Defendant’s Trial Memorandum — U.S. v. Bhakta, 3:21-cr-03352 (S.D. Cal.), Dkt. 119

Summary

Defendant’s Trial Memorandum, filed 10/17/24 as Document 119 in United States v. Denny Bhakta, Case 3:21-cr-03352, Southern District of California. Its Statement of Facts says that in 2011, Denny Bhakta developed the idea of TurboRes.com and that, in 2017, Mr. Bhakta began looking for investors to fund TurboRes. It states that a falling out with the initial investors led to litigation during the COVID shutdown, and that Mr. Bhakta took out PPP loans for several entities related to TurboRes. The memorandum then sets out proposed voir dire questions and proposed jury instructions headed Knowledge, Reckless, Willfulness, Materiality and Reasonable Doubt. The signature lines read /s/ John D. Kirby and /s/ Laura F. Marran, attorneys for Denny Bhakta.

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     Case 3:21-cr-03352-JLS Document 119 Filed 10/17/24 PageID.930 Page 1 of 12




 1    JOHN D. KIRBY
      CA Bar No. 149496
 2    The Law Office of John D. Kirby
 3    401 West A Street, Suite 1150
      San Diego, CA 92101
 4    Tel (619)557-0100
 5    jkirby@johnkirbylaw.com
 6    LAURA F. MARRAN
 7    CA Bar. No. 200374
 8
      NY Bar. 2310983
      1 Columbia Place, 401 West A. Street
 9    Suite 1150
10    San Diego, CA 92101
      Tel (858) 699-0375
11
      lauramarranattorney@gmail.com
12
13
                       UNITED STATES DISTRICT COURT
14                   SOUTHERN DISTRICT OF CALIFORNIA
15                   (HONORABLE JANIS L. SAMMARTINO)
16
17    UNITED STATES GOVERNMENT, ) Case No: 2:21-cr-03352-JLS-1
                                )
18             Plaintiff,       )
          vs.                   ) DEFENDANT’S TRIAL
19                              ) MEMORANDUM
20    DENNY BHAKTA              )
               Defendant        )
21                              )
22                              )
                                )
23
24
25
                                              I.
26
                              STATEMENT OF FACTS
27
28
            In 2011, Denny Bhakta developed the idea of TurboRes.com
29
30    (incorporated under Fusion Management LLC), which was designed to help

                                Defendant’s Trial Memorandum
                                U.S. v. Bhakta 21-cr-03352-JLS-1
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 1    eliminate third-party commissions that hotels, airlines and other providers have
 2
      been paying companies like Booking.com, Expedia, and food delivery
 3
 4    companies. These commissions range between 20%-40% of the retail prices of
 5
      the hotel rooms, airline tickets, and food orders. As a result of these
 6
 7    commissions, prices have gone up, but levels of have gone down. These
 8
      problems grew during the 2008 recession when Bhakta was working for Hilton
 9
10    as Director of Revenue Management.
11
         To solve the problem of third-party providers taking such large commissions,
12
13    Mr. Bhakta began developing intellectual property and other solutions for an
14
      entity that would break this third-party cycle. Mr. Bhakta actually filed a patent
15
16    on his ideas for TurboRes, which was designed to assist in the following ways:
17
18
         • B2B (business to business) TurboRes would gather future demand
19         analytics and provides a dashboard to service-providers (hotels, airlines
20         and restaurants) so they can tailor their offerings for high & low demand
           periods. Service providers would be able to offer promotions and match
21
           customers with those promotion such that these service providers would
22         be able to reduce their dependence on companies (Priceline, etc.) that
23         charge the higher commissions that hotels passed along to customers.
24
         • B2C (business to customer) TurboRes would match the traveler with
25
           services and service-providers that best meet their interests. TurboRes
26         would accomplish this through its algorithms that take customer purchase
27         patterns and match them with service-provider promotions. In addition,
           corporations seeking large blocks of rooms could also submit requests for
28
           proposals (“RFPs”) to TurboRes to match them to hotels and also provide
29         them with options for airline travel.
30


                                   Defendant’s Trial Memorandum
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 1        Simply put, TurboRes would help eliminate commissions and collect a
 2
      simple listing fee, with uncapped reservations volume to the service-providers.
 3
 4    That value would then be passed onto the travelers with better pricing and
 5
      greater service levels.
 6
 7            This was Mr. Bhakta’s solution to what he saw as a devaluation of
 8
      traveler service based upon the rise of the third-party providers such as
 9
10    Priceline. In order to bring the TurboRes system to fruition, in 2017, Mr.
11
      Bhakta began looking for investors who would help fund the development of
12
13    TurboRes.
14
              Mr. Bhakta first turned to one of his uncles, “Andy” Patel,1 along with
15
16    two of Andy Patel’s business partners, Mukesh and Vishal Patel (no relation).
17
      The Patels were interested in the convention RFPs (requests for proposal)
18
19    generated by TurboRes, but not the other technological aspects of TurboRes.
20
      Mr. Bhakta created therefore created Fusion Hospitality Corporation to
21
22    segregate the intellectual property for the convention RFP business, where the
23
      Patels provided an initial influx of capital to augment Mr. Bhakta’s own
24
25    $6,000,000 investment into the TurboRes. 2 Mr. Bhakta also gave the Patels to
26
27
28
29    1
        Avanindrakumar Patel. Mr. “Andy” Patel is related to Mr. Bhakta, although not his nephew is the strict sense.
      Messers. Mukesh and Vishal Patel are not related to Mr. Bhakta.
30    2
        Mr. Bhakta invested money he had saved from his previous salaried jobs at Hilton as well as money he
      received from his mother’s life insurance policy.
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 1    his Wells Fargo Account Access Manager for his Wells Fargo business
 2
      account.3
 3
 4            Mr. Bhakta also branched out to find additional investors for the
 5
      TurboRes concept. Initially, he sought out lenders who gave him money for a
 6
 7    flat interest rate. Later, he offered these individuals, and others, the opportunity
 8
      to participate as investors in stock in TurboRes, Inc. The “victims” in this case
 9
10    are for the most part the individuals who converted their loans to equity
11
      positions. These individuals continue to hold TurboRes stock.
12
13            Unfortunately, a falling out with the initial investors (the Patels) led to
14
      litigation during the COVID shutdown, which derailed the convention RFP
15
16    business model and further development of TurboRes. Mr. Bhakta continued
17
      developing the intellectual property aspect, but issues related to the litigation
18
19    took up a great deal of time and effort from the development of TurboRes.
20
              During heights of the COVID epidemic, Mr. Bhakta also took out PPP
21
22    (“paycheck protection program”) loans for several of the entities related to
23
      TurboRes. Mr. Bhakta, based upon the advise of his attorneys, took advantage
24
25    of the special hospitality business provision to borrow multiple loans for each of
26
27
      the related TurboRes companies.
28
29    3
       Wells Fargo Account XXXXX6589 (allows businesses to add multiple users that can access account activity
      and download statements).
30


                                           Defendant’s Trial Memorandum
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 1
 2
                                                 II.
 3
 4                       PROPOSED VOIR DIRE QUESTIONS
 5
         1. How many of you have applied for a loan through the Paycheck
 6
 7          Protection loan Program (“PPP loan program) PPP loan? Or worked for a
 8
            company that applied for a PPP loan?
 9
10       2. How many of you have used DocuSign for bank loans, mortgages, real
11
            estate or other transactions?
12
13       3. When you used DocuSign, did you ever sign without being able to review
14
            the entire document?
15
16       4. How many of you are you familiar with the term computer “spoofing?”
17
         5. Have any of you be involved in a case of computer “spoofing?”
18
19       6. Have you or anyone close to you applied for a PPP loan? If so, what was
20          your experience with the application process?
21       7. Have you ever been involved in processing or approving PPP loans or
22          other small business loans?
23       8. What is your understanding of the PPP loan program and its purpose?
24       9. Have you or anyone close to you experienced financial hardship due to
25          the COVID-19 pandemic?
26       10. Do you have experience with online booking platforms like Priceline,
27          Kayak, or Booking.com? Have you ever encountered discrepancies
28          between what was advertised and what you received?
29       11. Have you ever been a victim of identity theft, email hacking, or online
30          fraud? If so, how did it affect you?

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 1       12. Are you familiar with terms like "spoofing" or "phishing" in the context
            of cybersecurity?
 2
 3       13. Have you ever owned or managed a small business? If so, what
            challenges did you face in securing funding?
 4
 5       14. What are your thoughts on government assistance programs for
            businesses during times of crisis?
 6
 7       15. Do you have any strong opinions about white-collar crime or financial
            fraud?
 8
 9       16. Have you or anyone close to you ever been accused of or investigated for
            financial irregularities?
10
11       17. How do you feel about the government's role in regulating business
            practices?
12
13       18. Have you ever served on a jury for a financial crimes case? If so, without
            disclosing the outcome, how was that experience?
14
15
16
                                                III.
17
18                         PROPOSED JURY INSTRUCTIONS
19
      KNOWLEDGE
20
      The term 'knowingly' is a critical element in this case, and it requires careful
21
      consideration. 'Knowingly' means that the defendant was aware of [his] [her]
22
      actions, realized what [he] [she] was doing or what was happening around [him]
23
      [her], and did not [act] [fail to act] because of ignorance, mistake, or accident.
24
25
      To find the defendant acted 'knowingly,' you must be convinced beyond a
26
      reasonable doubt that:
27
28
      The defendant had actual knowledge of the specific facts alleged in the
29
      indictment. Mere suspicion or belief is not sufficient.
30


                                   Defendant’s Trial Memorandum
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 1    The defendant fully understood the nature and consequences of [his] [her]
 2    actions at the time they were taken.
 3
 4    The defendant's actions were deliberate and intentional, not the result of
 5    negligence, oversight, or misunderstanding.
 6
 7    Good faith is a complete defense to the charges in this case. If the defendant
 8    believed in good faith that [his] [her] actions were lawful, even if that belief was
 9    mistaken or unreasonable, it negates the 'knowingly' element.
10
11    The government must prove beyond a reasonable doubt that the defendant acted
12    with the specific intent to deceive or cheat, not merely that the defendant's
13    actions had the effect of deceiving or cheating.
14
15    Willful blindness or deliberate ignorance is not equivalent to knowledge. The
16    defendant must have actual awareness of the high probability of the existence of
17    the fact in question.
18
19    Evidence of the defendant's character, reputation, or prior acts should not be
20    considered in determining whether [he] [she] acted 'knowingly' in this specific
21    instance.
22
23    The complexities of securities and banking regulations may create situations
24    where a person can unknowingly violate the law. The defendant's understanding
25    of these regulations at the time of the alleged offense should be taken into
26    account.
27
28    Remember, the burden is on the prosecution to prove beyond a reasonable doubt
29    that the defendant acted 'knowingly.' If you have any reasonable doubt about
30


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 1    whether the defendant acted 'knowingly' as defined here, you must find the
 2    defendant not guilty."
 3
 4    RECKLESS
 5    The term 'reckless' in this context has a very specific and stringent legal
 6    meaning. It is not simply carelessness or negligence, even if severe. For an act to
 7    be considered 'reckless,' it must meet all of the following criteria:
 8
 9    1. The conduct in question must be highly unreasonable. This means it goes well
10    beyond mere mistakes or errors in judgment that might occur in the ordinary
11    course of business.
12
13    2. The conduct must represent an extreme departure from ordinary care.
14    'Extreme' in this context means a gross deviation from the standard of care that a
15    reasonable person would exercise in similar circumstances.
16
17    3. The conduct must present a danger of misleading investors. This danger must
18    be real and substantial, not merely theoretical or insignificant.
19
20    4. This danger must either be:
21      a) Actually, known to the defendant at the time of the action, or
22      b) So glaringly obvious that the defendant must have been aware of it.
23
24    It is crucial to understand and apply the following principles when considering
25    whether the defendant's conduct was reckless:
26
27    - The standard for recklessness is not met by showing that the defendant should
28    have known better or could have been more careful. The level of
29    unreasonableness must be extreme.
30


                                   Defendant’s Trial Memorandum
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 1    - Good faith errors, even if significant, do not constitute recklessness. If the
 2    defendant genuinely believed their actions were appropriate or non-misleading,
 3    this weighs against a finding of recklessness.
 4
 5    - The complexity of securities and banking regulations should be taken into
 6    account. What might seem obvious in hindsight may not have been clear at the
 7    time, especially in complex financial transactions.
 8
 9    - The defendant's state of mind at the time of the alleged conduct is crucial.
10    Later-acquired knowledge or retrospective analysis should not be used to judge
11    whether conduct was reckless at the time it occurred.
12
13    - Industry standards and practices should be considered. Conduct that aligns
14    with accepted practices in the securities and banking industries is less likely to
15    be considered an 'extreme departure' from ordinary care.
16
17    - The defendant's experience, role, and access to information should be taken
18    into account when determining whether a danger was 'so obvious' that they must
19    have been aware of it.
20
21    - Recklessness requires more than just a mistake in judgment. There must be an
22    element of conscious disregard or indifference to the danger of misleading
23    investors.
24
25    Remember, the burden is on the prosecution to prove beyond a reasonable doubt
26    that the defendant's conduct meets all elements of this stringent definition of
27    recklessness. If you have any reasonable doubt about whether the conduct was
28    truly reckless as defined here, you must find the defendant not guilty on this
29    basis.
30


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 1    Moreover, if the prosecution is alleging intentional fraud, recklessness is not
 2    sufficient. Intentional fraud requires a higher level of culpability than
 3    recklessness."
 4
 5    WILLFULNESS
 6
 7    "The element of 'willfulness' is crucial in this case and requires careful
 8    consideration. To act willfully, the defendant must have acted with the intent to
 9    defraud. This means more than just voluntary action; it requires a specific state
10    of mind. The government must prove beyond a reasonable doubt that the
11    defendant knew that [his] [her] conduct was unlawful.
12
13    To find that the defendant acted willfully, you must be convinced of all of the
14    following:
15
16    1. The defendant acted voluntarily and purposefully, not by mistake or accident.
17
18    2. The defendant specifically intended to deceive or cheat someone.
19
20    3. The defendant knew at the time that [his] [her] actions violated the law.
21
22    4. The defendant's purpose was to violate a known legal duty.
23
24    It is important to understand and apply the following principles when
25    considering whether the defendant acted willfully:
26
27    - Willfulness requires proof of the defendant's subjective intent. It is not enough
28    that a reasonable person would have known the conduct was illegal; the
29    government must prove that this specific defendant actually knew.
30


                                   Defendant’s Trial Memorandum
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 1    - Good faith is a complete defense to willfulness. If the defendant believed in
 2    good faith that [his] [her] actions were lawful, even if that belief was mistaken
 3    or unreasonable, it negates willfulness.
 4
 5    - Ignorance of the law can be a defense to willfulness in complex regulatory
 6    areas like securities and banking law. If the defendant was unaware of the
 7    specific legal duty [he] [she] is accused of violating, this weighs against a
 8    finding of willfulness.
 9
10    - Evidence of industry practices and standards is relevant. If the defendant's
11    actions were consistent with common practices in the securities or banking
12    industry, this may indicate a lack of willfulness.
13
14    - The complexity of the transactions or regulations involved should be
15    considered. In complicated financial matters, what may seem clear in hindsight
16    may not have been obvious at the time of the alleged offense.
17
18    - Willfulness requires more than negligence or recklessness. Even gross
19    negligence or extreme recklessness is not sufficient to prove willfulness.
20
21    - The defendant's background, experience, and role should be taken into account
22    when determining whether [he] [she] had knowledge of the unlawfulness of
23    [his] [her] actions.
24
25    - Evidence of efforts to conceal actions may suggest consciousness of
26    wrongdoing but is not alone sufficient to prove willfulness. There may be other
27    explanations for such behavior.
28
29
30


                                   Defendant’s Trial Memorandum
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 1    - The government must prove willfulness for each specific charge. A general
 2    sense that some of the defendant's conduct was improper is not enough to prove
 3    willfulness for all charges.
 4
 5    MATERIALITY
 6
 7    "A fact is material if there is a substantial likelihood that a reasonable investor
 8    would consider it important in making the decision to [purchase] [sell]
 9    securities."
10
11    REASONABLE DOUBT
12
13    The government must prove every element of the charged offenses beyond a
14    reasonable doubt. If you have a reasonable doubt about any element, you must
15    find the defendant not guilty.
16
17
      DATED: October 17, 2024.                                     Respectfully Submitted,
18
                                                                   /s/John D. Kirby
19
                                                                   John D. Kirby,
20
                                                                   Attorney for Denny Bhakta
21
22
                                                                   /s/Laura F. Marran
23
                                                                   Laura F. Marran
24
                                                                   Attorney for Denny Bhakta
25
26
27
28
29
30


                                     Defendant’s Trial Memorandum
                                     U.S. v. Bhakta 21-cr-03352-JLS-1
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