United States v. Mingqing Xiao
| Docket Number | 22-2758 |
| Decision Date | 08 August 2023 |
| Parties | United States of America, Plaintiff-Appellee, v. Mingqing Xiao, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Seventh Circuit |
ARGUED JUNE 21, 2023
Appeal from the United States District Court for the Southern District of Illinois. No. 4:21-cr-40039-SMY-1 - Staci M Yandle, Judge.
Before SYKES, Chief Judge, and HAMILTON and BRENNAN, Circuit Judges.
Defendant-appellant Dr. Mingqing Xiao has taught mathematics for many years at Southern Illinois University-Carbondale. He has also done academic work based in China, for which he has received more than $100,000 in payments. An investigation of certain grant applications by Dr. Xiao led FBI agents to take a deeper look at his finances. He was ultimately charged with wire fraud, making a false statement, failing to disclose his foreign bank account on his income tax returns, and failing to file a required report with the Department of the Treasury.
At trial, Dr. Xiao was acquitted of wire fraud and making a false statement, but a jury found him guilty of filing false tax returns and failing to file a report of a foreign bank account. He has appealed, seeking reversal of those convictions. He argues that the evidence was insufficient primarily on the question of willfulness, that the tax return question was ambiguous, and that the foreign-account reporting regulation is invalid. We affirm. The government's evidence permitted the jury to find beyond a reasonable doubt that Dr. Xiao acted willfully in choosing not to disclose his foreign bank account. The key question on the tax return form was not ambiguous as applied to Dr. Xiao's situation. He also has not shown that the foreign-account reporting regulation is invalid.
The Bank Secrecy Act requires many United States citizens and residents to report financial relationships and transactions with foreign banks. 31 U.S.C. § 5314(a). The Act's purposes include tax compliance and more general law enforcement, including civil investigations, criminal proceedings, and counterterrorism efforts. 31 U.S.C. § 5311 ( purposes of Act). Under regulations adopted under the Act, United States citizens and residents who have a "financial interest in" or "signature or other authority over" a foreign bank account or other financial account must report their accounts to the federal government. 31 C.F.R. § 1010.350(a). A taxpayer who meets the reporting criteria is required to disclose the existence of the foreign bank account on an annual tax return. Id. And if such a taxpayer meets the reporting criteria as to foreign bank accounts collectively exceeding $10,000, that taxpayer is required to file a separate annual report of a foreign bank account. 31 C.F.R. §§ 1010.306(c) &1010.350(a).
IRS Form 1040, Schedule B, asks whether the taxpayer has a foreign bank account:
At any time during [the tax year], did you have a financial interest in or signature authority over a financial account (such as a bank account, securities account, or brokerage account) located in a foreign country? See instructions ... .
(Emphases added.) Definitions are available in the instructions. If the answer is "yes"-that the taxpayer did have a "financial interest in" or "signature authority over" a foreign financial account-the tax form directs the taxpayer to instructions to determine whether it must be reported in a "Report of Foreign Bank and Financial Accounts," also known as an "FBAR." Willfully giving a false answer on a tax return is a criminal offense. 26 U.S.C. § 7206(1). So is willfully failing to file a required foreign bank account report. 31 U.S.C. §§ 5314 (duty to report) and 5322(a) (criminal penalty).
As part of an investigation into grant applications to the National Science Foundation for possible fraud, the Department of Justice investigated Dr. Xiao's finances, including his Chinese bank account and his tax returns. After the investigation, a federal grand jury indicted Dr. Xiao on seven counts: two counts of wire fraud by failing to disclose his outside funding to the National Science Foundation, one count of making a false statement to Southern Illinois University, three counts of making a false statement on three years of income tax returns, and one count of failing to file a report of a foreign bank account. See 18 U.S.C. § 1343 (wire fraud); 18 U.S.C. § 1001(a)(1) (false statement); 26 U.S.C. § 7206(1) (); 31 U.S.C. §§ 5314 &5322 ().
The case was tried to a jury. Before the case was submitted to the jury, the judge granted Dr. Xiao's motion for judgment of acquittal on the wire fraud charges under Federal Rule of Criminal Procedure 29(a). On those charges, the district judge found sufficient evidence that Dr. Xiao intended to deceive but not that he intended to defraud. The jury acquitted Dr. Xiao on the charge of making a false statement. The jury convicted Dr. Xiao on the three charges of filing false tax returns and the one charge of not reporting a foreign bank account. He was sentenced to serve one year of probation and to pay a fine and costs totaling just under $2,400.
On appeal, Dr. Xiao contests the denial of his renewed motion for judgment of acquittal or for a new trial under Federal Rules of Criminal Procedure 29 and 33. His principal argument is that the evidence did not support findings beyond a reasonable doubt that he acted willfully in filing his false tax returns and failing to file a foreign bank account report. His arguments revolve around a single question on each tax return: did he have a "financial interest in or signature authority over a financial account ... located in a foreign country?" He also argues that the question was fundamentally ambiguous and that the foreign bank account report regulation exceeds the statutory authority for issuing such regulations.
We consider first the sufficiency of the evidence of willfulness. We then address Dr. Xiao's claim that the tax return question about foreign bank accounts is "fundamentally ambiguous" and then his challenge to the FBAR regulation.
We will overturn a conviction for insufficient evidence only if, viewing the evidence in the light most favorable to the government, "no rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt." United States v. Snyder, 71 F.4th 555, 571 (7th Cir. 2023), quoting United States v. Maldonado, 893 F.3d 480, 484 (7th Cir. 2018), quoting in turn United States v. Brown, 726 F.3d 993, 1005 (7th Cir. 2013). We have often said this is a high hurdle for defendants to clear, but it is not impossible. The "height of the hurdle depends directly on the strength of the government's evidence," for even a "properly instructed jury may occasionally convict even when it can be said that no rational trier of fact could find guilt beyond a reasonable doubt." Snyder, 71 F.4th at 571, quoting United States v. Moreno, 922 F.3d 787, 793 (7th Cir. 2019), quoting in turn United States v. Garcia, 919 F.3d 489, 496-97 (7th Cir. 2019); see generally Jackson v. Virginia, 443 U.S. 307, 317 (1979).
The government's evidence-corroborated by Dr. Xiao's own statements in the interview with FBI agents-was easily sufficient to permit a finding beyond a reasonable doubt that Dr. Xiao answered the tax return question falsely and that he did so willfully. We summarize that evidence, giving the government the benefit of reasonable inferences from the evidence.
Since 2000, Dr. Xiao has taught mathematics at Southern Illinois University-Carbondale. He also worked with research colleagues in China, and that team received a grant of approximately $180,000. Dr. Xiao also received from one of those colleagues in China approximately $30,000 to critique papers, to edit manuscripts, and to help with English. Dr. Xiao also signed a contract to become a specially appointed professor at a university in China. By the contract's own terms, he would be paid for his "employment" in the form of an "annual salary," a "year-end performance" payment, and a home-purchase subsidy for "high-level talent."
Dr. Xiao opened a bank account with Ping An Bank in China to receive payments for his academic work in China. Accordingly, from at least 2017 to 2019, Dr. Xiao had a financial interest in, and signature authority over, a foreign bank account. But on his United States federal tax returns for those years, he answered "no," that he did not. Likewise, in 2019, he failed to file a foreign bank account report.
The evidence includes Dr. Xiao's foreign bank records, which documented his many transactions, including deposits, withdrawals, and investments. The records showed monthly deposits for "salary." They also showed his withdrawals to pay individuals, convenience stores, and mobile apps. The records further showed about $70,000 worth of investments, which Dr. Xiao hoped would produce a "stable increase of assets." His foreign bank records showed his transactions occurred during 2017, 2018, and 2019. In 2019, his foreign bank account had a balance in Chinese currency worth over $100,000, well beyond the reporting threshold of $10,000.
Dr Xiao did not disclose this income or the account when he applied for research grants in the United States. He was later asked to explain by Southern Illinois University officials. The reason, he explained to the university, was that he believed he did not have to disclose his "income from seminars, lectures, or teaching engagements sponsored by public or non-profit...
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