United States v. Beavers

• Decision Date: 30 June 2014
• Docket Number: No. 13–3198.,13–3198.
• Citation: 756 F.3d 1044
• Parties: UNITED STATES of America, Plaintiff–Appellee, v. William BEAVERS, Defendant–Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

756 F.3d 1044

UNITED STATES of America, Plaintiff–Appellee,

v.William BEAVERS, Defendant–Appellant.

No. 13–3198.

United States Court of Appeals, Seventh Circuit.

Argued April 3, 2014.

Decided June 30, 2014.

Debra Riggs Bonamici, Matthew M. Getter, Office of the United States Attorney, Chicago, IL, for Plaintiff–Appellee.

Samuel F. Adam, Chicago, IL, Victor P. Henderson, Henderson Adam, LLC, Chicago, IL, Sheldon Sorosky, Kaplan & Sorosky, Chicago, IL, for Defendant–Appellant.

Before POSNER, FLAUM, and ROVNER, Circuit Judges.

FLAUM, Circuit Judge.

William Beavers, a former Chicago alderman and Cook County Commissioner, was convicted of multiple counts of tax fraud. He appeals his conviction on several grounds. Beavers challenges many of the district court's evidentiary rulings and jury instructions, and he also contends that his right to a jury composed of a fair cross-section of the community was violated. We affirm.

I. Background

William Beavers was a Chicago alderman from 1983 until November 2006. In December 2006, he began serving as a Cook County Commissioner. Beavers had three political campaign committees: Citizens for Beavers, Friends of William Beavers, and the 7th Ward Democratic Organization. He was the chairman of each campaign committee as well as the only authorized signor for each committee's bank account. There is no dispute that Beavers' federal tax returns from 2005 to 2008 exhibited various inaccuracies; the parties disagree, however, as to whether these inaccuracies were honest mistakes or deliberate misrepresentations.

The first inaccuracy was Beavers' underreporting of his 2005 income. Each of Beavers' campaign committees was required to file semi-annual disclosure reports (called “D–2s”) listing its expenditures. In its D–2 for the first half of 2005, Citizens for Beavers reported a payment of $56,149 to Beavers. This payment was legal under Illinois law. However, Beavers had given his tax preparer a letter, addressed to the IRS and signed by Beavers, stating that he had received only $43,000 in campaign funds from Citizens for Beavers. Thus, Beavers' tax return listed $43,000—rather than $56,149—as “additional income.”

The second inaccuracy concerned Beavers' undeclared use of campaign funds to increase his pension annuity. Shortly before Beavers left his position as a Chicago alderman in November 2006, the Municipal Employees Annuity and Benefit Fund of Chicago informed Beavers about his options for his aldermanic pension. To take advantage of the option that maximized his pension benefits, Beavers provided the Annuity Fund with a check for $68,763, which was drawn on the account of Citizens for Beavers. Beavers did not report the $68,763 as income on his tax return for 2006, nor did Citizens for Beavers report the expenditure on its D–2s for 2006, 2007, or 2008. Additionally, when Beavers later applied to a bank for a personal loan, his financial statements did not include the $68,763 as an outstanding loan from his campaign. From the time he took the funds in November 2006 until April 2009, Beavers did not repay any of the $68,763 to his campaign.

The third inaccuracy concerned the monthly stipends that Beavers took as a Cook County Commissioner. Cook County paid its Commissioners not only an annual salary, but also a monthly stipend of $1,200 from the Cook County Contingency Account. Beavers cashed (or deposited in his personal bank account) every monthly check from December 2006 through November 2008. Beavers informed the County (through forms that he submitted) that he would claim these $1,200 stipends as income. However, he did not report these monthly checks on his tax returns for 2006, 2007, or 2008.

The fourth problem was that, between 2006 and 2008, Beavers wrote himself 100 checks totaling $226,300 from his three campaign-committee accounts. At trial, the government demonstrated that Beavers often wrote these checks in order to finance his gambling trips to the Horseshoe Casino in Hammond, Indiana. Beavers cashed 93 of the 100 checks the day before, the day of, or the day after he used his “player's card” at the Horseshoe. An IRS agent who examined these checks and the campaigns' bank accounts testified that Beavers often repaid his campaigns in some amount, but he never repaid the full $226,300. The agent further testified that there were no loan agreements or formal documentation for any of these “advances.”

The fifth problem concerned Beavers' efforts to obstruct the IRS. The government says that the fact that Beavers “made the 100 campaign checks payable to himself made it more difficult to determine what he did with the proceeds.” Beavers' campaign-committees' records said nothing of gambling or personal use. Indeed, some check stubs had no explanation of the check's purpose, while others indicated that checks were used for campaign-related expenses even though the timing suggested that they were used to fund Beavers' gambling. Beavers and his campaign committees did not document when he repaid the funds.

In April 2009, federal agents approached Beavers and said they wanted to interview him in connection with a grand jury investigation into his unreported conversion of campaign funds for personal use. Beavers then took several corrective actions. One week after agents contacted him, he filed amended tax returns for 2007 and 2008. He reported nearly $20,000 in additional income for each year, explaining that “[c]ampaign funds deemed reportable was [ sic ] inadvertently omitted from the original return.” The following month, Beavers wrote a $68,000 check—drawn on the account of one of his campaign funds, Friends for Beavers—to repay another campaign fund, Citizens for Beavers. (He later wrote several checks from his personal account in an effort to repay Friends for Beavers.) In fall 2010, the media reported that a grand jury had issued a subpoena for Cook County records about Beavers and the contingency-fund stipends. Later, in April 2011, Beavers filed a second amended tax return for 2008 in which he reported an additional $11,000 in income. This newly amended return included the explanation that “[a]dvances for expenses by the employer were not included on the W2 and were not accounted for on the original return.”

In 2012, the government charged Beavers with three counts of violating 26 U.S.C. § 7206(1), which prohibits wilfully making a material false statement on a tax return, and with one count of violating 26 U.S.C. § 7212(a), which prohibits corruptly obstructing the IRS in its administration of the tax laws. The jury convicted Beavers on all counts. Beavers was sentenced to six months' imprisonment and was ordered to pay about $31,000 in restitution and a $10,000 fine. He appeals.

II. Discussion

A. Evidentiary rulings

Beavers raises several evidentiary challenges. He also argues that the district court's rulings violated his constitutional right to present a meaningful defense and impermissibly burdened his right against self-incrimination. We typically review evidentiary rulings for an abuse of discretion, but we review de novo whether an evidentiary ruling violated Beavers' constitutional rights. United States v. Alayeto, 628 F.3d 917, 920–21 (7th Cir.2010).

i. The evidence of Beavers' remedial actions

Beavers first argues that the district court erred by excluding evidence of his conduct after federal agents approached him—namely his amended tax returns and payments to reimburse his campaign committees. The government moved in limine to exclude all of this evidence. Relying on Federal Rules of Evidence 401 and 403, the government argued that Beavers' actions were not probative of his state of mind at the time he filed the original returns,and that the jury would be confused by the admission of evidence of remedial actions. Beavers, on the other hand, argued that such evidence was probative of his good faith and lack of intent to file fraudulent returns in the first place. He also said that the fact that he repaid (with campaign funds) the $68,763 that he used to increase his pension shows that he considered the amount a loan, rather than income.

The district court ruled that the evidence would be admissible if Beavers could establish that each remedial action was relevant to his state of mind at the time he filed the original tax returns. Beavers ultimately elected not to testify, and he did not otherwise succeed in establishing the required evidentiary foundation. Thus, the evidence of his remedial actions was not presented at trial. Beavers argues that (1) the evidence of his remedial actions was relevant under Rule 401; (2) the district court's conditional admission impermissibly burdened Beavers' Fifth Amendment right against self-incrimination; and (3) the court's rulings deprived him of his constitutional right to present a meaningful defense.

First, the district court conditioned the admission of evidence of Beavers' corrective actions upon a showing that these actions had a connection to Beavers' state of mind at the time he filed his incorrect returns. The logic of the ruling was that, in the absence of a foundation establishing this link, the amended tax returns (and evidence of other remedial actions) did not make it more likely that Beavers believed his original returns were accurate when he filed them.

District judges making relevancy determinations in this type of situation should proceed on a case-by-case basis. Cf. United States v. Tishberg, 854 F.2d 1070, 1073 (7th Cir.1988) (reasoning, in the sufficiency context, that the defendant's amended return “may demonstrate a good faith effort to correct his previous mistakes,” but also noting that the return “does not negate the import of his previous action”). Nevertheless, courts have repeatedly affirmed the exclusion of evidence of remedial action taken after the taxpayer knows he is under investigation. See United States v. McClain, 934 F.2d 822, 834–35 (7th Cir.1991) (finding “no...