OPPOSITION to MOTION in Limine to Exclude to Exclude Evidence and Argument of… — USA v. Ayvazyan et al (Dkt. 383)

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U.S. District Court for the Central District of California · No. 2:20-cr-00579-SVW · Doc. 383 · 2021-05-31 · Docket on CourtListener

Summary

Defendant Manuk Grigoryan's response in opposition to the government's motion in limine to exclude evidence and argument of alleged victim negligence and guarantees as a defense (Dkt. No. 358), filed May 31, 2021 in United States v. Ayvazyan et al., No. 2:20-cr-00579-SVW, in the U.S. District Court for the Central District of California (Doc. 383). Relying on United States v. Lindsey, it argues that defendants may attack materiality through lending industry practice and the lenders' internal processes. It argues that because the government guaranteed the PPP loans, the lenders suffered no loss, and that this lack of harm and the benefits lenders received bear on intent to defraud. The response asks the court to deny the motion and is signed by counsel John Hanusz.

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RESPONSE IN OPPOSITION TO MOTION IN LIMINE 
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HANUSZ LAW, PC 
John Hanusz (SBN 277367) 
Email: john@hanuszlaw.com 
800 Wilshire Boulevard, Suite 1050 
Los Angeles, California 90017 
Telephone: (213) 204-4200 
 
 
Counsel for Manuk Grigoryan  
 
 
UNITED STATES DISTRICT COURT 
 
CENTRAL DISTRICT OF CALIFORNIA 
 
 
UNITED STATES OF AMERICA, 
 
 
 
 Plaintiff, 
 
 
 
v. 
 
MANUK GRIGORYAN, 
 
 
 
 Defendant. 
  
Case No. 20CR-00579(A)-SVW 
 
MANUK GRIGORYAN’S 
RESPONSE IN OPPOSITION 
TO GOVERNMENT’S MOTION 
IN LIMINE TO EXCLUDE 
EVIDENCE AND ARGUMENT 
OF ALLEGED VICTIM 
NEGLIGENCE AND 
GUARANTEES AS A DEFENSE 
(DKT. NO. 358)  
 
 
 
 
  
 
Manuk Grigoryan, by and through counsel, hereby files his Response in 
Opposition to the Government’s Motion in Limine to Exclude Evidence and 
Argument of Alleged Victim Negligence and Guarantees as a Defense (Dkt. No. 
358).  
 
Dated: May 31, 2021 
  
 
Respectfully submitted,  
 
 
 
 
 
 
 
 
 
 
 
 
 
/s/ John Hanusz _____  
 
 
 
 
 
 
John Hanusz 
 
 
  
 
Counsel for Mr. Grigoryan
 
 
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RESPONSE IN OPPOSITION 
I. INTRODUCTION 
 
The government has charged Mr. Grigoryan and his co-defendants with 
committing fraud in connection with loans issued through the Paycheck 
Protection Program (“PPP”). As the government notes, these loans were issued 
by private lenders to mitigate the economic effects of the Covid-19 pandemic. 
“[S]peed was of the essence” in the approval of these loans, and a streamlined 
process was instituted to provide for financial institutions to quickly approve 
loan applications. Dkt. No. 358 at 3. Notably, the lenders were not ultimately 
responsible for any loss associated with the loans: the government guaranteed all 
of the loans. 
 
The government has made clear that it intends to make the internal 
processes of the PPP program a central pillar of the story it will seek to tell the 
jury at trial. See Dkt. No. 374 at 2-3. At the same time, it seeks to prohibit the 
presentation of any evidence (which would presumably include cross-
examination) or argument by Defendants which might call the government’s 
narrative into question. The government’s request – made in a vacuum, more 
than three weeks before trial and without the provision of witness and exhibit 
lists – would deprive the defense of inquiring into the most basic building blocks 
of the government’s case: the loan programs and banks that Defendants stand 
accused of defrauding. Contrary to the government’s claims, Defendants should 
be permitted to question the government’s evidence regarding the processes by 
which the financial institutions processed the loan applications. The government 
has alleged that Defendants obtained (or sought to obtain) fraudulent loans from 
seventeen different financial institutions, and the Ninth Circuit has made clear 
that a lack of materiality may be demonstrated through industry practice. As a 
result, the banks’ internal processes of processing the loan applications and 
making loans guaranteed by the government – processes which the government 
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itself intends to place at issue – are directly relevant to the question of 
materiality. Moreover, the lack of actual harm suffered by the banks – given that 
they were completed insulated from any financial losses because of the 
government’s guarantee – is directly probative of lack of intent. In light of these 
benefits, the state of mind of the lenders, and their corresponding policies, 
procedures, and representations designed to entice borrowers, is directly relevant 
to the borrowers’ state of mind, especially given the disparity of sophistication 
between the two. 
 
The practices and internal processes of the lenders are neither irrelevant 
nor inadmissible, and the Court should permit Defendants to present evidence 
regarding the same at trial. 
II. ARGUMENT 
 
A. 
 Lending Industry Practice Is Directly Relevant to the Issue of 
Materiality 
 
 
Citing United States v. Lindsey, 850 F.3d 1009 (9th Cir. 2017), the 
government argues that evidence of an individual lender’s negligence is 
inadmissible as a defense in fraud case. Dkt. No. 358 at 4, 6-7. The government’s 
proposition is incomplete. Contrary to the government’s argument, the Ninth 
Circuit has not held that lending practices are irrelevant or inadmissible. Indeed, 
the government’s reading of Lindsey wholly ignores one of the case’s core and 
unambiguous holdings: defendants “may attack materiality through industry 
practice.” Lindsey, 850 F.3d at 1016. “Among other things, defendants can 
disprove materiality through evidence of the lending standards applied 
throughout the industry.” Id. Evidence of industry-wide standards is relevant and 
admissible to determine “the intrinsic capabilities of a statement to influence” a 
lender – that is, whether the statements at issue were material. Id. at 1015-17.  
 
As a result, Defendants are entitled to show that the lenders acted 
unreasonably, and that reasonable lenders “would not have relied on” the false 
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statements alleged by the government, and thus were immaterial. United States v. 
Casher, No. CR-19-65-BLG-SPW, 2020 WL 2557849 at *3 (D. Mont. May 20, 
2020); see also United States v. Markevich, 775 F. App’x 287, 289 (9th Cir. 
2019) (error to exclude defense evidence of lending practices regarding issue of 
materiality) .  
 
The Ninth Circuit’s ruling in United States v. Green, 698 F. App’x 879, 
880 (9th Cir. 2017) is particularly instructive here. In that matter, the trial court 
refused to allow evidence of lending standards in the mortgage industry. The 
Ninth Circuit reversed this ruling, holding that the exclusion of evidence 
deprived that defendant of a “meaningful opportunity to present a complete 
defense:”  
 
because (1) materiality was an essential element of wire fraud, (2) his 
main defense to materiality was that mortgage industry lenders at the 
time of his alleged fraud were only interested in closing on loans and 
would issue loans regardless of borrower qualifications, and (3) the 
expert’s testimony was essentially Green’s only evidence to prove 
these industry practices. 
 
Green, 698 F. App’x at 880. Certainly, if expert testimony regarding general 
industry practices is relevant, then percipient testimony about specific bank 
practices is that much more relevant. In this matter, the government seeks to do 
what Green forbids: to cut the defense off at the knees by prohibiting the 
introduction of evidence or argument regarding the core issue of whether the 
statements made to the lenders were material. As defendants in fraud cases 
should be “permitted to develop fully and fairly all of the evidence that would 
tend to exonerate,” United States v. Thomas, 32 F.3d 418, 421 (9th Cir. 1994), 
the Court should reject the government’s argument and allow Defendants to 
present the evidence and argument permitted by law.  
 
 
 
 
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B. 
The Lack of Harm Suffered By the Lenders, As Well As the Benefits 
Received, Are Directly Probative of the Lack of Intent to Cause Harm 
 
 
The government acknowledges that all of the PPP loans at issue were fully 
guaranteed by the government: lenders who participated in the PPP program 
would be fully reimbursed for any and all loans issued under the program. Dkt. 
No. 358 at 3. Simply put, the lenders are not victims. They suffered no loss. To 
the contrary, they were incentivized and compensated to provide each of the 
loans. Indeed, they were incentivized by the government to process the loans as 
quickly as possible. 
 
Intent to defraud necessarily means that a defendant contemplated and 
intended some actual harm or injury to his alleged victims. United States v. 
Miller, 953 F.3d 1095, 1103 (9th Cir. 2020) (“we … hold that wire fraud requires 
the intent to deceive and cheat — in other words, to deprive the victim of money 
or property by means of deception.”); see also United States v. Starr, 816 F.2d 
94, 98 (2d Cir. 1987) (only a showing of intended harm will satisfy the element 
of fraudulent intent); United States v. Jain, 93 F.3d 436, 442 (8th Cir. 1996) (the 
essence of a scheme to defraud is an intent to harm the victim); United States v. 
Cochran, 109 F.3d 660, 667-69 (10th Cir. 1997).  
 
As actual harm is probative of an intent to harm, lack of actual harm is 
similarly probative of a lack of intent to harm. United States v. Ethridge, 948 
F.2d 1215, 1217-18 (11th Cir. 1991) (per curiam) (“If Hanover had lost money, 
the government would likely have introduced that fact as evidence of intent to 
defraud. In our opinion, the Ethridges are equally entitled to argue that the fact 
that Hanover did not suffer a loss related to their intent, and present evidence to 
support that argument.”); see also United States v. Foshee, 578 F.2d 629, 634 
(5th Cir. 1978) (holding that a defendant must be permitted to argue that a lack 
of actual harm is circumstantial evidence of a lack of intent to defraud).  
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Moreover, the fact that the financial institutions received benefits in 
exchange for their participation in the loan programs is directly relevant to the 
issue of intent. Thomas, 32 F.3d at 421 (holding that benefits to purported 
victims were relevant to show lack of intent to defraud); see also United States v. 
Ciccone, 219 F.3d 1078, 1082 (9th Cir. 2000) (“Evidence of actual gain was 
highly probative on the issue of the nature of the scheme and whether [Ciccone] 
had an intent” to defraud.). The benefits received by the lenders—a widely 
publicized fact—were reflected in the lenders’ behavior and the state of mind of 
both lenders and borrowers.  Any policies, procedures, and representations 
designed to entice borrowers to use a particular service to apply for loans are thus 
directly relevant as well. The lenders at issue are sophisticated financial 
institutions, and to the extent that they promoted policies designed to solicit 
borrowers (particularly unsophisticated ones), Defendants are entitled to address 
these policies in light of the profits the lenders received in exchange for issuing 
the loans.  
 
Here, there is no question that any of the lenders suffered any harm – 
actual or otherwise – as a result of Defendants’ alleged actions. But not only did 
the lenders fail to suffer any harm, they actually benefited from their 
participation in the PPP program. Given these two critical facts, which 
Defendants expect will be uncontested at trial, Defendants should be allowed to 
inquire into the lenders’ internal processes with respect to the loan applications 
they received, and what, if any, mechanisms they had in place to deal with 
questionable or potentially fraudulent loan applications. This is especially the 
case in light of the fact that the lenders themselves knew they would be fully 
reimbursed by the government for all loans issued, and the fact that they were 
incentivized by the government to issue as many loans as possible and as quickly 
as possible. 
 
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III. CONCLUSION 
 
For the reasons stated above, the Court should deny the Motion in Limine 
to Exclude Evidence and Argument of Alleged Victim Negligence and 
Guarantees as a Defense should be denied.  
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