U.S. v. Walker

• Decision Date: 09 February 1990
• Docket Number: 89-1035,Nos. 88-2610,s. 88-2610
• Citation: 896 F.2d 295
• Parties: 90-1 USTC P 50,084 UNITED STATES of America, Appellee, v. R. Randall WALKER, Appellant. UNITED STATES of America, Appellee, v. Trula A. WALKER, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 295

896 F.2d 295

90-1 USTC P 50,084

UNITED STATES of America, Appellee, v. R. Randall WALKER, Appellant.

UNITED STATES of America, Appellee, v. Trula A. WALKER, Appellant.

Nos. 88-2610, 89-1035.

United States Court of Appeals Eighth Circuit.

Submitted Sept. 14, 1989.

Decided Feb. 9, 1990.

Thomas M. Bradshaw, Kansas City, Mo., for R. Randall Walker.

James L. Eisenbrandt of Overland Park, Kan., for Trula A. Walker.

David Jones, Springfield, Mo. and Timothy J. Sear, Kansas City, Mo., for appellee.

Before LAY, Chief Judge, BOWMAN and MAGILL, Circuit Judges.

LAY, Chief Judge.

On March 21, 1988, an indictment was returned against Randall and Trula Walker, husband and wife, alleging they had converted the monies and assets of a family corporation, Campbell Sixty-Six Express Inc., (C-66) ¹ to their personal use and failed to report approximately $679,000 in income on their federal income tax return. Both were charged with one count of conspiring to defraud the United States by obstructing the Internal Revenue Service (IRS) in the computation and collection of revenue in violation of 18 U.S.C. Sec. 371 (1988). They were also charged with five counts each of tax evasion for the years 1981 through 1985, in violation of 26 U.S.C. Sec. 7201 (1988). Randall Walker was additionally charged with two counts of filing false financial statements with the Interstate Commerce Commission (ICC) in violation of 18 U.S.C. Sec. 1001 (1988). This charge stemmed from understating the net income of C-66 in its annual report to the ICC. ²

On the morning of the second day of their trial, August 2, 1988, Randall Walker entered a plea of no contest to the charge of conspiring to defraud the United States, and guilty to the remaining counts of tax evasion and filing false financial statements. Trula Walker proceeded to trial and on August 10, 1988, a jury found her guilty on all counts.

On October 14, 1988, the district court ³ sentenced Randall Walker to twenty years imprisonment and fined him $980,000. ⁴ The district court also ordered Randall Walker to pay $200,000 in restitution to the employees of C-66. Any payments of restitution were to be offset against his fine. As a result of a recovery of certain assets by the IRS, ⁵ Randall Walker pleaded guilty on November 2, 1988, to submitting a false financial statement with the United States Probation and Parole Office (USPPO) in violation of 18 U.S.C. Sec. 1001 (1988). The district court sentenced him to an additional prison term of twenty-four months, to run concurrently with the sentences previously received.

At Trula Walker's final sentencing, ⁶ held December 21, 1988, the district court sentenced her to thirty years imprisonment and fined her $960,000. ⁷ The district court also ordered Trula Walker to pay $200,000 in restitution to the employees of C-66 with payments of restitution to be offset against her fine.

On appeal Trula urges that there was insufficient evidence to sustain her convictions because the government failed to prove that she knowingly and willfully defrauded the government. Although each defendant was sentenced in separate proceedings, both assert that the district court violated Fed.R.Crim.P. 32. The defendants also appeal the orders of restitution and additionally assert that their sentences constitute an abuse of discretion and are disproportionate in violation of the eighth amendment. We affirm the judgment and conviction of Trula Walker. We vacate the orders of restitution as not authorized by law; we also find deficiencies in the sentencing process under Fed.R.Crim.P. 32; we therefore vacate both sentences and remand for resentencing.

DISCUSSION

A. Sufficiency of Evidence

Trula Walker contends the evidence produced at trial is insufficient to sustain a finding that she "willfully" attempted to evade the payment of her tax. Willfulness as used in section 7201 means "a voluntary, intentional violation of a known legal duty." United States v. Pomponio, 429 U.S. 10, 12, 97 S.Ct. 22, 24, 50 L.Ed.2d 12 (1976) (per curiam). The Supreme Court has observed that willfulness may be inferred:

from conduct such as keeping a double set of books, making false entries or alterations, or false invoices or documents, destruction of books or records, concealment of assets or covering up sources of income, handling of one's affairs Spies v. United States, 317 U.S. 492, 499, 63 S.Ct. 364, 368, 87 L.Ed. 418 (1943) (emphasis added).

                to avoid making the records usual in transactions of the kind, and any conduct, the likely effect of which would be to mislead or to conceal.    If the tax-evasion motive plays any part in such conduct the offense may be made out * * *
                

In the operation of C-66, Randall and Trula Walker both operated under what the company referred to as 1133 shareholder accounts. These are company accounts to which an officer or shareholder of the company is allowed to charge personal expenses, but is later held responsible for expenses paid by the company by treating the payments as taxable dividends paid to the officer or shareholder. Evidence at trial established that it was not uncommon for Trula Walker to turn in bills and invoices for personal expenses to the company, which would pay those expenses and charge them to her 1133 account. She argues that it was her husband who controlled and directed all of the accounting and methods of payment under which C-66 paid their personal expenses, and that it was her husband who arranged for the preparation of their tax returns. She asserts that she had no knowledge that some of the bills and invoices submitted were not being processed through her 1133 account or that there was income not being reported on their joint tax returns. She argues that she cannot have willfully evaded the payment of her taxes without knowing that these things were occurring and that the government failed to prove willfulness beyond a reasonable doubt.

The $679,000 of income the Walkers failed to report was primarily obtained by submitting false invoices to the company so that the company would treat their personal expenses as business expenses or by converting the assets of C-66 to their own use. The evidence supporting Trula Walker's involvement in the acquisition of this unreported income may be placed into five general categories: (1) maid checks, (2) Kennedy Brick and Steel, (3) interest income, (4) garage sales, (5) theft of records and concealment of assets.

1. Maid Checks

Evidence at trial established that from 1982 through 1984, Trula Walker employed maids at the Walkers' personal residence. For their compensation Trula Walker would prepare false invoices which incorrectly represented that the maids had performed work for C-66. She would then submit these invoices to C-66 which would draft checks out to the maids for payment. The company would attribute those payments as business expenses rather than charging them to Trula's 1133 account because Trula Walker had falsely indicated that the work had been performed for C-66. Pursuant to her instructions, the checks were held at the C-66 office, where either she or one of the maids would pick them up. She would then take the checks, forge the name of the maid to whom the check was made out and cash the check. She would retain part of the funds and pay the other part to the maids. The total amount converted under this scheme is estimated to be over $39,000.

2. Kennedy Brick and Steel

During 1981 and 1982, the Walkers made substantial improvements to their personal residence. Pursuant to these improvements, Trula Walker personally ordered several items from Kennedy Brick and Steel (KBS). ⁸ After placing an order, she would instruct the KBS salesperson to give her the carbon copy of the sales invoice prior to his writing down the actual description of the item purchased. She would then submit the invoice to C-66 for payment but only after writing in the description of an item different than the item actually ordered, thus making it appear the item had been purchased for C-66. The company would then pay the invoice as a business expense and would not charge the

amount to Trula Walker's 1133 account. The total KBS purchases paid for by C-66 is estimated to be over $20,000.

3. Interest Income

During the years 1984 and 1985, Trula Walker received interest income totaling $7,788 and $12,688 respectively. The interest was earned from approximately ten money market accounts she held individually and separate from her husband. As required by law, the bank would send Trula Walker forms which stated the amount of interest her accounts had earned for the year and that those amounts would be reported to the IRS. Despite these notices, Trula Walker failed to report the interest income on her tax return for the years in question. ⁹

In 1985 Trula Walker withdrew the funds from her accounts and deposited them into a bank in Zurich, Switzerland. She indicated at trial that she had done so because of her distrust for United States banks. Shortly after this, however, Trula Walker removed the money from the Zurich bank and began storing it in her basement in a garbage bag. She testified at trial that the money, totaling approximately $190,000, was now missing.

4. Garage Sales

During the investigation of the Walkers, an IRS audit revealed that between 1981 and 1985, approximately $381,000 in cash had been either deposited into money market accounts held by the Walkers, or used to purchase cashier's checks. The audit also discovered that only $88,000 of the Walkers' reported income had been converted to cash, leaving approximately $293,000 in cash to have been deposited into the Walkers' accounts without being reported to the IRS as income. Of this unreported income, $213,000 in cash was deposited into accounts under the sole control of Trula Walker or used by her to purchase cashier's checks. Additionally, only $225,000 of this $293,000 of unreported income was unreported specific...