U.S. v. Elsen

Citation652 F.3d 955,51 Employee Benefits Cas. 2448
Decision Date31 August 2011
Docket NumberNo. 10–2474.,10–2474.
PartiesUNITED STATES of America, Appellee,v.James Norman VAN ELSEN, Appellant.
CourtUnited States Courts of Appeals. United States Court of Appeals (8th Circuit)

OPINION TEXT STARTS HERE

Dean Alan Stowers, West Des Moines, IA, for appellant.Stephen H. Locher, AUSA, Des Moines, IA, for appellee.Before SMITH, GRUENDER, and BENTON, Circuit Judges.SMITH, Circuit Judge.

James Norman Van Elsen stands convicted for the theft or embezzlement of funds from his employee's Individualized Retirement Accounts (IRA), in violation of 18 U.S.C. § 664. On appeal, Van Elsen argues that his conviction should be reversed because, at trial, the district court 1 barred him from presenting evidence to the jury that he eventually repaid all of the embezzled funds. We affirm.

I. Background

Van Elsen solely owned Van Elsen Consulting, Inc. (VEC), a small actuarial business that serviced insurance companies. In September 2002, Van Elsen established a “Simple IRA” for his employees' benefit. A Simple IRA, similar to a 401(k) retirement plan, enables employees to save for retirement by authorizing their employer to withhold from their paycheck pretax dollars in predetermined amounts and deposit the funds into the employees' Simple IRAs. When Van Elsen established the Simple IRA, his retained plan administrator, American Funds, advised Van Elsen of his legal obligation to deposit withheld money into an employee's Simple IRA as soon as the money could be reasonably segregated from VEC's general assets but not later than 30 days after the last day of the month in which the monies were withheld.

In the fall or winter of 2004, Van Elsen began working on plans to start his own life insurance company, “Pella RE.” Van Elsen testified that, during this period, he largely delegated the direction of VEC's day-to-day operations to VEC employees, and focused the majority of his time on starting Pella RE.

In 2005 and 2006, Van Elsen withheld retirement money from the paychecks of three employees, Michael Staudacher, Mark Rowley, and Terry Hilker, but Van Elsen failed to deposit any withheld money into the employees' Simple IRAs within the statutory period. On several occasions in 2005 and 2006, Van Elsen admitted to the employees—both orally and via email—that he failed to timely deposit the withheld monies but assured repayment as soon as possible. For example, in a February 2005 email, Van Elsen reassured the three employees that “I know, I am behind in the IRA payments.... No one should worry, all monies will be deposited.”

In late summer 2005, the Department of Labor (Labor Department) received a complaint from one of VEC's former employees concerning Van Elsen's failure to deposit Simple IRA withholdings for the year 2004. In response to the Labor Department's subsequent inquiry into the matter, Van Elsen assured the Labor Department representative that this failure was an isolated mistake but failed to mention that the Simple IRA deposits for 2005 were also in arrears. Moreover, Van Elsen also withdrew more than $213,000 from VEC's company bank account to pay his own personal mortgage, make department store purchases, and finance personal trips. In June 2005, Van Elsen used approximately $10,000 from the company's account to purchase a boat.

In June 2006, an Internal Revenue Service (IRS) agent contacted Van Elsen about delinquent payroll taxes, and, according to Van Elsen, instructed him “not to make any unnecessary payments to anyone other than the IRS until a repayment plan could be established for his debts to the IRS.” At trial, Van Elsen testified that the IRS agent instructed him to pay over to the IRS the Simple IRA monies that he withheld from his employees' paychecks. The IRS Agent countered this claim with her own trial testimony that, never in her 23 years with the IRS, had she advised a taxpayer to take such action. Presently, on appeal, Van Elsen avers in his brief that, [a]s [he] understood it, payments to the employees' retirement accounts were ‘unnecessary’ according to the IRS.”

In the fall of 2006, the Labor Department again received a complaint about Van Elsen's failure to pay into the Simple IRA, prompting one of its investigators to contact Van Elsen. Van Elsen conceded that he failed to timely deposit employees' withholdings into their Simple IRAs but attributed this failure to ongoing financial difficulties that the company was experiencing. Van Elsen did not claim to the Labor Department, as he did at trial, that the IRS had advised him earlier that year to abstain from depositing money into the Simple IRAs until he paid his tax arrears. Moreover, despite draining $213,000 from the company's accounts for personal expenditures, Van Elsen told the Labor Department investigator that he had not drawn a salary in 2005 or 2006 as a self-imposed austerity measure. At trial, Van Elsen testified that, notwithstanding the seemingly personal use to which it was put, the $213,000 in withdrawals was not “salary” or “income.”

In September 2006, just before Van Elsen received his second Labor Department complaint, the IRS placed a $17,000 levy on one of VEC's company accounts. In October 2006, the IRS levied VEC's accounts receivable. On December 31, 2006, Van Elsen closed VEC. In April of 2008, Van Elsen and his wife filed for protection under Chapter 11 of the Bankruptcy Code. On January 14, 2010, Van Elsen repaid the Simple IRA deposits to the Labor Department by depositing all past-due monies plus interest into his employees' accounts pursuant to his Chapter 11 reorganization plan. Van Elsen's repayment occurred approximately six years after they were due, nearly seven months after his indictment and just two weeks before trial.

At trial, Van Elsen sought to introduce evidence of his attempts to start Pella RE, certain medical ailments from which he suffered, his allegedly unwavering intent to repay the withheld Simple IRA money, and his actual repayment. The government filed a motion in limine to bar Van Elsen from introducing any such evidence.

Ultimately, the district court permitted Van Elsen to introduce evidence of his attempts to found Pella RE, his ailments, and his intent to repay the Simple IRA withholdings. However, the district court concluded that evidence of Van Elsen's actual repayment on the eve of trial is irrelevant. The district court first entertained Van Elsen's argument at a pretrial conference, just before voir dire:

MR. LOCHNER [att'y for the gov't]: There was just one thing. The defendant did finally make a payment about two weeks ago of what he owes these employees. I filed that as to exclude that evidence as being irrelevant because it was so far after the crime was either committed or not committed, but at least on that one I would like a limiting instruction to explain to the jury that—

THE COURT: I just think it's irrelevant. Yeah.

* * *

MR. APPLEBY [Att'y for Van Elsen]: I had intended to ask him about that.

* * *

THE COURT: Well, why don't you make an offer of proof and then if I think it has something to do with intent, I'll let it in.

It's difficult. It seems to me if we did that in every case where the Government claimed a late payment there would be very few prosecutions. I'm thinking of tax, ERISA, et cetera. So my sense is it's irrelevant, but maybe I'm missing something, which is always easy for me to do.

MR. APPLEBY: Well, Judge, I'm thinking of—

THE COURT: Yeah.

MR. APPLEBY: —if I'm a juror, it makes a lot of difference to me with intent, seeing if he wanted to defraud the plan, if he actually paid it. If he paid it, there's certainly a sense that there was no intention to defraud.

THE COURT: But it does seem to me that the statute would be meaningless, wouldn't it? I mean, every time the Government would indict me for nonpayment of taxes, if I come in the day before trial and pay up—I mean, that's kind of my common sense thinking about it, but you know, maybe—I guess your claim is it goes to intent?

MR. APPLEBY: That's my claim, Judge, yes.

THE COURT: Okay. Well, let me think about it.

Subsequently, the case proceeded to trial, and, after the government rested and just before putting on his own evidence, Van Elsen made his final proffer as to the evidence of his repayment and the district court concluded that such evidence was inadmissible due to its irrelevance:

MR. APPLEBY: ... If it please the Court, Your Honor, I'd offer proof that Mr. Van Elsen was civilly sued by the Department of Labor to recover these unpaid employee contributions to the SIMPLE IRA plus additional interest they call opportunity costs; that through that process he agreed to pay and he has, indeed, paid the entire amount and that suit has been satisfied and settled.

He went through bankruptcy and entered into a stipulation with the Department of Labor there to make that payment, so the civil suit was a direct result of that. Those payments have all been made.

THE COURT: Okay. And, counsel, I think my ruling, this goes to the Government's motion in limine, was based upon [sic] I didn't believe that that had anything to do with their intent—with his intent, pardon me, in '05 and ' 06.

Your argument is this does have something to do with intent, I take it?

MR. APPLEBY: Yes, Your Honor. That's the argument.

The jury convicted Van Elsen of theft or embezzlement from an employee benefit plan in violation of 18 U.S.C. § 664, and the district court subsequently sentenced him to 15 months' imprisonment. On appeal, Van Elsen maintains that the district court erred when it precluded him from presenting evidence of his eventual repayment.

II. Discussion

We review a district court's evidentiary rulings ... for abuse of discretion, according substantial deference to the district court's rulings.” Ferguson v. United States, 484 F.3d 1068, 1074 (8th Cir.2007). “Even when an evidentiary ruling is improper, we will reverse a conviction on this basis only when the...

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