U.S. v. Beale

• Decision Date: 23 July 2009
• Docket Number: No. 08-3205.,08-3205.
• Citation: 574 F.3d 512
• Parties: UNITED STATES of America, Appellee, v. Robert B. BEALE, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

574 F.3d 512

UNITED STATES of America, Appellee, v. Robert B. BEALE, Appellant.

No. 08-3205.

United States Court of Appeals, Eighth Circuit.

Submitted: June 10, 2009.

Filed: July 23, 2009.

Glenn P. Bruder, argued, Edina, MN, for appellant.

Timothy Christopher Rank, AUSA, argued, Minneapolis, MN, for appellee.

Before SMITH and SHEPHERD, Circuit Judges, and LIMBAUGH,¹ District Judge.

SHEPHERD, Circuit Judge.

Robert B. Beale was convicted on five counts of tax evasion in violation of 26 U.S.C. § 7201, one count of conspiracy to defraud the United States in violation of 18 U.S.C. § 371, and one count of failure to appear at trial in violation of 18 U.S.C. § 3146(a)(1). Beale appeals on the grounds that there was insufficient evidence to support his conviction for tax evasion, the district court judge should have recused herself because his efforts to intimidate her compromised her impartiality, he was denied adequate resources while in jail to prepare his pro se defense in violation of due process, and his sentence of 134 months imprisonment was unreasonable. We affirm.

I.

From 2000 to 2004, Beale used his position as majority shareholder, chief executive officer, and chairman of the board of directors of Comtrol Corporation ("Comtrol") to conceal more than $5 million in income from the Internal Revenue Service ("IRS") and the Minnesota Department of Revenue ("MDR"). Beale founded Comtrol, a computer technology company, after graduating from the Massachusetts Institute of Technology with an engineering degree. Comtrol was very successful, and Beale became a millionaire.

Beale has been involved in the so-called tax-protest movement. "Tax protestors offer a myriad number of arguments to illustrate the unconstitutionality, illegimacy [sic], illvalidity [sic], or narrowness of the Internal Revenue Code." (Appellant's Br. 22.) As noted in Beale's brief, "[u]nfortunately, many of these [arguments] are written in archaic, turgid prose and are liberally laced with nineteenth and twentieth century U.S. Supreme Court decisions which may have little relevance to the topic at hand." (Id.) At their core, Beale's various philosophic, statutory, and constitutional arguments revolve around his belief that citizens of the 50 states and Native Americans are immune from federal income taxation unless they are employees of the federal government or freed slaves.

The events giving rise to the instant indictment began in 2000. Until September of 2000, Beale was paid as an employee of Comtrol. Around this time, he instructed Eileen Johnson, an employee in Comtrol's payroll department, to stop paying him as an employee of Comtrol. Thenceforth, Beale wanted to be paid as an independent consultant instead of an employee so that he could avoid income tax withholding. Beale directed Johnson to designate retroactively the payments he had received as an employee during the first part of 2000 as payments to an independent consultant. This was done so that Beale could recoup the income tax that had been withheld from his salary.

Along with Lee D. Stagni, the president and chief operating officer of Comtrol, Beale set up a shell company called Chayil that was to provide "management services" to Comtrol. Stagni drafted a services contract in which Chayil was to stand in Beale's shoes and perform the functions of board chairman and CEO for Comtrol. Beale and Stagni completed this contract in November 2000 and then backdated it to January 1, 2000, the point at which the modified payroll records would show that Comtrol ceased paying Beale as an employee.

Beale and Stagni then submitted an invoice for Chayil for management services rendered in October and November 2000. When Lee Aide, an employee in charge of Comtrol's cash management, confirmed with Beale by email that payment had been sent to Chayil, Comtrol's chief financial officer Gary Kanowitz informed Aide that in the future he should verbally confirm payments with Beale rather than by email or in writing. Beale and Stagni then submitted invoices for Chayil dating back to January 1, 2000. To complete the appearance that Chayil had been rendering services to Comtrol for the entire year, Beale wrote Comtrol a check for $571,574.87, the amount paid in 2000 to Beale by Comtrol before Johnson changed the payroll records, and then Comtrol paid the same amount to Chayil.

Johnson testified that, although she did not object to this arrangement at first, she became concerned in January 2001 when Kanowitz and Stagni directed her not to issue a Form 1099 to the IRS to report sums paid to Beale through payments to Chayil. Johnson believed that a Form 1099 should be sent to the IRS because the payments to Beale, even though made through Chayil, were salary that would have been reported to the IRS through a Form W-2 if Beale had not changed his status from employee to independent consultant. Johnson understood this to be an attempt by Beale to hide his income from the IRS. Comtrol paid Beale approximately $650,000 in 2000. This arrangement continued until 2004, by which time Comtrol had paid Beale approximately $5,600,000 through Chayil. No part of this sum was reported to the MDR or the IRS.

Before they began inquiring into the Chayil arrangement, state and federal authorities were investigating other gaps in Beale's tax history. In June 2001, the IRS placed a lien on Beale's home in Collier County, Florida, for unpaid taxes from 1992 to 1995. To escape the lien on his home, Beale forged a "Certificate of Release of Federal Tax Lien" and filed it with the Collier County Clerk. Convinced by the counterfeit certificate, the county clerk released the lien. Another counterfeit certificate to obtain release of a tax lien on Beale's home in Minnesota was found on Beale's laptop computer after his arrest. This certificate had not been filed.

In March of 2002, the MDR instituted collection efforts against Beale for unpaid taxes for 1998. This collection action stemmed from Beale's sale of a television station in Minnesota in 1998, a transaction in which he made several million dollars. Stating that he was a resident of Florida who was exempt from the Minnesota capital gains tax, Beale refused to pay the taxes owed to Minnesota.

After Beale failed to pay, the MDR sent Comtrol a Notice of Intent to Levy Wages and a Third Party Levy for any property of Beale's held by Comtrol. Comtrol responded that Beale was not one of its employees and directed the MDR to Chayil. In response to the MDR's subsequent queries about Chayil, Stagni drafted a document purporting to describe the management services provided by Chayil to Comtrol. Stagni then gave this document to Comtrol's outside counsel to give to MDR. Stagni also faxed a copy of the document to Beale and explained in a cover sheet to the fax that Beale's name was not mentioned in the document and Chayil was described so as to make it appear that others besides Beale were working there.

Determining that Beale was hiding his Comtrol income, the MDR placed a lien on Beale's Minnesota home. To release the lien, Beale paid the taxes owed to the MDR with money loaned by Comtrol to Chayil. Beale then paid off this loan by increasing the amount of services billed by Chayil to Comtrol.

The MDR grew more suspicious and began investigating other aspects of Beale's income. MDR investigator Matt Schaefer contacted the IRS to inform them about Beale's effort to hide his Comtrol income from the government. In 2004, the IRS began investigating Beale. Over the next several months, Johnson and Aide provided the IRS with information about Beale and Stagni's activities at Comtrol.

In 2006, Beale and Stagni were indicted on five counts of tax evasion in violation of 26 U.S.C. § 7201 and one count of conspiracy to defraud the United States government in violation of 18 U.S.C. § 371. On August 14, 2006, the day scheduled for trial, Beale did not appear.² Beale was not apprehended for 14 months. While he was a fugitive, Beale transferred $100,000 from an account in Comtrol's name at the Banco Unione di Credito in Switzerland to a personal account at the same bank. He also wired $50,000 from his personal Swiss bank account to an account held in Chayil's name in Florida. The IRS seized the money wired to the Chayil account in Florida. Finally, after communications with Comtrol in August 2007, the Swiss bank refused to permit Beale to transfer $700,000 from Comtrol's account to his personal account. While a fugitive, Beale was indicted with an additional count of failure to appear at trial in violation of 18 U.S.C. § 3146(a)(1).

Beale was apprehended in Orlando, Florida, in November 2007. After his apprehension, Beale elected to represent himself. After determining that he knowingly and voluntarily waived his Sixth Amendment right to counsel, the district court appointed stand-by counsel to assist Beale. Beale later complained that he was being denied adequate resources to prepare his defense, specifically a private cell phone, a more modern computer, and personal contact with visitors. Beale enjoyed the right to make outgoing telephone calls, unlimited contact with stand-by counsel, meetings with up to ten visitors in a video-monitored visitor area, access to a computer, and he received all the government's discovery and exhibits in both paper and electronic formats. The court denied Beale's motion for additional resources.

While in jail awaiting trial, Beale and several accomplices created a "Common Law Court/Venue," which they styled as "[our] one supreme court common-Law court for the de-jure Ramsey: the county: Minnesota: the land a superior court for the People, original jurisdiction under Almighty Yahweh exclusive jurisdiction in and for confederation-government United States of America." Complaint ¶ 3, United States v. Beale, et al., No. 0:08-cr-00210-RSW-JJK (D.Minn. Apr. 14, 2008). Beale's "Common Law Court" drafted a fake arrest warrant with the intention of...