United States v. Barefoot

• Docket Number: 3:22-CR-13-DPJ-LGI
• Decision Date: 18 January 2024
• Parties: UNITED STATES OF AMERICA v. JONATHAN BAREFOOT, ET AL.
• Court: U.S. District Court — Southern District of Mississippi

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UNITED STATES OF AMERICA
v.
JONATHAN BAREFOOT, ET AL.

No. 3:22-CR-13-DPJ-LGI

United States District Court, S.D. Mississippi, Northern Division

January 18, 2024

APPEARANCES:

FOR THE GOVERNMENT: PATRICK ELWELL, ESQUIRE MARY FRANCES BETTY RICHARDSON, ESQUIRE ZACHARY ALFREDSON COBB, ESQUIRE U.S. DEPARTMENT OF JUSTICE - TAX DIVISION 150 M ST. NE WASHINGTON, D.C. 20002

FOR THE DEFENDANT, ADAM EARNEST: MATTHEW JAMES MUELLER, ESQUIRE FOGARTY MUELLER HARRIS, PLLC 501 E. KENNEDY BLVD., STE. 790 TAMPA, FLORIDA 33602 GRAHAM P. CARNER, ESQUIRE GRAHAM P. CARNER, PLLC 771 NORTH CONGRESS STREET JACKSON, MISSISSIPPI 39202

FOR THE DEFENDANT, CHRISTOPHER RANDELL: TERENCE L. HIGH, ESQUIRE THE HIGH LAW FIRM, PLLC 395 EDGEWOOD TERRACE dRIVE JACKSON, MISSISSIPPI 39206 JOHN C. HALL, II, ESQUIRE THE HALL LAW GROUP, PLLC 263 EAST PEARL STREET JACKSON, MISSISSIPPI 39201

FOR THE DEFENDANT, JAMES KLISH: AAFRAM Y. SELLERS, ESQUIRE SELLERS & ASSOCIATES, PLLC 395 EDGEWOOD TERRACE DRIVE JACKSON, MISSISSIPPI 39206

ORDER

DANIEL P. JORDAN III CHIEF UNITED STATES DISTRICT JUDGE

Defendants Adam “Casey” Earnest, Christopher Randell, and James “Gabe” Klish were convicted for conspiring to commit tax fraud and aiding or assisting in tax fraud. They now seek judgment of acquittal or, alternatively, a new trial. See Earnest Mot. [238], Klish Mot. [239], Randell Mot. [240]. Because the evidence of their guilt was overwhelming, judgment of acquittal is denied. And because there was no error, much less prejudicial error, they are not entitled to a new trial.

I. Background

Defendants were income-tax-return preparers at Sunbelt Tax Services in Jackson, Mississippi, a company Earnest owned and managed. The Government contended that Earnest and his employees-including Randell and Klish-prepared fraudulent tax returns to generate higher refunds for their clients and thus more business for themselves. The three primary means for increasing refunds were (1) claiming education credits for taxpayers who were not in school; (2) inflating deductions on Schedule As; and (3) manipulating income and expenses on Schedule Cs.

This pattern apparently began at American Tax Services, where Earnest and Randell worked before Sunbelt. It also drew the IRS's attention. In 2012 and 2014, the IRS conducted two due-diligence audits at American Tax to address issues that included questionable education credits, Schedule As, and Schedule Cs. The audits were designed to ensure that the tax preparers

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were properly documenting their files and had satisfied the due-diligence requirements before including these deductions and credits on their clients' returns. Earnest and Randell received six-figure fines.

After the audits, Earnest left American Tax and, in January 2015, opened Sunbelt where he hired Randell, Klish, and other tax preparers. Though they were working under a different name, the Government says Earnest and his employees followed the same pattern of falsely claiming education credits and manipulating Schedule As and Schedule Cs. Eventually, the IRS raided Sunbelt, and the Government obtained an indictment against Earnest, Randell, Klish, and other Sunbelt employees Jonathan Barefoot, Dwight Stamey, and John Wells. The latter three pleaded guilty before trial

Count 1 charges Earnest, Randell, and Klish with violating 18 U.S.C. § 371, which makes it a crime to conspire to defraud the United States. The remaining counts charge Defendants with violating 26 U.S.C. § 7206(2), which makes it a crime to willfully aid or assist in preparing or filing a materially false tax return. The § 7206(2) counts relate to specific tax returns prepared for Sunbelt customers. The Government dropped two of those counts against Randell (Counts 9 and 10) because the taxpayer witnesses never testified. The Court later granted judgment of acquittal for all § 7206(2) counts against Klish (Counts 11 through 13) because the evidence could not link Klish to those returns.

The remaining counts were sent to the jury and resulted in convictions. Specifically, the jury found Earnest, Randell, and Klish guilty of conspiracy under § 371 as charged in Count 1. It also found that Earnest violated § 7206(2) as to the returns charged in Counts 5 through 7 and that Randell violated § 7206(2) as to the return charged in Count 8. Defendants now seek judgment of acquittal or a new trial, and the briefing has closed.

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II. Standards

The factual analysis for the motions for judgment of acquittal overlaps with the analysis for the motions for a new trial. For example, Defendants say the evidence was insufficient under Rule 29 but also argue that the verdict was against the greater weight of the evidence under Rule 33. For that reason, the Court will provide the standards for both rules and then examine the sufficiency-of-the-evidence arguments together. The final section of this Order addresses Defendants' arguments for a new trial based on trial error.

A. Rule 29

Under Rule 29, the Court may set aside a jury's verdict of guilt if “the evidence is insufficient to sustain a conviction” of one or more of the offenses charged in the indictment. Fed. R. Crim. P. 29(a), (c). “The jury's verdict will be affirmed ‘if a reasonable trier of fact could conclude from the evidence that the elements of the offense were established beyond a reasonable doubt.'” United States v. Girod, 646 F.3d 304, 313 (5th Cir. 2011) (quoting United States v. Myers, 104 F.3d 76, 78 (5th Cir. 1997)). “In assessing the sufficiency of the evidence, we do not evaluate the weight of the evidence or the credibility of the witnesses, but view the evidence in the light most favorable to the verdict, drawing all reasonable inferences to support the verdict.” Id. (citingMyers, 104 F.3d at 78-79).

B. Rule 33(a)

Rule 33(a) allows the Court to “vacate any judgment and grant a new trial if the interest of justice so requires.” But “[t]he grant of a new trial is necessarily an extreme measure.” United States v. O'Keefe, 128 F.3d 885, 898 (5th Cir. 1997). Therefore, “motions for new trial are not favored, and are granted only with great caution.” Id. (citing United States v. Hamilton, 559 F.2d 1370, 1373 (5th Cir. 1977)). “A new trial is granted only upon demonstration of

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adverse effects on substantial rights of a defendant.” United States v. Wright, 634 F.3d 770, 775 (5th Cir. 2011) (quoting O'Keefe, 128 F.3d at 898). An error affects the defendant's substantial rights if “it affected the outcome of the trial court proceedings.” United States v. Alarcon, 261 F.3d 416, 423 (5th Cir. 2001).

When considering a motion for a new trial, the Court “may weigh the evidence and assess the credibility of the witnesses.” United States v. Arnold, 416 F.3d 349, 360 (5th Cir. 2005) (citing United States v. Robertson, 110 F.3d 1113, 1117 (5th Cir. 1997)). “The evidence must preponderate heavily against the verdict, such that it would be a miscarriage of justice to let the verdict stand.” Id. (quoting Robertson, 110 F.3d at 1118). And “any error of sufficient magnitude to require reversal on appeal is an adequate ground for granting a new trial.” United States v. Wall, 389 F.3d 457, 474 (5th Cir. 2004) (quoting 3 Charles Alan Wright, et al., Federal Practice and Procedure Criminal § 556 (3d ed. 2004)).

III. Analysis

A. Motion for Judgment of Acquittal or New Trial Based on Sufficiency of Evidence Defendants seek judgment of acquittal as to the convictions in Count 1 under § 371 and the individual counts under § 7206(2). As noted, the Court will consider the evidence under Rules 29 and 33.

1. Convictions under 18 U.S.C. § 371

Count 1 charges Defendants with violating § 371, which makes it a crime for two or more persons to conspire to commit an offense against the laws of the United States. In the tax-fraud context, the elements are:

First: That the defendant and at least one other person made an agreement to defraud the government or one of its agencies by impairing, obstructing, or defeating the lawful function of the Internal Revenue Service in the ascertainment assessment, or collection of income taxes due, as charged in the indictment; and

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Second: That the defendant knew that the purpose of the agreement was to defraud the government and joined in it willfully, that is, with the intent to defraud; and

Third: That at least one of the conspirators during the existence of the conspiracy knowingly committed at least one of the overt acts described in the indictment in order to accomplish some object or purpose of the conspiracy.

C-9 (Jury Instructions) at 16 (based on Fifth Circuit Pattern Jury Instruction (Crim.) 2.15B); see United States v. Njoku, 737 F.3d 55, 64 (5th Cir. 2013). While Defendants generically say they are entitled to judgment of acquittal on Count 1, their specific arguments focus on the existence of an agreement and whether the Government proved that they knowingly joined in it.

a. An Agreement

Defendants' arguments on the agreement element are narrow. They attack two Government witnesses, former Sunbelt employees John Wells (who pleaded guilty before trial) and Jessica Cella (who was never charged), claiming that neither could “credibly establish any agreement to defraud the government.” Earnest Mot. [238] at 5 (emphasis added); see also Randell Mot. [240] at 3.

There are four threshold problems with this argument. First, both witnesses testified to facts showing an agreement at Sunbelt to falsify education credits, Schedule As, and Schedule Cs. Whether the testimony “credibly” establishes an agreement is no concern under Rule 29. See Girod, 646 F.3d at 313.

Second, Defendants' argument suggests that neither Wells nor Cella could prove that a formal agreement existed, though no such proof is required. “The existence of an agreement, as well as a defendant's knowledge of its objective and intent to join, can be...