Both federal prosecutors and a defrauded victim are fighting a court order requiring the government to provide a Las Vegas man on trial for allegedly masterminding a $190 million Ponzi scheme with copies of the last ten years of tax returns for the scheme's wealthiest victims. Ramon Desage, 64, was arrested back in June 2012 and is currently awaiting trial on 52 charges including 19 counts of wire fraud and 28 counts of money laundering. Recently, his lawyers successfully petitioned the presiding magistrate judge to order the government to produce tax returns for several wealthy victims and their spouses on the basis that the failure to claim any scheme proceeds could serve as the basis for impeachment at trial. This week, both the government and one of the affected victims have filed papers challenging that ruling as error.
Desage was arrested in mid-2012 on a complaint by the Internal Revenue Service that he used his company, Cadeau Express, to defraud investors out of at least $75 million in an elaborate Ponzi scheme. That company, whose website is still active, describes itself as a "unique company that caters to hotels and casinos who roll out the red carpet for selective guests and high-end gamblers." The IRS alleged that Desage and Cadeau Express defrauded at least four wealthy investors, using some of these funds to pay off over $20 million of gambling debts owed by DeSage. While the IRS initially alleged that Desage defrauded investors out of at least $75 million, a subsequent indictment levied dozens of additional charges and pegged the amount of victim losses as at least $190 million. Desage was also accused of failing to report nearly $90 million in income from the Internal Revenue Service from 2006 to 2009.
In June, Desage filed a "Motion for Discovery of Tax Returns," seeking the production of tax returns for four wealthy victims named in his indictment as well as for those victims' spouses and business partners. Arguing that the returns, which are normally considered confidential, Desage stated:
Mr. Desage expects that Mr. Richardson's, Mr. Vechery's and Mr. Foonberg's personal and corporate tax returns will show that they did not take into account their receipts of cash from Mr. Desage. These omissions from their tax returns will constitute significant impeachment material regarding the credibility of these alleged victims. Thus, the tax returns are crucial to Mr. Desage's defense that he did not defraud investors/lenders.
While the government opposed Desage's motion, Magistrate Judge Fehrenbach entered an order on August 13, 2015 granting the request and concluding that Desage's efforts were not a fishing expedition and that he had made a plausible showing that the tax records were favorable to his defense. In so finding, the Court cited the government's obligation under Giglio v. United States to disclose potential impeachment evidence to the defense.
The government filed an objection today to Magistrate Judge Fehrenbach's order. The government asserted that Magistrate Judge Fehrenbach's Order was "clearly erroneous," first taking issue with the finding that Desage's "plausible" showing justified production of the tax returns. Rather, the government argued that Desage was required to, and failed to, articulate "specific facts, beyond allegations, relating to materiality." Next, the government argued that the tax returns did not constitute impeachment evidence under Giglio, noting that the materiality requirement of such evidence again doomed such an effort. Finally, the government argued that the tax returns were not favorable to Desage's defense since any cash payments were simply the return of funds previously stolen by Desage.
Notably, an objection was also filed by victim William Richardson, who invested over $50 million with Desage of which over $30 million remains outstanding. In that objection, Mr. Richardson cited to the Crime Victims Rights Act ("CVRA"), a 2004 "broad and encompassing" law that sought to create "enforce[able] rights" for victims. In providing a list of eight rights to crime victims, the first right listed was the "right to be reasonably protected from the accused." The objection first noted that while the indictment only alleged that Mr. Desage had committed wire fraud against Mr. Richardson for the years 2011-2012, the Order erroneously required production of Mr. Richardson's tax returns for the remaining years during the 2005 - 2014 period. Next, the objection argued that any distributions received from Desage during those years were not reportable income, as supported by a letter from Mr. Richardson's accountant, and thus were not required to be reported on the relevant tax returns. In short, Mr. Richardson argued, like the government, that his tax returns were not "material" and thus should not be produced.
As prosecutors noted, allowing Desage's request would be akin to a "rank fishing expedition that puts the victims' sensitive financial data in the hands of the defendant, effectively victimizing them a second time."
Copies of Desage's Motion, the Order, and the Government's objection are below: