Opinion ID: 583599
Heading Depth: 3
Heading Rank: 4

Heading: Acts of Evasion: Counts 7 & 8

Text: 54 McGill also disputes the Government's evidence of affirmative acts after May 15, 1988, the crucial period for Counts 7 and 8. The Government alleges that McGill opened the PSFS account in August of 1988, five months after the criminal investigation into his tax affairs had begun, and failed to report this account to the IRS. McGill allegedly deposited $9,000 of levied City fees into this account without forwarding any of the money to the IRS. 55 We find that, unless a taxpayer is in the situation of giving voluntary admissions during an investigation or a forced response to a subpoena, the failure of the taxpayer to report the opening of an account in his or her own name in his or her own locale cannot amount to an affirmative act of evasion. Omissions, including failures to report, do not satisfy the requirements of § 7201; the Government must prove a specific act to mislead or conceal. See Spies, 317 U.S. at 499, 63 S.Ct. at 368; Romano, 938 F.2d at 1572-73 (failure to report income is not by itself an affirmative act of evasion). McGill testified that he opened the account on the advice of counsel in response to IRS criticism for banking under the names of others. Joint App. at A-2005, A-2112-13. There is no evidence that McGill concealed this new account from the IRS apart from the fact that he did not inform the IRS of its existence. 56 The Government also cites as an affirmative act of evasion McGill's retention, allegedly in 1988, of $9,000 in City checks subject to levy. This action, if it occurred, does not suffice as an affirmative act under § 7201. Supposedly, McGill received the funds and deposited them into the PSFS account, an act necessarily occurring after August 1988 when the account was opened. By extension of our holding above, however, the deposit of funds into an account in one's own name cannot be an affirmative act of evasion. Thus, on the facts presented by the Government, there was no evidence that McGill attempted to conceal these funds. 23 57 In fact, McGill inquired as to why the City had sent the $9,000 to him; the City replied that it should not have done so and it forwarded the remaining $1,000 due McGill directly to the IRS. 24 Joint App. at 2099. Moreover, McGill apparently reported the money as income on his tax returns. Joint App. at 2100. Though he did not surrender the money, he was not ordered to do so, and it appears that he had no affirmative obligation to report its receipt, albeit he did have an obligation to pay his taxes. See e.g., Joint App. at A-229-30. 25 58 The Government argued at trial, in further support of Counts 7 and 8, that McGill's use of the Lillie and the McGill & Seay accounts continued past May 15, 1988, and that this continued use amounted to an affirmative act of evasion. Specifically, Agent Isabella testified that there were nine checks written from the Lillie account on McGill's behalf during 1988, and that automatic teller withdrawals from this account continued in proportion to years past. We find these arguments to be without merit. 59 On the facts of this case, McGill's use of the Lillie account becomes affirmative evasion only when he uses it to conceal his own funds. The jury could not conclude beyond a reasonable doubt that there were deposits of McGill's funds into the Lillie and McGill & Seay accounts after May 15, 1988. Nor could it conclude beyond a reasonable doubt that any of the funds in these accounts on and after that date were funds of McGill. The jury therefore could not find an affirmative act of evasion even if funds were disbursed from those accounts for the sole benefit of McGill. IRS Agent Isabella testified that the last deposit in the Lillie account of an item payable to McGill occurred on February 16, 1988. Joint App. at A-1598. Moreover, we have no evidence that McGill took in any cash payments from private clients after May 15, 1988. If such payments existed, the evidence should have been easy to produce, as McGill's secretary testified that she issued a receipt for each cash payment received. Joint App. at A-1541; A-1551. Finally, there were cash transactions through the Lillie account during 1988, but there is no indication how many, if any, occurred after May 15. Assuming there was activity beyond May, none of the transactions has been affirmatively linked to McGill. The record contains only total deposit and withdrawal figures for all users in 1988. 60 Thus, the record contains no evidence that identifiable McGill transactions continued with respect to the alternative accounts after May 15, 1988. 26 No jury could have found beyond a reasonable doubt that the evidence after May 15, 1988 sufficed to prove evasion under § 7201. 61 The Government did not meet its burden of proving evasive acts for Counts 7 and 8. We will, therefore, reverse McGill's convictions on Counts 7 and 8, for insufficient evidence of affirmative acts of evasion during the relevant period.