U.S. v. Crockett

• Citation: 435 F.3d 1305
• Decision Date: 31 January 2006
• Docket Number: No. 04-4204.,04-4204.
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Blayde Lynn CROCKETT, also known as Lewis Tremain, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

435 F.3d 1305

UNITED STATES of America, Plaintiff-Appellee, v. Blayde Lynn CROCKETT, also known as Lewis Tremain, Defendant-Appellant.

No. 04-4204.

United States Court of Appeals, Tenth Circuit.

January 31, 2006.

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Submitted on the briefs: James E. Rice and Ben Rice, Boise, ID, for Defendant-Appellant.

Alan Hechtkopf and John Hinton, III, Tax Division, Department of Justice, Washington, DC, for Plaintiff-Appellee.

Before HENRY, McKAY, and EBEL, Circuit Judges.

McKAY, Circuit Judge.

After examining the briefs and appellate record, this panel has determined unanimously to honor the parties' request for a decision on the briefs without oral argument. See Fed. R.App. P. 34(f). The case is therefore submitted without oral argument.

Defendant was charged in a four-count indictment with one count of conspiring to defraud the Internal Revenue Service, in violation of 18 U.S.C. § 371, and three counts of aiding and assisting in the preparation of false and fraudulent tax returns, in violation of 26 U.S.C. § 7206(2). A jury found him guilty on all four counts. After his motion for Judgment in Spite of Jury Verdict was denied, the district court sentenced Defendant to seventy months' incarceration.

Factual Background

Defendant was a promoter of "trust" schemes designed to thwart the tax laws. The conspiracy and false tax return charges of which Defendant was convicted arose from his dealings between 1993-1997 with the Reed family (brothers Chuck and Steve, and sisters Kristen Reed Seidelmann and Roi Delene Reed Jacobs) and their family-owned business, Nuway, Inc. Nuway specialized in corporate catering, and in providing meal and shower service to U.S. Forest firefighters. Nuway had originally been a restaurant owned by the Reeds' father but rapidly expanded during the 1970s and 1980s. By 1992, Nuway, still operating as a family-owned corporation based in Wyoming, was providing meals and showers to U.S. Government firefighters all over the United States. The corporation was owned in equal twenty-five percent shares by the four Reed siblings.

In the early 1990s, Chuck Reed had become hostile to the IRS. Defendant met Chuck at a meeting of a tax protestor organization known as The Pilot Connection Society. Chuck invited Defendant to visit the Reeds in Wyoming and give them a presentation on setting up trusts. Defendant explained how the Reeds could change the family business from a corporation to a "trust" and thereby obtain privacy, asset protection from lawsuits, and tax benefits. The Reeds decided to follow Defendant's advice and, with his technical expertise, executed a business trust known as Nuway Management Trust. They also established trusts for each of the mobile kitchen and shower units. These smaller trusts leased their property to the larger Nuway Management Trust which managed the cash flow from the subordinate trusts and facilitated equipment loans from one to another. The Reeds then formally dissolved Nuway, Inc., by filing articles of dissolution with the Secretary of the State of Wyoming.

Defendant agreed to serve as the trustee for Nuway Management Trust and the subordinate kitchen and shower trusts, although he had nothing to do with the daily operations or decision-making of the entities. In his capacity as trustee, Defendant would pre-sign checks to be drawn on the trusts' checking accounts. None of the Reeds' responsibilities or authority changed after Nuway's reorganization; they did not relinquish control of the business.

Defendant also helped the Reeds organize their personal finances. He recommended that they establish individual trusts, into which they would transfer title to their homes and cars and personal property such as furniture, tools, antique automobiles, and housewares. Defendant explained to the Reeds that all that was required to protect these assets was to transfer title into the trusts and register the conveyance with the county court or recorder of deeds. The transfer of ownership would not require even the formality of a sale; the trusts would not have to pay money for the assets that they were acquiring. The Reeds followed Defendant's plan and established these personal trusts. The personal trusts were identified by federal tax numbers and not the social security number of the individual establishing the trust. They selected close personal friends or Defendant to serve as trustees, and the Reeds themselves served as managers of their trusts, making all of the decisions that affected trust assets.

The personal trusts reduced the Reeds' income liability by allowing the Reeds to divert approximately fifty percent of their earnings into their personal trusts and claim substantial expenses for operating them. Defendant advised that the only expenses that would not qualify for a tax deduction were groceries, entertainment, clothing, and education. Thus, the Reeds funneled large portions of their Nuway income into their personal trusts accounts, where it was used for "deductible" operating expenses, such as gas, electric, and telephone bills; home mortgage payments; auto insurance, repairs and maintenance; monthly installment payments for their cars; property taxes; and home improvements and repairs.

In addition to serving as trustee for Nuway and for a number of the Reeds' personal trusts, Defendant agreed to prepare income tax returns for the trusts and for the Reeds. The Reeds paid Defendant for setting up the trusts, for his services as trustee, and for preparing their income tax returns. Defendant's scheme appeared to yield the promised tax benefits. By funneling wage and salary income from Nuway into their personal trusts, the Reeds all reported substantially less income.

Defendant also came up with a plan that enabled Nuway to evade paying taxes on its earnings—which amounted to $2,187,673 in 1994. He recommended the establishment of an offshore charitable trust to which the Reeds could make a generous donation. To this end, Defendant prepared a distribution of $2,187,673 to an Austrian company named Crystal Diversified (thereby reducing Nuway's reported 1994 tax liability to zero). (Defendant had established Crystal Diversified for the use of one of his former clients.) Next, Defendant assisted the Reeds in setting up a bank account in Isle of Man into which the Reeds wired $500,000. Defendant then transferred these funds to the Austrian Crystal Diversified account. Finally, in 1996, Defendant began repatriating the funds from Austria for the Reeds. Defendant testified that he had received payment for his services from the various Austrian entities through which the Nuway funds were repatriated. The Reeds asked Defendant to prepare their 1995 tax return. In addition, they invited Defendant to Wyoming to speak with other individuals interested in trusts.

Eventually, IRS agents visited Nuway after unsuccessfully attempting to contact Defendant. The Reeds were required to file amended tax returns and pay back taxes. They also pleaded guilty to various tax crimes. Defendant was charged in a separate indictment. Defendant argues that his conviction must be vacated because of errors in limiting his cross-examination of witnesses, presentation of false testimony, improper impeachment evidence, and inadequate jury instructions.

Limitation of Cross-Examination

Defendant argues that his conviction must be vacated because he was not allowed to cross-examine Marilyn Reed (wife of Steve), one of the prosecution's witnesses, regarding her acquaintance with a man named Eddie Kahn.

A district court's evidentiary rulings are ordinarily reviewed for abuse of discretion, see United States v. Janusz, 135 F.3d 1319, 1323 (10th Cir.1998), although when the trial court's evidentiary ruling implicates the Confrontation Clause of the Sixth Amendment, and the issue was preserved for appeal, we will review the asserted violation de novo. See United States v. Joe, 8 F.3d 1488, 1492 (10th Cir. 1993). But where an appellant has failed to preserve the issue at the trial court level, we will review the district court's ruling only for plain error. Janusz, 135 F.3d at 1322.

Defendant complains that the district court prevented him from cross-examining Ms. Reed about Mr. Kahn's advice concerning filing tax returns. After counsel raised this issue during cross-examination, the prosecution objected that the matter was beyond the scope of direct. Asked by the district court whether the matter had some connection to the direct examination of Ms. Reed, counsel responded only, "[w]ell, it has a connection to some things as to credibility. It deals with the 1996 tax returns." Rec., Vol. 1, at 27. When the district court replied that it was beyond the scope of direct, defense counsel received permission from the court to take a minute's pause, after which counsel remarked, "I don't have anything further." Id.

Defendant did not reveal to the district court the theories of relevance he now urges. In this appeal, Defendant claims that had he been able to cross-examine Ms. Reed regarding Mr. Kahn, he would have placed her credibility in doubt and shown that it was Mr. Kahn, not Defendant, who persuaded the Reeds not to file tax returns. But Defendant did not make anything other than a mere assertion that the Mr. Kahn materials had "a connection to some things as to credibility" and dealt "with the 1996 tax returns," to the district court. Rec., Vol. 1, at 27. Moreover, after the court's conclusion that the Mr. Kahn matter was beyond the scope of direct, Defendant failed to make an offer of proof in accordance with Fed.R.Evid. 103(a)(2) despite his opportunity to do so.

The proponent of excluded evidence does not satisfy his burden to make an offer of proof merely by telling the trial court the content of the proposed testimony. See United States v. Brown, 540 F.2d 1048, 1053 (10th Cir.1976). Rather, the proponent "must...