Wednesday, September 14, 2011

U.S. v. QUINN, Cite as 108 AFTR 2d 2011-XXXX, 08/31/2011

Case Information:

Code Sec(s):      
Docket No.:        Case No. 09-20075-01-JWL,
Date Decided:   08/31/2011.






Judge: John W. Lungstrum United States District Judge

On March 15, 2011, a jury convicted defendant Rosie Quinn of seven counts of failing to pay over employment taxes in violation of 26 U.S.C. § 7202 and two counts of failing to pay individual income taxes in violation of 26 U.S.C. § 7203. This matter now comes before the Court on defendant's motion for judgment of acquittal or for a new trial (Doc. # 109), her supplemental motion for judgment of acquittal (Doc. # 123), and her supplemental motion for a new trial (Doc. # 124). 1 For the reasons set forth below, the motions are denied.

I. Motions for Judgment of Acquittal

A. Interpretation of 26 U.S.C. § 7202

By her initial motion seeking a judgment of acquittal, defendant asserts that the Court erred in denying her motion to dismiss Counts 1 through 7, which alleged failures to pay over employment taxes in violation of 26 U.S.C. § 7202.   Section 7202 criminalizes a person's willful failure to pay over taxes that must be collected, such as employment taxes. See id. By Memorandum and Order of February 3, 2011 (Doc. # 75), the Court interpreted   Section 7202 to include a timing element, so that a person violates   Section 7202 if she willfully fails to pay over the taxes after the due date for such payment; thus, the Court refused to dismiss the charges, despite defendant's recent payment of the amounts due.

Defendant has not offered any argument supporting her claim that the Court's ruling was erroneous. Accordingly, for the reasons stated in its prior opinion, the Court reaffirms its construction of   Section 7202, and it denies this basis for acquittal.

B. Sufficiency of the Evidence

By her initial motion, defendant also seeks acquittal on the basis that the evidence supporting her convictions was insufficient as a matter of law. In her supplemental motion, defendant more specifically states that the Government failed to prove that she willfully failed to pay taxes. In resolving such a challenge to the sufficiency of the evidence, the Court must determine whether, “viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crimes beyond a reasonable doubt.” United States v. Doddles, 539 F.3d 1291, 1293 (10th Cir. 2008) (quotation omitted). The Court must “resolve any possible conflicts in the evidence in favor of the Government and assume that the jury found that evidence credible.” Id. at 1293–94 (citation omitted). “While the evidence supporting the conviction must be substantial and do more than raise a mere suspicion of guilt, it need not conclusively exclude every other reasonable hypothesis and it need not negate all possibilities except guilt.” United States v. Burkley, 513 F.3d 1183, 1188–89 (10th Cir. 2008) (internal quotation omitted).

Defendant has not provided any argument why the evidence was insufficient in this case. At trial, the Government submitted evidence, and defendant herself conceded, that she failed to pay over employment taxes and failed to pay individual income taxes for the periods in question on the dates due, and that she was responsible for the payment of those taxes. Defendant disputed only that those failures were willful, as required for convictions under the relevant statutes. See 26 U.S.C. §§ 7202, 7203. Concerning this element of the offenses, the Court instructed the jury as follows:

An essential element of the crimes charged is that defendant must have acted willfully. The word “willfully” means voluntarily and intentionally in violation of a known legal duty. In other words, the defendant must have acted voluntarily and intentionally and with the specific intent to do something she knew the law prohibited, or to fail to do something she knew the law required; that is to say, with intent either to disobey or disregard the law.
Conversely, the defendant did not act willfully if you find that she acted or failed to act because of negligence (even gross negligence), inadvertence, accident, mistake, reckless disregard for the requirements of the law, ignorance of the law, or a good-faith belief, based on a misunderstanding of the law, that she was not violating any of the provisions of the tax laws.
See, e.g., Cheek v. United States,   498 U.S. 192, 201–02 [67 AFTR 2d 91-344] (1991).

The Court concludes that the Government presented sufficient evidence of willfulness by defendant to support the convictions. Defendant, an attorney, conceded in her testimony that she knew she had a duty to pay over the employment taxes and to pay income taxes by certain deadlines, and she in fact filed tax returns and forms without the accompanying payments. The jury could reasonably infer from the evidence of defendant's dealings with the IRS that she was attempting to put off having to pay for as long as she could. The jury also heard evidence, including evidence of her gambling and the expensive homes in which she lived, that defendant had access to significant funds that she could have paid to the IRS. The Government also presented evidence suggesting that defendant purchased one home in her sister's name, and the jury could reasonably infer that defendant was attempting to hide her assets from the IRS. At trial, defendant relied on her testimony that she had a gambling addiction, but the jury was free either not to believe that testimony or to conclude that she acted willfully despite the addiction.

The Court concludes that from the evidence, the jury could reasonably have found beyond a reasonable doubt that defendant voluntarily and intentionally failed to pay the IRS when she knew such payments were required by law, and thus that she acted willfully. Accordingly, the Court denies defendant's motions for a judgment of acquittal.

II. Motions for a New Trial

Defendant also seeks a new trial based on various alleged errors by the Court at trial. With respect to defendant's request for a new trial, Rule 33 provides that “the court may vacate any judgment and grant a new trial if the interest of justice so requires.” Fed. R. Crim. P. 33(a). “A motion for a new trial is not regarded with favor and is only [granted] with great caution.” United States v. Herrera, 481 F.3d 1266, 1269–70 (10th Cir. 2007) (internal quotation omitted).

A. Rejection of Defendant's Proposed Instruction

In her initial motion, defendant claims, without argument, that “[t]his Court erred by rejecting Defendant's proposed jury instruction regarding the lack of a timing element in 26 U.S.C. § 7202.” Based on the Court's interpretation of   Section 7202, which the Court has now reaffirmed,see supra Part I.A, the Court's inclusion of a timing element in its instruction on Counts 1 through 7 was proper, and the Court denies this basis for a new trial.

B. Evidence of Purchase of Property by Charlie Sessoms

Defendant also makes the following claim in her initial motion, without any additional argument: “This Court erred by denying Defendant's Motion in Limine and allowing the government to present evidence at trial regarding the purchase of a property made by Charlie Sessoms. Defendant's Motion in Limine should have been granted as this evidence was irrelevant.” At trial, the Government submitted evidence that a particular residence (the “Canaan Lake Property”) was purchased in the name of Ms. Sessoms, defendant's sister and employee, for $375,000; that the earnest money deposit for that purchase came from defendant's business trust account; that defendant lived in the house and that Ms. Sessoms lived elsewhere; and that defendant paid monthly sums to her sister from her trust account that corresponded with Ms. Sessoms's monthly mortgage payments. Defendant conceded that she paid her sister rent in the amount of the mortgage payments. Thus, the evidence was relevant to whether defendant was attempting to hide assets and whether defendant had significant assets that she purchased with money that could have been paid to the IRS. Both points were relevant to the issue of defendant's willfulness. See, e.g., United States v. Blanchard,   618 F.3d 562, 569–70 [106 AFTR 2d 2010-6073] (6th Cir. 2010) (evidence of ability to pay, including discretionary purchases, is probative of willfulness); United States v. Ellis,   548 F.3d 539, 542–43 [102 AFTR 2d 2008-7033] (7th Cir. 2008) (evidence of lavish expenditures was relevant to issue of willfulness).

The Court concludes that it did not err in ruling at trial that the probative value of this evidence was not substantially outweighed by the danger of unfair prejudice. See Fed. R. Evid. 403. Therefore, the Court denies this basis for a new trial.

C. Photographs of Houses

Finally, defendant claims in her initial motion, that the Court erred in admitting into evidence one photograph each of two residences in which defendant lived. Defendant's only argument is that such evidence was “irrelevant, cumulative, and unduly prejudicial.” In her motion in limine, defendant argued that the photographs were cumulative because the jury would already have evidence of the value of those homes. As noted above, however, the Government was entitled to present evidence of significant expenditures by defendant, and the Court agrees with the Government that the photographs had probative value beyond the mere valuations to show defendant's lifestyle while she owed significant amounts of taxes—again, to show defendant's willfulness. Only one picture of each house was admitted, and the Court concludes that the probative value of the photographs was not substantially outweighed by the danger of unfair prejudice or the needless presentation of cumulative evidence.See Fed. R. Evid. 403. The Court also concludes that any error in the admission of these photographs was harmless, in light of the evidence of the value of the homes and the evidence that Ms. Sessoms acted as a straw purchaser for defendant with respect to one of the homes. See Fed. R. Evid. 103(a). Therefore, the Court denies this basis for a new trial.

D. Objection Sustained at Trial

In her supplemental motion for a new trial, defendant cites an incident when Government witness Huan Nguyen, an IRS Special Agent, was asked a question on direct examination to which the Court sustained an objection. Defendant argues that “it was too late to unring the bell and this testimony severely prejudiced Ms. Quinn.” Defendant does not explain, however, why any such error compromised the trial to such extent that a new trial is warranted.

At trial, Agent Nguyen testified that, in a meeting with defendant, he did not inform her of specific charges that he was considering. He was then asked which charges he was investigating at that point, and he responded as follows:

I had the gamut open. I had evasion of payment; I had conspiracy, obviously. What we're looking at here is 7202 ...
Defense counsel then interrupted with an objection. At sidebar, counsel explained that he objected to a discussion of other possible crimes for which defendant was not charged. The Court responded that it appeared that the witness had already answered the question, and that it did not seem that the witness had intended to leave the impression that defendant did commit other crimes. The Court explained that Government counsel could have the witness explain that he considers a number of things at the beginning of an investigation, but he did not need to go through a “laundry list” of statutes. Government counsel then resumed his examination with the following question:

[Y]ou don't need to tell us the code section or titles, but when you first received this case with respect to Ms. Quinn, what other potential crimes were you looking at the evidence — or thought that you could proceed in your investigation with Ms. Quinn?
Defense counsel then objected again. The Court ruled as follows:

Sustained. That is not what I told you was relevant. It isn't relevant what other ones he actually thought about. It may be relevant that he didn't tell her a specific statute that he thought she might have violated because he didn't know until he had looked at all the facts. That might be relevant if that was his state of mind, and you may inquire about that.
Government counsel then proceeded in his questioning along the line suggested by the Court, and defense counsel did not object further.

In her motion, defendant appears to take issue with the question following the first sidebar, to which the Court sustained an objection. The witness did not answer the question, however; thus, there was no testimony elicited in response to the improper question, and there was no bell to be “unrung”. Defendant did not seek any limiting instruction at the time, nor did she move for a mistrial. The jurors were instructed that questions by counsel did not constitute evidence, and that they should consider only the evidence admitted in the form of testimony and exhibits. Therefore, the Court concludes that this incident at trial did not represent an error warranting a new trial.

E. Testimony of Agent's “Personal Opinion” of Defendant's Honesty

In her supplemental motion for a new trial, defendant also complains, without further argument, that Agent Nguyen “repeatedly testified regarding his personal opinion of Ms. Quinn's honesty.” At trial, Agent Nguyen testified on direct examination, without objection, that defendant was evasive and uncooperative in answering questions in a meeting with him. The witness then had the following exchange with Government counsel, which defendant cites in her motion:

Q. When Ms. Quinn stated that she intended to pay her taxes, what was your impression of that statement?
A. I really didn't believe her. As the file stated, before there were a lot of other statements to say, I will work, I will pay whatever it may be. It's just — to me, it was just another answer in a long line.
Q. Was the fact that the largest payment you saw on her tax history was the payment ordered by the bankruptcy court, did that contribute to your impression of her answer to that question?
A. That's correct. If you look at that chart, two of the payments — pardon me. The payments were usually made in compliance with trying to do something else, yes, or requested by other individuals.
Q. Was there anything from her past that indicated to you that she intended to pay her taxes?
A. Not to me, no.
Defendant did not object to this testimony at trial; thus, the Court reviews the admission of this testimony only for plain error affecting substantial rights. See United States v. Schene, 543 F.3d 627, 640 (10th Cir. 2008); Fed. R. Evid. 103.

Defendant has not cited any authority in support of this assertion of error, nor has she explained why the testimony was improper. It is true that the credibility of a witness may not ordinarily be the subject of expert testimony. See United States v. Call, 129 F.3d 1402, 1406 (10th Cir. 1997) (affirming exclusion of polygraph evidence). In this exchange, however, Agent Nguyen was not testifying concerning defendant's general credibility as a witness. To the contrary, the witness was explaining the basis for his belief that defendant was being evasive and uncooperative in answering his questions—evidence that was probative on the issue of defendant's willfulness. Defendant has not shown that this testimony should not have been admitted.

The Court further concludes that any such error would have been harmless. The jury was presented with the history of defendant's dealings with the IRS, and it was free to determine the credibility of defendant, who took the stand, on its own. Moreover, in stating that he did not believe her statement that she intended to pay, Agent Nguyen did not give an opinion on the ultimate issue of whether defendant acted willfully, which question the jury answered. Accordingly, the Court concludes that it did not commit plain error affecting substantial rights in failing to exclude this testimony by Agent Nguyen, and the Court denies this basis for a new trial. 888-712-7690

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