Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca7-14-01206/USCOURTS-ca7-14-01206-0/pdf.json

Parties Involved:
Sharon Anzaldi
Appellant
United States of America
Appellee

Document Text:

In the

United States Court of Appeals

For the Seventh Circuit ____________________

Nos. 14-1206 & 13-3844, 

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v.

SHARON ANZALDI and STEVEN LATIN,

Defendants-Appellants.

____________________

Appeals from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 1:11-cr-820 — Harry D. Leinenweber, Judge.

____________________

ARGUED JANUARY 7, 2015 — DECIDED SEPTEMBER 4, 2015

____________________

Before RIPPLE, WILLIAMS, and SYKES, Circuit Judges.

WILLIAMS, Circuit Judge. Sharon Anzaldi, Phillip DeSalvo, 

and Steven Latin concocted an $8 million fraudulent tax 

scheme based on a sovereign citizen-type theory that the

U.S. government holds hidden bank accounts for its citizens 

that can be accessed through various legal maneuvers. By 

filing false tax returns, Anzaldi, DeSalvo, and Latin requested more than $8 million for themselves and others in tax refunds. The IRS accepted five of their returns, paying out 

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2 Nos. 14-1206 & 13-3844

more than $1 million in refunds before catching onto the 

scheme. A jury convicted all three of conspiracy to file false 

claims in violation of 18 U.S.C. § 286 and filing false claims 

upon an agency of the United States in violation of 18 U.S.C. 

§ 287. 

Anzaldi and Latin now appeal their convictions. Anzaldi 

claims the district court erred by not ordering that she undergo a competency examination pursuant to 18 

U.S.C. § 4241(a) before representing herself pro se. We disagree. The district court was not required to order a competency examination because it did not have reasonable cause 

to believe Anzaldi was suffering from a mental defect rendering her unable to understand the charges against her or

assist in her defense. We also reject Anzaldi’s argument that 

the district court erred by admitting evidence of how she 

structured her fees to be under $10,000. This evidence helped 

prove her intent to defraud and to rebut her good faith defense, and was therefore admissible under Federal Rule of 

Evidence 404(b). Finally, Latin claims the district court erred 

by not instructing the jury that willfulness was required to 

convict, and instead instructing that the defendants had to 

have acted “knowingly.” We do not agree. Willfulness is not 

an element of the charged offenses and, as we have repeatedly held, proving guilt under the false claims statutes does 

not require a finding of willfulness. We therefore affirm the 

convictions. 

I. BACKGROUND

In late 2008 and early 2009, Sharon Anzaldi, Phillip DeSalvo, and Steven Latin were in significant financial trouble. 

They began researching “redemption theory,” a sovereign

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Nos. 14-1206 & 13-3844 3

citizen-type1 view which, as the government explains, holds 

that the federal government went bankrupt when it abandoned the gold standard in 1933 and began converting the 

physical bodies of its citizens into assets against which it 

could sell bonds. A tenet of this view is that knowledgeable

citizens can redeem these assets and, through manipulating 

them in various imagined accounts, use them to their advantage.

In accordance with this bizarre theory, Anzaldi, DeSalvo, 

and Latin entered into a tax fraud scheme to solve their financial troubles. They filed 1099-Original Issue Discount 

(“OID”) tax forms which reported their debt as interest income. They then reported near-equal amounts as withheld 

taxes, and thereby claimed substantial refunds. Anzaldi and 

DeSalvo also helped other individuals file false claims for tax 

refunds. For these “services,” Anzaldi expected to be paid 

ten percent of any refund amount obtained, and required 

that her fees be paid in checks under $10,000, as anything 

larger might draw government scrutiny. 

All told, Anzaldi, DeSalvo, and Latin submitted fourteen 

fraudulent tax returns, requesting more than $8 million for 

themselves and others in tax refunds. The IRS accepted five 

of these returns, paying out more than $1 million in refunds

before catching onto the scheme. In connection with these 

activities, Anzaldi, DeSalvo, and Latin were arrested and indicted on fifteen counts of conspiracy to file false claims in 

violation of 18 U.S.C. § 286, and at least one count each of 

 1 Individuals claiming to be “sovereign citizens” assert that the federal government is illegitimate and insist they are not subject to its jurisdiction. See United States. v. Jonassen, 759 F.3d 653, 663 (7th Cir. 2014). 

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4 Nos. 14-1206 & 13-3844

filing false claims upon an agency of the United States in 

violation of 18 U.S.C. § 287. 

The defendants made their initial appearances in district 

court on November 18, 2011. DeSalvo and Latin, represented 

by counsel, entered not guilty pleas. Anzaldi elected to proceed pro se, leading the court to engage in a lengthy colloquy with her about the right to counsel and the dangers associated with proceeding pro se. The court also inquired 

about Anzaldi’s background to ensure she was representing 

herself “voluntarily and intelligently.” Anzaldi stated that

she finished high school and some college, was a real estate 

appraiser for 28 years, and studied law as a hobby. She also 

informed the court that she understood the charges against 

her and the maximum possible penalties. The court was satisfied with Anzaldi’s responses and she entered a plea of not 

guilty.

Following this initial colloquy, the government made additional requests for a hearing to determine whether Anzaldi 

was competent to proceed pro se and whether her waiver of 

her right to counsel was knowing and voluntary. Anzaldi

opposed these motions. On multiple occasions, the district 

court asked Anzaldi if she understood the charges against 

her and the maximum penalty she was facing. Anzaldi indicated that she did. The district court never made a formal 

finding on Anzaldi’s competency and declined to hold a 

competency hearing, which now forms a basis for Anzaldi’s 

appeal. The court did, however, appoint standby counsel, 

who assisted Anzaldi with her defense. Standby counsel also 

stated repeatedly that Anzaldi was competent to stand trial 

and to represent herself. 

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Nos. 14-1206 & 13-3844 5

Before trial, the district court considered two motions 

relevant to the current appeal. On April 8, 2013, in accordance with Federal Rule of Evidence 404(b)(2), the government gave notice that it intended to introduce evidence (in 

the form of witness testimony) of Anzaldi’s attempts to 

structure her “fees” in amounts under $10,000, so as not to 

raise any “red flags.” The government argued this evidence 

was admissible to show her intent to deceive and to refute 

Anzaldi’s “good faith” defense. The district court agreed and 

allowed the evidence to be admitted. Later, DeSalvo and 

Latin filed a motion requesting the jury be instructed that 

“willfulness” was an element of the crimes for which they 

were charged. The district court refused, stating “it is clear 

that the requisite mental state to sustain a conviction under 

18 U.S.C. §§ 286, 287, is ‘knowledge,’ not ‘willfulness.’”

Trial commenced in June 2013. The government presented substantial evidence against Anzaldi, DeSalvo and Latin,

including email exchanges among the three demonstrating 

they were aware of the illegality of their actions. Anzaldi, 

acting pro se, was an active participant in her defense. She 

gave an opening statement, cross-examined witnesses, offered exhibits to rebut the government’s case, and consulted

with standby counsel. Her strategy was to convince the jury 

she did not intend to defraud the government because she 

acted in good faith. 

At the close of evidence, Latin and DeSalvo reiterated 

their request for a willfulness instruction, which the district 

court denied. It instructed the jury that the defendants had 

to have acted “knowingly” but that if defendants honestly 

believed in the truth of their position, then the jury must find 

them not guilty.

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6 Nos. 14-1206 & 13-3844

The jury convicted Anzaldi, DeSalvo, and Latin on all 

counts. Latin was sentenced to eighteen months’ imprisonment and DeSalvo to thirty months. Anzaldi continued to 

represent herself at sentencing, but standby counsel addressed the court on her behalf, referring to Anzaldi’s views

on tax law as “delusional.” Counsel did not, however, request that a competency examination be ordered. Anzaldi 

was sentenced to sixty-three months’ imprisonment. Anzaldi 

and Latin now appeal their convictions.2

II. ANALYSIS

Anzaldi and Latin challenge their convictions on three 

grounds: (1) that the district court erred by not ordering that 

Anzaldi undergo a competency examination, (2) that the district court erred by refusing to include a willfulness instruction to the jury, and (3) that it was error for the district court 

to admit evidence of how Anzaldi structured her fees. We 

consider each of these arguments below. 

A. Declining to Order Competency Evaluation Was 

Not an Abuse of Discretion 

A district court is required to order a hearing to determine a defendant’s mental competency in limited circumstances. 18 U.S.C. § 4241(a). These circumstances exist when 

the court has “reasonable cause to believe” the defendant 

may be suffering from a mental disease or defect that either 

prevents her from understanding the nature and consequences of the proceedings against her, or renders her unable to assist in her defense. See id.; United States v. Grimes, 173 

 2 DeSalvo initially challenged his conviction, but has withdrawn his 

appeal.

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Nos. 14-1206 & 13-3844 7

F.3d 634, 635–36 (7th Cir. 1999). “Because the district court is 

in the best position to assess the mental status of a defendant,” we review this determination for abuse of discretion. 

United States v. Jonassen, 759 F.3d 653, 659 (7th Cir. 2014) (citing United States v. Alden, 527 F.3d 653, 659 (7th Cir. 2008)).

Although it is uncontested that Anzaldi has no history of 

mental illness, she contends there was evidence before the

district court that she was suffering from delusions, paranoia, or some other mental defect. She points to statements 

by the government that Anzaldi’s pro se pre-trial motions 

espoused “nonsensical” legal theories, as well as its requests 

that the district court evaluate Anzaldi’s competency. She 

also refers to statements made by her standby counsel at sentencing explaining that he had looked up Anzaldi’s behavior 

in the Journal of Psychiatric Diseases and concluded she was 

“delusional about [her] OID scheme and ... what she did.” 

Anzaldi contends that based on this evidence, the district 

court was required to order a competency hearing sua sponte under 18 U.S.C. § 4241(a).

We disagree that the district court had reasonable cause 

to believe Anzaldi may have been suffering from a mental 

disease or defect preventing her from understanding the nature and consequences of the proceedings against her, or 

rendering her unable to assist in her defense. Virtually all of

the purported evidence of mental illness put forward stems

from Anzaldi’s decision to pursue a sovereign citizen-type

legal defense. Anzaldi’s frivolous pre-trial motions, for example, were based on boilerplate legal templates made

available online by sovereign citizen groups. Likewise, 

standby counsel’s suggestion at sentencing that Anzaldi was 

“delusional” directly referred to her dogged adherence to 

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8 Nos. 14-1206 & 13-3844

the redemption theory and her pursuit of a sovereign citizen-type legal defense strategy. But as we have held, a defendant’s adherence to a discredited legal theory does not 

create “reasonable cause” to believe she suffers from a mental defect. See Jonassen, 759 F.3d at 660; Alden, 527 F.3d at 

659–60; United States v. James, 328 F.3d 953, 955 (7th Cir.

2003). 

Our decision in Jonassen is squarely on point. There, the 

defendant, like Anzaldi, advanced a “sovereign-citizen defense,” electing to proceed pro se “to avoid losing the ability 

to assert that he was ‘a natural person, common law citizen’ 

over whom the court lacked jurisdiction.” 759 F.3d at 657, 

660. We held that the pursuit of this theory did not require 

the district court to hold a competency examination, noting 

that “adherence to bizarre legal theories, whether they are 

sincerely held or advanced only to annoy the other side, 

does not imply mental instability or concrete intellect ... so

deficient that trial is impossible.” Id. at 660 (citing James, 328 

F.3d at 955; Alden, 527 F.3d at 659–60).

We reached a similar conclusion in James. The defendant 

there had “offered the ‘defense’ that his ancestors came from 

Africa, that he is therefore a Moorish national, and that as a 

result he need obey only those laws mentioned in an ancient 

treaty between the United States and Morocco.” 328 F.3d at 

954. Again, we held that the defendant’s reliance on this legal theory did not require the district court to hold a competency hearing under § 4241, noting that many litigants “articulate beliefs that have no legal support,” but that this did 

not equate to mental incompetence or demand that a competency hearing be ordered. Id. at 955. We also explained that 

while “[o]ne person with a fantastic view may be suspected 

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Nos. 14-1206 & 13-3844 9

of delusions; two people with the identical view are just 

oddballs.” Id. at 956.

Despite Anzaldi’s suggestion to the contrary, the record

clearly demonstrates she understood the charges against her 

and assisted in her defense—the key considerations under 

§ 4241. See Alden, 527 F.3d at 659. Each time the government 

requested a hearing to determine whether Anzaldi was 

competent, Anzaldi objected, telling the district court at one 

point that “there would be no reason that I would be incompetent or considered that. I’m quite capable.” Standby counsel also objected to the government’s request for a competency hearing, stating, “I would object to that at this point, 

too. My discussion with her yesterday was very cordial and 

informative.” Standby counsel also told the district court 

that Anzaldi understood “the peril of going ahead by herself.” In deciding not to order a competency examination, 

the district court was entitled to consider the statements 

made by both Anzaldi and standby counsel affirming 

Anzaldi’s ability to understand the charges against her and 

to assist in her defense. See United States v. Savage, 505 F.3d 

754, 760 (7th Cir. 2007) (“Significant weight is given to counsel’s representations concerning his client’s competence and 

counsel’s failure to raise the competency issue.”); United 

States v. Morgano, 39 F.3d 1358, 1374–75 (7th Cir. 1994) (district court entitled to rely on statements made by pro se defendant and his standby counsel to support finding no reasonable cause existed to believe defendant was mentally incompetent). 

The record also shows Anzaldi actively participated in 

her defense at trial. She gave an opening statement, crossexamined witnesses, offered exhibits to rebut the governCase: 14-1206 Document: 62 Filed: 09/04/2015 Pages: 18
10 Nos. 14-1206 & 13-3844

ment’s case, and consulted with standby counsel. Such 

meaningful participation in the judicial process indicates

that she was competent to assist in her defense. See United 

States v. Berry, 565 F.3d 385, 389 (7th Cir. 2009) (pro se defendant’s performance—lodging objections, cross-examining 

witnesses, and making opening and closing statements—

demonstrated mental competence). Anzaldi also advanced 

nuanced legal arguments, attempting to negate an essential 

element of her crime by submitting to the jury that she had 

acted in good faith. She maintained, for example, that she 

had diligently researched the tax positions she had taken 

and concluded they were legitimate, and that she asked the 

IRS for guidance to the extent these tax positions were erroneous. This sort of argumentation reflected an in-depth understanding of the charges against her, and also justified the 

district court’s conclusion that a competency hearing was

not required. See Alden, 527 F.3d at 659.

The district court was also entitled to rely on all of its informal observations of Anzaldi over the course of two years, 

during which time Anzaldi exhibited no behaviors suggestive of mental illness. See United States v. Weathington, 507 

F.3d 1068, 1073 (7th Cir. 2007) (finding district court entitled 

to “determine informally whether reasonable cause exists by 

observing the defendant’s demeanor and assessing his 

statements during ... interactions with the court.”); Grimes, 

173 F.3d at 636; cf. United States v. Auen, 846 F.2d 872, 874–76 

(2d Cir. 1988) (remanding case for competency examination

where defendant made multiple threats and affirmatively 

represented that “he did not ‘understand’” why he was being detained); United States v. Arenburg, 605 F.3d 164 (2d Cir. 

2010) (remanding case for competency examination where 

defendant had been previously diagnosed with paranoid 

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Nos. 14-1206 & 13-3844 11

schizophrenia). The district court also could have considered

the level of sophistication required to commit the crimes of 

which Anzaldi was convicted. Evidence showed Anzaldi 

filed numerous false tax returns seeking millions of dollars

in fraudulent refunds, convinced several individuals to 

adopt her fraudulent tax strategy, and took various steps to 

conceal her crimes. See United States v. Abdulmutallab, 739 

F.3d 891, 902 (6th Cir. 2014) (rejecting need for competency 

hearing based on complex nature of crimes at issue). 

Anzaldi further suggests that even if she were competent 

to stand trial, she was not competent to do so pro se. This 

argument is without merit. The Constitution does not create 

two standards for competence—one for standing trial and 

the other for self-representation. In Indiana vs. Edwards, 554 

U.S. 164 (2008), upon which Anzaldi relies, the Supreme 

Court held simply that “the Constitution permits States to 

insist upon representation by counsel for those competent 

enough to stand trial ... but who still suffer from severe 

mental illness to the point where they are not competent to 

conduct trial proceedings by themselves.” 554 U.S. at 178 

(emphasis added). But as we have noted, Edwards addresses 

“what the Constitution permits—limitation of the selfrepresentation right in connection with pleading guilty and 

presenting a trial defense, respectively—not what it mandates.” United States v. Berry, 565 F.3d 385, 391 (7th Cir. 

2009). As a result, Edwards simply means that “the Constitution may have allowed the trial judge to block [Anzaldi’s] 

request to go it alone, but it certainly didn’t require it.” See 

id. (citation omitted). In other words, even if the district 

court had doubts about Anzaldi’s abilities, nothing required 

the court to prohibit her from proceeding pro se once she 

understood the charges against her and was able to assist in 

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12 Nos. 14-1206 & 13-3844

her defense. Moreover, even if Edwards requires district

courts to appoint “counsel in certain cases—a dubious reading—the rule would only apply when the defendant is suffering from a ‘severe mental illness.’” Id. And there is no evidence Anzaldi was suffering from a severe mental illness.

Accordingly, we find that the district court did not abuse 

its discretion by declining to order Anzaldi to undergo a 

competency examination. 

B. No Error in Refusing to Give Willfulness 

Instruction 

Latin challenges the district court’s jury instructions regarding the required mental state for violating 18 U.S.C. 

§§ 286 and 287. He claims the defendants had to act “willfully” for the jury to convict, but that this was not part of the 

instruction.

We review such challenges to jury instructions in two 

steps. United States v. Brown, 726 F.3d 993, 997 (7th Cir. 2013). 

At step one, we review de novo “whether a particular jury 

instruction accurately summarize[s] the law.” Id. If it does, 

we examine “the district court’s particular phrasing of the 

instruction for abuse of discretion.” Id. At step two, we will 

reverse “only if it appears both that the jury was misled and 

that the instructions prejudiced the defendant.” Id. The district court “is afforded substantial discretion with respect to 

the precise wording of instructions so long as the final result, 

read as a whole, completely and correctly states the law.” 

United States v. DiSantis, 565 F.3d 354, 359 (7th Cir. 2009). 

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 

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Nos. 14-1206 & 13-3844 13

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 (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 

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14 Nos. 14-1206 & 13-3844

200—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 taxpayer’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 F. App’x 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 wellestablished rule that when multiple criminal statutes apply 

to the same conduct, a prosecutor has discretion to choose 

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Nos. 14-1206 & 13-3844 15

under which statute to proceed. E.g., United States v. Batchelder, 442 U.S. 114, 123–24 (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.”). 

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16 Nos. 14-1206 & 13-3844

C. No Abuse of Discretion in Admission of 

Anzaldi’s Fee Structuring Evidence 

Anzaldi claims the district court abused its discretion by 

allowing in testimony submitted by the government regarding Anzaldi’s fee structuring under Federal Rule of Evidence 

404(b). Specifically, two witnesses testified regarding Anzaldi’s attempt to keep individual check amounts under 

$10,000. According to one of the witnesses, Anzaldi requested three different checks, each under $10,000, because a single check for $25,000 “was a red flag” that could trigger government scrutiny. We review the district court’s decision to 

admit this evidence for abuse of discretion. United States v. 

Johnson, 624 F.3d 815, 819 (7th Cir. 2010).

Rule 404(b) prohibits the admission of evidence of other 

crimes, wrongs, or acts for the purpose of proving a person’s 

character or propensity to behave in a certain way. Fed. R. 

Evid. 404(b)(1). However, the rule permits the use of such 

“other-act” evidence for other purposes, e.g., to show motive, intent, preparation, plan, knowledge or absence of mistake. Fed. R. Evid. 404(b)(2). As we recently explained, otheract evidence may only be introduced “when its admission is 

supported by some propensity-free chain of reasoning.” 

United States v. Gomez, 763 F.3d 845, 856 (7th Cir. 2014) (en 

banc) (citing United States v. Lee, 724 F.3d 968, 978 (7th Cir. 

2013)). To determine this, courts must ask not just “whether 

the proposed other-act evidence is relevant to a nonpropensity purpose but how exactly the evidence is relevant 

to that purpose.” Id.

The probative value of such other-act evidence must then

be weighed against its potential prejudice. Id. at 857; see also 

Fed. R. Evid. 403 (authorizing district court to exclude “releCase: 14-1206 Document: 62 Filed: 09/04/2015 Pages: 18
Nos. 14-1206 & 13-3844 17

vant evidence” if its probative value is “substantially outweighed by a danger of ... unfair prejudice”). Evidence is 

“unduly prejudicial” if it creates a risk that invites an irrational emotional response from the jury. United States v. Miller, 688 F.3d 322, 327 (7th Cir. 2012). 

We do not believe the district court abused its discretion 

by admitting evidence regarding Anzaldi’s attempt to structure her fees in a way she believed would circumvent government attention. The propensity-free chain of reasoning is 

clear. Anzaldi’s attempted fee structuring tended to prove 

her intent to defraud the United States because she would 

not attempt to hide from the government her involvement 

with these tax returns if she truly believed her tax positions 

were legitimate. This evidence also helped negate her asserted defense that she had acted in good faith. The district 

court recognized this propensity-free chain of reasoning 

when it granted the government’s pre-trial motion to admit 

evidence of Anzaldi’s fee structuring, explaining the evidence “would be directed toward establishing an absence of 

good faith regardless of the way Anzaldi was paid.” This is 

precisely the type of logical progression anticipated by 

Gomez. See 763 F.3d at 856; see also United States v. Ryan, 213 

F.3d 347, 351 (7th Cir. 2000) (defendant’s efforts to conceal 

participation in fraudulent scheme is circumstantial evidence of an intent to defraud and is admissible to rebut defendant’s asserted defense). 

We also find that the probative value of the feestructuring evidence outweighed any potential prejudice. As 

the district court noted, evidence regarding fee structuring is 

not the type of evidence that “invites an irrational emotional 

response.” Furthermore, the district court gave a limiting inCase: 14-1206 Document: 62 Filed: 09/04/2015 Pages: 18
18 Nos. 14-1206 & 13-3844

struction to the jury, stating “[y]ou may consider this evidence [of the free structure] only on the question of defendant Sharon Anzaldi’s intent, preparation, plan, knowledge, 

and absence of mistake. You should consider this evidence 

against defendant Sharon Anzaldi only for this limited purpose.” This instruction helped reduce concerns about any 

prejudice associated with the fee structuring evidence. See

United States v. Molton, 743 F.3d 479, 483 (7th Cir. 2014). 

And again, we note that any error in admitting this testimony would have been harmless, as the evidence against 

Anzaldi was overwhelming. See United States v. Oros, 578 

F.3d 703, 709 (7th Cir. 2009) (quoting United States v. Jarrett, 

133 F.3d 519, 526 (7th Cir. 1998)) (admission of inadmissible 

evidence harmless “if it did not have a substantial and injurious effect on the jury’s verdict”). 

III. CONCLUSION

The judgment of the district court is AFFIRMED.

Case: 14-1206 Document: 62 Filed: 09/04/2015 Pages: 18