Sixth Circuit Affirms Tax Protestor Conviction, Rejecting Evidence and Reasonable Doubt Arguments (10/22/16)

In United States v. Myr, 2016 U.S. App. LEXIS 18963 (6th Cir. 2016) (unpublished), here, the Court affirmed the Myr's conviction for "count of tax evasion, 26 U.S.C. § 7201, and four counts of willful failure to file individual income tax returns, 26 U.S.C. § 7203."  Myr was "a self-employed auto mechanic with a professed interest in tax-protester theories."

Myr ran an auto-repair and brokerage business specializing in rare and exotic cars from a farm in Port Huron, Michigan. When he was not fixing luxury vehicles, Myr spent his free time studying the federal income tax laws. His reading list included the Internal Revenue Code as well as various tax-protester pamphlets and books which opined that the income tax applied to corporations but was "voluntary" or "unconstitutional" as applied to individuals.

Myr put those theories into action as he was earning substantial income from his business.  As in most supposed tax protestor cases, the ultimate issue in a criminal case is whether the taxpayer (or nontaxpayer) really believed that he was not subject to tax or was just hiding behind supposed tax protestor theories to disguise his "willful" conduct.  This is the so-called cheek willfulness issue, named for Cheek v. United States, 498 U.S. 192 (1991).  For many protestors, the objective elements of the charged crime -- e.g., for failure to file, he did not file -- is the only potential defense.  Myr's defense at trial was that the Government's proof did not meet the mens rea element beyond a reasonable doubt.  The jury rejected the defense.

Apparently realizing a frontal attack on the jury's holding was a loser, the issues Myr raised on appeal were (i) that the district court erred in excluding from evidence a civil complaint filed by DOJ Tax against the return preparer for the corporate return (the suggestion being that the preparer did the dastardly deed of preparing the false return and not the taxpayer); and (ii) the jury improperly instructed the jury on beyond a reasonable doubt.  The latter issue although applying to all elements of the crime is in the facts of these types of cases directed at the mens rea element, since the other objective elements of the crime are proved beyond a reasonable doubt.

So, let's look at the issues he did raise and the Court of Appeals rejected.

Exclusion of the Complaint Against the Tax Preparer

Myr uses the district court's decision to exclude the Pope complaint from evidence as the basis for two challenges to his conviction. The first asks us to consider the decision as an evidentiary matter under Rule 401. The second asks us to address it as a constitutional issue. Although these challenges differ somewhat conceptually, both rely on common propositions: that the complaint supported Myr's defense and its exclusion possibly affected the trial's outcome. We find no reversible error under either theory because the complaint offered—if anything—equivocal evidence on an insignificant point. 

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As an initial matter, it is important to keep in mind that Myr was not charged with filing a false return. Rather, he was charged with willfully evading the tax obligation assessed in May 2007 for tax years 2000 to 2003. The On Track tax return—which was prepared by Pope, underreported the $610,000 proceeds from the engine sale, and took unjustified deductions—was simply one piece of evidence offered in support of the Government's theory that Myr hid assets to avoid paying the amounts assessed for back taxes and penalties. The On Track return had no relevance to the charges that Myr willfully failed to file his individual income tax returns, and thus the Pope complaint also had no relevance to those charges. 

Assuming arguendo that the Pope complaint would have decreased the evidentiary value of the On Track return in relation to the evasion charge, it is clear that the complaint's exclusion, even if erroneous, was harmless. Myr equates the complaint's exclusion to a total inability to offer a defense on willfulness. See United States v. Canty, 499 F.3d 729, 734 (7th Cir. 2007) (holding that the decision to forbid defendant in a counterfeiting trial from even testifying about his motive for printing fake bills was harmful when intent was the only issue at trial). At multiple points in his briefing, he asserts that the complaint was "critically important" or related "directly" to his intent. And evidence going to intent should particularly matter here, he reminds us, because lack of intent was his only defense. See id. 

But these bare assertions belie what actually happened at trial. The jury heard Myr's intent defense in detail and received instructions on his theory. They also heard him testify about his role in the filing of On Track's return—an event that played a minor role in the proceedings. The indictment alleged three intentionally evasive acts as part of the tax-evasion charge: (1) conveying his property to a nominee entity after notice that the IRS intended to place a tax lien on it; (2); using nominee entities, including On Track and Hosea Holdings, to conceal his income and assets; and (3) dealing in cash. The allegations surrounding the Ferrari transaction—the use of nominee entities, the dealing in gold coins, the bank-account withdrawals with checks written to cash, and, yes, the On Track return—merely evidenced a single act that satisfied the evading charge. The government presented overwhelming evidence on all three alleged intentionally evasive acts. And it specifically offered voluminous evidence that Myr violated a known legal duty—to pay his tax debt—in bad faith: it presented multiple direct communications where-by the IRS informed Myr that, indeed, he was liable for the federal income tax. 

The falsity of the On Track tax return was offered by the government as one piece of evidence showing that Myr had used nominees to conceal income, itself one of three core allegations underlying the single tax-evasion charge. Had the complaint been admitted into evidence, it would have been—at most—evidence that minimally rebutted minor evidence related to the tax-evasion charge. On this record, admitting the complaint into evidence would not have affected the verdict on this or any other charge.

The Reasonable Doubt Issue

In his final challenge, Myr asserts the trial court abused its discretion by using the Sixth Circuit's pattern jury instructions on "proof beyond a reasonable doubt." He also says it erred in refusing his requested addendum: that reasonable doubt encompasses the concept of an "abiding conviction of the truth of the charge to a near certainty." 

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The Supreme Court has held, however, that similar instructions "correctly conveyed the concept of reasonable doubt to the jury." Holland v. United States, 348 U.S. 121, 140 (1954). In Holland, the district court defined "reasonable doubt" to mean "the kind of doubt . . . which you folks in the more serious and important affairs of your own lives might be willing to act upon." Id. The Court did not bless the Holland district court's instruction without exception, however. To define "reasonable doubt," rather than proof beyond a reasonable doubt, the Court noted, the district court should have phrased its instruction in terms of what would make a person "hesitate to act." See id. But the Court saw no actual risk that the jury misunderstood the instruction and so it passed muster. Id. 

Faced with this authority, Myr argues that our circuit's instructions vary materially from the language approved in Holland. It is an error, he contends, to instruct the jury that "proof beyond a reasonable doubt" is such proof that they "would act on it without hesitation." Instead, he argues the court must instruct a jury that "reasonable doubt" is a doubt that "would cause them to hesitate." 

We consider Myr's action-versus-inaction point to be a distinction without difference. This view is echoed by a leading treatise on jury instructions: "What is a reasonable doubt? . . . It is a doubt that would cause a reasonable person to hesitate [*14]  to act in a matter of importance in his or her personal life. Proof beyond a reasonable doubt must, therefore, be proof of a convincing character that a reasonable person would not hesitate to rely upon in making an important decision." John S. Siffert, 1-4 Modern Federal Jury Instructions-Criminal P 4.01 (Instruction 4-2 Reasonable Doubt). 

Because the jury instructions correctly stated the law, we need not consider Myr's proposed additions. See Victor, 511 U.S. at 5 ("[S]o long as the court instructs the jury on the necessity that the defendant's guilt be proved beyond a reasonable doubt . . ., the Constitution does not require that any particular form of words be used in advising the jury of the government's burden of proof.").

For further on proof beyond a reasonable doubt, see:

• Proof Beyond a Reasonable Doubt - Ramblings (Federal Tax Crimes Blog 9/1/13), here
• Reasonable Doubt and Mickey Mouse (Federal Tax Crimes Blog 3/6/12), here.
• Reasonable Doubt - What is It? (Federal Tax Crimes Blog 10/16/09), here.

 The Offshore Account

Myr also had a foreign account that, at least at the appellate level, was irrelevant because it is mentioned only cryptically in a footnote:

   n1 The audit also revealed that Myr had an undisclosed Costa Rican bank account.

Miscellaneous

Myr's attorney on appeal was Lowell H. Becraft, Jr.,, who is covered on the web site Tax Protestor Dossiers, here. I have heard of Mr. Becraft's representation in a number of tax protestor- type cases.