United States v. DeMURO, 677 F.3d 550

James and Theresa DeMuro owned TAD Associates, LLC, an engineering and surveying firm in New Jersey.
From 2002–2008, TAD withheld more than $546,000 in trust fund taxes but did not remit them to the IRS.
IRS notified the DeMuros they could be personally liable, and a trust fund recovery penalty was assessed in 2003.
In 2004 the IRS required a special trust fund account; the DeMuros diverted funds and later closed the account without permission.
A 2010 grand jury indicted the DeMuros on conspiracy to defraud and 21 counts of failure to account and pay over employment taxes; both were convicted on all counts.
At sentencing the district court applied a two-level abuse-of-trust enhancement, which the court later reversed on appeal, prompting remand for re-sentencing.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Admissibility of willfulness evidence	DeMuros contend Rule 404(b) and relevance rules were abused.	Government argues evidence is probative of willfulness and conspiracy.	Evidence properly admitted for willfulness/conspiracy purposes; not reversible error.
Rule 404(b) admissibility for other withheld monies	Evidence of failure to pay other deductions was irrelevant or unfairly prejudicial.	Evidence shows motive, pattern, and state of mind.	Proper under 404(b); probative and not unduly prejudicial with appropriate instruction.
Closing argument referencing prior bad acts	Government's closing improperly emphasized 404(b) acts to inflame jury.	Argument appropriately tied to state of mind and motive under 404(b).	No plain error; arguments properly linked to permissible 404(b) purposes.
Exclusion of Hornby testimony and related evidence	Exclusions deprived defense of important lack-of-willfulness evidence.	Exclusions were warranted to avoid confusion and duplicative testimony.	No reversible error; exclusions did not prejudice the defense given other evidence.
Abuse of position of trust enhancement at sentencing	Trust fund account did not place DeMuros in a fiduciary position warranting §3B1.3.	District court correctly applied enhancement based on positional trust and abuse.	Enhancement was error; remand for resentencing; convictions affirmed.

Cheek v. United States, 498 U.S. 192 (Supreme Court, 1991) (willfulness requires voluntary, intentional violation of known duty)
United States v. Thayer, 201 F.3d 214 (3d Cir., 1999) (willfulness and defense theories in tax cases)
United States v. Ellis, 548 F.3d 539 (7th Cir., 2008) (personal spending evidence relevant to ability to pay and willfulness)
United States v. Blanchard, 618 F.3d 562 (6th Cir., 2010) (economic conduct and willfulness evidence admissible per 404(b))
United States v. Daraio, 445 F.3d 253 (3d Cir., 2006) (prior tax payment failures admissible to prove willfulness)
United States v. Sampson, 980 F.2d 883 (3d Cir., 1992) (the four-part test for Rule 404(b) admissibility)
United States v. Lee, 612 F.3d 170 (3d Cir., 2010) (logic chain requirements for 404(b) evidence)
United States v. Jemal, 26 F.3d 1267 (3d Cir., 1994) (limits on 404(b) evidence when defendant fully proffers defense)
United States v. Hill, 976 F.2d 132 (3d Cir., 1992) (harmless error standard for evidentiary rulings)
Langford v. United States, 516 F.3d 205 (3d Cir., 2008) (harmless error review for Guidelines miscalculation)
United States v. Hart, 273 F.3d 363 (3d Cir., 2001) (de novo review for position of trust determinations)