Saturday, August 28, 2010

Kottwitz -- a Long Rambling Tax Opinion Covering Most of the Major Tax Crimes (8/28/10)

I write about the Eleventh Circuit's recent decision in United States v. Kottwitz, 614 F.3d  1241 (11th Cir. 2010), here.  The decision is per curiam so we don't know which judge or which judge's clerks took the laboring oar for the opinion. Judge Birch does dissent, so the other two who formed the majority are Circuit Judge Edmondson and assigned District Judge Terrell Hodges, although I suppose Judge Birch could have written the majority opinion and dissented the part inserted at the insistence of the other two. The per curiam opens with a summary:
Defendants Theresa L. Kottwitz ["Kottwitz"], Gerard Marchelletta, Sr. ["Senior"], and Gerard Marchelletta, Jr. ["Junior"] appeal their convictions and sentences for tax fraud-related charges. We find the evidence sufficient to support the jury's verdict regarding their conspiracy convictions and that the general good faith jury instruction that was provided by the district court fully encompassed Kottwitz and the Marchellettas' theory of defense on this charge. We find, however, that the district court erred in refusing to give Kottwitz's and the Marchellettas' requested special instruction to the jury on their good faith reliance on their accountant's advice. Because the evidence was sufficient for a properly instructed jury to convict on the charges of filing materially false personal income tax returns for 2000 as to Junior and Senior and for evading taxes as to Senior, we vacate and remand for retrial in light of the jury instruction error. Because the evidence was insufficient for a properly instructed jury to convict on the charge of aiding and assisting in the filing of a materially false corporate tax return for 2001, we reverse the convictions of Kottwitz, Junior, and Senior and remand with directions to enter a judgment of acquittal on this count.
1. Conspiracy.

The Per Curiam opinion affirms the sufficiency of the evidence on the conspiracy issue. The analysis is rambling, replete with unfocused glittering generalities and string points and quotations, followed by a a summary conclusion that, well, the evidence was sufficient to present to the jury. For flavor, consider the following:
The knowledge requirement must be established by evidence that each alleged conspirator knew that the scheme would culminate in the filing of false tax returns. Adkinson, 158 F.3d at 1155. Evidence of a conspiracy or that a defendant acted in a way that would have furthered "a conspiracy if there had been one" is insufficient; there must also be independent evidence that the defendants knew of the conspiracy in progress and knowingly and voluntarily joined it. Id. (citation omitted). Due to the complexity of the tax laws, specific intent or "willful" conduct is a necessary element of tax offenses. Cheek v. United States, 498 U.S. 192, 200, 111 S. Ct. 604, 609 (1991). "This tax purpose [to interfere with the IRS's lawful functions in collecting taxes] must be the object of a Klein conspiracy, and not merely a foreseeable consequence of some other conspiratorial scheme." Adkinson, 158 F.3d at 1155. The Klein conspiracy to impede the IRS must be the object, or at least an object in a conspiracy with multiple objectives; it is not adequate if the act of impeding the IRS is "only a collateral effect of an agreement." Id. (quotation and citation omitted). Evidence that owners directed their accountant to refer any questions to them and failed to disclose to their accountant payments to some employees or unreported revenue was sufficient to support a conspiracy conviction for IRS fraud. United States v. Useni, 516 F.3d 634, 650 (7th Cir. 2008).
Innocuous even if unfocused.  I do, however, raise a limited issue. Notice how the Per Curiam Opinion weaves into the conspiracy analysis the Cheek willfulness standard. As I have discussed ad nauseum in my article, that is not how the Government in its expansive imagination of the Klein conspiracy offense imagines it. See John A. Townsend, Is Making the IRS's Job Harder Enough?, 9 Hous. & Bus. Tax L.J. 260 (2009), here.

Addendum on 12/24/10:  On rehearing, the Eleventh Circuit panel reversed the conspiracy conviction for the same reason it reversed other convictions (discussed at paragraph 4, below).  The order on rehearing is here.  Specifically, the good faith reliance on accountant requested instruction.  The panel had already reversed some of the counts on this basis for retrial; since the burden to receive a requested instruction is light, the panel was convinced on rehearing that the requested instruction was proper for the Count One Conspiracy charge.

2. Tax Perjury.

The Per Curiam then says that there was sufficient evidence for the tax perjury charge. This too is based upon a rambling set of the same type stuff that, at least to me, does not convince that the Per Curiam Judges came to grips with the argument. I cannot say the result is wrong. Just that it seems less than focused.

3. Aiding and Assisting.

The Per Curiam then, quite summarily, reverses the aiding and assisting conviction by simply saying that there is no evidence. I guess that, if indeed there were no evidence, there is nothing to talk about. And so the Per Curiam doesn't talk about it [or the not it] other than to note its absence.

4. Failure to Give the Requested Good Faith Instruction.

Now we come to something a bit more meaty. The defense asserted a good faith reliance defense and the record had sufficient evidence to establish that it was a defense to be submitted to the jury. The defense thus properly requested a good faith jury instruction drawn from the Eleventh Circuit's pattern jury instructions. The Per Curiam held that the defense was entitled to that instruction and failure to give it upon proper request was reversible error.

In the course of its glittering generalities and string quotes, the Per Curiam says some curious things. It says, for example, "The requested good faith reliance jury instruction was based on our pattern jury instructions and was, therefore, a correct statement of the law." The Per Curiam cannot be serious in that statement read on its face. Congress never passed the pattern jury instructions nor has the Supreme Court put its imprimature on it, so if the pattern jury instructions misinterpret the law, the pattern jury instructions do not become the law. Cf. United States v. Svete, 521 F.3d 1302, 1310(11th Cir. 2008), reversed en banc 556 F.3d 1157 (11th Cir. 2009) (although reversed because the pattern was found correct, the key point is that pattern jury instructions are not the law).

Once you work past the fluff, the bottom line is that there was sufficient evidence to support the requested jury instruction.

The opinion, including the short dissent, is 70 pages long. Reminds me of the quote attributed to Blaise Pascal (and others), "I would have written a shorter letter, but I did not have the time."


  1. What was the final decision on the appeal?

  2. All counts were acquitted or reversed.

    It was a BS isr bogus case where they went for “the win” and not justice. The Appeals court got it right.

    Alpharetta Contractors’ Conviction Overturned

    Marchellettas Win on Appeal


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