U.S. v. Cooper

• Citation: 108 A.F.T.R.2d 2011,654 F.3d 1104
• Decision Date: 15 August 2011
• Docket Number: No. 10–3105.,10–3105.
• Parties: UNITED STATES of America, Plaintiff–Appellee,v.Michael Craig COOPER, Defendant–Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

654 F.3d 1104

108 A.F.T.R.2d 2011-5815

UNITED STATES of America, Plaintiff–Appellee,

v.Michael Craig COOPER, Defendant–Appellant.

No. 10–3105.

United States Court of Appeals, Tenth Circuit.

Aug. 15, 2011.

John Jenab of Jenab & McCauley, LLP, Olathe, KS, for Defendant–Appellant.Scott C. Rask, Assistant United States Attorney (Barry R. Grissom, United States Attorney, with him on the brief), Kansas City, KS, for Plaintiff–Appellee.Before HOLMES and BALDOCK, Circuit Judges, and JOHNSON, District Judge.^*HOLMES, Circuit Judge.

INTRODUCTION

Defendant–Appellant Michael Craig Cooper was convicted by jury of one count of conspiracy to defraud, multiple counts of mail and wire fraud, one count of conspiracy to commit money laundering, two counts of money laundering, and multiple counts of engaging in monetary transactions in property derived from unlawful activity. During the proceedings below, Mr. Cooper filed several motions with the district court, including motions for a judgment of acquittal, a post-verdict motion for a new trial, and a motion to suppress evidence under the Fourth Amendment. The district court denied them all. On appeal, Mr. Cooper challenges the district court's denial of his motions for a judgment of acquittal, his motion for a new trial, and his motion to suppress. Exercising jurisdiction under 28 U.S.C. § 1291, we affirm.

FACTUAL BACKGROUND

Mr. Cooper was the founder, president, and chief executive officer of Renaissance, The Tax People, Inc. (“Renaissance”), which he founded in 1995. Beginning in 1997, Renaissance developed, marketed, and sold tax materials aimed at home-based business owners. More specifically, Renaissance sold a tax package called the Tax Relief System (“TRS”), which “included a written manual and set of accompanying audiotapes setting forth the general guidelines and rules applicable to the wide array of tax deductions available to owners of home-based businesses.” Aplt. Opening Br. at 7; see also id. at 4 (stating that the TRS “consisted of a plastic clamshell containing a booklet and audiotapes summarizing tax deductions available to owners of a home-based business”).¹ The TRS sold for $300.

Renaissance also sold a bundle of services called the Platinum Tax Advantage (“PTA”), which purported to provide Renaissance users with unlimited tax advice and unlimited representation in the event of a tax audit. The tax advice and representation were provided by “tax professionals affiliated with Renaissance.” Id. at 4. The PTA was provided for a monthly fee of $100.

Renaissance operated through a network of independent sales representatives called Independent Marketing Associates (“IMAs”). The IMAs both sold Renaissance products and recruited new IMAs. IMAs earned commissions on both their own sales “and on sales by the downline of [IMAs] generated through their recruitment efforts.” Id. at 6. However, IMAs were “required ... to pay [Renaissance] $100 per month to receive commissions and bonuses based on recruitment of new IMAs,” R., Vol. 1, at 60 (Indictment, filed Aug. 13, 2004)—that is, IMAs had to “pay to play,” Aplee. Br. at 36. In addition, “[IMAs] who sold the Tax Relief System as a home-based business were then able to utilize the tax deductions outlined in the system.” Aplt. Opening Br. at 4. Essentially, the Renaissance network was what is known as a “pyramid scheme [ ].” R., Vol. 1, at 52.

Renaissance also launched the Affiliated Tax Professional Network (“ATPN”), a group of tax professionals specializing in home-based businesses who served as a resource for Renaissance customers and IMAs and offered discounted tax-preparation services to Renaissance members. “[T]o join the ATPN, a tax professional was required to ... submit a written endorsement of the Tax Relief System, pass a written exam ..., agree to provide tax services at a discounted rate to Renaissance members, and become an IMA.” Aplt. Opening Br. at 16 (citations omitted). According to Mr. Cooper, “[t]he idea behind the ATPN ... was to increase the professionalism of the company ... by putting together a group of knowledgeable and experienced tax practitioners who understood the tax laws as they relate to home[-]based business.” Id. at 17. By 2002, “Renaissance had in its possession over 2,000 written letters of endorsement from tax professionals all over the country.” Id.

Renaissance also developed a W–4 Exemption Increase Estimator tool (“W–4 Estimator”), which was used “to adjust W–4 withholdings to reflect anticipated losses when one starts a home business.” Id. at 24–25. The estimator was a “work sheet” that was “used as a tool by [IMAs] to help people adjust their [W–4s] for their newfound business deductions.” R., Vol. 3, at 373 (Trial Tr., dated Feb. 1, 2008). The tool served to help Renaissance IMAs to improperly “increase the number of exemptions” that could be claimed so that their “take home pay w[ould] increase.” Id. at 373–74. In other words, through the W–4 Estimator, Renaissance improperly “[e]mphasized the conversion of personal expenses into deductible business expenses,” R., Vol. 1, at 59, which decreased IMAs' tax liability.

Through the TRS, PTA, ATPN, and W–4 Estimator, Renaissance purported “to provide tax advice [and services] that would help individuals with home-based businesses.” Aplee. Br. at 9. However, as the company grew, it “expanded into a scheme to enable anyone associated with Renaissance [e.g., IMAs] to avoid paying taxes on their W–2 income through the use of the ‘W–4 Exemption Increase Estimator’ and the fraudulent claim of tax deductions.” Id. Mr. Cooper's co-conspirators testified that they prepared false or fraudulent tax returns for Renaissance customers and IMAs by “ignor[ing] the tax code's requirement that only ‘ordinary and necessary’ expenses may be included as deductions.” Id. These tax returns “overstated IMAs' personal expenses as business deductions,” and “contained excessive amounts of ‘expenses' with essentially no income.” Id. at 9–10. Personal expenses including vacations, “ ‘wages'/allowance paid to children,” commuting miles, and “unreasonable percentage use of the home for business purposes” were improperly and illegally deducted as business expenses. See id. at 9–12. Several of Mr. Cooper's co-conspirators also testified that the preparation of false or fraudulent tax returns and the creation of promotional tools and materials that contained false or erroneous tax advice—all of which were “consistent with the fraudulent tax advice espoused by [Mr. Cooper] and ... Renaissance,” id. at 9—were carried out despite the fact that many Renaissance affiliates had brought their concerns regarding this false advice and fraudulent activity to Mr. Cooper's attention.

Despite the red flags, the business continued to grow and accumulate more IMAs. By October 2000, Renaissance had recruited approximately 55,000 IMAs and was bringing in approximately $10 million a month.

On October 11, 2000, law enforcement agents of the Internal Revenue Service (“IRS”) and the U.S. Postal Inspection Service executed search warrants on Renaissance's warehouse, headquarters, accounting center, call and mailing operations center, and on Mr. Cooper's safe deposit box, as well as seizure warrants on various bank and investment accounts associated with Mr. Cooper and Renaissance. As the investigation progressed over the next two months, several additional seizure warrants were authorized and executed on various accounts associated with the company and Mr. Cooper. Finally, in April 2001, a search warrant was authorized and executed on Mr. Cooper's residence in Topeka, Kansas.

PROCEDURAL HISTORY

On August 13, 2004, a grand jury returned a 148–count indictment naming Mr. Cooper, Renaissance, and co-conspirators Jesse Ayala Cota, Todd Eugene Strand, and Daniel Joe Gleason. Mr. Cota, who is a former IRS employee, was Renaissance's “national tax director from June 1999 until after the government raids [in 2000],” Aplt. Opening Br. at 5, and managed the company's “Tax Dream Team” from July 1999 through May 2001, R., Vol. 1, at 50.² Mr. Strand—whom the government described as Mr. Cooper's “right-hand man”—was Renaissance's “Vice–President of Marketing,” id., and “national marketing director from the inception of the company until after the October 2000 raids,” Aplt. Opening Br. at 5. Mr. Gleason was Renaissance's “national tax director from March 1998 until mid–1999.” Id. As the national tax director, Mr. Gleason also served as the “Director of the Tax [Dream] Team.” R., Vol. 1, at 50.

The indictment alleged that Renaissance was a fraudulent pyramid scheme, and that Mr. Cooper and his co-conspirators had conspired to defraud the IRS, Renaissance customers, and IMAs through the company's false tax material and fraudulent operations (e.g., the preparation of false tax returns for IMAs). Specifically, the indictment charged Mr. Cooper with: one count of conspiracy to defraud (by impeding the functions of the IRS in computing and collecting taxes, committing mail fraud, and committing wire fraud), in violation of 18 U.S.C. § 371 (Count 1); fifty-six counts of assisting in the preparation of false tax returns, in violation of 26 U.S.C. § 7206(2) and 18 U.S.C. § 2 (Counts 2–57); thirty-six counts of mail fraud, in violation of 18 U.S.C. §§ 1341 and 2 (Counts 58–93); eleven counts of wire fraud, in violation of 18 U.S.C. §§ 1343 and 2 (Counts 94–104); one count of conspiracy to launder money, in violation of 18 U.S.C. § 1956(h) (Count 105); forty-one counts of engaging in monetary transactions in property derived from unlawful activity, in violation of 18 U.S.C. §§ 1957 and 2 (Counts 106–46); and two counts of money laundering, in violation of 18 U.S.C. §§ 1956(a)(1)(B)(I) and 2 (Counts 147–48).

On December 7, 2006, the grand jury returned a 148–count superseding indictment. The superseding indictment “removed some sentencing guideline enhancements, corrected some typographical...