United States v. Farnsworth , 302 F. App'x 110 ( 2008 )


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  •                                                                                                                            Opinions of the United
    2008 Decisions                                                                                                             States Court of Appeals
    for the Third Circuit
    12-11-2008
    USA v. Farnsworth
    Precedential or Non-Precedential: Non-Precedential
    Docket No. 07-2200
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    Recommended Citation
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    http://digitalcommons.law.villanova.edu/thirdcircuit_2008/129
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    NOT PRECEDENTIAL
    UNITED STATES COURT OF APPEALS
    FOR THE THIRD CIRCUIT
    ____________
    No. 07-2200
    _____________
    UNITED STATES OF AMERICA
    v.
    ARTHUR L. FARNSWORTH,
    Appellant
    __________
    On Appeal from the United States District Court
    for the Eastern District of Pennsylvania
    (E.D. Pa. No. 04-cr-00707)
    District Judge: Honorable John R. Padova
    __________
    Submitted Under Third Circuit LAR 34.1(a)
    on November 21, 2008
    Before: SCIRICA, Chief Judge, RENDELL, Circuit Judge,
    and O’CONNOR,* Retired U.S. Supreme Court Justice.
    (Filed: December 11, 2008)
    __________
    OPINION OF THE COURT
    __________
    * Honorable Sandra Day O’Connor, retired Associate Justice of the United States
    Supreme Court, sitting by designation.
    RENDELL, Circuit Judge.
    Arthur L. Farnsworth challenges his conviction by the United States District Court
    for the Eastern District of Pennsylvania on three counts of attempted tax evasion.
    Farnsworth argues that the District Court lacked jurisdiction, that the Government failed
    to meet its burden of proof on a particular element, and that the District Court erred with
    regard to jury instructions. For the reasons stated below, we will affirm.
    DISCUSSION
    I. Background
    Arthur L. Farnsworth was indicted by a grand jury on three counts of attempted tax
    evasion under 26 U.S.C. § 7201, relating to the tax years of 1998, 1999, and 2000. The
    indictment charged, and it is undisputed, that Farnsworth earned substantial income
    during each of those years, and that he failed to file tax returns for each year. The
    indictment also charged Farnsworth with concealing and attempting to conceal income
    through “various means, including, among other things: (1) transferring ownership of his
    assets to fraudulent trusts; (2) encumbering assets; and (3) hiding his money in overseas
    bank accounts.” (App. at 31-33.)
    Prior to trial, the District Court informed the parties that it intended to instruct the
    jury that it would have to find the existence of an assessment in order to conclude that
    Farnsworth attempted to evade payment of taxes. United States v. Farnsworth, 
    456 F.3d 394
    , 396 (3d Cir. 2006). The Government appealed the decision to this Court, arguing
    2
    that we should reverse the ruling or, in the alternative, issue a writ of mandamus ordering
    the District Court to give a different instruction. 
    Id. at 396.
    We concluded that we did
    not have jurisdiction to reverse the ruling. 
    Id. at 400.
    As for mandamus relief, we noted
    that our previous opinions only discussed the assessment issue in dicta, and we agreed
    with the Government that the “weight of authority favors [the] view that an assessment is
    not required.” 
    Id. at 403.
    However, because we also found that the state of the law was
    not clear, we did not find the intended instruction to be clear error of law, and accordingly
    did not issue a writ of mandamus. 
    Id. The District
    Court considered our opinion, and
    ultimately did not instruct the jury that it was essential to find the existence of an
    assessment.
    At trial, Farnsworth did not contend that he complied with the tax laws, but rather
    he asserted that he believed compliance with the tax system to be voluntary. The jury
    returned a guilty verdict on all three counts. Farnsworth argues that the District Court
    lacked subject matter jurisdiction, that the Government failed to present sufficient proof
    that he knowingly transferred assets to fraudulent trusts, and that the District Court erred
    with regard to its instructions to the jury.
    II. Jurisdiction
    This Court exercises plenary review over questions of subject matter jurisdiction.
    Frederico v. Home Depot, 
    507 F.3d 188
    , 193 (3d Cir. 2007). Undeterred by clear
    precedent, Farnsworth argues that the District Court lacked subject matter jurisdiction
    3
    over his case. Contrary to his contentions, there is no question that 18 U.S.C. § 3231, in
    establishing jurisdiction over “all offenses against the laws of the United States,”
    encompasses the federal tax statutes, United States v. Isenhower, 
    754 F.2d 489
    , 490
    (3d Cir. 1985), and specifically the crime of attempted tax evasion under 26 U.S.C.
    § 7201, United States v. Gwinnett, 
    483 F.3d 200
    , 201 (3d Cir. 2007). Moreover, we reject
    Farnsworth’s resort to the “‘hackneyed tax protester refrain’” that federal courts lack
    criminal jurisdiction outside of federal territories. E.g., United States v. Chisum, 
    502 F.3d 1237
    , 1243 (10th Cir. 2007) (quoting United States v. Collins, 
    920 F.2d 619
    , 629
    (10th Cir. 1990)).
    Equally unavailing is Farnsworth’s claim that the District Court lacked jurisdiction
    due to an alleged defect in the arrest warrant that issued after his indictment. Even
    assuming the warrant was defective, we see no reason to “retreat from the established rule
    that illegal arrest or detention does not void a subsequent conviction.” Gerstein v. Pugh,
    
    420 U.S. 103
    , 119 (1975).
    III. Sufficiency of Evidence
    Farnsworth argues that the evidence was insufficient to establish that he engaged
    in an affirmative act of evasion, a required element under section 7201. An appellant
    challenging the sufficiency of evidence in a criminal case bears a “very heavy burden.”
    United States v. Soto, 
    539 F.3d 191
    , 194 (3d Cir. 2008). We will “view the evidence in
    the light most favorable to the government, and will sustain the verdict if any rational trier
    4
    of fact could have found the essential elements of the crime beyond a reasonable doubt.”
    
    Id. (internal quotation
    marks and citations omitted).
    A person is guilty of attempt to evade or defeat tax who “willfully attempts in any
    manner to evade or defeat any tax imposed by [Title 26] or the payment thereof . . . .”
    26 U.S.C. § 7201. Conviction requires proof of three elements: “1) the existence of a tax
    deficiency, 2) an affirmative act constituting an attempt to evade or defeat payment of the
    tax, and 3) willfulness.” United States v. McGill, 
    964 F.2d 222
    , 229 (3d Cir. 1992) (citing
    Sansone v. United States, 
    380 U.S. 343
    , 351 (1965)). Farnsworth only challenges the
    sufficiency of evidence with regard to the affirmative act element. “An affirmative act is
    anything done to mislead the government or conceal funds to avoid payment” of a
    deficiency. 
    McGill, 964 F.2d at 230
    (citation omitted). A single act is sufficient to satisfy
    the element. 
    Id. at 229.
    Farnsworth argues that the Government failed to produce sufficient evidence to
    prove the allegedly essential finding that Farnsworth knowingly transferred assets into
    fraudulent trusts. The grand jury indictment charged Farnsworth with three separate
    affirmative acts of evasion for each of the three tax years at issue: “(1) transferring
    ownership of his assets to fraudulent trusts; (2) encumbering his assets; and (3) hiding his
    money in overseas bank accounts.” (App. at 30-33.) The District Court instructed the
    jury on each of these alleged acts. The Government argues that it was not required to
    prove knowing transfer into fraudulent trusts because two other affirmative acts of
    5
    evasion were charged, and, in any event, the evidence was sufficient with regard to the
    fraudulent trusts.
    We conclude that Farnsworth’s argument must fail because he does not challenge
    the sufficiency of evidence relating to the other acts of evasion with which he was
    charged. Since conviction under section 7201 only requires a single act, Farnsworth
    cannot possibly meet his burden to challenge the sufficiency of evidence.
    IV. Jury Instructions
    Farnsworth raises two arguments with regard to the District Court’s instructions to
    the jury. When a party timely objects to jury instructions, “[w]e exercise plenary review
    to determine whether jury instructions misstated the applicable law, but in the absence of
    a misstatement we review for abuse of discretion.” Cooper Distrib. Co. v. Amana
    Refrigeration, Inc., 
    180 F.3d 542
    , 549 (3d Cir. 1999). Where a district court denies a
    requested jury instruction, we will reverse “only when the requested instruction was
    correct, not substantially covered by the instructions given, and was so consequential that
    the refusal to give the instruction was prejudicial to the defendant.” United States v.
    Phillips, 
    959 F.2d 1187
    , 1191 (3d Cir. 1992).
    However, where a party claiming error in a jury instruction “did not make a timely
    objection, we review for plain error.” 
    Cooper, 180 F.3d at 549
    . We will only reverse if
    that error was “fundamental and highly prejudicial, such that the instructions failed to
    provide the jury with adequate guidance and our refusal to consider the issue would result
    6
    in a miscarriage of justice.” 
    Id. (internal quotation
    marks and citations omitted).
    A. Instruction Regarding Assessment
    Farnsworth argues that the District Court abused its discretion by denying his
    request to instruct the jury that an assessment is a necessary element in a charge of
    attempted evasion of payment. Farnsworth contends that the District Court improperly
    decided that an assessment was unnecessary upon considering our opinion in United
    States v. Farnsworth, 
    456 F.3d 394
    (3d Cir. 2006), an opinion that Farnsworth asserts was
    “advisory.” (App. Br. at 41, 46.) The Government argues that any error regarding the
    evasion of payment instruction would have been harmless because the jury expressly
    found Farnsworth guilty under both evasion of payment and evasion of assessment
    theories. Moreover, the Government contends, the District Court’s decision to deny
    Farnsworth’s proposed instruction was proper, and the final instruction presented to the
    jury was within the Court’s discretion. We agree with the Government.
    We reject Farnsworth’s argument that our 2006 decision in this matter contained
    an “advisory” opinion with regard to the elements of attempted evasion of payment. The
    Government had requested a writ of mandamus to resolve a pre-trial dispute over the
    evasion of payment jury instruction. 
    Farnsworth, 456 F.3d at 400
    . This required us to
    consider whether the District Court’s intended instruction constituted “a clear error of
    law.” 
    Id. We concluded
    that our prior discussions on the point were dicta, and that the
    “weight of authority favors [the] view that an assessment is not required,” but also that
    7
    lack of clarity in the law precluded us from concluding that the intended instruction
    constituted “a clear error of law.” 
    Id. at 403.
    In light of this, the District Court did not err
    by reconsidering the jury instruction and deciding that an assessment was not required.
    Moreover, Farnsworth’s argument necessarily fails for lack of prejudice.
    Attempted evasion under section 7201 includes both “willfully attempting to evade or
    defeat the assessment of a tax as well as the offense of willfully attempting to evade or
    defeat the payment of a tax.” 
    Sansone, 380 U.S. at 354
    . The Government proceeded
    against Farnsworth on both theories, and the jury expressly found Farnsworth guilty of
    both attempted evasion of assessment and evasion of payment for each of the tax years at
    issue. Since Farnsworth would have been found guilty notwithstanding any potential
    error in the evasion of payment instruction, we are unable to conclude that the District
    Court’s refusal to use Farnsworth’s proposed instruction was prejudicial.
    B. Instruction Regarding Fraudulent Trusts
    Farnsworth argues that the District Court erred by failing to submit a special
    verdict form to the jury to establish whether the jury specifically found that Farnsworth
    knowingly transferred assets into fraudulent trusts. We note that, although not prohibited,
    “special interrogatories are disfavored in criminal trials.” United States v. Hegepeth,
    
    434 F.3d 609
    , 613 (3d Cir. 2006). Farnsworth did not request any such instruction at
    trial, and thus must demonstrate that the failure to include the extraordinary instruction
    constituted plain error, and that the error was fundamental and highly prejudicial.
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    This argument rehashes Farnsworth’s challenge to the sufficiency of evidence, and
    it fails for similar reasons. As discussed above, Farnsworth was indicted for multiple
    affirmative acts of evasion for each of the tax years at issue. In addition to transfers to
    fraudulent trusts, he was charged with encumbering assets and hiding his money in
    overseas bank accounts. At trial, Farnsworth staked his defense not on his compliance
    with tax law, but on defeating the willfulness element by asserting that he believed
    compliance to be voluntary. In fact, Farnsworth either admitted or did not deny conduct
    that was probative of affirmative acts of evasion other than the knowing use of fraudulent
    trusts.1 Since a single affirmative act is sufficient under section 7201, we would be
    unable to find heightened prejudice even if the District Court had clearly erred. We must
    accordingly reject Farnsworth’s argument with regard to the fraudulent trust instruction.
    1
    For instance, Farnsworth did not deny that he earned income in the years for which he
    did not file tax returns. He admitted that he transferred money from his retirement
    account to an offshore bank account without paying taxes. He also admitted that
    Farnsworth Engineering Services (“FES”) received payments for Farnsworth’s personal
    consulting services, and that Farnsworth drew wages from FES without paying taxes on
    either the receipts or the wages. Farnsworth further testified that a business entity under
    his control took a lien out on the house he lived in, and that he did this as a means to
    protect his assets from collection. When asked about also transferring his cars to a
    business entity under his control, Farnsworth stated “I encumbered them - - I was
    protecting them . . . . From among others, the Internal Revenue Service, I guess.” (App.
    at 802.)
    9
    CONCLUSION
    For the reasons set forth above, we will AFFIRM the Judgment and Commitment
    Order of the District Court on all grounds.
    10