U.S.A v. Hills

• Decision Date: 18 August 2010
• Docket Number: 09-2152,No. 09-2151,09-2153.,09-2151
• Citation: 618 F.3d 619
• Parties: UNITED STATES of America, Plaintiff-Appellee,v.Debra HILLS, Kenton Tylman, and Brent Winters, Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

618 F.3d 619

UNITED STATES of America, Plaintiff-Appellee,v.Debra HILLS, Kenton Tylman, and Brent Winters, Defendants-Appellants.

Nos. 09-2151, 09-2152, 09-2153.

United States Court of Appeals Seventh Circuit.

Argued May 18, 2010.

Decided Aug. 18, 2010.

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Gregory V. Davis (argued), Department of Justice, Washington, DC, Hilary W. Frooman, Office of the United States Attorney, Springfield, IL, for Plaintiff-Appellee.

Richard C. Godfrey (argued), Kirkland & Ellis LLP, Chicago, IL, for Defendant-Appellant Debra Hills.

Christopher D. Donovan (argued), Pruhs Law Office, S.C., Milwaukee, WI, for Defendant-Appellant Kenton W. Tylman.

H. Kent Heller (argued), Heller, Holmes & Associates, Mattoon, IL, for Defendant-Appellant Brent A. Winters.

Before O'CONNOR,^* Associate Justice, and KANNE and ROVNER, Circuit Judges.

KANNE, Circuit Judge.

Appellants sold and implemented domestic and international trust packages, which were used by their clients to conceal income from the Internal Revenue Service (IRS) and thereby avoid payment of taxes. A grand jury indicted each of the Appellants with conspiracy to impede the IRS and also returned indictments charging Debra Hills and Brent Winters with filing false income tax returns. After a joint trial, a jury found Kenton Tylman and Hills guilty of conspiracy and Hills and Winters guilty of filing false tax returns. Appellants now appeal various aspects of their trial and sentencing. We affirm both Tylman's and Winters's convictions. We vacate Hills's convictions and remand for further proceedings.

I. Background

The investigation of Appellants first began when an unrelated organization, Aegis Corporation, caught the attention of the IRS. Sometime in the late 1990s, the IRS received a tip that Aegis was promoting a tax evasion scheme. This tip turned out to be accurate-Aegis was in the business of selling fraudulent trust packages. The Aegis scheme was designed so that customers appeared to sell their assets to several trusts when, in fact, customers never really ceded control of their assets. This scheme was effectuated by requiring customers to “purchase” fictitious consulting services when, in reality, the “payment” for the services was the means by which the customers initially transferred their assets into a trust. Then, in most instances, the customers' assets were diverted through a series of trusts, which were also referred to as common-law business organizations (“CBOs”), until those assets ultimately landed in the account of an international business company (“IBC”) that claimed exemption from United States taxation requirements. The IBCs then reconveyed the assets to the customers under the guise of a gift or a loan, or through the customers' use of a debit card tied to the IBC account. These reconveyed assets were never reported on the income tax returns of the Aegis customers.

From 1996 through 2000, IRS Special Agent Michael Priess investigated Aegis. Acting under the pseudonym “Michael Jordan,” Priess posed as a customer and attended a number of Aegis seminars that promoted the trust program. In the mid-1990s, Appellant Kenton Tylman was working as a salesman for Aegis. It was at one of these seminars in 1998 where Priess first met Tylman.

After having success selling the Aegis trusts, in 1999 Tylman started his own company, Worldwide Financial Services (“WFS”), for the purpose of promoting and selling Aegis trusts. Appellant Debra Hills was an employee of WFS and Tylman's girlfriend. Appellant Brent Winters was an attorney both at WFS and at a successor company to WFS, Worldwide Financial & Legal Association (“WFLA”). Winters made an unsuccessful bid for Congress in 1998.

In March of 1999, Priess, suspicious of WFS, arranged to meet with Tylman, Hills, and others so that he could receive WFS's assistance in managing Aegis trusts that Priess had “purchased” previously. At that meeting, Priess explained that he had “paid” $290,000 to an Aegis-created business under the guise of management services. He told those present that he had underestimated his income by $60,000 and that he was hoping to “take care of” those additional funds, meaning that he wanted to avoid reporting them as taxable income. Tylman offered to manage Priess's Aegis trusts, and also offered tax-return-preparation services through an Aegis accountant, who, according to Tylman, would be able to “do some tax, play games and do some things ... with [Priess's $60,000].” (Tr. 133-34.)

After a year of investigation, in late March 2000, IRS agents attempted to execute a search warrant at WFS's offices. Before they could execute the search, Tylman and Winters objected on the grounds that the list of items to be seized was missing from the warrant. Agents left to procure a new warrant and returned four hours later with a revised warrant in hand. This time, the warrant contained a list of items to be seized, but listed the incorrect location from which the items were to be seized. When agents realized that they had obtained the wrong attachment, they left yet again to procure a third warrant. That evening, agents finally returned with the correct warrant and executed the search, seizing numerous documents and computers.

Six years later, in April 2006, a grand jury indicted Tylman, Winters, and Hills with conspiracy to impede the authority of the IRS in violation of 18 U.S.C. § 371. Hills was also charged with an individual count of tax fraud based on a tax return she had filed with her then-husband in 2000. Winters too was charged with an individual count of tax fraud for his 1998 return. These tax fraud counts were brought under 26 U.S.C. § 7206(1).

Trial did not commence for two years after the indictments were issued because of various continuances, some sought by Appellants and some sought by the government. In June 2008, after a five-week trial, a jury convicted Tylman and Hills of conspiracy, but acquitted Winters of the conspiracy count. The jury also convicted Hills and Winters of tax fraud.

On appeal, Appellants argue that the district court committed various errors, at trial and sentencing. All three Appellants claim that their statutory and constitutional rights to a speedy trial were violated. They also complain that the search of WFS's offices violated their Fourth Amendment rights.

Winters argues that his conviction for filing a false tax return was time-barred. He also argues that the prosecution committed misconduct by offering certain evidence against him, and that the district court abused its discretion by admitting that evidence. Winters finally argues that the district court imposed an improper sentence on him.

Hills argues that there was insufficient evidence to support her conviction. She also contends that the prosecution committed misconduct during its closing argument by referring to Hills's invocation of the Fifth Amendment. Finally, Hills complains that the district court abused its discretion in denying her motion to sever.

We take each of these contentions in turn.

II. Analysis

A. Statutory Right to a Speedy Trial

Appellants argue that they were denied their statutory right to a speedy trial because numerous continuances delayed the trial far beyond the seventy-day period prescribed by the Speedy Trial Act (“STA”), 18 U.S.C. § 3161 et seq. We review a district court's legal interpretations of the STA de novo, and its discretionary decisions to exclude time for an abuse of discretion. United States v. Hemmings, 258 F.3d 587, 591, 593 (7th Cir.2001). Unless the district court committed legal error, “exclusions of time cannot be reversed except when there is an abuse of discretion by the court and a showing of actual prejudice.” United States v. Broadnax, 536 F.3d 695, 698 (7th Cir.2008) (emphasis added) (internal quotation marks omitted).

The STA provides that a defendant must go to trial within seventy days of either the issuance of an indictment or a defendant's first appearance before a judicial officer, whichever is later. 18 U.S.C. § 3161(c)(1). If a defendant is not brought to trial within that seventy-day window the indictment against the defendant must be dismissed upon the defendant's motion. § 3162(a)(2). Dismissal may be with or without prejudice. § 3162(a)(1).

To provide courts with the necessary flexibility to accommodate pretrial proceedings, however, the STA provides for certain periods of time to be excluded from the seventy-day clock. See § 3161(h)(1)-(8). In particular, the STA requires that certain periods of time “shall be excluded ... in computing the time within which the trial of such offense must commence.” This includes “[a]ny period of delay resulting from other proceedings concerning the defendant, including but not limited to ... delay resulting from any pretrial motion, from the filing of the motion through the conclusion of the hearing on, or other prompt disposition of, such motion ....” § 3161(h)(1)(D). Time is automatically excluded under this provision; no showing of actual delay in trial is required. United States v. Montoya, 827 F.2d 143, 150-51 (7th Cir.1987).

The STA also permits a district court to exclude time that results from “a continuance granted by any judge on his own motion or at the request of the defendant or his counsel or at the request of an attorney for the Government,” if the judge's decision to grant the continuance was based on “his findings that the ends of justice served by taking such action outweigh the best interest of the public and the defendant in a speedy trial.” 18 U.S.C. § 3161(h)(7)(A). The STA provides a non-exhaustive list of bases upon which an ends-of-justice continuance may be granted, § 3161(h)(7)(B), and for time to be excludable under this provision, the court must undertake a timely consideration of the reasons for the continuance United States v. Napadow, 596 F.3d 398, 404-05 (7th Cir.2010).

Appellants claim that the...