United States v. Patricia McQuarry , 816 F.3d 1054 ( 2016 )

United States Court of Appeals
For the Eighth Circuit
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No. 14-3605
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United States of America
lllllllllllllllllllll Plaintiff - Appellee
v.
Patricia Ann McQuarry
lllllllllllllllllllll Defendant - Appellant
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Appeal from United States District Court
for the District of Minnesota - St. Paul
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Submitted: October 23, 2015
Filed: March 22, 2016
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Before RILEY, Chief Judge, SMITH and SHEPHERD, Circuit Judges.
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RILEY, Chief Judge.
A jury found Patricia McQuarry guilty of one count of conspiracy to defraud
the United States in violation of 18 U.S.C. § 286, and two counts of making a false
claim against the United States in violation of 18 U.S.C. § 287. McQuarry appeals,
arguing the district court1 reversibly erred when it excluded from evidence a video
McQuarry claims supported her good-faith defense. With jurisdiction on appeal
under 28 U.S.C. § 1291, we affirm.
I. BACKGROUND
We recite the facts “‘in the light most favorable to the jury’s verdict[].’”
United States v. McKanry, 628 F.3d 1010, 1014 n.2 (8th Cir. 2011) (quoting United
States v. Van Nguyen, 602 F.3d 886, 890 (8th Cir. 2010)). In the summer of 2007,
McQuarry and her husband, Mark Garcia, were behind on mortgage payments for
their northeast Minneapolis, Minnesota, home. Seeking financial advice, McQuarry
and Garcia began attending a weekly “private study group” until they moved in 2008.
The private study group, led by a man whom McQuarry describes as “very young”
and “charismatic,” studied abstract theories of finance and debt relief. Through the
group, McQuarry spent “hundreds,” “if not thousands,” of hours studying videos of
financial seminars. According to McQuarry, one of the videos explained how to use
United States Department of the Treasury Internal Revenue Service (IRS) Form 1099-
OID.2 Another video, called the “The Money Matrix,” by a certified public
accountant (CPA) named Al Wagner (Wagner video), discussed fractional-reserve
banking—the practice whereby banks accept deposits and hold reserves equal to only
a fraction of their liabilities to depositers.
1
The Honorable Patrick J. Schiltz, United States District Judge for the District
of Minnesota.
2
IRS Form 1099-OID is used to report original issue discount (OID), that is,
amounts treated as interest from a debt instrument issued for less than its price at
maturity with the excess being a form of interest income. See generally 26 U.S.C.
§ 1273(a)(1). Generally, the issuer of the debt instrument (or an intermediary)
generates Form 1099-OID and sends it to the owner of the debt instrument and the
IRS. See 2015 IRS Pub. 1212, “Guide to Original Issue Discount (OID)
Instruments,” at 6.
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In December 2008, McQuarry filed a 2007 federal personal income tax return,
claiming a $97,624 refund. McQuarry reported $2,765 in wages and $127,483 in
OID income purportedly withheld by two financial institutions, attaching eight
corresponding Forms 1099-OID to her return. The IRS identified McQuarry’s return
and submitted it to the frivolous-return program. In April 2009, McQuarry filed a
2008 federal personal income tax return. For 2008, McQuarry claimed she earned
$1,138 in wages and claimed one financial institution withheld $30,883 in interest
income. McQuarry requested a $28,498 refund, but the IRS again submitted
McQuarry’s return to the frivolous-return program.
On June 18, 2013, a federal grand jury charged McQuarry with one count of
conspiracy to defraud the United States and two counts of making a false claim
against the United States. See 18 U.S.C. §§ 286, 287.
During a pretrial conference, the district court heard argument about whether
two videos informing McQuarry’s beliefs, including the Wagner video, should be
admitted into evidence and played for the jury. The district court stated the Wagner
video might be admissible if McQuarry testified and laid a proper foundation. Based
on this pretrial ruling, McQuarry’s counsel, in his opening statement at trial,
referenced topics covered in the Wagner video, such as fractional-reserve banking.
After viewing the two videos, and shortly before McQuarry took the stand, the
district court issued its final evidentiary ruling on the videos. The district court
explained it would allow the jury to watch the video that instructed how to fill out
Form 1099-OID “as an example of one of these salesmen trying to promote a
scheme.” However, the district court, citing Federal Rule of Evidence 403, would not
admit the Wagner video to play to the jury, explaining,
I have no idea what [the Wagner video] has to do with this case. OID
isn’t mentioned. I mean, our case is about making a false claim for tax
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refunds to the government. . . . I didn’t sense any connection at all
between what Wagner said and our case.
So, . . . I will let Ms. McQuarry testify that she watched a lecture
by CPA Wagner. I will let her explain what it is he said that made her
think what she was doing was lawful and that she wasn’t making a false
claim. But I’m just not going to play this hour and five minutes [video].
There is so much here that has nothing to do with our case. It looked to
me like almost all of it -- I assume [McQuarry] will point out some
connection, but I think under [Federal Rule of Evidence] 403 there are
multiple problems with the Wagner [video].
....
. . . [F]or example, the CPA’s rant about the [Fair Debt Collection
Practices Act], which, besides being wrong about virtually everything
he discussed, . . . I do worry that that’s going to confuse the jury and
mislead them.
The district court also opined Wagner took “45 minutes to make [the] same point”
about fractional-reserve banking that McQuarry’s counsel explained “more clearly
in about two minutes in his opening statement.” McQuarry objected that the opening
statement was not evidence. The district court told counsel his objection was
understood, but emphasized McQuarry could testify about the Wagner video and
“anything and everything she wants that she saw at that seminar that led her to believe
that what she was doing was -- that she was not making a false claim.” As part of her
testimony, McQuarry confirmed her understanding of fractional-reserve banking
gained from the Wagner video was “along the lines” of her counsel’s description in
the opening statement.
To prove a violation of 18 U.S.C. § 287 and 18 U.S.C. § 286, the government
had to show McQuarry knowingly presented a material false, fraudulent, or fictitious
claim against the United States. See United States v. Jirak, 728 F.3d 806, 811 (8th
Cir. 2013); United States v. Aleff, 772 F.3d 508, 511 (8th Cir. 2014). McQuarry
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maintained she believed she was filing “true and correct” tax returns and Forms 1099-
OID.
The jury found McQuarry guilty on all counts. The district court sentenced
McQuarry to concurrent sentences of 40 months imprisonment on each count and
ordered her to pay, in joint and several liability with Garcia, $226,000 in restitution
to the IRS. McQuarry appeals, challenging the district court’s ruling excluding the
Wagner video from evidence at trial.3
II. DISCUSSION
McQuarry argues the district court erred when it excluded the Wagner video
from evidence and thereby deprived McQuarry “of her fundamental right to present
a complete defense.” See Crane v. Kentucky, 476 U.S. 683, 690 (1986) (observing
the exclusion of “competent, reliable evidence” that is “central to the defendant’s
claim of innocence” risks depriving a defendant of rights guaranteed by the U.S.
Constitution). We review evidentiary rulings “for an abuse of discretion,” see
Quigley v. Winter, 598 F.3d 938, 946 (8th Cir. 2010), and constitutional and legal
claims de novo, see Hanan v. Mukasey, 519 F.3d 760, 763 (8th Cir. 2008). We
“‘revers[e] only when an improper evidentiary ruling affected the defendant’s
substantial rights or had more than a slight influence on the verdict.’” United States
v. Anderson, 783 F.3d 727, 745 (8th Cir. 2015) (quoting United States v. Henley, 766
F.3d 893, 914 (8th Cir. 2014)).
3
Though represented by counsel, McQuarry filed (1) with leave, a handwritten
pro se supplemental brief asserting eighteen new issues, (2) a petition for declaratory
judgment, (3) three motions to supplement the record on appeal, and (4) a motion for
release and miscellaneous other relief. We typically do not address a defendant’s pro
se filings when “the defendant is represented by counsel.” United States v. Moore,
481 F.3d 1113, 1114 n.2 (8th Cir. 2007). After careful review, we see no reason to
alter that practice here. We deny McQuarry’s petition for declaratory judgment,
motions to supplement the record, and motion for release and miscellaneous other
relief.
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McQuarry asserts the Wagner video provided the “sound, rational basis for the
belief that the Form 1099-OID could be used in th[e] manner” McQuarry used it.
Without the Wagner video, she contends, the “basis for those beliefs, all of their
theories . . . sound like mere [hearsay] and conduct in conformity with those beliefs
is well presumed to be in violation of law.” Upon our independent review of the
Wagner video, we conclude the district court did not err in excluding the video.
Federal Rule of Evidence 403 permits the exclusion of “relevant evidence if its
probative value is substantially outweighed by a danger of . . . unfair prejudice,
confusing the issues, [or] misleading the jury.” “We give great deference to a district
court’s application of the Rule 403 balancing test.” United States v. Lupino, 301 F.3d
642, 646 (8th Cir. 2002); accord Burris v. Gulf Underwriters Ins. Co., 787 F.3d 875,
881 (8th Cir. 2015) (“A trial court has ‘broad discretion in determining the relevancy
and admissibility of evidence.’” (quoting United States v. Jiminez, 487 F.3d 1140,
1145 (8th Cir. 2007))).
Not only did the district court reasonably fear the Wagner video could mislead
and confuse the jury, the district court questioned the video’s relevance and probative
value. See Fed. R. Evid. 403. McQuarry “was the best source of [her] subjective
beliefs, and [she] testified as to those beliefs.” United States v. Giambalvo, 810 F.3d
1086, 1095 (8th Cir. 2016). McQuarry’s own testimony about her beliefs was “‘more
probative’” of her good-faith defense than a lengthy, confusing, and, at best,
minimally relevant video she claims to be “‘the source or articulation of those
beliefs.’” Id. (quoting United States v. Mann, 884 F.2d 532, 538 (10th Cir. 1989)).
The district court’s exclusion of the Wagner video from the jury’s deliberations
did not affect McQuarry’s substantial rights, and we are confident admission of the
Wagner video would not have changed the verdict. The district court did not err
when it excluded the Wagner video from evidence.
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III. CONCLUSION
The judgment of the district court is affirmed.
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