Source: https://cbaclelegalconnection.com/2016/01/tenth-circuit-instruction-advising-knowing-dishonest-conduct-correctly-stated-mens-rea/
Timestamp: 2019-05-22 00:38:53
Document Index: 151804104

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

Tenth Circuit: Instruction Advising on Knowing and Dishonest Conduct Correctly Stated Mens Rea
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The Tenth Circuit Court of Appeals issued its opinion in United States v. Sorensen on Monday, September 14, 2015.
Jerold Sorensen, an oral surgeon in California, found Financial Fortress Associates (FFA) in 2000 after an online search to develop a business plan for his dental practice. FFA offered seminars advising attendees to develop “pure trust organizations” (PTOs) in order to reduce or eliminate tax liabilities. Sorensen developed six PTOs with the help of Melissa Sugar, an attorney who spoke at the first FFA seminar Sorensen attended and opened a bank account titled “Northside Management,” which was titled in the trusts’ names. Sugar was the trustee of the trusts but Sorensen had full account privileges because he was named as Sugar’s “administrative assistant” for the trust. Sorensen retained full control over the Northside Management account. Sorensen retitled his personal residence, dental practice, and dental equipment into the trust, then had his dental practice pay the trust to “rent” his home, dental practice, and dental equipment. He deposited dental income directly into the trust and reported the rental expenses as business expenses, thereby avoiding taxes. No tax return was ever filed for the trusts, which were active from 2002 through 2008.
Soon after establishing the trusts, Sorensen approached his longtime accountant and family friend about the FFA pure trust program. Sharp researched the program and advised Sorensen that the IRS considered it a scheme, and that she could no longer provide tax services to Sorensen if he continued with the PTOs. Sorensen hired a new accountant, Wayne Paul, who was recommended by FFA, to prepare his business returns, and had his personal returns prepared by H&R Block. He never informed H&R Block about the trusts or the Northside Management account, which he explained was because they never asked.
In May 2007, an IRS special agent executed a search warrant at Sugar’s law office. By August of that year, Sorensen knew of the search but did not stop using the trust or Northside account. Sorensen later told IRS Special Agent Michelle Hagemann that although he thought he should stop using the FFA services, “he was in too deep, he couldn’t get out, and he didn’t want to pay the tax.” Also in 2007, Sorensen approached his son’s father-in-law, CPA Keith Wilcox, about the trusts. Wilcox testified that he told Sorensen the trusts were a complete sham. Wilcox prepared amended tax returns for Sorensen, but Sorensen did not file them for two more years.
Agent Hagemann sent Sorensen a certified letter in 2008 to advise him he was the subject of a criminal investigation. Sorensen refused the letter, following advice received at an FFA seminar. Later, when Agent Hagemann appeared at Sorensen’s dental offices, Sorensen refused to let her in, again following FFA advice, and sent her a public servant’s questionnaire requesting information such as her birthdate, home address, and social security number.
Sorensen’s defense theory was that he believed PTOs were completely legal. However, he admitted at trial that the payments made to the PTOs were not legitimate business deductions, and he also admitted that he underpaid his taxes by more than $1.5 million from 2002 through 2007. In November 2013, a Colorado federal grand jury indicted Sorensen, charging him with violating 26 U.S.C. § 7212(a) by corruptly endeavoring to impede administration of Internal Revenue laws.
The primary issue at trial was whether the statute required knowledge of illegality and whether Sorensen acted with such knowledge. The defense argued that Sorensen was a gullible, naive man who was unaware his conduct violated the law. Dr. Dana Cogan, a forensic psychiatrist, testified on Sorensen’s behalf that he was “law abiding” and “very naive.” Nevertheless, in 2014, the jury convicted Sorensen of corruptly endeavoring to obstruct or impede the due administration of internal revenue laws in violation of § 7212(a)’s omnibus clause. The district judge varied downward from the guidelines range and statutory maximum and sentenced Sorensen to 18 months’ imprisonment. Sorensen appealed, raising seven issues, which the Tenth Circuit addressed in turn.
Sorensen first contended that his conduct should have been charged under 26 U.S.C. §§ 7201 and 7203 because it amounted to evading taxes, and that § 7212 requires something more than tax evasion. The Tenth Circuit first noted that the government may choose what conduct to charge when the underlying conduct satisfies requirements of more than one charging statute. Because § 7212 requires that the tax evasion be done corruptly instead of willfully, the two sections address different conduct. Willfully evading taxes is the more serious crime. The Tenth Circuit noted that Sorensen used trusts created with no EIN, which prevented the IRS from tracking them and therefore obstructed and impeded the IRS from duly administering the tax code. The Tenth Circuit concluded Sorensen’s charge fit within the omnibus clause of § 7212.
Sorensen next raised three challenges to the jury instructions: (1) the district court erroneously refused to give an instruction on knowledge of illegality, (2) the court erroneously gave a deliberate ignorance instruction, and (3) the court erroneously gave an instruction that allowed the jury to convict on any one of the “means” alleged in the indictment. As to the first issue, the Tenth Circuit found the mens rea element was properly set forth in the court’s instruction, and therefore the district court did not err by denying Sorensen’s request for a separate instruction that knowledge of illegality is required. The Tenth Circuit further found that the district court’s instruction on Dr. Sorensen’s good faith belief of legality satisfied any question of whether the jury believed he had acted “knowingly and dishonestly” with regard to the trusts.
Sorensen also challenged the court’s deliberate ignorance instruction, because he denied only criminal intent, not knowledge of any fact. The Tenth Circuit found no error, noting the instruction assisted the jury in determining whether the government had proved Sorensen’s knowledge of facts bearing on the trusts’ illegality. The Tenth Circuit then addressed Sorensen’s argument that the district court erred by, sua sponte, providing an instruction that the jury must convict Sorensen based on unanimous agreement of any of the means provided in the indictment. Although the Tenth Circuit agreed that it was error for the district court to so advise the jury, the error benefited Sorensen and therefore was harmless.
Sorensen next argued the district court erred by refusing to allow him to present surrebuttal evidence. The Tenth Circuit found this decision well within the district court’s discretion, and noted that the court would have allowed the evidence during Sorensen’s case in chief but refused to allow it as surrebuttal because of a fear it would have devolved into back-and-forth accusations. Sorensen also contended the prosecution’s closing rebuttal argument misstated the evidence to mount an attack on Sorensen’s credibility. The Tenth Circuit analyzed each statement in turn. For the first instance, the Tenth Circuit found the court’s curative instruction resolved any potential error. For the next assertions of error, Sorensen failed to preserve them for appellate review, and the Tenth Circuit found that the prosecutor’s misstatements did not affect Sorensen’s substantial rights. The Tenth Circuit also held that there was no error in the district court’s failure to declare a mistrial based on the prosecutor’s improper remarks. Finally, the Tenth Circuit rejected Sorensen’s cumulative error argument, noting he failed to cite any conclusory authority to support his bare assertion of cumulative error.
The Tenth Circuit affirmed Sorensen’s conviction.
Filed Under: Case Law Tagged With: 10th Circuit, criminal law, evidence, jury instructions, prosecutorial misconduct, tax evasion, tax law