Eighth Circuit Affirms Tax Obstruction Conviction without Proper Marinello Jury Instructions (3/20/19)

In United States v. Beckham, ___ F.3d ___, 2019 U.S. App. LEXIS 6964 (8th Cir. 2019), here, the Court affirmed Beckham's conviction for tax obstruction, § 7212(a).  Beckham had been charged also with three counts of aiding and assisting, § 7206(2), but was acquitted of those counts.  So the only count of conviction was tax obstruction.

The facts in chronological order are:

• Beckham allegedly induced a taxpayer (Horseman) to participate in a tax loss scheme to offset the taxpayer's taxes.  Basically, the scheme was to generate false deductions by appearing to have a large investment in a business entity producing losses and to claim those losses as nonpassive losses despite not materially participating in the business.  The IRS began an audit.  Beckham filed power of attorney to represent the taxapyer, representing that he was a licensed  CPA but in fact he was not licensed because of a mail fraud conviction.
• The agent asked Beckham for documents supporting the taxpayer's material participation in the business.  Beckham responded with the taxpayer's day planner showing hundred of hours work in the business. 
• The agent then discovered that Beckham was not a licensed CPA as he had represented.  Beckham said that he was in the process of getting his license renewed.
• The agent then discovered that the taxpayer had not made the claimed large investment in the business generating the losses that he claimed on the returns.
• Suspecting fraud, the agent referred the taxpayer to IRS CI.  IRS CI then added Beckham as a target.  Beckham was then indicted for tax obstruction and aiding and assisting.
• The Supreme Court granted certiorari in the Marinello case to resolve a circuit conflict as to whether tax obstruction required that, in committing alleged obstructive acts, the defendant know of nexus to a pending IRS investigation.
• The case went to trial before the Supreme Court's decision in Marinello.  So, the jury instructions were framed without that decision.  But, at the Government's request, the trial court decided to use a special verdict form asking the jury whether the defendant had committed a corrupt act after becoming aware of the audit.  Here is the description of the instruction conference:

At the instruction conference, Beckham objected to Jury Instruction 9—the instruction on the § 7212(a) offense—because it did not require the jury to find that he knew about the IRS audit at the time that he committed a corrupt act. He also argued that the special verdict form—which directed the jurors, if they found Beckham guilty of that offense, to indicate whether Beckham committed "at least one corrupt act after becoming aware of the existence of an Internal Revenue Service audit or proceeding[,]" see Proposed Jury Instructions 25, Dist. Ct. Dkt. 96, and, if so, to identify which corrupt act they unanimously agreed Beckham committed after learning of the proceeding—did not cure the faulty instruction. Beckham did not, however, specifically object to the language of the special verdict form. The district court overruled his objection.

• The instructions thus did not include the key element later required by Marinello.
• The jury convicted of tax obstruction.  "On the special verdict form, the jury indicated that it found Beckham committed at least one corrupt act after learning of the audit and that it unanimously agreed Beckham committed the acts alleged in paragraph 10 of the Superseding Indictment—submitting Horseman's day planner to the IRS—after learning of the audit."
• The Supreme Court then decided Marinello, holding, as described by the Court.  

Six months after Beckham's trial, the Supreme Court decided Marinello v. United States, 138 S. Ct. 1101, 200 L. Ed. 2d 356 (2018). The Court held that, for a § 7212(a) offense, "the Government must show . . . that there is a 'nexus' between the defendant's conduct and a particular administrative proceeding[.]" Marinello, 138 S. Ct. at 1109. Further, that proceeding must be "reasonably foreseeable by the defendant" at the time he acted. Id. at 1110. Because "[i]t is not enough for the Government to claim that the defendant knew the IRS may catch on to his unlawful scheme eventually[,]" if the proceeding is currently pending, the defendant must be aware of that proceeding. Id.

Based on Marinello, the Government conceded that the jury instruction omitting the element of nexus to a known audit was error, but "that the district court cured the instructional error through the use of a special verdict form and that, even if the special verdict form did not cure the error, the error was harmless."
The Eighth Circuit applied harmless error analysis to find that the delivery of the day planner, which was not contested, sufficed to meet the element, concluding:

Because we conclude that no rational jury could find reasonable doubt as to either of the two Marinello elements, we find that failure to instruct the jury on those elements was harmless. We thus need not determine whether the special verdict form properly cured the instructional error, and we decline to reverse Beckham's conviction on these grounds.

Other issues resolved by the Court, in summary are:

1.  The trial court did not err in admitting testimony of the IRS agent and, in any event, the agent's testimony related only to the acquitted aiding and assisting counts.

2.  The trial court did not err in refusing to exclude evidence the civil agent developed after the agent discovered that Beckham was not a CPA.  The Court held that there was no firm evidence of fraud requiring a referral to IRS CI at  that point and that the agent had not made misrepresentations to Beckham.

3.  The trial court did not improperly deny a motion for mistrial based on uninvited and unresponsive testimony from the taxpayer that an attorney told him the scheme was fraudulent.

JAT Comment on the Instruction Error.  I have not researched the issue of what should be done when the instruction omits an element of the crime.  The Eighth Circuit's handling of the issue smacks of a directed verdict (albeit ex post facto) on an element of a crime.  A trial court could not grant directed verdict on any element, regardless of the strength of the evidence.  And a jury could return a not guilty verdict on any element regardless of the strength of the evidence.  Our system requires that the jury find guilt of all elements with proper instructions regardless of how powerful the evidence is on any element or all elements.  While I do  think the Court is right, particularly with the special verdict form, that the jury would have found Beckham guilty on all elements with proper instructions reflecting Marinello's requirements, I think that our system requires a jury and not a court ex post facto to find those elements.  As I said, I have not researched that issue and just offer my off the cuff thoughts.

Addendum 3/20/19 7:00pm:  A reader just advised me that my comment was similar to Justice Scalia's concurring in part and dissenting in part opinion in Neder v. United States, 527 U.S. 1 (1999), here.  In Neder,the majority held that the failure to submit an uncontested element of an offense to a jury may be harmless.  Justice Scalia was peeved.  Here are some quotes from his dissenting opinion:

The right to be tried by a jury in criminal cases obviously means the right to have a jury determine whether the defendant has been proved guilty of the crime charged. And since all crimes require proof of more than one element to establish guilt (involuntary manslaughter, for example, requires (1) the killing (2) of a human being (3) negligently), it follows that trial by jury means determination by a jury that all elements were proved. The Court does not contest this. It acknowledges that the right to trial by jury was denied in the present case, since one of the elements was not—despite the defendant's protestation—submitted to be passed upon by the jury. But even so, the Court lets the defendant's sentence stand, because we judges can tell that he is unquestionably guilty. 

Even if we allowed (as we do not) other structural errors in criminal trials to be pronounced "harmless" by judges—a point I shall address in due course—it is obvious that we could not allow judges to validate this one. The constitutionally required step that was omitted here is distinctive, in that the basis for it is precisely that, absent voluntary waiver of the jury right, the Constitution does not trust judges to make determinations of criminal guilt. Perhaps the Court is so enamoured of judges in general, and federal judges in particular, that it forgets that they (we) are officers of the Government, and hence proper objects of that healthy suspicion of the power of government which possessed the Framers and is embodied in the Constitution. Who knows?— 20 years of appointments of federal judges by oppressive administrations might produce judges willing to enforce oppressive criminal laws, and to interpret criminal laws oppressively—at least in the view of the citizens in some vicinages where criminal prosecutions must be brought. And so the people reserved the function of determining criminal guilt to themselves, sitting as jurors. It is not within the power of us Justices to cancel that reservation—neither by permitting trial judges to determine the guilt of a defendant who has not waived the jury right, nor (when a trial judge has done so anyway) by reviewing the facts ourselves and pronouncing the defendant without-a-doubt guilty. The Court's decision today is the only instance I know of (or could conceive of) in which the remedy for a constitutional violation by a trial judge (making the determination of criminal guilt reserved to the jury) is a repetition of the same constitutional violation by the appellate court (making the determination of criminal guilt reserved to the jury). 

II 

The Court's decision would be wrong even if we ignored the distinctive character of this constitutional violation. The Court reaffirms the rule that it would be structural [*33] error (not susceptible of "harmless-error" analysis) to "`vitiat[e] all the jury's findings.' " Ante, at 11 (quoting Sullivan v. Louisiana, 508 U. S. 275, 281 (1993)). A court cannot, no matter how clear the defendant's culpability, direct a guilty verdict. See Carpenters v. United States, 330 U. S. 395, 410 (1947); Rose v. Clark, 478 U. S. 570, 578 (1986); Arizona v. Fulminante, 499 U. S. 279, 294 (1991) (White, J., dissenting). The question that this raises is why, if denying the right to conviction by jury is structural error, taking one of the elements of the crime away from the jury should be treated differently from taking all of them away—since failure to prove one, no less than failure to prove all, utterly prevents conviction.

* * * *

If this analysis were correct—if permitting speculation on whether a jury would have changed its verdict logically demands permitting speculation on what verdict a jury would have rendered—we ought to be able to uphold directed verdicts [*38] in cases where the defendant's guilt is absolutely clear. In other words, the Court's analysis is simply a repudiation of the principle that depriving the criminal defendant of a jury verdict is structural error. Sullivan v. Louisiana clearly articulated the line between permissible and impermissible speculation that preserves the well-established structural character of the jury-trial right and places a principled and discernible limitation upon judicial intervention: "The inquiry . . . is not whether, in a trial that occurred without the error, a guilty verdict would surely have been rendered, but whether the guilty verdict actually rendered in this trial was surely unattributable to the error." 508 U. S., at 279 (emphasis added). Harmless-error review applies only when the jury actually renders a verdict—that is, when it has found the defendant guilty of all the elements of the crime. 

The difference between speculation directed toward confirming the jury's verdict (Sullivan) and speculation directed toward making a judgment that the jury has never made (today's decision) is more than semantic. Consider, for example, the following scenarios. If I order for my wife in a restaurant, there is no sense in which the decision is hers, even if I am sure beyond a reasonable doubt about what she would have ordered. If, however, while she is away from the table, I advise the waiter to stay with an order she initially made, even though he informs me that there has been a change in the accompanying dish, one can still say that my wife placed the order—even if I am wrong about whether she would have changed her mind in light of the new information. Of course, I may predict correctly in both instances simply because I know my wife well. I doubt, however, that a low error rate would persuade my wife that my making a practice of the first was a good idea.

 Justice Scalia, as always, had more to say (he was never at a loss for words. often not at a loss for many words, and sometimes not at a loss for too many words, a phenomenon I just exhibited), but that is a good introduction.

Justice Stevens concurred in part and concurred in the judgment, but said:

I therefore cannot join the analysis in Part II of the Court's opinion, which—without explaining why the jury failed necessarily to find a material omission—states that judges may find elements of an offense satisfied whenever the defendant failed to contest the element or raise evidence sufficient to support a contrary finding. My views on this central issue are thus close to those expressed by Justice Scalia, but I do not join his dissenting opinion because it is internally inconsistent and its passion is misdirected.

The majority opinion, written by Justice Rehnquist, had this to say about Justice Scalia's point:

   fn2 Justice Scalia, in his opinion concurring in part and dissenting in part, also suggests that if a failure to charge on an uncontested element of the offense may be harmless error, the next step will be to allow a directed verdict against a defendant in a criminal case contrary to Rose v.Clark, 478 U. S. 570, 578 (1986). Happily, our course of constitutional adjudication has not been characterized by this"in for a penny, in for a pound" approach. We have no hesitation reaffirming Rose at the same time that we subject the narrow class of cases like the present one to harmless-error review.

Justice Rehnquist was a Gilbert & Sullivan fan, having designed his judicial robe after one worn by the Lord Chancellor in a local production of Gilbert and Sullivan's "Iolanthe,  (See here.)  Hence, it is not surprising that he used the "in for a penny, in for a pound" quote in the footnote.  See Iolanthe which has a musical selection titled "If you go in" all about faint heart never winning fair lady.  (See here.)  That selection concludes (emphasis supplied):

Never, never, never,

"Faint heart never won fair lady!"

Nothing venture, nothing win – 

Blood is thick, but water's thin – 

In for a penny, in for a pound – 

It's Love that makes the world go round!

Nothing venture, nothing win – 

Blood is thick, but water's thin – 

In for a penny, in for a pound – 

It's Love that makes the world go round!

I know this diversion is not relevant to the topic of this blog, but I am a G&S fan as well and particularly like Iolanthe and "If you go in."  I have two favorite versions on YouTube here and here.

Addendum 3/21/19 10:15am:  This is from the Wikipedia page, here, for Iolanthe (footnotes omitted):

Effect upon Chief Justice Rehnquist
William H. Rehnquist, former Chief Justice of the United States, was a great Gilbert and Sullivan fan and was inspired by the costume of the Lord Chancellor, in a production of Iolanthe, to add four golden stripes to the sleeves of his judicial robes. The next Chief Justice, John G. Roberts Jr., did not retain the ornamentation. In 1980, while an Associate Justice, Rehnquist mentioned the Lord Chancellor in his dissenting opinion in the case of Richmond Newspapers, Inc. v. Virginia, comparing the majority opinion to the hubris of the Lord Chancellor: The Law is the true embodiment/Of everything that's excellent./It has no kind of fault or flaw/And I, My Lords, embody the Law.