I address first the tax evasion convictions, although the Court addressed first the wire fraud conviction. The defendant's tax evasion convictions for 3 years arose from her failure to file income tax returns for those years where she omitted substantial income unrelated to the wire fraud. Normally, a failure to file income tax returns establishes only the crime of failure to file, Section 7203, a misdemeanor. In order to prove tax evasion in the context of failure to file, the Government has to prove some affirmative element other than just failure to file. The Second Circuit held, cryptically, that, for two of the years, the evidence was insufficient to support conviction for two of the three years but was sufficient for the third year, reasoning as follows (case citations and quotations omitted):
(i) 1995 Tax Count
We have previously described as examples of affirmative acts conduct such as making false statements to the IRS for the purpose of evading taxes, establishing accounts in the names of other entities to conceal income, and handling of one's affairs to avoid making the records usual in transactions of the kind, More broadly, we have held that an affirmative act includes any conduct, the likely effect of which would be to mislead or to conceal.
With these principles in mind, we review the evidence relating to the tax evasion count for 1995 (Count Two). The most significant testimony relating to that count was that of Peter Testaverde [an accountant]. As set forth above, Testaverde testified that Litwok barred him from verifying the accuracy of the trading account statements that she claimed were inaccurate and thereby prevented him from preparing 1995 K-1 tax forms for Kohn Investment I LP's partners — including its general partner, Kohn Investment Management, which Litwok owned. Without K-1 tax forms, the company's partners could not determine their income and file their returns. Based on Testaverde's testimony, a rational juror could find that Litwok actively prevented the filing of her returns that year. On a sufficiency challenge, her conduct constitutes an affirmative act sufficient to sustain her conviction on Count Two.
(ii) 1996 and 1997 Tax Counts
In contrast to the evidence relating to the calendar year 1995, there was no evidence at trial of any affirmative act beyond a mere failure to file tax returns for calendar years 1996 and 1997. For the first time at oral argument on appeal, the Government sought to defend the convictions for tax evasion for 1996 and 1997 (Counts Three and Four) in two ways. First, it claimed that Litwok had an affirmative, fiduciary duty to prepare K-1 tax forms for Kohn's partners, and that her failure to do so constituted the requisite affirmative acts. Second, it argued that Litwok's refusal to allow Testaverde to verify financial documents for 1995 constituted an affirmative act of tax evasion in 1996 and 1997 because it prevented the calculation of accurate income for those later years. Because it did not raise either of these arguments in its brief or before the District Court, these arguments were forfeited, and we decline to consider them. Accordingly, we reverse the judgment of conviction as to Counts Three and Four.
