United States Court of Appeals
For the First Circuit
No. 09-1237
UNITED STATES OF AMERICA,
Appellee,
v.
SHIRLEY ST. PIERRE,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. D. Brock Hornby, U.S. District Judge]
Before
Boudin, Stahl and Lipez,
Circuit Judges.
Bruce M. Merrill with whom Bruce M. Merrill, P.A. was on brief
for appellant.
Margaret D. McGaughey, Appellate Chief, with whom Paula D.
Silsby, United States Attorney, was on brief for appellee.
March 17, 2010
BOUDIN, Circuit Judge. The Staab Agency ("Staab") acts
as an agent for out-of-state trucking companies seeking to register
trailers in Maine. Shirley St. Pierre, the appellant in this case,
owned all of Staab after purchasing it from its previous owner in
1991. Under her guidance, the company prospered, growing from
approximately four employees and 4,000 customers in 1991 to 17
employees and 37,500 customers in 2002. As the sole owner, St.
Pierre regularly used company income to pay personal bills and for
other personal purposes--not objectionable so long as she reported
the income on pertinent tax returns.
The IRS randomly audited Staab's fiscal year 2000 returns
in March 2002; the audit gave rise to suspicions and was later
expanded to include other returns by Staab and St. Pierre herself.
Because Staab is a Subchapter S corporation, its income is not
taxed to Staab but is attributed to St. Pierre, who must pay taxes
on it herself. 26 U.S.C. § 1366(a)(1) (2006). In June 2007, St.
Pierre was indicted on three counts of tax evasion, 26 U.S.C. §
7201, and one count of obstructing administration of the internal
revenue laws for falsifying documents in an attempt to conceal her
prior acts, 26 U.S.C. § 7212(a).
At trial, St. Pierre's underpayment of her personal taxes
was undisputed; the central issue was whether St. Pierre had the
requisite state of mind for the various offenses. The government
relied primarily on testimony from the accountants and lawyer who
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had prepared Staab's and St. Pierre's tax returns and represented
her at the audit, and the IRS agents who investigated Staab. One
of the accountants, for example, testified that St. Pierre had been
told to deposit company income into Staab's corporate bank account,
as such deposits would enable the accountants to track Staab income
that had to be reported on Staab's corporate and St. Pierre's
personal income tax returns. Just when and to what extent St.
Pierre understood her obligations and the tax consequences were
disputed at trial.
The government showed that St. Pierre had regularly used
payments, owed to Staab for trailer registration work, for her
personal expenses and without depositing them in Staab's account or
otherwise disclosing them to her accountants. The government
pointed to diversion of such funds to 10 different St. Pierre
accounts and the depositing or diversion of over 3,000 company
checks without recording them as company income or paying personal
taxes upon them. Records indicated unreported income of $1,248,327
for the three-year period; the taxes avoided by the failure to
report this income amounted to over $500,000, apart from interest.
The complexities of the tax code have led the Supreme
Court to require for tax evasion a consciousness of wrongdoing.
Cheek v. United States, 498 U.S. 192, 201 (1991) ("voluntary,
intentional violation of a known legal duty"). St. Pierre conceded
that she had under-reported income but urged that she lacked the
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requisite state of mind, arguing that she was financially
unsophisticated and had relied on her accountants to capture
income; as for the allegedly doctored documents, she said she had
merely followed instructions from her lawyer. St. Pierre also told
the jury about her background, which included early hardship, and
her hard work with much personal stress.
The government countered with evidence that St. Pierre's
accountants had explained to her--in connection with past failures
that she had claimed to be inadvertent--the obligation to report
company income on Staab's books. The government also emphasized
the undisclosed bank accounts into which Staab funds were directed
and evidence that she had doctored documents given to the IRS to
conceal her wrongdoing when the scheme began to unravel. Although
St. Pierre blamed her lawyer for the doctored documents, he
testified in rebuttal and flatly denied her charges.
The jury found St. Pierre not guilty of tax evasion for
fiscal years 2000 and 2001 but guilty on the evasion charge for
fiscal year 2002 and the obstruction charge based on her doctoring
of documents.1 A post-trial motion was denied and she was
sentenced to 27 months, to be served concurrently, on the evasion
1
Although the unpaid taxes for 2000 and 2001 were also
substantial, the government suggests that the jury may have given
St. Pierre the benefit of the doubt as to her understanding of her
obligations prior to 2002. By the time she signed her 2002 return,
a tax audit was underway and St. Pierre had told IRS auditors that
she understood her obligation to report company income.
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and obstruction counts. St. Pierre now appeals. She does not
argue that the evidence was insufficient to support her conviction;
rather, her appeal seeks to contest two different rulings relating
to the admissibility of evidence.
St. Pierre's first argument concerns her attempt to
introduce expert testimony as to the standard of care owed to St.
Pierre by her accountants, specifically, that her accountants erred
in failing to ask her about company income not deposited in company
accounts. The purpose was to show that she reasonably relied on
her accountants to capture all of her income for her tax returns.
The government objected, arguing that even if her accountants were
careless, such evidence was irrelevant to whether St. Pierre knew
she was understating her income on her returns.
The court sustained the government's objection. It
invoked Rule 403 of the Federal Rules of Evidence, which allows the
exclusion of evidence whose probative value is substantially
outweighed by competing considerations (e.g., capacity to mislead
or prejudice the jury). At different points the court said that
"[t]he question here is her knowledge and intent, not that of [her
accountant]"; it noted the absence of evidence that St. Pierre was
aware of the standards governing accountant practice; and it said
that the result would be revisited if her testimony showed that she
knew about the standards and relied on them.
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St. Pierre asserts that the lower court's exclusion of
this evidence violated her Sixth Amendment right to present a
defense and misapplied the rules of evidence. The constitutional
right to present a defense under the Sixth Amendment is subject to
reasonable regulation, United States v. Scheffer, 523 U.S. 303, 308
(1998); Taylor v. Illinois, 484 U.S. 400, 410 (1988), and a judge
ordinarily has wide latitude in administering Rule 403. United
States v. Kepreos, 759 F.2d 961, 964 (1st Cir.), cert. denied, 474
U.S. 901 (1985). How far the constitutional overlap might alter
our standard of review does not matter in this case because even de
novo review would not change the outcome.
At first blush, one might think that whether St. Pierre's
accountants exercised due care was flatly irrelevant to any issue
properly in the case. Mere failure of the accountants to detect
her under-reporting or to give St. Pierre better directions, even
if negligent, would not be a defense to a knowing effort by St.
Pierre to evade taxes or willfully create false documents.2 The
jury was told what elements were required to prove tax evasion and
obstruction, and the evidence amply permitted the jury to find that
St. Pierre had the requisite consciousness of wrongdoing.
2
See United States v. Chesson, 933 F.2d 298, 305 (5th Cir.
1991)("[W]here a defendant attributes underpayment of taxes to his
accountant's failure to discover and rectify improper expenses, the
question of willfulness is not removed from jury consideration.");
accord United States v. Olbres, 61 F.3d 967, 970-71 (1st Cir.
1995).
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The trial judge was probably wise to invoke Rule 403,
thereby assuming arguendo some possible relevance of the proffered
evidence, however minimal or doubtful. Cases can be imagined where
an accountant's neglect could bear on the likelihood that a
taxpayer's under-reporting was due to honest reliance rather than
deliberate dishonesty. And, although not at all a straightforward
inference in this case, in some situations the professional
standards governing accountants might in turn have some bearing on
whether there was such neglect.
However, the scheme as charged and proved in this case
was not hospitable to such reasoning. The government's evidence
allowed the jury to find that St. Pierre, in diverting company
income to personal ends but not reporting it as income to the
company or herself, had acted against warnings; that St. Pierre had
used multiple personal accounts not disclosed to accountants; that
the scale of diversion was huge; that the accountants were unaware
of most of what was occurring; and that St. Pierre herself engaged
in creating false documents to cover her tracks.
By contrast, St. Pierre's proposed accounting standards
evidence, by shifting the focus to whether the accountants were
doing a good job, did have a potential to confuse and mislead a
jury--precisely because her accountants' failure to prevent the
fraud would not be a defense. To the extent that St. Pierre relied
on what she said her accountants or lawyer or bankers told her, she
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was permitted to offer such evidence. Her own beliefs about what
they were responsible for doing might also be pertinent to her
state of mind. Evidence of accounting standards, unknown to St.
Pierre, had at best little tendency to negate the damning
inferences against her, and Rule 403 was properly applied.
St. Pierre's second argument is that the court unduly
limited her cross-examination of the government witnesses against
her. Like the right to present a defense, the right to confront
witnesses is qualified; the trial judge "retain[s] wide latitude .
. . to impose reasonable limits on such cross-examination based on
concerns about, among other things, harassment, prejudice,
confusion of the issues, the witness' safety, or interrogation that
is repetitive or only marginally relevant." Delaware v. Van
Arsdall, 475 U.S. 673, 679 (1986).
In reviewing limits on the scope of cross-examination, we
ask de novo whether the defendant was given "sufficient leeway to
establish a reasonably complete picture of the witness' veracity,
bias, and motivation," United States v. González-Vázquez, 219 F.3d
37, 45 (1st Cir. 2000) (quoting United States v. Laboy-Delgado, 84
F.3d 22, 28 (1st Cir. 1996)); but as to individual rulings by the
trial court, scrutiny is tempered by deference and reviewed for
abuse of discretion, id.; see also United States v. Ofray-Campos,
534 F.3d 1, 36-37 (1st Cir. 2008).
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St. Pierre first says that she was unduly limited in
cross-examining the IRS agent, Roland St. Louis, who had conducted
the initial investigation of the Staab and St. Pierre returns. St.
Louis testified as to the conduct of his investigation, to his
interactions with St. Pierre and John Hallee (her accounting
representative during part of the investigation), and to what he
discovered in the audit. St. Pierre objects that she was limited
by the trial judge in exploring possible hostility between St.
Louis and Hallee by showing, importantly, the former's concern that
the latter had been delaying the investigation.
St. Louis had in his direct testimony portrayed the
relationship as friendly, albeit with some friction, and St. Pierre
describes her excluded evidence as aiming to show prejudice by St.
Louis, although the inference St. Pierre proffered to the district
judge was perhaps slightly different than prejudice.3 Arguably,
the evidence might have been independently relevant to impeach by
contradiction if there were a real conflict. But the proposed
cross examination had little punch to suggest either prejudice or
3
St. Louis testified that while he had told his manager "there
ha[d] been unreasonable delays on Mr. Hallee's part" in responding
to the audit, he had refused to sign a letter formally accusing
Hallee of the same. St. Pierre, claiming that this left the jury
with the mistaken belief that St. Louis felt positively toward
Hallee, wanted to cross-examine St. Louis regarding evidence that
St. Louis, when asked by IRS personnel for names of tax preparers
that they might investigate for misconduct, had recommended
Hallee's firm to them as a possible target.
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contradiction, and exclusion can easily be sustained under Rule 403
as a waste of time.
St. Pierre's underlying aim in seeking to develop the
excluded evidence may be its tendency to show that St. Louis
himself had a negative view of Hallee's competence. Despite the
exclusion of expert evidence on accounting standards, St. Pierre's
main defense at trial rested in part on the notion, developed by
her trial counsel, that her accountants had not done an adequate
job. For the reasons already set forth, St. Louis' views or
conduct bearing on this issue were no more admissible than
testimony about accounting standards.
Relatedly, St. Pierre objects to a ruling limiting her
cross examination of her former lawyer, Sumner Lipman, who had
represented her at the start of the IRS audit. In her own case,
St. Pierre had blamed him for urging her to supply false documents
to the IRS, a charge he flatly denied in the government's rebuttal
case. On cross examination, St. Pierre sought to examine Lipman as
to his failure to tell her that he had at one time represented St.
Louis and his wife in a personal injury case. The judge said that
this had "very little probative impact" and would divert the jury.
St. Pierre suggests that Lipman's failure to disclose
comprised an ethical violation, but this is far from self-evident
or even a promising theory, nor is it at all clear why it would be
relevant to Lipman's credibility or trustworthiness as a witness.
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As it happens, the jury was told by the government that Lipman and
St. Louis had a relationship prior to the audit. And certainly
Lipman's motive for denying that he had encouraged a client to
fabricate evidence was obvious without regard to any prior
connection with an IRS agent.
Finally, in a single paragraph, St. Pierre says that she
was precluded from asking the accountants who testified "as to what
inquiries they had made of [her] in preparing the corporate tax
returns." No specific testimony is discussed and this appears to
be a reiteration, under a Confrontation Clause heading, of her
effort to offer evidence of professional standards. The
accountants in fact testified, and they were cross-examined at
length about their interactions with St. Pierre and about their own
practices.
St. Pierre's brief concludes with a claim that the
district court abused its discretion in refusing to grant her
motion for a new trial. The district judge enjoys discretion in
this matter but that is beside the point: no separate arguments are
made by St. Pierre under this heading, which is essentially a cross
reference back to claims of error already addressed and found
wanting.
Affirmed.
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