United States v. Chet West , 829 F.3d 1013 ( 2016 )

United States Court of Appeals
For the Eighth Circuit
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No. 15-3026
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United States of America
lllllllllllllllllllll Plaintiff - Appellee
v.
Chet Lee West
lllllllllllllllllllll Defendant - Appellant
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Appeal from United States District Court
for the District of Nebraska - Omaha
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Submitted: April 14, 2016
Filed: July 22, 2016 (Corrected July 22, 2016)
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Before LOKEN, BEAM, and SMITH, Circuit Judges.
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BEAM, Circuit Judge.
Chet Lee West was convicted by a jury on three counts of tax evasion in
violation of 26 U.S.C. § 7201 and sentenced to fifty-one months' imprisonment and
three years' supervised release. He appeals the district court's exclusion of certain
evidence and its imposition of two special conditions of supervised release. We
affirm in part, reverse in part, and remand.
I. BACKGROUND
Computer Specialist Inc. (CSI) hired West as a computer technician in June
2006. West submitted a Form W-4 to CSI claiming he was exempt from any federal
income tax withholdings. He also represented in writing to CSI that he was exempt
from all income tax and withholding and he instructed CSI not to submit reports
concerning his wages to the Internal Revenue Service (IRS). As a consequence, CSI
did not withhold federal income tax from West's earnings. West deposited his income
from CSI into bank accounts opened in the name of companies he had formed in an
effort to conceal his income from the IRS. In June 2009 the IRS notified CSI it
would be levying West's wages. Learning that CSI intended to comply with the levy,
West resigned his position and began subcontracting for CSI through his own
company, Positive Flow Systems LLC (PFS). Going forward, CSI made payment to
PFS and that income was directed to West without any federal income tax
withholding deducted. As a result of these actions and neglecting to file federal
income tax returns for 2007, 2008, and 2009, West paid no federal income tax for
those years.1 West set out his beliefs that his earnings from CSI are not taxable
income and that he is not a taxpayer in several pieces of correspondence with the IRS
and with CSI.
West proselytized his beliefs in an e-book self-published and sold through
Amazon.com, entitled Are You a Taxpayer? Really? Prove It!. In addition, the
presentence investigation report (PSIR) identified West as "the owner/manager of
several websites and/or online blogs which promote his fraudulent tax scheme and
contain non-taxpayer propaganda, among other information." The first website the
PSIR identifies is a blog West maintains detailing his travails in the instant litigation.
The second is a website that West appears to neither own nor maintain; rather, the
website is dedicated to beliefs shared by West, and one of its many pages summarizes
1
West has not filed a legitimate return or paid federal income tax since 2000.
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"The Remarkable Redemption of Chet and Valerie West's 2001 1040."2 The third
website identified in the PSIR is no longer available, but according to the PSIR West
worked for the website as a "nontaxpayer advocate." In addition, West assisted an
acquaintance, Teresita Reed, in avoiding paying federal income tax. He organized
a company, Southern Sweets LC, with PFS as its registered agent. With West's
assistance, Reed arranged for her employer to contract with PFS, with the income
directed by PFS–sans federal income tax withholding and less a fee–to Southern
Sweets, who employed Reed. West also used PFS to employ his son, Brandt West,
and pay him without withholding taxes or reporting the income to the IRS.
West was indicted on three charges of tax evasion for failing to pay federal
income tax in 2007, 2008, and 2009. Before trial, the district court granted the
government's motion in limine, prohibiting West from offering argument that
purported to instruct the jury on the law. Specifically, West was prohibited from
offering evidence that federal tax laws are unconstitutional, that West is not subject
to them, and that wages are not income subject to taxation under the Internal Revenue
Code (IRC). West represented himself at trial, and his defense appears to have been
that he did not earn taxable income from 2007 to 2009. At times, he stated this
defense in terms of an absence of willfulness. In his opening statement he told the
jury, "I didn't think I was doing anything wrong." In his closing argument he stated,
"No knowledge of the legal duty equates to the impossibility of making a willful
intent." And one of West's proposed, unadopted jury instructions stated: "The
defendant's attitude toward the Internal Revenue Service or the reporting and payment
of taxes generally may be considered by you in determining his willfulness with
respect to each of the allegations contained in the indictment."
2
This apparently references West's 2001 Form 1040, which he signed with the
words "under duress" written above and below the signature. The IRS rejected it.
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West presented his defense almost entirely through cross-examination of the
government's witnesses. One of these was IRS agent Richard Troester, a so-called
"summary" witness, who discussed application of the tax code generally to the
particular facts of West's case. See United States v. Ellefsen, 655 F.3d 769, 780 (8th
Cir. 2011) (describing role of summary witness in tax evasion case). West cross-
examined Troester and attempted to impeach his knowledge of the IRC and contradict
his testimony by referencing the IRC's definition of "United States" and "employee."
The district court sustained the government's objection to each of these lines of
questioning and did not permit West to recite the IRC's definitions of "United States."
During his case-in-chief, West called his son Brandt, who had assisted West in
writing his e-book. When West attempted to enter the e-book into evidence, the
district court sustained the government's objection on relevance.
The jury found West guilty on all counts and the district court sentenced him
to fifty-one months' imprisonment and three years' supervised release. At the request
of the IRS the district court imposed, among others, the following two special
conditions of supervised release:
13. The defendant shall not engage in the creation of or establish any
new websites, and he is required to remove any websites, past or
present, which are currently active.
14. The defendant is prohibited from using or possessing any
computer(s) (including any handheld computing device, any
electronic device capable of connecting to any online service, or
any data storage media) without the prior written approval of the
U.S. Probation Officer. This includes, but is not limited to,
computers at public libraries, Internet cafes, or the defendant's
place of employment or education. Furthermore, he shall consent
to the search of his computer for content related to criminal
activity, at the request of his probation officer.
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West objected to these special conditions.
West appeals his conviction and sentencing, arguing that the district court's
evidentiary rulings deprived him of his right to present a complete defense and that
the above-quoted special conditions of supervised release were an abuse of discretion
and violated his First Amendment rights.
II. DISCUSSION
A. Evidentiary Rulings
West first argues that the district court's evidentiary rulings deprived him of his
constitutionally protected right to present a complete defense. We review evidentiary
rulings for an abuse of discretion, but our review is de novo when the challenge
implicates a constitutional right. United States v. White, 557 F.3d 855, 857 (8th Cir.
2009). Even where an evidentiary ruling is an abuse of discretion or violates a
constitutional proscription, however, we will not reverse unless the error is more than
harmless in that it affected a substantial right or had more than a slight influence on
the verdict. Id. at 857-58. We have recognized the right of a criminal defendant to
present a complete defense, grounded in either the Sixth or Fourteenth Amendments,
with the caveat that it may be limited by other legitimate interests of criminal trials,
such as excluding incompetent, irrelevant, or privileged testimony. E.g., United
States v. Petters, 663 F.3d 375, 381 (8th Cir. 2011). "To that end, the 'Constitution
leaves to the judges who must make these decisions wide latitude to exclude evidence
that is repetitive . . . , only marginally relevant or poses an undue risk of harassment,
prejudice, [or] confusion of the issues.'" Id. (alterations in original) (quoting Crane
v. Ky., 476 U.S. 683, 689-90 (1986)).
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Title 26 U.S.C. § 7201 provides: "Any person who willfully attempts in any
manner to evade or defeat any tax imposed by this title or the payment thereof
shall . . . be guilty of a felony . . . ." The requirement that such an attempt be "willful"
"requires the Government to prove that the law imposed a duty on the defendant, that
the defendant knew of this duty, and that he voluntarily and intentionally violated that
duty." Cheek v. United States, 498 U.S. 192, 201 (1991). West contends that by
preventing him from reading provisions of the tax code to agent Troester during
cross-examination and by excluding his e-book, the district court prevented him from
presenting as a defense his mistaken beliefs that he did not earn taxable income and
is not a taxpayer.
Cheek squarely addressed the mistaken-belief defense to a charged violation
of § 7201, holding that a defendant could defeat the willfulness element by proving
to the jury that he had a subjective, good-faith belief that the relevant provision of the
tax laws did not impose tax liability on him. "[O]ne cannot be aware that the law
imposes a duty upon him and yet be ignorant of it, misunderstand the law, or believe
that the duty does not exist." Id. at 202. Relevant here, the Court in Cheek observed:
Of course, in deciding whether to credit Cheek's good-faith belief claim,
the jury would be free to consider any admissible evidence from any
source showing that Cheek was aware of his duty to file a return and to
treat wages as income, including evidence showing his awareness of the
relevant provisions of the Code or regulations . . . .
Id. The Court also noted that "forbidding the jury to consider evidence that might
negate willfulness would raise a serious question under the Sixth Amendment's jury
trial provision." Id. at 203. The Court recognized, however, that a mistaken-belief
defense does not encompass situations where the defendant, rather than having a
genuine misunderstanding of the law, knows the law but merely disagrees with it. Id.
at 202 n.8. Further, the Court distinguished the mistaken-belief defense from an
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argument that a relevant provision is invalid, which argument would "reveal full
knowledge of the provisions at issue." Id. at 205.
We recently addressed an argument similar to West's in United States v.
Giambalvo, 810 F.3d 1086 (8th Cir. 2016). There, Giambalvo was charged with
filing false tax returns claiming zero taxable income, and he argued that he had a
mistaken belief that he did not earn taxable income. Id. at 1090-91, 1093. Giambalvo
wished to present testimony by an IRS employee that after the publication of a
particular book upon which Giambalvo had relied in forming his belief that he did not
earn taxable income, the agent had received zero-income returns similar to
Giambalvo's. Id. at 1093. We noted that
a court "ordinarily cannot exclude evidence relevant to the jury's
determination of what a defendant thought the law was in § 720[6][3]
cases because willfulness is an element of the offense." Therefore,
"statutes or case law upon which the defendant claims to have actually
relied are admissible to disprove that element if the defendant lays a
proper foundation which demonstrates such reliance."
Id. at 1095 (first alteration in original) (citation omitted) (quoting United States v.
Powell, 955 F.2d 1206, 1214 (9th Cir. 1992)). We concluded that the IRS agent's
testimony would not be relevant to establishing Giambalvo's subjective reliance on
the book and affirmed the district court's exclusion of that testimony. Id.
Cheek and Giambalvo compel the conclusion that West was entitled to present
provisions of the IRC and other material to the jury for the purpose of supporting a
mistaken-belief defense, but only after he laid foundation that he relied upon those
3
Both § 7201 and § 7206 contain a wilfulness element.
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provisions in forming his beliefs.4 It is not entirely clear whether West objects to the
district court's order granting the government's motion in limine, but we think that the
order was appropriate. It adheres to Cheek's distinction between a defense based on
the applicability of a tax law and one based on its validity. The order prohibited
argument on the constitutionality of tax laws, not on West's mistaken belief as to their
applicability. It also prohibited argument that West is not subject to United States
law and that his earnings from CSI were not taxable income. This, too, was
permissible. Although West may argue that his misunderstanding of the law was,
subjectively, formed in good faith, this is in contradistinction to an argument that the
law does not, in actuality, apply to West, an argument that risks confusing the jury
and which invades the district court's responsibility to instruct the jury on the law.
West specifically objects to the district court's ruling that he could not read IRC
provisions to Agent Troester during cross-examination and the district court's
exclusion of West's book from evidence.5 The problem with West's objection to the
former ruling is that he did not attempt to present those provisions for the purpose of
presenting a mistaken-belief defense. The transcript reveals that West intended to
contradict Troester's testimony that the IRC applied to West and, perhaps, to impeach
Troester's credibility by demonstrating his lack of knowledge of the IRC. Permitting
West to read the provisions to Troester for those purposes would have risked juror
confusion and would not have furthered West's right to present a mistaken-belief
4
The admissibility of evidence for this purpose is also illustrated in United
Stated v. Gustafson, 528 F.3d 587, 591-92 (8th Cir. 2008), and United States v.
Willis, 277 F.3d 1026, 1033 (8th Cir. 2002).
5
The government argues that West failed to make offers of proof and so failed
to preserve his objections, warranting plain-error review. Fed. R. Evid. 103(a)(2).
Even were we to decline to give West, a pro se defendant, the benefit of the doubt as
to whether the "substance [of the excluded evidence] was apparent from the context,"
id., this argument is of no consequence as it does not alter our conclusion.
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defense. West's e-book, although it may have presented West's beliefs, could not
logically comprise material upon which West relied in forming the very opinions it
sets forth and so was not relevant to a mistaken-belief defense. Further, his
questioning was directed at the "reliability of the thesis of the book," indicating his
purpose was to show that he was not, in fact, a taxpayer. Because the right to present
a complete defense does not entitle a defendant to present the jury with evidence that
is either irrelevant or is properly excluded under Federal Rule of Evidence 403, we
affirm the district court's evidentiary rulings.
B. Special Conditions of Supervised Release
West also objects to two of the district court's special conditions of supervised
release. We generally defer to a district court's broad discretion to impose special
conditions if they comport with the strictures of 18 U.S.C. § 3583(d) that the
condition is: (1) reasonably related to the nature and circumstances of the offense, the
history and characteristics of the defendant, adequate deterrence, public protection,
and the needs of the defendant; (2) involves no greater deprivation of liberty than
reasonably necessary for the sentencing purposes of adequate deterrence, public
protection, and the needs of the defendant; and (3) is consistent with applicable policy
statements by the United States Sentencing Commission. Further, special conditions
of supervised release must be supported by particularized findings specific to the
defendant, rather than be categorically applied to all those found guilty of committing
that offense. United States v. Davis, 452 F.3d 991, 995 (8th Cir. 2006). We review
special conditions for an abuse of discretion; however, "[w]here a condition of
supervised release would impose 'sweeping restrictions on important constitutional
rights,' we review the condition more closely." Id. (quoting United States v. Crume,
422 F.3d 728, 733 (8th Cir. 2005)). We address each condition in turn.
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1. Special Condition #13
Special Condition #13 requires that West refrain from creating or establishing
any new websites and that he remove any of his currently existing websites. West
argues that this condition deprives him of a greater amount of liberty than that
necessary for the purposes identified in § 3583(d). While he grants that "[i]f
Condition #13 prohibited only websites related to income tax, such a condition might
be permissible," he points out that the condition "prohibits West from creating or
maintaining any website, no matter the topic." Further, West challenges Special
Condition #13 as overly restrictive of his First Amendment rights. The government
responds that the condition is not overbroad because it meets § 3583(d)'s
requirements. Further, the government argues that West's promotion of methods of
avoiding taxes on the Internet is commercial speech, and thus his "use of websites and
his eBook to promote his fraudulent tax scheme is not protected by the First
Amendment."
"A special condition of supervised release is only unconstitutionally overbroad
if its overbreadth is real and substantial in relationship to its plainly legitimate
sweep." United States v. Thompson, 653 F.3d 688, 695 (8th Cir. 2011). We have
addressed the issue of special conditions infringing on First Amendment rights
largely in the context of criminal sex offenses, upholding restrictions on defendants'
access to pornographic materials, e.g. United States v. Deatherage, 682 F.3d 755, 764
(8th Cir. 2012); Thompson, 653 F.3d at 695; United States v. Boston, 494 F.3d 660,
667-68 (8th Cir. 2007), but rejecting as overbroad restrictions on accessing materials
that contain "nudity," that "allude" to sexual activity, or that present "sexually
arousing" content, e.g., United States v. Kelly, 625 F.3d 516, 520-22 (8th Cir. 2010);
United States v. Simons, 614 F.3d 475, 483 (8th Cir. 2010) (plain-error review). In
another vein of challenged special conditions, we have upheld bans on Internet access
(but allowing for access after receiving permission from a probation officer) where
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a defendant used the Internet to produce or distribute child pornography or to arrange
an illicit sexual encounter, e.g., United States v. Bender, 566 F.3d 748, 751-52 (8th
Cir. 2009); Boston, 494 F.3d at 668; United States v. Ristine, 335 F.3d 692, 695-96
(8th Cir. 2003) (plain-error review); United States v. Fields, 324 F.3d 1025, 1027-28
(8th Cir. 2003) (plain-error review), but not where the defendant only used the
Internet to access and possess limited amounts of child pornography, e.g., United
States v. Wiedower, 634 F.3d 490, 494-96 (8th Cir. 2011); United States v. Mark, 425
F.3d 505, 509-10 (8th Cir. 2005) (noting that an Internet ban in such circumstances
may be appropriate where defendant is "incorrigible" and where district court has
thoroughly considered and rejected as ineffective alternative restrictions); Crume, 422
F.3d at 733 ("We are not convinced that a broad ban from such an important medium
of communication, commerce, and information-gathering is necessary given the
absence of evidence demonstrating more serious abuses of computers or the
Internet."). But see United States v. Morais, 670 F.3d 889, 896-97 (8th Cir. 2012)
(upholding Internet ban for possession of child pornography where its quantity and
content were "egregious"); Deatherage, 682 F.3d at 764 (same where Internet access
was "central to [defendant's] child pornography offense" and where defendant had
violated a similar condition of pretrial release). Particularly relevant, we think, is our
opinion in Bender. Bender was convicted of traveling with intent to engage in illicit
sexual conduct, and while on supervised release was caught accessing pornographic
images on a computer in a public library. 566 F.3d at 750. At the revocation hearing,
the district court imposed a special condition of supervised release prohibiting Bender
from entering any library, public or private. Id. at 750-51. We struck down that
condition as overbroad, noting that "[a]lthough Bender improperly used library
resources, libraries are essential for research and learning." Id. at 753.
Although none of the foregoing precedent is factually on point, we think the
principles our cases elucidate demand greater precision from Special Condition #13.
Considering the findings set out in the PSIR that West assisted others in violating the
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tax laws, sold material online promoting his ideas, and maintained and participated
in websites relating to tax-evasion schemes, there may be a plainly legitimate sweep
of restrictions the district court could have placed on West's ability to promote his
ideas through the Internet. But the district court's special condition prohibits West
from creating and maintaining any website irrespective of its content. Even granting
the government's questionable position that West was only engaged in commercial
speech, Special Condition #13 would apply to noncommercial speech as well.
Perhaps such a restriction could be upheld if the conduct at issue was especially
egregious, as in Morais, or if it was central to West's offense, as in Deatherage. Cf.
United States v. Keller, 366 F. App'x 362 (3d Cir. 2010) (upholding special condition
on conviction for mail fraud banning creation or maintenance of "business" websites
where defendant's crime involved shipment of products sold through several of his
Internet retail websites). But this case is more analogous to Bender and Crume.
Although West misused his access to the Internet, websites present an important
mode of communicative and commercial intercourse in our society through which
West can exercise his right to speak. Because "[t]his court is 'particularly reluctant
to uphold sweeping restrictions on important constitutional rights,' . . . such [absolute]
bans are disfavored." Bender, 566 F.3d at 753 (quoting Crume, 422 F.3d at 733). We
agree with West that Special Condition #13 deprives him of a greater amount of
liberty than necessary to achieve the sentencing purposes identified in § 3583(d).
Given (1) the limitless amount of topics and purposes for which a website might be
created or maintained and the comparatively narrow ambit of subject matter West
may be prohibited from publishing, (2) the limited extent to which West created or
maintained websites in order to promote tax avoidance, and (3) the attenuated
relationship between the websites referenced in the PSIR and the offense for which
West was convicted, we hold that Special Condition #13 is overly broad.
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2. Special Condition #14
West also challenges Special Condition #14, which bans him from using or
possessing computing devices without prior written approval from a probation officer
and requires him to consent to searches of any computer he is permitted to possess.
West again argues this condition deprives him of a greater amount of liberty than
necessary, pointing out that he earns his living working with computers. West also
asserts that the district "court's conclusion that West's computer use incited criminal
activity lacks the individualized factual support required to uphold a special condition
of supervised release." The government argues that this restriction is necessary to
monitor West and restrict his ability to use computers to commit and encourage others
to commit criminal activity.
Again, our relevant precedent in this area comes from cases involving
convictions for criminal sex offenses. In this context, we have generally upheld
computer restrictions where a defendant used computers to distribute or produce child
pornography, United States v. Goettsch, 812 F.3d 1169, 1171 (8th Cir. 2016), stored
child pornography in a readily transferable medium, United States v. Muhlenbruch,
682 F.3d 1096, 1105 (8th Cir. 2012), and generally did more than "merely possess
child pornography," Boston, 494 F.3d at 668. Further, we have vacated such
restrictions if there is "nothing in the record to suggest that the district court
conducted an individualized inquiry into the appropriateness of the
computer . . . restriction[]." Wiedower, 634 F.3d at 495.
Neither the PSIR nor the sentencing hearing transcript contain any
individualized findings that West used a computer to promote tax evasion schemes.
This likely can be inferred from his Internet activity. The use of a computer could
also arguably be inferred from West's two-level enhancement for sophisticated means
in the creation of multiple accounts for different businesses and complex transactions
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made between them in an effort to conceal income. But if these activities comprise
the full extent of findings justifying the ban on computers, then clearly the restriction
is broader than necessary, as computers may be used in myriad ways not related to
promoting tax evasion online or concealing funds. We are convinced the district
court could have crafted a narrower restriction that would have adequately achieved
the sentencing purposes of deterrence and public protection without hindering West
in continuing his career as a computer technician. One of the sentencing purposes
identified in § 3583(d) is the need of the defendant to be provided vocational training,
demonstrating a determination that special conditions not needlessly interfere with
the defendant's ability to reintegrate into society. We hold that the ban on computer
restrictions appears to deprive West of a greater amount of liberty than necessary to
achieve § 3583(d)'s sentencing purposes.
III. CONCLUSION
For the foregoing reasons, we affirm the district court's evidentiary rulings but
vacate the challenged special conditions of supervised release and remand for
resentencing consistent with this opinion.
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