11th Circuit Reverses Conviction for Ineffective Assistance of Counsel for Not Filing a Rule 29 Motion re Affirmative Act of Evasion (7/13/22; 7/14/22)

As I promised yesterday, I have added substantially below for the paragraphs after paragraph 1. I made these additions on 7/14/22 3:30 pm.

The Eleventh Circuit issued the opinion in Hesser v. United States, 40 F.4th 1221 (4th Cir. 7/13/22), CA11 here and GS here. I have not fully digested the opinion and am not prepared to offer meaningful, nuanced comments that will be useful to readers of the Federal Tax Crimes Blog. I will stew on the opinion a bit before commenting. My detailed comments will come later as addenda to this blog.

Let me try to summarize at a high level what happened. A jury long ago convicted Hesser of “tax fraud under 18 U.S.C. § 287 and 18 U.S.C. § 2 and one count of attempted tax evasion under 26 U.S.C. § 7201.”  (A quibble, I would not describe § 287, labeled in the Code “False, fictitious or fraudulent claims,” as tax fraud since that term is often applied to other tax crimes, such as even § 7201.)  On Rule 29 motion after the jury verdict, the district court sustained the convictions. On direct appeal, the 11^th Cir. affirmed the convictions but remanded for further consideration of restitution. United States v. Hesser, 800 F.3d 1310 (11th Cir. 2015), GS here. Hessell then sought post-conviction relief under 28 USC § 2255 from the counts of conviction for "tax fraud" and tax evasion, alleging ineffective assistance of counsel. (Ineffective assistance of counsel is a common claim in § 2255 cases, although usually without merit.)  The district court granted the relief for the tax fraud counts but denied the relief for the tax evasion count.  Hesser appealed after obtaining a Certificate of Appealability from the 11^th Circuit. On the § 2255 appeal, the 11^th Circuit held that, on its view of the record, Hesser had been denied effective assistance of counsel because counsel failed to argue for Rule 29 judgment of acquittal at the close of the prosecution's case-in-chief on the basis that the prosecution had not adequately presented an element of the tax evasion crime – affirmative act of evasion. The 11^th Circuit reasoned that, had counsel timely requested Rule 29 relief, the district court would have erred as a matter of law in not granting that relief on the affirmative act of evasion element. So counsel’s failure to request that relief establishes that counsel’s representation was not effective, thus requiring vacation of the conviction. Whew (just trying to pack the gravamen of the case into those words wears me out; there is a lot of nuance underlying that summary).

Wow! I see a lot of problems with the 11th Circuit panel's reasoning in vacating the conviction. Maybe  when I dig deeper into the opinion, I will resolve my problems. Hence, I have decided to get into the nuance later by adding to this blog entry (probably tomorrow). Come back for further consideration of my thoughts. And, as always, I encourage those wishing to make comments to do so either by the comment feature below (which some readers find daunting) or by separate email to me at jack@tjtaxlaw.com. Before I return tomorrow, I call your attention to the following:

1. It is important to keep in mind that the Court was testing the state of the evidence at the close of the prosecution's case-in-chief. Hesser argued that, indeed, the evidence that defense counsel put in the defense case (including Hesser's own testimony) after that key testing point (close of prosecution case-in -chief) may have supplied the affirmative act, but the Court believed that evidence after the prosecution rested its case-in-chief was irrelevant. And the Court tested that evidence at the close of the prosecution case de novo. The notion is that, had the Court been the trial judge at that point, the law would have required judgment of acquittal because, as a matter of law, the acts proved by the prosecution in its case-in-chief were not affirmative acts of evasion. Apparently, then, as a matter of law, defense counsel's failure to request acquittal on that basis was ineffective assistance of counsel.

2. The Government alleged the following affirmative acts of evasion (as described by the Court Slip Op. 7):

First, the Government said that Hesser had removed his assets from examination of the IRS by converting them to gold and that he had quitclaimed his house to a trust. Second, the Government alleged in the indictment that Hesser had filed a fraudulent 2007 tax return, which would serve as an alternative affirmative act toward evasion. Third, the Government said that Hesser had filed additional false income tax returns for 2005 and 2006, which would be a third affirmative act of tax evasion.

Based on the prosecution's evidence, then (Id.),

The question is whether the Government sufficiently proved any of these affirmative acts with its own evidence—without defense counsel’s presentation—such that any evidence the defense could have added would not have prejudiced the outcome of the case because the Government had already carried its burden of proof.

CONTINUED ON 7/14/22 3:30PM:

3. For those wanting to dig deeper, I link the appellate briefs as follows:

• Hesser’s opening (initial) brief, here.
• Government answering brief, here.
• Hesser’s reply brief, here.

 4. On the Court’s resolution of the tax evasion count claims solely on what the law would have required had a proper and timely Rule 29 motion, consider the following:

• From Slip Op. 5 n 2

n2 We note that the District Court judge in this habeas case was the same judge who presided over the criminal case, and he said that, even under the standard of Fed. R. Crim. P. 29, he would not have granted the motion for judgment of acquittal. Because we hold today that the motion for acquittal should have been granted as a matter of law, we would have reversed the District Court on direct appeal, had Hesser’s trial counsel properly moved for judgment of acquittal under Fed. R. Crim. P. 29.

•  From prior case p. 1319 n 13:

And, although there was some question whether Hesser’s trial counsel made a Rule 29 motion for the tax evasion count (see  p. 1319 n 13): “Hesser contends that he also moved the District Court for a judgment of acquittal on Count Four. While it is possible that the District Court may have understood Hesser to have done so, Hesser waived the issue by failing to renew his motion after the close of his case. See United States v. Jones, 32 F.3d 1512, 1516 (11th Cir.1994).”

The point is that whether or not defense counsel moved under Rule 29 is irrelevant because, as relevant to the ineffective representation claim, the defense counsel should have made the Rule 29 motion. (And, correspondingly, I suppose, if he did make the timely motion, the district court erred in not granting it.)

5. Affirmative Act for tax evasion

The Court rejected the second and third claims of affirmative acts based on false return filings that, the Court claimed, had been refuted by its prior appellate decision in the merits appeal. United States v. Hesser, 800 F.3d 1310 (11th Cir. 2015), GS here. I won’t get into that because it would require discussion of the prior opinion which, as the Court acknowledged (Slip Op. 7), was not a model of clarity. So I focus on the two acts in the first claim – (i) the conversion of cash to gold and secreting the gold and (ii) the quitclaim deed of the house to a trust. The Court held that the prosecution's proof was deficient.

As best I understand it, the Court’s holding was that the prosecution’s trial evidence in the case-in-chief failed to establish a link between the bare acts and tax evasion. Of course, the willful element—intent to violate known legal duty—is stated as a separate element for the crime of tax evasion. I am not sure that they really are separate elements because the element of the affirmative act is commonly stated as an affirmative act of evasion. (The Court quoted its earlier Hesser opinion (p. 1323): “an affirmative act constituting an evasion or attempted evasion of the tax.)  Any act is not an act of evasion, but otherwise innocent acts can be an act of evasion if undertaken with an intent to evade and further the goal of evasion of payment. So, I have some concern about how the Court approaches its task.

Perhaps the Court was just concerned about the state of the prosecution's evidence that did not tie the otherwise legal acts to an intent to evade. The court thus says (Slip Op. 10-11): 

            The Government asked the jury to convict Hesser for hiding gold bullion in his house so that the IRS could not find it. But the Government never established that the gold was his. This matters because whether the gold was Hesser’s determines whether Hesser’s alleged attempt at tax evasion is a mistake of law case. If [*11] the Government had put forth sufficient evidence to prove beyond  a reasonable doubt that the gold was Hesser’s, then it might have presented enough evidence for a jury to reasonably find beyond a reasonable doubt that Hesser really did attempt to evade paying his taxes since tax liability had accrued to Hesser before he began hiding gold. And even if Hesser unsuccessfully evaded the IRS in the end because he was mistaken on the facts—he thought the IRS would not find out about the gold bullion—he still attempted to evade under the statute.

            But the Government did not provide enough evidence for a reasonable jury to conclude that the gold was Hesser’s beyond a reasonable doubt.4 Then, we are left with Hesser hiding random gold bullion. And, just like the defendant who thought that shooting at trees on one’s own property was a crime, based on the Government’s presentation of evidence, we are left to think that perhaps Hesser believed that hiding gold was an inherent act of tax evasion or that he needed to hide it because the IRS would come and steal it or that he was simply protecting money belonging to the family trust. But, just like shooting at trees on one’s own property isn’t a crime, hiding gold in and of itself is not tax evasion or attempted tax evasion. Without proving that the gold was actually Hesser’s, the Government has left open the very real possibility [*12] that Hesser committed a mistake of law—that he thought he was doing something criminal that was in fact innocuous—or that he did  not even think he was doing something criminal in hiding money for the family trust. And that is not proof beyond a reasonable doubt of an affirmative act, which the Constitution requires for Hesser’s conviction to stand.

Again, there is some conflation of the willfulness requirement and the affirmative act requirement. Hesser did not contest the willfulness finding. I think that on the evidence in the case-in-chief, the prosecution proved sufficient evidence to withstand a Rule 29 motion that a tax was due and owing and that Hesser acted willfully, tax evasion elements which Hessell apparently did not contest and the Court gave no concern as to whether the evidence proved those elements for purposes of the hypothetical Rule 29 motion. If those elements were proved, there is a short inferential leap, particularly from the willfully element, to a permitted jury inference that the acts claimed were affirmative acts of tax evasion. While it may be true that Hesser’s defense added something that furthered the case on the affirmative act element, I am just not sure the ultimate factual issue of affirmative act was not sufficiently in play to foreclose a trial court on the hypothetical Rule 29 Motion from holding that, as a matter of law, the prosecution’s case failed.

6. The Court illustrated its reasoning by two examples (p. 10):

            The Government confuses a mistake of law with a mistake of fact. Suppose one defendant is charged with attempted murder because he went into a bedroom and shot a gun at a mass under [*10] the covers, which he believed to be his arch enemy. It turns out the mass was a pillow and not a person. If the facts had been as the defendant thought they were—if he had been able to do everything he planned to do—he would have likely committed the crime of murder. He simply mistook the facts because it turns out his enemy was not under the covers, and he could be successfully prosecuted for attempted murder. Now suppose a second defendant mistakenly believes that it is a federal crime to shoot at trees on one’s own property. He intentionally shoots at a tree in his front yard, and he thinks that he has committed a crime. He is mistaken on the law. Under this hypothetical, shooting at a tree in one’s own yard is not a federal crime. So, the second defendant cannot be convicted of an attempt crime because he did everything he planned to do, and it still did not amount to a step toward criminal activity. All this is to say, someone can be convicted for attempt when they mistake the facts but not when they simply mistake the law. Because the Government did not show that the gold bullion was taxable to Hesser, at most, all the Government proved was that Hesser was possibly mistaken on the law. And he cannot be convicted for attempted tax evasion on that basis.

I am reminded of the holding in James v. United States, 366 U.S. 213 (1961) that intent to violate a duty that was not legally (as it later turned out) a duty is not a crime. In James, the jury convicted James of tax evasion, requiring a jury finding that he intended to violate a known legal duty, but the Court held that the law was not sufficiently knowable (because of confusion created by earlier Supreme Court opinions) that his “bad” intent found by the jury was not sufficient because the duty was not legally knowable. This sets up a dual requirement for willfulness that the legal duty must be knowable (in an objective sense to be determined by the judge as a matter of law) and known (in a subjective sense to be determined, usually based on circumstantial evidence, by the trier of fact, usually a jury in criminal cases). See e.g., Certainty of the Law's Command and Willfulness (Federal Tax Crimes Blog 9/10/09), here.

7. I noted in the opening my concern with calling the § 287 crime "tax fraud."  In the earlier opinion, the Eleventh Circuit had described the Counts in question as "submitting false claims, in violation of 18 U.S.C. § 287," (p. 1314.)  That is the usual description of the crime.

8. I wonder if this holding, should it remain in effect, might offer some future trial and appeals (both direct and collateral attack) strategies. I suppose that anytime one can formulate a claim of a deficient prosecution case-in-chief, one can launch a (perhaps) tougher to prevail case on direct appeal and then, failing on direct appeal, launch a (perhaps) easier to prevail case on collateral attack. I would appreciate any thoughts readers may have on this potential use of the second Hesser case (the one that is subject to this blog).

9. I think that, as in many of this type of case, the Government has many tax or tax related crimes that could be prosecuted that might not have a specific affirmative act requirement. Note in this regard that conspiracy, 18 USC §  371, does have an overt act requirement which, like the affirmative act requirement, requires some relationship to intent to commit the crimes. E.g., Iannelli v. United States, 420 U.S. 770, 785 n.17 (1975) (Even an innocent act may satisfy the  overt act requirement  of conspiracy, provided that the act furthers the purpose of the conspiracy. )  Still, for example, on the facts, the Government could have charged tax obstruction, § 7212(a).

10. I also think readers should take a lesson from Hesser's choice, presumably on advice of counsel, to testify in his defense. As the Court noted, he supplied the now recognized missing proof on the tax evasion count. My sense that defense counsel strategies and client decisions as to when a defendant will testify is not the stuff of which post conviction § 2255 relief for ineffective counsel is made.

11. I note in closing the Court's closing observation (Slip Op. 16):

[W]e note the asymmetry between the plight of Hesser’s wife and his own. It seems unfair that she now has a felony conviction for filing a false tax return on her record and her husband will have a record free of convictions for tax fraud or evasion based on this case. This is especially so since Hesser was clearly the mastermind behind all the tax and mortgage maneuvers that Hesser and his wife made. We do not rejoice in that outcome. But Hesser’s wife chose to plead guilty, and Hesser did not. And it turns out the Government did not carry its burden in proving Hesser’s guilt beyond a reasonable doubt, and Hesser’s own defense probably did more to convict him than the Government did. 

In any event, although Hesser gets his conviction vacated, he did serve the time required by the now vacated sentence and suffered the other conditions imposed by the now vacated sentence. I suppose that he might have some potential recovery from his original trial counsel, but suspect that the statute of limitations is long since passed. And, of course, any vindication he receives by vacation of the convictions is not based on his innocence but the prosecution's failure to prove guilt of the crimes charged beyond a reasonable doubt.