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Parties Involved:
Dennis R. Porth
Appellant
United States of America
Appellee

Document Text:

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UNITED STATES COURT OF APPEALS--"':_:_;.c.:;_ ,:.;;,~"'_·-~~-_•·> ·_ -,. .·. -:;:_-:-:: 

UNITED STATES OF AMERICA, 

Plaintiff-Appellee, 

v. 

DENNIS R. PORTH, 

Defendant-Appellant. 

TEN'l'H CIRCUIT 

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ORDER AND JUDGMENT* 

Al/r:?. ~ u.::.., - 1992 

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No. 91-1427 

(D.C. No. 90-CR-97) 

(Dist. of Colorado) 

Before MOORE, McWILLIAMS and BARRETT, Circuit Judges. 

Dennis R. Porth (Porth) appeals his convictions on three 

counts of willfully making and subscribing to false statements on 

joint income tax returns and aiding and abetting in violation of 

26 u.s.c. S 7206(1) 1 and 18 u.s.c. S 22 . 

* 

be 

for 

res 

1 

This Order and Judgment has no precedential value and shall not 

cited, or used by any court within the Tenth Circuit, except 

purposes of establishing the doctrines of the law of the case, 

judicata, or collateral estoppal. 10th Cir. R. 36.3. 

S 7206(1) provides: 

Any person whoWillfully makes and subscribes any return, statement, or 

other document, which contains or is verified by a written declaration that it is made under the penalties of perjury, and which 

he does not believe to be true and correct as to every material 

matter; 

2 S 2 provides: 

(a) Whoever commits an offense against the United States or 

aids, abets, counsels, commands, induces or procures its commission, is punishable as a principal. 

Appellate Case: 91-1427 Document: 010110307910 Date Filed: 08/28/1992 Page: 1
Porth and his ex-wife Sylvia were charged in a three count 

indictment with willfully making and subscribing to false 

statements on their income tax returns for 1983, 1984, and 1985. 

Sylvia pled guilty to a misdemeanor. Porth waived his right to a 

jury trial. Trial was to the court. 

Prior to trial, the parties stipulated that: during the 

three tax years in question Porth was engaged in the business of 

process serving: Perth's gross receipts from the process serving 

business for the three years were approximately $50,291.40, 

$58,766.45, and $50,299.19, respectively: the total net income to 

Porth for process serving for the three years was approximately 

$16,319.97, $24,649.07, and $20,761.67, respectively: the total 

taxable income figures on the Perth's' tax returns for 1983, 1984, 

and 1985, i.e. $12,000 per year, were materially false unless 

Porth was entitled to deduct gambling losses from other, nongambling sources of income. 

During trial, Porth testified that: he grew up on a farm and 

had a high school education: he was a professional gambler: 

gambling constituted his sole livelihood from 1961 to 1980: he 

took his first job, other than gambling, as a process server in 

1980: Sylvia, who had a college degree in accounting, became 

involved in the process serving business in 1982 and performed 

secretarial and bookkeeping functions: during 1983, 1984, and 

1985, he gambled on a regular basis and incurred substantial 

gambling losses: he never prepared any of their joint tax returns: 

the returns were prepared by a professional return preparer or by 

Sylvia: Sylvia prepared the joint income tax returns for the years 

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Appellate Case: 91-1427 Document: 010110307910 Date Filed: 08/28/1992 Page: 2
in question; he gave Sylvia the amount of his gambling losses for 

each year in question and relied upon her, as the bookkeeper of 

the process serving business, to come up with the correct net 

figure; he never reviewed the returns in question but rather 

relied on Sylvia for the accurate preparation of the returns; and 

he thought the returns were correctly prepared at the time they 

were filed. 

Sylvia testified on behalf of the government that: Porth told 

her that they could net his gambling losses against his process 

serving income; she had no information about his gambling; Porth 

told her to use $12,000 as the amount of their income because he 

could afford to pay the taxes due on that amount; and she 

prepared the returns in accordance with Perth's directions because 

he was running things. 

Following a four day trial, the district court announced its 

findings of fact and conclusions of law, finding/concluding: it 

is essentially undisputed that Porth made and signed the returns 

for each year in question; it is undisputed that each return was 

made subject to the penalties of perjury; the returns were so 

blatantly erroneous and inconsistent as to be false on their face; 

Sylvia's testimony that Porth selected an income figure of $12,000 

for each of the years in question by looking at the tax tables and 

arriving at a round figure which matched the amount of tax Porth 

wanted to pay was a more credible explanation than any other 

explanation heard of the manner in which the income figures were 

derived; in addition to the fact that the identical amount of 

income was used each year, no Schedule C's were attached to any 

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Appellate Case: 91-1427 Document: 010110307910 Date Filed: 08/28/1992 Page: 3
of the returns even though a Schedule Chad been attached in prior 

years; the amount of income reported was ridiculously low compared 

with the lifestyle of the Porths. 

The district court also found/concluded: Porth's explanation 

that Sylvia prepared all the returns and that he signed them 

without reading them is not persuasive; Sylvia was not so 

domineering in their relationship that she prepared all of the 

returns and Porth had nothing to do with them; Perth's "Sylvia 

defense" was inconsistent with his interview with a special IRS 

agent during which he related that the returns were prepared by 

both of them and that the returns were true and accurate; the lack 

of use of W-2s, 1099's, and other tax forms was consistent with a 

finding that there was a scheme here to conceal and not report the 

true income of the business; there was nothing approaching 

adequate records; Sylvia was not the kind of person who could 

hatch and carry out the type of scheme Porth attributed to her; if 

Porth had actually been in the business of gambling, as opposed to 

being addicted to gambling or gambling recreationally, he would 

have shut down the business after losing money three years in a 

row; Perth's gambling profits were pitifully small and it was 

ludicrous for him to claim gambling as his primary business; 

Porth did not produce records that there was a bona fide gambling 

business; one could infer that Perth's summary records had been 

recently created. 

The court found Porth guilty as charged on all three counts. 

Porth was sentenced to fourteen months imprisonment on Count I 

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Appellate Case: 91-1427 Document: 010110307910 Date Filed: 08/28/1992 Page: 4
(tax year 1983), and placed on five years probation to run 

concurrently on Counts II (tax year 1984) and III (tax year 1985). 

On appeal, Porth contends that: (1) the district court erred 

in concluding that the tax returns in question were materially 

false with respect to the total income reported; (2) he did not 

act willfully and did not believe that his tax returns were false; 

and (3) the district court erred in finding him guilty on the 

conspiracy counts. 

At the outset, we observe that we view all the evidence, both 

direct and circumstantial together with the reasonable inferences 

to be drawn therefrom, in the light most favorable to the 

government. United States v. Pinto, 838 F.2d 426, 429 (10th Cir. 

1988) . Moreover, we defer to the findings of the district court 

as the trier of fact: 

As the trier of fact, the jury was entitled to 

disbelieve [defendant] West's uncorroborated and 

confused testimony. In evaluating that testimony, 

moreover, the jury was entitled to ... take into 

account West's demeanor when testifying, which neither 

the Court of appeal nor we may review. And if the jury 

did disbelieve West, it was further entitled to consider 

whatever it concluded to be perjured testimony as 

affirmative evidence of guilt .... 

In Jackson [v. Virginia, 443 U.S. 307 (1979) ] , we 

emphasized repeatedly the deference owed to the trier of 

fact and, correspondingly, the sharply limited nature of 

constitutional sufficiency review. We said that "all of 

the evidence is to be considered in the light most 

favorable to the prosecution. "; that the 

prosecution need not affirmatively "rule out every 

hypothesis except that of guilt. " and that a 

reviewing court "faced with a record of historical facts 

that supports conflicting inferences must presume-even 

if it does not affirmatively appear in the record - that 

the trier of fact resolved any such conflicts in favor 

of the prosecution, and must defer to that resolution II 

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Wright v. West, u. s. (June 19, 1992) (Sl. Op. at pp. 17-18). 

I. 

Porth contends that the district court erred in concluding 

that the income tax returns in question were materially false with 

respect to the total income reported. Porth contends that since 

he was engaged in the trade or business of professional gambling 

during the years in question he should be allowed to offset his 

process serving income with his gambling losses. 

The essence of the crime under§ 7206(1) is the filing of a 

verified tax return knowing that it is false and fraudulent as to 

a material matter. Mertens Law of Federal Income Tax, § SSA.07. 

§ 7206(1) prohibits affirmative false statements and also knowing 

and willful omission of material matter. United States v. Tager, 

479 F.2d 

(1974). 

120, 122 (10th Cir. 1973), cert. denied, 414 U.S. 1162 

Under§ 7206(1), it is a felony for any person to 

"willfully" file a tax return "which he does not believe to be 

true and correct as to every material matter . . " A person 

acts "willfully" under § 7206(1) when he or she intentionally 

violates a known duty. United States v. Pomponio, 429 U.S. 10, 12 

(1976). Proof of evil motive is not required. Id. A tax return 

which omits material items necessary to the computation of income 

is not "true and correct" under § 7206(1). Siravo v. United 

States, 377 F.2d 469, 472 (1st Cir. 1967). 

The "government is not required to document [a] defendant's 

financial affairs to an absolute certainty before he can be 

convicted" under§ 7206(1). United States v. Notch, 939 F.2d 895, 

899 (10th Cir. 1991). Moreover, "[w]illfullness to defeat or 

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evade federal income taxes may be inferred from ... handling of 

one's affairs to avoid making records usual in transactions of the 

kind, and any conduct, the likely effect of which would be to 

mislead or conceal." United States v. Samara, 643 F.2d 701, 704 

(10th Cir.), cert. denied, 454 U.S. 829 (1981). 

Applying these standards to the facts herein, viewing all of 

the evidence in the light most favorable to the government, United 

States v. Pinto, and deferring to the findings of the district 

court as the trier of fact, Wright v. West, we hold that the 

evidence was sufficient to sustain the district court's findings 

that the returns were so blatantly erroneous and inconsistent as 

to be false on their face in violation of § 7206(1). We 

specifically affirm the district court's findings that: 

I do not think that Mr. Porth thought that he was 

in the business of gambling in good faith. I do not 

believe that he took these deductions in good faith. I 

do not believe that he honestly thought he could deduct 

gambling losses and expenses in excess of his gambling 

(sic) income. I do not believe that he in good faith 

thought that the total income reported in each of these 

three years was his true total income. To the 

contrary, the returns on their face are false returns. 

(R., Vol. v. at p. 613). 

II. 

Porth contends that he "did not act willfully [under§ 

7206(1)] because he reasonably believed that he could net his 

gambling losses with the income from his other business, and he 

did not believe the returns were false." (Brief For Appellant at 

p. 19). 

Perth's counsel acknowledged during oral argument that the 

returns were materially false. We need not address Perth's 

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contention that he was entitled to net his gambling losses from 

his other business income because we affirm the district court's 

findings that Perth's returns were so blatantly erroneous and 

inconsistent as to be false on their face. 

III. 

Porth contends that the district court erred in finding him 

guilty of conspiracy. No such finding was made by the district 

court. Porth is, we believe, challenging his convictions of 

aiding and abetting in violation of 18 u.s.c. S 2. In advancing 

this contention, Porth argues that "the Court should reverse the 

conspiracy conviction if it reverses the substantive 

convictions." (Brief for Appellant at p. 25.) This contention is 

rendered moot by our affirmance of the substantive,§ 7206(1) 

convictions. 

AFFIRMED. 

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Entered for the Court: 

James· E. Barrett, 

Senior United States 

Circuit Judge 

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