United States v. Jinwright

• Decision Date: 22 June 2012
• Docket Number: 10–5290.,Nos. 10–5289,s. 10–5289
• Citation: 683 F.3d 471,109 A.F.T.R.2d 2012
• Parties: UNITED STATES of America, Plaintiff–Appellee, v. Harriet P. JINWRIGHT, Defendant–Appellant. United States of America, Plaintiff–Appellee, v. Anthony L. Jinwright, Defendant–Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

683 F.3d 471

109 A.F.T.R.2d 2012-2729

UNITED STATES of America, Plaintiff–Appellee,

v.Harriet P. JINWRIGHT, Defendant–Appellant.

United States of America, Plaintiff–Appellee,

v.Anthony L. Jinwright, Defendant–Appellant.

Nos. 10–5289, 10–5290.

United States Court of Appeals,Fourth Circuit.

Argued: May 18, 2012.

Decided: June 22, 2012.

ARGUED:Ann Loraine Hester, Federal Defenders Of Western North Carolina, Inc., Charlotte, North Carolina; Joshua Daniel Davey, McGuirewoods, LLP, Charlotte, North Carolina, for Appellants. David Alan Brown, Sr., Office of the United States Attorney, Charlotte, North Carolina, for Appellee. ON BRIEF: Henderson Hill, Executive Director, Federal Defenders of Western North Carolina, Inc., Charlotte, North Carolina, for Appellant Harriet P. Jinwright; Jennifer L. King, McGuirewoods, LLP, Charlotte, North Carolina, for Appellant Anthony L. Jinwright. Anne M. Tompkins, United States Attorney, Craig D. Randall, Assistant United States Attorney, Office of the United States Attorney, Charlotte, North Carolina, for Appellee.

Before WILKINSON, NIEMEYER, and KING, Circuit Judges.

Affirmed by published opinion. Judge WILKINSON wrote the opinion, in which Judge NIEMEYER and Judge KING joined.

OPINION

WILKINSON, Circuit Judge:

Anthony and Harriet Jinwright, former co-pastors of Greater Salem Church in North Carolina, appeal their convictions and sentences arising from a tax evasion scheme in which they omitted millions of dollars of taxable income from their jointly filed tax returns. The Jinwrights raise a variety of challenges on appeal. Finding each contention to be without merit, we affirm the judgment of the district court.

I.

Mr. and Mrs. Jinwright were convicted of conspiracy to defraud the United States in violation of 18 U.S.C. § 371 and of three counts of tax evasion for the years 2005–2007, and aiding and abetting the same, in violation of 26 U.S.C. § 7201 and 18 U.S.C. § 2. Mr. Jinwright was convicted (and Mrs. Jinwright acquitted) of three additional counts of tax evasion for the years 2002–2004, as well as six counts of filing a false tax return in violation of 26 U.S.C. § 7206(1). The Jinwrights were also acquitted of several other charges not at issue in this appeal. The Jinwrights' convictions followed a four-week trial that involved the admission of over 90,000 pages of documentary evidence and the testimony of more than 70 witnesses. The facts most relevant to this appeal are summarized here.

A.

Prior to this litigation, Mr. Jinwright had served as senior pastor of Greater Salem Church (GSC) since 1981. Mrs. Jinwright played an active role in church life during her husband's ministry and began to draw a salary from GSC as a pastor of the church in about 2000. Over the course of their time with GSC, the Jinwrights were co-chairs of the GSC board of directors and served on a number of committees within the church, including those responsible for financial decisions. Mr. Jinwright had final authority over employee salaries and church finances more generally.

When Mr. Jinwright first became pastor at GSC, his salary was about $10,000. By 2001, his salary had increased to approximately $148,000. It reached about $300,000 by 2007. Between 2001 and 2007, GSC provided Mr. Jinwright with substantial benefits, in addition to his salary, that he underreported on his tax returns. He received housing allowances of between $130,000 and $160,000 per year, travel allowances of $19,000 to $48,000 per year, payments for his children's tuition and his federal income tax liability, and unlimited use of a luxury car leased by the church in addition to an annual vehicle allowance. Mr. Jinwright also received annual bonuses of $35,000 to $50,000, as well as separate Christmas bonuses. He had use of a GSC credit card and received reimbursements for purported business-related expenses that remained unsubstantiated. Taken together, Mr. Jinwright's total GSC compensation between 2001 and 2007 totaled nearly $3.9 million. During that time, Mrs. Jinwright received similar compensation from GSC in the form of salary, bonuses, allowances, and reimbursements, totaling nearly $1 million.

The Jinwrights earned more income outside of GSC. Together they earned tens of thousands of dollars in additional income for speaking at other churches that they failed to report to the IRS. Mr. Jinwright established an organization known as A.L. Jinwright Ministries, Inc. (ALJM), purportedly to receive his income from outside speaking engagements. Mrs. Jinwright was responsible for handling ALJM's bank statements and providing the corporation's financial information to the Jinwrights' CPA. Although defendants kept the income earned through this business, GSC paid its operating expenses. Mr. Jinwright also founded the Pastors Consortium. The consortium, with a membership of other pastors, held annual events celebrating the anniversaries of the members' churches. During these celebrations the participants would exchange “gifts” to one another in the form of checks for thousands of dollars.

IRS Revenue Agent Linda Polk reconstructed defendants' taxable income for the years 2002–2007 and testified at trial as to her conclusions regarding defendants' income and tax liabilities for those years. She treated as taxable income all GSC compensation by check, all payments for business-related expenses for which there was no substantiation, and payments received by defendants for speaking at other churches. Polk testified that defendants understated their taxable income by $2,486,771 between 2002 and 2007, resulting in a tax deficiency of $664,352 for those years.

B.

In light of the substantial evidence that the Jinwrights underreported their income from 2002 through 2007, the central dispute at trial concerned the defendants' knowledge of wrongdoing. See Sansone v. United States, 380 U.S. 343, 351, 85 S.Ct. 1004, 13 L.Ed.2d 882 (1965) (elements of tax evasion under 26 U.S.C. § 7201 are “willfulness; the existence of a tax deficiency, and an affirmative act constituting an evasion or attempted evasion of the tax”) (internal citations omitted). Mr. Jinwright testified that he and Mrs. Jinwright did not intend to evade their tax obligations. To establish that defendants knowingly understated their taxable income, the government introduced evidence of unreported income in the form of allowances, unsubstantiated reimbursements, bonuses and “gifts.” The government also tendered evidence of defendants' extravagant spending that exceeded the income they reported, including over a million dollars spent between 2001–2007 on mortgage and lease payments for two homes and several luxury cars.

Between 2001 and 2007, defendants reported total income of slightly more than $1.8 million, but claimed personal deductions of nearly $1.6 million, which would have left them with only about $28,000 to spend per year on nondeductible expenses. Yet the Jinwrights spent substantially more than that. Analysis of defendants' bank accounts revealed that from 2001–2007 the Jinwrights deposited and spent $3 million in excess of their reported income for those years. They also reported income on multiple loan applications between 2000 and 2006 that exceeded the reported income on their corresponding tax returns. They claimed tens of thousands of dollars in deductions for ALJM, even though the corporation had no employees and GSC bore its primary operating costs.

The government also presented evidence that the Jinwrights were informed multiple times of their legal duties and continued to breach them. Between 2001 and 2004, GSC undertook several audits to assist the church in obtaining tax-exempt status under I.R.C. § 501(c)(3). The auditors identified several problems with GSC's finances and informed the Jinwrights that they should be reporting their entire compensation package, including reimbursementsfor unsubstantiated expenses, as well as payments from GSC and other churches designated as “love gifts.” Nonetheless in 2001, for example, the Jinwrights' tax return reported almost $150,000 less than the auditors determined to be Mr. Jinwright's total compensation from GSC for that year. Several GSC employees, including three individuals who worked in the position of finance administrator, similarly told the Jinwrights that the variety of payments they were receiving from GSC constituted taxable income.

Yet the Jinwrights failed to inform their personal CPA Terry Lancaster about GSC compensation other than salary and housing allowances, which Lancaster testified he would have included as income in their returns had he known about it. According to the government, the defendants also structured their GSC compensation to conceal it from the IRS. For example, they directed that their non-salary compensation be paid out of the GSC operating account, rather than the payroll account. As a result, those payments were not included on the Jinwrights' W–2 forms and, per Mr. Jinwright's instruction, no 1099 forms were issued to disclose the added income to the IRS. Jacqueline Joyner–Jones, who served as an administrative assistant to the Jinwrights from 2001–2007, testified that the defendants instructed her to forge numerous checks from GSC Women of Faith Ministry, a subsidiary of GSC ministry. The checks were designated as reimbursements and included a $15,000 check in 2006 to cover Mr. Jinwright's tax liability.

The government presented evidence that defendants instructed GSC employees to alter GSC financial records to mislead both the congregation and the IRS. By 2002, the church began experiencing financial difficulties. According to several former GSC finance administrators, the Jinwrights paired extra months of revenues with fewer months of expenses in GSC's financial reports to conceal the church's level of debt. The financial reports also buried the amount of the Jinwrights' compensation by including all GSC employee salaries in one line item. Several of...