Wednesday, August 3, 2016

Eighth Circuit Opinion on Cheek Good Faith Defense and Conditions of Supervised Relied (8/3/16)

Leslie Book has a great Procedurally Taxinging Blog entry on a recent 8th Circuit case, United States v. West, ___ F3d ___ (8th Cir. 2016), here.  The Blog entry is 8th Circuit Strikes Down Restrictions on Internet and Computer Use Special Conditions for Convicted Tax Evader (Procedurally Taxing Blog 8/3/16), here.

The case involved an appeal by West who had been convicted of tax evasion.  West was what is commonly referred to as a tax protestor or tax defier, arguing that he believed that the law did not apply to him.  This is often called the Cheek defense, after Cheek v. United States, 498 U.S. 192, 201 (1991), a defense that is frequently discussed in this blog.  (Actually, as I note below, the Cheek defense is not a defense at all, so see below.)  As background, as noted by the panel "West proselytized his beliefs in an e-book self-published and sold through Amazon.com, entitled Are You a Taxpayer? Really? Prove It!."  (Readers may purchase the Kindle edition of the e-book here for just $7.77; the picture with the Kindle offering shows a man, presumably West, dressed ruggedly (perhaps as some type of patriot which is a cloak that many tax protestors/defiers adopt) with a gun, a look that might resonate with the anti-tax population.)  West made similar claims on his websites.  West represented himself at trial.  He lost (i.e., was convicted), despite his Cheek defense.

On appeal, the panel considered his arguments that (i) in the case in chief, the trial court had excluded certain evidence and argument generally addressed to a good faith defense and (ii) imposed certain conditions of supervised relief (banning creation of websites and use of computers).

Les -- with a contribution from Peter Hardy of Ballard Spahr, here -- does a great job discussing the holding on the conditions of supervised release holding, so I won't repeat that here.

Rather, I will focus on the common issue of the Cheek defense.  West's claim on appeal is that he was not allowed to present the Cheek defense properly -- or at least the way he wanted to.  Normally, the defendant will have to take the stand to present the most credible Cheek defense.  The defense after all is about what the defendant subjectively believed; the defendant is almost always the best witness on that issue and is in the courtroom and available to enlighten the jury.  But, it is often -- indeed usually -- dangerous for a defendant in a white collar crime case (of which a tax crimes case is a subset).  Apparently, although representing himself (which often blindsides the pro se litigant as to dangers of trial strategies), West made the right call on this and did not take the stand.  So, according to the panel opinion:
West presented his defense almost entirely through cross-examination of the government's witnesses. One of these was IRS agent Richard Troester, a so-called "summary" witness, who discussed application of the tax code generally to the particular facts of West's case. See United States v. Ellefsen, 655 F.3d 769, 780 (8th Cir. 2011) (describing role of summary witness in tax evasion case). West cross-examined Troester and attempted to impeach his knowledge ofthe IRC and contradict his testimony by referencing the IRC's definition of "United States" and "employee." The district court sustained the government's objection to each of these lines of questioning and did not permit West to recite the IRC's definitions of "United States." During his case-in-chief, West called his son Brandt, who had assisted West in writing his e-book. When West attempted to enter the e-book into evidence, the district court sustained the government's objection on relevance.
The Cheek defense is based on the element for most Title 26 tax crimes (including evasion) that the defendant have acted "willfully."  Specifically, for evasion the defendant must have "willfully attempt[]" to "evade or defeat any tax imposed by this title."  The willfully element "requires the Government to prove that the law imposed a duty on the defendant, that the defendant knew of this duty, and that he voluntarily and intentionally violated that duty." Cheek v. United States, 498 U.S. 192, 201 (1991). "  Cheek established that a subjective but good faith belief that the law did not require the taxpayer to pay the tax meant that the taxpayer could not have acted willfully.  Now, let's see what the panel opinion says about that.

The panel opinion starts with a misstatement of the law, although I don't think the misstatement was affected the outcome.  Here is the part I refer to (bold-face supplied by JAT):
Cheek squarely addressed the mistaken-belief defense to a charged violation of § 7201, holding that a defendant could defeat the willfulness element by proving to the jury that he had a subjective, good-faith belief that the relevant provision of the tax laws did not impose tax liability on him. "
The panel is wrong.  The defendant does not have to prove anything in a criminal case.   (Well there are some exceptions, but this is not one.)  The good faith defense is not what lawyers think of as an affirmative defense; rather it is just a way of stating what that the Government has to prove that the defendant acted willfully and the defendant cannot have acted willfully if he had the Cheek subjective good faith belief.  I have discussed various aspects of this issue in many blogs, but see e.g., Does A Standard Willfulness Instruction Adequately Inform the Jury of the Good Faith Defense? (Federal Tax Crimes Blog 4/19/16; 4/21/16), here; Making a Cheek Good Faith "Defense" Without Testifying (Federal Tax Crimes Blog 11/24/11), here.  All the defendant is required to do is put some evidence into the record about his good faith so that his good faith is an issue in play at the trial to impose upon the Government as part of its burden to prove willfulness beyond a reasonable doubt that it prove beyond a reasonable doubt that the defendant did not have the Cheek-required subjective good faith belief.  (Actually, as the courts often note, standard willfulness instructions that the Government must prove that the defendant acted willfully will, in theory, negate the Cheek good faith defense beyond a reasonable doubt, so the fight is usually about whether the defendant the record has sufficient evidence of good faith to just a complementary instruction that says specifically that good faith negates willfulness.)

Now, a separate question is how a defendant puts the Cheek issue in play by putting into the record evidence relevant to the his subjective good faith belief.  All evidence is still subject to the rules of evidence -- perhaps the most basic being relevance.  The defendant cannot try to admit evidence that the moon in made of blue cheese in order to permit the jury to infer anything about his subjective good faith belief.  But, as to relevant evidence, the Eighth Circuit quotes from Cheek that "forbidding the jury to consider evidence that might negate willfulness would raise a serious question under the Sixth Amendment's jury trial provision."  Further
The [Cheek] Court recognized, however, that a mistaken-belief defense does not encompass situations where the defendant, rather than having a genuine misunderstanding of the law, knows the law but merely disagrees with it. Id. at 202 n.8. Further, the [Cheek] Court distinguished the mistaken-belief defense from an argument that a relevant provision is invalid, which argument would "reveal full knowledge of the provisions at issue." Id. at 205. 
The panel then discusses its recent case of United States v. Giambalvo,  810 F.3d 1086 (8th Cir. 2016), here.  (I discuss Giambolvo in Should Proof of No Tax Evaded Be Admissible as Defense in Crime Not Requiring Tax Evaded as an Element (Federal Tax Crimes Blog 1/20/16), here).  After discussing Giambolvo, the panel says:
Cheek and Giambalvo compel the conclusion that West was entitled to present provisions of the IRC and other material to the jury for the purpose of supporting a mistaken-belief defense, but only after he laid foundation that he relied upon those provisions in forming his beliefs. It is not entirely clear whether West objects to the district court's order granting the government's motion in limine, but we think that the order was appropriate. It adheres to Cheek's distinction between a defense based on the applicability of a tax law and one based on its validity. The order prohibited argument on the constitutionality of tax laws, not on West's mistaken belief asto their applicability. It also prohibited argument that West is not subject to United States law and that his earnings from CSI were not taxable income. This, too, was permissible. Although West may argue that his misunderstanding of the law was, subjectively, formed in good faith, this is in contradistinction to an argument that the law does not, in actuality, apply to West, an argument that risks confusing the jury and which invades the district court's responsibility to instruct the jury on the law. 
West specifically objects to the district court's ruling that he could not read IRC provisions to Agent Troester during cross-examination and the district court's exclusion of West's book from evidence. The problem with West's objection to former ruling is that he did not attempt to present those provisions for the purpose of presenting a mistaken-belief defense. The transcript reveals that West intended to contradict Troester's testimony that the IRC applied to West and, perhaps, to impeach Troester's credibility by demonstrating his lack of knowledge of the IRC. Permitting West to read the provisions to Troester for those purposes would have risked juror confusion and would not have furthered West's right to present a mistaken-belief defense. West's e-book, although it may have presented West's beliefs, could not logically comprise material upon which West relied in forming the very opinions it sets forth and so was not relevant to a mistaken-belief defense. Further, his questioning was directed at the "reliability of the thesis of the book," indicating his purpose was to show that he was not, in fact, a taxpayer. Because the right to present a complete defense does not entitle a defendant to present the jury with evidence that is either irrelevant or is properly excluded under Federal Rule of Evidence 403, we affirm the district court's evidentiary rulings.

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