Sunday, June 16, 2013

Third Circuit Speaks on Fifth Amendment and Willfulness in Tax Case (6/16/13)

In United States v. Bean, 2014 U.S. App. LEXIS 11810 (3d Cir. 2013), here [a nonprededential opinion, the defendant, an accountant, appealed his convictions for tax obstruction (§ 7212(a)), tax evasion (§ 7201), and failure to file (§ 7203).  The actus rea occurred after he had become enthralled with one of the various trust schemes that many taxpayers fall prey to.  Taxpayers convince themselves that the tax evasion trust scheme will be sufficient at least to avoid a criminal prosecution because, they think, they really believe it works and therefore cannot act willfully.  These criminal prosecutions establish that a jury will usually not believe that the taxpayers really believe that nonsense.  On appeal, the defendant raised two interesting arguments that I address in this blog.  He did raise a sufficiency of the evidence, but that is routine and not interesting as presented in the opinion.  I write this blog primarily to students, since most practitioners will be familiar with the context and holdings of the court.

I do note at the outset that this is a nonprecedential decision and hence the Court of Appeals says:
We write principally for the parties, who are familiar with the factual context and legal history of this case. Therefore, we will set forth only those facts necessary to our analysis.
So, the Court says it is giving us the facts necessary for the issues it decides, but there is undoubtedly nuance (e.g., helpful facts) not presented.  Still for the issues I discuss, I think we have everything we need.  With that caveat, let's go!

First, the defendant made an interesting Fifth Amendment argument.  During the course of the IRS audits and collection activity forming the basis for the criminal proceedings, the defendant had obstructed the investigation, in part, by not responding to the IRS and not showing up for scheduled meetings.  During the trial, the prosecutors adduced evidence of that conduct and argued it to the jury.  The defendant says that, through such conduct, he was exercising his Fifth Amendment privilege and that, therefore, the prosecutors should not have been allowed to comment on that exercise, either by testimony, argument or otherwise.  Here is how the Court handled that argument:
Beam also challenges the government's comments during trial on his silence with respect to the IRS audits. Specifically, Beam asserts that "IRS Agents Thomas Kurtz and William Welsh testified that they called, sent letters and made appointments to meet with Troy Beam, but that he would never respond or show up for meetings," and that "[b]ecause Troy Beam had a right to remain silent, the Government's use of his silence against him violates the Fifth Amendment." Appellant's Br. at 20. Beam admits  that this alleged error was not brought to the District Court's attention, and thus our review is for plain error. 
This Court may, in its discretion under Rule 52(b) of the Federal Rules of Criminal Procedure, correct an error not raised at trial where the appellant demonstrates that "(1) there is an error; (2) the error is clear or obvious, rather than subject to reasonable dispute; (3) the error affected the appellant's substantial rights, which in the ordinary case means it affected the outcome of the district court proceedings; and (4) the error seriously affects the fairness, integrity, or public reputation of judicial proceedings." United States v. Marcus, 130 S. Ct. 2159, 2164 (2010) (internal quotation marks omitted).
The question of whether the government's comments were inappropriate under the Fifth Amendment invokes sub-issues of whether Beam actually invoked his right to remain silent and whether the Fifth Amendment's prohibition on comments pertaining to a defendant's silence extends to non-custodial situations, such as an IRS audit. However, in this case, we do not need to decide whether the government's comments were in error, or whether the error was clear or obvious, because, given the totality of the evidence presented to the jury, the government's alleged error cannot be said to have affected the outcome of the District Court proceedings. Hence, the alleged error did not affect Beam's substantial rights. 
Thus, we hold that the government's commenting during trial on Beam's silence with respect to the IRS audits was not plain error.
Notice the appellate-speak in ithe final holding.  The alleged error was not "plain error" and therefore not reversible.  So, was it error in the first place or did it escape reversal only because the error was not plain so as to warrant reversal?

Second, the defendant objected to the trial court's refusal to give his particular "theory of the defense" instruction on willfulness.  Theory of the defense jury instructions are quite important to rivet the jury on the defendant's defense.  I quote the Court's discussion and resolution of this argument:
Beam also alleges that the District Court erred in declining to instruct the jury as he proposed. Beam, at trial, requested the following instructions: 
"An American citizen such as the defendant has a right to rely upon representations and statements made by the government and appearing in official publications or documents . . . . If you find in this case that the IRS has created uncertainty regarding the taxability of the income of 'pure trust organizations' and that Defendant Beam has relied on these statements of the IRS, then it shall be your duty to acquit the Defendant of the charges set forth in the indictment. When the law is vague or highly debatable, a defendant - actually or imputedly - lacks the requisite intent to violate it." 
App. at 3902 & 3908. The District Court, however, instructed the jury in a manner  similar to that contemplated by the Third Circuit Model Criminal Jury Instructions § 5.05, stating as follows: 
"Willfully refers to a voluntary and intentional violation of a known legal duty. This means that the government must prove beyond a reasonable doubt that Mr. Beam knew his conduct was unlawful and intended to do something that the law forbids. To find that Mr. Beam acted willfully you must find that the evidence proved beyond a reasonable doubt that Mr. Beam acted with a purpose to disobey or disregard the law . . . . Mr. Beam's conduct was not willful if he acted through negligence, mistake, accident, or due to a good faith misunderstanding of the requirements of the law."
App. at 3589-90. 
"A defendant is entitled to a theory of defense instruction if (1) he proposes a correct statement of the law; (2) his theory is supported by the evidence; (3) the theory of defense is not part of the charge; and (4) the failure to include an instruction of the defendant's theory would deny him a fair trial." Hoffecker, 530 F.3d at 176 (citation omitted). 
Here, the District Court's decision to exclude Beam's preferred instruction did not deny him a fair trial. The District Court did not abuse its discretion in deciding that Beam's proposed instruction was "unnecessary and superfluous," App. at 3353, and that the issue of willfulness "is adequately described in the model Third Circuit instructions." Id. at 3448.
I encourage students to consider the defendant's theory of the defense and why it would have been important to have that theory presented to the jury.  Of course, it is implicit -- perhaps even stronger than that -- in the standard model instructions given in these cases.  And, therefore, courts of appeals will usually reject a theory of defense instructions on willfulness covered by standard tried and true instructions.  Still, the trial judge could have given the instruction and, at the margins, defendant probably would have had a better shot at acquittal if the trial judge had given the instruction.  The lesson is to press for a fine-tuned theory of the defense instruction.  All the judge can do is deny it.  And, just maybe, in the context of the evidence on which the fine-tuned theory of the defense instruction was proffered, might find it prejudicial error to have denied the proffer.

Also, note the attempt through the proffered instruction to present -- albeit obliquely -- the uncertainty of the law theory into the case.  The last sentence of the proferred instruction to the jury is: "When the law is vague or highly debatable, a defendant - actually or imputedly - lacks the requisite intent to violate it."  I have written other blogs on this defense based on the Supreme Court's opinions in James, noting that the argument is really an argument for the judge rather than the jury.  If, on an objective level, the law is uncertain so that the law's command is uncertain, the defendant cannot be charged with a crime requiring willfulness -- defined as intentional violation of a known legal duty.  As interpreted, that breaks down to a known legal duty (a factual issue within the ken of the jury) and a knowable legal duty (a legal issue as to the knowability of the law's command).  Hence, as in James, a legal duty that is uncertain as an objective matter of law cannot be prosecuted even if the particular defendant actually had the intent to violate what he thought was a knowable and known legal duty.  I don't think from the limited words in the proferred instruction, a jury would have a clue what that meant.

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