenses including: (1) tax evasion; (2) fraud and false statements; (3) conspiracy to defraud the United States; (4) wire fraud; (5) securities fraud; and (6) money laundering. Ex. B at 1-2. Pursuant to 18 U.S.C. § 3292, the government asserted that it had made an official request for evidence relating to the investigation to the Commonwealth of Australia because an Australian attorney named Steven Miotti had assisted Mr. Flynn and Michael Carnicle in evading income tax obligations. Ex. B at 2-3.

         In particular, the 2013 Application alleged that Mr. Miotti had helped Mr. Fynn and Mr. Carnicle evade taxes “by recruiting numerous Australian nominees to hold stock for [Mr. Flynn and Mr. Carnicle] and to receive the proceeds of the sale of such stock and then circuitously to route those proceeds back to [Mr. Flynn and Mr. Carnicle].” Ex. B at 2. Although an official request for assistance had been sent to Australia pursuant to the Treaty between the Government of the United States of America and the Government of Australia on Mutual Assistance in Criminal Matters, the Department of Justice had not received a response at the time the 2013 Application was filed. Ex. B at 5, 7.

         Based on the 2013 Application, Judge Tunheim found that Mr. MacLaughlin's declaration “summarized the relevant facts uncovered during the course of the investigation.” Ex. B at 9. Further, Judge Tunheim concluded that: “[i]t reasonably appears, based on a preponderance of evidence presented to the Court, that evidence of the offenses under investigation is located in [the] Commonwealth of Australia; [and] [i]t further appears, based on a preponderance of the evidence presented to the Court, that the . . . Department of Justice made an official request [pursuant to § 3292].” Ex. B at 9. Based on these findings, Judge Tunheim granted the 2013 Application and ordered “that the running of the statute of limitations for the offenses set forth in the [2013 Application] [was] [t]hereby SUSPENDED for the period authorized by 18 U.S.C. § 3292(c).” Ex. B at 9.

         The 2015 Application

         The government filed another Ex Parte Application for Suspension of Running of Statute of Limitations on February 26, 2015. Gov't's Ex. C. In the 2015 Application, which was again supported by a declaration from Mr. MacLaughlin, the government explained that the grand jury was investigating Mr. Miotti, Mr. Flynn, Arnaldo Bonilla Quesada, and a number of entities associated with them, for the same list of offenses in the 2013 Application, including a “tax scheme.” Ex. C at 1. The government explained that the grand jury's investigation “to date has revealed that Miotti, an Australian attorney, has assisted Scott Flynn in evading his United States income tax obligations by recruiting numerous Australian nominees to hold stock for Flynn and to receive the proceeds of the sale of such stock and then circuitously route those proceeds back to Flynn.” Ex. C at 3. Further, the 2015 Application explains that “[s]ubstantially all of the proceeds were routed from Australia to Arnaldo Bonilla Quesada in Costa Rica, who then transferred the proceeds to Flynn.” Ex. C at 3.

         The government also stated that the grand jury was investigating Mr. Flynn and Mr. Quesada for potentially defrauding victims of the United States and Europe out of approximately $12 million by inducing them to purchase property in Costa Rica through material misrepresentations. Ex. C at 2.

Specifically, Flynn and Quesada represented that, for prices that began at $90, 000, the victims could obtain unencumbered title to lots in Costa Rica equipped with infrastructure (road, water and electricity connections) suitable for building dwellings. However, none of the victims received deeds or title to the lots, and it appears that the infrastructure was never built.

Ex. C at 2.

         The 2015 Application stated that it reasonably appeared evidence of the alleged tax scheme and the fraudulent investment scheme would be found in Costa Rica. Ex. C at 3. The Department of Justice made an official request to Costa Rica pursuant to the Inter-American Convention on Mutual Assistance in Criminal Matters, Ex. C at 3-4, but Costa Rica had not yet responded, id. at 7. Based on the 2015 Application, United States District Judge Patrick J. Schiltz found that: (1) Mr. MacLaughlin's declaration “summarizes the relevant facts uncovered during the course of the investigation”; (2) a preponderance of the evidence presented to the Court reasonably showed that evidence of the offenses under investigation was located in Costa Rica; and (3) a preponderance of the evidence presented showed that the Department of Justice made ...


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