Source: http://federaltaxcrimes.blogspot.com/2016/03/eighth-circuit-affirms-adult.html
Timestamp: 2019-04-20 14:55:49+00:00

Document:
Fairchild argues that even if her statement of income was inaccurate, the evidence was insufficient to show that she knew and believed that she had underreported her income. According to Fairchild, the nature of the money that she received from Karlen and Pietz was "unclear." She notes that she, Karlen, and Pietz all gave different accounts of the nature of the money over time and that her accountant did not know how to categorize the money for tax purposes. She asserts that she "liberally" estimated the money received from Karlen and Pietz as payment for private parties. She cites her testimony at trial that she "truly believed that she accurately declared income from these private clients and that the remainder of the money was gifted to her." She concludes that because of the "widespread confusion over the nature of the money, no rational juror could have found that [she] believed that the declaration of her income was false." Fairchild also argues that the evidence was insufficient to show that she willfully made and subscribed false tax returns. She asserts that she sincerely held this belief and that she did not willfully violate the tax laws because she had a good-faith belief that the money that she received from Karlen and Pietz above and beyond the amount that she declared as income was a gift.
"Filing false tax returns is a specific intent crime requiring a showing of willfulness, which 'simply means a voluntary, intentional violation of a known legal duty.'" United States v. Mathews, 761 F.3d 891, 893 (8th Cir. 2014) (quoting Cheek v. United States, 498 U.S. 192, 201 (1991)). "Intent may be inferred from conduct, and [w]illfulness in a criminal tax case may be established by a consistent pattern of not reporting income or inconsistently reporting income." Id. at 893 (alteration in original) (quotations and citations omitted). Furthermore, the factfinder may infer from the facts of the case whether an act was committed willfully. Id. at 894.
Fairchild contends that the government failed to prove that her conduct was willful because there was evidence of her good-faith belief that she was not violating the tax laws. "'The issue is whether, based on all the evidence, the [g]overnment has proved that [Fairchild] was aware of the duty at issue, which cannot be true if the jury credits a good-faith misunderstanding and belief submission, whether or not the claimed belief or misunderstanding is objectively reasonable.'" United States v. Morse, 613 F.3d 787, 794 (8th Cir. 2010) (first alteration in original) (quoting Cheek, 498 U.S. at 202). The government frequently must prove intent "by circumstantial evidence; the determination often depends on the credibility of witnesses, as assessed by the factfinder." United States v. Morris, 723 F.3d 934, 939 (8th Cir. 2013) (quotation and citation omitted). "The jury may infer intent from the Appellants' conduct, such as inconsistencies between Appellants' representations to government agencies and other entities." Id. (citation omitted). Because "knowledge . . . turns in large part on the credibility of the witnesses," it "is peculiarly within the province of the factfinder." Id. (quotation and citation omitted). For that reason, a jury is "free to disregard [a defendant's] statements as not credible" in evaluating whether the defendant had a "'good[-]faith belief' that he was properly preparing his tax returns." Mathews, 761 F.3d at 894.
We hold that sufficient evidence exists to support the jury's finding that Fairchild knew and believed that she had underreported her income and that she willfully did so. At trial, Fairchild testified that she truly believed that she accurately declared income from Karlen and Pietz and that the remainder of the money was a gift to her. But, "the jury was free to disregard [Fairchild's] statements as not credible." See Mathews, 761 F.3d at 894.
The Indictment charges that both the income and tax liability owed were false as stated by Fairchild in the tax returns in question. It is not necessary for the government to prove both. It would be sufficient if the government proves beyond a reasonable doubt that Fairchild made and signed an individual income tax return that was false as to either the income or the tax liability owed. To find the government has met its burden on this element, however, you must unanimously agree on whether the false matter was regarding Fairchild's income, tax liability owed, or both. If you are unable to unanimously agree, you cannot find Fairchild guilty.
find the government has met its burden on this element in Count 4, you must unanimously agree on whether Fairchild understated her taxable income from David Karlen, her taxable income from Paul Pietz, or both. If you are unable to unanimously agree, you cannot find Fairchild guilty on Count 4.
Counsel's concern was that the jury could convict Fairchild "without all 12 of them agreeing on what the actus reus is in this case, what wrong thing she did is in Count 4" because Count 4 involved "evidence about false reporting David Karlen and false reporting Paul Pietz." According to counsel, a "real chance" existed that six jury members could believe that Fairchild lied about Karlen but not Pietz, while the other six members could believe that Fairchild lied about Pietz but not Karlen. Counsel asserted that the jury "would recognize that that means acquittal on Counts 1 through 3 where Karlen is the only issue." But he contended that unless the jurors were "specifically instructed about their duty to unanimously agree to a particular set of facts [on Count 4], they could . . . say, well, on Count 4 six of us agree she lied about Karlen. Six of us agree she lied about Pietz. Six plus six is 12, guilty." The trial court refused the requested instruction as unnecessary.
On appeal, Fairchild argues that because the government presented evidence of multiple sources of allegedly unreported income, the indictment was duplicitous, and the district court's jury instructions failed to ensure that the jury reached a unanimous verdict for each count. Fairchild concedes that her "duplicity argument does not rest on the language of the indictment." But she asserts that "this is not damning to [her] argument" because "the potential for a nonunanimous verdict arose out of the evidence of multiple sources of unreported income for each tax year," meaning that "the jury should have been instructed to agree on the willful falsity of 'one factually distinct false statement.'" (Quoting United States v. Duncan, 850 F.2d 1104, 1113 (6th Cir. 1988), overruled on other grounds by Schad v. Arizona, 501 U.S. 624 (1991).) She asserts that her proposed jury instruction "would have cured [the indictment's] duplicity" and ensured jury unanimity.
As Fairchild admits in her brief, she is not attacking the language of the indictment; that is, she does not argue that "the indictment is . . . duplicitous on its face. Instead, [she argues that] the indictment was rendered duplicitous by the evidence presented at trial." United States v. Pietrantonio, 637 F.3d 865, 871 (8th Cir. 2011) (citing United States v. D'Amico, 496 F.3d 95, 100 (1st Cir. 2007) ("[T]he fact that an indictment is not duplicitous on its face of course does not guarantee that a jury verdict will be unanimous, based on the evidence actually presented.")). Fairchild maintains that the government created a duplicitous indictment by presenting three sources of "underreported" income at trial: (1) unreported checks from Karlen and unreported tips for dancing in clubs in 2005; (2) unreported checks from Karlen and unreported income for dancing in clubs in 2006 and 2007; and (3) unreported checks from Karlen, unreported checks from Pietz, and unreported tips for dancing in clubs in 2008. Fairchild asserts that to reach a unanimous verdict, the jury needed to agree on which income that Fairchild failed to report for each tax year.
The present case is analogous to United States v. Adler, 623 F.2d 1287 (8th Cir. 1980). In that case, the defendant was charged with Medicare fraud for submitting false invoices to Medicare for reimbursement. Id. at 1288. Each count of the indictment concerned a different invoice (comparable to each count of Fairchild's indictment concerning a different tax year). Id. at 1289. Additionally, each invoice had multiple fraudulent line items on it (comparable to evidence of multiple sources of Fairchild's unreported income for each year). Id. at 1290. The defendant challenged the indictment as duplicitous because some of the counts involved invoices with more than one fraudulent line item on them. Id. We rejected the defendant's argument, explaining that "the government charged only one crime in each count of the indictment. There may be more than one piece of evidence to support each count, but that certainly does not make the counts duplicitous." Id. (citations omitted). "In other words, each invoice was a single execution, and the line items on each invoice were merely additional means of pursuing the single execution." United States v. Palazzo, 372 F. App'x 445, 452 (5th Cir. 2010) (per curiam) (citing Adler, 623 F.2d at 1290). Similar to Adler, each one of Fairchild's tax returns was "a single execution," and the multiple sources of unreported income contained in each tax return constituted "multiple means of accomplishing" Fairchild's making of a false statement as to her income and tax liability for a particular tax year. See id.
As the government points out, requiring the jury to decide unanimously whether the unreported income came from Karlen, Pietz, or another source was unnecessary because it was not an essential element of the crime; each source provided alternative pieces of evidence to support each count of the indictment.
Fairchild relies primarily on Duncan in arguing that because each juror could have found a different source of unreported income for each of her tax returns, there was a significant risk of a nonunanimous verdict on each count. See Duncan, 850 F.2d at 1111 (concluding that an indictment alleging separate false statements for one count of violating 26 U.S.C. § 7206 was duplicitous after finding that the "essence of the statute lies in the willful falsity of a statement"). Duncan, however, provides no support. Duncan involved an extremely complex count with what that court considered "a tangible risk of jury confusion." Id. at 1114. The instant case was neither extremely complex nor posed a tangible risk of confusion for the jury.
Even assuming duplicity in the indictment, the district court's instruction cured any potential prejudice created thereby. "Courts have held that the risk of a nonunanimous verdict inherent in a duplicitous count may be cured when the jury is given a limiting instruction that requires it to unanimously find the defendant guilty with respect to at least one distinct act." United States v. Karam, 37 F.3d 1280, 1286 (8th Cir. 1994) (citations omitted). In the present case, the district court gave such a limiting instruction by requiring the jury to "unanimously agree on whether the false matter was regarding Fairchild's income, tax liability owed, or both."
Accordingly, we hold that the district court did not abuse its discretion in instructing the jury.
As readers of this blog know, the sentencing court must compute the sentencing guidelines which produce a sentencing range driven primarily by the tax loss involved (both for counts of conviction and unconvicted relevant conduct) but then have wide discretion under Booker to fashion an appropriate sentence outside the guidelines range. The first step is computing the guidelines range. The Court held that the sentencing court had properly computed the range, including the component parts to get to the range. Specifically, the Court sustained the tax loss calculation and the two-level enhancement for failing to report income in excess of $10,000 from "criminal activity." The sexual services, the Court said, was illegal under state and federal law.
The court explicitly stated, "In deciding your sentence, I look at a variety of things. You had a really hard life as a child. As an adult, you've been a great mom to your kids, and have even taken in a neighbor's child and ended up being the guardian for that child." But the court ultimately gave more weight to other 18 U.S.C. § 3553(a) factors, such as the nature and circumstances of the offense. The court noted that Fairchild has "been a wreck" "on the financial side of things" as evidenced by her continued misrepresentations to banks to obtain loans. Additionally, the court stated that one of its considerations "in deciding a sentence is what responsibility have people taken for their actions to start putting things in order" and found that Fairchild had not yet done so. Specifically, she had failed to file her tax return for the current year, did not file the return the prior year, and had not "paid any Federal income tax over a nine-year time period." The court found this "an indicator of whether [Fairchild has] accepted responsibility and whether [Fairchild is] trying to put things into order and make amends for what's happened, and [the court] d[idn]'t see that." The court noted that Fairchild's crime was a "serious" one and that it had "considered all the factors in 3553(a)(1) through (7), and [it] d[id] not believe there are grounds for a downward variance."
The Court of Appeals held that the sentencing court had not abused its discretion.

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