United States v. Powers, 2012 U.S. App. LEXIS 25582

Powers and Mahan ran CTS, a temporary staffing agency, from 1998 to 2004 and were convicted after an eight-day jury trial of conspiracy to defraud the United States by impeding the IRS and of mail fraud; Powers also convicted of subscribing false tax returns and Mahan of procuring false tax returns.
CTS paid workers in cash and did not report wages to the IRS or provide Forms W-2 or 1099, underreporting payroll taxes by millions of dollars.
CTS failed to file Forms 1099 for contract laborers during 2000–2005, despite advice from an accountant that proper forms were required.
State unemployment audits found CTS treated certain workers as subcontractors, leading to disputes over employee status and unemployment contributions.
IRS and DUA investigations revealed off-the-books cash payments and representations about contractor status; DAK (Powers’ former employer) had a similar cash-pay model.
After investigations, CTS ceased operations in December 2004; the defendants argued their defense relied on a good-faith belief that CTS was not an employer and that payments were legal.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the trial court erred by not giving an advice-of-counsel instruction	United States contends defendants relied on counsel’s advice and instruction was warranted.	Powers and Mahan argue the defense theory was supported by advice-of-counsel and should have been charged.	No reversible error; adequate good-faith instructions cured any prejudice.
Whether admission of certain witnesses’ conclusions on ultimate issues was improper	United States says testimony aided jurors in understanding facts and tax consequences.	Defendants contend witnesses expressed improper legal conclusions on ultimate issues.	Court did not abuse discretion; testimony was permissible lay or summary testimony clarifying facts.
Whether Pachico’s testimony and draft DUA opinion were improperly admitted or excluded	United States argues there was limited evidence and no prejudice from exclusion.	Powers and Mahan sought Pachico's testimony and the draft opinion to support their defense.	Rulings upheld; the district court did not abuse discretion; draft opinion would have been misleading and prejudicial.

United States v. Mubayyid, 658 F.3d 35 (1st Cir. 2011) (requires intent to defraud for conspiracy and related offenses)
United States v. Stergios, 659 F.3d 127 (1st Cir. 2011) (conviction requires intent; lack of willfulness is a defense in tax-related crimes)
United States v. Rodriguez, 858 F.2d 809 (1st Cir. 1988) (test for good-faith reliance on counsel; entrapment-like framework for defense)
United States v. McElroy, 587 F.3d 73 (1st Cir. 2009) (IRS summary testimony by agents is permissible to explain tax consequences)
United States v. Stierhoff, 549 F.3d 19 (1st Cir. 2008) (summary testimony allowed to analyze tax consequences)
United States v. Mikutowicz, 365 F.3d 65 (1st Cir. 2004) (limits on expert lay testimony regarding state of mind and legal conclusions)