United States v. Michel

• Court: District Court, District of Columbia
• Decided: March 1, 2023
• Docket: Criminal No. 2019-0148
• Status: Published

Opinion

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

1 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). 1 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,

2 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”

3 (“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,

4 (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.

5 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).

6 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

7 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)).

8 * * *

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