United States v. Steven Latin

In the
United States Court of Appeals
For the Seventh Circuit
____________________
Nos. 14-1206 & 13-3844,
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
SHARON ANZALDI and STEVEN LATIN,
Defendants-Appellants.
____________________
Appeals from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 1:11-cr-820 — Harry D. Leinenweber, Judge.
____________________
ARGUED JANUARY 7, 2015 — DECIDED SEPTEMBER 4, 2015
____________________
Before RIPPLE, WILLIAMS, and SYKES, Circuit Judges.
WILLIAMS, Circuit Judge. Sharon Anzaldi, Phillip DeSalvo,
and Steven Latin concocted an $8 million fraudulent tax
scheme based on a sovereign citizen-type theory that the
U.S. government holds hidden bank accounts for its citizens
that can be accessed through various legal maneuvers. By
filing false tax returns, Anzaldi, DeSalvo, and Latin request-
ed more than $8 million for themselves and others in tax re-
funds. The IRS accepted five of their returns, paying out
2 Nos. 14-1206 & 13-3844
more than $1 million in refunds before catching onto the
scheme. A jury convicted all three of conspiracy to file false
claims in violation of 18 U.S.C. § 286 and filing false claims
upon an agency of the United States in violation of 18 U.S.C.
§ 287.
Anzaldi and Latin now appeal their convictions. Anzaldi
claims the district court erred by not ordering that she un-
dergo a competency examination pursuant to 18
U.S.C. § 4241(a) before representing herself pro se. We disa-
gree. The district court was not required to order a compe-
tency examination because it did not have reasonable cause
to believe Anzaldi was suffering from a mental defect ren-
dering her unable to understand the charges against her or
assist in her defense. We also reject Anzaldi’s argument that
the district court erred by admitting evidence of how she
structured her fees to be under $10,000. This evidence helped
prove her intent to defraud and to rebut her good faith de-
fense, and was therefore admissible under Federal Rule of
Evidence 404(b). Finally, Latin claims the district court erred
by not instructing the jury that willfulness was required to
convict, and instead instructing that the defendants had to
have acted “knowingly.” We do not agree. Willfulness is not
an element of the charged offenses and, as we have repeat-
edly held, proving guilt under the false claims statutes does
not require a finding of willfulness. We therefore affirm the
convictions.
I. BACKGROUND
In late 2008 and early 2009, Sharon Anzaldi, Phillip De-
Salvo, and Steven Latin were in significant financial trouble.
They began researching “redemption theory,” a sovereign
Nos. 14-1206 & 13-3844 3
citizen-type 1 view which, as the government explains, holds
that the federal government went bankrupt when it aban-
doned the gold standard in 1933 and began converting the
physical bodies of its citizens into assets against which it
could sell bonds. A tenet of this view is that knowledgeable
citizens can redeem these assets and, through manipulating
them in various imagined accounts, use them to their ad-
vantage.
In accordance with this bizarre theory, Anzaldi, DeSalvo,
and Latin entered into a tax fraud scheme to solve their fi-
nancial troubles. They filed 1099-Original Issue Discount
(“OID”) tax forms which reported their debt as interest in-
come. They then reported near-equal amounts as withheld
taxes, and thereby claimed substantial refunds. Anzaldi and
DeSalvo also helped other individuals file false claims for tax
refunds. For these “services,” Anzaldi expected to be paid
ten percent of any refund amount obtained, and required
that her fees be paid in checks under $10,000, as anything
larger might draw government scrutiny.
All told, Anzaldi, DeSalvo, and Latin submitted fourteen
fraudulent tax returns, requesting more than $8 million for
themselves and others in tax refunds. The IRS accepted five
of these returns, paying out more than $1 million in refunds
before catching onto the scheme. In connection with these
activities, Anzaldi, DeSalvo, and Latin were arrested and in-
dicted on fifteen counts of conspiracy to file false claims in
violation of 18 U.S.C. § 286, and at least one count each of
1 Individuals claiming to be “sovereign citizens” assert that the fed-
eral government is illegitimate and insist they are not subject to its juris-
diction. See United States. v. Jonassen, 759 F.3d 653, 663 (7th Cir. 2014).
4 Nos. 14-1206 & 13-3844
filing false claims upon an agency of the United States in
violation of 18 U.S.C. § 287.
The defendants made their initial appearances in district
court on November 18, 2011. DeSalvo and Latin, represented
by counsel, entered not guilty pleas. Anzaldi elected to pro-
ceed pro se, leading the court to engage in a lengthy collo-
quy with her about the right to counsel and the dangers as-
sociated with proceeding pro se. The court also inquired
about Anzaldi’s background to ensure she was representing
herself “voluntarily and intelligently.” Anzaldi stated that
she finished high school and some college, was a real estate
appraiser for 28 years, and studied law as a hobby. She also
informed the court that she understood the charges against
her and the maximum possible penalties. The court was sat-
isfied with Anzaldi’s responses and she entered a plea of not
guilty.
Following this initial colloquy, the government made ad-
ditional requests for a hearing to determine whether Anzaldi
was competent to proceed pro se and whether her waiver of
her right to counsel was knowing and voluntary. Anzaldi
opposed these motions. On multiple occasions, the district
court asked Anzaldi if she understood the charges against
her and the maximum penalty she was facing. Anzaldi indi-
cated that she did. The district court never made a formal
finding on Anzaldi’s competency and declined to hold a
competency hearing, which now forms a basis for Anzaldi’s
appeal. The court did, however, appoint standby counsel,
who assisted Anzaldi with her defense. Standby counsel also
stated repeatedly that Anzaldi was competent to stand trial
and to represent herself.
Nos. 14-1206 & 13-3844 5
Before trial, the district court considered two motions
relevant to the current appeal. On April 8, 2013, in accord-
ance with Federal Rule of Evidence 404(b)(2), the govern-
ment gave notice that it intended to introduce evidence (in
the form of witness testimony) of Anzaldi’s attempts to
structure her “fees” in amounts under $10,000, so as not to
raise any “red flags.” The government argued this evidence
was admissible to show her intent to deceive and to refute
Anzaldi’s “good faith” defense. The district court agreed and
allowed the evidence to be admitted. Later, DeSalvo and
Latin filed a motion requesting the jury be instructed that
“willfulness” was an element of the crimes for which they
were charged. The district court refused, stating “it is clear
that the requisite mental state to sustain a conviction under
18 U.S.C. §§ 286, 287, is ‘knowledge,’ not ‘willfulness.’”
Trial commenced in June 2013. The government present-
ed substantial evidence against Anzaldi, DeSalvo and Latin,
including email exchanges among the three demonstrating
they were aware of the illegality of their actions. Anzaldi,
acting pro se, was an active participant in her defense. She
gave an opening statement, cross-examined witnesses, of-
fered exhibits to rebut the government’s case, and consulted
with standby counsel. Her strategy was to convince the jury
she did not intend to defraud the government because she
acted in good faith.
At the close of evidence, Latin and DeSalvo reiterated
their request for a willfulness instruction, which the district
court denied. It instructed the jury that the defendants had
to have acted “knowingly” but that if defendants honestly
believed in the truth of their position, then the jury must find
them not guilty.
6 Nos. 14-1206 & 13-3844
The jury convicted Anzaldi, DeSalvo, and Latin on all
counts. Latin was sentenced to eighteen months’ imprison-
ment and DeSalvo to thirty months. Anzaldi continued to
represent herself at sentencing, but standby counsel ad-
dressed the court on her behalf, referring to Anzaldi’s views
on tax law as “delusional.” Counsel did not, however, re-
quest that a competency examination be ordered. Anzaldi
was sentenced to sixty-three months’ imprisonment. Anzaldi
and Latin now appeal their convictions. 2
II. ANALYSIS
Anzaldi and Latin challenge their convictions on three
grounds: (1) that the district court erred by not ordering that
Anzaldi undergo a competency examination, (2) that the dis-
trict court erred by refusing to include a willfulness instruc-
tion to the jury, and (3) that it was error for the district court
to admit evidence of how Anzaldi structured her fees. We
consider each of these arguments below.
A. Declining to Order Competency Evaluation Was
Not an Abuse of Discretion
A district court is required to order a hearing to deter-
mine a defendant’s mental competency in limited circum-
stances. 18 U.S.C. § 4241(a). These circumstances exist when
the court has “reasonable cause to believe” the defendant
may be suffering from a mental disease or defect that either
prevents her from understanding the nature and conse-
quences of the proceedings against her, or renders her una-
ble to assist in her defense. See id.; United States v. Grimes, 173
2DeSalvo initially challenged his conviction, but has withdrawn his
appeal.
Nos. 14-1206 & 13-3844 7
F.3d 634, 635–36 (7th Cir. 1999). “Because the district court is
in the best position to assess the mental status of a defend-
ant,” we review this determination for abuse of discretion.
United States v. Jonassen, 759 F.3d 653, 659 (7th Cir. 2014) (cit-
ing United States v. Alden, 527 F.3d 653, 659 (7th Cir. 2008)).
Although it is uncontested that Anzaldi has no history of
mental illness, she contends there was evidence before the
district court that she was suffering from delusions, para-
noia, or some other mental defect. She points to statements
by the government that Anzaldi’s pro se pre-trial motions
espoused “nonsensical” legal theories, as well as its requests
that the district court evaluate Anzaldi’s competency. She
also refers to statements made by her standby counsel at sen-
tencing explaining that he had looked up Anzaldi’s behavior
in the Journal of Psychiatric Diseases and concluded she was
“delusional about [her] OID scheme and … what she did.”
Anzaldi contends that based on this evidence, the district
court was required to order a competency hearing sua spon-
te under 18 U.S.C. § 4241(a).
We disagree that the district court had reasonable cause
to believe Anzaldi may have been suffering from a mental
disease or defect preventing her from understanding the na-
ture and consequences of the proceedings against her, or
rendering her unable to assist in her defense. Virtually all of
the purported evidence of mental illness put forward stems
from Anzaldi’s decision to pursue a sovereign citizen-type
legal defense. Anzaldi’s frivolous pre-trial motions, for ex-
ample, were based on boilerplate legal templates made
available online by sovereign citizen groups. Likewise,
standby counsel’s suggestion at sentencing that Anzaldi was
“delusional” directly referred to her dogged adherence to
8 Nos. 14-1206 & 13-3844
the redemption theory and her pursuit of a sovereign citi-
zen-type legal defense strategy. But as we have held, a de-
fendant’s adherence to a discredited legal theory does not
create “reasonable cause” to believe she suffers from a men-
tal defect. See Jonassen, 759 F.3d at 660; Alden, 527 F.3d at
659–60; United States v. James, 328 F.3d 953, 955 (7th Cir.
2003).
Our decision in Jonassen is squarely on point. There, the
defendant, like Anzaldi, advanced a “sovereign-citizen de-
fense,” electing to proceed pro se “to avoid losing the ability
to assert that he was ‘a natural person, common law citizen’
over whom the court lacked jurisdiction.” 759 F.3d at 657,
660. We held that the pursuit of this theory did not require
the district court to hold a competency examination, noting
that “adherence to bizarre legal theories, whether they are
sincerely held or advanced only to annoy the other side,
does not imply mental instability or concrete intellect … so
deficient that trial is impossible.” Id. at 660 (citing James, 328
F.3d at 955; Alden, 527 F.3d at 659–60).
We reached a similar conclusion in James. The defendant
there had “offered the ‘defense’ that his ancestors came from
Africa, that he is therefore a Moorish national, and that as a
result he need obey only those laws mentioned in an ancient
treaty between the United States and Morocco.” 328 F.3d at
954. Again, we held that the defendant’s reliance on this le-
gal theory did not require the district court to hold a compe-
tency hearing under § 4241, noting that many litigants “ar-
ticulate beliefs that have no legal support,” but that this did
not equate to mental incompetence or demand that a compe-
tency hearing be ordered. Id. at 955. We also explained that
while “[o]ne person with a fantastic view may be suspected
Nos. 14-1206 & 13-3844 9
of delusions; two people with the identical view are just
oddballs.” Id. at 956.
Despite Anzaldi’s suggestion to the contrary, the record
clearly demonstrates she understood the charges against her
and assisted in her defense—the key considerations under
§ 4241. See Alden, 527 F.3d at 659. Each time the government
requested a hearing to determine whether Anzaldi was
competent, Anzaldi objected, telling the district court at one
point that “there would be no reason that I would be incom-
petent or considered that. I’m quite capable.” Standby coun-
sel also objected to the government’s request for a compe-
tency hearing, stating, “I would object to that at this point,
too. My discussion with her yesterday was very cordial and
informative.” Standby counsel also told the district court
that Anzaldi understood “the peril of going ahead by her-
self.” In deciding not to order a competency examination,
the district court was entitled to consider the statements
made by both Anzaldi and standby counsel affirming
Anzaldi’s ability to understand the charges against her and
to assist in her defense. See United States v. Savage, 505 F.3d
754, 760 (7th Cir. 2007) (“Significant weight is given to coun-
sel’s representations concerning his client’s competence and
counsel’s failure to raise the competency issue.”); United
States v. Morgano, 39 F.3d 1358, 1374–75 (7th Cir. 1994) (dis-
trict court entitled to rely on statements made by pro se de-
fendant and his standby counsel to support finding no rea-
sonable cause existed to believe defendant was mentally in-
competent).
The record also shows Anzaldi actively participated in
her defense at trial. She gave an opening statement, cross-
examined witnesses, offered exhibits to rebut the govern-
10 Nos. 14-1206 & 13-3844
ment’s case, and consulted with standby counsel. Such
meaningful participation in the judicial process indicates
that she was competent to assist in her defense. See United
States v. Berry, 565 F.3d 385, 389 (7th Cir. 2009) (pro se de-
fendant’s performance—lodging objections, cross-examining
witnesses, and making opening and closing statements—
demonstrated mental competence). Anzaldi also advanced
nuanced legal arguments, attempting to negate an essential
element of her crime by submitting to the jury that she had
acted in good faith. She maintained, for example, that she
had diligently researched the tax positions she had taken
and concluded they were legitimate, and that she asked the
IRS for guidance to the extent these tax positions were erro-
neous. This sort of argumentation reflected an in-depth un-
derstanding of the charges against her, and also justified the
district court’s conclusion that a competency hearing was
not required. See Alden, 527 F.3d at 659.
The district court was also entitled to rely on all of its in-
formal observations of Anzaldi over the course of two years,
during which time Anzaldi exhibited no behaviors sugges-
tive of mental illness. See United States v. Weathington, 507
F.3d 1068, 1073 (7th Cir. 2007) (finding district court entitled
to “determine informally whether reasonable cause exists by
observing the defendant’s demeanor and assessing his
statements during … interactions with the court.”); Grimes,
173 F.3d at 636; cf. United States v. Auen, 846 F.2d 872, 874–76
(2d Cir. 1988) (remanding case for competency examination
where defendant made multiple threats and affirmatively
represented that “he did not ‘understand’” why he was be-
ing detained); United States v. Arenburg, 605 F.3d 164 (2d Cir.
2010) (remanding case for competency examination where
defendant had been previously diagnosed with paranoid
Nos. 14-1206 & 13-3844 11
schizophrenia). The district court also could have considered
the level of sophistication required to commit the crimes of
which Anzaldi was convicted. Evidence showed Anzaldi
filed numerous false tax returns seeking millions of dollars
in fraudulent refunds, convinced several individuals to
adopt her fraudulent tax strategy, and took various steps to
conceal her crimes. See United States v. Abdulmutallab, 739
F.3d 891, 902 (6th Cir. 2014) (rejecting need for competency
hearing based on complex nature of crimes at issue).
Anzaldi further suggests that even if she were competent
to stand trial, she was not competent to do so pro se. This
argument is without merit. The Constitution does not create
two standards for competence—one for standing trial and
the other for self-representation. In Indiana vs. Edwards, 554
U.S. 164 (2008), upon which Anzaldi relies, the Supreme
Court held simply that “the Constitution permits States to
insist upon representation by counsel for those competent
enough to stand trial … but who still suffer from severe
mental illness to the point where they are not competent to
conduct trial proceedings by themselves.” 554 U.S. at 178
(emphasis added). But as we have noted, Edwards addresses
“what the Constitution permits—limitation of the self-
representation right in connection with pleading guilty and
presenting a trial defense, respectively—not what it man-
dates.” United States v. Berry, 565 F.3d 385, 391 (7th Cir.
2009). As a result, Edwards simply means that “the Constitu-
tion may have allowed the trial judge to block [Anzaldi’s]
request to go it alone, but it certainly didn’t require it.” See
id. (citation omitted). In other words, even if the district
court had doubts about Anzaldi’s abilities, nothing required
the court to prohibit her from proceeding pro se once she
understood the charges against her and was able to assist in
12 Nos. 14-1206 & 13-3844
her defense. Moreover, even if Edwards requires district
courts to appoint “counsel in certain cases—a dubious read-
ing—the rule would only apply when the defendant is suf-
fering from a ‘severe mental illness.’” Id. And there is no ev-
idence Anzaldi was suffering from a severe mental illness.
Accordingly, we find that the district court did not abuse
its discretion by declining to order Anzaldi to undergo a
competency examination.
B. No Error in Refusing to Give Willfulness
Instruction
Latin challenges the district court’s jury instructions re-
garding the required mental state for violating 18 U.S.C.
§§ 286 and 287. He claims the defendants had to act “willful-
ly” for the jury to convict, but that this was not part of the
instruction.
We review such challenges to jury instructions in two
steps. United States v. Brown, 726 F.3d 993, 997 (7th Cir. 2013).
At step one, we review de novo “whether a particular jury
instruction accurately summarize[s] the law.” Id. If it does,
we examine “the district court’s particular phrasing of the
instruction for abuse of discretion.” Id. At step two, we will
reverse “only if it appears both that the jury was misled and
that the instructions prejudiced the defendant.” Id. The dis-
trict court “is afforded substantial discretion with respect to
the precise wording of instructions so long as the final result,
read as a whole, completely and correctly states the law.”
United States v. DiSantis, 565 F.3d 354, 359 (7th Cir. 2009).
Sections 286 and 287, under which Anzaldi, DeSalvo, and
Latin were convicted, are general false claims statutes, which
are not dependent on tax filing. Section 286 is a conspiracy
Nos. 14-1206 & 13-3844 13
charge that prohibits entering into “any agreement … to de-
fraud the United States.” 18 U.S.C. § 286. Section 287, in turn,
forbids any person from making or presenting a claim to the
United States when such person “know[s] such claim to be
false, fictitious, or fraudulent.” 18 U.S.C. § 287. Neither stat-
ute mentions willfulness.
By contrast, certain violations of the tax code do require a
willful mental state. See, e.g., 26 U.S.C. § 7206(1) (“Any per-
son who … [w]illfully makes and subscribes any return,
statement, or other document … which he does not believe
to be true and correct … shall be guilty of a felony… .”). As
the Supreme Court has explained, Congress imposed a will-
fulness requirement for certain tax offenses because of the
complex nature of the tax system, which makes it “difficult
for the average citizen to know and comprehend the extent
of the duties and obligations imposed by the tax laws.” Cheek
v. United States, 498 U.S. 192, 199–200 (1991) (“Congress has
… softened the impact of the common-law presumption
[that ignorance of the law is no defense] by making specific
intent to violate the law an element of certain federal crimi-
nal tax offenses.”).
Relying on Cheek, Latin argues that even though the gov-
ernment charged the defendants in this case with violations
of 18 U.S.C. § 286 (false claims conspiracy) and with indi-
vidual counts of violating 18 U.S.C. § 287 (making a false
claim)—rather than with submission of false tax returns as
prohibited by the tax code—it should have been required to
prove willfulness because the false claims at issue were
made in the course of filing tax returns.
We decline to extend the logic of Cheek—which dealt ex-
clusively with a conviction under the tax code, 498 U.S. at
14 Nos. 14-1206 & 13-3844
200—to cases charged under the false claims statutes and re-
affirm what we have repeatedly held in cases involving ar-
guments similar to Latin’s: The government “need not prove
that the defendant acted willfully” to prove a violation un-
der the false claims statutes at issue here, which only require
proof that “a defendant made a claim upon the United States
knowing that the claim was false.” United States v. Ferguson,
793 F.2d 828, 831 (7th Cir. 1986) (finding that because tax-
payer’s characterization of tax as “excise tax” was patently
false and groundless, taxpayer violated 18 U.S.C. § 287);
United States v. Catton, 89 F.3d 387, 392 (7th Cir. 1996)
(“[W]illfulness need not be proved [in a Section 287 case].”).
As our sister circuits have held, the false claims statutes
and the tax code “give rise to two different offenses,” even
when “the offenses arise out of the same transaction(s).”
United States v. Boyd, 378 F. App’x 841, 846 (10th Cir. 2010)
(unpublished); see also United States v. Jirak, 728 F.3d 806,
813–14 (8th Cir. 2013) (noting distinction between violations
of the tax code, which require a finding of willfulness, and a
violation of Section 287, which does not). And there are good
reasons for this distinction. First, as we stated in Catton, “it is
implicit in the filing of a knowingly false claim that the
claimant intends to defraud the government, and hence un-
necessary to charge willfulness separately.” 89 F.3d at 392.
As we emphasized, “this simply underscores the importance
of the government’s proving the defendant’s knowledge that
the claim is false.” Id. Second, requiring the government to
prove willfulness in a tax-related case would force it to
charge all tax-related offenses under the tax code, even when
other criminal statutes apply. This is inconsistent with well-
established rule that when multiple criminal statutes apply
to the same conduct, a prosecutor has discretion to choose
Nos. 14-1206 & 13-3844 15
under which statute to proceed. E.g., United States v. Batchel-
der, 442 U.S. 114, 123–24 (1979) (“[This Court] has long rec-
ognized that when an act violates more than one criminal
statute, the Government may prosecute under either so long
as it does not discriminate against any class of defend-
ants… .”).
In light of this discussion, we find that it was not error
for the district court to refuse to include a willfulness in-
struction. But we also note that any instructional error here
would have been harmless. The pattern instruction for a tax
code violation focuses on a defendant’s lack of subjective
good faith. See 7TH CIR. PATTERN FED. JURY INSTRUCTIONS, at
§ 6.11 (2012 ed.) (“A person does not act willfully if he be-
lieves in good faith that he is acting within the law, or that
his actions comply with the law. Therefore, if the defendant
actually believed that what he was doing was in accord with
the [tax] laws, then he did not willfully [make a false state-
ment on a tax return].”). But the district court’s instructions
addressed this, instructing the jury that the defendants’
“good faith” would preclude a guilty verdict. There would
be no meaningful difference between a willfulness instruc-
tion under the tax code and the instructions the district court
gave in this case. See Catton, 89 F.3d at 392 (“What ‘willfully’
adds to ‘knowingly’ in a section 287 case is obscure. Unlike a
knowingly false statement, which if immaterial might not
reflect a guilty intent, the making of a knowingly false claim
might seem inherently willful, inherently intended to de-
fraud, making an instruction on willfulness otiose.”).
16 Nos. 14-1206 & 13-3844
C. No Abuse of Discretion in Admission of
Anzaldi’s Fee Structuring Evidence
Anzaldi claims the district court abused its discretion by
allowing in testimony submitted by the government regard-
ing Anzaldi’s fee structuring under Federal Rule of Evidence
404(b). Specifically, two witnesses testified regarding Anzal-
di’s attempt to keep individual check amounts under
$10,000. According to one of the witnesses, Anzaldi request-
ed three different checks, each under $10,000, because a sin-
gle check for $25,000 “was a red flag” that could trigger gov-
ernment scrutiny. We review the district court’s decision to
admit this evidence for abuse of discretion. United States v.
Johnson, 624 F.3d 815, 819 (7th Cir. 2010).
Rule 404(b) prohibits the admission of evidence of other
crimes, wrongs, or acts for the purpose of proving a person’s
character or propensity to behave in a certain way. Fed. R.
Evid. 404(b)(1). However, the rule permits the use of such
“other-act” evidence for other purposes, e.g., to show mo-
tive, intent, preparation, plan, knowledge or absence of mis-
take. Fed. R. Evid. 404(b)(2). As we recently explained, other-
act evidence may only be introduced “when its admission is
supported by some propensity-free chain of reasoning.”
United States v. Gomez, 763 F.3d 845, 856 (7th Cir. 2014) (en
banc) (citing United States v. Lee, 724 F.3d 968, 978 (7th Cir.
2013)). To determine this, courts must ask not just “whether
the proposed other-act evidence is relevant to a non-
propensity purpose but how exactly the evidence is relevant
to that purpose.” Id.
The probative value of such other-act evidence must then
be weighed against its potential prejudice. Id. at 857; see also
Fed. R. Evid. 403 (authorizing district court to exclude “rele-
Nos. 14-1206 & 13-3844 17
vant evidence” if its probative value is “substantially out-
weighed by a danger of ... unfair prejudice”). Evidence is
“unduly prejudicial” if it creates a risk that invites an irra-
tional emotional response from the jury. United States v. Mil-
ler, 688 F.3d 322, 327 (7th Cir. 2012).
We do not believe the district court abused its discretion
by admitting evidence regarding Anzaldi’s attempt to struc-
ture her fees in a way she believed would circumvent gov-
ernment attention. The propensity-free chain of reasoning is
clear. Anzaldi’s attempted fee structuring tended to prove
her intent to defraud the United States because she would
not attempt to hide from the government her involvement
with these tax returns if she truly believed her tax positions
were legitimate. This evidence also helped negate her assert-
ed defense that she had acted in good faith. The district
court recognized this propensity-free chain of reasoning
when it granted the government’s pre-trial motion to admit
evidence of Anzaldi’s fee structuring, explaining the evi-
dence “would be directed toward establishing an absence of
good faith regardless of the way Anzaldi was paid.” This is
precisely the type of logical progression anticipated by
Gomez. See 763 F.3d at 856; see also United States v. Ryan, 213
F.3d 347, 351 (7th Cir. 2000) (defendant’s efforts to conceal
participation in fraudulent scheme is circumstantial evi-
dence of an intent to defraud and is admissible to rebut de-
fendant’s asserted defense).
We also find that the probative value of the fee-
structuring evidence outweighed any potential prejudice. As
the district court noted, evidence regarding fee structuring is
not the type of evidence that “invites an irrational emotional
response.” Furthermore, the district court gave a limiting in-
18 Nos. 14-1206 & 13-3844
struction to the jury, stating “[y]ou may consider this evi-
dence [of the free structure] only on the question of defend-
ant Sharon Anzaldi’s intent, preparation, plan, knowledge,
and absence of mistake. You should consider this evidence
against defendant Sharon Anzaldi only for this limited pur-
pose.” This instruction helped reduce concerns about any
prejudice associated with the fee structuring evidence. See
United States v. Molton, 743 F.3d 479, 483 (7th Cir. 2014).
And again, we note that any error in admitting this tes-
timony would have been harmless, as the evidence against
Anzaldi was overwhelming. See United States v. Oros, 578
F.3d 703, 709 (7th Cir. 2009) (quoting United States v. Jarrett,
133 F.3d 519, 526 (7th Cir. 1998)) (admission of inadmissible
evidence harmless “if it did not have a substantial and inju-
rious effect on the jury’s verdict”).
III. CONCLUSION
The judgment of the district court is AFFIRMED.