U.S. v. STIERHOFF CR No. 06-042-ML.
500 F.Supp.2d 55 (2007)
UNITED STATES of America v. Neil STIERHOFF, Defendant.
United States District Court, D. Rhode Island.
August 3, 2007.
Thomas G. Voracek, John N. Kane, U.S. Dept. of Justice-Tax Division, Washington, DC, for Plaintiff.
Alan S. Richey, Port Hadlock, WA, Scott A. Lutes, Providence, RI, for Defendant.
MEMORANDUM AND ORDER
LISI, Chief Judge.
Following a seven-day jury trial, Defendant Neil Stierhoff ("Defendant") was found guilty on four counts of tax evasion pursuant to 26 U.S.C. § 7201. Prior to trial, Defendant moved to dismiss his indictment under Fed.R.Crim.P. 12(b)(3)(B). At the close of evidence offered by the government at trial, Defendant also moved for a judgment of acquittal pursuant to Fed.R.Crim.P. 29, a new trial pursuant to Fed.R.Crim.P. 33, and a mistrial.
I. Motion to Dismiss the Indictment
The Federal Rules of Criminal Procedure provide that an indictment "shall be a plain, concise and definite written statement of the essential facts constituting the offense charged." Fed.R.Crim.P. 7(c)(1). The Supreme Court has "identified two constitutional requirements for an indictment: `first, [that it] contains the elements of the offense charged and fairly informs a defendant of the charge against which he must defend, and, second, [that it] enables him to plead an acquittal or conviction in bar of future prosecutions for the same offense.'" United States v. Resendiz-Ponce, ___ U.S. ___, ___, 127 S.Ct. 782, 788, 166 L.Ed.2d 591 (2007) (quoting Hamling v. United States,
Defendant was charged with four counts of tax evasion pursuant to 26 U.S.C. § 7201. Section 7201 provides that "[a]ny person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony. . . . 26 U.S.C. § 7201". Count One of the indictment alleges:
Counts Two, Three, and Four are virtually identical to Count One, but charge Defendant with receiving taxable income of $422,620, $345,967, and $145,006 for the years 2000, 2001, and 2002, respectively.
In his motion to dismiss, Defendant claims that the indictment fails to adequately apprise him of the elements of tax evasion, including willfulness, a tax deficiency, and an affirmative act of evasion. Defendant also argues that the indictment is deficient because it fails to set forth the statutory authority that imposes the legal duty to file an income tax return or pay an income tax. Finally, Defendant contends that the indictment is duplicitous because it charges Defendant with evading both the "assessment" and the "payment" of a tax. Accordingly, Defendant asks this Court to dismiss the indictment with prejudice.
The government argues that the indictment is sufficient because it tracks the language of the statute and includes all of the elements of the offense. In order to convict a defendant for tax evasion, the government must show (1) willfulness, (2) the existence of a tax deficiency, and (3) an affirmative act constituting an evasion or attempted evasion of the tax. Sansone v. United States,
Defendant argues that the indictment fails to properly allege the statutory element of willfulness. Although the indictment states that Defendant "willfully attempt[ed] to evade and defeat" his income taxes, Defendant maintains that the government was required to allege, inter alia, that he had actual knowledge of "the specific provision of the tax code that he was charged with violating." Bryan v. United States,
The general rule is that ignorance of the law or a mistake of law is no defense to criminal prosecution. Cheek v. United States,
Cheek, 498 U.S. at 199-200, 111 S.Ct. 604. Thus, the term "willfully" has been construed
According to Defendant, therefore, the term "willful," as it is used in the indictment, is too vague to allege that he intended to violate, a known legal duty. The Court, however, disagrees. The term "willfulness" is not vague, but is a term of art with a known meaning for tax defendants, i.e., the intentional violation of a known legal duty. See United States v. Whistler, 139 Fed.Appx. 1, 1 (9th Cir.2005) (unpublished). Defendant's argument is flawed because it fails to distinguish between what the government must allege in an indictment and what it must prove at trial. Defendant is correct in asserting that the government must prove at trial that he voluntarily and intentionally violated a known legal duty; Defendant, however, points this Court to no authority that requires the government to allege every component of the willfulness requirement in an indictment. Because the term "willfulness" has a known meaning, therefore, the indictment sufficiently apprised Defendant of the charges lodged against him.
B. Tax Deficiency
The indictment alleges that Defendant "had and received taxable income" and "that upon said taxable income there was owing to the United States of America a substantial income tax." The indictment also states that Defendant willfully attempted to evade and defeat the "income tax due and owing by him to the United States of America." Notwithstanding these express allegations, Defendant argues that the indictment fails to allege a "tax deficiency." Defendant maintains that in the absence of a signed return by a taxpayer, the government must show that the IRS has made a valid assessment of taxes owed before there can be a tax deficiency. This argument is simply incorrect.
"[A] tax deficiency . . . exists from the date a return is to be filed and . . . arises by operation of law when the return is not filed." United States v. Hogan,
Defendant also argues that the indictment is insufficient because it fails to set forth the specific amount of taxes that are due and owing. At least one circuit has explicitly found, however, under similar facts, that the grand jury is not required to make further allegations as to the precise amount of taxes a defendant sought to evade. See United States v. Citron,
Furthermore, proof at trial need not include a precise amount of tax due, but is sufficient if it shows that the amount of tax due is substantial. See id. at 315; United States v. Sorrentino,
C. Affirmative Act
The indictment alleges that Defendant willfully attempted to evade and defeat a substantial income tax "by failing to make an income tax return . . . and by committing the following acts: conducting business under the name of Joseph Adams, using a post office box in the name of Universal Audio to receive business receipts, utilizing a bank account in the name of Joseph Adams in order to deposit his business receipts, and using extensive cash." Nonetheless, according to Defendant, the indictment is deficient because it fails to allege that he performed an affirmative act. Defendant correctly points out that the failure to make an income tax return is a failure to act, or omission, and not an affirmative act. Defendant, however, also argues that the other "following acts" enumerated in the indictment are not specifically denoted as "affirmative acts," and therefore, the indictment is insufficient.
Defendant points to no authority, however, to support his assertion that the government must label every enumerated act an "affirmative act." Again, Defendant fails to understand the distinction between an allegation in an indictment and what the government must prove at trial. The government, at trial, must show that Defendant committed at least one "affirmative act constituting an evasion or attempted evasion of the tax." Sansone, 380 U.S. at 351, 85 S.Ct. 1004. Consistent with this obligation, the indictment alleges that Defendant committed several acts of evasion. The government, therefore, provided Defendant with sufficient notice of the affirmative acts of evasion that it intended to establish at trial.
In sum, the indictment clearly contains all of the elements of tax evasion and "fairly informs the defendant of the charge against which he must defend." Hogan, 861 F.2d at 314. The indictment identifies the type of tax evaded, i.e., the income tax. It states that Defendant had taxable income and owed a substantial tax to the United States, which he did not pay. It alleges that Defendant failed to make an income tax return. Finally, the indictment charges that Defendant acted willfully in evading his taxes, and enumerates several acts of evasion. Accordingly, the indictment plainly charges Defendant with the attempted evasion of his individual income taxes for the years 1999-2002, in violation of 26 U.S.C. § 7201.
Nonetheless, Defendant claims that the indictment is constitutionally defective because it fails to refer to a predicate statute requiring him to file an income tax return or pay an income tax. Defendant contends, and the government rightfully concedes, that 26 U.S.C. § 7201 does not impose a tax. Section 7201 penalizes
Defendant is mistaken. The indictment cites the statute he is accused of violating (26 U.S.C. § 7201) and identifies the specific tax (the income tax) he was obligated to pay.
In Vroman, the Ninth Circuit rejected the argument that an "indictment fails to charge a crime because it cites to 26 U.S.C. §§ 7201 and 7203, which prescribe penalties for failure to file an income tax return, rather than 26 U.S.C. § 6012, the section that requires a tax return to be filed." Vroman, 975 F.2d at 670. The court reasoned that a "[c]orrect citation to the relevant statute, though always desirable, is not fatal if omitted." Id. at 671; see Fed.R.Crim.P. 7(c)(3) (explaining that the omission of a citation is not grounds for dismissal of the indictment, or for reversal of a conviction, if the omission did not mislead the defendant to his prejudice). Here, as in Vroman, the indictment sets forth the elements of the offense Defendant is charged with violating (§ 7201) as well as the approximate amount of taxable income he earned each year. The indictment also alleges that Defendant engaged in specific acts as part of his attempt to evade paying taxes. Defendant, therefore, "knew the conduct he was being accused of, could adequately prepare a defense[,] and was not prejudiced by the lack of citation" to the predicate statute. Vroman, 975 F.2d at 671.
Finally, Defendant contends that the indictment is defective because it is duplicitous, i.e., because it charged more than one offense in a single count. United States v. Huguenin,
Hogan, 861 F.2d at 315 (internal citations omitted).
Defendant argues that his indictment is duplicitous because it contains allegations that could be interpreted to charge him with both evasion-of-payment and evasion-of-assessment. In its review of indictments remarkably similar to the one at issue here, however, the First Circuit rejected this argument. See Huguenin, 950 F.2d at 26; United States v. Waldeck,
Moreover, it is clear that Defendant understood as early as December 12, 2006, six months before the start of trial, that the government was proceeding on an evasion-of-assessment theory; the government stated as much during a hearing on Defendant's Motion for a Bill of Particulars. (Suppression Hr'g Tr. vol. 1, 14:10-19, Dec. 12, 2006). Accordingly, the Court finds that the indictment was not duplicitous and that Defendant understood the crime charged was evasion of assessment of taxes. See Waldeck, 909 F.2d at 558. In sum, the indictment here set out the elements of § 7201 with sufficient clarity to provide Defendant with fair notice of the charges against him, cf. United States v. Murphy,
II. Motion for a Judgment of Acquittal
Defendant moves for a judgment of acquittal, pursuant to Fed.R.Crim.P. 29, on the ground that there is insufficient evidence to support the verdict. In reviewing such a motion, a court must "scrutinize the evidence in the light most compatible with the verdict, resolve all credibility disputes in the verdict's favor, and then reach a judgment about whether a rational jury could find guilt beyond a reasonable doubt." United States v. Taylor,
Against the formidable backdrop, Defendant claims that the government has failed to prove all of the elements of 26 U.S.C. § 7201 beyond a reasonable doubt. As noted supra, the elements of tax evasion include: (1) willfulness, (2) the existence of a tax deficiency, and (3) an affirmative act constituting an evasion or attempted evasion of the tax. See Sansone, 380 U.S. at 351, 85 S.Ct. 1004; George, 448 F.3d at 98 n. 2 (same). Notwithstanding Defendant's contention, however, the Court finds, after a careful review of the record, that the government has come forward with sufficient, if not overwhelming, evidence to support each element of the offense charged.
To summarize briefly, the government produced uncontradicted evidence at trial that showed that Defendant was a successful, self-employed seller of electronic testing equipment. In the four years charged in the indictment, from 1999 through 2002, Defendant's business generated approximately $2.4 million in gross receipts. Defendant, however, held himself out to customers as Joseph Adams, and operated his business under the name of Adams Associates, Inc. The balance in one of his bank accounts during this period increased by over $1 million.
Finally, and perhaps more significantly, the jury heard Detective Timothy Sanzi's ("Sanzi") testimony concerning Defendant's admission to members of the Rhode Island State Police that he did not pay federal taxes.
III. Motion for a New Trial
At the close of the evidence offered by the government at trial, Defendant made an oral motion for a new trial pursuant to Fed.R.Crim.P. 33. Defendant renewed this motion at the close of all evidence. On June 29, 2007, Defendant also filed a written motion for a new trial, raising arguments
Rule 33 provides that "[u]pon the defendant's motion, the court may vacate any judgment and grant a new trial if the interest of justice so requires." Fed. R.Crim.P. 33(a). The First Circuit, however, "has repeatedly held that the seven-day limitations period for Rule 33 motions is jurisdictional, and therefore a district court is without power to hear such motions not filed within the seven-day period, unless based on newly discovered evidence, in which case the limitations period is three years." United States v. Glenn,
Here, Defendant, having filed his new trial motion (based on grounds other than newly discovered evidence) on June 29, 2007, ten days after the jury's verdict, submitted his motion one day late. See Fed.R.Crim.P. 45(a) (excluding intermediate Saturdays and Sundays from computation); see also Diaz, 300 F.3d at 78. Thus, this Court has no authority to entertain the written motion for a new trial filed on June 29, 2007. See Glenn, 389 F.3d at 287; Diaz, 300 F.3d at 78.
In his oral motion at the close of the government's evidence, however, Defendant raised two grounds for a new trial. First, Defendant contends that the testimony of IRS Revenue Agent, Michael Pleshaw ("Pleshaw"), exceeded the scope of a summary witness. Second, Defendant argues that the indictment was constructively amended by the government at trial, or in the alternative, that the government's proof constituted a material variance from the indictment. Neither argument, however, is persuasive.
At trial, Pleshaw testified as a summary witness for the government. Although not proffered as an expert, the government also established his qualifications before the jury. Those qualifications included twenty years of service with the IRS as a revenue agent, a bachelor's degree in business with a minor in accounting, and a master's degree in business administration. While employed by the IRS, Pleshaw completed additional classes in taxation, specialized training, and continuing professional education. Since 2000, Pleshaw has also been a member of the IRS's "Special Enforcement Program," working with the criminal investigation branch of the IRS and U.S. Attorney's Office to determine the correct tax liability of criminal defendants. At the time of trial, Pleshaw had testified as a summary witness on more than seven or eight previous occasions.
Pleshaw attended the entire trial and reviewed the voluminous documents entered into evidence in order to calculate Defendant's tax liability for the years 1999-2002. Pleshaw prepared summaries of his calculations which were admitted into evidence. (See Gov't Ex.'s 370-73, 375A-G, 376A-L, 377A-L, and 378A-L). According to Pleshaw's calculations, Defendant owed the IRS $458,587.00 in taxes for the years 1999 through 2002.
In computing Defendant's tax liability for the years in question, Pleshaw first
Once Pleshaw calculated Defendant's gross receipts, he then subtracted Defendant's business expenses from those receipts. Pleshaw explained that he treated any withdrawals from Defendant's bank accounts, with the exception of cash withdrawals made through an ATM, as a business expense.
After adding up all of the withdrawals from Defendant's Fleet Bank, Chase Bank, and PayPal accounts (other than ATM withdrawals), Pleshaw calculated that Defendant's business expenses for the year 2000 totaled $326,628.59. Subtracting this figure from the gross receipts of Defendant's business ($781,878.14), Pleshaw then arrived at Defendant's net profit for the year, or $455,249.55. (See Gov't Ex. 376K).
Starting with Defendant's net profit, Pleshaw next subtracted a self-employment tax adjustment, standard deduction, and personal exemptions to arrive at Defendant's taxable income. Pleshaw based
In his motion for a new trial, Defendant contends that Pleshaw exceeded his role as a summary witness and provided inadmissible expert testimony in the guise of a summary witness. The Court, however, believes that Pleshaw, although presumably qualified as an expert, did not go beyond his role as a summary witness. "It is well established that `[t]he nature of a summary witness' testimony requires that he draw conclusions from the evidence presented at trial.'" United States v. Pree,
"When a summary witness simply testifies as to what the [g]overnment's evidence shows, he does not testify as an expert witness." Pree, 408 F.3d at 869 (citing United States v. Swanguist,
Defendant's second ground for a new trial is based on his belief that the indictment was constructively amended by the government at trial, or in the alternative, that the government's proof constituted a material variance from the indictment. "A constructive amendment occurs `when the charging terms of the indictment are altered at trial so that they are different from those handed up by the grand jury.'" United States v. Munoz-Franco,
Defendant contends that there is a prejudicial variance between the amount of taxable income alleged in the indictment, for each of the years in question, and the amount of taxable income the government alleged at trial. This argument, however, is meritless. The indictment alleged that Defendant "had and received taxable income in the sum of approximately:" $193,246 in 1999; $422,620 in 2000; $345,967 in 2001; and $145,006 in 2002. At trial, the government introduced evidence showing that Defendant had taxable income in the amount of $232,635.98 in 1999, $440,028.55 in 2000, $360,882.64 in 2001, and $161,990.64 in 2002. The difference in the amount of taxable income alleged in the indictment and the amount the government's evidence showed at trial, however, is de minimis.
Defendant also argues that the government constructively amended the indictment by failing to call any of the grand jury witnesses to testify at his trial. According to Defendant, there is no indication that the evidence that was presented at trial was ever presented to the grand jury. Defendant, therefore, seeks to examine the grand jury transcript.
The Court, however, is not persuaded. The government constructively amends the indictment when it offers evidence at trial that operates to broaden "the possible bases for conviction from that which appeared in the indictment." United States v. Miller,
Here, the indictment clearly encompasses both the specific legal theory and the evidence the government presented at trial. At no point did the government attempt to offer evidence that was unrelated to the tax evasion charges. Nor has Defendant pointed to any evidence that was introduced at trial that would cause the Court to question "whether the defendant was convicted of [the] conduct that was the subject of the grand jury's indictment." Milstein, 401 F.3d at 65.
Moreover, Defendant has failed to show a "particularized need," if any, for the disclosure of the grand jury transcript. See generally Dennis v. United States,
IV. Motion for a Mistrial
Defendant also moves for a mistrial on the grounds that the government: (1) allegedly withheld exculpatory evidence and/or Jencks material, and (2) perpetrated a fraud on the Court because of alleged inconsistencies between the trial testimony of Detectives Sanzi and Killian and their testimony at a prior hearing on Defendant's Motion to Suppress. These arguments may be quickly dispatched.
Under Brady v. Maryland,
Under the Jencks Act, 18 U.S.C. § 3500, "a defendant is entitled to government documents for assistance in cross-examining witnesses in order to impeach them for prior inconsistent statements." United States v. Colon — Munoz,
18 U.S.C. § 3500(b) (emphasis supplied). The government is required to produce these documents whether they are exculpatory or not. See Rosario-Peralta, 175 F.3d at 53 (citation omitted). "In order to succeed on a claimed violation of the Jencks Act, defendants must demonstrate that they have been prejudiced by the failure to disclose." Id. (citations omitted).
During the cross-examination of Pleshaw, defense counsel asked the IRS agent about how he had determined Defendant's personal exemption for each of the years in question. Pleshaw responded that the exemption was calculated by computer, but that he had probably done the calculation out by hand to verify the number. When defense counsel asked about this calculation, Pleshaw referred to some work papers he might have used that would show his calculations. Defendant now argues that the government's failure to disclose these papers warrants a mistrial.
Initially, Defendant has failed, however, to show that these papers were material and potentially exculpatory or impeaching.
Defendant also contends that the government failed to provide him with copies of third-party summonses prior to trial. At trial, Defendant cross-examined several of the government's custodial witnesses about whether they had received a summons or a subpoena for the records they produced. Several witnesses testified that they had, in fact, received a summons -or subpoena. Defendant argues, therefore, that he was not provided with the proper notification that such summonses were issued.
At trial, Defendant informed the Court that he believed the IRS was required under the Internal Revenue Code ("IRC"), 26 U.S.C. § 6023, to provide notice to Defendant when it issues a summons to a third-party seeking documents. There is no 26 U.S.C. § 6023. The Court believes, however, that Defendant was referring to 26 U.S.C. § 7602(a), entitled "Authority to summon, etc." Under 26 U.S.C. §§ 7602 and 7604, "[t]he IRS has broad authority to issue summonses." United States v. Gertner,
26 U.S.C. § 7602(c)(1). This appears to be the section of the IRC on which Defendant is basing his argument. Section 7602(c)(3)(C), however, provides that this notice requirement "shall not apply with respect to any pending criminal investigation." As such, Defendant's argument is meritless.
Finally, Defendant claims that there were inconsistencies between the testimony of Sanzi and Killian at trial and their testimony at a prior hearing before this Court, and that, as a result, this Court should declare a mistrial. The Court, however, has painstakingly reviewed the transcript of the suppression hearing and has not found any material inconsistencies with the trial testimony of Sanzi and Killian that would warrant a mistrial.
Defendant has made a plethora of arguments in his various motions before the Court; any arguments the Court has not specifically addressed above, however, the Court has carefully reviewed and found to be without merit. Accordingly, for the foregoing reasons, Defendant's motions are all DENIED.
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