United States v. Steven Latin
800 F.3d 872
7th Cir.2015Background
- In 2008–2009 Sharon Anzaldi, Phillip DeSalvo, and Steven Latin pursued a "redemption"/sovereign-citizen tax scheme, filing 14 fraudulent OID tax returns seeking over $8 million in refunds; the IRS paid over $1 million on five returns before detection.
- Anzaldi expected 10% fees for assisting others and instructed payments to be structured in checks under $10,000 to avoid scrutiny.
- All three were indicted on multiple counts under 18 U.S.C. § 286 (conspiracy to file false claims) and § 287 (filing false claims).
- At arraignment Anzaldi chose to proceed pro se after a colloquy; the court appointed standby counsel who repeatedly stated she was competent. The district court declined to order a § 4241 competency hearing.
- Before trial the court admitted testimony about Anzaldi’s fee-structuring under Fed. R. Evid. 404(b). The court denied defendants’ request to instruct the jury that convictions required "willfulness," instead instructing "knowingly" and permitting a good-faith defense.
- A jury convicted all three; Anzaldi and Latin appealed, raising (1) failure to order competency exam, (2) absence of willfulness instruction, and (3) admission of fee-structuring evidence under Rule 404(b).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether court abused discretion by not ordering competency exam under 18 U.S.C. § 4241(a) | Anzaldi: her filings and adherence to sovereign-citizen theories showed delusions/paranoia and thus reasonable cause for a competency exam | Government/district court: Anzaldi understood charges, actively assisted in defense, standby counsel vouched for competence; bizarre legal beliefs alone do not show mental disease | No abuse of discretion; no reasonable cause to order § 4241(a) exam because adherence to discredited legal theories does not establish incompetence and record showed competency |
| Whether jury should have been instructed that conviction requires "willfulness" rather than "knowledge" | Latin: because claims arose from tax-return filings, Cheek dictates a willfulness requirement for tax-related offenses | Government/district court: §§ 286 and 287 do not mention willfulness; false-claims statutes require only knowledge that claim was false; Cheek applies to specific tax-code offenses, not false-claims statutes | Affirmed: willfulness is not an element of §§ 286/287; the "knowingly" instruction plus good-faith instruction was legally sufficient; any error would be harmless |
| Whether admission of testimony about structuring fees under $10,000 was improper under Fed. R. Evid. 404(b) | Anzaldi: evidence was improper other-act proof of bad character/propensity | Government/district court: admitted to show intent to defraud, knowledge, absence of mistake; a propensity-free chain of reasoning tied fee-structuring to intent and rebutted good-faith defense | No abuse of discretion; probative for intent/absence of mistake and not unduly prejudicial; limiting instruction given; admission harmless in light of overwhelming evidence |
Key Cases Cited
- United States v. Jonassen, 759 F.3d 653 (7th Cir. 2014) (adherence to sovereign-citizen theory does not, by itself, create reasonable cause for competency hearing)
- United States v. Alden, 527 F.3d 653 (7th Cir. 2008) (defendant’s unconventional legal beliefs do not necessarily show incompetence)
- United States v. James, 328 F.3d 953 (7th Cir. 2003) (frivolous legal theories are not evidence of mental incompetence)
- Cheek v. United States, 498 U.S. 192 (U.S. 1991) (certain tax offenses require a willful mental state because of tax-law complexity)
- United States v. Ferguson, 793 F.2d 828 (7th Cir. 1986) (Section 287 requires proof of knowing falsity, not willfulness)
- United States v. Catton, 89 F.3d 387 (7th Cir. 1996) (willfulness need not be proved under § 287; knowing falsity implies intent to defraud)
- United States v. Berry, 565 F.3d 385 (7th Cir. 2009) (pro se defendant’s active trial participation can demonstrate competence)
- United States v. Gomez, 763 F.3d 845 (7th Cir. 2014) (other-act evidence admissible only with a propensity-free chain of reasoning and careful Rule 403 balancing)