U.S. v. Charroux

• Decision Date: 23 September 1993
• Docket Number: No. 92-1545,92-1545
• Citation: 3 F.3d 827
• Parties: -6264, 93-2 USTC P 50,628, 37 Fed. R. Evid. Serv. 1172 UNITED STATES of America, Plaintiff-Appellee, v. Roy W. CHARROUX and Harry J. James, Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 827

3 F.3d 827

72 A.F.T.R.2d 93-6264, 93-2 USTC P 50,628,

37 Fed. R. Evid. Serv. 1172

UNITED STATES of America, Plaintiff-Appellee, v. Roy W. CHARROUX and Harry J. James, Defendants-Appellants.

No. 92-1545.

United States Court of Appeals, Fifth Circuit.

Sept. 23, 1993.

Jane E. Hutchinson, H. Campbell Zachry, Jenkens & Gilchrist, Dallas, TX, for defendants-appellants.

Richard H. Stephens, U.S. Atty., Dallas, TX, Gail Brodfueher, Robert E. Lindsay, Alan Hechtkopf, Tax Div., Dept. of Justice, Washington, DC, for plaintiff-appellee.

Appeal from the United States District Court for the Northern District of Texas.

Before EMILIO M. GARZA and DeMOSS, Circuit Judges, and ZAGEL ^*, District Judge.

EMILIO M. GARZA, Circuit Judge:

Defendants, Roy W. Charroux and Harry J. James ("Charroux and James" or "defendants"), were convicted of conspiracy, attempted tax evasion, and signing a false tax return. They now appeal their convictions and sentences, and we affirm.

I

James, Charroux, Susan Petr, and James McClain were all in the real estate business in Dallas. ¹ James was the president and co-owner of Texas Land Holding Corporation ("Texas Land"). Charroux was the other co-owner and vice president of Texas Land. Petr and McClain each owned half of Petr-Avery Development Corporation ("Petr-Avery"), of which Petr was president.

After Petr met James and Charroux at a bar, they introduced her to the concept of land flips, a type of transaction where a buyer agrees to purchase a tract of land at an inflated price, in return for a share of the seller's profits on the sale. James explained to Petr that a lot of money, which he described as profits, could be made on land flips.

Thereafter, James, Charroux, McClain, and Petr engaged in several land flip transactions together. First they formed a joint venture to purchase a tract of land in Carrollton, Texas. The joint venture agreement provided that all interests, including profits, in the sale of the Carrollton property would be divided as follows: 23.33% each to James, Charroux, and Petr; 30% to McClain. Petr-Avery then purchased the property from Sweden & Smith Investment Brokers for $3.1 million and resold it on the same day to Texas Land for $4.5 million. Texas Land financed its purchase of the Carrollton acreage with a $5.2 million loan, of which the lending institution disbursed roughly $4.8 million to Dallas Title Co. ² Dallas Title, which oversaw the sale to Texas Land, then disbursed the $4.8 million as instructed by Petr: $3.1 million to Sweden & Smith; $315,000 each to James, Charroux, and Petr-Avery; and $418,000 to McClain. Before the end of the year, James and Charroux were released from their liability on the $5.2 million loan.

A land flip involving acreage in Coppell, Texas was accomplished in a similar manner. The defendants, Petr, and McClain formed a joint venture to purchase the property, with the profits from the sale of the land to be divided between James, Charroux, Petr, and McClain. Thereafter Petr-Avery purchased the Coppell tract from James Fuller for $2.8 million and resold it on the same day to Texas Land for $4.2 million. Texas Land then sold the land to the joint venture for $4.2 million. The joint venture financed these transactions by borrowing $5 million, out of which the lender disbursed $4.5 million to Dallas Title. Dallas Title then distributed those funds according to Petr's instructions. James Fuller received $2.8 million for the property, and Petr-Avery's profits on the sale to Texas Land were divided among the joint venturers. James and Charroux each received $276,000. By the end of the year, neither defendant was liable on the joint venture's $5 million loan.

The third land flip involved property in Plano, Texas. McClain, Petr, and the defendants formed CPH Joint Venture ("CPH") of which one half was owned by Texas Land and the other half was owned by First American Capital Corporation. ³ Petr-Avery purchased the Plano land for $16 million and resold it the same day to CPH for $18 million. CPH financed this deal by borrowing $25 million. As instructed by Petr, the lender disbursed $18 million to Petr-Avery. Petr-Avery's $2 million in profits were divided among McClain, Petr-Avery, James, and Charroux. Each of the defendants received $441,000. Before the end of the year, Texas Land withdrew from CPH Joint Venture, and James and Charroux were no longer liable on the $25 million loan.

Texas Land's withdrawal from CPH Joint Venture occurred when McClain purchased Texas Land's interest in the venture for $5 million ("the CPH buyout"). From the $5 million, Texas Land distributed $1.23 million to each defendant and $1.25 million each to McClain and Petr.

The foregoing transactions were reviewed by a number of tax advisers who were retained by James and Charroux. However, it was revealed at trial that the defendants did not disclose to their tax advisers the agreements between themselves, Petr, and McClain to divide the profits from the land transactions. The tax professionals also did not see the checks which James and Charroux received as a result of those transactions, which indicated that the funds paid were for proceeds from the sale of land. Furthermore, according to accountant Kemble White, who analyzed the land flip transactions, the closing binders did not show payments to James and Charroux as a result of the land sales. After White noticed the amounts received from the land flips in the defendants' bank records, he inquired about them and was told by the defendants' in-house accountant Samuel Buggs, on behalf of James and Charroux, that the funds were excess loan proceeds.

As a result of the foregoing transactions and the defendants' failure to report the proceeds on their income tax returns, the defendants were indicted for conspiring to defraud the United States, pursuant to 18 U.S.C. Sec. 371 (1988), attempting to evade income taxes, in violation of 26 U.S.C. Sec. 7201 (1988), and subscribing to false tax returns, in violation of 26 U.S.C. Sec. 7206(1) (1988). A jury convicted the defendants on all counts, and the district court sentenced them to 33 months in prison. James and Charroux appeal, contending that (a) the evidence presented at trial was insufficient to sustain their convictions, as it was not proved that they acted willfully; (b) the district court erred by permitting the government's summary witness to testify that the payments which they received were kickbacks; (c) the district court violated Fed.R.Crim.P. 32(c)(3)(D) by failing to make explicit findings of fact at sentencing concerning the defendants' objections to the presentence report; (d) the district court increased their sentences on the basis of an erroneous finding that they used sophisticated means to conceal their offense; and (e) the district court erroneously increased their sentences by miscalculating the tax loss which resulted from their offenses.

II

A

James and Charroux argue that the evidence presented at trial was insufficient to sustain their convictions, because the government failed to prove that they acted willfully. ⁴ "In deciding the sufficiency of the evidence, we determine whether, viewing the evidence and the inferences that may be drawn from it in the light most favorable to the verdict, a rational jury could have found the essential elements of the offenses beyond a reasonable doubt." ⁵ United States v. Pruneda-Gonzalez, 953 F.2d 190, 193 (5th Cir.), cert. denied, --- U.S. ----, 112 S.Ct. 2952, 119 L.Ed.2d 575 (1992). "It is not necessary that the evidence exclude every rational hypothesis of innocence or be wholly inconsistent with every conclusion except guilt, provided a reasonable trier of fact could find the evidence establishes guilt beyond a reasonable doubt." Id. "We accept all credibility choices that tend to support the jury's verdict." United States v. Anderson, 933 F.2d 1261, 1274 (5th Cir.1991). Moreover, juries are "free to choose among all reasonable constructions of the evidence." United States v. Chaney, 964 F.2d 437, 448 (5th Cir.1992).

James and Charroux contend that the government failed to prove willfulness ⁶ because they relied on the advice of hired tax professionals in filing their tax returns. ⁷ "[R]eliance on a qualified tax preparer is an affirmative defense to a charge of willful filing of a false tax return." United States v. Wilson, 887 F.2d 69, 73 (5th Cir.1989). However, "[t]o avail himself of the defense, a defendant must demonstrate that he provided full information to the preparer and then filed the return without having reason to believe it was incorrect." Id.; see also United States v. Masat, 948 F.2d 923, 930 (5th Cir.1991) (stating that defendant must show "(i) he relied in good faith on a professional and (ii) he made complete disclosure of all the relevant facts"), cert. denied, --- U.S. ----, 113 S.Ct. 108, 121 L.Ed.2d 66 (1992).

According to James and Charroux, the "uncontroverted testimony that [the defendants] ... fully disclose[d] all necessary information to their tax experts" establishes that they relied in good faith on those experts and therefore did not willfully violate the tax laws. We disagree. ⁸ On the basis of the evidence presented at trial, the jury could have reasonably concluded that James and Charroux believed the disputed funds to be taxable income, and that they withheld information from their tax professionals which was relevant to the taxability of those funds.

The record supports the conclusion that the funds which the defendants received from the land flips were taxable profits, and that the defendants regarded them as such. Susan Petr testified that James introduced her to the idea of land flips and told her a lot of money, which he described as profits, could be made on them. Petr further testified that she engaged in land flip transactions with James, Charroux, and James McClain, involving the Carrollton, Coppell, and Plano tracts, and...