Does the False Claims Crime (18 USC § 287) Require Willfulness (or Something Like It) (11/20/17)

In United States v. Gasich, 2017 U.S. App. LEXIS 22696 (7th Cir. 2017), nonprecedential, here, the Seventh Circuit affirmed the taxpayer's conviction based on their plea of guilty to one count of false claims under 18 USC § 287, here.  Before sentencing, they sought to withdraw their pleas.  They had other bases for error in not allowing them to withdraw the plea, but I focus on only the mens rea requirement in § 287.

The relevant text of § 287 is:

Whoever makes or presents to * * * any department or agency [of the United States] * * *, any claim upon or against the United States, or any department or agency thereof, knowing such claim to be false, fictitious, or fraudulent, shall be imprisoned not more than five years * * * *. 

The key facts on this issue:

• "The Gasiches are tax protestors who have been warring with the IRS for roughly twenty years."
• They attempted the OID scam, falsely reporting that various institutions had withheld tax allowing them $475,000 in refunds.
• They were indicted.
• The proceeded pro se at trial.
• Before trial, each of them decided to plead to one § 2877 count.  The explained that they had come to understand that § 287 was a "strict liability" offense.  The court appointed standby counsel for them and scheduled plea colloquies.
• At the plea colloquies, they repeated their understanding that § 287 was a strict liability offense.  The trial court advised them that the understanding was not correct as summarized:

The court flagged this as a misconception and listed the three elements of § 287-(1) that the Gasiches made a claim; (2) that the claim was false, fictitious, or fraudulent; and (3) that they knew that the claim was false, fictitious, or fraudulent at the time they made it. Though the [Gasiches readily agreed that they understood these elements, the court continued to clarify the point in a methodical dialogue with Barbara that defined the phrases "strict liability" and "mens rea" and explained how those definitions did or did not apply to their case. After this explanation of the law, the Gasiches agreed with the government's statement of the facts: they knowingly had claimed they were entitled to funds that were not withheld in order to get the IRS off their backs for their longstanding tax liabilities. The court then accepted their pleas.

• The Gasiches then filed a number of motions as tax protestors are wont to do.  The trial court treated them as a motion to withdraw their plea.  The trial court denied the motion.
• The trial court sentenced each to 3 years.
• The Gasiches appealed.

Among their arguments was that they could not have given a knowing plea when the trial court failed to advise them of a potential conflict among the Circuits as to the mens rea element.  The Seventh Circuit's resolution of their mens rea argument:

The Gasiches next argue that their guilty pleas were invalid because they did not understand the elements of § 287 when they pleaded guilty. The record contradicts this contention. The Gasiches came in with a misunderstanding that the court quickly recognized and patiently corrected. Even if the Gasiches began their colloquies not fully grasping the elements of the crime, including the required state of mind, there is no reason to suspect that the confusion persisted after the district court's extensive explanations. That is the point of the colloquy. Their statements that they understood the charge and agreed to the factual basis offered by the government are subject to a "presumption of verity" and are "not a meaningless act." United States v. Collins, 796 F.3d 829, 834 (7th Cir. 2015). 

The Gasiches also insist on appeal that they could not knowingly and voluntarily plead guilty without a full understanding of a circuit split about whether 18 U.S.C. § 287 includes an element of willfulness beyond the knowledge requirement. Compare United States v. Clarke, 801 F.3d 824, 827 (7th Cir. 2015) ("[T]he government need not prove willfulness in a § 287 case."), with United States v. Nash, 175 F.3d 429, 437 (6th Cir. 1999) (finding harmless error in district court's refusal to instruct on a willfulness element in § 287). But the district court had no duty to inform the Gasiches of the split before accepting their pleas. A plea colloquy need not seek "conscious waiver" of every potential defense. United States v. Broce, 488 U.S. 563, 573 (1989). And lack of willfulness is no defense at all in this circuit. Cf. United States v. Ranum, 96 F.3d 1020, 1025 (7th Cir. 1996) ("[T]he failure to be informed of a non-existent legal defense could not, under any circumstances, represent a fair and just reason for withdrawing the plea."). Our determination that § 287 has no willfulness element is as old as the Gasiches' twenty years of quarrels with the United States taxing authority, see United States v. Catton, 89 F.3d 387, 392 (7th Cir. 1996) (clarifying that § 287 violation does not require willfulness), and their contention that the district court was required to apprise them of the possibility of changing our position is just as meritless.

JAT Comments:

1.  First, note the circuit split on whether § 287 has a willfulness element.  For the reasons that follow, I am not sure that there is a split or just a different way of articulating the mens rea element that end up at the same point.

2.  In United States v. Catton, 89 F.3d 387 (7th Cir. 1996), Judge Posner reasoned:

If Catton did not know that his claim was false, he could not have been acting willfully in submitting it, and although 18 U.S.C. § 287 (unlike section 1001) does not explicitly require proof of willfulness the judge here did, without objection by the government, give an instruction on willfulness. What "willfully" adds to "knowingly" in a section 287 case is obscure. Unlike a knowingly false statement, which if immaterial might not reflect a guilty intent, the making of a knowingly false claim might seem inherently willful, inherently intended to defraud, making an instruction on willfulness otiose. Yet several cases, including two in this circuit, assume that the defendant must be willful as well as knowing, that is, must intend to defraud the government. United States v. Nazon, 940 F.2d 255, 260 (7th Cir. 1991); United States v. Haddon, 927 F.2d 942, 950-51 (7th Cir. 1991); United States v. Martin, 772 F.2d 1442, 1444-45 (8th Cir. 1985). These are assumptions, not holdings; so far as appears, the question whether willfulness is required to be proved in a section 287 case had not been raised. Our decision in Ferguson, which was not cited in Nazon, is emphatic that willfulness need not be proved. 793 F.2d at 831. All the decisions that we have found that actually discuss the issue agree with this. United States v. Barker, 942 F.2d 585, 588-89 (9th Cir. 1991); United States v. Irwin, 654 F.2d 671, 681-82 (10th Cir. 1981); United States v. Milton, 602 F.2d 231, 233-34 (9th Cir. 1979). We think these decisions are correct. It is implicit in the filing of a knowingly false claim that the claimant intends to defraud the government, and hence unnecessary to charge willfulness separately. But this simply underscores the importance of the government's proving the defendant's knowledge that the claim is false.

3.  In United States v. Clarke, 801 F.3d 824, 827 (7th Cir. 2015), the Seventh Circuit held:

Contrary to Clarke's contention, the government need not prove willfulness in a § 287 case. United States v. Catton, 89 F.3d 387, 392 (7th Cir.1996); see also United States v. Ferguson, 793 F.2d 828, 831 (7th Cir.1986). In Catton, we stated “[i]t is implicit in the filing of a knowingly false claim that the claimant intends to defraud the government, and hence unnecessary to charge willfulness separately.” 89 F.3d at 392. The government need only prove that Clarke made a claim upon the United States knowing that the claim was false. Ferguson, 793 F.2d at 831.

4. In United States v. Anzaldi, 800 F.3d 872, 880-881 (7th Cir. 2015), the Court held:

Sections 286 and 287, under which Anzaldi, DeSalvo, and Latin were convicted, are general false claims statutes, which are not dependent on tax filing. Section 286 is a conspiracy charge that prohibits entering into “any agreement ... to defraud the United States.” 18 U.S.C. § 286. Section 287, in turn, forbids any person from making or presenting a claim to the United States when such person “know[s] such claim to be false, fictitious, or fraudulent.” 18 U.S.C. § 287. Neither statute mentions willfulness. 

By contrast, certain violations of the tax code do require a willful mental state. See, e.g., 26 U.S.C. § 7206(1) (“Any person who ... [w]illfully makes and subscribes any return, statement, or other document ... which he does not believe to be true and correct ... shall be guilty of a felony....”). As the Supreme Court has explained, Congress imposed a willfulness requirement for certain tax offenses because of the complex nature of the tax system, which makes it “difficult for the average citizen to know and comprehend the extent of the duties and obligations imposed by the tax laws.” Cheek v. United States, 498 U.S. 192, 199–200, 111 S.Ct. 604, 112 L.Ed.2d 617 (1991) (“Congress has ... softened the impact of the common-law presumption [that ignorance of the law is no defense] by making specific intent to violate the law an element of certain federal criminal tax offenses.”). 

Relying on Cheek, Latin argues that even though the government charged the defendants in this case with violations of 18 U.S.C. § 286 (false claims conspiracy) and with individual counts of violating 18 U.S.C. § 287 (making a false claim)—rather than with submission of false tax returns as prohibited by the tax code—it should have been required to prove willfulness because the false claims at issue were made in the course of filing tax returns. 

We decline to extend the logic of Cheek—which dealt exclusively with a conviction under the tax code, 498 U.S. at 200, 111 S.Ct. 604—to cases charged under the false claims statutes and reaffirm what we have repeatedly held in cases involving arguments similar to Latin's: The government “need not prove that the defendant acted willfully” to prove a violation under the false claims statutes at issue here, which only require proof that “a defendant made a claim upon the United States knowing that the claim was false.” United States v. Ferguson, 793 F.2d 828, 831 (7th Cir.1986) (finding that because tax-payer's characterization of tax as “excise tax” was patently false and groundless, taxpayer violated 18 U.S.C. § 287); United States v. Catton, 89 F.3d 387, 392 (7th Cir.1996) ( “[W]illfulness need not be proved [in a Section 287 case].”). 

As our sister circuits have held, the false claims statutes and the tax code “give rise to two different offenses,” even when “the offenses arise out of the same transaction(s).” United States v. Boyd, 378 Fed.Appx. 841, 846 (10th Cir.2010) (unpublished); see also United States v. Jirak, 728 F.3d 806, 813–14 (8th Cir.2013) (noting distinction between violations of the tax code, which require a finding of willfulness, and a violation of Section 287, which does not). And there are good reasons for this distinction. First, as we stated in Catton, “it is implicit in the filing of a knowingly false claim that the claimant intends to defraud the government, and hence unnecessary to charge willfulness separately.” 89 F.3d at 392. As we emphasized, “this simply underscores the importance of the government's proving the defendant's knowledge that the claim is false.” Id. Second, requiring the government to prove willfulness in a tax-related case would force it to charge all tax-related offenses under the tax code, even when other criminal statutes apply. This is inconsistent with well-established rule that when multiple criminal statutes apply to the same conduct, a prosecutor has discretion to choose under which statute to proceed. E.g., United States v. Batchelder, 442 U.S. 114, 123–24, 99 S.Ct. 2198, 60 L.Ed.2d 755 (1979) (“[This Court] has long recognized that when an act violates more than one criminal statute, the Government may prosecute under either so long as it does not discriminate against any class of defendants....”). 

In light of this discussion, we find that it was not error for the district court to refuse to include a willfulness instruction. But we also note that any instructional error here would have been harmless. The pattern instruction for a tax code violation focuses on a defendant's lack of subjective good faith. See 7th Cir. Pattern Fed. Jury Instructions, at § 6.11 (2012 ed.) (“A person does not act willfully if he believes in good faith that he is acting within the law, or that his actions comply with the law. Therefore, if the defendant actually believed that what he was doing was in accord with the [tax] laws, then he did not willfully [make a false statement on a tax return].”). But the district court's instructions addressed this, instructing the jury that the defendants' “good faith” would preclude a guilty verdict. There would be no meaningful difference between a willfulness instruction under the tax code and the instructions the district court gave in this case. See Catton, 89 F.3d at 392 (“What ‘willfully’ adds to ‘knowingly’ in a section 287 case is obscure. Unlike a knowingly false statement, which if immaterial might not reflect a guilty intent, the making of a knowingly false claim might seem inherently willful, inherently intended to defraud, making an instruction on willfulness otiose.”).

5.  The DOJ Tax CTM, here, has the following discussion after stating the truism that § 287 does not have a willfulness element:

22.04[3] Knowledge -- Intent -- Willfulness
* * * *
The circuits vary, however, on the proof of intent necessary to convict for a violation of Section 287. In United States v. Maher, 582 F.2d 842, 847 (4th Cir. 1978), the Fourth Circuit approved a jury instruction stating that, under § 287, criminal intent “could be proved by either a showing that the defendant was aware he was doing something wrong or that he acted with a specific intent to violate the law.” In United States v. Milton, 602 F.2d 231, 234 (9th Cir. 1979), the court held that no instruction on “intent to defraud” is necessary where a false claim is charged (because it is not an element of the offense), but left open whether an “intent to deceive” is an element of a charge of submitting a “fraudulent” claim. Id. at 233 n.7. The Eighth Circuit, in Kercher v. United States, 409 F.2d 814, 817 (8th Cir. 1969), did not draw a distinction between false and fraudulent claims, but held without elaboration that § 287 requires proof of criminal intent

6.  On this issue,  also see Mens Rea Element of False Claims Crime, 18 USC § 287 (Federal Tax Crimes Blog 11/19/16), here.

7.  My off the cuff synthesis is that, properly interpreted, § 287 has a mens rea element substantially overlaps the willfulness element even though § 287 does not require the standard Cheek instruction.  Cheek said that willfulness requires that the defendant have intended to violate a known legal duty.  Section 287 requires that the defendant have knowingly filed a false claim .  Although intent to defraud is not a textual element, the certain goal of filing a false claim is to obtain something the filer is not entitled to.  That is fraud.  The elements of § 287 seem to practically cover the Cheek definition.  Compare United States v. Kelly, 147 F.3d 172 (2d Cir. 1998) (holding that, although § 7212(a), the tax obstruction crime, has no textual willfulness element, the elements that it does have parallel the willfulness element.). If that is true, proper § 287 instructions should give the jury same understanding, but in different words, and permit a good faith defense.