U.S. v. Nolen

• Decision Date: 12 December 2006
• Docket Number: No. 05-40859.,05-40859.
• Citation: 472 F.3d 362
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Robert E. NOLEN, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

472 F.3d 362

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

No. 05-40859.

United States Court of Appeals, Fifth Circuit.

December 12, 2006.

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Appeal from the United States District Court for the Eastern District of Texas.

Alan L. Hechtkopf, Samuel Robert Lyons (argued), U.S. Dept. of Justice, Tax Div., Washington, DC, Terri Lynn Hagan, Asst. U.S. Atty., Plano, TX, for U.S.

Peter Goldberger (argued), Law Office of Peter Goldberger, Admore, PA, for Nolen.

Before JOLLY, DAVIS, and WIENER, Circuit Judges.

WIENER, Circuit Judge:

Defendant-Appellant Robert E. Nolen, a persistent "tax protester," was convicted on three counts of willfully attempting to evade the federal income tax in violation of 26 U.S.C. § 7201. On appeal, he contends that (1) the district court violated his Sixth Amendment rights when it revoked the pro hac vice admission of his retained counsel, (2) the evidence at trial was insufficient to establish the charged offense, because no tax obligation had been formally assessed, (3) the district court committed plain error by failing to require the jury to find an affirmative act other than willful failure to file returns and by failing to require the jury to find exactly the same affirmative act of evasion that was charged in the indictment, and (4) the district court erred by ordering restitution in a case arising under Title 26 of the United States Code.

We conclude that (1) the district court erred in failing to demonstrate that it conducted the proper balancing of Nolen's Sixth Amendment rights (if it did so) when it revoked the pro hac vice admission of his counsel, making appellate review of that order impossible, (2) the trial evidence was sufficient to establish the charged offense, (3) the district court's jury instructions did not constitute plain error, and (4) the restitution order was improper.

I. FACTS AND PROCEEDINGS

In 1992, Robert E. Nolen, a dentist practicing in Flower Mound, Texas, decided that he should no longer be subject to federal income taxation. Nolen filed an affidavit with the Clerk of Tarrant County, Texas declaring that although "tax is imposed upon the citizens and residents subject to the jurisdiction of the United States," he was a "`nonresident' to the residency and `alien' to the citizenship of the 14th Amendment." Despite his accountant's warning that failure to pay federal income taxes "was illegal," Nolen remained resolute. He filed his last federal income tax return in October 1992 for the 1991 tax year.

Non-cash receipts from Nolen's dental practice were deposited into a business account from which all business expenses were paid. In contrast, Nolen instructed his office manager to give him all of the cash receipts, which averaged $1,000 per month. In December 1993, Nolen and his wife created an entity called Genesis Enterprises, an unincorporated business organization "domiciled in the sovereign Republic of Texas." According to Nolen, the purpose of Genesis was to protect his assets from malpractice litigation. Nolen opened two new accounts, one in the name of "PJ Consultants DBA Genesis Enterprises ABBA" ("the Genesis account"), and one in the name of "PJ Consultants DBA Max Man Holding Company" ("the Max Man account").¹

Nolen instructed his office manager to transfer funds from the business account to the Genesis account, from which Nolen's personal expenses were paid. Nolen failed to report as income, or pay tax on, the dental practice receipts that were used to pay his personal expenses. He also falsely coded the transfers of money from the business account to the Genesis account as "professional fees." Nolen gave his office manager authority to sign checks on the Genesis and Max Man accounts and began paying her an additional $1,000 per month (later increased to $1,800 per month). Neither Genesis nor Max Man filed tax returns.

In October 1995, the IRS notified Nolen that it was aware of his failure to file returns for the past three years and requested that he meet with agents and produce his financial records. Nolen did not attend that meeting and later disregarded a second such request. Eventually, the IRS served Nolen with an administrative summons, ordering him to appear and produce records. Nolen disregarded that summons as well.

In June 1996, Nolen converted his dental practice from a corporation to a sole proprietorship, changed its name, and opened a new business bank account. Thereafter, the practice did not file tax returns. Nolen then altered the name of the Genesis bank account and removed his and his wife's names from it. Nolen still controlled the checkbook, however, by using a signature stamp created for one of the account signatories.

In December 1996, the district court issued an order requiring Nolen to appear and show cause why he should not be ordered to comply with the IRS administrative summons. Nolen failed to appear at that hearing and was finally detained by U.S. Marshals. He then filed a petition to quash the summons, stating that he was not a citizen or resident of the United States. The district court enforced the summons and ordered Nolen to appear before the IRS and produce the requested records. He appeared at that hearing, but refused to produce any records.

In September and November 1997, the IRS sent Nolen delinquency notices, demanding that he file tax returns and pay unpaid taxes. Thereafter, Nolen moved the Genesis account to a different bank and listed his office manager as the sole account holder. He continued to transfer funds from the dental practice's business account to the Genesis account and to use funds from the Genesis account to pay his personal expenses. In September 1998, the IRS sent Nolen notices of deficiency for tax years 1992, 1993, and 1994. After that, Nolen removed his name as a signatory on the business bank account but continued to own and control the funds in that account.

At some point in 1997, Nolen began consulting with various attorneys and accountants, seeking their advice as to what strategies he should employ to "resolve" his IRS issues. On the advice of his attorneys, Nolen began to pursue a series of document requests and related civil lawsuits against the IRS. Between March 1999 and April 2002, while this frustration-litigation strategy was playing out, Nolen made a series of $500 payments to the IRS, as a "bond" against determination of tax liability. In July 2003, a grand jury sitting in the Eastern District of Texas returned a three-count indictment charging Nolen with willfully attempting to evade federal income taxes for the years 1997, 1998, and 1999.

Nolen retained a California attorney, Roger Agajanian, and the district court granted Agajanian's motion for admission pro hac vice. In September 2003, the government filed a motion for inquiry into whether Nolen was receiving the effective assistance of counsel guaranteed by the Sixth Amendment. The government alleged that a legal assistant, Lawrence Maxwell, had been conducting all or part of Nolen's defense in Agajanian's name but without his control. The magistrate judge conducted a hearing and expressed concern about Maxwell's conduct and whether Nolen was receiving the effective assistance of counsel. The magistrate judge also stated that he took offense at some of the language in Nolen's pretrial motions challenging federal jurisdiction. The magistrate judge then appointed an experienced criminal defense attorney from the Eastern District of Texas, Gerald Cobb, to serve as Agajanian's co-counsel. The magistrate judge entered an order directing Agajanian to cooperate with Cobb or face removal from the case.

Nolen moved the district court to review the magistrate judge's order, and the district court initially affirmed the order, but later granted Nolen's motion for reconsideration and terminated Cobb's appointment as co-counsel. Agajanian then refiled some pleadings that Maxwell had authored previously, together with a new motion to dismiss for lack of jurisdiction, arguing that the United States does not exist in any capacity to bring a criminal prosecution. The government then moved for a hearing to require Agajanian to show cause why his pro hac vice admission should not be revoked. The district court scheduled a show-cause hearing for December 2003. At that hearing, Nolen advised the court that his defense was based on Maxwell's research and advice, and that he did not want Agajanian as his attorney if Maxwell could not assist in his defense. The court scheduled another hearing for January 2004, at which time Nolen was to advise the court of the identity of his new attorney if he still wanted Agajanian to withdraw. Ultimately, Agajanian filed a motion to withdraw, which the district court granted.

Nolen subsequently retained attorney John Green, who entered an appearance in March 2004. Green, who was admitted to practice in other federal courts in Texas but not in the Eastern District, was admitted pro hac vice. He then filed a motion for continuance that contained a footnote in which he alleged that the magistrate judge's asserted reason for appointing Cobb as co-counsel was false:

Magistrate Bush claimed [that ensuring that Nolen received effective assistance of counsel] was his basis for appointing Gerald Cobb as court-appointed counsel. Though we know now that was NOT the basis for the appointment (or it would not have been done the way it was done and later REVERSED by the trial court after multiple requests for de novo review and motions to reconsider — a huge waste of defense resources and time), a GRANT of this continuance and the 180 days sought by the defendant to properly prepare for trial would go a long way toward correcting the amazing number of inequities that have already occurred in this case.²

At a hearing on several motions in ...