Sunday, October 4, 2020

Second Circuit Affirms Conviction of Lawyer Offshore Account Enabler (10/4/20)

In United States v. Little, 2020 U.S. App. LEXIS 31384 (2d Cir. 9/30/20), here, the Court affirmed the conviction and sentencing of Michael Little, a lawyer who enabled the Seggerman family to cheat on their taxes, using in part failure to file FBARs.  I have written on Little before (see blogs on him, including in some blogs the Seggermans), here

I discuss here only two points from the opinion.

1. Willfulness.

The Court rejected Little’s Cheek defense that there was insufficient evidence to prove that he knew the legal duty.  The Court handled the defense summarily (Slip Op. pp. 5-6):

            We conclude that substantial evidence supports the jury verdict on each of the challenged counts. In a nutshell, Little contends that he merely misunderstood the byzantine tax code. But Little is a British-trained barrister admitted to the New York Bar with a quarter-century of experience in complex international financial transactions who, for much of his life, has claimed German domicile for tax [*7]  purposes. A reasonable juror could easily conclude that the failures of such a sophisticated professional to report his income to the IRS, including compensation from the Seggerman family, and to report foreign bank accounts into which his compensation was funneled, were willful acts. See United States v. MacKenzie, 777 F.2d 811, 818 (2d Cir. 1985) (permitting the inference of "knowledge of the law" from the "[d]efendants' backgrounds," including education). Similarly, Little's sophistication supports a conclusion that he was willfully misleading the Seggerman family's accountants when he informed them that the transfers from Lixam Proviso were merely "gifts from a kind benefactor from overseas" and not distributions.

2. Jury Instructions on Conscious Avoidance / Willful Blindness

The Court rejected Little’s claim that the conviction should be reversed because the Court improperly instructed the jury on conscious avoidance (usually called willful blindness, but the Second Circuit often uses conscious avoidance).  Again, the Court rejects the defense summarily as follows (Slip Op. 6):

First, Little challenges the "conscious avoidance" instructions on the failure to file return counts, the failure to file FBAR count, and the conspiracy count; and second, that the district court's instructions as to willfulness erroneously converted the standard into a reasonableness standard. Conscious avoidance instructions are permissible only when the defendant mounts a defense that he lacked "some specific aspect of knowledge required for conviction" and "a rational juror may reach the conclusion beyond a reasonable doubt that the defendant was aware of a high probability of the fact in dispute and consciously avoided confirming that fact." United States v. Coplan, 703 F.3d 46, 89 (2d Cir. 2012) (citation and internal quotation marks omitted). Here, each predicate is met: Little defended himself by claiming ignorance of his obligations under the Tax Code and, because of Little's legal education and the relative straightforwardness of his obligations, a reasonable juror could conclude that Little was aware of a high probability that his actions were unlawful.

 So, in this case, the conscious avoidance / willful blindness instruction was properly given.

 JAT Comments:

1.  I comment only on the conscious avoidance / willful blindness instruction.  Readers will recall that I have often discussed the willful blindness issue and problems with jury instructions on the concept.  The links to willful blindness show over 100 blog entries, here.  I do not address directly the Little Court’s holding.  Rather, I will address an issue that arises from use of the willful blindness instruction.  In United States v. Wentt, 2020 U.S. App. LEXIS 29685 (11th Cir. Sep. 17, 2020), here, the Court said (bold face supplied by JAT)

a deliberate-ignorance instruction is improper "when the relevant evidence points only to actual knowledge, rather than deliberate avoidance." Id. (internal quotation marks omitted). Nevertheless, we have repeatedly held that "instructing the jury on deliberate ignorance is harmless error where the jury was also instructed and could have convicted on an alternative, sufficiently supported theory of actual knowledge." Id.; see, e.g., Stone, 9 F.3d at 937 ("Even if we accept [the defendant's] characterization of the evidence and assume that there was no evidence of deliberate ignorance, reversal is not required because any error in giving the instruction was harmless beyond a reasonable doubt."). n1 In determining if the jury could have convicted a defendant on a theory of actual knowledge, we look to "the sufficiency of the evidence of actual knowledge." United States v. Kennard, 472 F.3d 851, 858 (11th Cir. 2006).
   n1 Wentt argues that our harmless error precedent is wrong, erroneous, and harmful, but we are bound by it until it is overruled by the en banc court or the Supreme Court. See United States v. Archer, 531 F.3d 1347, 1352 (11th Cir. 2008).

I question the logic of the holding that, because the jury could have convicted Wentt based on actual knowledge, any error in the willful blindness instruction is harmless.  That does not make sense.  If the willful blindness instruction should not have been given, then it would not be clear whether the jury convicted on determination of actual knowledge or on a determination of willful blindness per the instruction that should not have been given.  Simply because there was sufficient evidence to permit the jury to convict on actual knowledge does not mean that the jury in fact did not improperly convict based on improper inferences from the erroneous willful blindness instruction.  Of course, the footnote I include above may indicate that the panel was concerned about that issue but did not feel free to reverse a prior circuit precedent.

2.  (Added at 7pm):  I have often in my discussion of willful blinded discussed the issue of whether, in a specific scienter case like tax crimes requiring willfulness (specific intent to violate a known legal duty), the use of willful blindness permits (i) the fact finder (most often in a criminal case, a jury) to infer that specific intent or (ii) is a judicially created nonstatutory substitute for specific intent required by the statute.  In Intel Corp. Inv. Policy Committee v. Sulyma, 589 U.S. ___. 140 S. Ct. 768 (2020), here, in a civil case where a statute required bringing the civil suit within three years of actual knowledge then actual knowledge is required.  The Court did say (Slip Op. 11-12) that "evidence of 'willful blindness' supports a finding of 'actual knowledge,'" citing Cf. Global-Tech Appliances, Inc. v. SEB S. A., 563 U. S. 754, 769 (2011).  As worded, the Court seems to be taking the position in (i).  That's the position I have taken for specific intent statutes, particularly criminal specific intent statutes.  I think the courts often muddy the issue.

No comments:

Post a Comment

Please make sure that your comment is relevant to the blog entry. For those regular commenters on the blog who otherwise do not want to identify by name, readers would find it helpful if you would choose a unique anonymous indentifier other than just Anonymous. This will help readers identify other comments from a trusted source, so to speak.