NOT RE CO M M E NDE D F OR P UB L I CA T I ON Fi l e N ame: 07a0696n. 06 Fi l ed: Sept ember 25, 2007 N o. 06- 5876 UNI TED S TATES CO URT O F AP PEALS F O R T H E S IX T H C IR C U IT
UNI T E D S T AT E S OF AM E RI CA , Pl ai nt i ff- A ppel l ee,
v. CY RU S J E F F RE Y B L AND, D e f e n d a n t-A p p e llan t. O n A ppeal fr om t he U ni t ed St at es D i s t r i ctC our tfort he W es t ern D i s t r i ctof K entucky atB ow l i ng G r een

/ B efore: G U Y , R O G E R S , an d M C K E A G U E , C i rcu i t Jud ges. R A L P H B . G U Y , J R ., C ir c u it J u d g e . D e f e n d a n t C yru s J e f

f re y B lan d a p p e a ls f r o m h i s c o n v i c t i o n o n t wo c o u n t s o f f i l i n g f a l s e i n c o me t a x r e tu r n s i n v i o l a t i o n o f 2 6 U. S
. C. § 7206( 1)
. Seeki ng r ever s al , defe ndantar gues ( 1) t hatt he pros ecut or comm i t t ed mi s conduct in h is cl o s in g a rg u m e n t suf ficien t t o co n sti tute p lai n erro r; an d (2) tha t th e d istri ct co u rt abus ed i t s di s cr et i on byal l ow i ng t he governm entt o pr es entr ebut t al t es t i m ony . A ft err evi ew
o f t h e r e c o r d a n d t h e a r g u me n t s p r e s e n t e d o n a p p e a l , we a f f i r m. I. Sect i on 7206, a per

j ur ys t atut e t hat cr i m i nal i zes l y i ng on anydocument fi l ed w i t h t he I R S, pr ovi des t hat : “A nyper s on w ho .
. . w i l l ful l ym akes and su b scr i bes t o anyr etur n, sta tem e n t, o r o th e r d o c u m e n t, w h ich c o n tain s o r is v e rif ied b y a w ritten d e c lar a tio n th a t itisNo. 06-5876 2

De f e ndant a l s o t e s t i f

i e d that he s uf

f e r e d f o r y e ar s wi th b a c k

p a i n, un de rwe ntb a c k

s ur g e ry i n 2 002, 1 became a d d i c t e dto pain med ication, andreceiv ed ongoin g p sy chiatric treatmen t for un specified mental disord ers. m ade unde rt he pena l t i es of per j ur y , and w hi ch he doe s notbel i eve t o be true and c or r ectas t o everym at er i al m at t er. . . s hal l be gui l t yof a f el ony . . . . ” I t i s notnece s s ary , how ever , t hat t he governm entpr ove “the exi sten ce o f a t ax def i ci ency , exac tamount s of unr epor t ed

r e c e i p t s o r i n c o me , o r a n i n t e n t t o e v a d e t a x e s . ” U n it ed Stat es v. Tarwat er , 308 F. 3d 494, 5 0 4 (6th C ir
. 2 0 0 2 ). D e f e n d a n t , w h o l i v e d i n C a m p b e l l s v i l l e , K e n tu c k y, e m p h a s i z e d t h a th e h a s o n l y a hi gh s chool educa t i on and prof es s ed nott o under s t and the det ai l s of ac count i ng. H e r an a pai nt i ng bus i nes s dur i ng hi gh s chool , s t ar t ed an a ut om obi l e s al vage c om panyw i t h a fr i end

a f t e rh i g h s c h o o l , a n d b o u g h ta t e x t i l e ma c h i n e ma n u f a c tu r i n g b u s i n e s s f

r o m a n i n - l a w. He also o w n ed a sm all air-tran sp o rt co m p an y u sed to carry the tex ti le m ac h ineryto cu stom ers
ar ound t he countr y . W hen t he t ext i l e equi pm entand ai r - t r anspor tbus i nes s es fai l ed i n t he

w ake of N A FT A , defe ndantpur chas ed and ope r at ed a met al r e p r o c e s s i ng companyt hatm ade

m et al s i di ng and r oofs
. D efe ndantt es t i fi ed t hatal t hough he coul d t el l w hen a c om panyw as
m aki ng m oney , he r el i ed on l ong- t i m e bookkeepe r R uby W i l s on t o m oni t or t h e f inanci al d e t a i l s o f h i s b u s i n e s s e s . Th e c o mp a n i e s we r e o p e r a t e d a s “ S ” c o rp o r a t i o n s , wi t h t h e i n c o me
a pp e a r i ng on hi s fe de r a l i nc ome t a x r e turns . D e fe nd a nt ’ s t a x r e turns w e r e pr e pa r e d b yCPA H enr yL ee ba s ed on t he i nfor m at i on pr ovi ded bydefe ndant
. A ti t s peak, defe ndant ’ s l i ne of

cr edi tatt he bank e xcee ded $800, 000. 1 I tw as dur i ng a t r i p t o L as V egas i n 1994 t hatdefe ndantw as i nt r oduced t o gambl i ngNo. 06-5876 3

and w on $2, 500 pl ay i ng t hr ee $100 s l ot - m achi ne t okens
. A ft err etur ni ng hom e, defe ndant began f r equent i ng nearbycas i nos and bec ame w h at th e ca s i nos w oul d cons i dera “hi gh

r ol l er ” ora “w hal e. ” H i s fede r al i ncome t ax r etur n for1994 r epor t ed $2, 500 i n gambl i ng i ncome, w hi ch w as offs etby$2, 500 i n gambl i ng losse s . O n t he 1995 fe der al t ax r etur n, defe ndantr epor t ed $101, 000 i n w i nni ngs and $65, 000 i n l os s es . T he 1998 r etur n not ed a pl ace for“gambl i ng l os s es , ” but no gambl i ng i ncome or l os s es w er e r epor t ed on ei t hert he 19 98 or 199 9 returns. T he evi dence s how ed t hat defe ndant w on s ubs t ant i al s um s gambl i ng i n bot h 1998 and 19 99 , al t ho ug h the am ou nt of hi s net gambl i ng i ncome r emai ned i n di s put e at t ri al. B ank

r ecor ds s how ed t hat defe ndant depos i t ed checks fr om t he cas i nos i nt o hi s acc ountand dr ew
cas hi er s chec ks w r i t t en t o t he ca s i nos . W heneve rdefe ndant ’ s pay outexce eded $10, 000, t he casi no w ou l d fil e a C urr ency T ransact i on R epo rt(C T R ). In addit i on , t he casi no s kept l og s,
r e f e r r e d t o a s “ t r i p s h e e t s , ” t h a t r e c o r d e d d e f e n d a n t ’ s a c t i v i t y a tt h e t a b l e g a me s . Th e CTR s al er t ed t h e I RS t o t h e g a mbl i n g i n c o me t h a twas n o tr e p o r t e d
. Th e t wo- c o u n ti n d i c t ment fil ed in O ctob er 2 0 0 5 ch arg ed d ef en d an t w ith m ak ing fa lse s tatem en ts byfa il ing to rep o rt i ncome fr om gambl i ng on hi s fede r al i ncome t ax r etur ns for1998 and 1999. D efe ndant ’ s exper t , C PA M ar ci a Lew i s , concl uded t hatdefe ndant ’ s netgambl i ng i ncome for1998 and 1999 w as $94, 181. 74 and $310, 000, r es pect i vel y . A m ended r etur ns for th o se y e a rs, a lo n g w ith p a y m e n t o f $ 1 6 5 ,0 0 0 , w e re f

iled w ith th e IR S sh o rtlyb e f o re trial. T he governm ent ’ s exper t , I R S Speci al A gentB r andon W el ch, pr epar ed a re vi s ed

su m m ary
— revi s ed j us tbefor e tr i al and i n r es pon se to L ew is’ s rep o rt

— that fo u n d d ef en d an t’ sNo. 06-5876 4

Sp e c i f i c a l l y , the g o v e rnm e nt ’ s o r i g inal sum mar y t a l l i e d the ne tg amb l i ngi nc o me f o r 19 98 and 2 1999 at $310,181.74 and $33 1,954.02, r es pe ct iv el y , whil e the re vi se d summary ca lc ulat ed the amo unts to be $ 2 9 2 .8 4 3 .9 0 an d$ 3 1 9 ,2 4 1 .0 2 , r e s pe c t i ve l y. n e tg a m b l i n g i n c o m e f

o r1 9 9 8 a n d 1 9 9 9 t o b e $ 2 9 2 , 8 4 3
. 9 0 a n d $ 3 1 9 , 2 4 1
. 0 2 , r e s p e c t i v e l y. W h il e d ef

en d an t m ak es m u ch o f th e f ac t th at t h e re v isi o n s fro m W elch ’s origin al su m m ary i ncl uded a r educt i on of nea r l y$750, 000 i n gambl i ng r eve nue f o r 19 9 8 , th e “ b o tto m lin e ” is t hat the r evis i on s res ult ed i n a rel at i vely m od estreduct i on i n the defen dan t ’s n e t gambl i ng i ncome foreac h y ear . E ven af t ert hes e r evi s i ons , t he governm enti d en ti fi ed gambl i ng 2

r e l a t e d d e p o s i t s o f

$ 7 4 1 , 9 9 9 a n d $ 6 1 3 , 8 0 0 f o r1 9 9 8 a n d 1 9 9 9 , r e s p e c t i v e l y. B efor e t r i al , W el ch al s o pr epar ed cha r t s i dent i fy i ng s peci fi c i t ems fr om t he cas i no
r ecor ds t hatw er e notr efl ect ed i n L ew i s ’ s r epor t
. T hos e char t s w er e not di s cl os ed bef or e t r i al or used either i n the gov ernm ent’ s case- i n-chi ef or on cross -exam i nati on of L ew i s. R eser ving t his evidence f o r re b u t t al , t he g ov ernm ent r ecal l ed W el ch to r efute the d efen se exper t ’ s cal cul at i ons . D efe ns e couns el obj ect ed, butt he di s t r i ctcour tper m i t t ed t he test im o n y . T h is i s the b asis fo r de fe n d an t’ s sec o n d claim o f e rror. A l t hough t he I R S i ni t i at ed i t s i nves t i gat i on i n M ay 2001, defe ndantw as notcont act ed unt i l Februar y2002. D efe ndant t es t i fi ed t hat he pr om pt l y w ent t o an at t or ney w i t h boxes of

r ecor ds and l earned i n s hor tor dert hathe had be en underthe m i s t aken i m pr es s i on t hathe

c o u ld “ c a rryf

o rw a rd ” h is g a m b lin g w in n in g s a n d lo ss e s o v e r a f iv e -y e a r p e rio d . D e f

e n d a n t,

w ho w as re p resented byt hat s am e at t orneyatt ri al , rel at ed the subst ance o f t heirfi rs t
c o n v e rsa tio n a n d sq u a re lylaid b lam e f o r his f a ilu re to re p o rt th e g a m b lin g w in n in g s o n h is

a c c o u n tan t. T h is te stim o n yw a s c e n tra l to th e d e f e n d a n t’s c laim th a t h e h a d n o t w ill f u llyNo. 06-5876 5

m ade f al s e s t at ement s on t he t ax r etur ns i n ques t i on. Speci fi cal l y , defe ndantt es t i fi ed thathe t o ld Lee a bouthi s gambl i ng w i nni ngs , but L ee t ol d hi m nott o w or r yabouti tbeca us e gambl i ng i ncome coul d be ca r r ied forw ar d or b a c k w a rd f

o r f iv e y e a rs a s w ith h is b u sin e ss e s. L e e , o n th e o th e r h a n d , sta ted u n e q u iv o c a lly not onl y t hat t he defe ndantdi d nott el l hi m aboutanygambl i ng i ncome for1998 and 1999, butal s o t hatL ee ne veradvi s ed t he def endantt hatgambl i ng i ncome coul d be carr i ed forw ar d. L ee e xpl ai ned t hathe pr epar ed t he r etur ns fr om t he i nfor m at i on defe ndantpr ovi ded, and t hat he w ou l d ask d e f

e n dan ti f t here w as “anyotheri nco m e. ” In cl osi ng argum ent, defe nse
couns el cal l ed Lee i ncompet ent and vouche d fort he def endant ’ s ver aci t y . T he pr os ecut or
r es ponded i n r ebut tal b y ar gui ng t hatdefe ns e couns el had hel ped def endant“conc oct ” or “w eave ” a s t or y t hat coul d be used a s a def ens e att r i al
. A l t hough no obj ect i on w as m ade a t th e tim e , the se re m a rk s a re th e b a sis f o r d e f e n d a n t’s c laim o f

p ro se c u to ria l m isc o n d u c t. D efe ndantt es t i fi ed that, o nce a l er t ed t o t he err or , he ca l l ed t he ca s i no he had be en pat r oni zi ng and foun d o u t tha the had w on $110, 000 and $244, 000 i n t he y ear s 2001 and 2002. A ccor di ng t o defe ndant , he t hen i ns i s t ed t hat t he gambl i ng i ncome be r epor t ed on t he t ax r etur ns fort hos e y ear s , even though L ee t ol d B l and he w as “w as t i ng hi s m oney ” and

s houl d fi nd a new t ax pr epar eri f he w oul d nott ake Lee’ s advi ce. T her e i s no di s put e t hat t he r etur ns for2001 and 2002 r efl ect ed gambl i ng i ncome. D efe ndantt es t i fi ed t hathe

s t opped gambl i ng i n 2002, aft erhi s l os s es m ount ed, and t hathe w as l at ers ued byt he ca s i no
ov er hi s gam bli ng deb t s. A t th e c o n c lu sio n o f f

o u r da y s o f tes tim o n y , th e ju ry f o u n d d e f e n d a n t g u ilty o n b o thNo. 06-5876 6

The go ve rnme nt argue s that our re vi ew is fo r pl ai n er ro r be cause the o bjec ti ons we re c onf ined to 3 the admission of the c h a rt s . W h i le the objection began with the charts, defen se co un sel also ask ed th at Ag e ntWe l c h n o tb e a l l o we d t o t e s t i f y i n r e b utt a l
. T he i s s ue w a s a de quat e l y p r e s e rv e d. count s . O n J une 23, 2006, t he di s t r i ct cour t s ent ence d defe ndant t o 24 m ont hs ’ i m pr i s onm ent and or der ed r es t i tut i on equal t o t he t ax l i abi l i t y t hat had not y et been pai d. T h is ap p eal fol l ow ed. II. A . R ebut t al E vi dence D efe ns e couns el obj ect ed t o r ebut t al evi dence fr o m A g ent W el ch det ai l i ng t he t r ans act i ons t hatL ew i s had nott aken i nt o acc ounti n det er m i ni ng t he def endant ’ s net gambl i ng i ncome. D efe ndantpr ot es t ed, as he does on appea l , t hatt hos e cha r t s
— E xhi bi t s 30 and 32

— w ere p rep ar ed bef or e t r i al fr om cas i no r ecor ds t hatw oul d be admi t t ed i n t he gover nm ent ’ s cas e- i n- chi ef. A s a r es ul t , defe ndanti ns i s t s t hatt he governm entcoul d have i ncorpor at ed t he cha r t s i nt o A gentW el ch’ s di r ectt est im o n y o ri nt r oduced them fol l ow i ng defe nse cou nsel ’s cross -exam i nati on con cerni ng t he acc uracyof W el ch’s cal culat i on s. A l t ernat i vely , defe nd ant ar gu e s th a t the chart s w ou l d m ostnatur al l ybe u sed du ri ng cross exam i nati on of L ew i s. Inst ead, avoi ding dir ect chall eng e t o L ew i s’ s cal culat i on s on cross , th e g o v e rn m e n t re se rv e d th e a n a ly sis o f h e r re p o rt f

o r re b u ttal. A s d e f

e n d a n t co rre c tly obs er ves , t he t r i al co u rt ’s d ec is i on t o admi tevi dence on r ebut t al i s r evi ew ed forabus e of d is c re tio n . U

ni t ed Stat es v. C ar aw ay , 4 1 1 F
. 3 d 6 7 9 , 6 8 3 (6th C ir
. 2 0 0 5 ). 3

“‘ T he pr operfunct i on of r ebut t al evi dence i s t o cont rad ict , i m peac h ordefus e t he i m pact of t he evi dence offe r ed byan adve r s e part y . ’ ” U ni t ed St at es v. Levy , 904 F. 2d 1026,No. 06-5876 7

Evenif defend ant couldshow an abuse of discretion, error in the adm ission of the rebuttal eviden ce 4 wo ul d b e harml e s s b e c aus e e v e n L e wi s c o nc l ude d thatde f e ndantha d s ubstan ti a l unr e p o rt e d g amb l i ng i nc o me f o r the y e ar s 19 98 and 1999
. 1031 ( 6t h C i r . 1990) ( ci t at i on om i t t ed)
. T he di s t r i ctj udge has di s cr et ion to li m itr ebut t al evi dence “‘ t o t hatw hi ch i s di r ect ed t o r ebut new evi dence or new t heor i es pr offe r ed i n t he defe ndant ’ s ca se-in-chi ef. ’ ” To th v . Gr a n d Tr u n k R. R. , 306 F. 3d 335, 345 ( 6t h C i r . 2002) ( quot i ng M

ar t i n v. W

eave r , 666 F. 2d 1013, 1020 (6th C i r . 1981) )
. E vi dence i s “new ” for p u rpo ses o f re b u tt al i f it“‘w as n o t fairl yan d ad eq u atelyp rese n ted to the tri er o f f ac t bef o re t he def endant ’ s cas e- i n- chi ef. ’ ” Id
. ( quot i ng B enedi ct v. U ni t ed Stat es , 822 F. 2d 1426, 1429 (6th C ir
. 1 9 8 7 )). B ecause L ew i s’ s cal culat i on s and co nclusi on s w ere not fai rl yand adeq uately pr es ent ed before t he def endant ’ s cas e- i n- chi ef, A gentW el ch’ s cr i t i que of h er r epor tw as p ro p e rl y o f

f e re d in re b u tta l to d is p ro v e th e a c c u ra c yo f h e r c a lc u la tio n s . Id .; s ee al s o U ni t ed St at es v. Tej ada , 956 F. 2d 1256, 1266- 67 ( 2d C i r . 1992)
. M or eover , this cour thas

s peci fi cal l yr ej ect ed t he ar gum ent t hat admi s s i on of pr oper r ebut t al evi dence i s l i m i t ed byt he f a c t th a t it c o u ld h a v e b e e n in tr o d u c e d in th e g o v e rn m e n t’ s c a s e -i n -c h ie f
. C ar aw ay , 411 F. 3d

a t 6 8 3 ; T o th , 3 0 6 F .3 d a t 3 4 5 ; Tej ada , 956 F. 2d at1267. I ndeed, forr eal r ebut t al evi dence , “t he [gove r nm ent ] has no dut yt o ant i ci pat e o r to n eg at e a de fens e theor yi n [i t s ] cas e- i nchi ef. ” Ma rtin , 666 F. 2d at 1020. T he di s t r i ctj udge, t her efor e, di d notabus e hi s di s cr et i on in a llo w in g A g e n t W e lch to tes tifyin re b u ttal. 4 B . P ros ecut ori al M i s conduct T hi s cour thas adopt ed a tw o- s t ep appr oach f oreval uat ing claims of pr os ecut or i alNo. 06-5876 8

m is c o n d u c t. U

n itedS ta tes v . C a rr o ll , 2 6 F
. 3 d 1 3 8 0 , 1 3 8 5
- 8 7 ( 6 t h Ci r . 1 9 9 4 )
. F i r s t , we d e te rm in e w h e th e r th e p ro s e c u to r’ s c o n d u c t a n d c o m m e n ts w e re im p ro p e r. Id
. at 13 8 7
. If i m pr oper , t hen w e cons i derand w ei gh fourfac t or s t o det er m i ne w het her t he i m pr opr i etyw as f la g ra n t a n d th u s w a rr a n ts re v e rs a l. Id
. B ec au se no o b jecti o n w as m ad e a t tri al, h o w ev er,
o u r rev iew is on lyfo r plain e rr o r. U ni t ed Stat es v. Y

oung , 4 7 0 U .S . 1 , 6 -7 (1 9 8 5 ); U ni t ed St at es v. C ol l i ns , 78 F. 3d 1021, 1039 ( 6t h C i r . 1996)
. T o es t abl i s h pl ai n err or , t he def endant

m us t demons t r a t e ( 1 ) a n e r r o r , ( 2 ) t h a ti s p l a i n , ( 3 ) t h a ta f f e c t s t h e d e f

e n d a n t ’ s s u b s t a n t i al ri gh t s, and (4) , i f t he fir stt hree are s ho w n, t hat this err or ser i ou sl yaffected t he fa i rness , in te g ri ty, o r p u b lic re p u ta tio n o f th e ju d ic ia l p ro c e e d in g s . C ol l i ns , 7 8 F .3 d a t 1 0 3 9 ; see al so U ni t ed Stat es v. C ar t er , 2 3 6 F
. 3 d 7 7 7 , 7 8 3 (6th C ir
. 2 0 0 1 ). T he governm entconce des t hati tw as i m pr o p er to m ake pe r s onal at t acks on t he

ver aci t yof def

ens e couns el by su g ges t i ng t hatdefe ns e couns el hel ped t he def endant

“ c o n c o c t” o r “ w e a v e ” a s to ry th a t co u ld b e p re s e n te d in d e f e n s e a t tr ia l. Y

oung , 470 U
. S. at 9 ; C ol l i ns , 78 F
. 3d at10 40
. T urn in g to t he fo ur- fact or fl agrancyt est , t his cou rtm ust d eter m ine w h ethe r t h e re m ark s w ere so ex ce p ti o n all yflag ran t as t o co n sti tute p lai n erro r. C ar t er , 236 F. 3d at783. T he fourfac t or s ar e: ( 1) w het hert he r emar ks t end t o m i s l ead the j ur yorpr ej udi ce the ac cus ed; ( 2) w het hert he comm ent s w er e i s ol at ed o r ext ens i ve; ( 3)

w hethert heyw ere del i berat el yor ac ci den t al l y m ade; an d (4) w hethert he ev i den ce aga i nst t he acc us ed w as st ron g. Id
. In w eigh ing thes e f ac tors, w e m u st ex am ine th e p rose cu tor’s

r emar ks “w i t hi n t he cont extof t he t r i al t o det er m i ne w h ethe r t he pr os ecut or ’ s behavi or amount ed t o pr ej u d i ci al er r or . ” Y oung , 470 U
. S. at12. T hi s cons i der at i on i ncl udesNo. 06-5876 9

Al tho ugh de f

e ns e c o un s e l ha s a duty t o av o i d i mp r o p e r c o mm e nt s , the p r o p e r c o ur s e is f ora 5 prosecutor to object to improper comm ents by defen se co un sel andreceiv e a rul ing from the court, You ng , 470 U. S. at10 , 13
- 14. “w hether , and t o w hat ext ent, t he p rosecut or’ s i m proper rem arks w e re in v i t ed b ydefe nse
couns el ’ s ar gum ent
. ” I d. ; see al so C ar t er , 236 F. 3d 783. 5 W i t houtar gui ng t hatt he r emar ks w oul d t end t o m i s l ead t he j ur y aboutt he evi dence , d ef en d an t m aintains that they w ere p rejud ici al b ec au se t h e de fe n se d ep en d ed o n the ju ry ’s

es t i m at i on of t he defe ndant ’ s ver aci t y and the pr os ecut orw as as s er t i ng t hatdefe ns e couns el had putfal s e t es t i m onyi n defe ndant ’ s m o u th. T h is c as e i s unl i ke C ar t er , w her e t he pr os ecut or ’ s ar gum ent s notonl ym i s s t at ed evi dence butal s o a c c u s e d d e f e n s e c ouns el of l y i ng abo ut the tes t i m on y . H ere, defe nse cou nsel i nject ed h i s ow n credi bil i t yi nto t he p roofs,

re p re se n ted h e h a d p e rso n a l k n o w led g e o f th e f a c ts, a n d v o u c h e d f

o r th e d e f

e n d a n t. A s di scussed earl i er, t he d efen dan tw as asked to r el at e th e su b stance of thei r fi rs t
conver s at i on i n t he fol l ow i ng excha nge: Q : A nd t hen di d y ou come t o m yoffi ce then .
. . and br i ng m e al l y ourr ecor ds t hat y ou had
. . . i n som e bo xes? A : Y es , I di d. Q : A n d d o y o u re m e m b e r i f y o u h a d a d isc u ss io n w ith m e a b o u t w h a t co u ld th is b e a b o u t? A : Y eah. I r emem ber about

— s i t t i ng i n y ouroffi ce a bout10 m i nut es and — wh e n I o r i g i n a l l yc o me t o s e e y o u , a n d y o u s a y i n g r i g h th e r e i s y o u rp r o b l e m. Q : S o w hat di d I t el l y ou y ou r pr ob l em w as? A : Y ou t ol d m e I coul dn’ tcarr yfor w ar d t hos e. Q : I n 1 0 m inu tes that y o u ca m e to m y o ff ice I to ld y o u that y o u co u ldn ’tca rryNo. 06-5876 10

f o r w a r d t h o s e — A : A b s o l u t e l y. Q : E ven t hough i tw as on t he t ax r etur n, gambl i ng l os s es , I t ol d y ou y ou c o u l d n ’ t c a r r y f

o r wa r d g a mb l i n g l o s s e s o rwi n n i n g s ; t h o s e h a d t o b e t h e s a me y ea r. D ef en d an t t esti fied ex p li cit lythat h is acc o u n tant, H en ryL ee , h ad told h im h e c o u ld ca rry f o r wa r d g a mb l i n g i n c o me a n d l o s s e s , t o s h o w t h a t t h e f a i l u r e t o r e p o r t t h e g a mb l i n g i n c o me
w as notw i l l ful
. T o s uppor t t hi s defe ns e, defe ndantt es t i fi ed that , once c or r ect ed, he r epor t ed h is ga m b li n g inco m e o n h is re tu rn s f o r 2 0 0 1 an d 2 0 0 2 , an d am en d ed h is r eturn s to rep o rt gambl i ng i ncome for1998 and 1999. I n cl os i ng ar gu me n t , h o wev e r , d e f e n s e c o u ns el r evea l ed more abouthi s i ni t i al m eet i ng
w ith d ef en d an t. S p ec ifi ca ll y , d ef en se c o u n sel t o ld the jury i twa s o b v i o u s t o me wh e n J e f f c a me . . . t o myo f

f i c e . . . a n d h e s h o we d me t he t ax r etur n, he show ed m e a ‘ 97 or ‘ 98 t ax r etur n, t her e’ s gambl i ng l os s es on t he r etur n. N ow , no acc ount ant i n hi s r i ghtm i nd put s gambl i ng l os s es on th e re tu rn if

h e d o e sn ’t in ten d to . A n d I sa id , J e f f , w h e re a re th e w in n in g s to go w i t h these l osses. H e sa id , the a c c o u n tan t d id n ’t sa yI ha d to p u t th e m o n ; w e ’re g o in g to c a rryth e m f

o rw a rd f o r f iv e y e a rs. I s a id , w e ll, y o u c a n ’t c a rry— I m e a n , it t ook 10 m i nut es t o know t hat
. Y ou can’ t carr y for w ar d i f y ou knew w haty ou w e re d o in g , an d th a t w a s th e f irst tim e I r e a li z e d th a t H e n ryL e e is i n c o mp e t e n t
. T h e ma n s h o u l d n o tb e a CP A. D e fe ns e c ou ns e l a r gu e d a t l e ng t h t ha tLee w a s i nc ompe t e nta nd / ori nt i mi da t e d b yt he I RS, and t hatt he def

endanthad r el i ed i n good fai t h on t he advi ce he cl ai m ed t o have got t en fr om L ee. D efe ns e couns el per s onal l yvouched f ordefe ndant ’s cr edi bi l i t ybys ay i ng “[Bl and]

neverhad a di s hones tbone i n hi s body
. ” D efe ns e couns el al s o offe r ed hi s per s onal opi ni onNo. 06-5876 11

o f the d ef

en d an t, stat ing : “I d o n ’t think Jef f is a ro ck et scien ti st. I t h ink h e’s a h ard w o rke r, and he r el i es on peopl e foradvi ce on c er t ai n t hi ngs . ” Fi nal l y , defe ns e couns el al s o as ked t he j ur y t o “pl eas e bel i eve” hi m t hat t he defe ndant di d not r evi ew t he “20- s om ethi ng” page t ax
re tu rn b e f

o re sig n in g it. T he pr os ecut or ’ s chal l enged c om m ent s addr essed the def ens e— good fai t h r el i ance
on bad advi ce fr om an i ncompet ent acc ount ant

— and ar gued t hat i t w as not bel i evabl e. B eca us e def

ens e couns el had i nj ect ed hi s ow n cr edi bi l i t y i nt o t he i s s ue, hi s ar gum ent s i nvi t ed

comm enton hi s ow n r ol e i n asse rt i ng t he def ens e and the ac cus at i ons of i ncompet ence on L ee’ s par t
. T he pr os ecut orar gued i n r ebut t al t hatdefe ns e couns el appar ent lyr eal i zed thatt heyhad a huge pr obl em. T hes e gambl i ng r ecor ds w e r e g o i n g t o b e c o n c l u s i v e ; yo u d i d n ’ tr e p o r ti t ; w h a t c o u l d w e p o s s i b l y s a y; how coul d w e pos s i bl yexpl ai n t hat
. T hen he s aw t hat ‘ 98 r etur n . . . and s aw [gambl i ng] l os s es on i tand s t ar t ed t hi nki ng, how can w e us e t hat
. J us tw eave a s t o r y, s o m e t h i n g w e c a n s a y. A s M ar s ha [Lew i s ] t es t i fi ed t o y ou, i t ’ s not unus ual for s om ethi ng l i ke t hat t o get put on r etur ns . I t ’ s a com put er pr ogr am. Y ou’ ve gott o chec k t he box. H enryL ee t est i fi ed t hati tgotcarr i ed overbeca us e i thadn’ tbeen ch ec k ed off. H e conc l us i vel yt es t i fi ed t hathe had ne verbeen t ol d about g am b li n g w inn ing s an d losse s in tha t y ea r.

. . . Fi r s tof al l , di d he vol unt ar i l ygi ve s om e of the i n format i on over , but a lso w h a t y o u h e a rd w a s th a t S p e c ial A g e n t W e lc h s u b p o e n a e d a lo t o f it. [D ef en se c o u n sel] kn ew fro m d ayo n e tha t he c o u ld g et i t, so let ’s st art we a v i n g o u r s t o r y , l e t ’ s s t a r tc r e a t i n g a s t o r ya b o u ts o me e x p l a n a t i o n t h a twe can defe nd y ou at t r i al
. H e gave s om e of i tt o Speci al A gentW el ch. H e had t o gett he r es t
. I f w e ac tl i ke w e’ r e pl ay i ng ni ce, m aybe s om edayw e ca n s t and u p in co u rtan d say w e co o p era ted, I m u st b e i n n o ce n t. T h at’s ex ac tl yw h at’s goi ng on her e. A nd y ou can s ee that even fur t her i f y ou l ook atw hathappene d w i t h t heNo. 06-5876 12

‘9 8 a n d ‘ 9 9 tax re tu rn . M a rsh a L e w is te stif ied th a t sh e e stim a ted w h a t h is w in n in g s o r lo ss e s w e re a n d p re p a re d a 1 9 9 8 a n d 1 9 9 9 a m e n d e d re tu rn , [th a t] ju st h a p p e n e d to g e t f

iled tw o w e e k s b e f

o re trial, a n d w h y w a s tha t? It’s p re tty conveni ent
. I tal l ow s hi m t o come up her e and s t and and s ay he’ s t r y i ng t o do t he ri gh tt hing. H e’s t ry i ng t o p ayhis t axes. U s e y ourcomm on s ens e on t hatone. I f y ou’ r e cont act ed 2/ 12/ 2002, w hy notc o n t a c tt h e c a s i n o s ? W h yn o tg e tt h e wi n / l o s s s t a t e me n t ? Y ou’ ve hear d a l otof peopl e t es t i fy t hat y ou coul d gett hati nfor m at i on. H e coul d have ea sil yam en d ed tho se return s in 20 0 2
. A t that p o int, h e w as h o p ing h e w asn ’t g o in g to g e t in d icte d . H e w a s h o p in g th a t a c a se w o u ld n ’t g e t b ro u g h t.

. . . . T h e re ’s b e e n n o p re

ju d ice a g a in st th e m . . . . Ju st f o llo w th e tim e lin e in y ourow n head. H e get s co nt act ed on t hi s dat e. H e get s s om e r ecor ds s ent o v er. D o esn ’t fil e an am en d ed tax return u n ti l a w ee k b ef o re tri al, fo u r y ea rs late r. T h a t sh o w s w h a t’s g o in g o n h e re , a n d th a t sh o w s h o w th e y ’re try in g to s etup M r . H enr yfr om dayone. H e n ryL e e c a m e in h e re a n d te s tif ied tw ice , an d y o u c a n c o m p a re h is t es t i m onyt o t hatof M r . B l and and the rea s onabl enes s of i t , and us e y our comm on s ens e. M r . B l and
. . . t es t i fi ed t hat he t ol d H enr y L ee cer t ai n t hi ngs . O ne, I had w inn ing s in 1 9 9 8 an d 1 9 9 9 , an d as a c o n s e q u e n c e o f th at, ap p are n tl yH en ry L ee, . . . cam e back and sai d, do n’t report i t ; y ou can ca rryi tov er fi ve y ears . A n d c a rry in g it o v e r f

iv e y e a rs is sig n if

ica n t. T h a t w o u ld b e 1 9 9 8 , an d a g a in t hat ’ s ki nd of conve ni ent
. I tj us thappens t o be roughl y ar ound w hen he vi s i t ed [def ens e couns el ]
. So t hatw ayt hey ’ d have a n excus e. T hey coul d s ayhe w as goi ng t o pay appar ent l y , t hat , y eah, he w as j us tw ai t i ng att he veryend t o s ee w hathappene d. B u t l o o k at t h e a m o u n t th at he su p p o sed lyfil ed – h e p aid th at y e ar; $110, 000. I f he w as r eal l ycarr y i ng for w ar d orcarr y i ng backw ar d of w hat ever they ’re say ing , h o w d o es t h at ac co u n t fo r the m il li o n d o ll ars of w inn ing s? It d o e sn ’t. T h a t w a s . . . th e ir a ttem p t to c re a te th is sto ry a n d to tryto w e a v e th is defe nse, and i t fal l s short ; and w here y ou see i t fal l i ng shortm osti s t he m ost rid icu lo u s th in g h e sa id in h is te stim o n y : I to ld M r. L e e th a t I w a n ted to f ile a n d p a yth e se tax e s, a n d h e sa id , y o u ’re c ra z y ; if y o u p a yth o se , I’m g o in g to f ire y o u a s a c lien t.No. 06-5876 13

. . . .

. . . [I ]n d e c id in g th e q u e stio n o f w ill f u ln e ss , y o u ’re u lti m a telyg o in g to have t o w ei gh M r . L ee’ s t es t i m onyver s us hi s t es t i m onyand l ook atevery t hi ng i nvol ved and l ook at w hen t hi s s t or yof ca r r y i ng for w ar d and ca r r y i ng back w a s c re a ted , ap p a r e n tl yc re a ted in c o n ju n c tio n w ith h is a tto rn e y , an d h o w it play ed o ut throug h ti m e; fi l ed an am end ed tax r eturn no tt hen , no tM r. H on est Je f f B lan d w h e n h e f

irst g o t co n tac te d ; h e w a its [ u n til ] a w e e k a n d a h a lf befor e t r i al beca us e hi s at t or neyt el l s hi m t o do i t
. T hi s i s goi ng t o l ook good. W e’ l l s a y y o u p a i d t h a t
. W e c a n c r i t i c i z e t h e g o v e r n me n t n o w b e c a u s e t hey d id n ’t c o n tac t y o u e a rlier a n d a sk y o u to p a yit. He c o u l d h a v e p a i d i t a l o n g , l o n g t i me a g o , a n d th a tj u s ts i mp l ys h o ws t he s t or yt hey ’ r e at t empt i ng t o w eave . W e bel i eve th ere ’s n o d oubtt hatt he e v id e n c e w e h a v e p re se n ted to y o u w ill sh o w a n d d o e s s h o w th a t h e is g u ilty of t hi s , t hat he w i l l ful l y knew about i t , a m i l l i on dol l ar s i s not on y o u r t ax r et ur n, he di dn’ tr epor t
. . . . W e as k y ou t o fi nd hi m gui l ty , beca us e t he e v i d e n c e h a s p r o v e n t h a th e i s g u i l t y. (E m p h a s is a d d e d .) T he r emar ks , w hi l e not i s ol at ed oracc i dent al , w er e l es s an at t ack on de fens e couns el per s onal l yand more a re s pons e t o t he ar gum ent s l i nki ng defe ns e counse l ’ s cr edi bi l i t y t o t he defe ndant ’ s good fai t h defe ns e. I n fac t , t he pr os ecut oremphasi zed t o t he j ur yt hatt o deci de t he i s s ue t heyw oul d have t o w ei gh t he defe ndant ’ s t es t i m ony agai ns t t he t es t i m ony fr om L ee. A s fort he fi nal fac t or , w e agr ee w i t h t he governm entt hatt he evi dence agai ns tt he def endant

w as stron g . T h e d ef

en d an t rep o rt ed g am b li n g inco m e fo r 1 9 9 4 an d 1 9 9 5 , b u t d id n o t r ep o rt any gambl i ng i ncome f or t w o y ear s i n w hi ch he had over $1 m i l l i on in g am b l i ng- r el at ed d e p o s it s a n d d u rin g w h ich d e f e n d a n t’s o w n e x p e rt f

o u n d h e h a d su b sta n tial net g a mbl i ng i ncome of m or e t han $400, 000. T he evi dence l eft pl ent y of r oom for t he j ur yt o di s bel i eve defe ndant ’ s cl ai m t hat he s i gned t he 1998 and 1999 r etur ns i n t he good fai t h bel i ef thatt he gambl i ng i ncome and l os s es coul d be carr i ed for w ar d over a fi ve- y ear per i od. W hi l e, as t heNo. 06-5876 14

gover nm entconce des , t he pr os ecut ors houl d have a voi ded ac cus i ng defe ns e couns el of

concoc t i ng a s t or yt o l ayt he bl ame on bad advi ce f r om t he ac count ant , defe ndanthas not sh o w n that the e rror w as so flag ran t as t o co n sti tute p lai n erro r. AF F I RM ED .