Feds Say Virus Fears Didn't Taint $511M Fraud Conviction

Law360 (March 25, 2020, 9:13 PM EDT) -- Prosecutors who recently obtained a conviction against Los Angeles businessman Lev Dermen for a $511 million tax fraud told a Utah federal court Tuesday the man’s push for a coronavirus-based mistrial is off-base since the district is still still conducting already-begun criminal trials to this day.

Prosecutors said Dermen, a diesel fuel magnate who was convicted of a scheme to reap lucrative biofuels incentives for truckloads of nonbiofuels products, is wrong to argue that the jury that convicted him was driven along by a sense of fear and desire to get out of the courthouse amid the coronavirus crisis.

The court where Dermen was convicted still has not shut down all trials, prosecutors said.

“As of today, eight days after the jury returned its verdict, the court is operating under General Order 20-009, which continues any trials scheduled in the future, but which explicitly states '[c]riminal jury trials already underway are not affected by this order,'" prosecutors said. 

Prosecutors believe that Dermen — who had cited the public shuttering of the Tenth Circuit and President Donald Trump's gathering-size limitation recommendation as evidence of the extreme caution taking hold — also "relies on a smattering of news stories regarding jury trials in other states and other countries. These news stories have little to no probative value. Each court must respond to the status of the COVID-19 pandemic in its own jurisdiction," they said.

Dermen also allegedly hasn't "identified a single fact to support his assertion that this jury was experiencing the kind of undue pressure that would deprive the defendant of a fair and impartial jury."

Prosecutors also argued there was no sign jurors were rushing at all. After deliberating for a few hours on Thursday, they could have come back on Friday, "or even on Saturday," prosecutors said. Instead, the jury decided to wait until Monday, at which time they kept deliberating for hours and then ate lunch together before delivering their decision.

Mark Geragos, Dermen's lawyer, said Wednesday that prosecutors' filing against mistrial ignored the fact that prosecutors had wanted the jury to keep going to decide the amount of civil forfeiture necessary in the case — something that still hasn't been decided and will require the jury to return at some as-yet-undetermined later date. "They were still trying to force the jury to go forward," Geragos said, even as the coronavirus threat swirled.

Geragos also noted that on Tuesday the judge in the case released from detention one of the four defendants who pled guilty, Isaiah Kingston, a younger brother of the quartet's leader, Jacob Kingston.

In that ruling, U.S. District Judge Jill Parrish cited Kingston's cancer, but also said: "Based on the evidence presented at trial, the court finds, by clear and convincing evidence, that Isaiah is not likely to flee and that he is not a danger to the community. Isaiah largely served as a pawn in the fraudulent activities organized by his older brother and other parties."

On March 16, the jury convicted Dermen on money laundering-related offenses. Federal prosecutors from the U.S. Department of Justice’s tax division as well as the District of Utah had been squaring off with Dermen since opening arguments on Jan. 30 over charges he led a massive scheme to obtain per-gallon credits for green fuel by rotating biofuel "precursors" around the country, putting them down on paper as the real thing at each step of the way to reap the federal incentives.

A representative for the DOJ was not immediately available for comment.

The U.S. is represented by John Sullivan, Richard Rolwing, Leslie Goemaat and Arthur Ewenczyk of the U.S. Department of Justice's Tax Division.

Dermen is represented by Mark Geragos of Geragos & Geragos.

The case is U.S. v. Kingston et al., case number 2:18-cr-00365, in the U.S. District Court for the District of Utah.

--Additional reporting by Jody Godoy, Yvonne Juris, Christopher Cole, and Mike LaSusa. Editing by John Campbell.

For a reprint of this article, please contact reprints@law360.com.

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Case Title

USA v. Kingston et al


Case Number

2:18-cr-00365

Court

Utah

Nature of Suit

Date Filed

August 01, 2018

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