Opinion ID: 1249230
Heading Depth: 2
Heading Rank: 4

Heading: mrs. moran's testimony

Text: The Morans argue that by excluding Mrs. Moran's testimony about advice she received from outside financial and legal experts, the district court committed reversible error. Mrs. Moran's principal defense was that she held a good faith belief that the programs in which she participated were legal. She contends that her belief was based, among other things, on opinions from a CPA and outside experts. The district court sustained objections to her testimony about what she had been told on grounds of hearsay and Rule 403. [2] On two occasions during the trial, the district court excluded testimony by Mrs. Moran about what she had learned from outside experts. On the first occasion, she started to testify what the CPA preparing her statements to the IRS had told her. When the prosecution objected to hearsay, the court sustained the objection and added, That's a 403 analysis . . . that the probative value is outweighed by the potential for prejudice. [3] The second exchange occurred following the cross-examination of Mrs. Moran, during which the government questioned Mrs. Moran regarding a letter she had received from an outside attorney in which that attorney had questioned the legality of AAA's programs. [4] On redirect, Mrs. Moran attempted to testify about legal opinions she had received from outside experts; the government objected (without specifying grounds), and the court sustained the objection, referring to both Rule 403 and the hearsay rule. [5]
A district court's ruling excluding testimony is reviewed for abuse of discretion. United States v. Sure Chief, 438 F.3d 920, 925 (9th Cir.2006). However, when the court excludes evidence under Rule 403 but does not engage in explicit balancing, we review such a determination de novo. United States v. Boulware, 384 F.3d 794, 808 n. 6 (9th Cir.2004). [W]illfulness is an element in all criminal tax cases. United States v. Bishop, 291 F.3d 1100, 1106 (9th Cir.2002). Willfulness . . . requires the Government to prove that the law imposed a duty on the defendant, that the defendant knew of this duty, and that he voluntarily and intentionally violated that duty. Id. The burden is on the government to negate the defendant's claim that he had a good faith belief that he was not violating the tax law. Id. Good faith reliance on a qualified accountant has long been a defense to willfulness in cases of tax fraud. Id. The defendant is entitled to testify about the tax advice he receivedsubject, of course, to cross-examinationand exclusion of this testimony is error. Id. at 1111. Not only is testimony about the reliance on qualified experts relevant to establishing this defense, but the defendant [has] the right to tell the court his own version of the tax advice on which he claim[s] to have relied. Id. Such testimony does not constitute hearsay when not offered for the truth of the matter stated. Id. Because there is an intent element in fraud cases, good faith belief in legality also provides a defense to the fraud counts. See, e.g., United States v. Amlani, 111 F.3d 705, 717-18 (9th Cir. 1997) (wire fraud); United States v. Beecroft, 608 F.2d 753, 757 (9th Cir.1979) (mail fraud). The government's brief concedes that Mrs. Moran was entitled to testify about what outside experts told her but argues that she did not do so. The record makes clear that she did trytwicebut was stopped by the court's sustaining the government's objections. [6] To the extent the court excluded the disputed testimony from Mrs. Moran's redirect as hearsay, it was error since the testimony was not offered for the truth of the matter asserted and thus its exclusion was an abuse of discretion. See Bishop, 291 F.3d at 1112. To the extent the ruling was based on Rule 403, we review it de novo because the court did not engage in explicit balancing of the Rule 403 factors. See Sure Chief, 438 F.3d at 925. The government defends the exclusion on the ground that the cross-examination exceeded the scope of direct. However, the government in its brief takes an unreasonably narrow view of the permissible scope of redirect, limiting it to what the defendants did or could have done in response to the concerns expressed in the Hayes letter. The government's questioning of Mrs. Moran raised the implication, as her counsel explained at trial, that the Hayes letter was the only opinion the Morans ever received, thus opening the door to redirect about what other legal opinions they had received. The government further argues that this testimony would have been cumulative because Mrs. Moran had previously testified to other opinions she had received. Those opinions, however, came from insiders, the principals and architects of the AAA plan, and not qualified outside professionals, and thus could be expected to carry significantly less weight with the jury. Thus, because the testimony was not hearsay, fell within the scope of redirect, and was not cumulative or otherwise in violation of Rule 403, the district court erred in excluding it.
When testimony has been erroneously excluded, we apply the harmless error standard for nonconstitutional error. We must reverse unless there is a `fair assurance' of harmlessness or, stated otherwise, unless it is more probable than not that the error did not materially affect the verdict. United States v. Morales, 108 F.3d 1031, 1040 (9th Cir.1997). This standard requires that the Government show a `fair assurance' that the verdict was not substantially swayed by error. United States v. Seschillie, 310 F.3d 1208, 1214 (9th Cir.2002). The government argues only that the district court's ruling did not deny Mrs. Moran's right to present a defense. We agree that her constitutional right was not violated. Mrs. Moran testified about advice she received from in-house advisers. The government has failed, however, to address its burden to show a fair assurance that the verdict was not substantially swayed by the exclusion of evidence of opinions from outside experts. That evidence went to the heart of Mrs. Moran's defense, which entitled her to rebut the Government's proof of willfulness by establishing good faith reliance on a qualified accountant after full disclosure of tax-related information. Bishop, 291 F.3d at 1106-07(quoting United States v. Claiborne, 765 F.2d 784, 798 (9th Cir.1985), abrogated on other grounds, Ross v. Oklahoma, 487 U.S. 81, 108 S.Ct. 2273, 101 L.Ed.2d 80 (1988)). We conclude the error was not harmless.