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  • dave
    Message 1 of 1 , Sep 24, 2010




      C. Willfulness.

      The defendant next challenges the district court's denial of his motion for judgment of acquittal, asserting  [*14]  a purported lack of proof of willfulness. Fed. R. Crim. P. 29. This claim of error is properly preserved. See Stierhoff III, 500 F. Supp. 2d at 64-65. Hence, we review the denial of the defendant's motion de novo to determine "whether the evidence, construed favorably to the government, permitted rational jurors to conclude, beyond a reasonable doubt, that the defendant was guilty as charged." United States v. Sebaggala, 256 F.3d 59, 63 (1st Cir. 2001). The assessment takes into account both direct and circumstantial evidence. United States v. Santiago, 83 F.3d 20, 23 (1st Cir. 1996). Circumstantial evidence of willfulness, standing alone, can suffice to sustain the government's burden of proof. United States v. Boulerice, 325 F.3d 75, 80 (1st Cir. 2003).

      In tax cases, "the standard for the statutory willfulness requirement is the voluntary, intentional violation of a known legal duty." Cheek v. United States, 498 U.S. 192, 201, 111 S. Ct. 604, 112 L. Ed. 2d 617 (1991) (citations and internal quotation marks omitted); see United States v. Johnson, 893 F.2d 451, 453 (1st Cir. 1990). Here, the defendant contends that the government failed to establish that he knew of his obligation to pay income taxes, so he could not  [*15]  have acted willfully. As framed, this contention rests largely on the government's failure to introduce specific evidence of any previously filed federal income tax returns.

      To be sure, one way to show that a defendant knew of his obligation to pay taxes may be to offer evidence that he filed a tax return for a previous year. See, e.g., United States v. Sempos, 772 F.2d 1, 2 (1st Cir. 1985). But even though such a proffer may be sufficient to ground a finding of willfulness, it is by no means a necessary part of the needed mosaic of proof. The defendant's contrary contention ignores the Supreme Court's admonition that "Congress did not define or limit the methods by which a willful attempt to defeat and evade might be accomplished and perhaps did not define lest its effort to do so result in some unexpected limitation." Spies v. United States, 317 U.S. 492, 499, 63 S. Ct. 364, 87 L. Ed. 418, 1943 C.B. 1038 (1943). Willfulness may be inferred from "any conduct, the likely effect of which would be to mislead or to conceal." Id.

      In the case at bar, the evidence against the defendant was entirely consistent with an inference of willfulness. The case law suggests that such an inference can rest, in part, on a defendant's employment of  [*16]  aliases and nominee entities when conducting business. See, e.g.,United States v. Daniel, 956 F.2d 540, 543 (6th Cir. 1992). Similarly, the case law teaches that an inference of willfulness can rest, in part, on a defendant's persistent failure to file income tax returns over several years. See, e.g., United States v. Greenlee, 517 F.2d 899, 903 (3d Cir. 1975). The case law further suggests that an inference of willfulness can rest, in part, on the pervasive use of non-interest-bearing accounts (which do not trigger mechanical reporting of income earned). Cf. United States v. Smith, 424 F.3d 992, 1009 (9th Cir. 2005) (noting use of non-interest bearing accounts in a tax evasion scheme as evidence of aid, assistance, and advice in a prosecution under 26 U.S.C. ยง 7206(2)). Then, too, the case law indicates that regularly conducting business in cash where checks normally would be used can be deemed a badge of willfulness. See, e.g., United States v. Conley, 826 F.2d 551, 557 (7th Cir. 1987). Proof that the defendant routinely used untraceable money orders instead of personal or corporate checks is equally suggestive. See, e.g., United States v. Tipton, 56 F.3d 1009, 1013-14 (9th Cir. 1995).  [*17]  Finally, earning substantial income during several tax years but not reporting any of that income can be a significant indicium of willfulness. See, e.g., United States v. Bohrer, 807 F.2d 159, 162 (10th Cir. 1986).

      Here, the government introduced evidence in each of these categories. It supplemented that evidence with proof that the defendant was an educated, experienced, and sophisticated businessman -- a showing that strengthened the inference of willfulness. See, e.g., United States v. MacKenzie, 777 F.2d 811, 818 (2d Cir. 1985). To cinch matters, two troopers testified that the defendant was aware that he had not paid any federal income taxes (he told them as much).

      Of course, context is important, and there might be innocent explanations for the defendant's actions and statements. But the context here is damning, and the sheer number of telltale indicators works to fortify the inference that the government would have us draw. See Gaunt v. United States, 184 F.2d 284, 290 (1st Cir. 1950). What counts is that, on the evidence assembled here, a rational jury easily could have inferred -- as this jury did -- that the defendant knew of his obligation to file federal income tax returns  [*18]  and that his failure to do so constituted an intentional violation of a known legal duty. See Cheek, 498 U.S. at 201. Consequently, the district court did not err in denying the motion for judgment of acquittal.

      D. Summary Witness.

      At trial, the government presented the testimony of Michael Pleshaw, an experienced IRS agent, as a summary witness. The defendant argues that the district court erred in allowing this testimony because it embodied impermissible legal conclusions. We review a trial court's decision to admit or exclude evidence for abuse of discretion. United States v. Maldonado-Garcia, 446 F.3d 227, 231 (1st Cir. 2006).

      In denying the defendant's post-verdict motions, the district court described Pleshaw's testimony in meticulous detail. See Stierhoff III, 500 F. Supp. 2d at 66-68. We assume the reader's familiarity with that narrative and, thus, limit ourselves to an overview of the testimony.

      Pleshaw sat through the trial and studied the amplitudinous documentary evidence. Based on the information thus acquired, he calculated the defendant's tax liability for the years at issue.

      Pleshaw's methodology was unremarkable. Using bank deposit records, Pleshaw computed the defendant's  [*19]  gross receipts, again on a year-by-year basis. He then set to one side non-taxable receipts (such as loan proceeds) and subtracted business expenses (treating all non-cash withdrawals from the defendant's accounts as deductible), year by year. To the 2002 total, he added the cash found during the search (which the defendant had admitted to a trooper emanated from his business dealings).

      In that manner, Pleshaw arrived at an estimate of the defendant's net profits for each year. Thereafter, he adjusted for self-employment taxes, took the standard deduction, and factored in personal exemptions. These computations yielded the defendant's putative taxable income for each of the four years in question. From there, elementary school arithmetic -- an application of the rate table -- produced annual figures for taxes due and owing.

      Pleshaw's testimony fits comfortably within the mine-run of permissible summary witness testimony in tax cases. We have recognized as a general proposition that testimony by an IRS agent that allows the witness to apply the basic assumptions and principles of tax accounting to particular facts is appropriate in a tax evasion case. See, e.g., United States v. Hatch, 514 F.3d 145, 165 (1st Cir. 2008);  [*20]  see also United States v. Mikutowicz, 365 F.3d 65, 72 (1st Cir. 2004) (collecting cases). The key to admissibility is that the summary witness's testimony does no more than analyze facts already introduced into evidence and spell out the tax consequences that necessarily flow from those facts. See United States v. Pree, 408 F.3d 855, 869 (7th Cir. 2005). We hold, therefore, that in a tax evasion case, a summary witness may be permitted to summarize and analyze the facts of record as long as the witness does not directly address the ultimate question of whether the accused did in fact intend to evade federal income taxes. See Mikutowicz, 365 F.3d at 72; United States v. Sabino, 274 F.3d 1053, 1067 (6th Cir. 2001).

      The defendant struggles to parry this thrust. He points out that a summary witness may not give legal opinions that purport to determine a defendant's guilt, nor may such a witness instruct the jury on controlling legal principles. See Mikutowicz, 365 F.3d at 72. Those generalizations are true as far as they go, but neither generalization was offended here. A careful review of the record shows that Pleshaw's testimony did not trespass into this forbidden terrain. He summarized  [*21]  the evidence and stated his conclusions regarding what that evidence showed as to the defendant's tax liability for the years in question. The characterizations that he made en route to those conclusions (classifying various entries as, say, "income" or "expenses") did not represent impermissible legal opinions but, rather, under the methodology that Pleshaw used, were part of a mechanical sorting of entries (e.g., classifying all receipts as "income" and all withdrawals as "expenses"). n2 

      - - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -2

      We caution that situations exist in which the characterization of a specific item may call for a legal opinion. See, e.g., Comm'r v. Duberstein, 363 U.S. 278, 280, 80 S. Ct. 1190, 4 L. Ed. 2d 1218 (1960) (addressing whether a specific transfer to a taxpayer should be characterized as a gift or as income). Here, however, Pleshaw's computations were transparent, the taxonomy that he employed was neither complex nor sophisticated, and he appears to have given the defendant the benefit of every plausible doubt.
      - - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -

      The defendant mentions in passing that the district court did not allow Pleshaw to testify as an expert. That is true, but it ignores both that the government gave appropriate advance notice of its intention to offer Pleshaw's  [*22]  testimony and that Pleshaw had the credentials needed to offer expert opinion testimony. Despite these facts, the district court decided that, considering the limited use that the government proposed to make of him, there was no need for him to testify as an expert. See Stierhoff III, 500 F. Supp. 2d at 68.

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