Case Name: UNITED STATES of America, Plaintiff-Appellant, v. William E. EAKEN, Defendant-Appellee
Court: United States Court of Appeals for the Seventh Circuit
Jurisdiction: United States
Decision Date: 1993-06-08
Citations: 995 F.2d 740
Docket Number: No. 93-1362
Parties: UNITED STATES of America, Plaintiff-Appellant, v. William E. EAKEN, Defendant-Appellee.
Judges: Before CUDAHY, EASTERBROOK, and ROVNER, Circuit Judges.
Reporter: Federal Reporter 2d Series
Volume: 995
Pages: 740–745

Head Matter:
UNITED STATES of America, Plaintiff-Appellant, v. William E. EAKEN, Defendant-Appellee.
No. 93-1362.
United States Court of Appeals, Seventh Circuit.
Submitted April 22, 1993.
Decided June 8, 1993.
Frances C. Hulin, Asst. U.S. Atty., Office of the U.S. Atty., Danville, IL, for plaintiff-appellant.
Ronald E. Boyer, Wateska, IL, for defendant-appellee.
William E. Eaken, pro se.
Before CUDAHY, EASTERBROOK, and ROVNER, Circuit Judges.

Opinion:
ILANA DIAMOND ROVNER, Circuit Judge.
The United States asks us to reverse a district court order releasing William Eaken on bail pending appeal. Because we conclude that Eaken's appeal presents a substantial question of law likely to result in a reversal of his conviction, we affirm the order of the district court.
I.
A grand jury indicted William Eaken for willfully attempting to evade or defeat the payment of taxes in violation of 26 U.S.C. § 7201, and for failure to file a tax return in violation of 26 U.S.C. § 7203. The indictment alleged that Eaken attempted to evade the payment of taxes by:
failing to make an income tax return on or before April 15, 1986 . by acquiring . $197,800 through a series of illegal withdrawals from the account of an estate that he was administering; by refusing to appear before the Probate Division . for proceedings concerning the estate; by refusing to file an accounting of the estate or to deliver the assets of the estate; by securing the services of an attorney to represent to the Probate Division that another attorney was being retained to represent Eaken and that the estate would be closed; and by attempting to conceal the embezzlement by diverting the funds into multiple bank accounts of business partnership entities other than Eaken's own business account.
After a jury trial, Eaken was convicted of both willful tax evasion and failure to file a tax return, and he was sentenced to five years imprisonment on the tax evasion count and to probation on the failure to file a return count. Eaken appealed the judgment of conviction and filed a motion for release pending appeal. The district court granted Eaken's motion and released him on bail pending appeal. The government appeals the order releasing Eaken.
II.
Section 3143(b) of Title 18 governs motions to release a defendant pending appeal: "the judicial officer shall order that a person who has been found guilty of an offense . be detained, unless the judicial officer finds — (A) . that the person is not likely to flee or pose a danger to the . community . and (B) that the appeal is not for the purpose of delay and raises a substantial question of law or fact likely to result in . reversal." 18 U.S.C. § 3143(b) (1992). In the present case, the government concedes that the only factor at issue is whether Eaken's appeal "raises a substantial question of law or fact likely to result in . reversal."
We review de novo orders releasing a defendant pending appeal — that is, "our review of release . orders under 18 U.S.C. § 3143(b) is independent." United States v. Shoffner, 791 F.2d 586, 590 (7th Cir.1986). In granting Eaken's release pending appeal, the district court stated: "I don't believe there is [a] substantial question of fact, really, in the case.... I can't say that two circuit judges won't disagree with me. But, at the same time, I think all [Eaken] may achieve is to delay the evil day. I will enlarge him on bail pending appeal." United States v. Eaken, No. 92 CR 20022, order at 1-2 (N.D.Ill. Jan. 11, 1993) (order releasing defendant on bail pending appeal). The district court's order is insufficient to support release pursuant to section 3143(b). See Shoffner, 791 F.2d at 589 ("a district court . should not base its bail determination on its assessment of a defendant's chances of getting some panel of the Court of Appeals to agree with him"). Our own independent review, however, convinces us that Eaken's appeal raises a substantial question likely to result in a reversal of his conviction for willfully attempting to evade the payment of taxes.
An appeal raises a "substantial question" if it presents " 'a 'close' question or one that very well could be decided the other way.'" Shoffner, 791 F.2d at 589 (quoting United States v. Giancola, 754 F.2d 898, 901 (11th Cir.1985)). Eaken asserts that a substantial question exists as to whether the evidence was sufficient to prove an overt act evincing an intent to avoid the payment of income taxes. To establish insufficiency of the evidence, Eaken must demonstrate that "after viewing the evidence in the light most favorable to the prosecution, [no] rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt." Jackson v. Virginia, 443 U.S. 307, 319, 99 S.Ct. 2781, 2789, 61 L.Ed.2d 560 (1979); accord United States v. Beall, 970 F.2d 343, 345 (7th Cir.1992). The crime of willful tax evasion has three elements: willfulness, the existence of a tax deficiency, and an affirmative act constituting an attempt to evade or defeat the payment of the tax. Beall, 970 F.2d at 345; United States v. Conley, 826 F.2d 551, 556 (7th Cir.1987). Significantly, the affirmative act must demonstrate something more than a "mere passive failure to pay." Conley, 826 F.2d at 557 (citing United States v. Mesheski 286 F.2d 345, 346 (7th Cir.1961)).
In the present ease, we are unsure that the evidence demonstrates an "affirmative positive act to attempt to defeat or evade the tax." Mesheski 286 F.2d at 346. The government emphasizes Eaken's embezzlement of estate funds and his "diversion" of funds to private bank accounts. We have previously held, however, that "reprehensible actions, designed to hinder detection of the strictly local crime of embezzlement, do not constitute such affirmative conduct as clearly and reasonably infers a motive to evade or defeat the tax." Id. at 347. In Mesheski we reversed the conviction of a tax preparer who embezzled money from his clients and diverted these proceeds to his own use without the payment pf taxes, finding this conduct legally insufficient to constitute willful tax evasion. Id.
The government, nevertheless, attempts to distinguish Mesheski by focusing on Eaken's alleged concealment of embezzled funds. The government asserts that the diversion of the embezzled funds to three different accounts was an affirmative act evincing an intent to defeat the payment of taxes. See Conley, 826 F.2d at 557-58 (holding that defendants who diverted funds to hidden or untraceable accounts evaded the payment of tax by concealing their assets). Although the government's argument may have some merit, we believe that our decision in Meshe-ski provides Eaken with a significant issue on appeal.
The record indicates that Eaken deposited the embezzled proceeds in three personal business accounts, one of which was in his own name. Furthermore, the two remaining accounts (accounts for his business partnership) listed Eaken's social security number and also recognized him as an authorized signatory. Finally, all three accounts were maintained at the same bank as the estate account. Given these facts, we conclude that a substantial question exists on appeal as to whether Eaken committed affirmative acts evincing an intent to evade the payment of taxes. See Conley, 826 F.2d at 557 ("The charge against the defendant . was that he willfully attempted to avoid paying what he did disclose.... There is a distinction between willfully attempting to evade the assessment of the tax and willfully attempting to evade or defeat the payment of the tax") (emphasis added). As we emphasized in Mesheski "aetions[ ] designed to hinder detection of the strictly local crime of embezzlement[] do not constitute such affirmative conduct as clearly and reasonably infers a motive to evade or defeat the tax." Meshe-ski 286 F.2d at 347 (emphasis added). We believe that Eaken has presented a substantial issue as to whether, as a matter of law, a jury could have found beyond a reasonable doubt that Eaken's conduct demonstrated the requisite intent.
Our dissenting colleague, however, would order Eaken jailed during the pendency of his appeal on the assumption that, even if the tax evasion conviction is reversed, Eaken would still spend one year in jail on the failure to file conviction, which Eaken has not challenged on appeal. (Dissent at 744-745.) Because Judge Easterbrook considers this one-year sentence almost a certainty, he would have Eaken begin to serve it immediately, before a panel of this Court has considered Eaken's challenge to the tax evasion conviction. Yet, we find Eaken's possible sentence on the remaining conviction less certain than does the dissent.
The district court originally sentenced Eaken to five years imprisonment for tax evasion and two years probation on the failure to file charge. Because the district court sentenced Eaken to the five-year statutory maximum on the tax evasion count, see 26 U.S.C. § 7201, the dissent finds it "unlikely" that the district court, in' the event that conviction is overturned, would impose a sentence less than the one-year statutory maximum on the failure to file count. See 26 U.S.C. § 7203. Yet, as the difference in the maximum sentences under sections 7203 and 7201 reflects, failure to file is considered a less serious crime than tax evasion. Therefore, absent a tax evasion conviction, we will not assume that the district court would automatically impose the maximum period of incarceration for failure to file.
The dissent also focuses on the nearly identical treatment of the two offenses under the Sentencing Guidelines, noting that Eaken would drop only one offense level if his tax evasion conviction were reversed. (Dissent at 744-746.) But as our colleague acknowledges, the Sentencing Guidelines do not apply to Eaken because the crimes charged in the indictment occurred before November 1, 1987, the effective date of the Guidelines. United States v. Stevenson, 942 F.2d 1111, 1116 (7th Cir.1991). Thus, in this pre-Guide-lines case, the district court enjoys even greater discretion in formulating the defendant's sentence. United States v. Johnson, 903 F.2d 1084, 1089 (7th Cir.1990). Although the district court certainly would have the authority to sentence Eaken to one year on the failure to file conviction, it could also fine Eaken or impose a period of probation, for imprisonment is not required by section 7203. Because of the availability of these sentencing options, we find that the requirements of 18 U.S.C. § 3143(b)(1)(B)(iv) have been satisfied here. Our dissenting colleague's speculation as to Eaken's future sentence would have the effect of usurping the district court's exclusive sentencing role by limiting its sentencing options. When a particular period of imprisonment is not required by the statute, we refuse to intrude upon the district court's discretion by, in effect, passing that sentence ourselves.
III.
For the foregoing reasons, the motion of the United States is Denied and the order releasing Eaken on bail pending appeal is Affirmed.
. A district court is required to provide a list of reasons either in a written order or in a hearing transcript supporting her ruling on a motion for release pending appeal. Fed.R.App.P. 9(b).
. The record reveals that Eaken fully disclosed his embezzlement of estate funds to both the probate court and to agents at the Internal Revenue Service, and further, that he never made any false statements regarding his tax liability to these officials.
. The dissent purports to fulfill a statutory responsibility by predicting the sentence the district court would impose on remand. (See Dissent at 745.) Yet our colleague does not engage in the language of prediction, for he unequivocally states that "Eaken owes the United States a year of his life for failure to file his tax return for 1985." (Id. at 745.) We believe that the dissent is not predicting what Judge Baker would do, but is essentially telling Judge Baker what he should do if the case is remanded for resentencing. (See id. at 745.) By declining to issue a similar directive, we have not spumed our statutory duty under section 3143(b)(l)(B)(iv). (Id. at 745.) Rather, we have respected the district court's broad, pre-Guidelines discretion to pass an appropriate sentence if the case is remanded.