U.S. v. Shrum

• Decision Date: 09 September 2011
• Docket Number: No. 10–3331.,10–3331.
• Citation: 108 A.F.T.R.2d 2011,2011 USTC P 50620,655 F.3d 782
• Parties: UNITED STATES of America, Plaintiff–Appellee,v.Rodney L. SHRUM, Defendant–Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

655 F.3d 782
108 A.F.T.R.2d 2011-6157
2011-2 USTC P 50,620

UNITED STATES of America, Plaintiff–Appellee,
v.
Rodney L. SHRUM, Defendant–Appellant.

No. 10–3331.

United States Court of Appeals, Eighth Circuit.

Submitted: April 15, 2011.Filed: Sept. 9, 2011.

[655 F.3d 784]

Talmage E. Newton, IV, St. Louis, MO, for appellant.Andrew J. Lay, St. Louis, MO, for appellee.Before LOKEN and MURPHY, Circuit Judges, and JARVEY,^* District Judge.LOKEN, Circuit Judge.

A jury found Rodney L. Shrum guilty of willfully filing a false joint income tax return with his wife for calendar year 2007 in violation of 26 U.S.C. § 7206(1) and 18 U.S.C. § 2. The district court ¹ sentenced him to twenty-four months in prison. Shrum appeals, arguing insufficient evidence of willful false reporting, admission of unfairly prejudicial evidence of gambling expenses, and a substantively unreasonable sentence. We affirm.

I. Sufficiency of the Evidence

The Internal Revenue Code provides that any person who “[w]illfully makes and subscribes any return ... which he does not believe to be true and correct as to every material matter,” and declares in writing that the return is made under penalty of perjury, is guilty of a felony. 26 U.S.C. § 7206(1). Shrum argues that the Government failed to prove that he willfully submitted a materially false statement on his 2007 return, which he signed and which contained the requisite written declaration. “Willfulness requires proof of a voluntary, intentional violation of a known legal duty.” United States v. Morse, 613 F.3d 787, 794 (8th Cir.) (citation omitted), cert. denied, ––– U.S. ––––, 131 S.Ct. 834, 178 L.Ed.2d 567 (2010). In reviewing the sufficiency of the evidence on this issue, “[w]e view the evidence in the light most favorable to the verdict, giving the government the benefit of all reasonable inferences that may logically be drawn from the evidence.” Id. (quotation omitted). We briefly summarize the evidence at trial consistent with this standard of review.

In April 2008, Shrum and his wife Teressa filed their joint return for the year 2007. Most of the reported income appeared on a Schedule C form for an office-supply business, Infiniti Business Solutions (“IBS”), with Shrum listed as the proprietor of IBS. Schedule C reported gross sales of $279,316 and cost of goods sold of $285,115, resulting in a net loss that reduced to zero the Shrums' income tax liability for that year. An Internal Revenue Service investigation uncovered the fact that IBS's income was derived from a fraudulent scheme by Teressa Shrum and a Department of Defense employee, Steven Brown, in which Brown ordered computers that IBS never delivered, paying for them in small installments to avoid detection. Teressa and Brown pleaded guilty to theft of public money in October 2008; each was sentenced to twenty-four months in prison. In January 2009, the Shrums filed an amended 2007 joint return that adjusted IBS's cost of goods sold to zero, resulting in a tax liability of more than $100,000.

[655 F.3d 785]

The government presented evidence that all the money Brown paid to IBS for the fraudulent computer sales in 2007 flowed directly into a Washington Mutual bank account solely owned by Shrum. That account had almost no other source of deposits. For a business reselling office equipment, an IRS witness testified, the cost of goods sold would be its inventory purchases. The Shrums reported “purchases” of $285,000 on line 36 of Schedule C. But the expenditures from Shrum's Washington Mutual bank account in 2007 were not for the purchase of computer inventory for resale to DoD and other customers. Rather, the IRS traced expenditures of $87,000 in cash advances, $43,000 in casino spending, $23,822 in department store purchases, and $10,357 in cash withdrawals from ATMs located in casinos. There was evidence that money from the account was spent at casinos during times that Shrum's player activity card was active, raising the inference that he was using IBS revenues to finance his gambling.

The Government argued that this evidence proved Shrum knowingly and willfully provided false,...