Opinion ID: 3064204
Heading Depth: 2
Heading Rank: 2

Heading: King’s Continuance Motions

Text: Here, 61 days separated King’s indictment (August 24) and trial (October 24) in this relatively complicated tax evasion case. King’s counsel moved for a continuance on three different occasions, each time explaining why he could not be prepared for the impending trial. The court granted King only an eight-day continuance (from October 16 until October 24) and denied his other requests. At the start of trial, King’s counsel orally renewed his continuance motion, which the court also denied. The difficulty in trial preparation was exacerbated by the fact that, little more than a month before trial, the government left 39 boxes containing 80,000 discovery documents at Xpedia, a copy center. Although the government gave King its list of 170 exhibits two weeks before trial and copies of each exhibit 11 days before trial, King did not receive the revised exhibit list until the day before trial. Admittedly, the majority of the documents at Xpedia were copies of King’s own documents and were itemized in the government’s Attachments C and D. Nonetheless, this is a complicated tax fraud case involving voluminous records. King’s request for more time to prepare was reasonable. While we understand the need to move cases expeditiously, this case was not a simple one. A 30- or 60-day continuance, for example, would not have unduly delayed the court’s docket under Id. at 1264 (quotation marks omitted) (alteration in original). 31 these facts. The problem for King, however, is that he has not shown that the district court’s denials resulted in “specific, substantial prejudice” to his defense, as required by our precedents. King’s brief argues generally that he did not have sufficient time to fully develop a defense to the charges, to find and prepare his own witnesses, to effectively cross-examine the government’s witnesses, or to rebut the government’s case. King also claims that Dunn, his forensic accountant, did not have adequate time to review the government’s calculations and exhibits. However, King has not identified what new, specific information he would have presented to the jury with more preparation time, much less how that new information possibly would have affected the outcome in his case. Simply put, King’s claims are primarily general allegations of a lack of time to prepare unaccompanied by a description of how more time would have changed the end result. King fails to name a single new witness, other than Dunn, he would have called if given more time to prepare. And, two years later, he does not point to a single question he would ask differently on cross-examination. Indeed, Dunn, his third accountant, admits in his January 2, 2007, letter that he cannot give any opinions about the amount of taxes owed by King. In fact, a total of five months elapsed from the indictment in August 24, 2006, until the sentencing on January 30, 2007, yet King still did not have an accountant develop any new information 32 that would support a possibility of a different result. King has no accountant or evidence that would impeach his own two filed and signed tax returns, much less the government’s calculations of his tax liabilities. At a minimum, King could have had an accountant in that five-month period take one of the tax years and prepare a computation of what King contends he actually owed. He never did. The closest King gets to specifics are his allegations that he discovered posttrial (1) that CCEC is a C-corporation (and not an S-corporation) and (2) loan documents for some of his motorcycle purchases. Neither allegation helps King. First, at trial, both King’s lawyer (Sands) and King’s accountant (Cook) acknowledged knowing about the question regarding the corporate status of CCEC. Sands’s cross-examinations of Hechtman, Cook, and Leavitt at trial indicate that King was aware of, and had the opportunity to fully cross-examine witnesses about, the subchapter S/C-corporation issue during trial.18 All knew that the 18 For example, this exchange between Sands and Leavitt took place at trial: Q Now, you know that Civil CADD was an S-corporation, correct? A Yes. Q That CCE[C] was a C-corporation? A Yes. Q Wouldn’t it have made better sense if both of them had been S- corporations? A Yes. Q At least that is what you would expect. A Certainly. Q It was not in the taxpayer’s interest to have an S-corporation and a C- corporation? A No, they were filed together, and we have already discussed, but – ... Q But it really is not advantageous to the taxpayer, and we can forget about this case, okay, but just in general, it’s not advantageous to operate two 33 government’s calculations, and even King’s first and second returns, treated CCEC as an S-corporation that passed its income through to King. King’s ignorance of CCEC’s corporate status—an entity that he owns—cannot be blamed on the lack of time to prepare for trial.19 Moreover, even if the income from CCEC was not passed through to King, Dunn’s calculations, eliminating that pass through, show that King still owed $362,986 in personal taxes.20 businesses that are somehow related, and one is an S-corporation and the other one is a C-corporation? A Yes, sir, in general, that would be correct. Q Because you are going to wind up paying taxes twice on the C- corporation. A The C-corporation would have double-taxation, yes, if the dividends would be given to the shareholders, yes. ... Q And the reason why a small businessman would not want to have a C- corporation is because he is going to run into this problem of having double taxation? A In general an S-corporation is going to be more advantageous for a small business. Q And that’s why you do it. You would expect to see – A As a limited-liability company, yes. Q Which is the same idea that there would be taxation once to the owners? A Right. Q Especially when you have two companies that are related and that you more or less have the same ownership, it makes no sense that one should be a C-corporation and the other one should be an S-corporation? A Yes, sir, I would agree with that. Q And certainly Barry Hechtman would have known the difference, or he should have known the difference? A I am sure that he knows the difference between the C-corporation and an S-corporation, yes. 19 According to his corporate tax returns, King’s Civil Cadd and CCEC did not pay taxes on income but as S-corporations passed that income through to King. This may explain why the jury convicted King on the personal income tax charges but acquitted him on the corporate tax charges. 20 As noted earlier, Dunn’s letter mentions that Cook prepared King’s third returns showing King had no personal taxes due for 2000, 2001, and 2002. It is unclear from Dunn’s 34 In any event, at sentencing, the district court rejected the argument that CCEC should be treated as a C-corporation, not an S-corporation, and that King owed less or no taxes. King’s own accountants, Hechtman and Cook, had prepared King’s first and second returns, both treating CCEC as an S-corporation. Further, each return shows that King owed substantial personal taxes ($295,014 according to King’s first returns and $473,000 according to King’s second returns). Given that the jury also had King’s first and second returns in evidence, King has not shown a possibility of a different result as to his convictions for the evasion of personal income taxes. As to the motorcycle purchases, King was on actual notice that the government was going to rely on specific motorcycle purchase records. The October 10 Exhibit List, served on King’s attorneys, specifically informed King that company checks that he used to pay for personal motorcycle purchases (Civil Cadd checks to Blais Cycles, Motoport USA, and Cycle Race Tek), as well as copies of the invoices he had been issued from Blais Cycle, Cycle Race Tek, and Motoport USA, would be introduced at trial. These checks supplemented the government’s earlier disclosure of the copies of King’s Wachovia Bank and Colonial Bank records in its SDO Response. The government’s draft of proposed stipulations also specifically refers to the records of the motorcycle purchases as letter when in 2006 Cook allegedly did this. In any event, those purported new, third tax returns were not introduced at the sentencing hearing on January 30, 2007. 35 government trial exhibits. The government delivered copies of each marked exhibit to King’s attorney on October 13, 2006. King had time before the October 24 trial date to investigate this discrete set of his records. In any event, King’s motorcycle purchases were but a single example of King’s large-scale financial manipulations designed to hide his personal income, as established at trial. This leads us to the final point. The trial evidence overwhelmingly showed that King had evaded paying personal income taxes in 1999, 2001, and 2002. King falsely told his original accountant Hechtman that another accountant was filing his returns for 1999 through 2002 and that Hechtman need not prepare them. Only after the IRS began its investigation and searched his office did King have Hechtman and his second accountant, Cook, prepare returns in 2004. Those two sets of returns both showed that King owed substantial personal income taxes for each of the years he was convicted. There was ample evidence that, inter alia, King (1) used Civil Cadd funds to pay the mortgage on his personal residence throughout 1998 to 2002 and to pay for the construction of a swimming pool at his residence, but booked those payments as Civil Cadd expenses or debts, (2) repeatedly commingled his personal and business funds, (3) channeled transactions through the Civil Cadd account that should have been handled as personal finances, and (4) paid himself hundreds of thousands of Civil Cadd’s dollars and deducted them as corporate expenses or repayment of “loans” rather than listing 36 them as salary or distributions. The trial evidence is replete with conduct designed to evade detection of personal income. We are convinced that King has not shown that more preparation time would have possibly changed the outcome in this case. In the absence of “specific, substantial prejudice” to King and in light of the overwhelming evidence against King, we cannot say that the district court’s denial of King’s continuance motions require a new trial.