Defendant’s Response to the Government’s Motions in Limine — U.S. v. Bhakta (S.D. Cal.), Dkt. 102

Summary

Defendant’s Response to the Government’s Motions in Limine, filed 10/01/24 as Document 102 in United States v. Denny T. Bhakta, Case 3:21-cr-03352, Southern District of California. The response argues that the government’s motion to admit the defendant’s statements should be denied, discussing SEC testimony and a proffer session. On business records, it states that the government asks the Court to admit over 40,000 pages of documents as purported “certified business records,” with over 20,000 additional documents in a supplemental motion. It asks the government to narrow those requests into specific categories. It also argues that Kabbage was involved in at least half, and maybe more, of the PPP loans at issue in the indictment. The filing is dated September 27, 2024.

Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used

Cite this document

“Defendant’s Response to the Government’s Motions in Limine — U.S. v. Bhakta (S.D. Cal.), Dkt. 102.” Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/court-filing-s-d-cal-no-3-21-cr-03352-dkt-102-s-d-cal-3b0723595a/, SHA-256 dead901ac9619b402cbd8c13b3f48ad6544a0926ec40d3c80456c8d0932d8651.

Full text

Case 3:21-cr-03352-JLS Document 102 Filed 10/01/24 PageID.608 Page 1 of 19

1 JOHN D. KIRBY
CA Bar No. 149496
2
The Law Office of John D. Kirby
3 401 West A Street, Suite 1150
4 San Diego, CA 92101
Tel (619)557-0100
5
jkirby@johnkirbylaw.com
6
7 LAURA F. MARRAN
CA Bar. No. 200374
8
NY Bar. 2310983
9 Columbia Place, 401 West A. Street
10 San Diego, CA 92101
11
Tel (858) 699-0375
lauramarranattorney@gmail.com
12
13 Attorneys for DENNY BHAKTA
14
UNITED STATES DISTRICT COURT
15
SOUTHERN DISTRICT OF CALIFORNIA
16 (JUDGE JANIS L. SAMMARTINO)
17
18 UNITED STATES GOVERNMENT, ) Case No. 21-CR-03352-JLS-1
)
19 Plaintiff, ) DEFENDANT’S RESPONSE TO
20 vs. ) THE GOVERNMENT’S MOTIONS
) IN LIMINE
21 DENNY T. BHAKTA )
22 Defendant )
)
23 )
24
)
25
26
MEMORANDUM OF POINTS
27
AND AUTHORITIES

28
Denny Bhakta, (Mr. Bhakta), by and through his counsel, John D. Kirby

29
and Laura Marran, Esq., hereby file this Response to the Government’s Motions
30
in Limine.

U.S. v. BHAKTA
21-CR-03352-JLS-1
1
Case 3:21-cr-03352-JLS Document 102 Filed 10/01/24 PageID.609 Page 2 of 19

1 I.
2 RESPONSE TO GOVERNMENT’S MOTION IN LIMINE
3
4 1. Government’s Motion to Admit Defendant’s Statements Should be
Denied.
5
6
In United States v Stringer 535 F. 3d 929 (9th Cir. 2008), the Ninth Circuit
7
8 noted that "[t]he Supreme Court has held that the government may conduct
9
parallel civil and criminal investigations without violating the due process
10
11 clause, so long as it does not act in bad faith." (emphasis added) Id. at 936.
12
In Mr. Bhakta’s case we believe that the Government did act in bad faith
13
14 by having every intention of prosecuting Mr. Bhakta criminally; while
15
simultaneously conducting a civil SEC investigation to obtain sworn testimony
16
17 it would eventually use in its criminal case. The SEC case was initiated by a
18
whistleblower complaint lodged by Avanindrakumar “Andy” Patel, Mr.
19
20 Bhakta’s “uncle” and one of the first investors in Fusion. The complaint was
21
given priority by one of the SEC prosecutors, Alka Patel, who is close family
22
23 friends with Andy’s civil attorney Sunil Brahmbhatt,1 who was opposing
24
25
26
27
1
Brahmbhatt (Super. Ct. No. 30-2021-01188360) has been disqualified from representing
himself in a litigation involving a former client against whom he threatened with criminal
28 prosecution and to use confidential information gathered when he represented him as counsel.
29
30

U.S. v. BHAKTA
21-CR-03352-JLS-1
2
Case 3:21-cr-03352-JLS Document 102 Filed 10/01/24 PageID.610 Page 3 of 19

1 counsel in the civil action against Mr. Bhakta. Ms. Alka Patel did not recuse
2
herself from the investigation despite the clear conflict of interest.
3
4
5 a. SEC Testimony Taken After the FBI Opened a Criminal
Investigation and Before Mr. Bhakta was notified that he was
6
a Target should not be used in the Government’s Case in
7 Chief:
8
9 Mr. Bhakta and his companies were served SEC Subpoenas for document
10
production on July 29, 2021. Within less than two weeks, on August 11, 2021,
11
12 the FBI requested the opening of a criminal investigation of Mr. Bhakta and his
13
companies based upon an SEC referral that he was operating an “affinity
14
15 investment fraud scheme.” Interestingly, despite having already opened a
16
criminal investigation, Mr. Bhakta was not provided a target letter,2 so that he
17
18 would realize he was under criminal investigation and could have made an
19
informed judgment as to whether to assert his Fifth Amendment rights during
20
21 the SEC deposition. The Government appears to have intentionally proceeded
22
23
24 2
There are generally three parts to a federal target letter: the nature of the
25 investigation, a statement of your rights, and often an invitation to testify before
26 the grand jury. A target letter outlines the nature of the crime you’re suspected
of, the rights you have, including the right to legal representation, and often an
27
invitation to testify before a grand jury or speak to a prosecutor. It is also very
28 clearly putting you on notice that you are a target, not merely a witness the
29 grand jury wants to hear from. (https://www.justice.gov/archives/jm/criminal-
30
resource-manual-160-sample-target-letter)

U.S. v. BHAKTA
21-CR-03352-JLS-1
3
Case 3:21-cr-03352-JLS Document 102 Filed 10/01/24 PageID.611 Page 4 of 19

1 with an SEC deposition because, unlike the grand jury process in which targets
2
of an investigation are often identified, the SEC is not required to provide any
3
4 type of target notification for testimony of possible violations of the federal
5
securities laws.3 It is very clear that the SEC Deposition was intended to
6
7 ambush Mr. Bhakta. The following SEC testimony of Mr. Bhakta on October 6,
8
2021, represents an example of how pre-meditated the SEC was in its attempt to
9
10 get Mr. Bhakta to admit to criminal wrongdoing.
11
SEC Q: I'm going to share with you now a document 24 marked
12 Government Exhibit 9. Exhibit 9 has Bates number 25 AP 00243 in the
13 lower right. In the upper right, it has the Wells Fargo symbol. In the upper
14 left, it says Platinum Business Checking Account number ending 6589.
It's a seven-page document. The first page bears the date, June 1, 2017, to
15
June 30 of 2017. And then in the down a little bit on the left, it says
16 Fusion Hotel Management LLC. It provides an address, 9984 Scripps
17 Ranch Boulevard. It appears to be a June 2017 statement for Fusion Hotel
Management accounting ending 6589 at Wells Fargo. Do you recognize
18
Exhibit 9?
19 BHAKTA A: I do recognize that as being a Wells Fargo statement. Yeah.
20 SEC Q Did Fusion Hotel Management have an account ending 6589 at
Wells Fargo in June of 2017?
21
BHAKTA A: Yes, it did
22
23 3
The Supreme Court, in SEC v. O’Brien, 467 U.S. 735, 750 (1984), noted
24 that “the imposition of a notice requirement on the SEC would substantially
25 increase the ability of persons who have something to hide to impede legitimate
investigations by the Commission.” Citing the SEC’s broad investigatory
26
responsibility under the federal securities laws, the Court found no statutory, due
27 process, or other standard regarding judicial enforcement of such subpoenas to
28 support the proposition that notice is required. Although some parties involved
in investigations eventually may be named as defendants or respondents in
29
subsequent litigation, the SEC does not have targets of its inquiries or
30 investigations.

U.S. v. BHAKTA
21-CR-03352-JLS-1
4
Case 3:21-cr-03352-JLS Document 102 Filed 10/01/24 PageID.612 Page 5 of 19

1 SEC Q: Take a look on the second page. There's a --it's heavily redacted.
Do you see that?
2
BHAKTA A: Yes.
3 SEC Q: Did you do those redactions?
4 BHAKTA A: I don't recall if I did them or if it was through counsel.
SEC Q: Did you share a copy of this document with Andy Patel?
5
BHAKTA A: It could have been one that was in that High Tail upload.
6 SEC Q: Take a look at page 2. Page 2, you can see towards the bottom,
7 I'll zoom in for you. Under debits, there’s a June 19 debit of $2,728,740
and the beneficiary is Hilton at Bank of America. Do you see that?
8
BHAKTA A: I do.
9 SEC Q: Did FHM ever make a payment to Hilton of $2,728,740?
10 BHAKTA A: Nope.
11
SEC Q: Well, why does this document reflect a transfer in that amount to
Hilton?
12 BHAKTA A: Yeah. I don't recall the transaction like that ever happening
13 with Hilton.
14 SEC Q: And did you create this document? Exhibit 9?
BHAKTA A: No. I mean, it's -- that number is not something that would
15
-- I would have created. That's not -- that seems really, really odd.
16 SEC Q: It -- do you have -- can you explain why this document would
17 reflect that number and transaction?
BHAKTA A: No. That transaction never took place. So, it’s not
18
something that I recall FHM ever remitting to Hilton.
19 SEC Q: Did you ever edit or revise an FHM bank statement and send it to
20 Andy Patel?
BHAKTA A: No.
21
SEC Q: Did you ever fabricate a bank statement and send it to Andy
22 Patel?
23 BHAKTA A: No.
SEC Q: Did you ever edit or revise an FHM bank statement and send it
24
to Mukesh Patel?
25 BHAKTA A: No.
26 SEC Q: Did you ever edit or revise an FHM bank statement and send it to
27
Vishal Patel?
BHAKTA A: No.
28 SEC Q: On the same page 2, you can see there's an entry, June 19, it
29 shows $120,000 deposit from AS Patel at the Bank of the Panhandle. Do
30 you see that?
BHAKTA A: I do.
U.S. v. BHAKTA
21-CR-03352-JLS-1
5
Case 3:21-cr-03352-JLS Document 102 Filed 10/01/24 PageID.613 Page 6 of 19

1 SEC Q: Is that a deposit FHM received from Andy Patel?
BHAKTA A: Yes, it is. I believe his other -- it's either his or it's listed on
2
here under Ranjanben.
3 SEC Q: What did FHM do with the $120,000 it received from them on
4 June 19?
BHAKTA A: Yeah. FHM immediately went into registering for these
5
RFPs and I guess within days, Andy Patel reached back out with Mukesh
6 Patel now, first contact, and Vishal Patel wanting to talk about building
7 another business out of the RFPs.
8
Not surprisingly, within less than two weeks of Mr. Bhatka’s testimony (in
9
10 response to a follow up email from Mr. Bhakta’s counsel, Jonah Toleno asking
11
is the SEC had a plan for follow up, SEC Attorney Jasper, says "Thanks Jonah. I
12
13 don't currently have plans for a second OTR. I'll let you know if that changes."
14
October 26, 2021 (BHAKTA-RECIPROCAL-000078). With the sworn
15
16 testimony secured, the SEC had performed its function of getting sworn
17
testimony from Mr. Bhakta for his ongoing criminal investigation. There was
18
19 no further need for follow-up.
20
b. Mr. Bhakta’s Proffer Statements:
21
22 On February 22, 2022, Mr. Bhakta participated in a proffer session with
23
the government. The government apparently now seeks to introduce Mr.
24
25 Bhakta’s statements from that proffer session.
26
27
As an initial matter, it is clear from the plain language of the proffer
28 agreement that the government may not use Mr. Bhakta’s statements in his case-
29
30 in-chief. Further, the government may only use Mr. Bhakta’s statements during

U.S. v. BHAKTA
21-CR-03352-JLS-1
6
Case 3:21-cr-03352-JLS Document 102 Filed 10/01/24 PageID.614 Page 7 of 19

1 the proffer session if he testifies inconsistently, or to refute evidence, arguments
2
or representations offered or elicited by the defense that are inconsistent with
3
4 Mr. Bhakta’s statements from the proffer session. See, e.g., United States v.
5
Rebbe, 314 F.3d 402 (9th Cir. 2002).
6
7 2. Government’s Motion to Admit Business Records.
8
In its original Motions in Limine (“GMIL”), the Government asks this
9
10 Court to admit over 40,000 pages of documents as purported “certified business
11
records”4. In its Supplemental Motion in Limine (“GSMIL”), the Government
12
13 adds to this request with over 20,000 additional documents as “certified business
14
records.” The authority cited is Fed R. Evid. 902 (11) which is purportedly
15
16 satisfied by “fill in the blank forms” signed by an employee at the bank. These
17
forms essentially state the following: that such records were made: 1) at or near
18
19 the time of the occurrence of the matters set forth by (or from information
20
transmitted by) a person with knowledge of those matters; 2) such records were
21
22 kept in the course of a regularly conducted business activity; 3) the business
23
activity made such records as a regular practice; and 4) if such records are not
24
25 the originals, such records are duplicates of the originals.5
26
27
28 4
These 40,000 documents are represented by a series of Bates stamps as set forth in the left-hand column of a
five-page chart: MIL Exhibit 1 (CR 78-1). The right- hand column of the chart represents corresponding
29 certifications. The 20,000 additional documents are represented by a chart contained on page 2 of the SMIL.
5
The witness offering the documents is thus not required to have personal knowledge of the facts set forth in the
30 records but is required to know about how that record was made and kept, and about the company’s
recordkeeping practices generally.
U.S. v. BHAKTA
21-CR-03352-JLS-1
7
Case 3:21-cr-03352-JLS Document 102 Filed 10/01/24 PageID.615 Page 8 of 19

1 The Government suggests that if defense has any dispute, of the
2
admissibility of any record under Rule 803 (6) or Rule 902 (11) it can submit
3
4 “both the disputed record and certification for the Court’s review.” Mr. Bhakta
5
respectfully requests that the Government narrow its proposed 60,000 of
6
7 proposed “business records” into specific categories of documents that the
8
defense can choose to challenge if necessary.
9
10 In the meanwhile, Mr. Bhakta does indeed challenge for example, the 18
11
PPP loan applications and related documents such as W-2 summary reports and
12
13 W-2 and 940 forms that are contained within the 60,000 pages of the
14
Government's proposed business records for the Court’s admission, unless the
15
16 Government is willing to accede that these applications, reports and forms were
17
in fact made by the bank. Mr. Bhakta is guessing that this is not something the
18
19 Government is prepared to do as it would make the banks liable for PPP fraud.
20
In its MIL, the Government makes the unfounded assumption that
21
22 “employee/ payroll verification documents” were submitted by the Defendant
23
along with his “PPP loan applications” to various lending banks. (See Gov. MIL
24
25 at 7-8.) This is incorrect.
26
27
Mr. Bhakta is adamant that he did not submit the fraudulent PPP loan
28 applications, W-2 Summary Reports, nor the individual W-2’s and 940’s which
29
30 the Banks then produced as its own “certified business records.” Mr. Bhakta is

U.S. v. BHAKTA
21-CR-03352-JLS-1
8
Case 3:21-cr-03352-JLS Document 102 Filed 10/01/24 PageID.616 Page 9 of 19

1 also adamant that he did not fill in the monthly payroll amount nor the number
2
of employees on the PPP loan application.
3
4 Instead, it was Kabbage (a clearinghouse who partnered banks with
5
borrowers) who provided the client banks with auto-filled values of monthly
6
7 payroll and number of employees on PPP loan applications based upon
8
documents uploaded to its “Kore” portal.
9
10 It is possible that Kabbage mistakenly put 1099 INTs that were uploaded
11
by Mr. Bhakta, and mistakenly calculated them as “monthly payroll” (believing
12
13 them to be 1099 MISC or independent contractors) then populated an employee
14
count with the number of 1099 INTs provided. A simple mistake by a Kabbage
15
16 employee could then propel Kabbage to generate summary W-2 reports without
17
Mr. Bhakta’s knowledge. Kabbage and/or the Banks also had a motive to do so
18
19 as they played catch up with requests by SBA for back up information they had
20
neglected to ask for.6
21
22 For the Court’s consideration we will go through an analysis of one such
23
PPP production of “certified business records” to make our points that these
24
25 documents were not authenticated as having been received by Mr. Bhakta and
26
27
28 6
In fact, many of these banks as recently as June 2024, requested that Mr. Bhakta provide
29 such documentation. These requests are memorialized in recent email communications
between Mr. Bhakta and the various banks, for example in June 2024, many of the banks
30 emailed him requesting detailed payroll reports, W-2 statements, 940 statements and the like.
(Exhibit B).
U.S. v. BHAKTA
21-CR-03352-JLS-1
9
Case 3:21-cr-03352-JLS Document 102 Filed 10/01/24 PageID.617 Page 10 of 19

1 appear to have been at the very least assembled (if not prepared) in anticipation
2
of litigation.
3
4 BHAKTA-GJ-009-SBOCA- 03 (GMIL Exhibit 1 page 3 of 7)
5
The above referenced document represents a 37- page compilation of documents
6
7 (SBOCA -03 - SBOCA 3.37.) (Exhibit A) that appears to have been prepared by
8
the Bank of Southern California in response to an investigation/ and or
9
10 litigation. When “business records” are made in anticipation of litigation they
11
are considered inherently unreliable.
12
13 The first page SBOCA -03 is a cover page entitled “Bank of Southern
14
California” listing an index of documents pertaining to a PPP loan made by the
15
16 bank to True Vine Hospitality which is charged in count 19 of the Superseding
17
Indictment.
18
19 The “Index” for this package of documents lists the following documents)
20
1) Paycheck Protection Program Application,
21
22 2) 940 for 2020
23
3) W-2 2020 summary report (21 pages)
24
25 4) Profit and loss 2020 and
26
27
5) Certification of Beneficial Owners.
28 Then a corresponding Certificate of Authenticity of Business Records in
29
30 Bhakta GJ-009 SBOCA (000004.0) which appears to be the entire basis for the

U.S. v. BHAKTA
21-CR-03352-JLS-1
10
Case 3:21-cr-03352-JLS Document 102 Filed 10/01/24 PageID.618 Page 11 of 19

1 Government's request that the Court admit over 40,000 bank documents as
2
business records (Attached as Exhibit C).
3
4 In this particular Certificate, Vice President Ms. Walker attests, inter alia
that
5
1. Such records were made at or near the time of the occurrence of the
6 matters set forth by (or information transmitted by) a person with
7 knowledge of those matters;
2. Such records were kept in the course of regularly conducted business
8
activity;
9 3. The business activity; made such records a regular practice.
10 4. If such records are not originals, such records are duplicates of the
11
originals.
12
13 While it may have been expedient to simply execute the form certification
14
regarding the authenticity and origination of the records being produced in this
15
16 PPP loan investigation, the banks have failed to provide true and accurate
17
representations to the Government. Many of the records turned over by the Bank
18
19 were not created by the Bank and therefore the Bank has no knowledge of the
20
circumstances under which they were created. Nor does the bank indicate how
21
22 these documents came into their possession. The Bank should not be providing
23
an opinion on the admissibility of these documents in evidence.
24
25 If the Bank is asserting that the 940, the W-2 summary report, and profit
26
27
and loss 2020, were documents “prepared” by the Bank of Southern California,
28 then they are claiming responsibility for the fraudulent information contained
29
30

U.S. v. BHAKTA
21-CR-03352-JLS-1
11
Case 3:21-cr-03352-JLS Document 102 Filed 10/01/24 PageID.619 Page 12 of 19

1 therein, or they are claiming they filled the fraudulent information by someone
2
not employed by the bank
3
4 Mr. Bhakta adamantly denies any part in preparing the above referenced
5
W-2 reports and 940 forms. He denies preparing any of the W-2’s or tax
6
7 documents contained in any of the PPP loan documents. Mr. Bhakta did
8
however provide1099’s to the Lending Banks either directly through the bank
9
10 portal or through the Kabbage portal where he made his initial application for
11
almost all the PPP loans. These 1099’s provided the information that would
12
13 have been necessary to produce the W-2’s, reports of W-2’s as well as 940’s It is
14
therefore Mr. Bhakta’s supposition that either someone at Kabbage or at the
15
16 lending banks may have generated these forms and reports in order to provide
17
“back up” requested by the SBA.7
18
19 Who provided these forms or the information that led to filling out these
20
forms is pivotal to the question of Mr. Bhakta’s guilt or innocence. Having
21
22 these documents admitted as the Bank’s business record circumvents that
23
necessary step of inquiry regarding who prepared these fraudulent documents.
24
25 The Government has also requested that the Court accept as “business
26
27
records” supporting certifications of non-related entities: For example, the
28
29
7
Indeed, as recently as June 28, 2024, JPM/ First Republic emailed Mr. Bhakta requesting that he provide a
30 “2019 detailed payroll report, W-2 statements 940 and 941 statements and proof of payroll on February 15,
2020. (Exhibit B).
U.S. v. BHAKTA
21-CR-03352-JLS-1
12
Case 3:21-cr-03352-JLS Document 102 Filed 10/01/24 PageID.620 Page 13 of 19

1 business record certification BHAKTA-GJ-059- CUSTOMERS-0000152
2
(Exhibit D) which purportedly certifies Customers Bank loan records for Fusion
3
4 Hotel Management, LLC [BHAKTA-GJ059-CUSTOMERS- 000001 to 0151]
5
contains business records of a different entity, namely Kabbage. See GJ059-
6
7 CUSTOMERS 000002-000080 (Exhibit F).
8
When questioned about this discrepancy the Government initially stated:
9
10 “We subpoenaed loan records from Customers Bank related to entities tied to
11
your client. They produced loan documents, including from their loan servicer,
12
13 Kabbage.” The documents themselves tell a different story: for Example,
14
BHAKTA-GJ-059-CUSTOMERS-000004 is a screenshot of the Kore portal
15
16 “powered by Kabbage” (see Exhibit G). It includes event data from “First
17
Republic” and “Bank of America” and no data at all on Customer’s Bank.
18
19 Another, BHAKTA-GJ-059-CUSTOMERS-000065 (Exhibit H) is a screenshot
20
of the Kabbage Servicing Portal Dashboard, and another BHAKTA-GJ-059-
21
22 CUSTOMERS-000074 (Exhibit I) is a Kabbage screenshot thanking Denny for
23
an application on behalf of TurboRes.
24
25 Further along in “Customer's production is BHAKTA-GJ-059-
26
27
CUSTOMERS-000080 (Exhibit J), whose footer reads:
28 https://kabbage.lightning.force.com/lightning/r/Case/5000e00001pzgQIAAl/vie
29
30 w?ws=%2Flightning%2Fr%2FLead%2F00Q0e00001ePZL3EA0%2Fview

U.S. v. BHAKTA
21-CR-03352-JLS-1
13
Case 3:21-cr-03352-JLS Document 102 Filed 10/01/24 PageID.621 Page 14 of 19

1 As it happens, the “ticket owner” of this document “Patricia Lacrete”
2
happens to have been an employee who worked at Kabbage from 2019- 2021.
3
4 (https://www.linkedin.com/in/patty-l-5a29272a/details/experience)
5
This example underscores the unreliability of what is purported to have been
6
7 attested to by the affiant and what has been presented to this Court.
8
3. Motion to Allow Testimony of Government Summary Witness.
9
10 The defendant does not object to the government’s use of Mr. Benjamin
11
McDonnell as a “summary witness” in this case. Regardless of the defendant's
12
13 position of the distinction between a summary witness and an expert witness, the
14
notice provided by the government regarding Mr. McDonnell’s testimony
15
16 (Docket 77), qualifies him as an expert witness.
17
4. Government’s Motion to Admit Summary Charts.
18
19 The defense does not object per se to the use of summary charts as an aid
20
to the jury. See e.g., Sam Macri & Sons, Inc. v. U.S. for Us of Oaks Const Co.,
21
22 313 F.2d 119, 128-29 (9th Cir. 1963) (“It is long established that, where records
23
are voluminous, a summary, either oral or written, may be received in
24
25 evidence.”). However, it is important that the information contained in any
26
27
summary chart be evidentiary and reliable. The Government proposes taking
28 information from documents found in the Banks’ possession with no foundation
29
30 (such as the number of employees and average monthly payroll and

U.S. v. BHAKTA
21-CR-03352-JLS-1
14
Case 3:21-cr-03352-JLS Document 102 Filed 10/01/24 PageID.622 Page 15 of 19

1 incorporating it into a “summary chart” compounds to the already unfair
2
mischaracterization that the fraudulent information could only have been
3
4 provided by Mr. Bhakta.
5
5. Government’s Motion to use Evidence in its Opening Statement.
6
7 For the reasons set out in Mr. Bhakta’s motions in limine (Docket # 92),
8
The defense objects to the government’s use of unadmitted evidence in its
9
10 opening statement.
11
6. Government’s Motion to Admit Additional Expert Testimony.
12
13 The government for the first time in its supplemental motions in limine moves
14
for the introduction of an additional expert. Specifically, the government has
15
16 posited FBI S/A Chris Christopherson, an FBI Special Agent, to testify “as an
17
expert regarding his analysis of certain emails obtained during the FBI’s
18
19 investigation.” The government’s motion does not specify which emails about
20
which S/A Christopherson will testify, nor the details of his proposed analysis.
21
22 In addition, the defense has not received any sort of report disclosing S/A
23
Christopherson’s findings. See Federal Rule of Criminal Procedure
24
25 16(a)(1)(g)(iii). The government has therefore not followed the requirements
26
27
for expert notice, under the federal rules, and S/A Christopherson should not be
28 allowed to testify. The rule on disclosure of experts was amended to avoid
29
30 unfair surprise during the trial process. See e.g. United v. Yandell, 2023

U.S. v. BHAKTA
21-CR-03352-JLS-1
15
Case 3:21-cr-03352-JLS Document 102 Filed 10/01/24 PageID.623 Page 16 of 19

1 U.S.Dist. LEXIS 230333 (E.D. CA 2023); Fed. R. Crim. P. 16 advisory
2
committee’s note. The government seeking to introduce a previously
3
4 unidentified and undisclosed expert, without providing the reporting required
5
under the rule, violates not just the technical aspects of the rule but also the
6
7 reason the rule was changed. This late-noticed expert should be excluded.
8
7. Government’s Motion to Exclude Evidence of Kabbage.
9
10 Wrongdoing. Kabbage’s wrongdoing in the context of the Payroll Protection
11
[loan] Program was wide and deep. Kabbage entered into two separate
12
13 settlements to settle fraud charged by the government. In those settlements
14
Kabbage agreed to pay the government approximately $120,000,000 based upon
15
16 their fraudulent conduct.
17
Kabbage’s admitted fraudulent conduct took many modes. According to
18
19 the settlements, Kabbage grossly inflated employee compensation, often
20
inflating compensation to in excess of $100,000 (so-called “$100,000
21
22 Inflation”)8. This widespread fraud caused recipients of PPP loans to receive
23
loan forgiveness amounts to which they were not entitled.
24
25 In addition, Kabbage also included ineligible payroll costs from IRS
26
27
Forms 940, which had the effect of apparently inflating business costs and
28 double counting (“Form 940 Inflation”).
29
30
8
See Exhibit K.
U.S. v. BHAKTA
21-CR-03352-JLS-1
16
Case 3:21-cr-03352-JLS Document 102 Filed 10/01/24 PageID.624 Page 17 of 19

1 Kabbage also admitted in the settlement documents that it double counted
2
employees’ state and local tax withholdings in determining borrowers’ average
3
4 monthly payroll9. This so-called “Salt Inflation” increased the loan amounts of
5
“tens of thousands of borrowers, collectively, by at least one hundred million
6
7 dollars.”10
8
In addition, and in contrast to the government’s representation, as
9
10 explained below Kabbage was involved in the processing of at least nine of the
11
eighteen loans at issue in this case.
12
13 With regard to Count 3 of the indictment, Kabbage’s loan processing
14
portal shows that Kabbage contacted First Republic Bank and provided the loan
15
16 referral.11 Kabbage provided First Republic with the loan documentation.
17
Similarly as to Count 4 of the indictment, Kabbage’s loan portal shows it
18
19 contacted Bank of America and provided the loan referral, and provided Bank of
20
America with the loan documentation.12
21
22 As to Count 6, the loan was funded by WebBank, however, as indicated
23
by the government’s Bates Numbering, the loan documents came from
24
25 Customer’s Bank, who received the documents from Kabbage.13
26
27
9
See Exhibit K.
28
10
Id.
29
11
See Exhibit G.
30
12
Id.
U.S. v. BHAKTA
21-CR-03352-JLS-1
17
Case 3:21-cr-03352-JLS Document 102 Filed 10/01/24 PageID.625 Page 18 of 19

1 As to Count 7 of the indictment, discovery provided by the government
2
indicates that Kabbage was in contact and supplied the documentation for the
3
4 loan. The government concedes that Kabbage was involved in the processing of
5
this loan (Docket 93, page 6).14
6
7 As to Count 16 of the indictment, WebBank funded the loan, however, the
8
loan documents were received by Customer’s Bank, which received the
9
10 documents from Kabbage.15
11
In addition, while there is little backup for the loans that form the basis of
12
13 Counts 5, 8, and 11 – 13, the defense believes that these loans were also
14
processed by Kabbage because the institutions16 who funded the loans are out-
15
16 of-state institutions with no connection with Mr. Bhakta. In addition, with
17
regard to Count 5 of the indictment, a notice sent by Kabbage links it to Celtic
18
19 Bank.
20
So, Kabbage was involved in at least half, and maybe more, of the PPP loans at
21
22 issue in the indictment.
23
In sum, there is a plethora of evidence that Kabbage, which was, as
24
25 explained below, involved in processing at least half the loans at issue in this
26
27
13
Mr. Bhakta’s contact with Customer’s Bank was entirely through Kabbage Exhibit L
28
14
See Exhibit M
29
15
See Exhibit N.
30
16
See Exhibit O.
U.S. v. BHAKTA
21-CR-03352-JLS-1
18
Case 3:21-cr-03352-JLS Document 102 Filed 10/01/24 PageID.626 Page 19 of 19

1 indictment, was a bad actor and involved in fraud on a massive scale. While
2
Kabbage did not admit in the settlement agreements to the particular type of
3
4 fraud complained of by the defense, it is certainly within the realm of reasonable
5
argument that Kabbage was involved in the creation of false documents in the
6
7 context of the PPP loan program. The government can argue that there is no
8
evidence that Kabbage engaged in this particular type of fraud, and the jury can
9
10 weigh the evidence, as is their function.
11
12
13
DATED: September 27, 2024. Respectfully Submitted,
14
/s/John D. Kirby
15
John D. Kirby,
16
Attorney for Denny Bhakta
17
18
/s/Laura F. Marran
19
Laura F. Marran
20
Attorney for Denny Bhakta
21
22
23
24
25
26
27
28
29
30

U.S. v. BHAKTA
21-CR-03352-JLS-1
19

File and source

File: 102.pdf
Size: 250,312 bytes
SHA-256: dead901ac9619b402cbd8c13b3f48ad6544a0926ec40d3c80456c8d0932d8651
Our copy: 102.pdf
Original: No public link identified.