Fourth Circuit Affirms Criminal Tax Sentences in Unpublished Opinion that Is Good for Teaching (5/162/24)

In United States v. Rice, 2024 U.S. App. LEXIS 11329, 2024 WL 2078454 (4^th Cir. 5/9/24), CA4 here and GS here, an unpublished opinion, the Court affirmed the Rices’ convictions and sentencing. Normally, I don’t write on unpublished opinions, but I thought this opinion had some interesting facets which are good teaching opportunities for students or relatively new tax crimes practitioners.

First, the opinion says at the opening (slip op. 3):

James and Susan Rice (collectively, Appellants) appeal their conviction and sentence on ten counts relating to their failure to file tax returns and failure to pay employment taxes to the Internal Revenue Service (IRS). Finding no error, we affirm.

Second, the Court provides a short summary of the facts, among which was the following (slip op. 4):

Appellants were jointly represented by trial counsel.

In my experience joint representation in a criminal case is very unusual. The concern is that the two defendants might have different interests which would compromise the joint representation. For example, one defendant may have an interest in obtaining the benefits of cooperation (such as no prosecution or a better plea deal) or presenting evidence of a defense which might not be in the other defendant’s interest. I entered such a joint representation with two family members once. After extensive discussion with the defendants, I satisfied myself that there was nothing other than a theoretical possibility of conflict; and they waived the possibility of conflict. Nevertheless, the judge expressed displeasure. Recognizing that it was not in the defendants’ interests to displease the judge, at my advice that it was not worth the hassle, one of the defendants quickly engaged new counsel (a former colleague) and, as often in tax prosecution, both defendants took the same plea deal (without any actual conflict between the defendants).

The joint representation was raised in the ineffective assistance of counsel (“IAC”) claim on appeal, to which I now turn.

Third, the opinion rejected an IAC claim on this direct appeal. The Court noted (slip op. p. 4-8):

We review claims of ineffective assistance of counsel de novo. United States v. Faulls, 821 F.3d 502, 507 (4th Cir. 2016). But we consider ineffective assistance of counsel claims on direct appeal “only where the record conclusively establishes ineffective assistance.” United States v. Baptiste, 596 F.3d 216, 216 n.1 (4th Cir 2010). 

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          As a general matter, we do not consider IAC claims on direct appeal, and instead require defendants to raise them in a proceeding under 28 U.S.C. §2255. This is because “[w]hen an ineffective-assistance claim is brought on direct appeal, appellate counsel and the court must proceed on a trial record not developed precisely for the object of litigating or preserving the claim and thus often incomplete or inadequate for this purpose.” Massaro v. United States, 530 U.S. 500, 504-05 (2003). “If the alleged error is one of commission, the record may reflect the action taken by counsel but not the reasons for it.” Id. As a result, “[t]he appellate court may have no way of knowing whether a seemingly unusual or misguided action by counsel had a sound strategic motive or was taken because the counsel's alternatives were even worse.” Id. And where, as here, the alleged error is one of omission, the trial record is unlikely to contain any evidence of such errors, “much less the reasons underlying them. And evidence of alleged conflicts of interest might be found only in attorney-client correspondence or other documents that, in the typical criminal trial, are not introduced.” Id. For that reason, without further factual development of the record, “an appellate court may not be able to ascertain whether the alleged error was prejudicial.” Id.         

          Appellants point to no on-the-record explanation or discussion of trial counsel motivations for any of the alleged errors. Appellants' primary allegations of ineffectiveness concern trial counsel's failure to investigate their case, failure to put on any evidence at trial, and decision to continue the joint representation of James and Susan despite an apparent conflict. But even a decision not to investigate certain defenses or not to put on particular evidence may be a reasonable strategic decision under the circumstances. “[I]nquiry into counsel's conversations with the defendant may be critical to a proper assessment of counsel's investigative decisions, just as it may be critical to a proper assessment of counsel's other litigation decisions.” Strickland, 466 U.S. at 691. Evidence of such conversations cannot be found on the record of a direct appeal. Rather, further factual development through a §2255 proceeding is necessary.

          In any IAC claim alleging trial counsel's failure to introduce evidence, we require the defendant to make a specific proffer of what evidence should have been introduced. See Goins v. Warden, Perry Corr. Inst., 576 F. App'x 167, 173 (rejecting an IAC claim because of the appellant's “failure to make a specific proffer” of “what an expert witness would have testified regarding the mental health evidence”); see also Beaver v. Thompson, 93 F.3d 1186, 1195 (4th Cir. 1996) (“[A]n allegation of inadequate investigation does not warrant habeas relief absent a proffer of what favorable evidence or testimony would have been produced.”). Here, the record is utterly devoid of what evidence should have been introduced. This “reduces any claim of prejudice to mere speculation and is fatal to” an IAC claim. Goins, 576 F. App'x at 173.

          For example, Appellants fault trial counsel for failing to present expert testimony and suggest that trial counsel's retained expert should have been called to testify. But beyond this bare allegation and an unsupported assertion that a “minimum tax defense requires engagement and use of the services of a tax accountant,” Opening Br. at 18, Appellants do not explain what a tax expert could or should have testified to. In light of their failure to make such a proffer, we cannot determine whether trial counsel's failure to call an expert was deficient. Appellants also fault trial counsel for failing to object to certain evidence but make no effort to explain why the evidence was objectionable. Putting aside the insufficiency of the trial record to shed any light on these purported deficiencies, even Appellants' briefing on appeal contains no more than conclusory allegations of what trial counsel should have done.

          Because Appellants raised no objection to their joint representation at trial, and indeed, affirmatively waived this conflict on the record on at least two occasions, see J.A. 46-47, 75-76, they can establish that such joint representation was constitutionally deficient only if they establish that (1) “an actual conflict of interest” (2) “adversely affected [their] lawyer's performance.” Cuyler v. Sullivan, 446 U.S. 335, 348 (1980). Appellants' conclusory accusations that “counsel was restrained from engaging in an adequate defense for one defendant without causing prejudice to the positions of the other defendant,” do not satisfy this requirement. Opening Br. at 24. And to the extent that they argue that trial counsel improperly encouraged them to waive this conflict, that accusation again turns on counsel's conversations with and advice to Appellants, which do not appear on the record.

          Because the record does not conclusively establish trial counsel's ineffectiveness we defer consideration of Appellants' IAC claim. Of course, this decision in no way prejudices Appellants' ability to bring this claim in a §2255 proceeding, where they can more fully develop the record.

Fourth, the Rices challenged the Guidelines calculations that drive sentencing, both in the technical application and in the evidentiary bases for including corporate and individual taxes in addition to the payroll taxes.  The Court has a good, though somewhat technical, discussion of the relevant Guidelines provisions (slip op. 8-11) and finally concludes (slip op. 11):

          Because the guidelines mandate that district courts apply the “offense guideline that produces the highest offense level,” §2T1.1, which produced a base offense level of 22 (2 levels higher than the base offense level produced by §2T1.6), is the applicable guideline. See U.S.S.G. §3D1.3(b). The district court's calculations likewise produced a base offense level of 22. We need not reach the question of whether the district court's determination of loss attributable to unpaid individual and corporate income taxes was clearly erroneous, because even if it was, any such error was harmless. We thus affirm Appellants' sentences.