United States v. James Stuart, Jr.

In the
United States Court of Appeals
For the Seventh Circuit
No. 12-3471
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
JAMES A. STUART, JR.,
Defendant-Appellant.
Appeal from the United States District Court for the
Eastern District of Wisconsin.
No. 10-CR-288 — Charles N. Clevert, Jr., Judge.
ARGUED SEPTEMBER 13, 2013 — DECIDED DECEMBER 3, 2014
Before BAUER, FLAUM, and ROVNER, Circuit Judges.
ROVNER, Circuit Judge. After a three-day trial, jurors found
James Stuart guilty of three counts of tax evasion for failing to
pay almost $239,400 in income tax between 2005 and 2007. See
26 U.S.C. § 7201. Stuart moved for a new trial and judgment of
acquittal because, he argued, his trial counsel inadequately
defended him. The district court denied the motions, and on
appeal Stuart maintains that his trial counsel performed
2 No. 12-3471
deficiently. Ordinarily it is imprudent to raise on direct appeal
a claim of ineffective assistance if, as is usually the case, the
record is not developed. United States v. Flores, 739 F.3d 337,
341 (7th Cir. 2014). But the district court allowed Stuart’s new
counsel to develop a record on his claim, so we consider it.
Because nothing in that record demonstrates constitutionally
ineffective assistance, we affirm.
During opening statements Stuart’s trial counsel asserted
the theory of Stuart’s defense: Stuart believed that he owed no
taxes. He explained that Stuart thought that the money he
earned from his family business, New Age Chemical, was not
income and that the United States had no authority to tax
income. Stuart had adopted these views after reading a book
called “Cracking the Code,” which urges people to resist
paying income taxes, but his counsel told the jury that Stuart
learned his ideas from his fellow church patrons. Counsel
described Stuart as a curious, determined, and “kooky, not
criminal” person. Only after he received no response to his
inquiries from the IRS, the Secretary of the Treasury, or his
accountants about his tax ideas, counsel mused, did Stuart
begin to refrain from paying income tax.
The prosecution opened its case with witnesses who
testified that Stuart had wilfully defied his obligation to pay
taxes for 2005 to 2007. Beverly Schlipp, Stuart’s sister and co-
owner and vice president of New Age Chemical, stated that
beginning around 2004, Stuart told her that he was not
lawfully required to pay income taxes. He therefore directed
her to stop withholding tax from his salary. She added that a
couple of years later Stuart repeated that he wished not to pay
income taxes, so New Age Chemical continued not to withhold
No. 12-3471 3
taxes. Three of Stuart’s accountants also testified that Stuart
did not want to pay income taxes and referred to Stuart’s tax-
resistor emails about “Cracking the Code.” Two IRS special
agents furnished inculpatory communications from Stuart.
They submitted: (1) several letters that Stuart mailed to the IRS
declaring that he was not liable for taxes; (2) a letter that Stuart
sent to a local newspaper proclaiming that only a few people
had income-tax obligations and that accountants and lawyers
fail to give valid tax advice; and (3) a letter he wrote to the IRS
and the Secretary of the Treasury in which, to evade taxes, he
renounced his United States citizenship. Finally an IRS investi-
gator testified that Stuart routinely paid income tax before
2004, but when, in 2007, Stuart requested tax refunds, the IRS
told him then that his wages were taxable and his tax protest
had no basis in law.
After the prosecution rested, Stuart’s trial counsel did not
put on any case in defense, so the trial moved to closing
arguments. Before those arguments began, in a colloquy with
Stuart, the judge asked him whether he knew that he had the
right to testify on his own behalf. Stuart answered that he
understood this right and that he nonetheless knowingly and
voluntarily waived it. During closing arguments his counsel
repeated the defense theory that Stuart believed that he owed
no income tax between 2005 and 2007. Referring to evidence
that the prosecution had used (Stuart’s emails, letters, and
conversations with the IRS and his accountants), counsel
argued that Stuart was a curious, passionate, and possibly
crazy person who simply was earnestly trying to understand
the tax code. He was not, counsel urged, a conniving criminal
thwarting tax responsibility.
4 No. 12-3471
The jury rejected Stuart’s defense and convicted Stuart of
three counts of tax evasion. But the case was not over. Stuart
hired a new attorney to represent him at sentencing, and he
asked for a new trial or judgment of acquittal based on
ineffective assistance of his trial counsel. The district court held
a hearing on that claim and received testimony from three
witnesses. First Stuart testified that his decision not to testify
was involuntary because he did not believe that his trial
attorney was prepared. He acknowledged, however, that his
counsel had received from him before trial his written synopsis
of his version of events, which set forth his tax-protester
beliefs. Second his daughter, Erin, testified that when she
worked at New Age Chemical in 2009, Beverly Schlipp
embezzled funds from the company and was fired. Stuart
argued that trial counsel might have profitably elicited these
facts on cross-examination of Schlipp. Third Joel Nettesheim,
one of Stuart’s accountants, emphasized that Stuart sincerely
believed that he did not have to pay income tax.
The district court denied Stuart’s motions, finding no
ineffective assistance. It reasoned that the colloquy during trial,
where Stuart explained that he was freely relinquishing his
right to testify, refuted his contrary testimony at the post-
verdict hearing. The court found, therefore, that Stuart had
validly waived his right to testify. His trial counsel performed
adequately, the court added, because counsel had advanced
Stuart’s theory that he believed that he had no tax-payment
obligations. Counsel did so during his opening statement and
closing argument as well as through his examination of the
evidence elicited from the prosecution’s witnesses and exhibits.
Finally, the court observed, extrinsic evidence about Beverly
No. 12-3471 5
Schlipp’s alleged embezzlement would have been excluded.
After denying Stuart’s motions, the court sentenced him to a
33-month term of imprisonment.
On appeal Stuart maintains that his trial counsel was
ineffective for four reasons: (1) He did not interview Stuart
before trial to ascertain that the correct source of his
tax-protesting beliefs was “Cracking the Code;” (2) counsel did
not present a case in defense, where he could have called
Nettesheim and Erin Stuart as witnesses; (3) he did not cross-
examine Beverly Schlipp about her possible embezzlement;
and (4) counsel did not call Stuart to testify in his own defense.
To prevail on a claim of constitutionally deficient performance,
we examine the record as a whole, see Pole v. Randolph, 570 F.3d
922, 934 (7th Cir. 2009), and from it Stuart must establish both
that trial counsel’s performance was objectively unreasonable
and that he was prejudiced by that performance. See Strickland
v. Washington, 466 U.S. 668, 687 (1984); Watson v. Anglin,
560 F.3d 687, 690 (7th Cir. 2009). We review this district court’s
decision to reject his claim de novo. See United States v.
Ruzzano, 247 F.3d 688, 697 (7th Cir. 2001); United States v.
Shukri, 207 F.3d 412, 418 (7th Cir. 2000).
We conclude that trial counsel was not deficient in any of
the four ways that Stuart has identified. First, the record shows
that counsel conducted an adequate pretrial investigation of
Stuart. Counsel requested and received from Stuart a written
synopsis of his version of the events, which included his tax
beliefs. These beliefs became the defense theory at trial, which
counsel raised during opening and closing, and which he
grounded in the evidence elicited from the prosecution’s
6 No. 12-3471
witnesses and exhibits. Stuart replies that a pretrial interview
would have disclosed the true source of his tax-protester
beliefs. But Stuart has not explained how correcting the source
of those beliefs, which the jury rejected as a defense in any
case, might have exculpated him. He thus cannot show
prejudice. See United States v. Lathrop, 634 F.3d 931, 939 (7th Cir.
2011); Keys v. Duckworth, 761 F.2d 390, 394 (7th Cir. 1985);
United States v. Davis, 406 F.3d 505, 510 (8th Cir. 2005).
Second, counsel’s decision not to call Nettesheim and Erin
to testify during the defense case does not support a claim of
ineffective assistance. See Menzer v. United States, 200 F.3d 1000,
1003-04 (7th Cir. 2005); United States v. Best, 426 F.3d 937,
945–46 (7th Cir. 2005); Foster v. Schomig, 223 F.3d 626, 631 (7th
Cir. 2000). Nettesheim was a witness in the prosecution’s case,
and Stuart does not articulate what additional, admissible
evidence his counsel would have offered in a defense case.
Nettesheim could not recall any specific facts about Stuart
other than his “passionate” belief about his views about
income taxes, and this testimony was presented to the jury
during the prosecution’s case. Likewise, Stuart cannot point to
admissible testimony that Erin might have offered. She did not
work at the company before 2009, so she had no relevant,
personal knowledge about its tax position. Stuart thus has not
shown that the failure to call either witness prejudiced his case.
See Pole, 570 F.3d at 946; Best, 426 F.3d at 945–46.
Third, counsel’s decision not to cross-examine Beverly
Schlipp about the alleged embezzlement does not constitute
ineffective assistance. See Bergman v. McCaughtry, 65 F.3d 1372,
1379–80 (7th Cir. 1995); DeLozier v. Sirmons, 531 F.3d 1306, 1326
No. 12-3471 7
(10th Cir. 2008). Counsel could have asked Schlipp about
embezzlement during her cross-examination, but Stuart gives
us no reason to believe that she would have confessed to a
crime for which she has never been charged. And counsel
would not have been entitled to introduce extrinsic evidence
(such as an accusation through his daughter Erin) to prove
embezzlement because Federal Rule of Evidence 608 forbids
introducing extrinsic evidence to prove the truthfulness of
prior acts of misconduct. See FED. R. EVID. 608(b); United States
v. Holt, 486 F.3d 997, 1001–02 (7th Cir. 2007); United States v.
McGee, 408 F.3d 966, 981–82 (7th Cir. 2005).
Finally, counsel’s decision not to call Stuart to testify at trial
does not amount to ineffective assistance. Stuart had the right
to testify in his defense, see Rock v. Arkansas, 483 U.S. 44, 52–53
(1987), but at trial, under scrutiny from the inquiring judge, he
explicitly waived this right and acquiesced to counsel’s
strategy. “The decision not to place the defendant on the stand
is a classic example” of a strategic trial decision. United States
v. Norwood, 798 F.2d 1094, 1100 (7th Cir. 1986); see United States
v. Dyer, 784 F.2d 812, 817 (7th Cir. 1986); Higgins v. United
States, 267 F.3d 1202, 1205 (11th Cir. 2001); Robison v. Johnson,
151 F.3d 256, 261–62 (5th Cir. 1998). And in this case trial
counsel’s decision not to call Stuart to testify was reasonable.
Stuart’s far-fetched, tax-protesting ideas were already pre-
sented to the jury through his letters to the IRS, and his emails
and conversations with the accountants. They were also
reinforced during opening statements and closing arguments.
8 No. 12-3471
Calling Stuart to testify would not have added to this informa-
tion but might have further alienated the jury.
Accordingly the decision of the district court is AFFIRMED.