Monday, December 7, 2020

Court of Appeals Rejects Lawyer Defendant's Proffered Instruction that Cheek Requires Knowledge that Conduct Is Criminal (12/7/20)

In United States v. Gilmore, 2020 U.S. App. LEXIS 37861 (3rd Cir. 2020), here, a nonprecedential opinion, the Court affirmed the convictions of Gilmore, a lawyer, for tax and financial crimes.  The Court rejected Gilmore’s claims that (i) the trial court erred in excluding expert testimony as to a mental-health disorder with respect to willfulness; (ii) the trial court erred in stating in the jury instruction that willfulness require only that the defendant know the conduct was unlawful rather than criminal; and (iii) the evidence was sufficient to support the convictions.

I focus only on the second holding – regarding the jury instruction.  The Court’s discussion is brief, I include it all:

Gilmore next challenges the District Court's jury instructions on willfulness. The Court instructed that willfulness could not be found if Gilmore believed in good faith that "the tax laws did not make his conduct unlawful." App. 2412. Gilmore requested the word "criminal" be used instead of "unlawful." App. 335. Gilmore claims the instruction was legally erroneous because it equated belief of "unlawful" action with belief of "criminal" action. Gilmore Br. 43.

Contrary to Gilmore's claims, willfulness in the context of tax crimes merely requires knowledge and violation of a duty. It does not require knowledge that one is committing a criminal act. As the Supreme Court has made clear, "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 (1991) (internal quotation marks omitted). Thus, to prove willfulness, the Government had to show "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, 498 U.S. at 201 (emphasis added). There is no requirement that a person must be aware that the conduct is criminal. It is enough that he knew he had a legal duty and violated it-in other words, that he acted unlawfully.

For these reasons, we hold the District Court did not err in instructing the jury on the willfulness requirement.

JAT Comments:

1. I don’t think it is uncommon for persons to transmute the Cheek willfulness requirement of intentional violation of a known legal duty to requiring that the defendant know that the conduct (violating a known legal duty) is criminal (or a crime).  For example, take the simple case of failure to file which is a crime under § 7203.  The law requires a taxpayer to file a return, assuming the predicate requirements specified in § 6012 are met.  For conviction, all that the Government must show is that the defendant knew of the obligation to file and the defendant chose not to file.  There is no requirement that the defendant know that failure to file is a crime.

2.  A related issue is whether the defendant know the provision of law imposing the obligation (as opposed to a knowledge that some provision of law imposed the obligation).  Consider this language from Bryan v. United States, 524 U.S. 184, 191-92 (1998), where the Court distinguished the willfulness requirement for most tax crimes as follows (footnotes omitted):

In certain cases involving willful violations of the tax laws, we have concluded that the jury must find that the defendant was aware of the specific provision of the tax code that he was charged with violating. See, e. g., Cheek v. United States, 498 U. S. 192, 201 (1991). Similarly, in order to satisfy a willful violation in Ratzlaf, we concluded that the jury had to find that the defendant knew that his structuring of cash transactions to avoid a reporting requirement was unlawful. See 510 U. S., at 138, 149. Those cases, however, are readily distinguishable. Both the tax cases and Ratzlaf] involved highly technical statutes that presented the danger of ensnaring individuals engaged in apparently innocent conduct. As a result, we held that these statutes "carv[e] out an exception to the traditional rule" that ignorance of the law is no excuse and require that the defendant have knowledge of the law.

The Court said that the Government prove the defendant was “aware of the specific provision of the tax code that he was charged with violating.”  What does that mean?  In United States v. Mousavi, 604 F.3d 1084, 1092-1093 (9th Cir. 2010), the Court said :

Neither of these cases [Cheek and Ratzlaf], however, required the government to prove the defendant's knowledge of a specific provision of law. In Cheek, the Supreme Court held that "willfulness," as used in the criminal provisions of the tax code, required the government to prove that the defendant knew of the legal duty to file an income tax return and to treat his wages as income. 498 U.S. at 202. But the Court noted that the "jury would be free to consider any admissible evidence from any source" showing that the defendant was aware of this duty. Id. While Cheek listed "awareness of the relevant provisions of the Code or regulations" as one source of such evidence, it did not identify it as the exclusive source. Id. Similarly, Ratzlaff [sic] held that the government could not carry its burden to prove the "willfulness" requirement in a prosecution for illegal structuring of financial transactions merely by proving that the defendant knew of the bank's duty to report cash transactions of more than $ 10,000. 114 S. Ct. at 663 n.19. Nevertheless, the government did not have to prove that the defendant was aware of the provision of the federal statute that made it illegal to structure his cash deposits to avoid triggering the bank's reporting obligation. It was sufficient if a jury could reasonably conclude that the "defendant knew of his duty to  refrain from structuring," a conclusion which could be based on "reasonable inferences from the evidence of defendant's conduct." Id. Similarly, prior to Cheek and Ratzlaff [sic], we indicated that "willfulness" under a complex anti-exportation statute required proof of "a voluntary, intentional violation of a known legal duty," United States v. Lizarraga-Lizarraga, 541 F.2d 826, 828 (9th Cir. 1976), but we considered this standard satisfied where the government proved "that the defendant [knew] that his conduct . . . is violative of the law." Id. at 828-29. These cases make clear that even in the context of "highly technical statutes that presented the danger of ensnaring individuals engaged in apparently innocent conduct," Bryan, 524 U.S. at 194, the term "willfulness" requires the government to prove that the defendant was aware of the legal duty at issue, but not that the defendant was aware of a specific statutory or regulatory provision.

Or, as said more pungently by Judge Easterbrook (United States v. Patridge, 507 F.3d 1092, 1093-1094 (7th Cir. 2007), cert. den. 552 U.S. 1228 (2008) and cert. den. 555 U.S. 909 (2008)):

Cheek v. United States, 498 U.S. 192, 111 S. Ct. 604, 112 L. Ed. 2d 617 (1991), holds that a person may be convicted of tax offenses only if he knows that the Code requires him to pay. The jury was so instructed, and its verdict shows that it found, beyond a reasonable doubt, that Patridge knew that he had to pay taxes on what he made from his business. It is scarcely possible to imagine otherwise: the system of offshore trusts, and the fictive "loans," show that Patridge was trying to hide income that he knew to be taxable. Why else all this folderol? Yet Patridge, in common with many other people who know what the law requires, could not say just which provisions of the Code make income taxable and prevent evasion. For that matter, many tax lawyers (and most judges) could not rattle off the citations without glancing at a book. This shortcoming of memory (perhaps, for Patridge,  a deliberate avoidance of knowledge) prevents criminal punishment, counsel insists.

But why would this be so? No statute says it; no opinion holds it. Cheek derived its knowledge-of-law requirement from the fact that § 7201 makes only "willful" tax evasion criminal. An act is willful for the purpose of tax law, the Court concluded, when the taxpayer knows what the Code requires yet sets out to foil the system. Knowledge of the law's demands does not depend on knowing the citation any more than ability to watch a program on TV depends on knowing the frequency on which the signal is broadcast.

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