Sunday, January 8, 2012

Good Faith Belief Conviction -- Of Guilt by Association and Klein Conspiracy (1/8/12)

In United States v. Allen, 670 F.3d 12 (1st Cir. 2012), here,  the Court affirmed convictions of tax protestors / defiers --  husband and wife -- for convictions of one Klein / defraud conspiracy count, one evasion count, and four failure to file counts.  The defendants "defense" was that they had a Cheek good faith belief that they had complied with their legal obligations.  The case offers nothing particularly exceptional, but does present an opportunity for some reminders to students and practitioners.

First, the defendants testified in their defense.  I have observed before that testifying in a criminal tax case -- indeed in white collar cases generally -- is a dicey gambit.  But, if the only defense is Cheek good faith, that defense is usually hard to sustain without the defendant testifying.

Second, the defendants testified that they had read  literature that informed him that they were liable for taxes.  The defendants specifically cited literature from one Larken Rose.  The prosecutors opening question to one of the defendants and that defendant's response was:
"Are you telling this jury that you firmly hold these beliefs even after your good friend Larken Rose went to jail for 15 fifteen [sic] months for not filing tax returns for these same and similar beliefs?" -- to which Allen responded, "Absolutely."
Pursuing the same line, defendants called another tax protestor / defier -- one Robert Schulz who headed the We The People Foundation -- to testify.  Schulz testified as to his belief that the no tax liability position was correct.  I am not entirely sure how this testimony was permitted (perhaps the prosecutor did not object), but, once it was introduced, the prosecutor sought to exploit it by asking Schulz if he had testified on behalf of a  defendant in criminal tax case who had been convicted, to which Schulz responded  that he had.

Defendants' counsel did not object to the two cross-examinations but did complain on appeal, urging that the trial court should have given their requested instruction advising the jury that it should not find guilt  by association.  The Court of Appeals noted that the instructions were ample to advise the jury that it should convict only based on the defendants' conduct which implies that it should not convict by association.  The Court of Appeals reasoned:
As for the requested cautionary instruction, there is often some risk of prejudice in averting to convictions of others for the crime in question. n2 The threat of guilt by association is perhaps greatest where the defendant has done little but is closely associated with others already known to have been convicted or, more often, who are co-defendants or alleged co-conspirators whose patent wrongdoing is brought out in detail in the trial.
   n2 One risk is the general concern that the jury will rely on "birds of a feather are flocked together" reasoning to conclude that the defendant is more likely to have committed a criminal act if he is associated with other criminals. E.g., United States v. Rivera-Santiago, 872 F.2d 1073, 1083-84 (1st Cir.), cert. denied, 492 U.S. 910, and cert. denied, 493 U.S. 832 (1989). The other -- probably more relevant here -- is that the jury could treat a conviction of another for similar conduct as a guide to what it should do in the case at hand. E.g., United States v. Ofray-Campos, 534 F.3d 1, 22-23 (1st Cir.), cert. denied, 129 S. Ct. 588 (2008), and cert. denied, 129 S. Ct. 999 (2009). 
Here, the Allens' own conduct and the basis for their beliefs were the centerpiece of the trial, and the reference to the convictions of Rose and Simkanin was brief and undeveloped. Little risk existed that the latter would overwhelm, confuse or seriously taint the jury's understanding of the former. The instruction could reasonably have been given but, in matters like this not everything permissible is therefore compulsory: given the minimal risk of such prejudice in this case, refusing the instruction was not an abuse of discretion.
The Court seemed gave short shrift to the defendants' other complaints about failure to give requested instructions.  I should note, however, that the Court seems to have been less than precise and clear is some of its discussion about the Klein / defraud conspiracy.  The Court thus said that the following requested instruction was accurate:
The first of the two, labeled "conspiratorial intent," sought to make clear that the prosecution  must prove two intents on the conspiracy charge: an intent to agree to participate in the conspiracy and an intent to commit the underlying substantive offense -- here defrauding the United States.
There is no underlying substantive offense of defrauding the United States.  My picky point is that the conspiracy statute, 18 USC 371, describes two types of conspiracy.  The first is an offense conspiracy -- a conspiracy to commit an offense described in the statute.  The second is a defraud conspiracy -- a conspiracy not to commit a described offense but to generally defraud the Government.  The requested instruction conflates the two types of conspiracy and describes the defraud conspiracy as an offense conspiracy.  So that request was not accurate.

Perhaps as a consequence of that notion, the Court of Appeals then said that the instructions actually given were sufficient to advise the jury that it must find that the defendants acted "willfully."  Willfulness is required for offense conspiracies where the underlying offense requires willfulness (such as in most tax crimes), but the text of the defraud conspiracy statute does not have a willfulness requirement.  I have argued in the article cited below that the defraud conspiracy does have elements which, as interpreted, are the equivalent of willfulness, but not willfulness itself.  In a later footnote, the Court of Appeals does seem to recognize that the defraud conspiracy does not have a willfulness requirement, saying:
Frankhauser, 80 F.3d at 653, as was explained to the jury by the instructions in this case; the tax evasion counts and the failure to file counts name crimes that explicitly require willfulness. 26 U.S.C. §§ 7201, 7203."
I suggest that the defraud count requires more than just some generalized wrongful intent but perhaps as a short hand that is not quite so bad.

My article for further discussion on intent in tax crimes and conspiracies, see John A. Townsend, Is Making the IRS's Job Harder Enough?, 9 Hous. & Bus. Tax L.J. 260 (2009), here.

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