Source: http://federaltaxcrimes.blogspot.ae/2017/05/district-court-denies-sufficiency.html
Timestamp: 2017-06-27 02:02:08
Document Index: 11863654

Matched Legal Cases: ['§ 7201', '§ 7212', '§ 7201', '§ 7201', '§ 7201', '§ 7212', '§ 7212', '§ 7212', '§ 7212', '§ 7212', '§ 19']

In United States v. Pflum, 2017 U.S. Dist. LEXIS 72422 (D KS 2017), here, Pflum had been convicted of two counts - evasion, § 7201, and tax obstruction, § 7212(a). In a prior prosecution in 2004, Pflum had been convicted of "multiple tax code violations, including three counts of failing to file income tax returns for the tax years 1997 through 1999." As a condition of supervised release on that conviction, the court ordered Pflum to file "truthful and complete federal and state income tax returns in a timely manner, according to law, and cooperate with the Internal Revenue Service and state tax authorities regarding any manner related to the defendant's past or present tax liability during the term of supervision." As recounted in the facts in the current case, Pflum continued to misbehave. Hence, Pflum was again indicted, this time for evasion and tax obstruction. During the pretrial proceedings, Pflum thrashed around in various ways, including representing himself pro se at times. The jury convicted. Pflum filed post-trial motions. In the order linked above, the Court denied the post-trial motions. The only part Memorandum and Order that I think worthy of comment is the denial of the Motion for Acquittal based on insufficiency of the evidence. Before excerpting that portion of the Order, I first offer the following regarding the jury verdict from the factual background:
Now, turning to the excerpt where the Court discusses and denies the Motion for Acquittal. Mr. Pflum asserts that the government presented insufficient evidence for a rational jury to convict him beyond a reasonable doubt of the counts charged. The court addresses the two counts of conviction separately, below. 1. Count 1: Attempting to Evade and Defeat the Payment of Income Tax Count 1 charged Mr. Pflum with attempting to evade and defeat the payment of income tax in violation of 26 U.S.C. § 7201. To secure a conviction under § 7201, the government must prove beyond a reasonable doubt that: (1) the defendant owed substantial income tax; (2) the defendant intended to evade and defeat the payment of that tax; (3) the defendant committed an affirmative act in furtherance of this intent; and (4) the defendant acted willfully, that is, with the voluntary intent to violate a known legal duty. See 10th Cir. Crim. Pattern Jury Instruction No. 2.92 (2011); see also United States v. Meek, 998 F.2d 776, 779 (10th Cir. 1993) ("To obtain a conviction for evasion, the government must prove three elements: 1) the existence of a substantial tax liability, 2) willfulness, and 3) an affirmative act constituting an evasion or attempted evasion of the tax.") For the first element, the government need not prove the exact amount of the tax due—just that the tax liability is substantial. See United States v. Mounkes, 204 F.3d 1024, 1028 (10th Cir. 2000) (holding that the government had proved substantial tax liability because the "evidence showed that the [defendants'] bank deposits and cash expenditures exceeded their reported income after adjustments for applicable exemptions and deductions. Such evidence supports an inference that defendants had unreported income."). "Whether the tax evaded was substantial is a jury question and generally not susceptible to a precise definition." 10th Cir. Crim. Pattern Jury Instruction No. 2.92 cmt. (2011); see also Canaday v. United States, 354 F.2d 849, 851-52 (8th Cir. 1966) ("The word 'substantial,' as applicable here, is necessarily a relative term and not susceptible of an exact meaning."). The third element—the requirement of an affirmative act—"distinguishes the offense of evasion from the misdemeanor offense of willful failure to file a tax return." Meek, 998 F.2d at 779. "An affirmative act requires more than the passive failure to file a tax return; rather, it requires a positive act of commission designed to mislead or conceal." Id. The misstatement of one's income is an affirmative act sufficient to sustain a jury's conviction for tax evasion. See United States v. Jones, 816 F.2d 1483, 1488 (10th Cir. 1987) ("Defendant's filing of his tax returns with the knowledge that he should have reported more income is sufficient to sustain the jury's conclusion that defendant willfully attempted to evade taxes." (citing Sansone v. United States, 380 U.S. 343, 351-52, 85 S. Ct. 1004, 13 L. Ed. 2d 882 (1965))). Here, the government presented evidence sufficient for a reasonable jury to find that the government proved each one of the elements essential to a tax evasion conviction under 26 U.S.C. § 7201. At trial, the government presented evidence that Mr. Pflum owed substantial income tax. The evidence included the federal income and employment tax returns that Mr. Pflum had filed for tax years 1997 through 2007. By his own admission, the tax returns reported Mr. Pflum's total income as $7,700,494.00 and claimed he owed $2,663,854.23 in federal income and employment taxes. The government also presented evidence that Mr. Pflum had earned income from the sale of his business in 2006. The government thus presented sufficient evidence of the first element. The government also presented sufficient evidence of the second, third, and fourth elements. The government presented evidence that Mr. Pflum committed affirmative acts in furtherance of his intent to evade and defeat the payment of the tax that he owed the government. And, the jury could infer from the circumstantial evidence that Mr. Pflum's conduct was willful. Indeed, the jury specifically found that the government had presented evidence of and proved beyond a reasonable doubt that Mr. Pflum committed certain affirmative acts. Specifically, this evidence included the affirmative acts of: (1) "submitting false financial statements claiming $472.75 in assets and $470.00 per month income, when in truth and in fact [Mr. Pflum] owned over $2 million in real estate and received monthly income of over $16,000;" (2) "instructing third parties, such as renters, potential buyers, and others indebted to [Mr. Pflum] to ignore collection efforts by the Internal Revenue Service;" and (3) "threatening legal action against third parties who complied with the Internal Revenue Service's collection efforts." Doc. 179 at 2-3. Viewing the evidence in the light applied to a Rule 29(c) motion, the court concludes that a rational jury could have reached the very same verdict that this jury reached. 2. Count 2: Corruptly Endeavoring to Obstruct and Impede the Due Administration of the Internal Revenue Laws Count 2 charged Mr. Pflum with corruptly endeavoring to obstruct and impede the due administration of the Internal Revenue laws in violation of 26 U.S.C. § 7212(a). To secure a conviction under § 7212(a), the government must prove beyond a reasonable doubt that: (1) the defendant, in any way corruptly, (2) endeavored (3) to obstruct or impede the due administration of the Internal Revenue laws. United States v. Sorensen, 801 F.3d 1217, 1225 (10th Cir. 2015). "To act 'corruptly' is to act with intent to gain an unlawful advantage or benefit either for oneself or for another." Id. (citations and internal quotation marks omitted). "'Endeavor' means to knowingly and intentionally make any effort which has a reasonable tendency to bring about the desired result. It is not necessary for the government to prove that the 'endeavor' was successful." See id. at 1229 (affirming the district court's use of this definition in the jury instructions). The government presented sufficient evidence at trial for a reasonable jury to find Mr. Pflum guilty beyond a reasonable doubt of violating 26 U.S.C. § 7212(a). The evidence established that Mr. Pflum owed more than $2.6 million in federal taxes. It was reasonable for the jury to infer that Mr. Pflum acted corruptly—that is, with the intent to gain an unlawful advantage—when he failed to pay the federal taxes that he owed to the government. The government thus presented sufficient evidence of the first element. See United States v. Marinello, 839 F.3d 209, 225 (2d Cir. 2016) (holding that evidence that the defendant failed to provide complete and accurate information of his personal and corporate income was sufficient for the jury to convict the defendant of corruptly obstructing or impeding the due administration of the Internal Revenue Code in violation of § 7212(a)). The government also presented evidence of specific acts that Mr. Pflum had committed to endeavor to obstruct or impede the due administration of the Internal Revenue laws. And, the jury found that the government had proved these affirmative acts beyond a reasonable doubt. The affirmative acts included: (1) "submitting false financial statements claiming $472.75 in assets and $470.00 per month income, when in truth and in fact [Mr. Pflum] owned over $2 million in real estate and received monthly income of over $16,000;" (2) "transferring assets to fictitious entities and to third parties, in an attempt to conceal these assets from the Internal Revenue Service by [creating a] Grant Deed attempting to transfer ownership interest of 500 MacDonald, San Juan, WA from Pilot Enterprises, LLC to Friday Harbor, LLC;" (3) "instructing third parties, such as renters, potential buyers, and others indebted to [Mr. Pflum] to ignore collection efforts by the Internal Revenue Service;" and (4) "threatening legal action against third parties who complied with the Internal Revenue Service's collection efforts." Doc. 179 at 6-7. The government thus presented sufficient evidence of the second and third elements to support a conviction under § 7212(a). Taking this evidence in the light most favorable to the government, it was sufficient for the jury to find Mr. Pflum guilty beyond a reasonable doubt of corruptly endeavoring to obstruct and impede the due administration of the Internal Revenue laws. The court thus denies Mr. Pflum's Motion for Judgment of Acquittal.
2. The category of issue I raise here is probably one of multiplicity, which is described as occurring "multiplicity occurs when two charges allege the same offense. Charges are not multiplicious if each offense requires proof of an additional fact that the other does not." USAM 812. Duplicity and Multiplicity Issues, here; and see also USAM 919. Multiplicity, Duplicity, Single Document Policy, here. Based on this, perhaps the evasion and tax obstruction are not multiplicitous. Evasion certainly requires elements -- intent to evade and tax due and owing -- that tax obstruction does not. But where the acts of tax obstruction are also affirmative acts of evasion, it certainly suggests a single crime encompassed by tax evasion, otherwise every act of tax evasion could be charged also as tax obstruction. 3. "The principle danger in multiplicity is that the defendant will receive multiple sentences for a single offense, although courts have noted that multiple counts may also work against defendant by leading the jury to believe that defendant's conduct is especially serious because it constitutes more than one crime." 5 Wayne R. LaFave, et al., Criminal Procedure § 19.3(e) (4th ed., Dec. 2016 update). Normally, the sentencing guidelines calculations would take the sting out of overcharging, including by two separate crimes from the same fact pattern. However, where the tax loss is so large that the indicated sentencing range and the final sentence is above the maximum for the greatest offense -- 5 years for tax evasion -- then the charging of the separate tax obstruction crime will have real world consequences. I think that may be the case in Pflum because he is a repeat offender and the numbers appear large. I suppose that, if the charges had been multiple counts of evasion, the need for a tax obstruction count would have been less and it might not have been charged.