District Judge Dismisses Wire Fraud Counts with Overlapping Facts for Tax Counts Because the Lesser Burden of Proof for Wire Fraud Violates Due Process (5/7/26; 6/16/26)

In United States v. Garza (N.D. TX 3:22-CR-0390-8), Memo and Order dated 5/6/26, CL here and GS here, the Court dismissed certain counts in a long-standing indictment. (No speedy trial here.) In broad strokes, the indictment alleges that Garza, a Dallas attorney (at least at the time of the charged conduct) and the other co-defendants participated in promoting a “fraudulent tax shelter plan to clients.” (I have a somewhat fuzzy recall that it was Garza’s version of a BLIPS variant.) They were indicted for tax crimes (§ 7206(1)) and for wire fraud crimes, on some counts related to the charged tax crimes.

The Court describes the defendants’ motion as (Slip Op. 2):

Defendants move to dismiss the Wire Fraud Counts under Federal Rule of Criminal Procedure 12 on the grounds that: (1) the Wire Fraud Counts function as an end-run around the willfulness mens rea requirement for tax fraud in violation of the Fifth Amendment’s Due Process Clause; (2) 26 U.S.C. § 7206(2) (“Tax Fraud Statute”) preempts the application of 18 U.S.C. § 1343 (“Wire Fraud Statute”) “when both rest on the same alleged scheme”; and (3) the Wire Fraud Statute, interpreted according to its text and constitutional footing, does not extend to tax fraud against the  Federal government and cannot be used to prosecute tax conduct.

The Court granted the motion as to the overlapping charges, dismissing the wire fraud counts related to the tax counts but leaving the false tax return counts. The gravamen of the holding is that by charging basically the same conduct (or at least intertwined conduct) as tax crimes with the high “willfully” standard of proof (the Cheek standard) and as wire fraud, the Government was trying to bootstrap a conviction for that conduct under the lesser burden of proof for wire fraud. The Court concluded, somewhat conclusorily, that the phenomenon violated due process, almost as if she knew a due process violation when she saw it. (To paraphrase Potter Stewart’s famous comment on pornography.) She thus says (Slip Op. 3):

In this case, the Government’s prosecution of the same tax conduct under both the Tax Fraud Statute and Wire Fraud Statute violates the Due Process Clause by enabling the Government to avoid proving every fact necessary to constitute tax fraud.

The opinion is short and, since I am leaving Charlottesville for D.C., the primary purpose of this blog (at least as preliminarily offered) is notice. Readers can read the opinion and draw such conclusions as they wish. (I may add to this blog later, likely not until Monday.)

Quick questions:

More on the Goldstein Trial; Herein of Lying and Cheating, Good Guys and Bad Guys (1/10/26)

I have written about the Tom Goldstein prosecution. Tom Goldstein--SCOTUSblog founder, Prominent Supreme Court Advocate, and High-Stakes Gambler--Indicted for Tax and Related Crimes and False Statements to Mortgage Lenders (Federal Tax Crimes Blog 1/17/25; 1/19/25), here; Two Recent Tax Crimes Cases Involving Bitcoin (Federal Tax Crimes Blog 1/19/25; 2/9/25), here; Free CourtListener Docket Sheet and Documents for Major Tax Crimes Case (Also Major White Collar Crimes Case) (Federal Tax Crimes Blog 7/3/25), here.

I offer a new article and some comments. The article is Holly Barker, Tom Goldstein’s Defense Hinges on Giving the Jury Good Guy Vibes (BloombergLaw 1/10/26), here. Key excerpts for purposes of this blog relate to the general tax crimes element of willfulness, which per Cheek is the voluntary intentional violation of a known legal duty.

          Tom Goldstein—the former US Supreme Court advocate and blogger with a years-long ultra-high-stakes gambling habit—heads to trial Monday in a case that may turn on whether the jury thinks he’s “a good guy or a bad guy.”

          That’s from Goldstein himself.

          The government rejected that framing at Friday’s final pretrial conference: What the jury will decide is whether Goldstein is guilty of tax evasion and making false statements, prosecutor Sean Beatty said. But there might be something to Goldstein’s point.

          Tax cases generally require a showing of willfulness—the knowing and intentional violation of an understood legal duty. In theory, proving that willfulness or an absence of good faith can be difficult due to the confusing nature of the tax code. But the precise standard might not make a practical difference, said Jeff Neiman, a former Assistant US Attorney and founder of Neiman Mays Floch & Almeida.

          “The jury will either conclude that Mr. Goldstein is a liar and a cheater, or that he simply made mistakes that led to erroneous filings,” he said.

Government Motion in Kepke Case to Exclude Expert Testimony About the Law (8/10/22)

I picked up an argument in a Government Motion to Exclude Defendant’s Proffered Expert Witness in the Kepke prosecution, United States v. Kepke (N.D. Cal. Criminal No. 3:21-CR-00155-JD), Motion dated 8/5/22, here. In general, the Government claims that Kepke’s expert witness disclosures were too cryptic to understand the expert witness’s proffered testimony, but the Government inferred that the expert witness would improperly testify about the law. Here are the three key paragraphs I focus on (Motion pp, 7-9):

             Expert witnesses are not permitted to offer opinions consisting of their interpretation of the law. See Hangarter v. Provident Life and Acc. Ins. Co., 373 F.3d 998, 1018 (9th Cir. 2004) (quoting Mukhtar v. Cal. State Univ., Hayward, 299 F.3d 1053, 1066 n. 10 (9th Cir. 2002), overruled on other grounds by Barabin v. AstenJohnson, Inc., 740 F.3d 457, 467 (9th Cir. 2014)); see also Snap-Drape, Inc. v. Comm’r, 98 F.3d 194, 198 (5th Cir. 1996). “[I]instructing the jury as to the applicable law is the distinct and exclusive province of the court.” Nationwide Transp. Fin. V. Cass Info. Sys., Inc., 523, F.3d 1051, 1058-59 (9th Cir. 2008); see also United States v. Caputo, 517 F.3d 935, 942 (7th Cir. 2008) (“The only legal expert in a federal courtroom is the judge.”); United States v. Weitzenhoff, 35 F.3d 1275, 1287 (9th Cir. 1993); CZ Services, Inc. v. Express Scripts Holding Co., 3:18-cv-04217-JD, 2020 WL 4518978, at * 2 (N.D. Cal. Aug. 5, 2020) (“[L]egal opinions are not the proper subject of expert testimony. Reed v. Lieurance, 863 F.3d 1196, 1209 (9th Cir. 2017). An expert may not give opinions that are legal conclusions, United States v. Tamman, 782 F.3d 543, 552-53 (9th Cir. 2015), or attempt to advise the jury on the law, Strong v. Valdez Fine Foods, 724 F.3d 1042, 1046-47 (9th Cir. 2013).”).

            In at least one criminal tax case, the Ninth Circuit approved expert testimony about the law where “the theory of the defense [was] that there [was] a good faith dispute as to the interpretation of the tax laws.” See United States v. Clardy, 612 F.2d 1139, 1153 (9th Cir. 1980) (citing United States v. Garber, 607 F.2d 92 (5th Cir. 1979) (distinguished by United States v. Burton, 737 F.2d 439, 444 (5th Cir. 1984)). But that does not mean that legal evidence is automatically admissible in all criminal tax trials. To the contrary, courts regularly exclude legal experts in criminal tax cases. See, e.g., United States v. Boulware, 558 F.3d 971, 974-75 (9th Cir. 2009) (affirming exclusion of expert testimony that specific “corporate distributions were legally non-taxable” as an impermissible legal opinion); see also United States v. Curtis, 782 F.2d 593, 598-600 (6th Cir. 1996) (affirming exclusion of expert testimony and distinguishing Garber); United States v. Harris, 942 F.2d 1125, 1132 n.6 (7th Cir. 1991) (evidence “may include expert testimony about case law, to the extent that the defendant claims actual reliance on that case law. Case law on which the defendant did not in fact rely is irrelevant because only the defendant’s subjective belief is at issue.”); United States v. Ingredient Tech. Corp., 698 F.2d 88, 96-97 (2d Cir. 1983) (affirming exclusion of expert testimony and distinguishing Garber); United States v. Alessa, 3:19-cr-00010, 2021 WL 4498638, at *4 (D. Nev. Sept. 30, 2021) (evidence of a conflict in the law is irrelevant if Defendant was not aware of the conflict).

            Here, Mr. Read’s proposed testimony must be excluded because, reading between the lines (as we must because the disclosures do not reveal Mr. Read’s actual opinions), it seems likely that Mr. Read plans to testify about his understanding of the law. At best, Mr. Read’s opinion that certain offshore structures are permissible or even common is tantamount to testimony that, in his opinion, Defendant’s actions were legal. This is exactly the type of opinion that is prohibited under Ninth Circuit law because “‘[w]hen an expert undertakes to tell the jury what result to reach, this does not aid the jury in making a  decision, but rather attempts to substitute the expert’s judgment for the jury’s.’” United States v. Diaz, 876 F.3d 1194, 1197 (9th Cir. 2017) (quoting United States v. Duncan, 42 F.3d 97, 101 (2d Cir. 1994)). And any minor probative value the proffered testimony might have would be substantially outweighed by a danger of unfair prejudice, confusing the issues, and misleading the jury.

District Court Rejects Motions for Acquittal and New Trial on Tax Perjury Convictions (6/29/22)

In United States v. Thompson, No. 21-cr-00279-1, 2022 U.S. Dist. LEXIS 99469 (N.D. Ill. June 3, 2022), CL here, the court denied Thompson's motions for acquittal and, in the alternative, a new trial. Thompson had been convicted of "two counts of making a false statement with the intent to influence the Federal Deposit Insurance Corporation (the FDIC) and a mortgage lending business, in violation of 18 U.S.C. § 1014, and five counts of filing a false tax return, in [*2]  violation of 26 U.S.C. § 7206(1)."

I focus on certain tax aspects of the opinion, although I note that the court held (Slip Op. 28-38) that, for the § 1014 conviction in the Seventh Circuit, literal falsity was not required. 

Special Agents Assisting the Grand Jury Make Surprise Visit.

As often happens in a tax investigation, IRS CI Special Agents make a surprise early morning visit, which is often the target's or subject's first indication of the investigation, designed to catch him or her off-guard and, even when given the modified Miranda warnings, more amenable to an interview without counsel. Here is the court's description of that interview. In this case, the Special Agents were, respectively FDIC and IRS Special agents, and were assistants to a grand jury rather than agents conducting agency administrative investigations.

             At 8:15 a.m. on December 3, 2018, Evans [Special Agent with the FDIC Office of Inspector General] and Special Agent Jason Gibson (Gibson), [*13]  with IRS Criminal Investigation, visited Thompson at his house unannounced to interview him. Tr. 935:16-936:4, 944:12-19. Evans testified that, during the interview, they discussed Thompson's loan at Washington Federal, Evans and Gibson asked him questions about the loan, and Thompson provided information about the loan. Tr. 938:16-25. Specifically, Evans told Thompson that he was investigating Washington Federal, but he never told Thompson that Thompson himself was the subject of an investigation or that Thompson's taxes or tax deductions were the subject of an investigation. Tr. 950:23-951:8. At some point during or at the end of the interview, Gibson served Thompson with a grand jury subpoena that called for Thompson to appear and provide records, including but not limited to federal tax records and records used to prepare federal tax returns, loan and credit applications, records related to the purchase of Thompson's primary residence, his rental residence, and a third property located in Michigan. Tr. 939:1-22, 941:9-942:6, 948:19-22; GX 411.

I infer that, although not expressly stated, Thompson was at least a subject of the grand jury investigation. The opinion does not state whether he was given modified noncustodial Miranda warnings or whether Thompson made incriminating admissions during the interview. I have to assume that defense counsel made whatever he could from the described event.

 Denial of Good Faith Jury Instruction for Tax Perjury.

Ninth Circuit Panel Requires Cheek-Type Specific Intent for Civil Willfully Preparer Penalty (8/31/21)

In Rodgers v. United States,   (9th Cir. 7/6/21), CA9 here (unpublished and nonprecedential), the Court held (based on a prior appeal) that the return preparer penalty under § 6694(b)(2)(A) for a “willful attempt in any manner to understate the liability for tax on the return or claim” requires “specific intent to understate tax liability on tax returns or claims.”  Basically, the panel held, the civil penalty requires the same level of intent as § 7206, which is the Cheek-type of intent – specific intent to violate a known legal duty.  (The panel opinion does not cite Cheek, but that is the way I read the opinion.)

The opinion is nonprecedential because, as interpreted by the panel, the Ninth Circuit’s precedent compelled the conclusion.  Accordingly, the panel reversed because the district court held that willful blindness satisfied the test of willfulness.

JAT Comments:

1. A civil penalty statutory willfully “element” often is not interpreted and applied the same as the tax crime willfully "element." The obvious example for those who follow this blog is the FBAR civil willful penalty under 31 U.S.C. § 5321(a)(5)(C).  The FBAR criminal penalty requires Cheek-type specific intent willfulness.  Ratzlaf v. United States, 510 U.S. 135 (1994).  But the FBAR civil penalty with the same word (willfully), as interpreted and applied by the courts, requires a less specific intent, including willful blindness and reckless conduct.

District Court Holds that Delinquent Payment and Filing After CI Agent Contact Is Admissible in Criminal Case (7/5/21)

In United States v. Thrush, 2021 U.S. Dist. LEXIS 118742 (E.D. Mich. 6/25/21), CL here, “Thrush was indicted on multiple counts of willfully failing to pay over payroll taxes and to file tax returns.”  After being contacted by the CI agent, Thrush “began making payments on his tax liability” and filed tax returns.  In the ensuing criminal case, the Government moved in limine “to exclude evidence of Defendant's delinquent tax payments and returns.”  

The Court held that, under Sixth Circuit precedent, Thrush could introduce the evidence.  After reviewing the case authority, the Court concluded (pp. 9-10):

Defendant's version of events, if believed, would allow a reasonable jury to infer that his failure to pay taxes and file tax returns was the result of ignorance, rather than willfulness. Accordingly, Defendant's [*10]  delinquent filings, if offered in conjunction with the assertions discussed above, would be probative of his mental state during the period in question.

In comparison, evidence of the delinquent filings poses only a modest risk of misleading the jury. The evidence will not, and cannot, be offered to show that Defendant's prior crimes, if any, were somehow vitiated, see Sansone 380 U.S. at 354, and the jury will be clearly instructed as to the elements of the charged offenses and the meaning of willfulness.

Based on the foregoing, the Government has not demonstrated that the probative value of Defendant's delinquent filings is substantially outweighed by the risk of misleading the jury.

JAT Comments:

Tax Crimes Core Concept Questions from ProPublica's Publication of Tax Return Information (6/10/21)

Two days ago, I posted on perhaps the top tax story at least on this news cycle:  ProPublica Publishes Series Based on IRS Data Trove Produced by Anonymous Source (Federal Tax Crimes Blog 6/8/21), here.  In the posting, I focused on the legality of the disclosure of the IRS information, known as return information, about the identified taxpayers.  Section 7213, here, makes it a felony crime for IRS personnel to disclosethe return information and for nongovernment persons receiving and disclosing (publishing) the information.  ProPublica seems within the scope of § 7213(a)(3).

As I noted in the blog, ProPublica stated that it was aware of the law and justified its disclosure as follows:

There is also a legal question here, and we want you to know we have taken it seriously. A federal law ostensibly makes it a criminal offense to disclose tax return information. But we do not believe that law would be constitutional if applied to bar or sanction publication of a story in the public interest when the news organization did not itself remove the information from the control of the IRS or solicit anyone else to do so — as we did not. And this is not our first experience with this law.

In 2012, someone at the IRS (we don’t know who or why; they used a plain brown IRS envelope) sent ProPublica copies of tax filings seeking exemption for a number of political committees, including Republican political guru Karl Rove’s Crossroads GPS. The filings were not yet supposed to be public, and the IRS indicated that it would consider our publication of them to be criminal. We explained our view of the constitutionality of that statute as applied in such circumstances and published our story, which raised concerns about whether Rove’s group had been forthcoming with the agency. We never heard about the matter from the IRS again.

I offer today questions for Tax Crimes professionals and students to test a basic federal tax crimes concept.  Section 7213(a)(3), like the earlier provisions in § 7213(a) requires that the person “willfully” disclose the return information.  Indeed, most of the tax crimes in the IRC (Title 26) require the person act willfully.  Willfully requires "'a voluntary, intentional violation of a known legal duty.'" Cheek v. United States, 498 U.S. 192, 200 (1991), here.

More on Willful Blindness (5/28/21)

Today, I revisit one of my “rant” topics – willful blindness (aka deliberate ignorance, conscious avoidance, etc.).  My past rants have been about using the concept of willful blindness as a substitute for a specific knowledge requirement in criminal statutes, particularly the willfully element of most Title 26 tax crimes.  To remind, that willfully element, often referred to as the Cheek interpretation of the willfully element in tax crimes, is specific intent to violate a known legal duty.  Cheek v. United States, 498 U.S. 192, 201 (1991).  Such a specific intent requires that a defendant know the facts that create a legal duty and must know the law (sufficiently) to know that he is violating a legal duty.  I have urged that, if Congress legislated a knowledge element for a crime, courts and juries should not be treating something that is not knowledge as knowledge.  That is effectively creating a common law crime, supposedly a no, no in our legal system.

I periodically review willful blindness cases to see if there is more ranting I can do without duplicating my ranting too much.  I read a case today that offered something that I should have noticed and ranted on before.

The willful blindness concept requires that the defendant:  "(1) The defendant must subjectively believe that there is a high probability that a fact exists and (2) the defendant must take deliberate actions to avoid learning of that fact."  Global-Tech Appliances, Inc. v. SEB S.A., 563 U.S. 754, 766 (2011).  Global-Tech was a civil case, but the Supreme Court looked to criminal analogies where the concept was deployed, so courts often cite Global-Tech in criminal cases.  The Supreme Court in Global Tech also said that willful blindness applies when the defendant “can almost be said to have actually known the critical facts.”  (pp. 769-770, emphasis supplied by JAT.)  I suppose that if one took that sentence literally, a defendant in a criminal case can be convicted of a crime requiring specific knowledge even without that specific knowledge.  But, we all know from the trajectory of the willfully requirement for the civil and criminal FBAR penalties that willfully is not the same for criminal purposes as for civil FBAR purposes, with willfully for civil FBAR purposes permitting something like willful blindness / reckless behavior to meet the willfully element in a way that could not suffice for the crime.  The statement in Global-Tech thus may be technically dicta.

I have urged in my rants that, instead of a substitute for the statutory element of specific knowledge, the role of facts indicating willful blindness should instead be circumstantial evidence of actual knowledge that would permit the factfinder (jury in most criminal cases) to infer the required knowledge (the actual statutory element for the crime) beyond a reasonable doubt.  It is not and should not be a substitute for the statutory element requiring specific knowledge.

Supreme Court Opinion in CIC Services LLC On Risk of Criminal Penalty Aspects (5/17/21)

The Supreme Court this morning decided CIC Services, LLC v. IRS, 583 U.S. ___ (2021), here, holding that § 7421(a), the Anti-Injunction Act, did not preclude pre-enforcement review of an IRS Notice requiring “material advisors” in  micro-captive transactions to report information.  I have posted a blog on my Federal Tax Procedure Blog, Supreme Court Holds in CIC Services that IRS Micro-Captive Notice May Be Contested Pre-Enforcement (5/17/21), here.  The Supreme Court holding implicates tax procedure issues, but one excerpt may be interesting to tax crimes enthusiasts (slip Op. 11-12).

Third, violation of the Notice is punishable not only by a tax, but by separate  criminal penalties. As noted above, any “[w]illful failure” to comply with the Notice’s reporting rules can lead to as much as a year in prison. §7203; see supra, at 3–4. That fact clinches the case for treating a suit brought to set aside the Notice as different from one brought to restrain its back-up tax. For the existence of criminal penalties explains why an entity like CIC must bring an action in just  this form, framing its requested relief in just this way. Recall what the Government would [*12] have such a party do: disobey the Notice, pay a resulting tax penalty, and then bring a refund suit. See Brief for Respondents 16–17; supra, at 5. That approach—not the Anti-Injunction Act’s familiar pay-now-sue-later  procedure, but one with lawbreaking at the start—subjects the party to criminal punishment. n3 And that is not the kind of thing an ordinary person risks, even to contest the most burdensome regulation. So the criminal penalties here  practically necessitate a pre-enforcement, rather than a refund, suit—if there is to be a suit at all. And so too, those penalties necessitate a suit aimed at eliminating the Notice, rather than the statutory tax penalty. Only an injunction against the Notice gives the taxpayer or advisor what it wants: relief from the obligation to report transactions. An injunction against the tax penalty would not do so. Because such an injunction would leave both the reporting duty and the criminal penalty untouched, the taxpayer or advisor would still have to accede to the Notice’s demands on pain of prison time. Small wonder that CIC’s complaint asks  for an injunction against the Notice, not one against the tax penalty helping to enforce it. Contrary to the Government’s assertion, those injunctions are not two sides of one coin.

   n3 The Government suggests that criminal liability would not attach to a taxpayer or advisor who refuses to comply with the Notice out of a “good faith” objection to its validity. Brief for Respondents 46. It is easy to see why the Government  wishes that were true: In none of our Anti-Injunction Act cases has postponing a taxpayer’s suit until after payment exposed him to criminal penalties—because in no other case has that approach required a taxpayer to break a law in the first instance. But this Court’s precedent precludes the Government’s effort to erase the criminal penalties from this case. We have held in no uncertain terms that “a defendant’s views about the validity” of a tax provision—even if held “in good faith”—do not “negate[ ] willfulness or provide[ ] a defense to criminal  prosecution.” Cheek v. United States, 498 U. S. 192, 204, 206 (1991). So in failing to report transactions as the Notice requires, an advisor like CIC would risk criminal punishment.

JAT Comments:

Another Failed Judicial Contest of the FBAR Willful Penalty (3/23/21)

In Kimble v. United States, 991 F.3d 1238 (Fed. Cir. 3/22/21), TN here, in an appeal from an adverse holding in a refund suit, the Court sustained the willful FBAR civil penalty.  Unfortunately for Kimble, neither the facts nor the law was helpful.

The Court almost summarily dispatched Kimble’s main arguments about the CFC’s holding sustaining the penalty.

Here, the parties do not dispute that Ms. Kimble failed to disclose a foreign bank account that she was required to disclose. Rather, Ms. Kimble argues that her violation was not “willful.” We hold that, based on the undisputed facts, it was not clear error for the Court of Federal Claims to find Ms. Kimble's violation willful.

Contrary to Ms. Kimble's argument that a taxpayer cannot commit a willful violation without “actual knowledge of the obligation to file an FBAR,” Appellant's Br. 32, we have held that “willfulness in the context of § 5321(a)(5)(C) includes recklessness,” Norman, 942 F.3d at 1115. Accordingly, a taxpayer signing their returns cannot escape the requirements of the law by failing to review their tax returns. Id. at 1116 (“[W]hether [the taxpayer] ever read her . . . tax return is of no import because '[a] taxpayer who signs a tax return will not be heard to claim innocence for not having actually read the return, as . . . she is charged with constructive knowledge of its contents.'”) (quoting Greer v. Comm'r, 595 F.3d 338, 347 n.4 (6th Cir. 2010)).

The undisputed facts show that Ms. Kimble knew about the numbered account and took efforts to keep it secret by, among other things, not disclosing the account to her accountant. She did not review her tax returns for 2003-2008, but she represented under penalty of perjury that she had reviewed her tax returns and had no foreign accounts. J.A. 17. In other words, Ms. Kimble had a secret foreign account, she had constructive knowledge of the requirement to disclose that account, and she falsely represented that she had no such accounts. Under these facts, it was not clear error for the Court of Federal Claims to hold that she committed a willful violation. n2 

   n2 Ms. Kimble's reasons for the violation (her subjective belief about the need for secrecy, advice from her ex-husband, etc.) do not alter our inquiry. A taxpayer can be “willful” even if her violation has good reason. See Bedrosian v. United States, 912 F.3d 144, 153 (3d Cir. 2018) (inquiring into “subjective motivations and the overall 'egregiousness' of [the taxpayer's] conduct . . . [is] not required to establish willfulness in this context”); Norman, 942 F.3d at 1116 (“Actions can be willful even if taken on the advice of another.”). And there is no “reasonable cause” exception for willful violations. 31 U.S.C. § 5321(a)(5)(C)(ii).

The Court then moved to Kimble’s hail Mary arguments and also handily dispatched them.

Third Circuit Case Discussing Difference Between Willfully Element for Tax Crimes (Cheek Willfulness) and for General Crimes with Willfully Element (1/30/21)

In United States v. Smukler, 986 F. 3d 229 (3d Cir. 1/26/21), Ct here; GS here,  a nontax case, the Court wrestled with the criminal statutory element that the defendant have acted "willfully."  Readers of this blog will recall that Title 26’s tax crimes generally required that the defendant act willfully.   Cheek v. United States, 498 U.S. 192, 201 (1991); see also Ratzlaf v. United States, 510 U.S. 135 (1994).  (The Smukler Court calls this the Cheek-Ratzlaf standard, but I shorten it here to the Cheek standard.)  Cheek interpreted willfully for  tax crimes to be intentional violation of a known legal duty.  Stated otherwise, the defendant must know that he is violating the law to act and, as a corollary, ignorance of the law is an excuse (contrary to the general requirement for crimes, even those with a willfully element, that ignorance of the law is no excuse).  Smukler was charged and convicted of a mélange of campaign finance violations, conspiracy with respect to them, filing and causing the filing of FEC reports.  (See Slip Op. 11 n6.) Some of these required that the defendant act willfully.

The Court tees up the discussion as follows (p. 233):

Interpreting the term "willfully" can be a challenge. It is a "chameleon word," United States v. Starnes, 583 F.3d 196, 210, 52 V.I. 1051 (3d Cir. 2009), and "[i]n any closely reasoned problem, whether legal or nonlegal, chameleon hued words are a peril both to clear thought and to lucid expression," Bryan A. Garner, A Dictionary of Modern Legal Usage 145 (2d ed. 1995) (quoting Wesley N. Hohfeld, Fundamental Legal Conceptions 35 (1919) (reprint 1966)). But we take comfort knowing that we do not struggle alone with this "notoriously malleable" concept. Bryan v. United States, 524 U.S. 184, 202, 118 S. Ct. 1939, 141 L. Ed. 2d 197 (1998) (Scalia, J., dissenting). Indeed, "willfully" is "a word of many meanings" whose definition is "dependent on the context in which it appears." Id. at 191 (majority opinion). And just as a chameleon's appearance depends on the surroundings, we look to the whole text of a law to best "interpret the words consistent with their ordinary meaning . . . at the time Congress enacted the statute." Wis. Cent. Ltd. v. United States, 138 S. Ct. 2067, 2070, 201 L. Ed. 2d 490 (2018) (alteration in original) (internal quotation marks omitted). We approach that task with a full box of "traditional tools" of construction. Kisor v. Wilkie, 139 S. Ct. 2400, 2415, 204 L. Ed. 2d 841 (2019). Aided by these principles, interpreting "willfully" seems less troublesome.

Kenneth Smukler asks us to do just the opposite, arguing for an exceptional understanding of "willfully" in otherwise unexceptional statutes. But the ordinary understanding of "willfully" is the best one.

In other words, Smukler wanted a Cheek-type jury instruction as explained (pp. 238-239):

First, Smukler argues that the District Court incorrectly instructed the jury on the mens rea element of the federal criminal laws requiring the Government to prove that Smukler acted "willfully." The District Court explained that "the Government must prove beyond a reasonable doubt that defendant knew his conduct was unlawful and intended to do something that the law forbids." (App. at 1943.) "That is," the Court continued, "to find that the defendant acted willfully, you must find that the evidence proved beyond a reasonable doubt that defendant acted with a purpose to disobey or disregard the law." (App. at 1943.) Smukler sought different language: that "the government must prove beyond a reasonable doubt that the defendant knew of the specific law prohibiting the conduct at issue, and that he acted with the intent to violate that specific law." (App. at 312.) In rejecting Smukler's proposed instruction, the District Court explained that it would follow "the mens rea standard of willfulness based on [the] Third Circuit Model Jury Instructions . . . and will not cover [Smukler's] inconsistent instructions requested on that issue." (App. at 12-13.) Smukler argues that because the Government charged him with violations in the federal election law context, our precedent required the District Court to charge the jury under a "heightened" standard of "willfully."

The Court’s discussion of Smukler’s “willfully” arguments (pp. 238-244) is too lengthy to copy and paste here.  I will therefore just bullet-point the key points that I see in that discussion.  I do encourage interested readers, to read the entire discussion.  The following are key points I focus on here:

Third Circuit Discussion on Violation of Legal Duty with Other Reasonable Interpretations of Duty (1/13/21)

In United States v. Harra, ___ F.3d ___, 2021 U.S. App. LEXIS 915 (3rd Cir. 2021), here, the Court held (as summarized at the opening of the opinion):

When a defendant is charged with false reporting based on an ambiguous reporting requirement, what is the prosecution’s burden at trial as to the element of falsity? Is it sufficient for the prosecution to prove the statement was false only under the Government’s interpretation of the requirement, or must it prove the statement was false under each objectively reasonable interpretation of the requirement? In the balance hang the convictions of four former executives of Wilmington Trust Corporation, a bank that, in the wake of the Great Recession of 2008, excluded certain commercial real estate loans from those it reported as “past due” to the Securities and Exchange Commission and the Federal Reserve. The executives maintained that, under a reasonable interpretation of these requirements, the exclusion of the loans was proper, but the District Court denied their requests to introduce evidence concerning or instruct the jury about that alternative interpretation. The jury then found the executives’ reporting constituted “false statements” for purposes of 18 U.S.C. § 1001, 15 U.S.C. § 78m, and related statutes and convicted Defendants on all counts. 

We hold today that to prove falsity beyond a reasonable doubt in this situation, the Government must prove either that its interpretation of the reporting requirement is the only objectively reasonable interpretation or that the defendant’s statement was also false under the alternative, objectively reasonable interpretation. And because the Government here produced insufficient evidence from which a rational jury could find Defendants’ statements false under this rule, we will reverse Defendants’ false statements convictions and remand on those counts for entry of judgments of acquittal. As for Defendants’ conspiracy and securities fraud convictions,  [*6]  however, which were charged in the alternative on an independent theory of liability, we will vacate and remand for retrial.

Harra is not a tax case, but it does involve the interpretation and application of 18 USC § 1001, sometimes deployed in tax cases.  Moreover, I think it has overtones related to other issues in tax crimes.  I will offer points that, from my perspective of interest in tax crimes, I think are potentially important:

The concerns discussed in the decision and the analysis seem to track the Cheek standard for tax crimes.  Under Cheek, a tax crime (such as tax evasion, § 7201) must have been committed "willfully" -- that is, was the “voluntary, intentional violation of a known legal duty.” Cheek v. United States, 498 US 192, 200 (1991) (citing United States v. Bishop, 412 U. S. 346 (1973) and United States v. Pomponio, 429 U. S. 10 (1976) (per curiam) (see also Justice Blackmun’s dissent citing this as the “conclusively established standard for willfulness under the applicable [tax] statute,” Cheek p. 209.).  Cheek established that there is no requirement to negate this element that the defendant prove that the defendant’s belief be objectively reasonable.

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.

Fourth Circuit Affirms District Court Decision in Tax Crimes Case to Limit Taxpayer's Reading Excerpts From Book on Cheek Willfulness Issue (10/24/20)

In United States v. Gerard, 2020 U.S. App. LEXIS 33341 (4th Circuit 10/22/20), here and govinfo here, the Court affirmed the taxpayer’s conviction for “for conspiracy to commit tax fraud” but remanded for the district court to address the elements of the obstruction of justice enhancement for sentencing purposes.  Although the opinion is an unpublished opinion, I thought the following from the opinion might be interesting to readers:

We further conclude that the district court did not err in barring Gerard from reading three books to the jury in support of his defense that he had a good faith belief that his tax minimization plan was lawful. We review a district court's evidentiary rulings for abuse of discretion, and will only overturn a ruling that is arbitrary and irrational. United States v. Farrell, 921 F.3d 116, 143 (4th Cir.), cert. denied, 140 S. Ct. 269 (2019). Rule 403 of the Federal Rules of Evidence states that "[t]he court may exclude relevant evidence if its probative value is substantially outweighed by a danger of . . . unfair prejudice, confusing the issues, misleading the jury, undue delay, wasting time, or needlessly presenting cumulative evidence." We agree with the district court that Gerard's request to read all three books would amount to something similar to the presentation of expert testimony, but without the opportunity for the Government to cross-examine the expert. Furthermore, as the district court observed, Gerard did not have to prove that his tax minimization system was lawful, only that his good faith belief in the lawfulness of his system was credible. See Cheek v. United States, 498 U.S. 192, 201-02 (1991) (holding that a defendant in a criminal tax case can assert a defense of ignorance or misunderstanding of the tax law, leading to "a good-faith belief that he was not violating any of the provisions of the tax laws"). Moreover, as the court observed, Gerard's proposal to read all three books would confuse the jury. We note that, even though the court permitted Gerard to read excerpts from the books, Gerard chose to read excerpts from just one of the three books, suggesting that it was not so imperative that he read each book to the jury.

Fifth Circuit Affirms Republican Congressman Conviction for Crimes Including Tax Perjury (1/14/20)

In United States v. Stockman, ___ F.3d ___, 2020 U.S. App. LEXIS 851 (5th Cir. 2020), here, the Fifth Circuit affirmed Stockman’s convictions of four counts of mail fraud, three counts of wire fraud, two counts of making false statements in FEC filings, eleven counts of money laundering, one count of conspiracy to make conduit campaign contributions and false statements, one count of causing an excessive campaign contribution, and one count of filing a false tax return.  Stockman was a former congressman (Republican).

The only item that I found interesting, more as a reminder rather than as new to readers of this blog, was the rejection of Stockman’s complaint that he should have received a “good faith” instruction for crimes (including the tax crime) with willful conduct as an element of the crime.  Stockman alleged his “good faith” reliance on his tax professional.  The relevant discussion from the Fifth Circuit opinion is (Slip Op. at 17-19 (cleaned up)) :

We next consider Stockman's argument that his tax and campaign finance convictions under Counts 10, 11, 12, and 28 of the indictment were tainted by the district court's refusal to instruct on "good faith." Stockman points to evidence that he relied on an accountant who "wrongly advised him that having aides contribute money to his congressional campaign in the name of their parents was permissible." He also points to evidence that Stockman and Posey intentionally omitted words of express advocacy from The Conservative News in order to comply with FECA. He asserts that in this context and where willfulness is required, a good faith instruction should have been given. 

Again, we disagree. Although the parties dispute the standard of review applicable to the district court's refusal to instruct on good faith, decisions of this court and the Supreme Court show that the refusal was not erroneous, whether reviewed de novo or for plain error. See United States v. Pomponio, 429 U.S. 10, 11-12 (1976); United States v. Simkanin, 420 F.3d 397, 409-11 (5th Cir. 2005). Stockman argues that a good faith instruction should have been issued because the tax and campaign finance offenses [*18]  in question all require a showing of "willfulness." 

But it is precisely that requirement that renders any such instruction unnecessary. The Supreme Court held in Pomponio that an additional good faith instruction is not required when the charge already requires proof of "willfulness," properly cabined to cover only voluntary, intentional violations of known legal duties. In so holding, the Court gave its approval to a charge that did not instruct on good faith but did instruct on the need for proof of a "willful" act, meaning an act done voluntarily and intentionally and with the specific intent to do something which the law forbids, that is to say with the bad purpose either to disobey or disregard the law.  Drawing from Pomponio, we held in Simkanin that a "specific instruction" on good faith is not required when the concept is sufficiently subsumed by a general instruction on "willfulness." Simkanin, like Pomponio, approved of instructions alerting the jury to the fact that a "willful" act is done voluntarily and deliberately, with the intention of violating a known legal duty. 

Here, the district court's instructions [*19]  mirrored those in Pomponio and Simkanin. With respect to Counts 10, 11, and 12, the district court instructed the jury that to act "willfully," the defendant must act "voluntarily and purposely, with the specific intent to do something the law forbids, that is, with the bad purpose either to disobey or disregard the law." With respect to Count 28 [the tax perjury count], the district court instructed the jury that it could not convict unless it found that Stockman acted "with intent to violate a known legal duty." We find no merit in Stockman's "good faith" argument.

JAT Comments:

Interesting Retrial After Cheek Defense Based on Religious Objection to Use of Tax Collections (12/11/19)

I picked up this article: After mistrial, judge says he made mistake in allowing man to argue religious objection to filing tax returns (The Oregonian 12/10/19), here.  Basically, it reports that the defendant in a failure to file tax case, Michael Bowman, was permitted in the first trial to assert this defense: “he believed the government had to accommodate his religious objection to funding Planned Parenthood and abortions before he filed the returns.”  The jury hung, so the judge declared a mistrial.  Facing retrial, the judge determined that the defense could not be asserted.  So, it looks like the defendant may not have a viable defense, but he is still entitled to have the government prove his guilt beyond a reasonable doubt.

But, in that retrial, the parties apparently agreed to unusual procedures described in the article:

The extremely rare trial will have no witnesses and no jury and will take place before Chief U.S. District Judge Michael W. Mosman, the same judge who presided over the first trial. Mosman will make a decision based on a set of facts agreed upon ahead of time by the prosecutor and the defense lawyer. 

Bowman, 55, of Columbia City, doesn’t even plan to show up but instead will listen to the proceeding by phone, calling the latest legal twist an “abortion of justice’’ in an email to the judge. Stripped of his defense, he expects Mosman to convict him on all four counts of willful failure to file tax returns. 

Then he plans to appeal.

The trajectory in the first trial has become something of a cause celebre among tax protesters with some misleading claims about what happened.  Here is a good factcheck on those claims (Saranac Hale Spencer, Old Decision in Tax Lawsuit Gets New Spin (FactCheck.org 4/9/19), here) where the quick take is:

A website known for spreading misinformation writes that a man who cited religious reasons for not paying his income taxes “has won an historic lawsuit against the IRS.” That’s misleading. One charge was dropped, but four others have yet to be determined.

JAT Comment:

A Reminder on the Cheek Good Faith Defense -- It Usually Does Not Work (10/12/19)

The United States Attorney for Nevada announced here the sentencing of William Waller Jr., a Las Vegas real estate broker and the owner of Burbank Holdings or Platinum Properties for convictions of tax evasion and willful failure to file.  His sentence was 78 months and restitution imposed is $1,459,535.70.  Key excerpts are:

According to court pleadings and evidence presented at trial, Waller sought to evade taxes by incorporating a shell entity, opening bank accounts in its name, and directing his income into those accounts rather than accounts in his own name.  He also dealt extensively in cash and reduced his equity in his home, the only asset he held in his own name, thereby making it an unattractive asset for the IRS to seize.  

Waller testified at trial that he believed that he was not required to file tax returns or pay taxes, but acknowledged that he was influenced by the teachings of several prominent tax defiers. These included one, who had been convicted three times of tax fraud, and another, who had been stripped of his CPA license. Waller also admitted to purchasing and watching tax defier courses, including one on how to beat criminal tax charges.  Following the defendant’s testimony and the conclusion of the trial, the jury returned guilty verdicts on March 18, 2019.

The first two sentences of the second paragraph describe, somewhat cryptically, his Cheek good faith defense.  That defense is that, in effect, he, in good faith, did not intend to violate a known legal duty.  See Cheek v. United States, 498 U.S. 192 (1991), here, defining willfulness (an element of most Internal Revenue Code (Title 26) tax crimes) as voluntary, intentional violation of a known legal duty.  United States v. Pomponio, 429 U.S. 10, 13 (1976), here.  As I have conceptualized that element of the crime, (i) the duty must be knowable (the law must be clear and not ambiguous, per the line of cases going back to James v. United States, 366 U.S. 213 (1961), here) and (ii) the defendant must have known the knowable duty.  A defendant's good faith belief that he is not violating the law is a defense.  In other words, real, good faith ignorance of the law (but not feigned ignorance) is a defense.

In Cheek, the defendant was successful in establishing that he was entitled to an instruction properly advising the jury of the defense, thus entitling him to retrial where the Government must prove that he intended to violate a known legal duty.  The defendant lost on retrial.  United States v. Cheek, 3 F.3d 1057 (7th Cir. 1993), cert. denied, 510 U.S. 1112 (1994), here.

I don't have statistics on how many cases in which this defense has been raised on trial it has been successful, but my sense from watching these cases over a number of years is that it is rarely successful.  It certainly did not work for Mr. Waller in the case prompting this blog.

I thought I would include some discussion of the Cheek good faith defense from Michael Saltzman and Leslie Book, IRS Practice and Procedure (Thomsen Reuters 2015), here, ¶12.05. Selected Criminal Tax Topics (of which I am the principal author):

Confusion Regarding the Cheek Willfully Element of Specific Intent to Violate a Known Legal Duty (9/8/19)

In United States v. Severino, 2019 U.S. App. LEXIS 26560 (11th Cir. 2019) (unpublished), here, the Eleventh Circuit affirmed Severino's "convictions and 65-month sentence for aiding and assisting in the preparation of false tax returns, wire fraud, and aggravated identity theft."  Severino was a return preparer, and, based on the convictions, an abusive preparer.  On appeal, Severino argued that the Court failed to give a proper willfulness instruction that he had requested for the aiding and assisting counts, § 7206(2).  Severino made other arguments on appeal, but I focus on the willfulness instruction issue which is framed by the Eleventh Circuit's pattern criminal jury instructions.

The Eleventh Circuit's pattern jury instructions for criminal cases are available, here.  Those pattern instructions (with annotations and comments) cover 747 pages.  In order to focus on the pattern jury instructions in issue here, I used the Eleventh Circuit's Pattern Jury Instruction Builder, here, which I have discussed previously.  I "built" the pattern jury instructions in question with Annotations and Comments here.

The relevant pattern jury instructions are:

• B9.1A On or About; Knowingly; Willfully – Generally
• B9.1B On or About; Knowingly; Willfully – Intentional Violation of a Known Legal Duty
• O109.2 Aiding or Assisting in Preparation of False Documents Under Internal Revenue Laws 26 U.S.C. § 7206(2)

The aiding and assisting, § 7206(2) counts, have the same willfully element as in most of the other commonly employed Title 26 tax crimes defined to mean specific intent to violate a known legal duty.  Thus, DOJ CTM 13.07 Willfulness, here, says:

Willfulness has the same meaning in Section 7206(2) cases as it has for other criminal tax violations: “the word ‘willfully’ in these statutes generally connotes a voluntary, intentional violation of a known legal duty.” United States v. Bishop, 412 U.S. 346, 360 (1973); see also Cheek v. United States, 498 U.S. 192, 200 (1991); United States v. Ervasti, 201 F.3d 1029, 1041 (8th Cir. 2000).

As readers of this blog know, many crimes have a willfully element but the element is not always interpreted the same.  As the Court said in Bryan v. United States, 524 U.S. 184, 191-192 (1998), here:

Fifth Circuit on Willful Blindness / Deliberate Ignorance as Circumstantial Evidence of Intent Element (5/2/19)

In United States v. Ricard, ___ F.3d ___, 2019 U.S. App. LEXIS 12598 (5th Cir. 2019), here, "Ricard was convicted by a jury of one count of conspiracy to pay and receive kickbacks for referring Medicare patients to a particular health care provider, three counts of receiving such kickbacks for such referrals, three counts of identity theft, and one count of making false statements to a federal agent."  Although this is a nontax case, the case has some good discussion on issues that arise in criminal tax cases, particularly regarding the willful blindness jury instructions.

The Court explained the crime involved:

Willfulness in the Medicare kickback statute "means that the act was committed voluntarily and purposely with the specific intent to do something the law forbids; that is to say, with bad purpose either to disobey or disregard the law." United States v. Davis, 132 F.3d 1092, 1094 (5th Cir. 1998) (quoting United States v. Garcia, 762 F.2d 1222, 1224 (5th Cir. 1985)). Under this definition of willfulness, "knowledge that the conduct is unlawful is all that is required." n8 Bryan v. United States, 524 U.S. 184, 196, 118 S. Ct. 1939, 141 L. Ed. 2d 197 (1998).
   n8 In contrast, a heightened willfulness standard applies in certain tax and currency structuring cases. Those statutes "carve 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." Bryan, 524 U.S. at 195 (internal quotation marks and footnotes omitted).

At this point, I am not sure what the Court means by "In contrast."  The Court says the crime is a "specific intent" crime requiring that the defendant know the law and intend to violate it.  I am not sure that, as articulated, it is distinguishable from the tax and currency structuring cases.  I don't think this need detain us, other than those digging into the issue might want to dig deeper on that.

The willful blindness / deliberate ignorance instruction the trial court gave was from the Fifth Circuit's Pattern Jury Instructions § 1.37A (2015).:

You may find that a defendant had knowledge of a fact if you find that the defendant deliberately closed his eyes to what would otherwise have been obvious to him. While knowledge on the part of the defendant cannot be established merely by demonstrating that the defendant was negligent, careless, or foolish, knowledge can be inferred if the defendant deliberately blinded himself to the existence of a fact.

The trial court also gave an "inferring mental state" charge as follows (this time from the Sixth Circuit pattern jury instruction § 2.08 (2013 ed.):

But a defendant's state of mind can be proved indirectly from the surrounding circumstances. This includes things like what the defendant said, what the defendant did, how the defendant acted, and any other facts or circumstances in evidence that show what was in the defendant's mind. 

You may also consider the natural and probable results of any acts that the defendant knowingly did or did not do, and whether it is reasonable to conclude that the defendant intended those results. This, of course, is all for you to decide.

At trial:

Ricard objected to the deliberate ignorance instruction, arguing that it was "covered by" the instruction concerning "inferring [the] required mental state" and that only one or the other charge should be given. The district court overruled the objection, saying that "while they both deal with the mental element" the deliberate ignorance instruction "is a different charge."

On appeal, Ricard made a different argument -- that the elements required for the deliberate ignorance instruction were absent, so that Court reviewed for plain error, noting that, in any event, "even if a deliberate ignorance charge is error, it is harmless where substantial evidence of actual knowledge exists." (Internal quotation marks omitted.)

Tenth Circuit Affirms Tax Crimes Convictions and Sentencing (3/2/19)

In United States v. Stubbs (10th Cir. 2019), here, a nonprecedential decision, the Court affirmed Stubbs' convictions and sentencing for two counts of tax evasion and six counts of failure to file.

The activity giving rise to the tax obligations involved was a rebate program, run by his company National Energy Rebate Fund, Inc.  Basically, the scheme was to sell home-improvement companies the opportunity to market a potential 50% rebate to their customers, but the rebate was well into the future and very difficult to qualify for.  Here is the description:

NRF's profit allegedly came from the "slippage" between the total number of customers eligible for rebates and the much smaller number who successfully completed the requirements. The rebate opportunity carried extremely stringent rules: customers had to register the rebate within 17 days of receiving the form; they had to send forms by registered mail only; they had to claim the rebate within the 30 days after the 47th month from the purchase; and the rebate offer would be invalid if anyone other than NRF, such as the company from which they got the rebate forms, reminded them about the deadlines. NRF set aside only a small portion of the revenues it received to pay rebates. And although the rebate program ostensibly was administered by an independent third party, that administration company actually was connected to Stubbs. Apparently, some customers received rebates, but numerous customers who failed to strictly satisfy each and every condition were denied rebates. NRF and its activities were the subject of civil lawsuits brought by Wisconsin and Colorado on behalf of their citizens, which resulted in multi-million-dollar default judgments against Stubbs.

Stubbs failed to file returns at the S-corporation level and at the individual level.  He also failed to pay the tax that would have been due.

Indictments were obtained for tax evasion and failure to file.  Convictions were obtained.  Stubbs fled to Costa Rica, was arrested and returned to U.S.  He was sentenced to 88 months.  He appealed.  He lost..

The issues resolved against Stubbs on appeal were:

1.  The evidence was sufficient to convict for tax evasion.

2.  The district court did not plainly err in admitting evidence of prior acts.

3.  In its sentencing calculation, the district court did not err in applying the criminal activity and sophisticated means enhancements.

This is a nonprecedential case so there is nothing of major significance in the opinion.  The following, however, did catch my eye.