United States v. Louis Wayne Ratfield

[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
________________________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
Aug. 18, 2009
No. 07-13537
THOMAS K. KAHN
________________________
CLERK
D.C. Docket No. 06-80059-CR-DTKH
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
LOUIS WAYNE RATFIELD,
Defendant-Appellant.
________________________
Appeal from the United States District Court
for the Southern District of Florida
_________________________
(Augsut 18, 2009)
Before EDMONDSON, BLACK and SILER,* Circuit Judges.
PER CURIAM:
*
Honorable Eugene E. Siler, Jr., United States Circuit Judge for the Sixth Circuit, sitting
by designation.
Louis Wayne Ratfield appeals his conviction for preparing and filing false
tax returns, specifically, (1) aiding and assisting in the preparation of false federal
tax returns for trusts and estates (IRS Form 1041), in violation of 26 U.S.C.
§ 7206(2) (Counts 1-20); (2) aiding and assisting in the preparation of false
individual and joint federal tax returns (IRS Form 1040), in violation of 26 U.S.C.
§ 7206(2) (Counts 21-42); (3) filing false federal income tax returns in violation of
26 U.S.C. § 7206(1) and 18 U.S.C. § 2 (Counts 43-45); (4) impeding the Internal
Revenue Service in violation of 26 U.S.C. § 7212(a) (Count 46); and (5) willfully
and knowingly disobeying and resisting the lawful orders issued by a United
States District Judge for the Southern District of Florida during proceedings held
in United States v. Louis W. Ratfield and LWR Financial Services Trust, Case No.
01-cv-8816, by committing acts that he knew to have been enjoined, or by failing
to perform acts that he had been ordered to perform, in violation of 18 U.S.C.
§ 401(3) (Counts 47-56).1 A jury returned a verdict convicting Ratfield on all
counts of the indictment except for Count 50.2
1
On March 15, 2007, the district court granted the Government’s motion to
dismiss Counts 16, 21, 27, 29 and 36 of the indictment with prejudice.
2
The jury failed to indicate a verdict for Count 50 on the verdict form, so it was
dismissed with prejudice.
2
We have had oral argument in this case and the parties are intimately
familiar with the facts, so we will not extensively review the facts. Ratfield raises
three issues on appeal: (1) whether the district court abused its discretion by
allowing IRS revenue agent-witnesses to remain in the courtroom during the trial
after Ratfield invoked the rule of sequestration; (2) whether the district court
abused its discretion by admitting evidence showing that six years before
Ratfield’s trial commenced, the district court held one of Ratfield’s clients in civil
contempt for violating an order to provide documents to the IRS; and (3) whether
the district court abused its discretion by admitting testimony from IRS agents that
Ratfield was a tax protester, that his arguments were frivolous, and that trusts he
set up were abusive and a sham. We address these arguments in turn.
I.
Ratfield argues the district court abused its discretion by allowing two IRS
agents to remain in the courtroom after Ratfield invoked the sequestration rule,
Fed. R. Evid. 615.
Rule 615 provides, in relevant part, “At the request of a party the court shall
order witnesses excluded so that they cannot hear the testimony of other
witnesses.” Nevertheless, the rule “does not authorize exclusion of . . . an officer
or employee of a party which is not a natural person designated as its
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representative by its attorney, or [] a person whose presence is shown by a party to
be essential to the presentation of the party’s cause.” A decision regarding who
will be excused from the rule of sequestration is within the trial judge’s discretion
and will be reversed only upon a clear showing of abuse of discretion. United
States v. Alvarado, 647 F.2d 537, 540 (5th Cir. Unit A June 1981)3 (finding the
trial court did not abuse its discretion in excusing two drug enforcement agent-
witnesses from sequestration requirements).
The district court did not abuse its discretion in deciding to allow the two
IRS agents to remain in the courtroom during trial. Agent Grimes testified as a
fact witness, an expert witness regarding trusts and taxation, and as a summary
witness regarding Ratfield’s evolving theories of the taxation of common law
trusts. Agent Grimes’ testimony aided the jury in understanding the significance
of Ratfield’s statements, the testimony of the other revenue agents, and the
testimony of Ratfield’s clients. Her testimony also permitted the other revenue
agents to testify primarily as fact witness and avoid repetitive testimony regarding
tax laws. Agent Grimes summarized Ratfield’s evolving theories regarding the
taxation of common law trusts, based on the testimony of other witnesses and
3
In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), this
Court adopted as binding precedent all decisions of the former Fifth Circuit handed down prior to
the close of business on September 30, 1981.
4
documents introduced into evidence.4 She could not have done so had she not
heard the evidence introduced during the course of the trial.
Agent Lottman testified about his calculation of Ratfield’s taxable income
and also as a summary witness regarding the total tax loss to the Government.5
There was little, if any, overlap in the testimony of Agents Grimes and Lottman
because they focused on different aspects of the case. Consequently, we find
unpersuasive Ratfield’s contention they tailored their testimony to bolster each
4
In tax evasion cases, courts permit IRS agents to testify as summary witnesses. See, e.g.,
United States v. Stierhoff, 549 F.3d 19, 28 (1st Cir. 2008) (“We hold, therefore, that in a tax
evasion case, a summary witness may be permitted to summarize and analyze the facts of record
as long as the witness does not directly address the ultimate question of whether the accused did
in fact intend to evade federal income taxes.”); United States v. Gold, 743 F.2d 800, 817 (11th
Cir. 1984) (“[T]his court has expressly approved the use of expert legal testimony in a case
where an IRS agent merely stated his opinion as an accountant with regard to the tax
consequences of a transaction, and did not attempt to assume the role of the court.”) (internal
quotation omitted).
5
Ratfield also argues the district court erred by allowing Agent Lottman to testify as to
the ultimate issue in the case, which Ratfield describes as whether he impeded the IRS from
determining the correct tax due. Ratfield complains the admission of Lottman’s expert opinions
was unduly prejudicial, violating Fed. R. Evid. 403, and Lottman should not have been allowed
to tell the jury what verdict to reach. This claim was not raised in the district court, thus it is
subject to plain error review. See Fed. R. Crim. P. 52(b); United States v. Pielago, 135 F.3d 703,
708 (11th Cir. 1998).
The jury was instructed that the ultimate issue in Count 46 was whether Ratfield had
specifically intended to impede and obstruct the IRS by, inter alia, having his clients file tax
returns and other documents that he knew to be false and frivolous. The district court instructed
the jury that in order to find Ratfield guilty of Count 46, it would have to find beyond a
reasonable doubt that Ratfield knowingly endeavored to obstruct or impede the IRS and that he
did so corruptly. A review of the record shows Agent Lottman did not offer any testimony
regarding his opinion about what Ratfield intended, so he did not invade the jury’s province as
fact-finder.
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other or the testimony of the eleven other IRS agents, who testified regarding their
audits of Ratfield’s clients and their individual dealings with Ratfield.
The jury was able to view and assess the credibility of these witnesses. The
district court’s decision to allow Agent Grimes and Agent Lottman to remain in
the courtroom aided the orderly presentation of the case. There were adequate
grounds to permit both IRS agents to remain in the courtroom, so we find no abuse
of discretion in excusing them from the sequestration rule.
II.
Ratfield argues the district judge abused his discretion by allowing the jury
to hear evidence that he had previously decided the issues against the defendant’s
position in a prior, related case. According to Ratfield, the introduction of this
evidence, which concerned one of the Government’s witnesses, was so prejudicial
as to make the trial unfair. Additionally, he argues the attempt at a curative
instruction was insufficient to cure the prejudice.
District court rulings on the admissibility of evidence are reviewed for a
clear abuse of discretion. United States v. Brannan, 562 F.3d 1300, 1306 (11th
Cir. 2009). In determining whether the district court erred in failing to exclude
relevant evidence under Fed. R. Evid. 403, we give deference to the discretion of
the district judge, looking “at the evidence in a light most favorable to its
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admission, maximizing its probative value and minimizing its undue prejudicial
impact.” United States v. Elkins, 885 F.2d 775, 784 (11th Cir. 1989).
Ratfield fails to show how he was unfairly prejudiced by Frederick
Crawford’s testimony, which was only relevant to Count 46, impeding the IRS in
violation of 26 U.S.C. § 7212(a). During trial, the Government introduced court
documents, which had been signed by Judge Hurley six years earlier, that included
(1) an order to Crawford, one of the Government’s witnesses in Ratfield’s case, to
produce documents to the IRS, (2) an order to show cause related to the order to
produce documents, and (3) an order incarcerating the witness for failure to
comply. Ratfield argues Crawford and the Government purposefully mentioned
the judge by name numerous times during the testimony to prejudice Ratfield.
After Ratfield objected, Judge Hurley instructed the jury that they should not take
it as any indication of what he thinks their verdict should be in the case. The
judge then instructed the jury as follows:
Ladies and gentlemen, as you can imagine, there are lots of things
that come before The Court. This is the first time I realized that I had
any prior involvement dealing with Mr. Crawford and Mr. Crawford’s
relationship with Mr. Ratfield.
I want to make sure the jury understands that they cannot in any way
take that as indicating that I have any view at all in terms of what the
verdict should be as to Mr. Ratfield or whether the Government has
proof in terms of Mr. Ratfield’s situation.
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The only thing I was looking at obviously with Mr. Crawford is the
statute that requires people to turn over books and records, and if they
have the ability to do it and don’t do it, the Court has what is called
civil contempt power which effectively says to someone, if you don’t
turn it over, you will be held in jail until you do turn it over. It is a
coercion to say to somebody you have the key to the jail cell yourself,
you get out by turning over the records if you have them.
I want to be very clear. I want to really emphasize to the jury they
should not in any way, number one, consider that I have any view at
all on the merits in terms of the charges against Mr. Ratfield. I assure
you I do not. Those are matters for you, the jury, to decide. The fact
that there is some prior proceeding that was related principally to
Mr. Crawford as he indicated to us.
There is no reason to conclude the jury did not follow the district court’s
instructions and consider Crawford’s evidence only with respect to Count 46 and
not with regard to the criminal contempt charges.6 Moreover, the jury indicated on
the special verdict form, that the only manner in which Ratfield impeded the IRS
was by filing tax returns stating zero income and zero taxes due and owing.
Therefore, the district court did not abuse its discretion in admitting the evidence.
IIII.
Ratfield argues he was unfairly prejudiced when numerous IRS agents were
permitted to testify that he was a tax protester, that his arguments were frivolous,
and the trusts he set up were abusive and a sham. Ratfield also contends the
6
At trial, the evidence was overwhelming that Ratfield violated the preliminary and
permanent injunctions.
8
prejudice was compounded when the judge instructed the jury that he was
allowing the testimony about Ratfield being a tax protester because the good faith
defense is not available to someone making tax protester arguments.
In determining whether the district court erred in failing to exclude relevant
evidence under Rule 403, we give deference to the discretion of the district judge,
looking at the evidence in a light most favorable to its admission, and will reverse
only upon a clear showing of abuse of discretion. Elkins, 885 F.2d at 784;
Brannan, 562 F.3d at 1306.
The district court did not abuse its discretion in allowing the IRS agents’
testimony. At trial, the ultimate issue the jury decided with respect to the charges
relating to the filing of false tax returns (Counts 1-46) was whether Ratfield acted
in good faith. Contrary to Ratfield’s claims, none of the Government’s witnesses
testified Ratfield was actually a tax protester. The record shows that Dr. Olson,
one of Ratfield’s clients, testified that he asked Ratfield if he wanted to go down
the path of what looked like being a tax protester. Agent Grimes testified the
arguments Ratfield made to the IRS were “protester type arguments.”
Likewise, none of the witnesses opined that Ratfield’s arguments were
frivolous in the sense that he did not have a good faith belief in them. Instead,
they testified they treated his arguments as frivolous, which meant they were not
9
required to provide a point-by-point refutation to his theories on income taxation
or his challenges to their authority to conduct audits.
Agent Grimes explained that the IRS defined an “abusive trust” as a trust set
up to avoid taxes. The other agents accurately applied the terms “sham” and
“abusive” in that manner in their testimony. The IRS agents testified that, based
upon their training and experience as revenue agents, they recognized the trusts
Ratfield had set up for his clients were abusive because the person who controlled
the trust was also the beneficiary. Moreover, the evidence was overwhelming that
Ratfield set up the trusts so that he and his clients could reduce or eliminate their
income tax payments.
The only issue was whether Ratfield acted in good faith. The district court
gave a comprehensive instruction on the good faith defense and specifically
instructed the jury:
Let me tell you, I’ve said before that in this tax area, the Government
must prove that someone acted willfully.
When the issue of good faith has been raised, that requires the
Government to prove that the person did not have a good faith
subjective belief that they were following the law or that, to show that
they misunderstood the law.
Now, I’ve explained this before. The reason for this in the one area
of the law is that Congress recognizes that the tax laws are complex,
so if somebody has a good faith belief that they are not violating the
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law, even though their position may seem really quite extraordinary,
if they hold that in good faith, if they really believe that, that is a
complete defense.
Now, I’m allowing this testimony about tax protest in because that
good faith defense is not available if what someone is really doing is
just acting as a tax protester.
In other words, the theory of the good faith defense is that somebody
intends to follow the tax laws, but they just misunderstand them, and
they in good faith believe what they are doing is not a violation of the
law.
If somebody is really against paying tax at all, and they are just
making up language, that good faith doesn’t apply.
But I want to be sure that the jury understands these issues are issues
for the jury to decide. They are factual issues.
And in allowing the agent to testify about this concept, I am not in
any way suggesting that you need to accept these categorizations.
It is for the jury to make those ultimate determinations as to whether
the Government has or has not proven that Mr. Ratfield did not have a
good faith belief, and again, it will be for the jury to decide whether
this tax protester issue is in place in this case or not.
Based on our review of the record, the Government’s witnesses did not
opine whether Ratfield acted in good faith. The witnesses’ testimony concerned
Ratfield’s conduct, his evolving theories on the IRS’s authority to tax and the
taxation of trusts and the fact that they advised him his theories lacked any support
in the law. This testimony was relevant to the jury’s determination whether
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Ratfield acted in good faith. Ratfield’s argument he was unfairly prejudiced by
the IRS agents’ testimony and the jury instruction on the good faith defense is
without merit. We conclude the district court did not abuse its discretion.
AFFIRMED.
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