U.S. v. Mounkes

• Decision Date: 22 February 2000
• Docket Number: Nos. 99-3096,s. 99-3096
• Citation: 204 F.3d 1024
• Parties: (10th Cir. 2000) UNITED STATES OF AMERICA, Plaintiff - Appellee, v. WILLIAM L. MOUNKES AND CORREEN KAY MOUNKES, Defendants - Appellants. & 99-3098
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1024

204 F.3d 1024 (10th Cir. 2000)

UNITED STATES OF AMERICA, Plaintiff - Appellee, v. WILLIAM L. MOUNKES AND CORREEN KAY MOUNKES, Defendants - Appellants.

Nos. 99-3096 & 99-3098

UNITED STATES COURT OF APPEALS TENTH CIRCUIT

February 22, 2000

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF KANSAS. D. Ct. Nos. 98-40032-01-DES & 98-40032-02-DES

[Copyrighted Material Omitted] Thomas D. Haney, Fairchild, Haney & Buck, P.A., Topeka, Kansas, appearing for Defendants-Appellants.

Meghan S. Skelton (Alan Hechtkopf, with her on the brief), Attorneys, Tax Division, Department of Justice, Washington, DC, appearing for Plaintiff-Appellee.

Before TACHA, MCWILLIAMS, and KELLY, Circuit Judges.

TACHA, Circuit Judge.

Defendants William L. and Correen Kay Mounkes appeal from the district court's order denying their motions for judgment of acquittal and for a new trial. Defendants also appeal the district court's two point enhancement of Mr. Mounkes's sentence and the district court's failure to rule upon their motion for a one point reduction of Mrs. Mounkes's sentence. We exercise jurisdiction pursuant to 28 U.S.C. § 1291 and 18 U.S.C. § 3742, and affirm.

I.

Mr. and Mrs. Mounkes owned and operated Bill Mounkes, Inc. (BMI). BMI purchased used educational materials from professors and colleges and at government auctions, then sold the materials to distributors. One distributor, Amtext, sometimes sent defendants multiple checks to pay for a single shipment. Mr. Mounkes testified that somebody at Amtext advised him to request payment by multiple checks for sums over $10,000 in order to avoid IRS paperwork. Amtext's financial officer, Paula Blanche, testified that Amtext would break up payments only upon a payee's request. Ms. Blanche did not recall having spoken personally to Mr. Mounkes about multiple check payments.

On at least one occasion, Mr. Mounkes cashed multiple payment checks for a single shipment of BMI materials at different bank branches on the same day. On at least one other occasion, Mr. Mounkes cashed multiple checks at the same bank branch on different days. Mr. Mounkes testified that he knew about the IRS's $10,000 transaction reporting requirement but did not comply because he was concerned that filling out the reports would lengthen his already lengthy workdays.

Mr. and Mrs. Mounkes maintained both business and personal bank accounts. Stanley Buss, the Mounkeses' accountant, testified that he instructed the Mounkeses to keep their business and personal accounts separate. Mr. Mounkes testified that he did not recall being so advised.

The IRS audited the Mounkeses' personal income tax returns for 1989 and their personal and corporate income tax returns for 1991 and 1992. In the 1989 audit, IRS Agent Robert Tice found that the Mounkeses had deducted $10,000 in corporate expenses on their personal return. Tice testified that he explained to Mr. Mounkes that personal and corporate expenses must be kept separate and that the Mounkeses could properly receive payments from the corporation only in the form of wages or dividends. Mr. Mounkes testified that he had never heard of a dividend until trial.

In the 1991 and 1992 audits, IRS Agent Maria Espinoza employed the "bank deposits" method of determining unreported income. This method required that she compare the Mounkeses' bank deposits and nondeductible personal expenditures to the income reported on their tax returns for each audited year. Espinoza therefore had to establish a "cash on hand balance" for the beginning of each of those years. In BMI's 1991 corporate tax return, Mr. Mounkes reported that BMI's cash on hand was $1000 at the beginning and $296 at the end of the year. Mr. Mounkes also gave Espinoza a handwritten statement of personal cash on hand repeating what he had reported for BMI. He further testified that he did not keep any additional cash at home or in his desk.

Espinoza ultimately found that the Mounkeses' bank deposits and personal expenditures significantly exceeded the amount of income they reported on their personal returns for 1991 and 1992. She testified that Mr. Mounkes blamed the discrepancies on Buss. Mr. Mounkes testified that he had told Buss that certain land and jewelry he purchased were corporate assets. Evidence at trial indicated otherwise, and Buss testified that he believed the assets to be personal on the basis of information that Mr. Mounkes had provided him.

A grand jury indicted the Mounkeses on four counts of attempting to evade personal and corporate income taxes in violation of 26 U.S.C. § 7201. A jury convicted both defendants on all four counts. The Mounkeses moved for a judgment of acquittal and a new trial, and the district court denied both motions. In sentencing the defendants, the trial court applied a two point enhancement to Mr. Mounkes's sentence for obstruction of justice pursuant to U.S. Sentencing Guidelines Manual § 3C1.1 (1998). Under 18 U.S.C. § 3553(b), the court did not rule upon the Mounkeses' motion for a one point reduction of Mrs. Mounkes's sentence on the basis of circumstances not contemplated by the sentencing guidelines.

II.

The Mounkeses challenge the denial of their motions for judgment of acquittal and for a new trial, arguing that the evidence of beginning on-hand cash balances was insufficient to support a guilty verdict. In determining the sufficiency of evidence, we review the record de novo. United States v. Urena, 27 F.3d. 1487, 1489 (10th Cir. 1994). We review the evidence to determine whether, if taken in the light most favorable to the prosecution, it is sufficient for a reasonable jury to find the defendants guilty beyond a reasonable doubt. United States v. Jenkins, 175 F.3d 1208, 1215 (10th Cir.), cert. denied, 120 S. Ct. 263 (1999). "The evidence supporting the conviction must be substantial and do more than raise a suspicion of guilt." United States v. Anderson, 189 F.3d 1201, 1205 (10th Cir. 1999) (internal quotation marks and citation omitted).

We review the district court's refusal to grant a new trial for abuse of discretion. United States v. Quintanilla, 193 F.3d 1139, 1146 (10th Cir. 1999). The trial court may grant a new trial if the interests of justice so require. Fed. R. Crim. P. 33. Motions for new trial are disfavored, however, and granted only with great caution. Quintanilla, 193 F.3d at 1146.

A jury convicted the Mounkeses of willfully attempting to evade personal and corporate income taxes in violation of 26 U.S.C. § 7201. To establish that offense, the government must prove 1) the existence of a substantial tax liability, 2) willfulness, and 3) an affirmative act constituting evasion or attempted evasion. United States v. Meek, 998 F.2d 776, 779 (10th Cir. 1993) (citing Sansone v. United States, 380 U.S. 343 (1965)). The Mounkeses argue that there was insufficient evidence to prove the first element.

To establish the first element, the government employed the bank deposit method of proof. The government's evidence showed that the Mounkeses' bank deposits and cash expenditures exceeded their reported income after adjustments for applicable exemptions and deductions. Such evidence supports an inference that defendants had unreported income. See United States v. Conaway, 11 F.3d 40, 43 (5th Cir. 1993); United States v. Ludwig, 897 F.2d 875, 878 (7th Cir. 1990); United States v. Abodeely, 801 F.2d 1020, 1023 (8th Cir. 1986). This "indirect" method of proof is permitted because "direct methods of proof . . . depend on the taxpayer's voluntary retention of records," rendering "[p]roof of unreported taxable income by direct means . . . extremely difficult and often impossible." Abodeely, 801 F.2d at 1023. However, to distinguish between unreported, taxable income and those deposits and expenditures not derived from taxable income, the government still must establish the defendants' pre-income "cash on hand" with reasonable certainty, while negating other sources of nontaxable income during the same period. Conaway, 11 F.3d at 44. On the other hand, the government need not establish the "cash on hand" figure with mathematical exactitude. Id.; see also Ludwig, 897 F.2d at 880-81; United States v. Boulet, 577 F.2d 1165, 1170 (5th Cir. 1978).

Agent Espinoza testified at trial that she defined "cash on hand" for Mr. Mounkes when she sought his beginning cash balances. The record indicates that Mr. Mounkes then gave Espinoza a written statement of his cash on hand, and that statement was admitted into evidence. Mr. Mounkes testified at trial that he did not keep unreported cash at home or in his desk. Finally, BMI's corporate balance sheets and tax returns, which were admitted into evidence, precisely corroborated the figures that Mr. Mounkes gave to Espinoza. Under these circumstances, the jury could quantify the Mounkeses' beginning cash on hand with reasonable certainty for 1991 and 1992. Thus the evidence, when taken in the light most favorable to the prosecution, was sufficient for a reasonable jury to find the Mounkeses guilty beyond a reasonable doubt. We therefore affirm the district court's denial of the Mounkes's motion for judgment of acquittal.

Because the Mounkeses based their motion for a new trial on the same claim as their motion for judgment of acquittal, we also conclude that the trial court did not abuse its discretion in denying their motion for a new trial. Nothing in the record indicates that the interests of justice required a new trial be granted.

III.

The Mounkeses also claim that the trial court erred in enhancing Mr. Mounkes's sentence by two points for obstruction of justice pursuant to U.S. Sentencing Guidelines Manual § 3C1.1 (1998). The district court must enhance the defendant's base offense by two levels if it finds that

the defendant willfully obstructed or impeded, or attempted to obstruct or impede, the administration of justice during the course of the investigation, prosecution, or...