United States v. Thomas

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
July 20, 2009
No. 08-30567 Charles R. Fulbruge III
Clerk
UNITED STATES OF AMERICA,
Plaintiff-Appellee
v.
SAMUEL H. THOMAS,
Defendant-Appellant.
Appeal from the United States District Court
for the Western District of Louisiana, Monroe Division
USDC No. 3:06CR30031-01
Before JONES, Chief Judge, ELROD, Circuit Judge, and GUIROLA, District
Judge.*
PER CURIAM:**
Following a jury trial, defendant-appellant Samuel H. Thomas was
convicted of two counts of filing a false tax return and one count of tax evasion.
He timely appealed both his convictions and the restitution ordered. We
AFFIRM.
*
District Judge, Southern District of Mississippi, sitting by designation.
**
Pursuant to Fifth Circuit Rule 47.5, the court has determined that this opinion should
not be published and is not precedent except under the limited circumstances set forth in Fifth
Circuit Rule 47.5.4.
No. 08-30567
I. BACKGROUND
Samuel Thomas appeals his conviction on two counts of filing a false tax
return, 26 U.S.C. § 7206(1), and one count of tax evasion, 26 U.S.C. § 7201.
Thomas, a self-described country lawyer in Louisiana, employed an assistant,
Matra Hamilton, and an accountant, Louis Bradley, to manage his accounts.
The false tax return convictions concern his 1999 corporate income tax return,
which reported a gross income of $436,850 (as against actual gross income of
$1,231,681), and his 1999 individual tax return, which reported a taxable income
of $66,575 despite purchases and disbursements of approximately $310,000 that
year. Thomas concedes that his books were not monuments to organization, but
denies that his behavior was criminal.
The evasion conviction stems from Thomas’s failure to make a particular
disclosure during negotiations with the Internal Revenue Service (IRS)
regarding overdue tax liability in excess of $407,000. The negotiations were
initiated on grounds of “doubt as to collectibility,” i.e., Thomas’s inability to pay.
At the time, Thomas’s law firm was engaged in litigating and mediating a case
(“the Wiley matter”) it had taken on a contingency fee basis. Thomas did not
disclose in his negotiations with the IRS the possibility that he might receive
attorney’s fees in the case; following settlement, he received $557,193 for his
work on Wiley.
Bradley, the accountant, was tried with Thomas. Both were acquitted of
conspiracy to file a false tax return, and Bradley was also acquitted on two
counts of aiding and assisting and making and subscribing a false tax return.
The district court denied Thomas’s motion for a judgment of acquittal.
II. DISCUSSION
On appeal, Thomas challenges (1) the sufficiency of the evidence for all
three convictions, (2) the propriety of the deliberate ignorance jury instruction,
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and (3) the restitution ordered.1 He conceded the third issue at oral argument;
accordingly, we consider only the first two.
A. Sufficiency of the Evidence
Thomas timely moved for a judgment of acquittal, thus preserving his
challenge to the sufficiency of the evidence. Accordingly, we review the denial
of that motion de novo. United States v. Harris, 566 F.3d 422, 435 (5th Cir.
2009). “Under this standard, we determine whether a reasonable jury could find
that the evidence establishes the guilt of the defendant beyond a reasonable
doubt.” United States v. Williams, 507 F.3d 905, 908 (5th Cir. 2007). We view
the evidence in the light most favorable to the verdict and draw all reasonable
inferences and credibility choices from the evidence to support the verdict.
Harris, 566 F.3d at 435.
1. Two counts of making and subscribing a false tax return
Thomas was convicted of making and subscribing a false tax return, 26
U.S.C. § 7206(1).2 He claims that Hamilton, his assistant, dealt with Bradley,
and that he was not involved with the preparation of the 1999 corporate and
individual returns. Thomas admits he signed both the returns, but maintains
he did so without reading them and that he hired Hamilton and Bradley so that
1
Thomas also asserted an inconsistent verdicts argument below, but does not raise it
on appeal except to allude to it in a couple pages of his reply brief. It is unclear whether this
claim is even recognized in this circuit, see United States v. Agofsky, 458 F.3d 369, 375 (5th
Cir. 2006) (quoting United States v. Powell, 469 U.S. 57, 69 (1984)), but in any event we deem
it waived here. See United States v. Jackson, 426 F.3d 301, 304 n.2 (5th Cir. 2005) (claims
raised on appeal for the first time in a reply brief are waived); United States v. Thames, 214
F.3d 608, 612 n.3 (5th Cir. 2000) (inadequately briefed claims are waived).
2
The elements of the offense are that: (1) a false return was made and signed, (2) the
false entry was material, (3) the return contained a written declaration that it was made
under the penalties of perjury, (4) the defendant did not believe that the return was true and
correct when signed, and (5) that the defendant signed willfully and with specific intent to
violate the law. United States v. Bishop, 264 F.3d 535, 552 (5th Cir. 2001).
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he did not have to worry about his taxes and could avoid liability.3 The basis of
his sufficiency challenge is that any errors were Bradley’s fault, and that any
fault attributable to Thomas was mere negligence.
Considering the significant disparity between the income Thomas reported
on his corporate income tax return and his law practice’s actual income, and
viewing the evidence in the light most favorable to the verdict, the jury was
entitled to disbelieve this excuse. In 1999, Thomas’s law practice had $1,231,681
in gross income versus the $436,850 he reported. The fees Thomas received from
the Wiley case alone exceeded the entire amount of corporate gross income he
reported that year. (Thomas received checks for his work in the Wiley matter
totaling approximately $647,193 in 1999.) In addition, as discussed supra at
note 3, Bradley testified that he sent drafts of the two returns to Thomas’s office
in February 2000 and that Hamilton called and stated that Thomas’s income
was too high on the draft. Bradley testified that he then made some
questionable changes to the return, reducing his income and increasing his
expenses. He further testified (though Thomas disputed) that Thomas reviewed
the tax forms before Bradley submitted them. On this record, the jury was
entitled to credit Bradley’s version of events over Thomas’s.
3
The jury was instructed on the defense of good faith reliance on a tax professional.
The defense requires (1) full disclosure and (2) good faith reliance. See, e.g., United States v.
Charroux, 3 F.3d 827, 831 (5th Cir. 1993). On appeal, Thomas only alludes to this defense,
and not until his reply brief. The Government concedes that Thomas provided Bradley with
all of his bank statements, but argues that this disclosure was nevertheless incomplete
because Thomas did not provide explanations for the various deposits and expenditures.
One specific incident illuminates, and provides support for, the jury’s decision to find
that Thomas was not truthful with Bradley. Bradley sent over a draft of the 1999 return in
February 2000. Hamilton, Thomas’s assistant, told Bradley that the corporate income was too
high and should be adjusted downward. Bradley complied. The jury could have reasonably
believed that this instruction did not really come from Hamilton, but from Thomas. If the jury
so concluded, it would have meant that Thomas failed to fully disclose financial information,
which would undermine the first prong of this defense. See id.
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Regarding Thomas’s individual return, the disparity in gross individual
income reported is striking. He reported $66,575 in personal income in 1999, but
spent approximately $310,000 on personal expenses that year, including
expensive gifts for his wife, a $53,000 Lexus for his wife, 4 $50,000 to buy a
certificate of deposit and fund a bank account for his wife, gifts to relatives
exceeding $22,000, a donation to his church for $25,000, a $5,000 campaign
contribution, and other disbursements, including purchases of jewelry, furniture,
and electronics.
After reviewing evidence of these purchases and the circumstances of
Thomas’s filing his tax return, the jury was entitled to reject Thompson’s claim
that he simply never looked at his returns before signing them. Because the jury
apparently concluded that Thompson was at a minimum aware of the gross
income he reported, the jury could also have been justified in concluding that
Thompson knew (or was deliberately ignorant) that this figure was far too low
considering corporate revenue and personal expenditures.
In sum, a rational jury could have concluded beyond a reasonable doubt
that Thomas knew how much money his business was making and that he
misreported that figure willfully and with specific intent to violate the law.
2. Evasion count5
a. Relevant facts
In 1994, Thomas pled guilty to two counts of failing timely to file several
tax returns. On December 7, 1995, he was released from prison and served the
4
Thomas claims that the car was a business expense because his wife helped out with
his firm. Thomas’s and his wife’s joint individual return lists Thomas’s wife’s occupation as
housewife, not as a firm employee. Even without this purchase, Thomas obviously spent more
on personal items than he reported in individual gross income.
5
26 U.S.C. § 7201. The elements of evasion are (1) willfulness, (2) the existence of a
tax deficiency, and (3) an affirmative act constituting an evasion or an attempted evasion of
the tax. United States v. Nolen, 472 F.3d 362, 377 (5th Cir. 2006).
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No. 08-30567
remainder of his sentence in a halfway house. He still owed the IRS $407,000
for unpaid taxes. At some point, he took on the Wiley matter mentioned above,
a personal injury case in which he represented Draina Wiley in a suit against
Traditional Trucking (his license to practice law had not yet been suspended).
Thomas engaged the help of three other lawyers, and the four of them entered
a contingency fee agreement with Wiley for forty percent of any recovery, which
the lawyers agreed to divide evenly.
The suit was filed on November 5, 1996, and in May 1997, Producers Feed
Company was added as another defendant. On August 20, 1997, Traditional
Trucking agreed to a $900,000 settlement, but at the last minute, attempted to
add an additional term that Producers Feed Company also be released from
liability. Wiley refused and litigated the settlement agreement. On November
21, 1997, the defendant’s suspension from the practice of law began.
On November 23, 1997, Thomas wrote the IRS to explain that his bar
license was being suspended and that he would not be able to make the
payments on his outstanding $407,000 tax liability. He claimed that friends
were willing to lend him $43,000, but only if that would extinguish the entire
liability. This letter began the offer in compromise (OIC) process. On January
14, 1998, a complying OIC was submitted, which included the required Form
656. An additional OIC was submitted on September 10, 1998, with an
addendum on February 25, 1999. As the reason for submitting the OIC, each
form has checked “doubt as to collectibility,” i.e. insufficient assets to pay the
outstanding tax liability of $407,000.
An OIC also requires forms 433-A and 433-B, information statements for
individuals and businesses, respectively. Thomas submitted his 433-A dated
April 8, 1998, which he updated on September 23, 1998. Thomas never signed
this form; Bradley did. The form asks about anticipated increases in income,
and the “no” box is checked. The form also inquires about court proceedings.
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The “yes” box is checked, but the IRS agent responsible testified that the only
lawsuit disclosed to him was a suit between Thomas and some family members
over an estate—not the Wiley matter.
Thomas’s 433-B is dated November 25, 1997, and was updated
December 31, 1998. He signed this form, but it is not clear who updated it. (The
updates are penciled-in, and the signature block is initialed.) The form asks for
“additional financial information regarding financial condition.” Thomas merely
states that the firm is current on its tax liabilities.
On August 25, 1998, Wiley prevailed on summary judgment. This ruling
meant the $900,000 settlement agreement with Traditional Trucking, if upheld
on appeal, was enforceable and that Thomas would receive a quarter of the forty-
percent contingency fee, or $90,000.6 However, none of the documents Thomas
submitted after August 25, 1998, included any reference to this potential, and
substantial, increase in income. The relevant documents are: (1) the updated
433-B, dated December 31, 1998, (2) the updated 433-A, dated September 23,
1998, (3) the amended OIC, filed September 10, 1998, and (4) the addendum to
the OIC, filed February 25, 1999.
Thomas also never disclosed the possibility of settlement with Producers
Feed Company. On February 11, 1999, Producers Feed Company offered to
settle for $1.5 million, which was rejected. Nevertheless, the OIC addendum,
dated February 25, 1999, did not mention a possible increase in income. The
case went to mediation, and on March 31, 1999, the defendant received $557,193
in attorney’s fees from a settlement with Producers Feed Company.
Thomas neither updated his OIC or his 433 forms to reflect the
settlements, nor informed the IRS of the settlements in any way. On April 27,
1999, the IRS, unaware of the settlement, accepted Thomas’s offer of
6
It took approximately one year for Thomas to receive payment. The check he received
was dated August 31, 1999.
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compromise. The compromise agreement states, “Based upon the taxpayer’s
projected future income, the service [IRS] believes collection of the remaining
liability is in doubt.”
On May 4, 1999, Thomas borrowed money from Cross Keys bank to pay
the $43,000. Just a month earlier he was issued a check for over $550,000 from
the Producers Feed Company settlement.
On December 2, 2002, Thomas answered questions from an IRS agent in
a letter. Among these answers, Thomas denied having any involvement in the
Wiley matter. According to the Government, evidence of Thomas’s involvement
in the suit consisted of (1) paying investigators, (2) representing to Traditional
Trucking in writing that he represented Wiley, and (3) writing to Producers Feed
Company’s counsel regarding a prior meeting and a potential future settlement.
All of this allegedly occurred before Thomas’s license was suspended on
November 21, 1997—two days before he first contacted the IRS regarding an
OIC. Thomas also corresponded with one of Wiley’s other attorneys on
December 18, 1998, and complimented him on his handling of the case.
In these responses, Thomas also claimed that he provided Bradley with
the information for the 433-A. In addition, he claimed that the fees from the
Wiley case were reflected in his returns. Thomas wrote that he answered all
questions truthfully according to his knowledge at the time.
b. Discussion
Thomas’s argument on the evasion conviction is essentially two-fold. First,
he did not sign the 433-A and therefore cannot be liable for any of his attorney’s
misrepresentations. Second, he claims that he did not know the status of the
Wiley case and honestly doubted its outcome. In essence, he claims that he had
no duty to update his initial, truthful disclosures.
The Government disputes these claims. It maintains that even if the
forms themselves were truthful, the disclosures in the December 2, 2002, letter
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were untruthful, and therefore acts of evasion. The Government further
contends that obtaining the bank loan was an act of evasion intended to conceal
Thomas’s recent receipt of substantial assets. Finally, the Government argues
that the false tax returns themselves could have been an attempt to hide assets
to avoid paying the outstanding $407,000 liability.7
The evidence adduced at trial was substantial. Based on the record
evidence, including that recounted above—namely, Thomas’s failure to disclose
the Wiley matter in his 433-A and 433-B, including in the updated versions of
these documents submitted after his client in Wiley prevailed in her fight to
enforce a prior settlement against one party, and after the other party proposed
a settlement that would yield Thomas hundreds of thousands of dollars; the OIC
addendum Thomas submitted after these developments that made no mention
of them; the bank loan he secured, giving the impression that he was short on
cash; and his denial of involvement with the Wiley matter—a reasonable jury
could conclude beyond a reasonable doubt that Thomas committed evasion.
B. Deliberate Ignorance Instruction
1. Standard of review and applicable law
Thomas claims there was insufficient factual basis to justify giving a
deliberate ignorance instruction. Such an instruction is justified where “the
evidence shows (1) subjective awareness of a high probability of the existence of
illegal conduct and (2) purposeful contrivance to avoid learning of the illegal
conduct.” United States v. Nguyen, 493 F.3d 613, 619 (5th Cir. 2007) (internal
quotation marks and citation omitted). Because Thomas objected to this
instruction at trial, this court reviews its propriety for abuse of discretion. Id.
7
The Government also disputes Thomas’s contention that he had no duty to update his
initial disclosures once circumstances changed, but briefed no argument on that point. We
need not reach this issue, however, because without it there remains sufficient evidence in the
record on which the jury could have found evasion.
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No. 08-30567
2. Discussion
As an initial matter, the deliberate ignorance instruction pertains to
“knowledge,” which is not an element of evasion. The instruction, therefore, only
properly pertains to the two counts of filing a false tax return. Thomas’s
argument in his opening brief is cursory. He argues, again, that he hired
Bradley to avoid these problems and therefore did not intend to violate the law.
That motivation and conduct do not negate the justification for giving a
deliberate ignorance instruction under Nguyen. 493 F.3d at 619 (instruction
appropriate where defendant subjectively aware of high probability of illegal
conduct and engaged in purposeful contrivance to avoid learning of the illegal
conduct).
Further, sufficient evidence existed to support the instruction. First, the
evidence supports a “subjective awareness of a high probability of the existence
of illegal conduct.” Id. Thomas had first-hand knowledge that his personal and
corporate gross income exceeded the reported gross income. Regarding corporate
liabilities, Thomas clearly knew of the Wiley case’s settlement and of his fees for
$647,193, an amount exceeding his firm’s reported gross income of $436,850.
Bradley also testified that Thomas told him that Thomas kept a running log of
the financial status of each case; therefore, Thomas had a sense of how much
money his clients owed, which suggests knowledge of his firm’s finances.
Thomas made roughly $310,000 in personal expenditures in 1999. He very likely
knew these purchases and various checks were greater than his reported gross
personal income of $66,575. Moreover, in November 1999, Thomas submitted
a financial statement to Cross Keys bank on which he listed his income as
$200,000. This strongly suggested that Thomas knew both his corporate and
individual gross incomes were larger than those reported—the “subjective
awareness of a high probability of the existence of illegal conduct” that is the
first prerequisite of a deliberate ignorance instruction. Id.
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No. 08-30567
The evidence also supports finding the second prerequisite, “purposeful
contrivance to avoid learning of the illegal conduct.” Id. Thomas notes in his
own brief his testimony that “he wanted to sign whatever Mr. Bradley placed in
front of him.” Also, Bradley was asked to discontinue sending monthly reports
to Thomas, suggesting deliberate ignorance. Thomas’s uncritical reliance on
Bradley and his assistant, Hamilton, was more than enough evidence to support
a jury instruction for deliberate ignorance regarding the first two counts of filing
a false tax return. The trial court did not abuse its discretion by giving the
instruction. See United States v. Bieganowski, 313 F.3d 264, 290–291 (5th Cir.
2002) (finding no abuse of discretion where a “jury could certainly infer from
th[e] evidence that [defendant] could have been aware of the presence of fraud,
but instead deliberately closed his eyes to it.”).
III. CONCLUSION
For the reasons set forth above, the judgment of the district court is
AFFIRMED as to all counts.
11