United States v. Craig Orrock

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA, No. 19-10388
Plaintiff-Appellee,
D.C. No.
v. 2:16-cr-00111-
JAD-DJA-1
CRAIG P. ORROCK,
Defendant-Appellant. OPINION
Appeal from the United States District Court
for the District of Nevada
Jennifer A. Dorsey, District Judge, Presiding
Argued and Submitted October 19, 2021
San Francisco, California
Filed January 26, 2022
Before: Bridget S. Bade and Patrick J. Bumatay, Circuit
Judges, and Richard M. Berman, * District Judge.
Opinion by Judge Bumatay
*
The Honorable Richard M. Berman, United States District Judge
for the Southern District of New York, sitting by designation.
2 UNITED STATES V. ORROCK
SUMMARY **
Criminal Law
The panel affirmed a conviction for evading the
assessment of taxes under 26 U.S.C. § 7201, in a case in
which a jury convicted the defendant on this evasion charge
along with two other tax offenses.
The government accused the defendant of tax evasion for
concealing income he received from the sale of a vacant lot
that he controlled. Rather than report the sale proceeds on
his personal tax return, the defendant belatedly disclosed the
sale in the return of a partnership that he also controlled. In
that return, he significantly underreported the sale proceeds.
The defendant argued that the statute of limitations
barred his conviction for the evasion of the assessment of
taxes. In essence, he contended that the statute of limitations
ran from the date he filed his false personal tax return, not
from the later act of filing the partnership return. Although
some language in this court’s prior cases may seemingly
support the defendant’s argument, the panel took this
opportunity to clarify that the statute of limitations for
evasion of assessment cases under § 7201 runs from the last
act necessary to complete the offense, either a tax deficiency
or the last affirmative act of evasion, whichever is later. In
so ruling, the panel aligned evasion of assessment cases with
evasion of payment cases, and joined all the other circuit
courts that have addressed the issue. Because the indictment
was filed within six years of the defendant’s last affirmative
**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
UNITED STATES V. ORROCK 3
act of evasion, the filing of the partnership tax return, the
panel saw no bar to the defendant’s prosecution for the
evasion of assessment of taxes.
In a concurrently filed memorandum disposition, the
panel addressed the defendant’s other contentions on appeal,
and affirmed in part and vacated in part.
COUNSEL
Michael Tanaka (argued), Law Office of Michael Tanaka,
Los Angeles, California, for Defendant-Appellant.
Gregory S. Knapp (argued), Katie Bagley, and Joseph B.
Syverson, Attorneys; S. Robert Lyons, Chief, Criminal
Appeals & Tax Enforcement Policy Section; David A.
Hubbert, Acting Assistant Attorney General; Tax Division,
United States Department of Justice, Washington, D.C.; for
Plaintiff-Appellee.
OPINION
BUMATAY, Circuit Judge:
Craig P. Orrock was accused of tax evasion for
concealing income he received from the sale of a vacant lot
that he controlled. Rather than report the sale proceeds on
his personal tax return, he belatedly disclosed the sale in the
return of a partnership that he also controlled. In that return,
he significantly underreported the sale proceeds. For this
offense, the government charged Orrock with evading the
4 UNITED STATES V. ORROCK
assessment of taxes under 26 U.S.C. § 7201. 1 A jury
convicted Orrock on this tax evasion charge along with two
other tax offenses.
On appeal, Orrock argues that the statute of limitations
barred his conviction for the evasion of the assessment of
taxes. In essence, he contends that the statute of limitations
ran from the date he filed his false personal tax return, not
from the later act of filing the partnership return. Although
some language in our prior cases may seemingly support
Orrock’s argument, we take this opportunity to clarify that
the statute of limitations for evasion of assessment cases
under § 7201 runs from the last act necessary to complete the
offense, either a tax deficiency or the last affirmative act of
evasion, whichever is later. 2 See United States v. Carlson,
235 F.3d 466, 470 (9th Cir. 2000).
I.
On July 25, 2001, Orrock, a former Internal Revenue
Service attorney, persuaded his friend, Roger Thompson, to
purchase a vacant lot in Nevada, known as the “Arville”
property. Thompson purchased the property for $80,000
and, at Orrock’s direction, transferred ownership to Arville
Properties, LLC, a company set up by Orrock and managed
through another entity solely owned by Orrock. The
government alleged that Orrock was the true owner of the
1
Unless otherwise indicated, all section (§) citations refer to Title
26 of the U.S. Code.
2
In a concurrently filed memorandum disposition, we address
Orrock’s other contentions on appeal. In that memorandum, we affirm
in part and vacate in part.
UNITED STATES V. ORROCK 5
Arville property as he controlled Arville Properties and was
the sole signer of the company’s bank account.
On February 21, 2007, Orrock, through Arville
Properties, organized the sale of the Arville property for
$1.5 million. As Arville Properties served as a nominee for
Orrock, the government contended that Orrock received
$914,433 in taxable income from the sale. Such income
would lead to a $314,483 tax liability for Orrock. Orrock
filed his 2007 personal tax return on February 19, 2009, but
he did not report any income from the Arville property sale.
Several years later, in February 2011, an IRS revenue
agent began a civil audit of Orrock’s 2007 personal tax
return. Three months later, on May 9, 2011, Orrock filed a
tax return for Arville Properties, which substantially
underreported the gain from the 2007 Arville sale. The
partnership return reported a sales price of about $1.4
million, a tax basis of about $1.2 million, and a gain of about
only $200,000. In reality, the sale was for $1.5 million and
only had a basis of about $90,000.
On April 12, 2016, a grand jury indicted Orrock on three
tax felonies: (1) evasion of the payment of taxes under
§ 7201; (2) evasion of assessment of taxes also under
§ 7201; and (3) obstruction of the administration of tax laws
under § 7212(a). The evasion of tax assessment count
stemmed from the 2007 sale of the Arville property. The
indictment on that charge read:
That in or about February 2007, and
continuing to at least on or about May 9,
2011, in the District of Nevada, CRAIG P.
ORROCK, did willfully attempt to evade and
defeat the assessment of a large part of the
income tax due and owing by him to the
6 UNITED STATES V. ORROCK
United States of America for the calendar
year 2007, by concealing both ownership of
property he held through a nominee known as
Arville Properties, LLC, and the proceeds
from the sale of such property from the
Internal Revenue Service, and thereby
evading the proper assessment of his 2007
federal income taxes.
All in violation of Title 26, United States
Code, Section 7201.
Orrock moved pretrial to dismiss the evasion of
assessment count based on the statute of limitations. The
district court denied his motion, holding that because the
government sufficiently alleged that Orrock committed an
affirmative act of evasion in May 2011, the indictment fell
within § 7201’s six-year statute of limitations.
A jury convicted Orrock on all counts. Orrock appeals
his § 7201 evasion of assessment conviction. We review the
district court’s interpretation of the statute of limitations de
novo and any factual findings underlying the decision for
clear error. United States v. Jenkins, 633 F.3d 788, 797 (9th
Cir. 2011).
II.
On appeal, Orrock continues to assert that his § 7201
conviction for evasion of assessment was barred by the
statute of limitations. He contends that the six-year
limitations clock started on February 19, 2009, when he filed
his 2007 personal tax return without disclosing income from
the sale of the Arville property. At that point, he alleges, all
the elements of the § 7201 offense were satisfied, triggering
the limitations period. In Orrock’s view, any further act of
UNITED STATES V. ORROCK 7
evasion after completion of the offense, such as the filing of
the partnership tax return, can’t extend the limitations
period. If Orrock’s interpretation is correct, then the
limitations period expired in February 2015, and the
indictment’s filing in April 2016 was more than 13 months
too late.
But the government advances a different view. Although
the government agrees that the statute of limitations can start
once all the elements of the offense are satisfied, it also
maintains that the limitations period can run from the last
affirmative act furthering the tax evasion. Under that
interpretation, the government alleges that Orrock
committed another, final act of evasion on May 9, 2011,
when he filed the partnership tax return. If the government
is right—that Orrock’s last act of evasion restarts the statute
of limitations—then the indictment was brought 13 months
before the expiration of the limitations period.
We hold that the government’s position is correct and
affirm.
A.
The Tax Code makes it a felony to “willfully attempt[]
in any manner to evade or defeat any tax . . . or the payment
thereof.” 26 U.S.C. § 7201. A person may violate § 7201 in
two ways: (1) by evading the assessment of taxes or (2) by
evading the payment of taxes. See United States v. Mal,
942 F.2d 682, 689 (9th Cir. 1991) (“[Section] 7201
proscribes a single crime—tax evasion—which may be
accomplished either by evading the assessment of tax or the
payment of tax.”). To obtain a conviction under § 7201
under either theory, the government must prove three
elements: “1) the existence of a tax deficiency,
8 UNITED STATES V. ORROCK
2) willfulness, and 3) an affirmative act of evasion or
affirmative attempt to evade.” See Carlson, 235 F.3d at 468.
The statute of limitations for a violation of § 7201 is six
years. See 26 U.S.C. § 6531(2) (“[T]he period of limitation
shall be 6 years . . . for the offense of willfully attempting in
any manner to evade or defeat any tax or the payment
thereof[.]”). As with most crimes, the statute of limitations
on § 7201’s evasion of assessment offense may “begin[] to
run from the occurrence of the last act necessary to complete
the offense.” Carlson, 235 F.3d at 470. Normally the last
act is the existence of a tax deficiency, which occurs on April
15 after the tax year—“when tax returns are due.” Id.But importantly, nothing in the text of § 6531(2) or
§ 7201 dictates that the limitations period may only begin
once all the elements of the offense are satisfied. Rather,
both § 6531 and § 7201 broadly refer to the evasion of taxes
“in any manner.” As a textual matter then, there is no limit
to the method of evasive actions chargeable under § 7201.
See Spies v. United States, 317 U.S. 492, 499 (1943)
(“Congress did not define or limit the methods by which a
willful attempt to defeat and evade might be accomplished
and perhaps did not define lest its effort to do so result in
some unexpected limitation.”). Thus, under § 7201, the
government may prosecute a defendant for any acts
furthering the evasion of taxes, even after all the elements of
a § 7201 offense have first been met. Cf. Cohen v. United
States, 297 F.2d 760, 770 (9th Cir. 1962) (“One can . . .
evade and defeat the tax by a combination of such things as
failing to file a return, filing a false return, failing to keep
records, concealing income, or other means.”); see also
United States v. Anderson, 319 F.3d 1218, 1220 (10th Cir.
2003) (“[E]vasive acts following the filing of a return may
be considered part of the offense[.]”). Concomitant with that
UNITED STATES V. ORROCK 9
authority, § 6531(2) extends the statute of limitations to any
evasive acts committed “in any manner”—again even after
all elements of § 7201 are first met.
As we said more than thirty years ago, “[e]ven if the
taxes evaded were due and payable more than six years
before the return of the indictment, the indictment is timely
so long as it is returned within six years of an affirmative act
of evasion.” United States v. DeTar, 832 F.2d 1110, 1113
(9th Cir. 1987). 3 Indeed, it would be a “surprising assertion
that Congress intended the limitations period to begin to run
before [the defendants] committed the acts upon which the
crimes were based.” United States v. Habig, 390 U.S. 222,
224–25 (1968); see id. at 225–27 (holding that the statute of
limitations for § 7201 runs from the actual filing of the tax
return if filed after the filing deadline).
We thus conclude that the statute of limitations for
§ 7201 evasion of assessment offenses runs from the last act
necessary to complete the offense, the later of either: (1) a
tax deficiency, or (2) the last affirmative act of tax evasion.
In so ruling, we align evasion of assessment cases with
evasion of payment cases, see Carlson, 235 F.3d at 470(“[T]he six year limitations period in evasion of payment
cases runs from the last act of evasion[.]”), and join all the
other circuit courts that have addressed the issue. See, e.g.,
United States v. Ferris, 807 F.2d 269, 271 (1st Cir. 1986);
United States v. DiPetto, 936 F.2d 96, 98 (2d Cir. 1991) (per
curiam); United States v. Wilson, 118 F.3d 228, 236 (4th Cir.
3
We are mindful that the defendant in DeTar attempted to evade the
payment of taxes, 832 F.3d at 1113, while Orrock challenges his evasion
of assessment conviction. But, as we explain below, we see no reason to
impose separate limitations periods for evasion of payment and evasion
of assessment cases.
10 UNITED STATES V. ORROCK
1997); United States v. Irby, 703 F.3d 280, 283 (5th Cir.
2012) (per curiam); United States v. Dandy, 998 F.2d 1344,
1355–56 (6th Cir. 1993); United States v. Trownsell,
367 F.2d 815, 816 (7th Cir. 1966) (per curiam); United
States v. Perry, 714 F.3d 570, 573–74, 573 n.2 (8th Cir.
2013); United States v. Anderson, 319 F.3d 1218, 1218–19
(10th Cir. 2003); United States v. Winfield, 960 F.2d 970,
973–74 (11th Cir. 1992) (per curiam).
We accordingly see no bar to Orrock’s prosecution for
the evasion of assessment of taxes. Rather than charge
Orrock with the filing of the February 2009 personal tax
return that theoretically completed the § 7201 crime, the
government opted to charge him with his last affirmative act
of evasion—the filing of the May 2011 partnership tax
return. Such a prosecution was timely because the
indictment was filed within six years of that affirmative act.
B.
Admittedly, Orrock’s interpretation of the law seemingly
has some support from one of our prior unpublished cases.
In United States v. Galloway, a panel of our court construed
Carlson’s language about the statute of limitations running
from the “last act necessary to complete the offense” as
establishing the sole method for calculating the limitations
period for evasion of assessment cases. 802 F. App’x 247,
248–49, 249 n.2 (9th Cir. 2020) (unpublished). In other
words, the panel interpreted Carlson to exclude any other
later evasive acts from restarting the limitations period. But
put in context, Carlson was not meant to be construed in
such a cramped manner. Rather, we read Carlson to
establish the basic proposition that, at the earliest, the
limitations period begins once all the elements of § 7201 are
complete. This is clear for three reasons.
UNITED STATES V. ORROCK 11
First, Carlson did not deal with the situation we have
here—when a defendant committed another act of evasion
after all the elements of § 7201 were first met. Instead,
Carlson addressed a defendant’s assumption that the statute
of limitations began to run from his affirmative acts of
evasion, even though they were committed before the
existence of a tax deficiency. 235 F.3d at 468, 470. But, as
Carlson noted, § 7201 requires a tax deficiency and so no
crime is committed until the deficiency occurs—which is
“normally” April 15 following the tax year. Id. at 470. So
even though the defendant only committed affirmative acts
of evasion before tax returns were due, we held that the
statute of limitations didn’t begin to run until all the elements
of the offense were satisfied—April 15, in that case. Id. But
nothing in Carlson forbids a timely prosecution if the
indictment is filed within six years of the last affirmative act
of evasion so long as all other elements of the charge are met.
Rather, Carlson crafted its language to address the particular
facts and argument presented in that case and did not
preclude the rule we adopt today for later affirmative acts of
evasion.
Second, we later recognized in Carlson that the statute
of limitations may “run[] from the last act of evasion” for
evasion of payment cases. Id. We do not think that Carlson
intended to create separate rules for evasion of assessment
and evasion of payment cases, which Congress enacted by
the same statutory text and designed to punish the same,
“single crime of tax evasion.” Mal, 942 F.2d at 688. Thus,
no reason exists to “draw[] a distinction between evasion of
assessment and payment for the purposes of applying the
statute of limitations.” United States v. Hunerlach, 197 F.3d
1059, 1065 (11th Cir. 1999). We therefore read Carlson as
treating evasion of assessment and evasion of payment cases
the same for calculating the limitations period.
12 UNITED STATES V. ORROCK
Finally, Carlson cited approvingly to authorities that
recognize that the statute of limitations may run from the last
affirmative act of evasion for evasion of assessment cases.
When articulating the holding that the limitations period ran
from the “last act necessary to complete the offense,” we
cited United States v. Payne, 978 F.2d 1177, 1179 (10th Cir.
1992), DiPetto, 936 F.2d at 98, and United States v.
Williams, 928 F.2d 145, 149 (5th Cir. 1991). Carlson,
235 F.3d at 470. Payne and DiPetto expressly support our
holding today that a post-filing deadline, evasive act may
extend the limitations period. In Payne, the Tenth Circuit
recognized that the statute of limitations may begin with the
“last affirmative act of evasion” when the defendant has
already incurred a tax deficiency. 978 F.2d at 1179 n.2. In
DiPetto, the Second Circuit expressly held that a prosecution
is “timely if commenced within six years of the day of the
last act of evasion, whether it is the failure to file a return or
some other act in furtherance of the crime.” 936 F.2d at 98.
Finally, in Williams, the Fifth Circuit “express[ed] no
opinion relative to the effect of affirmative acts occurring
subsequent to the filing date.” 928 F.2d at 149. But, as
stated above, the Fifth Circuit later adopted the rule we
follow today—that an affirmative act after the filing deadline
may extend the statute of limitations. See Irby, 703 F.3d
at 283–84.
III.
In sum, evasion of assessment and evasion of payment
offenses are two ways to commit the same § 7201 offense.
And we hold that the last affirmative act of evasion rule
applies to both cases. Given the indictment was brought
within six years of Orrock’s last evasive act, we affirm his
conviction on the evasion of assessment charge.
AFFIRMED.