U.S. v. Bishop

• Decision Date: 29 August 2001
• Docket Number: No. 00-20282,00-20282
• Citation: 264 F.3d 535
• Parties: (5th Cir. 2001) UNITED STATES OF AMERICA, Plaintiff-Appellee v. GEORGE MEREDITH BISHOP, III, Defendant-Appellant
• Court: U.S. Court of Appeals — Fifth Circuit

Page 535

264 F.3d 535 (5th Cir. 2001)

UNITED STATES OF AMERICA, Plaintiff-Appellee v. GEORGE MEREDITH BISHOP, III, Defendant-Appellant

No. 00-20282

IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

August 29, 2001

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Appeals from the United States District Court for the Southern District of Texas

Before HIGGINBOTHAM and BENAVIDES, Circuit Judges, and LITTLE, District Judge.^*

LITTLE, District Judge:

Today we consider George M. Bishop III's appeal of three convictions centered upon income tax and reporting violations. The first and third counts involve attempted tax evasion,¹ in the 1991 and 1994 tax years, respectively. The second count relates to knowingly filing a false income tax return, under penalty of perjury, for 1991.² Finding no reversible error, we affirm each conviction.

I.

The operative facts are not in serious dispute. During all times material to counts one, two and three, Bishop was the sole proprietor of George M. Bishop and Associates (GMBA), a law firm in Houston, Texas. In 1994, the Internal Revenue Service (IRS) initiated an audit of Bishop's account, because he did not file federal income tax returns for the years 1989, 1990, and 1991. Bishop explained the delay was caused by tensions in his marriage, leading to his divorce in 1991. Under the pressure of the audit and with the assistance of his accountants, Bishop filed the missing returns in August 1994, September 1994, and December 1994, respectively.

The audit continued because IRS employees suspected Bishop understated his income. In September 1995, Mark E. Locus, the IRS agent in charge of the case, received an anonymous letter suggesting that Bishop omitted a substantial fee he received in April 1991 from Harold Scharold, a client in a breach of contract suit. A review of Bishop's records showed that, on 5 April 1991, Scharold paid a $933,333.33 legal fee. The check was payable to GMBA, but was deposited in Bishop's personal account at Dean Witter. Joye Wilson, Bishop's bookkeeper, initially recorded the amount as fee income in the GMBA general ledger, in accordance with the normal office procedure. At Bishop's instruction, Wilson reversed the first ledger entry by debiting the account. GMBA's monthly profit and loss statements therefore did not reflect receipt of the fee.

Bishop did not report the fee either. His 1991 tax return stated that his gross income from the practice of law was $988,599.00. IRS agent Kay Campbell, Locus' successor, determined that at most, Bishop reported $352,945.81 out of the $933,333.33 fee he received from Scharold. The $352,945.81 included $140,000 which is the sum Bishop paid to his ex-wife and advised his accountant to add to his reported income, and $212,945.89 that Campbell could not attribute to other sources. Campbell also found that Bishop may have failed to report other income of $150,344.77, the total of amounts added to the GMBA general ledger during the last four months of the year but not included on Bishop's return.

Additionally, in August 1991, Bishop received a $183,666.67 fee plus $28,513.42 in litigation expenses, for representing the Cash children in a legal malpractice suit. Both sums were paid into Bishop's trust account. Bishop should have reported the $183,666.67 as income. During the week after receiving the money, however, he withdrew $111,120.59 from the trust account and deposited it in two personal accounts. He did not report any portion of this money as income. Accordingly, his total unreported income for 1991 was at least $841,822.80. Campbell recalculated Bishop's taxes for the year, making appropriate adjustments in Bishop's favor as well as adding the unreported income. Bishop's return reported a tax of $107,973.00, but according to Campbell, he actually owed $358,002.00. There was an underpayment in excess of $250,000.³

Campbell also reviewed Bishop's return and records for 1994. Bishop filed his 1994 return in April 1995, reporting gross income from the practice of law of $676,262. In a matter settled during the year, Bishop received a $575,000 fee. One of the opposing lawyers paid Bishop a $400,000 portion of the fee. Bishop requested that the lawyer wire transfer the money to Bishop's personal account at Chappell Hill Bank. The lawyer refused to wire transfer the money, but did send the check directly to Chappell Hill Bank. Consequently, the payment was not recorded in the GMBA general ledger. Upon receipt of a Form 1099 regarding the $400,000 payment, Pat Schulmeier, Bishop's new bookkeeper, informed Bishop's accountant of receipt of only $196,006.74 out of the $400,000, for reasons that remain unclear.⁴ A $10,000 check, which was a part of the $575,000 fee but from a different source, also was deposited at Chappell Hill Bank and omitted from Bishop's return. As a result, Bishop failed to report $179,532.41 to $213,993.26 of fee income received in 1994.⁵

In October 1996, Bishop amended his 1994 return in an attempt to correct the problem, increasing his gross income from the practice of law by $400,000, resulting in a total of $1,076,262. He also adjusted his deductions, and paid appropriate additional taxes. Later, Bishop discovered that $196,006.74 of the $400,000 had in fact been included in the initial return and filed a second amended return in July 1998. Now Bishop's reported gross income from the practice of law was $890,255.⁶

In light of Campbell's findings, and Bishop's efforts to conceal his income and spending habits from IRS agents and his own accountants, a fraud investigation and criminal prosecution began. On 24 March 1999, a grand jury returned a three count indictment against Bishop. After a seventeen day trial, the jury convicted Bishop on all three counts. Subsequently, Bishop discovered that one of the jurors, Jodi Tharp, had been less than candid concerning her prior experiences with the law. Specifically, Tharp was charged with third degree felony embezzlement in 1997. Over the course of eight months, Tharp stole $42,250 from the bank where she worked. She pled guilty in Texas state court, and adjudication of the matter was deferred for ten years. At the time of Bishop's trial, she was paying a fine and restitution in installments, and was under community supervision, which is equivalent to probation.

On a juror questionnaire, Tharp responded "no" to the questions "Have you ever been convicted of a state or federal crime punishable by imprisonment for more than one year?" and "Have you ever been charged criminally other than with a traffic ticket?" During voir dire, she did not raise her hand in response to several questions as to whether she had ever been involved in a criminal matter, as an accused, witness, or victim. Nor did she respond when the judge gave the jurors an opportunity to raise their hands if they had anything to add regarding the previous questions.

After Tharp's criminal history was revealed, Bishop moved for a new trial. The district court held an evidentiary hearing and determined that Tharp was statutorily disqualified from serving on a jury, but denied Bishop's motion because he failed to demonstrate that Tharp was biased and that he suffered as a result of that bias. Bishop appeals this ruling and asserts that the district court madeseveral other reversible errors before, during, and after the trial. We address each point raised, some in more detail than others.

II.

Bishop contends that counts one and three of the indictment are defective because they omit the tax deficiency and knowledge elements of tax evasion, and that count two contains no allegation he acted willfully in filing a false return. An indictment must allege each element of the charged offense, in order to insure that the grand jury finds probable cause that the defendant committed each element, to prevent double jeopardy, and to provide notice to the accused. See United States v. Cabrera-Teran, 168 F.3d 141, 143 & n.5 (5th Cir. 1999). We consider the sufficiency of the indictment de novo. See id. at 143.

A.

The crime of tax evasion as defined in 26 U.S.C. § 7201 has three essential elements: (1) the existence of a tax deficiency; (2) willfulness; and (3) an affirmative act constituting evasion or attempted evasion of the tax. See United States v. Townsend, 31 F.3d 262, 266 (5th Cir. 1994) (citing Sansone v. United States, 380 U.S. 343, 351, 85 S. Ct. 1004, 1010, 13 L. Ed. 2d 882, 888 (1965)).

After describing the results of the audit in detail, count one of the indictment boldly alleges the following:

[Bishop] did knowingly and willfully attempt to evade and defeat a substantial income tax due and owing by him. . . by: failing to timely file an income tax return on or about October 15, 1992, causing false and misleading books and records to be created, providing incomplete or misleading information to his tax preparer, concealing information likely to alert the IRS Revenue Agents to unreported income, and other affirmative acts of evasion.

Count three describes the misreporting of the fees deposited at the Chappell Hill Bank and states that Bishop "did willfully attempt to evade and defeat a substantial income tax due and owing by him.a.a.aby preparing and causing to be prepared, and by signing and causing to be signed, a false and fraudulent United States Individual Income Tax Return-Form 1040."

Both count one and count three explicitly charge that a tax deficiency existed that Bishop's acts were willful, and that he committed affirmative acts constituting evasion or attempted evasion. All elements were presented to the grand jury. Bishop argues that the indictment fails to acknowledge certain items that would offset any deficiency. This argument has no merit. The non-existence of credits, refunds, and...