US v. Olbres, Cr. No. 93-27-1-2-M.
| Decision Date | 30 September 1994 |
| Docket Number | Cr. No. 93-27-1-2-M. |
| Citation | 881 F. Supp. 703 |
| Parties | UNITED STATES of America v. Anthony G. OLBRES and Shirley A. Olbres. |
| Court | U.S. District Court — District of New Hampshire |
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Steven M. Gordon, Shaheen, Cappiello, Stein & Gordon, Concord, NH, Terry Philip Segal, Boston, MA, for Anthony G. Olbres and Shirley A. Olbres.
Gretchen Leah Witt, U.S. Attorney's Office, Concord, NH, James W. Chapman, Jr., U.S. Dept. of Justice, Tax Div., Northern Crim. Enforcement Section, Washington, DC, Brian T. Tucker, Rath, Young, Pignatelli & Oyer, P.A., Concord, NH, for U.S.
This close and difficult case raises fundamental issues about the nature of the court's role in insuring that criminal convictions are obtained only upon proof beyond a reasonable doubt of each essential element of the crime charged.
Defendants Anthony and Shirley Olbres were indicted on three counts of willful income tax evasion related to tax years 1986, 1987, and 1988. 26 U.S.C. § 7201. After seven days of trial and three days of deliberation, the jury declared itself deadlocked. Over defense objections, the court delivered a modified Allen charge,1 urging the jury to continue its deliberations in an effort to reach a verdict. The jury then retired for the weekend and returned a verdict on each count the following Monday, the fourth day of deliberations. The jury acquitted defendants on Counts I and III of the indictment, relating to tax years 1986 and 1988, but convicted both defendants on Count II, relating to tax year 1987.
At the close of all the evidence, and before the case was submitted to the jury, defendants moved for judgment of acquittal on all three counts on grounds that the evidence was insufficient as a matter of law to establish their guilt beyond a reasonable doubt. See Fed.R.Crim.P. 29(a). The court reserved its decision on the motion until after the verdict. See Fed.R.Crim.P. 29(b). On March 22, 1994, the court heard oral argument on the motion and granted the parties leave to file supplemental memoranda.
The difficulty presented by this case stems in part from the inexact nature of judicial review of insufficiency of evidence claims, and in part from the fact that such review unavoidably includes a subjective component. In considering an insufficiency claim, a court is called upon to decide whether the evidence is adequate, as a matter of law, to meet a subjective standard of persuasion. That assessment is itself partially subjective, and, because it is partially subjective, it will, in close cases, yield conclusions about which reasonable judicial minds might differ.
In this case, the only disputed element of the crime of conviction was "willfulness." As demonstrated in the government's post-trial memoranda, its case for willfulness was neither frivolous nor wholly unpersuasive. Thus, the critical Rule 29 inquiry here is not whether evidence was presented from which willfulness could be inferred; it could. Instead, the critical inquiry here is whether a reasonable jury could infer willfulness from the evidence presented to the requisite degree of certitude necessary to support a conviction. Subsumed in that inquiry is a basic issue related to the means properly used by a trial judge to measure circumstantial or inferential evidence to determine whether it is of sufficient persuasive force to prove a necessary fact "beyond a reasonable doubt." Those questions provide the focus of discussion.
At the outset, however, it must be noted that, as difficult as it might be to draw and enforce inexact distinctions among varying degrees of certitude, a defendant's constitutional due process right not to be convicted except upon proof legally sufficient to establish each element of the crime charged "beyond a reasonable doubt" compels judges to do exactly that. In this case, albeit a close one, the government's proof must be deemed to fall short, as a matter of law, of the persuasive value required to permit a reasonable jury to find the element of willfulness beyond a reasonable doubt.
To prove the crime described in Count II, violation of 26 U.S.C. § 7201,2 the government was required to prove the following essential elements beyond a reasonable doubt: (1) the existence of a substantial tax deficiency; (2) an affirmative act constituting an evasion or attempted evasion of the tax; and (3) willfulness. See Sansone v. United States, 380 U.S. 343, 351, 85 S.Ct. 1004, 1010, 13 L.Ed.2d 882 (1965); Spies v. United States, 317 U.S. 492, 499-500, 63 S.Ct. 364, 368-69, 87 L.Ed. 418 (1943); United States v. Waldeck, 909 F.2d 555, 557 (1st Cir.1990). Defendants conceded that they failed to pay a substantial amount of income tax in each of the three years specified in Counts I, II and III of the indictment. They also conceded that because each tax return understated their income, those returns were necessarily false. The government and defendants agreed that the only disputed issues between them were whether defendants knew the returns were false when filed and whether they, therefore, acted "willfully." Of course, the issue here is limited to the conviction on Count II (tax year 1987); the verdicts of acquittal on Counts I and III are not relevant to this ruling. United States v. Powell, 469 U.S. 57, 64-65, 105 S.Ct. 471, 476-77, 83 L.Ed.2d 461 (1984).
"Willfulness" is the "voluntary, intentional violation of a known legal duty." United States v. Drape, 668 F.2d 22, 26 (1st Cir.1982) (citing United States v. Pomponio, 429 U.S. 10, 11-12, 97 S.Ct. 22, 23-24, 50 L.Ed.2d 12 (1976)); see also, Cheek v. United States, 498 U.S. 192, 195, 111 S.Ct. 604, 607, 112 L.Ed.2d 617 (1991); United States v. Aitken, 755 F.2d 188, 191 (1st Cir.1985). Evidence of willfulness is often circumstantial, since direct proof of the required specific intent is ordinarily unavailable.
The evidence presented at trial in this case, cast in the light most favorable to the prosecution, showed the following. Defendants Anthony and Shirley Olbres are husband band and wife. In 1974 they began a small business designing, fabricating, and selling trade show booths. The business, originally a small sole proprietorship, rapidly grew into a successful enterprise with gross receipts in the millions of dollars and clients among the country's major corporations. The business experienced major relative growth between 1986 and 1988.
Anthony Olbres, an industrial designer by education and profession, was responsible for the business's major design and fabrication work, most of the marketing, and its billing function. Shirley Olbres assisted in the business from its inception, but always on a part-time basis. She assumed responsibility for maintaining the financial records, while also caring for the couple's three children. Mrs. Olbres completed three years of college before her marriage, but she had neither training nor prior experience in accounting or bookkeeping. As the business grew, defendants hired employees to assist in the fabrication, administration, and marketing aspects of the enterprise. But, despite her lack of training, Shirley Olbres continued to be responsible for the company's financial records. Those records were generally sloppy and contained many errors.
Beginning in 1976, ten years before the tax year at issue, defendants retained a local certified public accountant, Wilson Dennett, to provide general business accounting and tax preparation services. Although not without some professional deficiencies, Dennett was a competent accountant, an honest person, and was not in collusion with defendants in any way. Dennett prepared financial statements, assisted with financing transactions, provided routine accounting advice, and prepared defendants' tax returns, including the 1987 return described in Count II of the indictment. He routinely relied on information provided by Mr. and Mrs. Olbres in performing these services. He did not perform in-house bookkeeping or other record keeping functions for the business.
Defendants' 1987 joint tax return was audited by the Internal Revenue Service in 1989.3 Agent Leonard Kaply was eventually assigned the task of conducting the audit. After routine investigation, he determined that substantial business receipts had been deposited in defendants' business accounts in 1987, but had not been properly accounted for on that year's tax return. Upon request, Mr. Dennett provided Agent Kaply with access to defendants' files and his own work papers. Meetings between the IRS and defendants were scheduled, but they proved unproductive. Bank records relating to some of defendants' accounts were not produced as requested by Agent Kaply. At some point defendants, through legal counsel, expressed a willingness to cooperate fully with the civil audit, but only on condition that IRS agree not to refer the matter to its criminal division. Agent Kaply and his superiors declined, and decided that defendants, and presumably their accountant and legal counsel, were not fully cooperating in the civil audit. The case was then referred to the criminal investigation division. Agent Kaply also testified that Dennett once stated that Anthony Olbres had acknowledged (to Dennett) a "problem" with unreported income relative to defendants' 1987 return. Mr. Dennett's statement to Kaply and Mr. Olbres's statement to Dennett were both made after the audit had begun.
Defendants' 1986, 1987, and 1988 tax returns in fact underreported their income, with the most substantial understatement occurring on the 1987 tax return. Defendants reported gross business receipts of $1,235,069, and rental income of $30,000 for 1987. The correct amounts were shown to be $1,962,170 and $51,890 respectively, resulting in a total gross income understatement of $748,991, or roughly 37%. (While much confusing testimony and argument was presented involving other comparisons —...
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U.S. v. Olbres
...to the 1987 tax return on the basis that the government had failed to prove willfulness beyond a reasonable doubt. United States v. Olbres, 881 F.Supp. 703, 706 (D.N.H.1994). The government appealed, and this court reversed, holding that there was evidence of willfulness sufficient to uphol......
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U.S. v. Olbres
...7 While the defendants maintained other books and records from which the existence of these funds could perhaps be gleaned, see Olbres, 881 F.Supp. at 715, it is readily evident that a jury plausibly could infer from these facts that the defendants clumsily attempted to conceal income from ......