*1 in the Antiterrorism and period that the above cause Effective IT ORDERED IS 2244(d). Act, Penalty § en banc. Death 28 U.S.C. reheard this court shall be opinion hereby Supreme is VA- The Court vacated order previous panel’s and remanded to this Court for further CATED. Holland v. in the of light
consideration Florida, U.S.-, 130 S.Ct. (2010). L.Ed.2d 130 We now remand to purpose the district court for the limited conducting proceedings further fact- FORD, Petitioner-Appellant, James D. necessary, if finding including, eviden- — v. tiary hearing' opinion with the —consistent SECRETARY, DEPARTMENT OF judgment Supreme Court CORRECTIONS, Attorney General Holland. Florida, Respondents-Ap State LIMITED REMAND. pellees. No. 09-14820
Non-Argument Calendar. Appeals, States Court of
United
Eleventh Circuit.
Aug. (Court-Appointed),
Martin J. McClain Manors, FL, for Ford. Wilton America, UNITED STATES of Dittmar, FL, Tampa, M. for Re- Carol Plaintiff-Appellee, spondents-Appellees. v. KOTTWITZ, L. Mar-
Theresa Gerard chelletta, Jr., Marchelletta, Gerard Sr., Defendants-Appellants. No. 08-13740. Appeals, United States Court of Eleventh Circuit. DUBINA, Judge, Before Chief Aug. PRYOR., EDMONDSON Circuit Judges.
PER CURIAM: appeal
This is before us on remand from McNeil, Court. See Ford v. Supreme
— — U.S.-, 130 S.Ct. L.Ed.2d
-(2010). This denied in an un- Court
published applica- order James D. Ford’s appealability
tion for a certificate of about equi- whether Ford is entitled to
the issue tolling one-year
table limitations *7 Marcoviteh, Atlanta, GA, P.
Robert Rob- Bernhoft, ert Gerald The Law of Office Bernhoft, S.C., Milwaukee, WI, Robert G. Parker, III, Maloy, Wilmer Bruce W. Krutules, Jenkins, Agne A. James K. Ma- Parker, Froelich, loy, & Jenkins Jerome J. Froelich, Atlanta, GA, McKenney & Defendants-Appellants. 2001, we reverse the convic- Anand, R. tax return for Lawrence Sommer-
Justin S. GA, Atlanta, Kottwitz, Junior, feld, for U.S. and Atty., tions of and Senior U.S. enter a judg- with directions to
remand count. acquittal on this ment
I. BACKGROUND BIRCH, EDMONDSON Before & Associates is [“Nastasi”] Nastasi HODGES,* District Judges,' and Circuit in subcontractor Garden carpentry union Judge. City, York which installs and finishes New drywall. It was formed R20 438. PER CURIAM: in [“Frank”] Frank Senior Nastasi L. [“Kott- Theresa Kottwitz Defendants by Frank Tom and was owned Marchelletta, [“Senior”], witz”], Sr. Gerard White, Nastasi, In Hughey Senior. Marchelletta, Jr. [“Junior”] and Gerard son, president was Frank’s Nastasi’s and sentences for appeal their convictions [“Anthony”].1 Id. at Anthony Nastasi find the charges. tax fraud-related We 439^42, Nastasi, At served as Senior support jury’s evidence sufficient in President and was regarding conspiracy their convic- the Executive Vice verdict jury faith general good tions and that the charge estimating. Id. at 442. Nastasi by the dis- provided that was instruction in majority interest Circle Indus- owned fully encompassed trict court Kottwitz [“Circle”], drywall a commercial con- tries theory of defense on the Marchellettas’ Atlanta, Georgia tracting business find, however, that the charge. this We early R17 formed Junior 1990s.2 refusing give erred in district court 224; 370-71, R18 request- and the Marchellettas’ Kottwitz’s During years the first few after Circle jury special instruction to the ed Atlanta, working in often began Circle was their accountant’s good faith reliance on cash, including short of what was neces- advice. Because the evidence was suffi- sary payroll, regularly obtained jury instructed to con- properly cient for 430, 435, loans from Nastasi. Id. at materially charges filing vict on the income tax returns for 2000 false In awarded a construc- Circle was evading and for as to Junior and Senior on the Atlantis hotel project working tion Senior, taxes as to we vacate and remand Nassau, and casino in Bahamas. R18 instruction light for retrial Bahamian employ- 228. Because error. Because the evidence was insuffi- *8 required employees working ment law con- properly cient for a instructed to Bahamian in the Bahamas work for com- aiding assisting charge vict on the Industries, Circle materially corporate panies, organized in false Circle filing * 438, 468, Hodges, Id. at 470. Nastasi & White was United States District Wm. Terrell Florida, Frank, Tom, Senior, owned, Judge part by for the Middle District of sit- in ting by designation. drywall work in the World installed brother, Nastasi, at 471-72. Trade Center. Id. estab- 1. Frank and his Tom R20 at lished Nastasi Brothers in the 1950s. working the Nas- Senior started for 468-69. employee had worked as an of Nas- Junior school, high tasi Brothers while he was in 474; predecessor, White. R20 at tasi Nastasi job eventually promoted to a estimator in was 1984, purchased R17 at Nastasi While 95. In office. Id. at 469. In the late 1950s front business, drywall “biggest” Circle New York's 1960s, merged early with Nastasi Brothers Industries. R20at471-72. White. another subcontractor to form Nastasi company pay by February Bahamian to its from account the end of Ltd. as a 239; R20 at 415. Id. at 1999. R26 at 282-84. After the stock employees. swap, ownership Senior had no in interest time, decided About the same Senior percent Nastasi and owned about a 75 to retire from Nastasi and that he wanted Circle; in interest Junior served as Presi- run help to Atlanta to Junior Circle. move percent. dent Circle and owned about 25 1998, Senior and Frank On 31 December 153; 500; 288; R20 at R18 R26 Govt. with swap agreement entered into a stock 2, Exhs. 5 at 458-60. Senior devoted 75 attorney, of Nastasi’s tax the assistance Circle, percent of his time to while Junior Bernard, in ex- which Senior William devoted 100 percent his time Circle. in for changed his interest Nastasi Circle, year Govt. Exh. 5 at 2. For tax by and Nasta- stock held Nastasi $700,000 from repay approximately si loan Circle had million in agreed $26 444-45, 448-49, revenue, R20 at 499- Senior.3 gross principally large from com- 521; 1102-03; Exhs. R27 at Govt. 458-60. dormitories, projects mercial such as hos- The stocks transfer was to have been com- hotels, homes, pitals, nursing and resorts. January 2000. R26 at pleted prior to 224-25; 373; R18 at R20 at Govt. Exh. 5 swap agree- At the time of the stock at 1. ment, the Nastasi stock was owned 70 estimating expertise Senior’s and the es- by percent by Frank percent and 30 Sen- timating software that he developed were ior; percent the Circle stock was owned 80 business, “critical” to Nastasi’s and he con- per- Nastasi. R20 at 448. Senior’s 30 tinued to work for until Nastasi he retired cent share of Nastasi stock was valued at in 2000. R20 at working 450. While $1,300,000; percent Nastasi’s 80 share of Nastasi, Senior’s W-2 statements were $1,050,000. stock was valued at Circle prepared by the bookkeeping Nastasi de- 502-03; con- part Exh. 473. As partment and reviewed their account- sideration, agreed Nastasi to make an ad- Upon ants. Id. at 518. Senior’s retire- $250,000payment ditional Id. at Circle. ment, agreement he entered into an not to 503; The stock Exhs. 456. 473.1. compete with Nastasi construction exchange gener- recorded Nastasi’s was agreement provided work. The also $250,000 al ledger. R20 501. The Senior and employed Circle were as advis- wired from Nastasi to on 11 Febru- Circle Nastasi, pay- ors and consultants to ary and was received and recorded in Circle, any company ment Senior or operating account where it was co- Circle’s By sepa- either or both of them owned. mingled with other monies in that account. agreement, designee rate or his Senior 501-04; 198-207; Id. at R24 at R26 at $1,300,000, guaranteed paid to be Schleger, performing 280-82. who was ac- $6,000 weekly installments of and one for both counting auditing services $4,000 consulting payments, installment as Nastasi and Circle in considered the 1 January effective 2000. Id. at $250,000 it transfer a loan and entered 453-57, 508; 1102-03; R27 at against Nastasi’s records as an “advance Exhs. of the consul- Govt. Much cost to affiliate” and on Circle’s [Circle] *9 place tation estimation work took between books as an advance from a shareholder 503-04, 505-07, 522-24; technology departments the information R20 at [Nastasi]. 199-200, 202-03; 280-82; and working R24 at R26 at Nastasi Circle with Senior’s $250,000 software, spent estimating Govt. Exh. 473.1. The which both Nastasi exchange agreement independent performed 3. The stock was also re- accountant who Nas- by Stanley Schleger [''Schleger''], at viewed an tasi’s audits. R20 524-25. 375, 383, Id. at 422- On tion onto the invoice. R20 at 458-59. used. and Circle basis, sent an invoice weekly Circle between 50 and 100 23. Circle received work, consulting Nas- for 423; Nastasi Senior’s at at day. invoices each Id. R26 312. $6,000, deposit- and Circle paid tasi Circle job project name reflected the and The $6,000 account. Id. at into its bank ed the job assigned by year and the number was 218; 461-63, 465.1- 459-62, at Exhs. R24 job. the awarded Id. at historical order of recorded .44, 466.1-.42, Nastasi 467.1-.13. job number consist- 376-77. The standard “consulting fees” and Cir- as payments digits: represented the first two ed of five R20 them as “other income.” cle recorded year project began, that the and the 555-60; 458-61, 509, 545, R22 at at assigned consecutively three were last monies No other checks or R24 at 215. job The accounts chronological order. Id. “other income” account. posted were job payable clerk determined what and included payments at were R20 557. ledger assign number to to each general corporate income on Nastasi & Associates’ invoice, entered the invoice data into the IRS, return, audited which were and filed the invoice into Emque program, consulting fees. Id. at 530-31. 388-89, 423; invoice unpaid an file. bookkeep- as a employed Kottwitz was employees at accounts R26 312-13. Circle at 504. for Nastasi. Id. er/controller Emque about 2000 entries to the made Nastasi, Kottwitz worked with While at jour- month. If program per Id. 315. accountant, Gary outside Nastasi’s or were made nal entries reclassifications [“Schwartz”], work- while he was Schwartz books, they were done under Circle Stanley Schleger independent ing with the instruction of Kottwitz or Schwartz. accounting opened firm4 and after he had month, R20 at 408-09. About once an 424-25, 497, 513, practice. his Id. at own payable report unpaid invoices accounts 30-33, 36-38, 521; R22 at 156. Schwartz printed given to Junior for the performed work on the Nastasi tax returns paid. selection of invoices to be Id. at Schleger the Nastasi and account- both au- signature 423-24. Junior had ing at 35. offices. Id. Circle; and other ac- thority Logan for Logan [“Logan”] began Kassandra signature had a payable employees counts and, working beginning in 1994 Circle stamp they frequently used. Id. at entry data for accounts performed job Logan provided copies of the 395-96. estimating. R20 at 370-72. payable (“JM”) management reports, pay- accounts accounting Emque She learned Circle’s reports, general ledgers ables program during trip from Kottwitz Schwartz, Schleger and and discussed spoke New York and to her on the tele- ledger them. general revisions with phone any questions. if had Id. at she 377, 424-25, reports provid- 431. The JM that, an in- Logan explained 374. when cost, job’s on a overall ed information goods voice for or services was received losses, company’s profits progress Circle, opened by receptionist it was job, percentage job of the clerk, who payable and sent to accounts completed. that had been Id. at 377. The delivery shipping then matched it to a both the active and reports JM could show ticket to insure that the materials had accounts, reports inactive were received, both job name been and entered the routinely given to Id. at general ledger and number and informa- Junior. Nastasis, Schleger R20 at 498. worked with the in their businesses, years until various over *10 schedules, report. “en- and the JM Id. at 57- Schwartz was Beginning 58, 60-61, 63-64; Exh. prepare their audited Govt. 431.1. He gaged by Circle to computer and the related tax also had access to Circle’s and statements financial 39, 45, 125, any run needed additional reports. R22 at 185. His could returns.” 424-25; R22 at prepared that he would R20 at 146. He engagement provided letter “work-in-progress” that “reasonably obtain information” from the schedule listed accounts, jobs pending the accounts all with their actual billings and assess whether expenses compared and it were free from material misstatements to Circle’s expected profit that reconciled and valid. estimate of the from that insure each was 39, 41, Although job expenses at Schwartz re- to determine whether the Id. 48. for tax matched. Id. at ceived much of the information the revenues mail, he also trav- preparation return audits, In preparing Schwartz re- to Atlanta for the eled from New York “reasonable, quired provide that Circle spent days audits and two and one-half absolute, rather than assurance that and records each reviewing Circle’s books [wejre financial statements free of material at through from 1999 2003.5 Id. 41- June misstatement, whether caused error or 43, 45, 84, any 89. When he noticed misla- that “a explained fraud” material mis- entries, journal made en- beled Schwartz m[ight] statement remain undetected.” Kottwitz, or Ken- Logan, tries and advised Govt. Exh. 425 at 1. He further explained clerk, ya Diggs, an accounts receivable so designed that “an audit is not to detect correctly that the entries could be labeled.6 error or fraud that is immaterial 431, 563-64, R20 at R22 at financial statements” and that “a material 32, 107, completed the au- 162. Schwartz may fraud occur and not be detected.” Id. New York home office. Id. at dits his document, year, signed Each tax Junior 36, 41, 43. Schwartz, that, prepared by confirming belief, knowledge conducted audits the best of his Schwartz Circle’s he insurance, bonding given and used the au- had Schwartz all of the relevant information, prepare corporate tax including dits Circle’s re- documentation and records, data, personal turn and the Marchellettas’ tax financial Circle’s related 47, 83-84, any returns. Id. 90. Schwartz minutes of stockholder or directors’ it that explained “quite meetings, necessary difficult” to for Schwartz in- perform company’s prepare the audits of “the to audit Circle’s books and to Cir- control,” ternal in- personal but audits were cle’s and the Marchellettas’ 50-54; 140; “only done to the extent tax assess the come returns. control risk” and not to “uncover certain Exh. 427.10. One of the Govt. items 46, 49, types irregularities.” agreed Id. at Junior to disclose was “Relat- party Schwartz testified that no one at Circle ed transactions.” Govt. Exh. 427.10 limited his time in Atlanta or his audit at 2. The tax returns were due analysis any way, they provid- April year; corporate and that on 15 each him much time and September ed with as information return was due on 15 because prepare operated year began as he needed to the audits. R22 on a fiscal Circle 47, 60, 154, April 161-62. Schwartz on reviewed and ended 31 March. 90-91; ledgers, salary R24 general payroll Circle’s at 106-07. year Diggs charge
5. Circle’s fiscal ended on 31 March each was in of Circle’s accounts year, and Schwartz waited about two and department receivable from October 2001 un- one-half the books to close before months for til December 2004. R20 at 545. performing the audit. R22 at 43. *11 1252 necessary other information needed 31 what eventually prepared Circle’s
Schwartz 37, 43, 54-55, 57, R22 at statement, pulled.8 to be its financial March 2000 158, Although “very Kottwitz was 160. 1999-31 March April for returns 2001, bookkeep- busy” position in her as Circle’s March and the 2000-31 April and 1 er, manager, she comptroller, and office tax returns for personal Marchellettas’ 7, 83-87, 102-03; him with “as much information as provided Govt. R22 at 1999-2000. locating him in other 475, assisted 1-2, 5, 7.3, preparing possible,” In 485. Exhs. in returns, while he was needed information both personal the Marchellettas’ to New Atlanta and after he had returned for each of requested extensions Schwartz York, R20 at 125, help.”9 and was “there to 91, 174. R22 at Junior’s them. 32, 43, 56, 73, 156, 159, 583-84; $145,000 salary R22 at in reported tax return 161-62, 85-87; generally did not Exh. 3. 187. Schwartz at Govt. from Circle. Id. information, but re- or Senior for and 2000 tax returns ask Junior Senior’s 1999 W-2s, on Kottwitz. Id. at 32. Kottwitz capital his small relied flected income from Reports, interest, provided R22 at Schwartz with JM pension.7 and a gains, projects listed all of Circle’s includ- reported 2000 tax return which 100-03. Senior’s Bay. at $176,000 ing Crabapple Newport Id. salary from Circle but did not 60-61, not review or from 63-64. Schwartz did include income from Nastasi job, every on each construction but expenses by Cir- record payment 102-03; 232-34; every job job ledgers R24 had access to the cle. at at Govt. Id. jobs at random to a tax and selected certain “generated” Exh. 4. When Schwartz 59-60, return, review. Id. at 146. Schwartz com- signed original he IRS, “always” un- that Kottwitz was “re- sent his clients an mented sent return, get right them copy kept classifying an entries” signed books, 92-93, his advice on files. R22 at and would ask unsigned copy his 98, entry. at 162. classify where to Id. 119. was aware that Schwartz and Kott- Senior 2000, early In late 1999 or Kottwitz together, on the audits witz worked replace Logan Atlanta to as Cir- moved to in- upon relied Kottwitz for Schwartz accounting manager cle’s and controller. at formation and documentation. 185- 420, R20 at 563. Schwartz testi- 86. that, fied after he was retained to work Schwartz, Circle, who that he was spoke explained
with he to Kottwitz a few then, separation agreement by telephone times after unaware Senior’s audits, Nastasi, in Atlanta noticed that Circle’s “other when he arrived for the large account had a balance of he sat down with Kottwitz to review the income” $300,000,and asked Kottwitz about documents that had been assembled for around 101, 103; R22 at regarding the audits and to advise her it.10 R20 164-65. independent employee employee 7. cle's CPA and not an Senior was salaried of Nastasi employee and a salaried of Circle in of Circle. R20 583. R20at518; 2000. 306. that Circle's 10. Other witnesses also testified payments matter, these as "other in- books reflected separate In a Kottwitz testified that Randy CPA Brown testified come.” Circle's perform did and that she audits for Circle $6,000 "originally ... payments were that the were handled outside Circle's audits "an R24 at 215. Cir- booked as other income.” CPA firm.” R18 Kenya Diggs cle accounts receivable clerk post pay- told her to Diggs said that Kottwitz also obtained documents Schwartz, 559- as other income. R20 whom she understood to be Cir- ments
1253 that “it income come” explained was account was reclassified under the Kottwitz officer, payable that when the “note loan to officer” ac- from Nastasi & Associates 107-08, 120, count.12 at split up company former owners Id. 177-82.13 two Associates], explained suggested Schwartz that he money & was owed [Nastasi reclassification because he understood that corpora- to—as commission income to the “it capital, was a return of because of at at tion Id. also see id. [Circle].” (Schwartz breakup of the two ... companies, Senior explained that “what 120-21 So, money. was owed lot of that’s what payments] was happened [the Nastasi say ... brought me to that it should have put first into income and then w[ere] payable been in note rather than income.” that it told me was return of [Kottwitz] at journal Id. 120-21. Schwartz (Schwartz made at capital”), id. 164 answered entry regarding discrepancy when asked whether Kottwitz “[c]orrect” where the monies should be properly understanding it was her had “said logged. at Id. 177-78. After the money negotia- this was result of reclassification of the monies as loans pay- tions between Senior and ... Nastasi con- Senior, able to paid Circle three items on (Schwarz cerning split-up”); at id. behalf “charged Senior’s which were answered when asked whether “[c]orrect” offset” to what Circle owed Senior: his just telling Kottwitz “was what [Schwartz] taxes, personal York New his 2000 (Schwartz told.”); at she was id. 180-81 taxes, personal federal and construction explained testified Kottwitz that the Seay costs owed to Construction Ser- “money company owed” to Senior after the 119-23; R24 vices.14 at Exh. Govt. 600. breakup deposited into ac- Circle’s and “should” counts have been credited to Schwartz Kottwitz conferred on oth- Senior). Schwartz asked Kottwitz for er issues necessary, when and Schwartz regarding “documentation” the income but provided Kottwitz with regarding advice Kottwitz did not have the documents. Id. reporting personal expenses paid by 104, 165, at 184-85. Schwartz did not ask R22 at Circle.15 185. Schwartz basi- Senior for the documents and never re- cally relied on Kottwitz for all information any documentation, ceived documentation for this in- generally and did not come.11 Id. 184. At the close confer with the Marchellettas because year get of Circle’s fiscal the “other in- “didn’t want involved” and were $6,000 Agent correctly 60. IRS Lesso testified that the Schwartz to calculate his taxes. Id. payments were recorded as "other income.” 185. R24 at 216-17. payments $6000 13. Lesso confirmed that the 11. Schwartz understood that payable documents were reclassified as “notes officer” attorney's were at Nastasi's office. R22 at explanation account and that Schwartz's 184. the reclassification was consistent with his analysis. R24at217. Despite 12. in Circle’s ac- reclassification counting, did Seay actually Schwartz not correct Senior’s 14. Construction was the builder Junior's, Senior's, income tax return which did not and not residence. R18 $300,000 270, 272, missing reflect the in income. R22 182-83; R24 at 232-34. Schwartz admit- ted that he knew that the tax return needed to 15. When Kottwitz asked how to document revised, necessary but did not have the monies borrowed an individual from the legal appropriately company explained documents to account for Schwartz unreported up income. she should set a note receivable from the company showing Schwartz knew that Senior “never reviewed a loan receivable. R22 at ... of the tax returns” and relied on amounts,” $280,963 with “other when taled him with answers provide unable to pay- a “note in Circle’s books as recorded at 185-87. questions. them he did ask meaning that their officer to officer” able *13 was not that Senior recognized Schwartz $280,963; it never shown owed Circle was of books in the technicalities interested an asset. R22 at 75- books as Circle’s infor- financial records, not review and did 201-02; 285, 76; at R24 at R26 355. tax returns personal his or even mation in to Senior property was transferred 174-75, If 186. Schwarz him. Id. at Exh. 25. A March 2002 for Govt. $10. Sen- preparing he was while questions had occupancy was issued to Sen- certificate of return, he communicated ior’s Newport Bay residence on 10 ior for the 174. Id. at wife. with Senior’s 2002, to occu- May permitting thus Senior Exh. 33. py the home. Govt. 1999, a resi- purchased Junior In March in began planned he to build Junior’s home construction lot on which dential Seay had January after builder Bob 1999,16 April In Junior R18 at 186. home. for a house on the Cra- deposit received $250,000 from Enter- loan C&G obtained 272, 277-78; R18 at bapple property. Ltd.,17 purchase it to and used prises, Seay Exh. 114. referred Junior to Govt. Way Alpharet- Tullamore lot located on Frederick, mortgage origina- loan Robert 262; at ta, [“Crabapple”]. Id. Georgia Bank Colony tor at First where Junior 553-54; 851-53; R21 at R26 at at R20 $650,000 sought a construc- subsequently 248^49, not en- purchase This was 252. 136-37, 141, In at 278. tion loan. R18 at records.18 Id. 248^9. tered on Circle’s January contracted with Senior thereafter, found a suitable lot Junior Soon Dorman, Allen Inc. for the con- builder Senior, and, September for a home for Newport Bay struction of a house on the for the signed agreement Senior 338-43; at Exh. 125. property. Govt. located in New- purchase property Dorman, one of the owners of Allen Marc Cove, Georgia Bay Alpharetta, port Dorman, Inc., understood Senior was $270,000. Bay”] for R18 at [“Newport and, in the property the owner of the 321-24; Exh. 75.1. In October Govt. contract, Newport Bay construction Senior 1999,19 assigned the contract to Cir- Senior “Owner”; was no was identified as there Bay 339-43; purchased Newport at cle and Circle reference to Circle. R18 Govt. Exh. $270,006; 125. was re- property for deed Circle’s name as owner.20 corded with April the first month Beginning 321-22, 358-60; 75-76; R24 at R18 year, began 2001 fiscal Circle of Circle’s 284; 200-01; at Exhs. at R26 Govt. for the paying many of the contractor bills Bay homes.21 75.2, Crabapple Newport to- purchase, 75.4. The land which the Circle check was working at this 20. Lesso testified that was not for Circle 16. Kottwitz payable to of America. R24 at made Bank at 420. time. R20 building contractor Marc 201. Lesso Ltd., Enterprises, was a Bahamian acknowledged Newport Bay 17. C&G was Dorman Gorman, by George company during one of actually owned the construc- owned Circle 358-60; at close business associates. R18 Junior's R26 at 316-17. tion. R18 (Cameron Padgett architect 21. See R18 at 217 check received Circle Charles Cameron According to Internal Revenue Service Bay payment Newport down on the house Lesso, Agent John W. this transaction ["IRS”] was to be Senior’s resi- which he understood "through go the books” of Circle. did not dence; checks from Cir- [came] "most of the at 248. R26 cle”); (Seay's id. at subcontractors on 285-86 Circle); paid by Crabapple id. house were Again, transaction occurred before this Supply’s (Seay subcontractor Lummus began working Kottwitz for Circle. 214-21; payments R24 at 233. Some Junior understood that the R18 paid by Kottwitz the contractors from Circle were shown on the contractors were pay- employee Circle’s books as loans but he regarding with her or dealt investigate in an did not how were booked. In an affidavit submitted ments.22 between and R18 at 306. Senior’s home construction proceeding Junior arbitration project assigned “Newport Kottwitz indicated that she had the name Seay, Bay” for subdivision and on the Marchellettas’ its the number payments made project to the Marchel- Junior’s home construction “compensation” homes as times, assigned “Crabapple” At other the name for its lettas. R18 312-13. *14 by payments approved were subdivision and the number 00999. R20 at contractors’ 380-81,553-54; by check handled R26 at The Mar- Senior or with Circle 243-44. paid appeared also some of the chelletta home construction costs Senior.23 Circle vendors who worked on the Marchellettas’ Circle’s books and records as “ex- corporate year penses” categorized goods homes after the 2001 fiscal as “cost of sold,”25 and provided ended.24 were Schwartz (Moore paid by at owner Brandon Underwood was Cir- 615 received a Circle check air- 338, 349-50, (builder cle); by spoke id. at 360 Marc regard- billed Kottwitz and with her up check); by pick (Whitcomb Senior to ing Dorman was instructed and R21 at 840 paid by draw checks at Circle and was his comptroller, knew that Kottwitz was Circle’s house); Newport Bay Circle for work on the payments). and he dealt with her for 600-01, 603, (although R20 at 610-16 Diver- employee Jay sified Cabinet Distributors’ 281, (Seay 23. See R18 at 283-84 discussed had contracted with and Sen- Moore Junior Lummus Williams Brothers’ invoices ior, by paid she was Circle for work at the approve pay- with Junior and heard Senior houses); Bay Crabapple Newport R21 at ments); (Dorman id. at 349-50 received 631-33, (Gilmore Drywall 636 co-owner Den- "[ejvery check from Senior in a once while” by paid Gilmore Circle for work on nis was check). may have seen write one him 645-47, residence); Crabapple id. at 649- (Marvin Young, 50 the owner of Shamrock (Oscar Hadizadeh, 24. See R21 at 652-56 Doors, paid by was Circle for work on the Allgreen Landscape, owner of worked with 666-67, residence); Crabapple id. at 669 Crabapple Dorman on the residence and was Crawford, (Christian owner of Crawford 659, 661, Circle); (David by paid id. at 663 Landscaping paid by was Circle for work on White, Fountains, Specialty a co-owner of 703, 705-06, residence); Crabapple at id. paid by Crabapple was Circle work at the 712, 710, 714, (Jennifer Testa, 716-17 an em- 674-76, residence); (Dan at id. 679 Bartlett Creations, ployee paid by of Testa Marble was Heating Cooling paid by with Bartlett & was residence); Crabapple Circle for work on the Circle for work on the Marchellettas’ resi- 819, (Dennis Rose, employee id. at 822-23 dences); 686, Rast, (Jim id. at owner 690-91 Interiors, Spacemaker paid with Closet was Drywall by Company, paid of Jim Rast was by Circle for work on a Marchelletta resi- Newport Bay Circle for work on the resi- 828, Viale, dence); (Angelo id. at 833 720, 726, dence); (Edmond id. at 728-29 Ca- International, paid owner of Iron Works was Industries, pozzi, the owner of Modern was Circle for work on Marchelletta resi- paid Crabapple Circle on the for work 835, Whitcomb, dence); (David id. at 839-40 762, 766, residence); (Charlene at id. Capitol the Chief Financial Officer for Materi- Lott, a co-owner of American Landmark als, paid by was Circle for materials used at Fence, paid by on the was Circle for work residences); the Marchellettas' and R23 at (Louis residence); Crabapple R25 at 1008-09 Francois, (Thierry 916-18 the owner of Buckman, granite who installed floor tile and Age Designs, paid by Stone Circle for countertops, paid by Circle for work on residence). Crabapple work on the residence). Crabapple (Dorman 22. See R18 at 349-50 received a "every 25. The Marchellettas' homes’ construction check from Kottwitz once in awhile” check); may Report, have seen her one R20 costs were tracked on a "JM” which write 62-65, 76, at 141— income tax returns. Id. R22 at sonal during his audits. 268, 276, also testified that he was 144, 159; 315- 78. Schwartz 45; R26 R24 at of the Mar- fiscal unaware of construction 16; For Circle’s Exh. 328. Govt. residences; explained he the home chellettas’ 31 March year ending on construction of residences no income but sub- Circle’s jobs listed construction 431-32; the Marchellettas would have been “re- R22 64- R20 stantial costs. transactions” but that he was party for the New- lated payments 144-46. for the directly paying to never told that Circle was were made Bay residence port expenses. contractors; were made Marchellettas’ construction payments no 65-66. He further testified he at 316-18. R26 Senior.26 “may project not have noticed” the costs Bay Newport Although both costs, reports on the JM and thus the recorded Crabapple expenses were billings, no related did not constitute a not include them did reports, JM Schwartz 53-54, 63, flag” “red for him. 65- schedule, and work-in-progress his that, if he had 71. He claimed R22 them with Kottwitz. did not discuss *15 noticed the costs and realized that Circle 79-80; reports at 144-45. The JM at R26 paid for the residence con- had Newport Bay showed that both costs, he would have booked the struction jobs large expenses contained Crabapple compensation or as a loan to the costs as R22 at and no income. 65-66. Schwarz adjusted when he the en- Marchellettas consulting fees for the noted some of in R22 at tries June 2002. 69-71. Circle jobs in audit but did home construction his Georgia paid Alpharetta, also for Senior’s verify a letter to follow-up at apartment 2000 and for lawn care work.27 R22 at 175-77. The Marchellet- Island, Long New York home Senior’s tas’ construction costs were not treated for 694, 698, R21 at during 2000 and 2001. until accounting purposes after the end of 733-35; 228-32; 522, R24 at Ex. Govt. 531. accounting year on 31 March. Circle’s on expenses These were booked Circle’s 156-57; time, R24 R26 at At that at 278. records, respectively, as “office rent” and the costs could be treated as shareholder 229-31; R24 at R26 at “consulting fees.” distribution, straight compensa- income or 241-42. tion, R22 at or as a loan to shareholder. 70; 157-58; paid R24 at R26 at also for Junior’s visits with 278-79. Circle however, Club, Schwartz, adjust to the Gold did not Circle’s business associates venue, regarding projects books the home-related Atlanta adult entertainment clothing purchases. The Gold reported and the distributions were as Club return, appeared tax on the credit card state- cost-of-goods-sold charges on the 2001 “MSB, Bar” or reported Sports and did not include the distribu- ments as “Mike’s Inc.,” per- income on the Marchellettas’ and were recorded on the Circle tions as explained jobs progress project Id. at 141-45. He that reflected as numbers them. Bay”) (“Newport ("Crabap- "may and 00999 he not have noticed” the absence of 381, 552-54; ple”). at R26 at 277. R20 Id. at income. 65. that, audits, during Schwartz testified his provided Kottwitz him with boxes of materi- 26. Circle’s records reflected over of the 99% relating jobs. expenses paid Newport Bay R22 at als to each of Circle’s on the house. acknowledged that he 60. Schwartz had at 316. R26 pages of a JM made handwritten notations on expenses Specifically, paid Report that for both the New- Schwartz noted fees listed 27. Padgett jobs, firm Cameron port Bay Crabapple but made no to the architectural Landscaping. job Crawford R22 at 175- notations as to either and was unsure and to spoken had to Kottwitz about whether he as miscellaneous office 95. Brown reviewed Circle and accounting system 785-88, records, including Marchellettas’ R21 at 791- drafts of expenses. or vehicle 253-54, 257; prepared unfiled 2001 returns 92; Ex. Govt. R26 Schwartz. R24 at 102. Brown clothing purchases, Hong Kong from His prepared then and filed 2001 returns for Tailors, Hong Kong, Elegant Fashions the Marchellettas. Brown included in- Atlanta, credit appeared Circle’s return, come from Nastasi in Senior’s 588, 590-91, 597-98; R26 at card. R20 treated as income the expenses for the 257; 518, 520, Exhs. 529. These Govt. houses, cards, weekly credit expense pay- were recorded on Circle’s books expenses ments, and automobile use for Senior and and “miscellaneous office” ex- as “vehicle” 103, 163; Junior. Govt. Exhs. R26 at 259-62. penses. that explained reported 504. He he Schwartz During the summer that payments Senior received from the pre- to conduct his audit and visited Circle “Nastasi stock installment sale” in both tax for and the Mar- pared returns Circle payments 2000 and 2001 and treated as R22 at In the tax chellettas. 89-93. “[ljong capital gain” term because Junior, prepared return Schwartz “directly were related to the sale of the $183,231 reported salary as from Cir- stock, stock, exchange and not 100; cle. R22 at Govt. Exh. any consulting pro- services were pre- In return Schwartz vided.” R24 at 138-44. He observed Senior, $176,000 pared reported Newport Bay Crabápple both the 129-30; R24 salary from Circle. Govt. *16 home construction costs were shown on Exh. 497. Neither draft tax return re- reports, the JM which reported less than any personal expenses paid by flected Cir- that, jobs, “a hundred” but since there was cle for either Junior or Senior nor did jobs,” “no contract amount for these it was any Senior’s tax return include income screwy” “obvious” that “something’s be- 104-05, 109-10, 113, R24 at from Nastasi. right.” cause “it doesn’t look R24 at 168— 2002, September following 132. In a Unit- filed, 69. Before the returns were the agent’s investigation ed States Custom of Marchellettas submitted their estimated project Bahamian construction and Circle’s tax payments IRS. Id. 162- subsequent investigation by a the Internal 63. Service,28the Revenue Marchellettas were Junior, against An indictment issued tax re- advised to file additional Senior, April and Kottwitz in and previous turns until returns were by superseding was followed indictment 925, 927-30, R25 at 959-61. reviewed. Rl-1, against July each of them in 2007. Thus, prepared by the 2001 returns felony charges 42. Nine were set forth in signed were never nor filed. Schwartz (1) Junior, superseding indictment: 100-02; 96-98, R22 at R24 at Govt. charged and Kottwitz were with Senior howev- investigations, Exhs. 497. The conspiracy by to defraud the United States 965-71, er, continued. R25 at impeding the Internal Revenue Service in In the Marchellettas hired CPA revenue, in the collection of violation of 18 Brown, Randy (Count One)29; who then met with their § 371 Junior was U.S.C. Robertson, attorney and Ted a forensic charged filing materially person with false (Count Two) agent. accountant and former R24 at al income tax returns for 1999 IRS Immigration IRS would contacted. R25 28. The and Customs Enforce- to whether the 925, 931-33, 955-57. agent investigated ment who the Bahamian project attorney's the IRS of Circle's notified § 29. Under 18 U.S.C. an individual must field” "unusual” and "out of left concerns part conspiracy with at least have been Three) (Count to file false tax in 2000 and 2001. in violation of returns and for statement, 7206(1)30; charged During opening govern- § its Senior 26 U.S.C. materially in argued false ment that the Marchellettas “knew filing with for 2000 violation 26 the tax rules” chose not to follow them come tax return but Four) 7206(1) (Count § and lifestyle in order to live a U.S.C. unattainable in violation of 26 U.S.C. evading jurors. argued taxes 27. It that Senior, (Count Five)31; Junior, § and “conspired the Marchellettas with each jtime charged aiding with and Kottwitz were long[ loyal employee, other and their materially false filing in the assisting Kottwitz, bookkeeper” ... to hide (Count Six), for 2001 corporate tax return money by “cooking from taxes books” charged aiding with and Kottwitz was tricks,” “through accounting materially of a false assisting filing in the 10-11, filing false tax returns.33 R17 at (Count for 1999 Sev return Junior “against It claimed that their crimes were (Count en) Eight), and for and for 2000 taxpayers” and its United States (Count Nine), in for 2000 violation Senior provided lifestyles the Marchellettas with 7206(2).32 of 26 U.S.C. “mansions,” clothes,” replete with “custom nightclub trips. selected, jury After the district jury provided court with initial instruc- attorney’s During opening Senior’s jury court advised the tions. The district statement, explained he of- Senior lawyers’ not consider should opportunity fered Schwartz the to work statements, arguments, questions, and ob- Circle in Atlanta because he had seen Later, jections R17 at 4. as evidence. Nastasi, Schleger Schwartz’s work with instructions, during the same the district ... and Schwartz “held himself out as a again court reminded the CPA, experienced New York ... ... “[ojpening are neither evidence statements industry the construction and ... an audi- arguments” explained nor tor, financial R17 preparing statements.” ... government’s “opening statement is attorney emphasized 55-56. Senior’s *17 simply help you an outline to understand given that “complete Schwartz was access it in.” 7. the evidence as comes Id. at Circle,” to all the of books conceded trial, that, although home government At claimed that Senior’s construction books, conspired kept Kottwitz and the Marchellettas costs were on Circle’s Senior person any "Any person [wjillfully one other "to commit offense 32. aids or as- who— States, in, counsels, against procures, the United or to defraud the sists or or advises the under, States, preparation presentation any agency any or or in United or thereof in con- under, any purpose any arising or for ...." nection with matter manner laws, return, affidavit, internal revenue of a claim, document, "Any person [w]illfully or other which is fraudulent makes and who— return, statement, matter, any any or is false as to material whether subscribes other or document, falsity or not or is with the or such fraud knowl- which contains is verified edge person of the authorized or written that is made under the consent declaration return, affidavit, required present penalties perjury, such of and which he does not claim, guilty felony be every or document shall believe to be true and correct as to 7206(2). § guilty felony ...." 26 U.S.C. material ... shall be of a matter 7206(1). § ...." 26 U.S.C. presence jury, gov- 33. Outside the of the willfully any "Any person attempts explained who in ernment that "Kottwitz form[ed] any imposed with Junior Senior as the manner to evade or defeat tax the hub” "[tjhat shall, spokes, unreported payment ... or the in addition income thereof law, through penalties provided by guilty Crabapple related to flow[ed] [her].” to other felony § of a 26 U.S.C. 7201. R27 at 1025. 217-18, instructing any- By tracing do with Id. nothing “had classify $250,000 in over where to body the business received Circle from Nastasi invoices, ... February construction] that [home he believed facts, any bury [or] cost[s].” conceal money purchase was used in the explained 59. He further Id. at property for Senior’s home in October ... person, was “not a book that Senior 1999. Id. at 198-207. background,” but was have d[id not] that, Lesso 1 January confirmed from out as a “blue-collar worker who started March, 2000, $6,000 until 1 payments hard, ... an estima- young working man were entered on Circle’s books as “other tor,” professionals, people who “relied on income” paid Circle tax on this as ” ....
who wear the suits 59. Kott- 216-17; income to R24 at Circle. Govt. attorney argued also that Schwartz witz’s Exh. explained 7.3. He Junior had expertise for his tax and to was hired $150,506.97 in unreported about income financial records were cor- make sure the $56,480 deficiency and owed a tax needed, if changes rect or to make expenses 2000 as result of the for the review, sign, or prepare, Kottwitz did not Crabapple suits, home construction and returns, tax and that Kott- file $798,295.97 and that he had in unreported knew little about taxes that she witz so deficiency income and owed a tax to do hers. Id. at 65- also asked Schwartz $319,041 for 2001 as a result of the ex- 66, 71-73. penses Crabapple for the home construc- agent revenue John Lesso calculat- IRS personal expenses. tion and other R26 at ed that the Marehellettas’ and Circle’s 258-62. having tax transactions resulted Junior Lesso believed that the monies that Cir- $103,616 1999, $56,480 for deficiencies of paid apartment cle for Senior’s and land- 2001; $319,041 for Senior scaping unreported per- work constituted having deficiencies of sonal income taxable to Senior because the $132,858 $319,832 for 2000 and expenses were unrelated to Circle’s busi- having corporate and Circle tax deficien- 228-32; R24 at ness. R26 at 242. He $105,050 year ending cies of for the fiscal that, explained although temporary hous- $510,667 in March for the fiscal ing possible expense, was a business it was year ending in March 2002. R24 at period. limited to a short-term 247, 258, 260, 262, 268, 271. He ex- however, agreed, 231. He that the New- plained payments that the Nastasi consti- port Bay property was asset of Circle’s *18 (1) tuted income to because Antho- Senior during Although 2001. R26 at 316-17. he ny Schleger Nastasi and testified that explained expenditures that Circle’s on be- payments these were for services ren- half of Junior and were “taxable Senior (2) Nastasi, dered to invoiced Nas- Circle when the individual receives an economic (3) week, every tasi and Nastasi deducted benefit,” he later testified that the con- at 210-12. payments expenses. as Id. expenses struction on Circle’s books could Lesso, however, sepa- never examined the corpora- be characterized at the end of the ration, payment guarantee, consulting year tion’s fiscal either as loans or income agreements. explained at 209. He Id. shareholders, and that a such deter- payments that the reclassification of these mination was not made this case until payable account was to the “notes officer” books, adjusted Schwartz closed Circle’s analysis, inconsistent with his entries, prepared and filed that, Circle’s based on the reclassification of these Senior, during through September returns permit- a it June payments as loan to of the income. 2001. R26 at 354. ted Senior tax-free use ness, ordinary necessary and an ex- Hishon, attorney and CPA an Robert matters, person for a who lived New York pense in tax testified specializes who by Georgia corpora- a employed and was 1111— R27 at and Senior. behalf of Junior at 1141-42. He stated that the tion. Id. “receipt that Senior’s opined Hishon home construction costs for Senior proceeds from $6,000 a would be week “tax neutral” because Circle owned were ... of his shares in exchange the sale or and, time, building the land at that un- .... that would be classified Nastasi that house. Id. at 1142. He said capital as a Revenue Code der the Internal construction costs were taxable to Senior asset, [long-term] capital taxed as [and] year at the end of Circle’s 2001 tax when qualify ... as an ... would gain [and] compensa- he obtained the house title as R28 at 1132-33. He sale.” installment tion, paid that then and observed Senior that, capital gain, explained tax. Hishon believed Id. 1143-44. by taking the would be taxed “transaction expenses that the lawn maintenance were what was received minus the total value of incorrectly charged to Circle and should once, paid all at but under basis” and part have been booked as of the sharehold- Code, the tax could the Internal Revenue open account. at 1144-45. ers’ Id. if pay- of time paid period over evidence, period govern- ments on the sale were over At the close of the against He noted that Circle ment dismissed Count Seven Kott- time. 94; R2 at R27 at 1020. witz. Kottwitz “open to maintain an account” appeared jointly and the Marchellettas moved for an shareholders, things where were for both counts, acquittal remaining on all of the credited, and that such charged arguing that there was no evidence that account was “not unusual.” Id. laws, they intended to violate the tax payments He observed Circle’s process rights that their were due violated apartment rental for Senior were “ordi- government’s improper references necessary expenses ... nary and business trial to their Id. at 1022- during wealth. fringe” a working as sort of condition ben- 1035, 1037, 1039-45, 23, 1027, 1047-48. help efit to Senior move from New York to 94; These motions were denied. R2 at Atlanta. Id. at 1138. He believed R27 at 1049. lodging expenses were either excludable “ordinary gross from Senior’s income as request- Kottwitz and the Marchellettas necessary” expenses or deductible be- ed a “reliance on accountant” instruc- necessary 26; temporary, cause were tion.34 Rl-81 at Exh. A at R28 at 1199-1200. Based on its inter- employee participate busi- requested beyond a 34. The Marchellettas’ instruction Government must establish rea- acted sonable doubt the Defendant read: willfully specific charged and with intent as complete Good faith is a defense to the in the indictment. charges good in the indictment since faith qualified “Good reliance on ac- faith *19 part on the of the Defendant is inconsistent countant ... a to in [is] willfullness defense the existence of intent to or with So, defraud cases tax Defendant would of fraud.” part which an willfulness is essential if, "willfully” doing wrong not be before charge. Specific intent to or will- taking any regard alleged defraud action with to the ‘‘may negated by good-faith be mis- offense, good the Defendant consulted in fulness understanding good-faith law aor faith an ... accountant whom the Defen- of belief violating the law ...” The that one is not competent, made a full and dant considered proof burden of is not on the Defendant to report ... all accurate to that accountant of faith, course, prove good the Defen- of since material facts of which Defendant had the strictly anything. knowledge, and acted prove The means of then dant has no burden to Johnson, v. you if will. that States problem, 730 fixed the And is United of pretation (11th Cir.1984), the district court an expert.” F.2d 683 reliance on the advice of R28 instruction, finding that the denied the government objected at 1200-01. The that required instruction faith reliance good put it “think the should [e]ourt did not its one, “show, that de- [the that the defense Randy imprimatur on Brown’s advice” and all relevant facts fully disclosed fendants] that asking that the defendants were the and, two, that defen- expert [the to the “essentially ignore contempora- court their expert’s faith on the good relied in dants] they neous intent to ... look to what did that R22 at 1200. It commented advice.” Id. the fact.” at 1201-02. the after When that the defen- no evidence “there [wa]s court it not district asked whether was all relevant information to supplied dants] “just government sufficient for the to and relied accountant or accountants argument make that to rebut at- [Junior’s opinion” and good in faith on accountant’s torney’s] point,” government respond- the as appropriate that the instruction was not do,” that “what would to ed was which [it] to the facts.” Id. “adjusted not it was attorney I replied, Junior’s all “[t]hat’s responded counsel 1199-1200. Junior’s need.” that, initially to the 2001 returns draft- as During closing arguments, govern- the ultimately prepared by ed Schwartz and ment claimed that Kottwitz was “central” Brown, he did not want to be foreclosed scheme, to the and characterized arguing they presented had “tes- from statement, wit, Kottwitz’s to that she un- through Hi- timony through Brown and payments for Mar- derstood Circle’s the believed that shon that the defendants in filing what did the 2001 returns chellettas’ as “income” to the residences given by in accordance with the advice V Conduct and Article the of Professional New York State Society Principles accountant. CPA’s of ... good acted Whether the Defendant in provide, Conduct in relevant of Professional seeking purpose advice con- part, requires faith for the of care “[d]ue [an account- cerning questions the about which Defen- discharge professional responsibilities ant] to doubt, dant and whether the Defen- competence diligence. imposes It with strictly the dant acted in accordance with obligation perform professional to ser- received, questions you are all for to ability advice vices to the best a member’s of determine. concern the best interest those of for charges performed complete whom services are and consistent Also a defense [accounting] profession’s responsi- the indictment is where the tax violation was with the bility public." should “[Accountants] the result an accountant to to of failure of discharging responsibilities diligence, diligent to exercise due care or not Diligence imposes responsibil- ... result actions. Title clients Defendants’ ity promptly carefully, Regulations, render services Code Federal Section 16694— preparer thorough, applicable provides that an accountant or tax to be and to observe person “may prepares taxes not technical and ethical standards.’’ who - ignore implications you or tax accountant information fur- If find actually preparer ignored any information, did preparer or known to nished to inquiries preparer. preparer make rea- make reasonable as to whether The must complete inquiries provided him sonable fur- if information information correct, incomplete diligent, appears or or otherwise was not nished to be incorrect ability, appropriate thorough the best his preparer ... must make in- careful exercise due care quiries the existence and that to determine of facts failure charged in the in- required caused the tax violations a[n] [Internal and circumstances dictment, you acquit regulation as a must Code section or Revenue] Defendants. ” *20 R5-81, (italics are the Marchel- Exh. A at 15 claiming the deduction. condition to V, Circuit additions to the Eleventh Pat- lettas' the American Insti- Article Section Instructions). Jury tern tute Public Accountants Code of of Certified attorney’s Marchellettas, closing argument ... oath.” em- as a under Senior’s “lie[ ] 1265; phasized It that there was no evidence that also R18 312-13. see any knowledge he had of how for the entries that Kottwitz was liable suggested accounting were booked on Circle's rec- tax fraud because she conspiracy ords, certain entries should have that Circle to Schwartz failed to disclose potential problems alerted Schwartz to Marchellettas’ resi- for the paying was returns, and the need to file amended government at 1256. The dences. R29 had no criminal intent to Senior vio- that, the Mar- also maintained because the tax Id. at late laws. 1303-04. allocation of their chellettas did not direct any specific costs to home construction jury The district court instructed the to account, ... no “payables clerks had only base its verdict on the evidence and would treat idea” how the Marchellettas law, the court’s instructions on the and not job ledg- on their home the income shown lawyers’ on the at 1214- statements. actually or not would ers or whether see also R6-113 at The court 2-3. it as income. Id. at 1268. It declare provided jury with general instruc- suggested argument that the defense tion on the of a faith good elements de- supposed to know about” “Schwartz charge fense to the of intent to defraud person- 1228-30; of the Marchellettas’ the inclusion and on willfullness.35 R29 at expenses expense logs al Circle’s closing argu- R6-113 at 19-21. After ments, only lunch, ac- “nonsense” since he reviewed the was excused for day.” begin counts on “one Id. at 1329-30. instructed deliberations when forbids; good provid- purpose 35. The court’s faith instruction the law that with bad is ed: disobey disregard either to or the law. complete Good faith is a defense to the charges good So, in the indictment since faith you beyond find if a reasonable doubt part of the defendant is inconsistent constituting charged that the acts the crime [,] intent with to defraud or willfulness voluntarily were committed a defendant part charges. which is of the an essential legal as an intentional a known violation of "good precise While the term faith” has no is, duty; specific with intent to do definition, belief, honest it means an lack forbids, something the law then the element malice, perform and the intent to all of "willfulness” as defined in these instruc- obligations. proof lawful The burden of is tions has been satisfied. faith, good prove not on the defendant to hand, you On the other if have a reason- course, since the defendant has no burden able doubt as to whether a defendant acted prove anything. The Government must faith, good sincerely believing that the beyond establish a reasonable doubt that question tax returns in were true cor- specific the defendant acted intent to every rect as to material matter and that no charged defraud as in the Indictment. owed, additional tax was then the defen- expresses honestly opin- One who held intentionally dant did not violate a known ion, belief, honestly or an formed is not is, legal duty; that the defendant did not act chargeable with fraudulent intent even "willfully” part that essential though opinion is erroneous or the be- —and offense would not be established. It is not mistaken; and, similarly, lief is evidence purpose penalize of the tax laws only person which that a establishes made a despite innocent errors judgment manage- made exercise mistake in ment, or an error in careless, care, enough or was and it does establish reasonable is not fraudulent intent. merely paid show that a lesser tax was than careless, R29 1228-29. negligent, was due. Nor is a The district court's willfullness instruction unintentional understatement of income stated: sufficient. “willfully,” The word ... means that the Id. at 1229-30. voluntarily purpose- act was committed ly, specific something with the to do intent *21 room, tax ad- tent to violate the law and jury and they returned to government properly introduced evidence provided would vised because the evi- copy a of the indict- of the defendants’ wealth exhibits and admitted report high their failure to a Id. at 1340. With dence of form. ment and verdict courtroom, of income was relevant to their Junior’s volume jury out of the R2-134. court that he willfulness. attorney notified the district objection to court’s a written prepared had objected sentencing, At Senior instructions; requested jury denial of the probation officer’s determination as to the “[j]ust him to court instructed the district 21-24, amount of the tax loss. R30 at 32- In the written it.” Id. at 1343-44. file 37, 39-42, court district overruled that the district objection, observed Junior objections and found that the loss Senior’s Defendants’ give had “refused to court $1,000,000 between and amount was Number Jury Instruction proposed $2,500,000. 54-55. Kottwitz was ... Upon Reliance concerning ‘GoodFaith twenty-four impris- to months of sentenced to Exer- Failure of Accountant Accountant two onment on each of the counts of con- ” that “the dis- and argued cise Due Care’ viction, concurrently, run and three granted [good have trict court should count, years supervised of release on each R2-95 at 4. faith instruction.” reliance] concurrently. to run R30 at 147. She was deliberations, jury found Following Id.; also fined and assessed $2500 $200. Eight and guilty Kottwitz not of Counts RIO-156. Junior was sentenced see also abetting Junior and Sen- (aiding Nine thirty-six imprisonment on months of filing materially personal false ior conviction, three each of the counts of 2000), and found Junior not returns for concurrently, thirty-six run months of su- (filing materially guilty of Count Two pervised release on Count One and twelve 1999). return for R2-109 false supervised months of released on each of 2-4. convicted on Counts Kottwitz was Six, concurrently. Three to run Counts Six; was convicted on One and Junior $50,000 R30 at 146. He was also fined Six; One, Three and Senior Counts Id.; was assessed see also R3-154. $300. One, Four, Five, on was convicted Counts thirty-three sentenced to Senior and Six. Id. imprisonment on each of the months conviction, to run concur- four counts of jointly
Kottwitz and the Marchellettas supervised rently thirty-six months on all of the counts acquittal moved for an conviction, count of to run release on each conviction, no arguing that there was at 145-46. He was concurrently. R30 finding of intent to support evidence to $50,000 was assessed also fined $400. laws, govern- and that the violate the Id. at 146. Kottwitz and the Marchellettas during references the tri- improper ment’s ap- pending were each released on bond process violated due al to their wealth peal. RIO-186. R2-106; R2-127 at 24-26. rights. alia, “many, if not
They argued, inter II. DISCUSSION all, items of government’s specific Junior, Kottwitz, and Senior required appeal, income were not On alleged omitted was insufficient to year argue income for that the evidence reported [the] to be convictions and that the dis- support R2-127 at 9. The district question.” give motion, refusing trict court erred finding there court denied good faith reliance on accountant evidence from which rea- was substantial criminal in- instruction.36 jury could have found sonable ment; argument sufficiency argu- adopted Junior’s adopted Senior Senior’s Junior *22 1264 challenge review a the Evidence We both Insufficiency A. sufficiency the of the evidence and the Junior, Kottwitz, contend Senior judgment of a Rule 29 motion for denial insufficient to that trial evidence was the v. acquittal de novo. United States Mer conspiracy, a tax the existence of show (11th cer, Cir.2008) 1070, 541 F.3d 1074 knowingly participated any in that curiam); Descent, (per United States v. existed, may have or that conspiracy (11th Cir.2002) (per 292 F.3d 706 cu filing in the of a they aided and abetted riam). in view the evidence the “[W]e in 2001. Senior false tax return Circle government,” most light favorable that, because he was owed maintains making all reasonable inferences and cred $250,000 the end of 1999 from the as- favor, in ibility government’s choices by loan made Nastasi to signment and then “determine whether reasonable any personal swap, the stock Circle and guilty could have found the defendant made Circle for him expenditures Mercer, beyond a reasonable doubt.” 541 against credited should have been uphold F.3d at 1074. We will a Rule 29 reducing thus Circle’s debt payable, *23 objective economic “the
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of co-
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ernment must also show statements
than
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rather
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ties
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conspirators
parties
the
form
particular
Pritchett,
v.
429,
pede
the IRS. United States
Boulware,
128 S.Ct.
552 U.S.
(11th Cir.1990).
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citation omit
908 F.2d
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requirement must be
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of actual knowl
by evidence
established
that each
must be established
evidence
conspiracy
a
edge by
participant
each
conspirator knew that the scheme
alleged
intending
participants
at least two
between
filing
in the
of false tax
would culminate
of owed tax
the IRS’s collection
to obstruct
Adkinson,
at 1155. Ev
returns.
158 F.3d
evidence
progress
was in
revenue
or that a defendant
conspiracy
idence of a
knowing and volun
participant’s
of each
way
acted in a
that would have furthered
in it. Adkin
tary
participation
intentional
there had been one” is
conspiracy
“a
if
son,
The evidence
year.” Id.
Boulioare,
Supreme
In
Court noted
testimony
“nothing’s
Lesso’s
John W.
that tax classifications mandated consider-
pre-
are
the financial statements
final until
objective
ation of “the
economic realities of
testified
pared.” R26 at 278. Junior
particu-
rather than ...
a transaction
expenses
understood the construction
he
parties
lar form
that the
[of classification]
at 306.
employee
“an
loan.” R18
to be
Boulware,
employed.”
552 U.S. at
$36,456 deposit, due five
paid a
Circle
S.Ct. at 1175. The Court held
con-
the commencement of
days within
objec-
timing
intent is irrelevant to the
struction,
January
home in
on Junior’s
reporting
and IRS
tive
classifications
expenses
R18 at 27-78. No other
requirements
for distributions to share-
con-
on behalf of Junior’s home
paid
were
closely
corporations; objec-
holders of
held
2000. Id.
April
struction until
application
tive
of the Internal Revenue
*25
apply.
301 and 316
Id. at
Code Sections
26
For a conviction under
424-25, 434, 439,
1173, 1179,
at
128 S.Ct.
7206(1),
government
§
the
must
U.S.C.
a
Specifically,
it stated that
criminal
(1)
a tax
that the defendants:
filed
prove
tax
... does not need to show
“defendant
a written declaration made
return with
a
intent to treat diver-
contemporaneous
(2)
not
penalty
perjury;
of
did
under
capital
relying
sions as returns of
before
to be true and correct
believe the return
on
301 and
to demonstrate
316]
[Sections
(3)
matter; and
acted
every
as to
material
439,
owed.”
at
128
that no taxes are
Id.
merely negligently.
not
willfully and
Supreme
applied
The
S.Ct. at 1182.
Court
Edwards,
644,
777
v.
F.2d
United States
7206(1)
§
not-
Bouhvare to 26 U.S.C.
cases
Cir.1985).
(11th
A
under
conviction
651
7206(1)
§
...
ing
“[ajlthough
does not
show
requires
government
§ 7201
prove
the exis-
require
prosecution
(2)
(1)
willfully;
acted
that the defendants
deficiency, ...
the nature
tence of a tax
(3)
taxes; and
affir
deficiently paid their
can
character of the funds received
attempted to
matively acted to evade or
determining
whether
critical
v.
taxes. Sansone
United
evade
7602(1)
at
n.
§
has been violated.” Id.
433
States,
343, 351,
1004,
85 S.Ct.
380 U.S.
(internal
9,
quotation
13, 128
(citing
applied
at 1181 n. 13
Truesdell
should “be
S.Ct.
Comm’r,
against
adjusted
reduce the
basis of
v.
IRS Non Docketed Service
stock;” and,
(Mar.
if
Review,
the amount “which is not
15
Advice
1989 WL
omitted).
adjusted
a dividend ... exceeds the
1989))
(internal
basis
quotations
stock,”
for the
it
gain
should “be treated as
“[Ejconomic
right
remains the
substance
exchange
property.”
from the sale or
characterizing
funds re
touchstone
301(c)(l)-(3)(a).
§
Income
in-
should be
diverts them
ceived when
shareholder
gross
cluded in an individual’s
income dur-
corpo
before
can be recorded on the
ing
year
it is received
may
the diverted funds
ration’s books” as
451(a);
§
taxpayer.39 26 U.S.C.
26 C.F.R.
capital
be treated as “dividends
distri
(a
§ 1.301-1
dividend becomes taxable
on the
received
butions” based
benefit
when it is “unqualifiedly
subject
made
the shareholder.
S.Ct.
demands.”); Avery
[the
v.
shareholders’]
unclear, however,
1176. If it is
whether
Revenue,
Comm’r
Internal
292 U.S.
corporation
will have sufficient funds
674, 676,
(1934)
54 S.Ct.
1269 (7th Cir.1991). Aiding Abetting Filing Mews, 923 F.2d 68 of Re-
Materially False Income Tax turn expense en personal Although could not have been books prove charge
tries Circle’s To under 26 7206(2), government § must or balanced U.S.C. as dividends characterized “(1) willfully and that the defendant show and Senior’s sharehold to Junior’s relation (2) in the knowingly aided or assisted ac the end of Circle’s interests until er filing of a federal income preparation or suffi jury possessed counting year, the (3) that material tax return contained Three, on Counts to convict cient evidence knew to that the defendant statements $5,000 payment Four and Five. Circle’s Parker, 277 v. Fed. false.” United States $8,000 night-club visits for suits Cir.2008) curiam) (11th (per Appx. 957 Junior, erroneously labeled on were which Searan, v. 259 F.3d (citing United States by Junior reported and not books Circle’s (6th Cir.2001)). Although the de 441 income, provided sufficient the returns preparation fendant’s is of the understate evidence substantive essential, prove must government payments of income. Circle’s knowingly provided ment false the defendant Senior, expectation that it documentation with the fees for landscaping York New filing in the of a tax return. would be used per by Senior as reported were not which Wolfson, v. 573 F.2d United States income, substan provided sufficient sonal (5th Cir.1978); v. Ara United States in of the understatement tive evidence (2nd Cir.1992) cri, F.2d Further, if the determined come. 7602(2) (convictions § upheld under where landscaping payment that Circle’s the “defendants their scheme knew Senior, personal income fees constituted filing in the of false tax re would result deficiency of a tax objective element turns.”). that Senior satisfy charge was met *27 case, suggests In this no evidence in the Viewing the evidence evaded taxes. the Marchellettas knew that Kottwitz or government, favorable to the light most would file a false 2001 tax that Circle circumstantial could find sufficient jury the Kottwitz the Marchellettas return. finding a of intent and support evidence to tax before it was never saw the return on these counts. willfulness of it preparation filed or took action in it filed expectation an that would be with may shown Id. Evidence of such intent be in excess of the in an amount shareholder indebtedness, or other se- notes of collateral Dynamics Corp., 392 value of his services.” loan, curity provided repayment the for the "It is not the intent of F.2d repayment agreements the as to the time of governs parties that the characterization paid, to or and the amount of interest distribution, the economic the but rather corporate regarding the loan. Id. resolutions legal actions.” Id. consequent effect of their Intent, however, of a share- may If there is insufficient evidence be considered at 247. loan, corpo- receipt of a holder a shareholder's whether or not in the determination of dis- receipts is “treated as a constructive Ha- rate was a loan to a shareholder. distribution Revenue, ... taxable as a dividend to the T.C. tribution Internal 52 ber v. Comm'r of 255, 266, (1969). earnings profits corporate extent of WL In such 1969 1548 determination, corporate year in which it oc- fiscal parties at the the intent of Stainless, Inc. v. Comm'r key: curred.” Midwest is the sharehold- time of the distribution T.C.M.2000-314, Revenue, *4 n. 5 corpora- Internal repay the loan and the er’s intent to obligation. tion's intent to enforce such (2000). 1270 A materially false statements. Their district court abuses its discretion in (1) denying requested jury instruction on Count Six are reversed. if:
convictions (2) correct; the instruction is the instruc- Requested B. to Give the Good Failure substantially tion was not covered Jury Faith Reliance Instruction (3) given charge; and the defendant’s abili- ty present to an effective defense was seri- argue Kottwitz and the Marchellettas ously impaired by give the failure to by failing that the district court erred instruction. United v. Sirang, States 70 give proposed jury instruction re- (11th Cir.1995). F.3d 593 “The dis- garding good faith reliance on Schwartz’s trict court has broad discretion in formu- accounting advice and his failure exer- lating jury long instructions as as those care in They cise due his audit of Circle. instructions are a correct statement of the maintain that the district court misappre- Garcia, law.” United States v. 405 F.3d regarding jury hended the law what the (11th Cir.2005) curiam). (per needed to decide order for a defendant Further, jury because confused “[a] can opposed they to succeed as to when should give improper as a verdict as one which be instructed their ultimate determina- significant has failed to receive some in- guilt They as to tions innocence. con- struction, ... charge should be direct overwhelming tend there was evi- jury’s and focus the attention on the evi- dence that Schwartz failed to exercise due given dence at trial.” United States v. diligence in discharging care of his duties. (3d Blair, Cir.1972). 456 F.2d government responds The that Kottwitz In objecting a district and the Marchellettas were not entitled to failure to provide requested jury court’s good faith reliance instruction because instruction, objecting party must ad Schwartz never advised them how to rec- vise the court jury before the retires report ord personal expenditures specific objection deliberate of its and the returns, on their they never told evidentiary grounds upon objec which the about payments, (cid:127)Schwartz tion was based. R. Fed. of Crim. Proc. gave him disguised false books that 30(d). objection specific must be payments. It charge maintains that timely, Wright, United States v. 392 F.3d would have confused the and was (11th Cir.2004), “a general unnecessary because the court provided an objection suffice,” ... will not United instruction regarding high standard Gallo-Chamorro, States v. 48 F.3d criminal “good intent and that faith is a *28 (11th Cir.1995). objection 507 An timely is complete defense.” Finally, it asserts that even if jury made after the has been ex we should review only plain this issue for long jury cused as as the was told not to error because Junior never articulated begin deliberations until further notice. specific evidentiary grounds in support of Eiland, 738, See United v. States 741 F.2d charge object the and did not to its omis- (5th Cir.1984). 742 Although “we do not jury sion until after the had retired. extremely insist on an reading technical of We review de novo the issue of 30, objection Rule the should be sufficient requested whether a jury instruction is to give the district court the chance to evidence, supported by sufficient United goes correct errors before the case to the Calderon, 1314, v. States 127 (citations F.3d 1329 jury.” Sirang, 70 F.3d 594 (11th Cir.1997), omitted). and review the district Objections to the district court’s give court’s refusal to such an instruction erroneous belief that requested the in discretion, of abuse United States v. struction was an “incorrect statement of Morris, (11th Cir.1994). 1111, law,” 20 F.3d 1114 Yeager, the United States v. 331 F.3d
1271 (citation Cir.1991) omitted); (11th Cir.2003), a objections “as United States 1216, 1223 (11th Middleton, 820, 826 the 690 F.2d Cir. the denial of all of v. of form” to matter 1982); States, instructions, F.2d v. Strauss v. United 376 United States requested Cir.1994) (5th Cir.1967). (11th 416, is 419 reversible 1002, “[I]t 1006 15 F.3d Flynt, curiam) omitted), charge refuse on error to to a defense (quotation marks (per an theory evidentiary the for which there is not address objections that do which, if denial of foundation believed explanation court’s its district jury, legally it tailored would sufficient to render was “not the instruction because evidence,” accused innocent.” v. inadequate pre- are United States to the (11th Edwards, 1148, 1153 70 F.3d 968 F.2d Cir. appeal, Sirang, on serve issue omitted). 1992) (quotation A non- marks and citation omit- (quotation marks at 594 ted). objection failure to court’s preserved jury instruction is re- requested give good of faith reli “The defense stringent under
viewed the more standard expert designed is to refute ance advice 52(b). As plain error. Fed.R.Crim.P. government’s proof that the defendant explained, a is one plain we have error commit intended offense.” United law, clear, is under current is obvious (11th Johnson, 683, v. 730 F.2d States 686 rights. United that affects substantial Cir.1984) (internal quotation marks omit (11th Eckhardt, v. 466 F.3d 948 States ted). Such defense is successful when Cir.2006). (1) fully that they the defendants establish all facts to expert A is to de disclosed relevant trial court not free (2) expert’s relied in faith on good defendant’s existence termine law; charged it is Id. Once the defendant theory of as a matter of advice.41 defense presenta presents income tax evasion established the defendant’s willful legal all the rele evidentiary foundation evidence he disclosed tion of established, to a and, competent is en facts advisor and once defendant vant on the advice on his on that defense relied advisor’s based titled instructions disclosures, Ruiz, a jury F.3d he entitled to instruc theory. v. 59 is United States (11th Cir.1995); good on the defense of faith reliance 1154 States tion United (11th Williams, advice 1404 on the of his advisor. United v. 728 F.2d Cir.1984). Eisenstein, F.2d v. 731 1543- requested jury instruction States (11th Cir.1984) (citing v. specifically, rather Bursten Unit “precisely and should (5th States, 981-82 Cir. merely abstractly, point ed F.2d generally than 1968)). Morris, If the advice or expert provides ... no theory defense.” [ ] as an co-conspirator cita acts as (quotation at 1117 marks and 20 F.3d omitted). is expert, good faith reliance not estab The law is clear that tions Johnson, “any 730 F.2d United light is lished. defendant’s burden foun (11th Miles, if v. 290 F.3d in the is sufficient even States dation evidence” Cir.2002) curiam). credibility, (per A instruc reliance that evidence is of doubtful *29 if frivolous, inconsistent, required is also not the defendant imprudent, insuffi tion “material to cient, unbelievable, failed to disclose facts related or weak. United (11th misrepresentations.”42 1530, Opdahl, defendant’s] F.2d 1535 [the v. 930 States 353, Lindo, "possesse[s] ant.” United v. 18 F.3d all States 41. Where the accountant Cir.1994). (6th concerning 356 transactions [the the relevant facts outset,” necessary it not issue] at from is the material personally taxpayer A who fails to disclose the show "that he defendant takes his accountants or pertinent all facts the account- information from disclosed to 1272 Condon, 653, ability v. 132 657 the defendant’s
United States
F.3d
conduct his
defense[,]
(11th Cir.1998)
curiam).
(per
evidence,
any
regard
and where there is
an “ex
The defendant bears
dubious,
how
less of
inconsistent or weak it
justify
good
threshold to
tremely low”
been,
may have
support
good faith
faith
not need
reliance instruction
does
Morris,
claim.
20
1116 (punctua
F.3d at
Ruiz,
faith.
prove good
59 F.3d at
omitted).
tion and citation
The instruction
Morns,
20
1114 n.
see also
F.3d at
appropriate
is
even where the evidence
fully
the defendant
disclosed
Whether
might
jury
lead the
to conclusions that
facts,
failed to
all
relevant
disclose
not benefit the
would
defendant because
facts,
relevant
or concealed information
refusing
charge
point
withdraws the
advisor,
from
faith
good
his
and relied in
jury’s
from the
consideration and a jury
jury—
on his
are matters for the
advisor
given
opportunity
should be
to resolve
determine,
and not
court—to
under
all questions of fact. United States v.
proper instruction.43 See
States v.
United
Platt,
(2nd
789,
Cir.1970).
435 F.2d
792-93
(7th
Baldwin,
577,
Cir.1962);
307 F.2d
579
Such an instruction
proper
was
where the
Walters,
388,
v.
United
913 F.2d
392
States
defendants’ books
kept internally
were
(7th Cir.1990). A jury is entitled to the
by
accountants,
reviewed
outside
and their
opportunity to believe or disbelieve even
by
prepared
returns were
outside acc
fragile
support
evidence
of a defense.
ountants,44
Morris,
1114,
see
20
F.3d
Strauss,
419; Eisenstein,
376 F.2d
731
only
support
where
evidence in
F.2d
1545. Defendants are entitled to
instruction is the
own
defendant’s
testimo
if
good faith defense instruction
it
Strauss,
ny,
see
376
419 (citing
F.2d
(1)
(2)
correct,
substantially
was
was
States,
v.
Tatum United
F.2d
190
617
by
charge
(D.C.Cir.1951)),
covered
court’s
where
defendant
(3)
jury,
dealt with
point
Lindo,
some
testify,
failed to
see
1273
Duncan,
conviction,
v.
quired for
United States
v.
850
States
defendant. United
(6th Cir.1988),
1104, 1105,
(5th
Tannehill,
1049,
1117
over
F.3d
1058
F.2d
49
Cir.
Arizona,
v.
grounds,
on other
Schad
ruled
1995), adequately covered the
of
substance
2491,
115
111 S.Ct.
L.Ed.2d
U.S.
501
per
of defense
theory
the defendant’s
and
(1991).
instruction
The denial of the
555
present
mitted
counsel to
ade
defense
they
the defendants where
may prejudice
on
quate argument
good
the defendant’s
specif
the
lacked
have contested that
law,
misunderstanding
Snipes,
faith
of the
fraud;
preju
tax
such
intent
commit
ic
*10;
611
2010
2794190 at
F.3d
WL
the evidence
“amplified”
is
when
dice
Kouba,
v.
F.2d
771
United
822
States
and limit
them was circumstantial
against
(8th Cir.1987),
jury
or
the
required
in
ed,
their favor was
evidence
the
faith
the
good
rule out
in order to convict
Morris,
F.3d at 1118.
substantial.45
Martinelli,
v.
defendant. United States
denied,
may be properly
The instruction
Cir.2006).
(11th
1300, 1316
454 F.3d
(1)
however,
is
if:
there
evidence
the
to record re
personally failed
defendant
requested good
jury
The
faith reliance
with the un
provide his accountant
ceipts,
pattern jury
instruction was based on our
records, or inform his accountants
derlying
was, therefore,
instructions
a correct
income, see
v.
United States
of additional
of the law.46
statement
(6th
F.2d
1059-60
Garavaglia, 566
Cir.1977); (2)
is no
the
there
evidence.that
must
whether
We
first determine
received,
followed the
sought,
defendant
preserved
the
Kottwitz and
Marchellettas
in
faith or in
good
of an
advice
advisor
good
the
of the
faith reliance instruc
issue
facts,
of all
the
see
formed the advisor
of
in
through
objection
tion
the district
F.2d
Brimberry, 961
States v.
United
good
theory
court. The
faith defense
(7th Cir.1992);
v.
United States Dur
presented throughout the trial.
theo
The
(5th
(3)
1297, 1301
Cir.1980);
nin, 632 F.2d
statements,
in
ry
opening
was set out
the
merely
based
theory
such
of defense is
cross-examination,
during
Schwartz’s
Condon, 132
upon speculation, see
F.3d
Kottwitz, Junior,
in closing arguments that
(4)
656; or
issue of the defendant’s
the
Senior,
none of
were trained or
whom
given
for
conduct is
reliance on advice
not
taxes,
experienced in
relied on Schwartz
charges
jury
before
convic
classifying
his
made
for
advice
entries
tion,
F.3d
Snipes,
v.
United States
and in
correct tax
preparing
Circle’s books
(11th
July 16,
at *9
1275 (Counts income tax returns for 2000 Three jury the court’s erroneous district whether Four), requiring ... error and for constituted and Senior’s conviction instruction (Count Five), for a new trial.” and remand RE- evading reversal taxes and Mount, States v. 161 F.3d 678 United MAND for a new trial. We REVERSE (citation omitted). Cir.1998) (11th “If the Junior’s, Kottwitz’s, and Senior’s convic- evidence contain sufficient record does not in aiding assisting filing tions for and the properly which a instructed under materially corporate a false return for of of the [the have defendants could convicted (Count Six) REMAND di- 2001 and with offenses], jeopardy then charged double of judgment acquittal rections to enter the that con- mandate we vacate principles resentencing for on this count and of Kott- to court and remand the district viction witz on One. Count judgment enter a of directions to with in acquittal question.” on the count BIRCH, in Judge, concurring Circuit omitted). and citation (quotation marks dissenting in part part: that the have determined Because we majority’s analy- I fully concur the Junior’s support sufficient evidence was ruling on district sis the court’s filing material- and Senior’s convictions for jury. properly charge failure to With personal income tax returns for ly false regard majority’s conclusion that (Counts Four), and Three and Sen- 2000 adequate the record reflects evidence to (Count taxes evading conviction for ior’s prosecution’s sustain the burden on the Five), their convictions on we reverse charges, conspiracy respectfully I dissent. new for a trial. these counts remand prosecution’s Mindful of burden however, was, insuf- Because the evidence doubt, prove beyond a reasonable guilt Junior’s, Kottwitz’s, support ficient review of the record manifests that there aiding convictions for assist- Senior’s was no or circumstantial evidence direct materially corpo- false ing filing presented that Kottwitz and Marchel- (Count Six), we rate return for 2001 need conspired impede lettas the IRS. whether the district court’s not address There no evidence showed plain have constituted instruction would knew the Marehellettas Kottwitz how if requiring a new trial the evidence error any of expenses would treat the Circle Mount, 161 See F.3d had been sufficient. them personally which benefitted on n. 4. reverse their convictions 680 We returns, any put prepa- tax had this count and remand with directions on returns, saw ration of their ever judgment acquittal on this to enter was no their tax returns. There evidence resentencing for Kottwitz.47 count showing Kottwitz ever presented III. CONCLUSION Agreement or Consulting even saw the Guarantee between Senior Payment above, we AF- For reason stated Associates, had direct any and Nastasi & Kottwitz’s, Junior’s, and Senior’s FIRM of those docu- knowledge terms to defraud conspiracy convictions for ments, (Count One). to their or had information Internal Service Revenue maintains, As tax treatment. Senior convic- We VACATE Junior’s and Senior’s acceptance IRS’s filing materially false documents—and tions conviction, pendence appeal of the counts of resen her sentence and 47. Kottwitz did appropriate. United v. sentencing tencing is See States her is not before us. the record of Watkins, (11th note, however, F.3d 1296 n. the sentenc- We because Cir.1998). may ing multiple counts reflect interde- three on the first months’ never saw tax return before it Circle’s taxes *33 $6,000 any payments consulting preparation of the fees— filed or took action in of it payments expectation conclusion that with an that would support a it be filed materially not were to Circle and to Senior. with false statements. income consulting agreement provid- The written Moreover, personal expense entries retaining the ed that Nastasi was services in Circle’s books could have been char- Circle, and Nastasi’s IT Senior acterized as dividends or balanced rela- with IT people people. consulted Circle’s tion to Junior’s and Senior’s shareholder Senior a salaried of Circle employee was interests until the end of Circle’s account- paid income taxes on a based W-2 ing year. The determination of these ex- from he received Circle. The Nastasi penses April from until 31 March monies were reclassified Schwartz so 2001 as taxable also not income could occur recognizable as not to be as in- taxable year, until the end of Circle’s fiscal after in- come to Circle Schwartz failed to adjusted 31 March and the entries adjustment form or Senior to advise in September were made 2001. At that him 2000 tax that his returns needed to be time, recognized the Marchellettas adjustment. amended to reflect paid constructive income and their respec- (1) There no evidence that Kottwitz tive taxes. Those determinations could readjustment of pay- directed the Senior’s year. not be made for the tax (2) Senior, ments as taxable income to conspiracy convictions should reversed. cover attempted up original classifi- government Because the did not show (3) payments, cation of the or Senior knew or Kottwitz the Marchellettas knew of readjustment payments. of these a tax conspiracy or that Kottwitz or the no presented There was evidence that ei- voluntarily knowingly Marchellettas ther any Junior or Senior directed account agreed impede the IRS’s collection of entries Circle’s into accounts. The con- taxes, proof it failed on its burden struction costs for Crabapple and New- respect on Count convictions One. port Bay separate set up were as accounts books, expenses Circle’s and all were tracked within those accounts. There was
no any evidence Kottwitz made deci-
sions regarding Newport Bay proper- was, not, ty or how it or treated MED. FLORIDA CENTER OF Circle’s books or Senior. There was INC., CLEARWATER, no evidence that ever Kottwitz saw Cir- Plaintiff-Appellant, cle’s tax any input returns or had other v. than providing documentation Schwartz. There was no evidence that SEBELIUS, Kathleen in her official ca- Kottwitz had involvement in prep- pacity Secretary United aration, or execution submission of Jun- Department States of Health and Hu- ior’s or Senior’s returns or knew how Services, Defendant-Appellee. man payments Circle’s home construc- No. 09-13922. expenses tion and other were treated in Appeals, States United Court of Junior and Senior’s tax returns. Eleventh Circuit. There was no that suggests evidence Aug. Kottwitz the Marchellettas knew that Circle would file a false 2001 tax
return. Kottwitz and the Marchellettas
notes
if
motion denial we “determine that a rea
such,
expenditures
were
to him. As
sonable fact-finder could conclude that the
properly accounted for and did not result
evidence established the
guilt
defendant’s
income to him.
taxable
Senior also
Descent,
beyond reasonable doubt.”
292
that the evidence was insufficient
argues
(quotation
F.3d
706
marks and citation
knowingly
that he
show
evaded taxes
omitted).
tax return for 2000.
filed false
Kottwitz
Conspiracy
maintains that
the evidence showed she
consistently
right thing
tried to do the
conspiracy
A
to defeat the In
any of the tax
never saw
returns
issue
(“IRS”)
ternal Revenue Service’s
lawful
any expectation
or had
that the filed re-
functioning and
victimize
IRS is known
materially
con-
turns would
false. She
conspiracy.
as a Klein
United States v.
that there is no trial evidence
tends
show-
(11th
Adkinson,
158 F.3d
1154
Cir.
ing
any conspiracy
that she knew of
1998)
Klein,
(citing United
v.
247
States
filing
would result
tax re-
false
(2d Cir.1957)).
F.2d
government
908
The
agreed
join any
turns or that she
such
(1)
only
show not
requisite
must
act of
conspiracy.
argue
Junior and Senior also
properly report
a failure to
income but
by denying
the district court erred
(2)
agreement
also
between
least two
judgment
acquittal
motion
be-
conspirators
impede
the IRS’ function
cause,
States,
(3)
under Boulware v. United
ing and
knowing participation
such a
Adkinson,
U.S.
128 S.Ct.
170 L.Ed.2d
conspiracy.