U.S. v. Olbres

• Citation: 61 F.3d 967
• Decision Date: 01 May 1995
• Docket Number: No. 94-2123,94-2123
• Parties: -5743, 95-2 USTC P 50,401 UNITED STATES of America, Appellant, v. Anthony G. OLBRES and Shirley A. Olbres, Defendants, Appellees. . Heard
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

Page 967

61 F.3d 967

76 A.F.T.R.2d 95-5743, 95-2 USTC P 50,401

UNITED STATES of America, Appellant, v. Anthony G. OLBRES and Shirley A. Olbres, Defendants, Appellees.

No. 94-2123.

United States Court of Appeals First Circuit.

Heard May 1, 1995.

Decided July 26, 1995.

Karen Quesnel, Tax Div., U.S. Dept. of Justice, with whom Loretta C. Argrett, Asst. Atty. Gen., Robert E. Lindsay and Alan Hechtkopf, Tax Div., Washington, DC, and Paul M. Gagnon, U.S. Atty., Concord, NH, were on brief, for the U.S.

Terry Philip Segal, with whom Matthew H. Feinberg, Matthew A. Kamholtz, Segal & Feinberg, Boston, MA, Steven M. Gordon, and Shaheen, Cappiello, Stein & Gordon, Concord, NH, were on joint brief, for appellees.

Before SELYA, Circuit Judge, COFFIN, Senior Circuit Judge, and CYR, Circuit Judge.

SELYA, Circuit Judge.

In 1989, an employee of the Internal Revenue Service (IRS) noticed a Rolls Royce belonging to the defendants, Anthony and Shirley Olbres, parked outside a restaurant in Exeter, New Hampshire. The presence of so opulent a vehicle in so bucolic a setting piqued the taxman's interest. He initiated an investigation that led, in succession, to an audit, an indictment, a trial, and a conviction for income tax evasion pursuant to a jury verdict. ¹ The district court then trumped the jury's verdict, granting the defendants' motions for judgments of acquittal. See United States v. Olbres, 881 F.Supp. 703 (D.N.H.1994). ² The government appeals. We reinstate the convictions.

I. BACKGROUND

We start by relating certain (essentially uncontradicted) facts that serve to put the appeal into initial perspective. In 1974, the Olbreses--he an industrial designer, she a schoolteacher destined to become a self-taught bookkeeper--launched a proprietorship, Design Consultants (DC), to conceive, construct, and erect exhibit booths for trade shows. At first, the proprietors comprised the entire work force. The business grew steadily, and by 1987 DC employed 23 persons and had revenues in excess of $1,900,000. Despite the phenomenal growth of the business, Shirley Olbres continued to handle the books, toiling part-time, mostly at home. Her working materials consisted of an invoice log (in which she recorded bills sent and payments received), and three journals reflecting, respectively, cash receipts, cash disbursements, and petty cash.

Beginning in 1976, the defendants retained the services of an accountant, Wilson Dennett. Dennett compiled income tax returns and financial statements, but did not perform bookkeeping or kindred services. He prepared the tax returns in reliance on information supplied by the defendants. For the tax year at issue on this appeal--1987--Shirley Olbres drafted a summary of the defendants' books and records for Dennett's use. She and her husband then met with Dennett to answer questions. When Dennett completed the return, the defendants came to his office and signed it.

The defendants maintained various bank accounts during 1987. These included business checking and savings accounts at Indian Head Bank (IHB). Defendants deposited most of their business receipts into the business checking account, but occasionally deposited business receipts into the business savings account. While Shirley Olbres recorded all sums deposited into the business checking account in the cash receipts journal, she did not make comparable entries showing deposits made to the business savings account. During the same time frame, the defendants also maintained payroll and petty cash accounts at a second bank, and a rent-receipts account in the name of Seabrook Properties at yet a third financial institution.

The IRS started its investigation into the defendants' tax returns in 1989. Revenue Agent Leonard Kaply pulled the laboring oar. He determined, inter alia, that the defendants had substantially underreported their income on their joint federal income tax returns for the years 1986 through 1988. For 1987, Kaply's audit indicated that the defendants had failed to report nearly $750,000 in income from three sources: (1) business receipts deposited directly into the business savings account and not recorded in the cash receipts journal; (2) rebates from a transportation company that had contracted with DC to move trade show booths from place to place; ³ and (3) certain income from rental property. In the course of the audit, the defendants gave Agent Kaply the cash receipts journal, but claimed to have misplaced the invoice log and the passbook for the business savings account (either of which would have revealed much of the unreported income). It was only when the IRS issued a summons to IHB that it discovered the business savings account, with its trove of unreported funds.

The IRS concluded that the defendants willfully failed to report substantial amounts of income on their 1986, 1987, and 1988 federal tax returns ($150,954 in 1986, $748,991 in 1987, and $175,432 in 1988). The defendants conceded the underreporting, but denied criminal responsibility, saying that they lacked any intent to defraud. ⁴ A federal grand jury returned a three-count indictment charging the defendants with willfully attempting to evade income tax for those three years. The case was tried to a jury. The defendants moved for judgments of acquittal at the end of the government's case, and again when both sides had rested. See Fed.R.Crim.P. 29(a). The district court denied the first set of motions and reserved decision on the second set. See Fed.R.Crim.P. 29(b). On January 24, 1994, the jury reached a split decision: it found the defendants not guilty on count 1 (1986) and count 3 (1988), but guilty on count 2 (1987).

After a gestation period of nearly nine months, the district court, acting in pursuance of the earlier Rule 29(b) reservation, granted the defendants' motions for judgments of acquittal on count 2. The government then filed this timely appeal.

II. ANALYSIS

Our analysis of this case is partitioned into three segments. First, we limn the standard of review. Second, we examine the elements of the offense of conviction and the sufficiency of the evidence. Third, we explain why we find the district court's analysis unpersuasive.

A. Standard of Review.

Expressing the standard for judicial review of a claim of evidentiary insufficiency in a criminal case is a straightforward exercise. If the evidence presented, taken in the light most flattering to the prosecution, together with all reasonable inferences favorable to it, permits a rational jury to find each essential element of the crime charged beyond a reasonable doubt, then the evidence is legally sufficient. See Jackson v. Virginia, 443 U.S. 307, 319, 99 S.Ct. 2781, 2789, 61 L.Ed.2d 560 (1979); United States v. Gifford, 17 F.3d 462, 467 (1st Cir.1994); United States v. Castro-Lara, 970 F.2d 976, 979 (1st Cir.1992), cert. denied, --- U.S. ----, 113 S.Ct. 2935, 124 L.Ed.2d 684 (1993). In evaluating sufficiency, both direct and circumstantial evidence are accorded weight. See, e.g., United States v. O'Brien, 14 F.3d 703, 706 (1st Cir.1994). So long as the evidence, taken as a whole, warrants a judgment of conviction, "it need not rule out other hypotheses more congenial to a finding of innocence." Gifford, 17 F.3d at 467.

When, as now, a criminal defendant mounts a sufficiency challenge, all the evidence, direct and circumstantial, is to be viewed from the government's coign of vantage. Thus, the trial judge must resolve all evidentiary conflicts and credibility questions in the prosecution's favor; and, moreover, as among competing inferences, two or more of which are plausible, the judge must choose the inference that best fits the prosecution's theory of guilt. See United States v. Taylor, 54 F.3d 967, 974 (1st Cir.1995); United States v. Rothrock, 806 F.2d 318, 320 (1st Cir.1986).

The granting of a motion for judgment of acquittal is subject to de novo review. See United States v. Kirvan, 997 F.2d 963, 967 (1st Cir.1993). Like the trial court, "we scrutinize the evidence in the light most compatible with the verdict, resolve all credibility disputes in the verdict's favor, and then reach a judgment about whether a rational jury could find guilt beyond a reasonable doubt." Taylor, 54 F.3d at 974.

B. Sufficiency of the Evidence.

In this instance, our assignment is simplified. Because the defendants do not dispute that they signed the 1987 tax return and that they substantially understated their income in the process, the question of guilt reduces to whether the underreporting occurred willfully, that is, whether it constituted "a voluntary, intentional violation of a known legal duty," United States v. Pomponio, 429 U.S. 10, 12, 97 S.Ct. 22, 23-24, 50 L.Ed.2d 12 (1976) (per curiam) (citations omitted). The trial focused on this narrow issue. The government contended that the defendants deliberately understated their 1987 income, while the defendants--who claimed to have signed the return without reading it--contended that they were guilty only of inadvertence, aggravated by the hiring of a maladroit accountant.

In a tax evasion case in which the defendants assert that blind reliance on their accountant, not criminal intent, caused an underreporting, the critical datum is not whether the defendants ordered the accountant to falsify the return, but, rather, whether the defendants knew when they signed the return that it understated their income. See Rothrock, 806 F.2d at 321. So here: if the evidence introduced at trial, taken in a pro-government light, permitted the jury to infer that the defendants (a) were aware of the contents of their return, and (b) knew that their reportable income significantly exceeded the income reflected therein, then the jury lawfully could find that the defendants acted willfully, and, hence, violated 26 U.S.C. Sec. 7201. See, e.g., United States v. Gaines, 690 F.2d 849, 855 (11th Cir.1982). We turn to this two-part inquiry, and then buttress the...