U.S. v. Brooks

• Decision Date: 04 May 1999
• Docket Number: No. 98-1317,98-1317
• Parties: -2202 UNITED STATES of America, Appellee, v. Joe Raymond BROOKS, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 950

174 F.3d 950

83 A.F.T.R.2d 99-2202

UNITED STATES of America, Appellee, v. Joe Raymond BROOKS, Appellant.

No. 98-1317.

United States Court of Appeals,

Eighth Circuit.

Submitted Jan. 13, 1999.

Decided May 4, 1999.

John R. Osgood, Lee's Summit, MO, argued, for Appellant.

Carla B. Oppenheimer, Asst. U.S. Atty., Kansas City, MO, argued (Stephen L. Hill, Jr., on the brief as U.S. Attorney), for Appellee.

Before RICHARD S. ARNOLD, BRIGHT and FLOYD R. GIBSON, Circuit Judges.

BRIGHT, Circuit Judge.

Defendant appellant Joe Raymond Brooks appeals his conviction and sentence after a jury found Brooks guilty of one count of failure to file a tax return, in violation of 26 U.S.C. § 7203, and two counts of tax evasion, in violation of 26 U.S.C. § 7201. Brooks seeks reversal of his conviction and review of his sentence. Brooks contends that the evidence adduced at trial was insufficient to support his conviction, principally because Brooks believed in good faith that the Internal Revenue Code ("Code") did not require him to pay federal income taxes. He further asserts that the district court erred, in not granting his motion to dismiss on grounds that the § 7201 counts for tax evasion were duplicitous, in failing to sever the § 7203 count from the § 7201 counts for trial, and in declining to ask prospective jurors whether fear of retaliation by the Internal Revenue Service ("IRS") would affect their deliberations. Brooks also complains that the district court clearly erred in enhancing his sentence for use of sophisticated means to conceal his tax evasion activities, and obstruction of justice. For the following reasons, we affirm the conviction, reverse the two-point enhancement for obstruction of justice, and remand for resentencing.

I. FACTUAL BACKGROUND

During the years charged in the indictment--1992 through 1994--Allied Signal, Inc. ("Allied Signal") employed Brooks as a tool and dye maker. The IRS initiated a criminal investigation of defendant Brooks in early 1995, after Brooks failed to appear at a meeting with the IRS to discuss his tax liability for the years 1992 and 1993. ¹ IRS Agent Mary Seifers scheduled two meetings with Brooks to discuss his tax liability. After not appearing at the first meeting and rescheduling, Brooks sent a representative to the second meeting to inform Agent Seifers that he would not be attending the appointment. Through his representative, Brooks provided Agent Seifers with so-called "exodus documents." These documents stated that although Brooks was a private citizen of the State of Missouri, he was not a citizen of the United States, and, thus, he was not required to file a federal tax return and pay federal income taxes.

The IRS sent Brooks at least one letter urging him to file his taxes, and threatened to file for him if he did not comply, but Brooks remained adamant in his non-compliance. Brooks declined to file until the IRS would explain to Brooks' satisfaction which section in the Code required him to pay federal income taxes. According to Brooks, he never received a satisfactory answer, although the IRS informed him by letter of his obligation to file under the Code. Subsequently, two IRS agents visited Brooks at his home to advise him that the IRS had initiated an investigation of Brooks' tax liability for the tax years 1992 through 1994. Brooks refused to answer the agents' questions and directed them to leave his property. ²

On May 27, 1997, the government indicted Brooks for criminal tax violations--failure to file a federal income tax return for 1992, and tax evasion for the tax years 1993 and 1994. The case proceeded to trial. At trial, Brooks testified that, with the help of a third party preparer, he had filed returns with the IRS for the tax years 1988 through 1991. In late 1992, however, Brooks became associated with the tax protestor movement. Brooks attended various seminars and read tax protestor materials, and he came to believe, and apparently continues to believe, that the Code does not require him to pay federal income taxes.

Beginning in late 1992, Brooks took certain steps to attempt to avoid paying taxes. In December 1992, he submitted an IRS Form W-4 to Allied Signal claiming nine allowances and, in September 1993, he filed another Form W-4 claiming "exempt status." In March 1994, Brooks filed a Form W-8 in which he represented that, as a "non-resident alien" of the United States, he was exempt from filing a return for the year 1994. Brooks did not file any income tax returns with the IRS for the years 1992 through 1996.

The testimony at trial further indicated that Brooks attempted to conceal his income and assets from the IRS: Brooks cashed his paychecks personally instead of relying on Allied Signal's direct deposit system; placed the warranty deed of his property, his homeowner's insurance policy and his utilities in the name of "Pidlin Acres Trust"; established a bank account in the name of "IM More Able Trust" from which he paid the bills from the Pidlin Acres Trust; and set up a P.O. Box under the name of "Mail Call" to receive all mail relating to his properties, bank accounts and other financial affairs. In addition, Crown Enterprise, the company hired to set up Brooks' trusts, recorded the trusts in Arizona, not in Jackson County, Missouri, where the real property actually existed. Thus, the property records in Jackson County did not show any interest Brooks may have had in any property or trust in Missouri. ³

Brooks testified at trial in support of his defense. He explained his good faith belief that the Code did not obligate him to pay federal income taxes and how he had arrived at that belief. Brooks also gave an alternative explanation for his "evasive" actions--namely, that he was very ill at the time that he took these actions, and he wanted to preserve the property for his son by placing it in trust. During cross-examination, Brooks admitted that he had put his property in trust, and that he had taken the other "evasive" actions already discussed. He denied, however, that he had taken those actions to evade the payment of federal income tax. Upon being questioned about the trusts themselves, Brooks produced a one-page document which appeared to be a cover page for a more extensive "IM More Able Trust" trust agreement. Brooks testified vaguely about the terms of the trusts--referring the government to the trustee for more detailed information--but he could not produce the actual trust documents themselves. Further investigation by the government after trial revealed that the "IM More Able Trust" actually consisted of only the one-page document produced at trial; the government could find no other documents setting forth the terms of that trust.

Following a three-day trial, the jury returned a guilty verdict against Brooks on all three counts of the indictment. The district court sentenced Brooks to twelve months on Count I, and twenty-seven months on Counts II and III, to run concurrently for a total of twenty-seven months of confinement. The district court also ordered Brooks to pay the cost of the prosecution of $2,868.36, and imposed a term of three years of supervised release, a special assessment of $125.00, and a fine and restitution totaling $13,868.36. ⁴ Brooks timely appealed his conviction and sentence.

II. DISCUSSION

Brooks first argues that the government adduced insufficient evidence at trial to support his conviction for two counts of tax evasion. More specifically, Brooks contends that the government did not meet its burden in proving that Brooks had willfully evaded his tax obligations, in large part because Brooks had established his good faith belief that the Code did not require him to pay taxes. We review de novo a question of the sufficiency of the evidence to sustain a conviction and consider the evidence in the light most favorable to the government. See United States v. Bussey, 942 F.2d 1241, 1251 (8th Cir.1991).

To obtain a conviction for income tax evasion under § 7201, the government must prove three elements beyond a reasonable doubt: the existence of a tax deficiency, willfulness, and an affirmative act of evasion or attempted evasion of the tax. See Sansone v. United States, 380 U.S. 343, 351, 85 S.Ct. 1004, 13 L.Ed.2d 882 (1965); United States v. Abodeely, 801 F.2d 1020, 1023 (8th Cir.1986). To prove a tax deficiency, the first element, the government must show that the taxpayer had unreported taxable income. See United States v. Vannelli, 595 F.2d 402, 405-06 (8th Cir.1979) ("In a tax evasion prosecution it is necessary to show that an individual received more income than he reported."). Brooks does not dispute that he failed to report taxable income in the years charged in the indictment.

As to the second element of this offense, willfulness, Brooks contends that his failure to file tax returns and pay income tax in 1993 and 1994 resulted from his good faith belief that he had no obligation to do so under the Code. In support of this contention, Brooks testified at trial that after study of the Code and applicable case law, he came to the conclusion that his wages did not constitute income and that he did not qualify as a taxpayer under the Code. Therefore, considering this good faith belief, his failure to file income taxes was not willful under § 7201. The jury did not credit Brooks' good faith defense and neither do we.

"Willfulness, as construed by our prior decisions in criminal tax cases, requires the Government to prove that the law imposed a duty on the defendant, that the defendant knew of this duty, and that he voluntarily and intentionally violated that duty." ⁵ Cheek v. United States, 498 U.S. 192, 201, 111 S.Ct. 604, 112 L.Ed.2d 617 (1991); accord United States v. Grunewald, 987 F.2d 531, 535-36 (8th Cir.1993); United States v. Pomponio, 429 U.S. 10, 11-12, 97 S.Ct. 22, 50 L.Ed.2d 12 (1976). Nevertheless, the Supreme Court has recognized a good faith defense to...