Making a Cheek Good Faith "Defense" Without Testifying (11/24/11)

In United States v. Kokenis, 662 F.3d 919 (7th Cir. 2011), here, the Seventh Circuit affirmed a conviction, although the Court rejected the trial court's notion that the defendant must testify -- thereby waiving his Fifth Amendment privilege and subjecting himself to cross-examination -- in order to assert the defense. (Technically, as noted in the excerpts below, the defense is not a defense since the Government must prove willfulness which is absent if the defendant acted in good faith; but in order to rivet the jury's attention on the "defense", the defendant will want to introduce evidence and get a specific good faith instruction.)  The opinion has a good discussion on why the defendant's proferred evidence of his subjective defense was inadequate to raise the "defense" sufficiently to obtain the instruction.  (For my previous discussion of the trial court's holding rejected by the Seventh Circuit, see Cheek Good Faith - Must the Defendant Testify to Assert the Good Faith "Defense" (10/13/10), here.)

The core of the Seventh Circuit's decision is as follows (some case citations omitted for readability):

The court erred in thinking that evidence of Kokenis's state of mind had to come from Kokenis's own testimony. See, e.g., United States v. Lindo, 18 F.3d 353, 356 (6th Cir. 1994) ("'[T]he standard of evidence necessary to warrant a [good-faith reliance] instruction cannot include an absolute requirement that the taxpayer must testify, for that would burden the taxpayer's own Fifth Amendment right against self-incrimination.'") (quoting United States v. Duncan, 850 F.2d 1104, 1115 n.9 (6th Cir. 1988)); United States v. Phillips, 217 F.2d 435, 442 (7th Cir. 1954) (noting that evidence of defendant's good-faith reliance on advice of counsel can come from the government's witnesses or the defendant's witnesses). Although a defendant's own testimony might be the best evidence of that defendant's good faith, a defendant can offer evidence of good faith in other ways. For example, circumstantial evidence may tend to show good faith and hearsay statements of the defendant may suggest a defendant's belief. 

  Nonetheless, Kokenis was not entitled to a good-faith instruction. First, the evidence did not support this theory of good faith. Kokenis's claim that the district court wouldn't allow him to present evidence of good faith unless he testified is wrong. He simply didn't offer any evidence relevant to his good faith.

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Another reason Kokenis was not entitled to an instruction on good faith: the theory was already part of the charge. Willfulness is an essential element of the tax evasion offenses charged under 26 U.S.C. § 7206(1). The good-faith theory "is essentially a claim that [the defendant] did not act willfully." United States v. Brimberry, 961 F.2d 1286, 1291 (7th Cir. 1992) (quotation omitted); see also Cheek, 498 U.S. at 202 (government's burden of proving willfulness requires "negating a defendant's claim of ignorance of the law or a claim that because of a misunderstanding of the law, he had a good-faith belief that he was not violating any" law). The district court properly instructed the jury on the elements of the offenses under § 7206(1), including that the government had to prove that "when defendant made and signed the tax return he did so willfully and didn't believe that the tax return was true, correct and complete as to every material matter." The court properly defined "willfully" as "the voluntary and intentional violation of a known legal duty or the purposeful omission to do what the law requires." The court further instructed that "defendant acted willfully if he knew it was his legal duty to file truthful income tax returns and he intentionally filed false returns." We note, too, that the court also instructed the jury that the government had the burden of proving the propositions (elements) beyond a reasonable doubt and that the burden of proof stays with the government throughout the case. The district court's instructions on willfulness "necessarily encompassed" the defense theory of good faith. The jury could not find both that Kokenis acted willfully as defined in the instructions and that he acted in good faith.

Thus the district court did not err in refusing to give Kokenis's good-faith instruction. Moreover, the district court's mis-impression that Kokenis could not assert good faith unless he himself testified was harmless because it did not affect his "substantial rights." Fed. R. Crim. P. 52(a). The evidence of his guilt, especially the phony documentation of personal deductions, was overwhelming. The good-faith argument was directed only to the income side of the false tax returns, not to the deduction of personal expenses. On the record before us, the district court's error did not affect Kokenis's substantial rights and does not require remand. 

I offer for your further consideration, the modifications I have made to my Federal Tax Crimes book (the modifications will appear in the next edition):

One of the practical problems with asserting the so-called Cheek good faith “defense” at trial is how to get to the jury and focus its attention on that issue without the defendant having to testify as to his good faith, thus waiving his or her Fifth Amendment right to remain silent and opening himself to cross-examination. In white collar crime cases, of which tax crime cases are a subset, allowing the Government to cross-examine the defendant often – even usually – is a dicey gambit indeed; the risks of the defendant testifying often outweigh the potential benefit to be gained. Instead, the defendant will often remain silent and put the Government to its proof beyond a reasonable doubt. That proof, of course, includes proving the defendant’s willfulness; necessarily, if the defendant acted with Cheek good faith, there is no willfulness. The jury will be instructed on the requirements of willfulness which will necessarily put good faith in issue, so the Government’s evidence at least at some level must refute any indication in the record that the defendant acted in good faith. The perceived problem for a defendant wanting to assert this “defense” is that the standard willfulness instruction does not rivet the jury’s attention on the Government proving the absence of good faith beyond a reasonable doubt. In this regard, although the Cheek claim is often called a defense, it really isn’t a defense; it is colloquially referred to as a defense because, once the Government makes a prima facie case of intentional conduct on the defendant’s part, the defendant is at high risk of conviction if the record fails to at least create an inference of good faith sufficient to create a reasonable doubt of willfulness. So, if the defendant wants to maximize the force of his or her good faith “defense” on the jury verdict without taking the risk of testifying and subjecting himself to cross-examination, the defendant will want to: (1) make sure the record contains circumstantial evidence from which the defendant’s good faith may be inferred (the stronger such evidence is the better, but it must be some such evidence and, to work, must create a reasonable doubt) and (2) if the record contains that evidence, request a specific instruction to the jury about good faith (an instruction that goes beyond the standard instruction on willfulness), so that the jury’s collective mind is focused on good faith and whether the Government then refuted good faith beyond a reasonable doubt. n96 

n96 See United States v. Kokenis, ___ F.3d ___, 2011 U.S. App. 23370 (7th Cir. 2011) [662 F.3d 919], holding that a defendant may obtain the specific instruction even without taking the stand, provided that the record evidence is sufficient to create the inference of good faith. In Kokenis, the trial court specifically did not allow evidence that the defendant argued permitted an inference of the defendant’s good faith and rejected the specific good faith instruction because the defendant did not testify. The Seventh Circuit rejected that notion, although it found the defendant’s proffered evidence of good faith lacking sufficient probative value of the inference of defendant’s subjective good faith to justify either its admission or the requested Cheek good faith instruction. See also United States v. Wisenbaker, 14 F.3d 1022, 1027 (5th Cir. 1994). and CTM 40.05[1][a] (2008 ed.) dealing with the reliance on professional subset of the good faith defense: “A reliance-on-advice-of-accountant instruction may be warranted “even without per se testimony that the defendant relied on the accountant’s advice, so long as the circumstances support an inference that he did so rely.”

P.S. 11/24/11:  I provide this additional stretch beyond the implications of Kokenis for most of the readers of this blog.  Still, it is interesting and through that noble animal, the ostrich, works its way into another area of interest for tax crimes afficionados -- the conscious avoidance instruction.  In Kokenis, the Seventh Circuit concludes with this:

Kokenis argues that the district court's use of acquitted conduct in determining his sentence violated his constitutional rights. He concedes that circuit precedent forecloses this argument, see, e.g., United States v. Black, 625 F.3d 386, 394 (7th Cir. 2010) ("'A jury's verdict of acquittal does not prevent the sentencing court from considering conduct underlying the acquitted charge, so long as that conduct has been proved by a  preponderance of the evidence.'") (quoting United States v. Watts, 519 U.S. 148, 157 (1997) (per curiam)), cert. denied, 131 S. Ct. 2932 (U.S. May 31, 2011) (No. 10-1038), and raises it only to preserve it for review by the Supreme Court.

On the same day Kokenis was decided, in a nontax case, Judge Posner, for the panel, crafted the opinion in Gonzalez-Servin v. Ford Motor Company, ___ F.3d ___ (7th Cir. 2011), here, dealing with the appellant's ostrich-like tactic on appeal -- just ignore apparent precedents that are against the appellant.  (Note Kokenis'  counsel took the higher road.)  Judge Posner lectures:

When there is apparently dispositive precedent, an appellant may  urge its overruling or distinguishing or reserve a  challenge to it for a petition for certiorari but may not simply ignore it . We don’t know the thinking that led the  appellants’ counsel in these two cases to do that.  But we do know that the two sets of cases out of which the appeals arise, involving the blood-products and Bridges tone/Firestone tire litigations, generated many transfers under the doctrine of forum non conveniens, three of which we affirmed in the two ignored precedents.
There  are likely  to be additional such appeals; maybe appellants think that if  they ignore our precedents their appeals will not be assigned to the same panel as decide the cases that established the precedents. Whatever  the reason, such advocacy is unacceptable. 

The ostrich is a noble animal, but not a proper model for an appellate advocate. (Not  that  ostriches really bury their heads in the sand when threatened; don’t be  fooled by  the picture below.) The “ostrich-like tactic of pretending that potentially dispositive  authority against a litigant’s contention does not exist is as  unprofessional as it is pointless.” Mannheim Video, Inc. v. County of Cook, 884 F.2d 1043, 1047  (7th  Cir. 1989), quoting Hill v. Norfolk & Western Ry., 814 F.2d 1192, 1198 (7th Cir. 1987).

As indicated there opinion incorporates images which are quite illustrative of the points Judge Posner makes regarding appellants' counsel and the ostrich.  I encourage readers to view the images.

While on the noble ostrich, I do note another use of the mythical ostrich in the so-called ostrich instruction, known by variant terms such as conscious avoidance, willful blindness, etc. that I discuss from to time, here.  Here is what Judge Posner said previously about this noble animal in that context (United States v. Black, 530 F.3d 596, 604 (7th Cir. 2009), vacated and remanded ___ U.S. ___ 130 S. Ct. 2963 (U.S. 2010):

The reference [to the ostrich instruction] of course is to the legend that ostriches when frightened bury their head in the sand. It is pure legend and a canard on a very distinguished bird. Zoological Society of San Diego, Birds:Ostrich, www.sandiegozoo.org/animalbytes/t-ostrich.html (visited June 12, 2008) (“When an ostrich senses danger and cannot run away, it flops to the ground and remains still, with its head and neck flat on the ground in front of it. Because the head and neck are lightly colored, they blend in with the color of the soil. From a distance, it just looks like the ostrich has buried its head in the sand, because only the body is visible”). It is too late, however, to correct this injustice. 

Finally, depending upon the nature of any good faith defense a defendant makes (or tries to make), the Government might leverage the defense into a conscious avoidance / willful blindness [or ostrich] instruction.

Addendum 11/28/11:  The WSJ Law Blog had this on the Ostrich affair:  Joe Palazzolo, Who’s the Ostrich? (WSJ Law Blog 11/28/11), here, reporting an aggressive defense from the putative ostrich lawyer.