Opinion ID: 65776
Heading Depth: 3
Heading Rank: 3

Heading: Evidence of Failure to File Income Tax Returns

Text: The standard for reviewing an alleged violation of Federal Rule of Evidence 403, which prohibits unfairly prejudicial testimony, is especially high and requires a clear abuse of discretion for reversal. United States v. Fields, 483 F.3d 313, 354 (5th Cir.2007). Setser objects to the admission of evidence regarding the failure of his enterprises to file federal income tax returns or pay taxes. He argues that because he was not charged with tax offenses, and the evidence was that the businesses had not filed tax returns even outside the period of time charged in the indictment, his tax compliance was not probative of whether he was engaged in fraud and served only a prejudicial purpose. The district court granted Setser's motion to exclude evidence about his personal tax returns, but found that the government's theory that Setser had lied to investors about the existence of the corporate tax returns made that evidence intrinsic to the alleged conspiracy, and thus admissible. Intrinsic evidence is usually admissible in order to give a complete explanation of the crime. Freeman, 434 F.3d at 374 & n. 2. Setser quotes some testimony in which the failure to pay taxes was discussed in a more general way, with reference to both Setser personally and his corporations. On one such occasion, the district court interrupted the line of questioning. The government then returned to the previously approved use of the corporate tax returns to illustrate fraud. Other occasions did not concern the filing of tax returns per se, but statements made by Setser to others bragging about the low amount of taxes he paid. Setser must show that the probative value of the challenged evidence was substantially outweighed by the danger of unfair prejudice before its admission will be error. Fed.R.Evid. 403. Setser offers no meaningful response to the trial court's conclusion that the corporate tax return evidence was intrinsic to the conspiracy. That was because it showed he lied to potential investors to gain their confidence. His main complaint seems directed at the scattered references to his personal taxes. Those references largely were accounts of what Setser had told potential investors or employees about the tax benefits he enjoyed. Thus, that evidence could also be characterized as intrinsic to the conspiracies charged against Setser. In addition, the district court gave instructions that Setser was not charged with any tax crimes and, as noted, the court barred the admission of Setser's personal tax records. Because the tax evidence was intrinsic to the offenses charged, and not introduced simply to prejudice Setser by implying he committed uncharged offenses, the district court did not err in admitting it.