U.S. v. Iles

• Decision Date: 27 November 1990
• Docket Number: Nos. 88-3055,88-3445,s. 88-3055
• Citation: 906 F.2d 1122
• Parties: -5303, 90-2 USTC P 50,366 UNITED STATES of America, Plaintiff-Appellee, v. Robert E. ILES, Sr., Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1122

906 F.2d 1122

66 A.F.T.R.2d 90-5303, 90-2 USTC P 50,366

UNITED STATES of America, Plaintiff-Appellee, v. Robert E. ILES, Sr., Defendant-Appellant.

Nos. 88-3055, 88-3445.

United States Court of Appeals,

Sixth Circuit.

Argued Oct. 10, 1989.

Decided June 28, 1990.

Rehearing and Rehearing En Banc Denied Nov. 27, 1990.

Patrick Hanley (argued), Asst. U.S. Atty., Cincinnati, Ohio, for plaintiff-appellee.

Robert E. Iles, Sr., Edgewater, Fla., pro se.

Robert D. Grossman (argued), Grossman & Flask, Washington, D.C., for defendant-appellant.

Before JONES and GUY, Circuit Judges, and ENGEL, Senior Circuit Judge.

ENGEL, Senior Circuit Judge.

Robert E. Iles, Sr., was found guilty of one hundred thirty-seven counts of criminal tax law violations. The Government argued at trial that three tax shelters promoted by Iles were utterly without economic substance and that many investors and the Treasury were consequently defrauded of millions of dollars. The primary issue in this appeal is whether the district court erred in appointing an attorney to represent Iles where the attorney initially had been retained by Iles and his wife, who was originally a codefendant. When the issue of the attorney's request to withdraw as retained counsel arose here, the district court was presented with two dominant issues: (1) the attorney's conflict of interest in representing both defendants caused by plea-bargain negotiations with the United States Attorney, and (2) the defendants' non-payment of attorney fees and claim of indigency. The district court addressed these problems by removing the attorney from the representation of Mrs. Iles and subsequently appointing the attorney to represent Mr. Iles, at the Government's expense. On appeal, Iles contends that he was dissatisfied with counsel and was embroiled in an irreconcilable conflict with him. He therefore argues that he was deprived of his Sixth Amendment rights when the district court appointed the attorney to represent him without inquiring into his alleged dissatisfaction. Iles, however, did not object to the appointment, did not express a wish to have new counsel appointed, and did not seek to conduct his own defense. In addition to arguing that he was deprived of his Sixth Amendment rights, Iles also argues that the evidence adduced at trial is insufficient to support his convictions. We find Iles' contentions to be without merit. As for Iles' ineffective assistance of counsel argument, however, we are precluded from reviewing this argument for the first time on appeal.

I.

On April 9, 1987, a grand jury returned an indictment against Robert E. Iles, Sr., and his wife Monica, charging them with one hundred thirty-nine counts of criminal tax violations. Count 1 charged both Iles and his wife with conspiracy to defraud the United States and numerous investors in connection with their promotion of three tax shelters, in violation of 18 U.S.C. Sec. 371. ¹ Both defendants were named in Counts 2 through 134, charging them with aiding and assisting in the preparation and presentation of false tax returns to the Internal Revenue Service, in violation of 26 U.S.C. Sec. 7206(2). ² The defendants were also charged in Count 135 with willfully filing their personal 1980 joint tax return knowing it was false in a material matter, a violation of 26 U.S.C. Sec. 7206(1). In Counts 136 and 137, the appellant was charged with failure to file tax returns for 1981 and 1982, respectively, in violation of 26 U.S.C. Sec. 7203. Monica Iles was charged in Count 138 and 139 with failure to file a tax return in 1981 and 1982, respectively.

Prior to trial, Monica Iles underwent surgery for cancer. In view of several continuances, the district court decided to proceed with the trial of Mr. Iles and severed Mrs. Iles from the trial. Mr Iles' trial began on November 2, 1987, and concluded on November 24, 1987, with jury verdicts of guilty on all one hundred thirty-seven counts. The judgment was entered upon the jury verdicts in the United States District Court for the Southern District of Ohio, Western Division, on May 13, 1988. Iles subsequently was sentenced to a term of thirteen years imprisonment and assessed a fine of $940,000. Iles appeals the convictions on the counts relating to the tax shelters. ³

On this direct appeal from his convictions, Iles frames two issues for review:

I. Whether the appellant was denied his Sixth Amendment right to effective assistance of counsel as guaranteed by the U.S. Constitution where the Court, at the request and suggestion of the U.S. Attorney[,] appointed counsel originally retained by appellant to represent the appellant at the Government's expense when the Court had knowledge of appellant's dissatisfaction with said counsel and refusal to communicate with said counsel.

II. Whether the record in the instant action contained sufficient evidence to support appellant's conviction of conspiracy to defraud the United States and of willingly and knowingly aiding in the presentation and preparation of false income tax returns.

Iles has not challenged the convictions on the three counts pertaining to his false statements in his 1980 tax return and his failure to file tax returns for 1981 and 1982.

II.

The events which formed the basis of Iles' convictions involved the promotion and sale of various tax shelters and the preparation and presentation of income tax returns for investors in these shelters. Iles initially was a bookkeeper in the Cincinnati, Ohio area. He provided a small bookkeeping, tax preparation, and financial consultation service through his operation of a sole proprietorship under the name of R. Iles and Associates. In 1978, the tax services were taken over by a separate entity, R. Iles Tax Consultants, Inc. Iles prepared income tax returns for clients and investors through this entity, which operated as an Ohio corporation beginning mid-year in 1978.

During early 1980, Iles also formed Structured Shelters, which was the primary vehicle utilized to create, promote and sell tax shelters in the Cincinnati, Ohio area. Iles subsequently incorporated this sole proprietorship in August, 1980. Structured Shelters, Inc. marketed tax shelters on a national level in late 1980 and thereafter through a national system of chartered representatives. This criminal prosecution arises out of the local and national marketing of three tax shelters between 1980 and 1982: "Comprehensive Computer Systems 1980," "The Cocoa Trusts," and "Cocoa, Ltd."

The sixty-one page indictment outlines the basic structure by which Iles marketed the tax shelters. ⁴ Iles, personally and through Structured Shelters, undertook to entice prospective investors to invest in tax shelters by making various representations. Iles assured investors that by investing in the tax shelters, the investors would be entitled to deductions and credits on their income tax returns which would result in tax savings equal to or greater than the amount of the cash investment. Iles represented that the investors would only be investing tax dollars, but at the same time the investors would obtain a worthwhile investment. Iles also told investors that R. Iles Tax Consultants would prepare their tax returns if they wished.

Iles also offered to prepare "Random Reports" for investors through Random Processing Services, Inc., another corporation formed by Iles. These reports, compiled by using a computer program, provided a projection of the amounts of income tax an investor would be required to pay for a particular calendar year. These projections were designed so that the investor could determine how much money must be invested to eliminate or significantly reduce tax liability in that year. Some of these projections, however, were made after the end of the calendar year for investments in that year.

Before an investor could participate in a program, Iles initially required investors to establish a sole-proprietorship investment company through which investments would be made and tax deductions and credits would be taken. Investors also executed a management agreement, whereby Iles and Structured Shelters were to operate as the manager. Although the initial manager's fee was 10% of the "profits" generated by the investment companies, in 1981 the management agreements provided for a fee of 10% of the "proceeds" flowing through the investment companies plus 1% of the investor's gross income.

In 1981, many investors were required to establish their own individual trusts for deposits of money for tax shelters. The investors also were required to execute a Declaration of Trust, wherein Structured Shelters and Iles were named trustees. The trustees received absolute and exclusive authority to manage the Trust property and to conduct the Trust's affairs without the consent of the beneficiaries (i.e., the investors).

Comprehensive Computer Systems 1980

In 1980 and 1981, Iles promoted and sold interests in a tax shelter known as Comprehensive Computer Systems 1980. Iles represented to investors that the money invested in this program would fund research and development to create a unique and advanced payroll computer program. The investment, Iles claimed, would entitle the investors to substantial tax deductions on their 1980 and 1981 income tax returns while providing them with a worthwhile investment.

Initial representations in the program's offering memorandum stated that investors were required to make a 10% cash down payment, with the balance to be reflected in a full-recourse promissory note. Nowhere in the offering memorandum was it stated how much an investor would need to invest in the shelter, nor how many units of ownership were being offered. Iles represented to investors that there was no set amount of investment, but that an investor should invest an amount sufficient to generate deductions which would eliminate or substantially reduce the investor's tax liability. Iles also assured...