United States Court of Appeals
For the First Circuit
No. 07-1670
UNITED STATES,
Appellee,
v.
JOHN J. ANTHONY,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. D. Brock Hornby, U.S. District Judge]
Before
Lipez and Howard, Circuit Judges,
and DiClerico, Jr.,* Senior District Judge.
Robert E. Barnes, with whom The Bernhoft Law Firm, S.C. was
on brief, for appellant.
Margaret D. McGaughey, Appellate Chief, with whom Paula D.
Silsby, United States Attorney, was on brief, for appellee.
October 22, 2008
*
Of the District of New Hampshire, sitting by designation.
HOWARD, Circuit Judge. A jury convicted John Anthony of
four counts of evading federal income tax, in violation of 26
U.S.C. § 7201.1 He raises several challenges to his conviction and
his sentence. We affirm.
I. Facts
John J. Anthony had twenty-one years of service in the
United States Coast Guard. For many years he paid federal income
tax without incident. Beginning in 1998, however, that changed.
For the tax year 1998, Anthony and his spouse filed a joint return
on which zeros had been entered for income and tax owed. The
return also claimed a refund due of all tax withheld for that
year.2 Attached to the return was a three-page statement. The
Anthonys wrote that they did not believe they had a duty to pay
federal income tax or to file a return, but that they had filed the
return only because others had been -- wrongfully, in their eyes --
punished for failure to do so. The statement also explained the
basis for the Anthonys' belief that they did not have the duty to
pay federal income tax.
Anthony subsequently filed, with his employer and with
the Coast Guard, W-4 forms that claimed exemption from federal
1
Specifically, the indictment charged that Anthony "willfully
attempted to evade and defeat the assessment of the income tax due and
owing to him" in the years 1999, 2000, 2001 and 2002.
2
Matters relating to the 1998 return were not charged in the
indictment.
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income tax withholding on the basis that he would not be liable for
any federal income tax.3 The Anthonys also filed a zero return for
1999 and did not file returns at all for 2000, 2001 and 2002 until
2004, when they learned a criminal investigation had commenced.
During this time, Anthony met Wayne Rebuck, who worked
for a company called Commonwealth Trust Company selling trusts and
internationally based corporations.4 Anthony purchased trusts and
corporations from Rebuck, and with his help opened a bank account
for one of these entities at the Federal Bank of the Middle East in
Cyprus. Over time, Anthony transferred most of his assets into
these entities, including his primary residence and funds he
withdrew early from his IRA. In all, $870,778 was wired to the
bank in Cyprus.
In 2004, Anthony emailed Rebuck, informing him that the
Anthonys were going to "take a compliance position approach" due to
the criminal investigations. In November of that year, Anthony
began to file his overdue returns and to pay what he owed.
Throughout this course of events, Anthony continued to
represent to the IRS that he did not believe he had a duty to pay
taxes. He asserted a belief, relying on language from Supreme
Court opinions published many years ago, that wages were not
3
The record reflects that the Anthonys had $1,603 withheld in
1999, $0 in 2000, $71 in 2001, and $70 in 2002.
4
Pursuant to an agreement with the government, Rebuck testified
at Anthony's trial.
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taxable as income, since they represented an even exchange, rather
than a gain. He also believed, based on his analysis of the tax
code, that there was no statute levying a federal income tax on
individuals, except those individuals under exclusive federal
jurisdiction, which he took to mean those living in the District of
Columbia and in the territories of the United States.
Despite Anthony's "compliance position approach," and
despite his eventual payment of back taxes, he was indicted and
brought to trial in the District of Maine. A jury convicted
Anthony on all counts. He was sentenced to thirty-three months of
imprisonment, with a period of supervised release to follow. This
appeal from both the conviction and the sentence ensued.
II. Discussion
Anthony was vigorously defended at trial and zealously
represented on appeal. He marshals a host of challenges to both
his conviction and sentence. First, he challenges on three fronts
the willful blindness instruction given to the jury. Second,
Anthony claims that evidentiary errors prejudiced him. And third,
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he challenges his sentence.5 Unpersuaded by any of these claims,
we affirm.
A. Willful Blindness
"A willful blindness instruction informs jurors that they
may impose criminal liability on people who, recognizing the
likelihood of wrongdoing, nonetheless consciously refuse to take
basic investigatory steps." United States v. Griffin, 524 F.3d 71,
77 n.4 (1st Cir. 2008) (citation and internal quotation marks
omitted). "'A willful blindness instruction is appropriate if (1)
a defendant claims a lack of knowledge, (2) the facts suggest a
conscious course of deliberate ignorance, and (3) the instruction,
taken as a whole, cannot be misunderstood as mandating an inference
of knowledge.'" Id. at 78 (quoting United States v. Coviello, 225
F.3d 54, 70 (1st Cir. 2000)).
Anthony argues that the district court's willful
blindness instruction was erroneous for three reasons. First, he
claims that after United States v. Cheek, 498 U.S. 192 (1991), the
heightened knowledge requirement in tax cases renders this
5
We reject without further discussion Anthony's claim that the
district court compromised his defense by interrupting counsel during
closing argument. Our review of the record finds no impropriety, at
least on the part of the district court. We likewise find no merit
in the contention that the district court abused its discretion when
it refused to ask the venire particularized questions about jury
nullification of Anthony's good faith defense. This claim is based
on nothing more than the bare declaration of Anthony's counsel that
a "survey data report" -- known to counsel but never produced --
provided evidence that some in Maine might be reluctant to entertain
the defense.
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instruction all but forbidden in such cases. Second, he argues
that no such instruction should have been given because the facts
did not suggest a conscious course of deliberate ignorance, as the
government's evidence tended to show actual knowledge of the duty
rather than deliberate ignorance of it. And third, he attacks the
specific instruction given at his trial, claiming that it would
lead a jury to convict based on "reckless" ignorance rather than
deliberate ignorance. He is mistaken.
We have not definitively resolved what standard of review
we apply to the district court's decision to give a willful
blindness instruction. United States v. Lizardo, 445 F.3d 73, 85
(1st Cir. 2006) ("[O]ur precedent is unclear."); see also United
States v. Heredia, 483 F.3d 913, 921 n.11 (9th Cir. 2007) (en banc)
(discussing circuit split on standard of review). This question
need not detain us. As was true in Lizardo, "[o]ur outcome is the
same whether we apply a de novo or deferential standard of review,
so we do not decide this issue today." Lizardo, 445 F.3d at 85.
First, Anthony attacks the general propriety of willful
blindness instructions in the context of tax evasion. We have
recently upheld the use of a willful blindness instruction in a tax
case. Griffin, 524 F.3d at 78-79 (1st Cir. 2008). That
instruction concerned not whether the defendant was willfully blind
to a duty, but whether she was willfully blind to the falsity of
the statements on her tax returns. Nonetheless, the case is
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instructive. Griffin argued, inter alia, "that willful blindness
instructions are per se unconstitutional in cases involving a
specific intent crime." Id. at 79. We dismissed this argument as
"merit[ing] little discussion." Id. at 79 n.6.
In tax cases, "the standard for the statutory willfulness
requirement is the voluntary, intentional violation of a known
legal duty." Cheek, 498 U.S. at 201 (internal quotation marks and
citation omitted). The government must prove "that the law imposed
a duty on the defendant, that the defendant knew of this duty, and
that he voluntarily and intentionally violated that duty." Id. In
Cheek, the Court held that the district court had committed error
when it instructed the jury that Cheek's beliefs about the non-
taxability of his wages were objectively unreasonable. "[I]f Cheek
asserted that he truly believed that the Internal Revenue Code did
not purport to treat wages as income, and the jury believed him,
the Government would not have carried its burden to prove
willfulness, however unreasonable a court might deem such a
belief." Id. at 202.
The Court, however, was careful to note that the jury
would still have to find that Cheek held a "good-faith belief" that
he had no duty to pay taxes.6 Id. at 203. While such a belief
need not be objectively reasonable, it must be one that is held in
6
More accurately, to convict Cheek, it appears that the jury would
have had to find beyond a reasonable doubt that Cheek did not have a
good-faith belief that he had no duty.
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good faith. Thus, the defense that the accused did not know of his
duty fails if he came by his ignorance through deliberate avoidance
of materials that would have apprised him of his duty, as such
avoidance undermines the claim of good faith. Other circuits share
our conclusion that Cheek does not foreclose the use of a willful
blindness instruction in tax-avoidance cases in general. See
United States v. Dean, 487 F.3d 840, 851 (11th Cir. 2007) (per
curiam) (willful blindness appropriate in post-Cheek tax evasion
case); United States v. Bussey, 942 F.2d 1241, 1249 (8th Cir. 1991)
(same); United States v. Bissel, 954 F. Supp. 903, 927 (D.N.J.
1997) ("[D]eliberate ignorance is a subjective state of mind that
may satisfy the element of willfulness." (internal quotation marks
and citation omitted)). Accordingly, because deliberate ignorance
of a duty to pay taxes is contrary to a good-faith belief, the
willful blindness instruction may be given in appropriate tax
evasion cases.
Anthony also claims the willful blindness instruction was
unwarranted in his particular case because the government did not
introduce evidence that would support a finding that he was
willfully blind to his duty. We have said that "[a]s long as
separate and distinct evidence supports a defendant's deliberate
avoidance of knowledge and the possibility exists that the jury
does not credit the evidence of direct knowledge, a willful
blindness instruction may be appropriate." United States v. Bilis,
-8-
170 F.3d 88, 93 (1st Cir. 1999) (quoting United States v. Brandon,
17 F.3d 409, 452 n.74 (1st Cir. 1994)). Anthony asserts on appeal
that there was no "separate and distinct" evidence that supported
the claim he had willfully blinded himself to his duty to pay his
taxes. We do not agree.7
The government attempted to prove that Anthony actually
knew of his duty to pay taxes. It pointed to his previous payment
of taxes, his use of elaborate financial entities to conceal his
assets, his refusal to use other channels to challenge the IRS's
demands for payment, and his eventual payment when he learned of an
impending criminal investigation. Separate and distinct from this
body of evidence, there was evidence of his willful blindness.
Anthony testified that he based his view of his tax obligations on
old Supreme Court cases and old versions of the tax code. On
cross-examination, however, Anthony admitted he had not read more
recent cases (including Cheek) that address the subject, nor had he
consulted the current version of the tax code and regulations.
Based on this, the jury could reasonably infer that, even if
Anthony's claim that he did not know of his duty was credible, his
7
Anthony takes too narrow a view of the "separate and distinct"
requirement, as there is always some overlap between the evidence that
a defendant knew a fact and the evidence that, if he did not know it,
he ought to have known it. See Bilis, 170 F.3d at 93 (finding no
error in willful blindness instruction because prevalence of drug
dealing at bar supported both claim that proprietor knew of the drug-
dealing and claim that if he did not know it was because he "purposely
contrived to avoid learning all of the facts"); see also Coviello, 225
F.3d at 70-71.
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lack of knowledge depended on his deliberate refusal to extend his
research to more current, authoritative sources. In other words,
if Anthony did not know that the current law was that he had to pay
taxes, it was because he had willfully blinded himself to that
fact.
Finally, Anthony argues that even if an instruction were
warranted in his case, the instruction as given was fatally flawed.
He is mistaken.
Anthony claims that a willful blindness instruction must
contain an actual belief caveat. "An actual belief caveat informs
the jury that a showing of mistake, negligence, carelessness, or
recklessness could not support a finding of willfulness and that,
although knowledge may be inferred from willful blindness to the
existence of a fact, the jury must find the defendant had actual
knowledge." Griffin, 524 F.3d at 79 (internal quotation marks and
citation omitted). Anthony does not cite to any authority within
this circuit to support his contention that an actual belief caveat
must be given. See id. at 80 ("We have never required that willful
blindness instructions contain such a statement."). Instead, we
examine the jury instructions as whole to determine error. Id.
(citing United States v. Bailey, 405 F.3d 102, 110 (1st Cir.
2005)).
The district court instructed the jury as follows: "You
may not find that John Anthony acted willfully if you find that he
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actually believed that he had no duty . . . ." Similarly, although
the district court did not specifically mention recklessness, it
did say, "Mere negligence or mistake . . . is not sufficient." See
Bilis, 170 F.3d at 92 (finding no error in an instruction that
omitted the word "recklessness"). The risk of the jury
instructions as a whole being materially misunderstood was minimal
and offers Anthony no basis for relief.
B. Evidentiary errors
Anthony argues that the district court abused its
discretion when it refused to admit into evidence legal materials
on which Anthony claimed to have relied in forming his good-faith
belief that he did not have a duty to pay taxes. Relying on Fed.
R. Evid. 403, the district court excluded the materials because the
risk of confusion substantially outweighed the probative value of
the evidence. "We accord district courts considerable latitude in
this exercise and review the exclusion of evidence under Rule 403
for abuse of discretion." Galarneau v. Merrill Lynch, Pierce,
Fenner & Smith Inc., 504 F.3d 189, 206 (1st Cir. 2007) (internal
quotation marks and citation omitted). In this case, the probative
value of the evidence was slight and the risk of confusion was
great.
Anthony was permitted to read from and summarize the
disputed materials when he testified in order to explain what his
good-faith belief was, as well as how he had come to that belief.
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We have noted that "testimony by the defendant as to what he was
told the decisions held" bears less of a risk of confusing the jury
on the law, and is in any event more probative of the subjective
belief of the defendant. United States v. Bonneau, 970 F.2d 929,
933 (1st Cir. 1992). And so it is here. The probative value of
the documents themselves was limited because Anthony's testimony
listing, summarizing and reading from these documents was more
probative of his beliefs. As the district court pointed out in
excluding the materials, Anthony was permitted to read extensively,
and no challenge was raised that the materials were not as Anthony
had read them. There was thus no reason to admit the materials to
supplement or corroborate Anthony's testimony.
At the same time, the risk of confusion in admitting
legal materials as evidence is high. We have noted that "courts
often exclude from evidence copies of statutes, constitutional
provisions, and decisions, which might invite the jury to
substitute its own view of the law." 970 F.2d at 932. "'In the
orderly trial of a case, the law is given to the jury by the court
and not introduced as evidence.'" Getty Petroleum Mktg., Inc. v.
Capital Terminal Co., 391 F.3d 312, 332 n.26 (1st Cir. 2004) (per
curiam) (Lipez, J., concurring) (quoting United States v.
Bernhardt, 642 F.2d 251, 253 (8th Cir. 1981)). This is because "it
would be most confusing to the jury to have legal material
introduced as evidence." Id. That is all the more true in this
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case. First, many of the materials were old or outdated. But more
importantly, Anthony, by his own account, had relied on them in
forming a good-faith belief at odds with the law as given by the
district court. Anthony claims that his careful study of these
materials over a period of years was the basis for his belief that
the law was otherwise than the district court was instructing the
jury in this case. The risk of confusion in providing them to the
jury is virtually undeniable.
"The District Court retains considerable latitude even
with admittedly relevant evidence in rejecting that which is
cumulative, and in requiring that which is to be brought to the
jury's attention to be done so in a manner least likely to confuse
that body." Hamling v. United States, 418 U.S. 87, 127 (1974).
Here, the district court did not abuse its discretion when it ruled
that the slight probative value of these materials was
substantially outweighed by the confusion inherent in giving the
jury voluminous legal materials. See United States v. Sampson, 486
F.3d 13, 45 (1st Cir. 2007) ("Having supportably found that the
evidence was of limited probative value and that its introduction
would create a high risk of juror confusion, the district court had
ample reason to exclude it.").
Nor was there an abuse of discretion, contrary to
Anthony's contention, in the admission of evidence of payment
evasion in this assessment evasion case. The false W-4s and "zero
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returns" may be used as evidence of either evasion of assessment or
evasion of payment, or both. United States v. Waldeck, 909 F.2d
555, 560 (1st Cir. 1990). Finally, evidence that Anthony was
shielding assets was probative of Anthony's knowledge of his duty
to pay the tax and was well within the district court's discretion
to admit for that purpose.
C. Sentencing Errors
Anthony raises four challenges to his sentence. None are
availing. We shall examine each briefly. In general, we review
the district court's construction of the Sentencing Guidelines de
novo, and the application of those Guidelines to the facts for
clear error. United States v. Stoupis, 530 F.3d 82, 84 (1st Cir.
2008). We review the sentence as a whole for reasonableness,
affording the district court broad discretion. United States v.
Ofray-Campos, 534 F.3d 1, 42 (1st Cir. 2008). "Assuming a
plausible explanation and a defensible overall result, sentencing
is the responsibility of the district court." Id. (quoting United
States v. Jimenez-Beltre, 440 F.3d 514, 519 (1st Cir. 2006) (en
banc)).
Anthony's first argument centers around the testimony of
a character witness, his pastor, who framed his comments as a plea
for mercy. Responding to this, in imposing sentence the district
court said that "there is not a basis for a federal judge to use
mercy." Anthony argues this is clear error, and that had the
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district court properly understood its discretion to indulge in
mercy, it would likely have imposed a lower sentence. The
sentencing proceedings as a whole -- rather than this one statement
wrenched from context -- reveal that the district court was aware
of its discretion. The court did not mean the statement to
indicate a literal constraint, but rather as a response to those
who sought mercy for mercy's sake alone. Indeed, the district
court said in the next breath, "A federal judge is here to try to
impose a fair punishment." There was no error.
Second, Anthony argues, without citation, that the
district court erred in calculating the tax loss for Guidelines
calculation purposes. The district court ruled that the "penalty"
for early withdrawal of funds from an IRA is a tax, and as such
should be considered part of the total tax loss. The district
court explicitly grounded this ruling on the language of the
Guidelines; the IRS's practice of calling this payment a "penalty"
in some of its publications is not dispositive. In any case, the
statute itself calls this amount an "additional tax." 26 U.S.C. §
72(t). For the purposes of our review, that ends the matter.
Anthony next argues that the district court erred when it
applied a two-level enhancement for use of sophisticated means.
See U.S.S.G. §2T1.1. This enhancement was not improper. "Conduct
such as hiding assets or transactions, or both, through the use of
fictitious entities, corporate shells, or offshore financial bank
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accounts ordinarily indicates sophisticated means." Id.,
application note 4. As the district court noted at sentencing,
trial evidence led to an inference that Anthony did exactly that.
There was no error.
Finally, Anthony argues that his within-Guidelines
sentence was unreasonable. He cites statistics that purport to
show that his sentence is longer than others convicted of similar
crimes.8 He also argues that he presents a very low risk of
recidivism, but that argument misses the point of the sentence. In
considering and ultimately rejecting Anthony's request for
imposition of a non-Guidelines sentence, the district court read
from the Introductory Commentary to the relevant Guidelines
section. This commentary emphasizes general deterrence and the
importance of cultivating respect for our tax system. The district
court also went through the sentencing factors enumerated in 18
U.S.C. § 3553(a), and supportably explained the sentence in this
case. We do not require more. Jimenez-Beltre, 440 F.3d at 519-20.
III. Conclusion
The conviction and sentence are affirmed.
8
Anthony claims that the other sentences are short because tax
offenders generally repay what they owe, suffer disproportionately to
the loss they cause, and are easy to rehabilitate. But he cites no
authority for these propositions.
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