In the
United States Court of Appeals
For the Seventh Circuit
No. 11‐1837
UNITED STATES OF AMERICA,
Plaintiff‐Appellee,
v.
JAMES A. SIMON,
Defendant‐Appellant.
Appeal from the United States District Court for the
Northern District of Indiana, South Bend Division.
No. 10 CR 56 — Robert L. Miller, Jr., Judge.
ARGUED FEBRUARY 10, 2012 — DECIDED AUGUST 15, 2013
Before RIPPLE and ROVNER, Circuit Judges, and COLEMAN,
District Judge.*
ROVNER, Circuit Judge. A jury convicted James A. Simon of
filing false income tax returns, failing to file reports of foreign
bank accounts, mail fraud and financial aid fraud. He chal‐
*
The Honorable Sharon Johnson Coleman, of the United States District
Court for the Northern District of Illinois, sitting by designation.
2 No. 11‐1837
lenges the legal basis for his convictions on failing to file
reports of foreign bank accounts and also contests the district
court’s decision to limit the evidence he could present in his
defense on the false income tax return counts. He also contends
that the court erred in its rulings on jury instructions, and he
maintains that a reversal on some counts necessarily requires
reversal on other counts. We affirm.
I.
James Simon is a Certified Public Accountant, a professor
of accounting, and an entrepreneur whose business dealings
require a flowchart to unravel. At the center of Simon’s
financial life was JAS Partners, a Colorado limited partnership.
Simon and his wife Denise1 each owned one percent of JAS
Partners. The Simon Family Trust (hereafter “the Trust”),
based in the Cook Islands, owned the other ninety‐eight
percent. The Trust existed for the benefit of Simon, his wife
and their children; the trustees were a Cook Islands corpora‐
tion and a retired attorney. Simon’s sisters, Sherri Johnson and
Sandra Simon, each owned forty‐three percent of Elekta Ltd, a
Gibralter company for which Simon served as the managing
director. The Simon sisters are retired teachers who entrusted
the entirety of the business to their brother. Elekta owned
nineteen percent of JS Elekta, a Cyprus corporation, also
managed by Simon. JS Elekta, in turn, owned seventy‐five
percent of Ichua Company, a Cyprus corporation also man‐
aged by Simon. Ichua owned 100% of Intellecom, a Ukrainian
1
Denise committed suicide several days after federal agents executed a
search warrant at the Simon family home.
No. 11‐1837 3
telecommunications business entity.2 Simon thus was the
managing director of three foreign companies, Elekta, JS Elekta
and Ichua. In his capacity as managing director, he held
signature authority over foreign bank accounts for each of
these companies.
For tax years 2003 through 2006, the Simon family received
approximately $1.8 million from JAS Partners, Elekta, JS Elekta,
Ichua and William R. Simon Farms, Inc., most of this recorded
as loans in Simon’s personal financial records. Simon and his
family spent approximately $1.7 million during this same
period of time. Yet Simon paid just $328 in income taxes for
2005, and claimed refunds for the other three years, at the same
time pleading poverty to financial aid programs in order to
gain need‐based scholarships for his children at private
schools. The government charged Simon with four counts of
filing false tax returns, in violation of 26 U.S.C. § 7206(1) and 18
U.S.C. § 2; four counts of failing to file reports related to
foreign bank accounts, in violation of 31 U.S.C. §§ 5314, 5322
and 18 U.S.C. § 2; eleven counts of mail fraud, in violation of 18
U.S.C. §§ 1341 and 2; and four counts of financial aid fraud, in
violation of 20 U.S.C. § 1097 and 18 U.S.C. § 2. In his defense,
Simon sought to demonstrate that the money he received from
various entities was loaned to him and thus was not taxable.
Alternately, he characterized the money he received as
partnership distributions that were not taxable because they
did not exceed his basis in the partnership. At worst, he
2
Persons unrelated to the case owned the other fourteen percent of Elekta,
the remaining eighty‐one percent of JS Elekta and the other twenty‐five
percent of Ichua.
4 No. 11‐1837
explained, he mischaracterized some of the transactions, but
not in a manner that violated any criminal law. As for any
failure to file reports regarding his signature authority over
foreign bank accounts, Simon contended that the IRS did not
require him to file these reports by the dates alleged by the
government, that the IRS had extended the filing deadlines for
the tax years in question past the date of his indictment, and
that he filed the reports within the extended time period. The
other counts, he contended, were largely dependent on the
false income tax counts, and he therefore maintained that a
failure to prove the income tax counts necessarily required
reversal of the other counts.
In ruling on pre‐trial motions, the district court rejected
Simon’s claim regarding the extended deadlines for filing
reports of foreign bank accounts as a matter of law. The court
concluded that the relief the IRS granted from civil liability for
certain failures to report foreign bank accounts could not
relieve Simon of criminal liability for offenses completed
before the IRS granted the civil relief. The court also found that
evidence related to the funding of some of Simon’s business
entities would be excluded except to the extent that Simon
himself provided that funding. A jury subsequently found
Simon guilty of four counts of filing false tax returns; guilty of
three counts (one count was dismissed) of failing to file reports
related to foreign bank accounts; guilty of eight counts (and
not guilty of three counts) of mail fraud; and guilty of four
counts of financial aid fraud. Simon appeals.
No. 11‐1837 5
II.
On appeal, Simon first contends that his convictions for
failing to file reports of foreign bank accounts must be reversed
because he filed the required documents within the time
allotted by extensions granted by the IRS. He characterizes the
issue as one of conflicting interpretations of the law by the
Treasury Department and the Justice Department. He main‐
tains that the courts should defer to the agency entrusted with
implementing the statute at issue, in this case the Treasury
Department, and that deferring to Treasury would require
reversal of those counts. Second, Simon argues that evidentiary
errors and jury instruction errors require reversal of his
convictions for filing false tax returns. He complains that the
court’s rulings in limine prevented him from presenting a valid
defense to the charges when he was not allowed to present
certain evidence of his basis in JAS Partners. He also challenges
the government’s second theory underlying the false tax return
counts: that the returns were false because Simon failed to
check the “yes” box on Schedule B of his return in response to
a question regarding whether he had signature authority over
foreign bank accounts. If the conviction on the foreign bank
reporting counts must be reversed, then the conviction on the
false returns must also be reversed, he argues, because it was
no more necessary to check the “yes” box revealing his
signature authority over foreign accounts than it was to file
reports for those accounts. Third, he maintains that the
evidentiary errors he asserted on the false return counts led to
an error in the jury instructions. Finally, Simon contends that
if the false tax return counts are reversed, then he is also
entitled to a new trial on the mail fraud and student loan fraud
6 No. 11‐1837
counts, because these convictions were dependent on the
validity of the false tax return convictions.
A.
The Bank Secrecy Act of 1970, 31 U.S.C. § 5311, et seq. (the
“Act”), requires “certain reports or records where they have a
high degree of usefulness in criminal, tax, or regulatory
investigations or proceedings, or in the conduct of intelligence
or counterintelligence activities, including analysis, to protect
against international terrorism.” 31 U.S.C. § 5311. Section 5314
of the Act provides that the Secretary of the Treasury (“Secre‐
tary”) “shall require … a person in, and doing business in, the
United States, to keep records, file reports, or keep records and
file reports, when the … person makes a transaction or
maintains a relation for any person with a foreign financial
agency.” Although the Act specifies the information that must
be collected, it provides to the Secretary the discretion to
prescribe the classification of persons subject to the law and
regulations, the foreign countries to which record requirements
may be applied, the magnitude and types of the transactions
subject to record and reporting requirements, and the manner
in which the information should be kept, among other things.
See 31 U.S.C. § 5311(a)‐(b). The persons required by the Act and
its accompanying regulations to keep the designated records
also must disclose them “as required by law.” 31 U.S.C.
§ 5314(c). Willful violations of the disclosure requirements
carry criminal and civil penalties. See 31 U.S.C. § 5322.
In each year from 2005 through 2007, Simon had signature
authority over foreign bank accounts. Regulations in place at
that time provided that Simon was required to file with the
No. 11‐1837 7
Commissioner of Internal Revenue (hereafter “IRS”) a Form
TDF 90‐22.1, “Report of Foreign Bank and Financial Accounts,”
also known as an “FBAR.” See 31 C.F.R. § 103.24(a).3 The
deadline for filing FBARs was “June 30 of each calendar year
with respect to foreign financial accounts exceeding $10,000
maintained during the previous calendar year.” 31 C.F.R.
§ 103.27(c).4
Simon concedes that he did not file the required FBARs for
each calendar year from 2005 through 2007 by June 30 of the
next year in each instance.5 He nonetheless contends that he
did not violate the law because the IRS issued guidance in 2009
and 2010 that granted retroactive extensions for filing FBARs
for the 2008 and earlier calendar years. The initial guidance,
which we discuss below, was published in the form of fre‐
quently asked questions and answers, and this document
purported to extend the deadline for filing FBARs to Septem‐
ber 29, 2009. An IRS notice then extended the FBAR filing date
to June 30, 2010, and a second IRS notice later extended the
deadline even further to June 30, 2011. See IRS Notice 2009‐62,
2009‐35 I.R.B. 260, 2009 WL 2414299 (hereafter “Notice 2009‐
3
In 2010, several regulations relevant to Simon’s prosecution were
superceded by new regulations. For example, in this instance, 31 C.F.R.
§ 103.24 was replaced by 31 C.F.R. § 1010.350. Nevertheless, section 103.24
was in effect at all times relevant to this appeal.
4
This regulation was superseded in 2010 by 31 C.F.R. § 1010.306(c).
5
The court dismissed Count 5 of the indictment, for failure to file an FBAR
for foreign accounts in 2004, prior to trial. Simon was convicted on the three
remaining counts for 2005, 2006 and 2007.
8 No. 11‐1837
62ʺ); IRS Notice 2010‐23, 2010‐11 I.R.B. 441, 2010 WL 672300
(hereafter “Notice 2010‐23ʺ). By then, Simon asserts, he had
filed the required FBARs and thus could not, as a matter of
law, face prosecution for his failure to meet the original
deadlines. Indeed, he filed the FBARs prior to his indictment
and within the extended deadlines set forth in Notices 2009‐62
and 2010‐23 (collectively the “Notices”). The government
counters that Simon’s crimes were complete before the IRS
issued the Notices, and that the Notices cannot serve to absolve
a person of his then‐existing criminal liability for completed
acts. The government also contends that amendment of a
regulation does not relieve criminal liability for conduct
occurring prior to the amendment, even when the amendment
purports to have retroactive application. Moreover, the
government maintains that the Notices specified only that the
IRS would not impose civil penalties for persons whose failure
to comply was not willful, but that nothing in the Notices
evidenced an intention to relieve from criminal liability
taxpayers who willfully failed to file their FBARs. Finally, the
Notices did not apply to taxpayers like Simon, the government
contends, who had not reported all of their taxable income, had
not paid all of their taxes, and instead willfully violated the
FBAR provisions.
We turn to the language of the Notices themselves as well
as earlier guidance that the IRS published on FBAR issues. In
March 2009, the IRS initiated the “2009 Offshore Voluntary
Disclosure Program,” intended to “get those taxpayers hiding
No. 11‐1837 9
assets offshore b a c k into the s y s t e m . ” 6 See
http://www.irs.gov/uac/Statement‐from‐IRS‐Commission
er‐Doug‐Shulman‐on‐Offshore‐Income (last visited July 12,
2013). On May 6, 2009, the IRS posted on its website a series of
Frequently Asked Questions (“FAQs”) explaining the program
to taxpayers in plain language. Several of the FAQs addressed
FBAR issues, and one purported to extend the FBAR filing
deadline:
Q9. I have properly reported all my taxable income
but I only recently learned that I should have been
filing FBARs in prior years to report my personal
foreign bank account or to report the fact that I have
signature authority over bank accounts owned by
my employer. May I come forward under the volun‐
tary disclosure practice to correct this?
A9. The purpose for the voluntary disclosure prac‐
tice is to provide a way for taxpayers who did not
report taxable income in the past to voluntarily
come forward and resolve their tax matters. Thus, If
[sic] you reported and paid tax on all taxable income
but did not file FBARs, do not use the voluntary
disclosure process.
For taxpayers who reported and paid tax on all their
taxable income for prior years but did not file
FBARs, you should file the delinquent FBAR reports
6
In its publications, the IRS sometimes refers to the Voluntary Disclosure
Program as the “Voluntary Disclosure Practice,” and we will also use those
terms interchangeably.
10 No. 11‐1837
according to the instructions … and attach a state‐
ment explaining why the reports are filed late. Send
copies of the delinquent FBARs, together with
copies of tax returns for all relevant years, by Sep‐
tember 23, 2009, to the Philadelphia Offshore Identi‐
fication Unit. …
The IRS will not impose a penalty for the failure to file the
FBARs.
S e e h t t p : / / w w w. i r s . g o v / u a c / Vo l u n t a r y ‐ D i s c l o ‐
sure:‐Questions‐and‐Answers (last visited July 12, 2013). FAQ
7 instructs that taxpayers who are already under examination
by the IRS are not eligible for the Voluntary Disclosure
Program, and FAQ 14 explains that there are criminal penalties
for failing to file FBARs.
Notice 2009‐62 purports to address “technical issues” for
certain FBAR filers and states that the Notice “provides
temporary relief to those filers while formal guidance is
developed.” Notice 2009‐62 also states that it “extends the due
date for filing an FBAR for one year until June 30, 2010, for U.S.
persons having signature authority over, but no financial
interest in, a foreign financial account[.]” After referencing the
earlier issued FAQs, Notice 2009‐62 clarified that affected
persons “have until June 30, 2010, to file an FBAR for the 2008
and earlier calendar years with respect to these foreign
financial accounts. Thus, eligible persons that avail themselves
of the administrative relief provided in this notice may need to
file FBARs for the 2008, 2009 and earlier calendar years on or
before June 30, 2010, to the extent provided in future guid‐
ance.” Finally, the filing extension provided in the Notice
No. 11‐1837 11
expressly “supplements the filing extension to September 23,
2009, previously provided by the IRS on its public website.”
The “future guidance” referenced in Notice 2009‐62 came
the next year in Notice 2010‐23. Public comment received after
issuance of Notice 2009‐62 led the IRS and Treasury Depart‐
ment to provide additional administrative relief:
Persons with signature authority over, but no
financial interest in, a foreign financial account for
which an FBAR would otherwise have been due on
June 30, 2010, will now have until June 30, 2011, to
report those foreign financial accounts. The deadline
of June 30, 2011, applies to FBARs reporting foreign
financial accounts over which the person has signa‐
ture authority, but no financial interest, for the 2010
and prior calendar years.
…
Provided the taxpayer has no other reportable
foreign financial accounts for the year in question, a
taxpayer who qualifies for the filing relief provided
in this notice should check the “no” box in response
to FBAR‐related questions found on federal tax
forms for 2009 and earlier years that ask about the
existence of a financial interest in, or signature
authority over, a foreign financial account.
Notice 2010‐23. A third notice later extended further the
deadline for FBARs for 2009 and earlier calendar years to
November 1, 2011. See IRS Notice 2011‐54, 2011‐29 I.R.B. 53,
2011 WL 2409318 (hereafter “Notice 2011‐54ʺ).
12 No. 11‐1837
The government contends that Simon was not eligible for
either the Voluntary Disclosure Practice or the administrative
relief set forth in the FAQs and the Notices. Second, the
government asserts, the crime was complete when Simon did
not file the three FBARs on June 30 of the year following each
calendar year at issue. Any subsequent notice issued by the IRS
could not relieve criminal liability already incurred under the
government’s interpretation. Finally, the government insists
that any relief granted by the FAQs and the Notices was
strictly civil, and that the IRS could not and did not promise to
retroactively relieve from criminal liability any persons who
had already completed a criminal act when they willfully
failed to meet the original deadlines.
Simon counters that the Treasury Department and IRS
expressly granted retroactive relief to taxpayers like himself
who had signature authority over foreign financial accounts.
Simon characterizes the issue as one of conflicting interpreta‐
tions of the regulations by the Treasury Department and the
Justice Department. The Treasury Department, he contends,
retroactively extended the deadline for filing FBARs for
taxpayers like himself who properly reported all of their
taxable income but failed to file FBARs by the original dead‐
lines. In such a scenario, the FAQs directed taxpayers not to
use the Voluntary Disclosure Practice but to simply file the
FBARs by the new deadlines published in the FAQs and
subsequent Notices. See FAQ 9; Notice 2009–62; Notice 2010‐23.
For these otherwise compliant taxpayers who simply failed to
file FBARs by the original deadlines, the IRS promised it would
“not impose a penalty for the failure to file the FBARs.” FAQ
9. Simon reads that promise as applying to both civil and
No. 11‐1837 13
criminal penalties. This asserted conflict between the Treasury
Department and the Justice Department presents an issue of
first impression, Simon contends, that can be answered by
extending the principles set forth in Director, Office of Workers’
Compensation Programs v. Ball, 826 F.2d 603 (7th Cir. 1987).
Under Ball, Simon maintains that we must defer to the inter‐
pretation given to the regulations by the agency that is charged
with administration of the statute and regulations. Although
Ball involved two parts of the same agency, namely, the
Director of the Department of Labor and the Review Board of
that same department, Simon urges us to apply that principle
here to defer to the Treasury Department’s interpretation of the
regulations here.
The government counters that there is no conflict between
the Justice Department and the Treasury Department in the
interpretations of the regulations. The Treasury Department
never opposed Simon’s prosecution and, in fact, the case agent
and several testifying witnesses were IRS employees. As the
government reads the regulations and the Notices, any relief
granted was from civil penalties only. Moreover, the Notices
expressed no intention to refrain from prosecuting persons like
Simon who were already being investigated for wilfully
violating the tax laws and wilfully failing to file FBARs. The
government also maintains that the IRS could not, as a matter
of law, extinguish criminal liability for crimes that were
completed before any regulations were repealed or amended
with new deadlines. Relying on United States v. Hark, 320 U.S.
531 (1944), and a number of similar cases, the government
argues that the amendment of a regulation does not relieve
14 No. 11‐1837
criminal liability for conduct occurring prior to the amend‐
ment.7
We need not address the thorny issue of whether an IRS
Notice can retroactively wipe out criminal liability for an
already completed crime because, as we discuss below, Simon
is not one of the persons to whom the IRS granted retroactive
relief. That is, even if we assume solely for the purpose of this
appeal that the IRS has the power to retroactively relieve
criminal liability by publishing FAQs or Notices, we agree with
the government that Simon was not in the class of persons to
whom the relief was granted. As Simon himself notes, the IRS
Notices and FAQs address relief for two groups of taxpayers.
7
The government notes that the Notices were “no more authoritative than
a regulation.” Brief of the Plaintiff‐Appellee, at 25. This is an understate‐
ment. Official guidance from the Treasury Department and the IRS comes
in many forms. Regulations are typically issued first in proposed form in
a Notice of Proposed Rulemaking; public comment is invited and is
considered in both written form and through possible public hearings.
Final regulations are then published in the Federal Register, and we
generally defer to an agency’s interpretations issued in this form, when the
regulations are issued pursuant to a specific directive from Congress. See
Bankers Life & Cas. Co. v. United States, 142 F.3d 973, 977‐83 (7th Cir. 1998).
See also www.irs.gov/uac/Understanding‐IRS‐Guidance‐A‐Brief‐Primer,
(“IRS Primer”) (last visited July 12, 2013). The Treasury Department also
issues guidance through revenue rulings, revenue procedures, private letter
ruling, technical advice memoranda, notices and announcements. IRS
Primer; Bankers Life, 142 F.3d at 978; First Chicago NBD Corp. v. Commissioner
of Internal Revenue, 135 F.3d 457, 459 (7th Cir. 1998) (revenue rulings, unlike
regulations that are subject to notice and comment, are entitled only to
“some weight”). Although we have not yet addressed the level of deference
due to IRS Notices, because they are issued without prior notice and
comment, they are likely due no more deference than revenue rulings.
No. 11‐1837 15
First, through the Voluntary Disclosure Practice, taxpayers
who failed to report all of their taxable income could come
forward to belatedly report the income and resolve their tax
liabilities while minimizing their chances of criminal prosecu‐
tion. FAQs 3 & 4. But persons who were already under civil
examination by the IRS were not eligible to participate in the
Voluntary Disclosure Practice. FAQ 7. Second, persons who
properly reported all of their income and paid all of their taxes
but simply failed to timely file their FBARs could file their
“delinquent” FBARs, along with a statement explaining why
the FBARs were late.8 In that instance, the IRS stated it would
“not impose a penalty for the failure to file the FBARs.” FAQ
9. Simon agrees that he was not eligible for the Voluntary
Disclosure Practice. He claims it did not apply to him because
he reported all of his taxable income; the government asserts
he was not eligible because the IRS had already initiated a civil
examination. No matter the reason, the government and Simon
agree that he was not eligible for a program that, at most,
minimized his chances for criminal prosecution.
Nor was Simon in the second group of taxpayers eligible
for administrative relief. As we will discuss below, because he
had not “properly reported all [his] taxable income,” he was
not eligible to avoid penalties (civil or criminal) for filing
delinquent FBARs as described in the FAQs and the subse‐
quent Notices that extended the filing dates further. See FAQ
9 (“Q9. I have properly reported all my taxable income but I
only recently learned that I should have been filing FBARs …
8
Simon concedes he never filed a statement explaining why his FBARs
were late.
16 No. 11‐1837
A9. For taxpayers who reported and paid tax on all their
taxable income for prior years but did not file FBARs, you
should file the delinquent FBAR reports according to the
instructions … by September 29, 2009”); FAQ 43 (“Taxpayers
who reported and paid tax on all their 2008 taxable income but
only recently learned of their FBAR filing obligation and have
insufficient time to gather the necessary information to
complete the FBAR, should file the delinquent FBAR report
according to the instructions … by September 23, 2009ʺ);
Notice 2009‐62; Notice 2010‐23. FAQs 9 and 43, which extend
the filing deadline to September 29, 2009, both refer to FBARs
filed under the extended deadline as “delinquent” and both
apply by their terms only to taxpayers who reported all of their
income, paid all of their taxes and “only recently learned” that
they should be filing FBARs. Notice 2009‐62 specifically
references FAQs 9 and 43, and expressly notes that the new
filing extension to June 30, 2010 “supplements the filing
extension to September 23, 2009, previously provided by the
IRS on its public website.” Notice 2010‐62, in turn, notes that
it is extending the relief provided in Notice 2009‐62, extending
the June 30, 2010 deadline to June 30, 2011.
Thus, the extensions described in the Notices applied only
to the persons described in FAQs 9 and 43, persons who had
properly reported all of their income, paid their taxes, and
“only recently” learned of their obligations to file FBARs.
Moreover, the late‐filed FBARs were considered “delinquent”
even if filed by the extended deadlines, but the IRS would not
No. 11‐1837 17
impose penalties9 for FBARs filed within these narrow parame‐
ters, so long as the affected taxpayers met the new deadlines
and explained why the FBARs were late. As we will discuss
below, at trial, the government proved that Simon had not
“properly reported” all of his taxable income, and had not paid
all of the taxes due, and he concedes that he never filed a
statement explaining why his FBARs were late. Thus, as a
factual matter, he was not eligible for any of the administrative
relief described in the FAQs and the Notices. Indeed, by the
time the IRS had decided to extend the FBAR deadlines for
otherwise‐complaint taxpayers, Simon was already under
investigation by the IRS and was not even eligible for the
Voluntary Disclosure Practice, a special program that mini‐
mized but did not eliminate the risk of criminal prosecution. So
even if we assume that the IRS could grant “administrative
relief” in a notice that would erase already‐incurred criminal
9
The IRS is empowered only to levy civil penalties, of course. Only the
Justice Department may pursue criminal charges, and generally does so
after the IRS has investigated a taxpayer and referred the case to the Justice
Department. See 31 U.S.C. § 5321 (setting forth the power of the Secretary
of the Treasury to impose civil fines for certain violations of the tax code);
31 U.S.C. § 5322 (setting forth criminal penalties for violations of the tax
code); FAQ 4 (“The Voluntary Disclosure Practice is a longstanding practice
of IRS Criminal Investigation of taking timely, accurate, and complete
voluntary disclosures into account in deciding whether to recommend to
the Department of Justice that a taxpayer be criminally prosecuted. It
enables noncompliant taxpayers to resolve their tax liabilities and minimize
their chances of criminal prosecution. When a taxpayer truthfully, timely,
and completely complies with all provisions of the voluntary disclosure
practice, the IRS will not recommend criminal prosecution to the Depart‐
ment of Justice.”).
18 No. 11‐1837
liability, it is clear in this instance that the IRS Notices did not
extend that relief to taxpayers like Simon who had not reported
all of their taxable income, had not paid all of their taxes and
had not filed statements explaining why their FBARs were
delinquent.
To the extent that the Notices and FAQs were relevant to
the issue of wilfulness, the district court granted the govern‐
ment’s motion in limine to exclude the Notices, and Simon has
not appealed that ruling. In any case, Simon could not have
seen the 2009 and 2010 Notices until several years after he had
already violated the law requiring him to file FBARs for the
2005, 2006 and 2007 tax years. He could not have mistakenly
relied on the advice given in the Notices because it had yet to
be issued. To the extent the Notices were evidence that he
lacked wilfulness because the Notices demonstrated that many
taxpayers found the FBAR requirements confusing, Simon was
not harmed by the exclusion of this evidence because he was
able to bring forth other evidence that taxpayers found the
requirements confusing. In sum, we need not decide whether
the IRS had the power to retroactively eliminate criminal
liability for FBAR violations because we affirm the judgment
on the grounds that the extensions granted expressly did not
apply to otherwise noncompliant taxpayers like Simon.
B.
We turn to Simon’s claim of evidentiary error. Simon was
charged with four counts of filing false tax returns, in violation
of 26 U.S.C. § 7206(1) and 18 U.S.C. § 2. The government
sought to prove that the returns were false in two respects.
First, Simon failed to indicate on Schedule B that he had access
No. 11‐1837 19
to foreign bank accounts. Second, he failed to report all of his
income. On this second theory, Simon sought to introduce
evidence that any money he received from JAS Partners and
the other business entities was not taxable because it was
loaned to him by those entities and he was obliged to repay it.
If the funds could not be legally characterized as loans, he
wished to argue in the alternative that the money he withdrew
from JAS Partners did not exceed his basis in the partnership,
and thus the funds were non‐taxable partnership distributions.
Prior to trial, the government moved in limine to exclude
evidence regarding loans to Simon’s business entities. Up to
that point, Simon’s defense appeared to be that the money he
received from all of the business entities was not taxable
income but rather constituted loans. The government conceded
that legitimate loans by the businesses to Simon would not be
taxable but that loans to the businesses by others were irrele‐
vant to Simon’s loan defense and would serve to confuse the
jury. R. 77. Simon countered that loans to his business entities
by others were relevant circumstantial evidence of how he
usually conducted business. In other words, Simon contended
that his history of borrowing and lending as a course of dealing
in his businesses provided circumstantial evidence of whether
the money he received personally from the assorted business
entities were loans or taxable income. He also intended to
demonstrate that, if he had loaned money to his business
entities, repayment of those loans was not taxable income to
him. R. 86. See also R. 95.
Prior to the start of trial and after hearing argument, the
court entered a preliminary ruling on the matter:
20 No. 11‐1837
As to the evidence of loans to Mr. Simon’s business
entities, I think the motion is well taken to the extent
I—if I understand it, the motion is directed to
whether the business entities received loans with
which they then made the money transfers, and I’ll
ju8st [sic] call it that trying to find some neutral
description, the money transfers to Mr. Simon, and
I think the issues for jury determination relate to
whether the money—the money transfers from the
entities to Mr. Simon were loans or income and not
how the entities acquired the money, and I think it
might well be confusing.
This is the closest of the issues I’m ruling on, and I
may well re‐evaluate this during trial. But to the
extent the Government’s motion is directed to how
the money came into the hands of the business
entities, specifically whether it was a loan, I think, to
the extent the business was doing something and
got money as a result of it, that, obviously, would
not create the same jury confusion.
Trial Tr. at 148‐49. Simon’s counsel sought to clarify and asked,
“Are you saying that we cannot show, for example, that Mr.
Simon’s trust loaned the money to JS [sic] Partners that
subsequently loaned or distributed monies to Mr. Simon?”
Trial Tr. at 149. The court replied:
Yes, I am, and let me clarify it. I am saying that, and
I may well re‐evaluate when I understand better.
But as I understand it now—and again, I read the
briefs. I gave everybody a chance for argument. And
No. 11‐1837 21
I understand it, at this point, how the money got to
JS Elektra [sic] wouldn’t have anything to do with
whether it would be a loan from JS Elektra [sic] to
Mr. Simon. Now maybe there’s more to it that I
haven’t understood yet, and I’ll be happy to recon‐
sider it as we go along, but we’ve had two chances
to educate me, and, at this point I don’t understand
what the relevancy would be as to how JS Elektra
[sic] got it, and the time for educating me has passed
because I’ve got a jury waiting for opening state‐
ments.
Trial Tr. at 149‐50.
Trial commenced and the government presented its case‐in‐
chief. Before the defense presented its first witness, counsel for
Simon again raised the issue of money loaned to JAS Partners.
Counsel informed the court that the defense’s first witness
would be Don Willis, a man who loaned $445,000 to JAS
Partners in 2003 and 2004. Counsel contended that Simon
signed for these loans on behalf of the partnership and was
personally responsible for the loans as a general partner.
Because Simon was personally liable on the loans, counsel
contended, money that Simon received from JAS Partners was
non‐taxable to him:
These documents—and we’re going to have experts
that are going to testify to the fact that JAS Partners,
when they borrow the money from Mr. Willis—and
there’s another one, Mr. Scheumann—and Mr.
Simon signed on the note as general partner, it’s like
him borrowing the money himself, and, therefore,
22 No. 11‐1837
he could borrow it back from the partners or he
could take the money as a distribution, and there’s
no tax effect on it, Judge, and that’s the key to this
whole case. There’s no tax effect on his taking
money from JAS Partners. It’s his.
And the other thing … is that JAS Partners was
comprised of James and Denise Simon and the
Simon Family Trust, which was a 98 percent partner.
The Simon Family Trust, which Mr. Simon funded,
when it was established, he put in about 2,000,000
plus dollars of his own money, after‐tax dollars.
When they loaned money to JAS Partners, the same
thing, Judge. It’s Mr. Simon’s money. He could take
it out. He’s a general partner. So it’s all non‐taxable,
and that’s the whole issue in the case.
Trial Tr. at 626‐27. The government disagreed with this
characterization of the law. Hearing what it perceived to be a
new facet of the defense, the court then adjourned trial for the
day and allowed the parties to file authority in support of their
respective positions. The court then heard another round of
arguments the next day.
In the new round of briefing, the government took the
position that “the manner in which a partnership receives or
categorizes funds bears no relation to the characterization of a
payment of those funds from a partnership to its partner.”
R. 113, at 1. The government therefore sought to exclude all
references to the characterization of funds that flowed between
Simon’s various business entities before those funds reached
Simon’s personal accounts. The government noted that, under
No. 11‐1837 23
the tax code, when a partner who is not acting in his capacity
as a partner engages in business with a partnership, the
transaction will be treated as if he were not a partner. 26 U.S.C.
§ 707(a)(1); 26 C.F.R. § 1.707‐1. Thus, in deciding whether a
partnership’s loan to a partner was a true loan, the court would
look at the substance of the transaction and determine whether
there was an unconditional obligation to repay the loan. See
Mangham v. Commissioner of Internal Revenue, 1980 WL 4125
(Tax Ct. July 29, 1980). See also DeSantis v. Commissioner of
Internal Revenue, 1997 WL 119799 (Tax Ct. Mar. 18, 1997). The
factors assessed in determining whether a loan is bona fide
include whether there is a sum certain, the likelihood of
repayment, a definite date of repayment, and the manner of
repayment. Ibid. Thus, the government argued, the manner in
which JAS Partners (or any of the other business entities)
obtained the money that it loaned to Simon was irrelevant to
determining whether the loans to Simon were bona fide and
non‐taxable.
Simon countered that the court should allow evidence
regarding (1) the nature of any third‐party loans to JAS
Partners; (2) the identity of the creditor; (3) whether the loans
were guaranteed by Simon or his wife; and (4) whether they
were bona fide liabilities for tax purposes. Simon also contended
that partnership distributions to partners are tax‐free to the
extent that they did not exceed the partner’s basis in the
partnership. See 26 U.S.C. § 731 (“In the case of a distribution
by a partnership to a partner – (1) gain shall not be recognized
to such partner, except to the extent that any money distrib‐
uted exceeds the adjusted basis of such partnerʹs interest in the
partnership immediately before the distribution”). Simon
24 No. 11‐1837
noted that a partner’s adjusted basis is generally determined
by 26 U.S.C. §§ 705. A partner’s adjusted basis increases, Simon
contended, when the partner’s share of partnership liability
increases. See 26 U.S.C. § 751 (“Any increase in a partnerʹs
share of the liabilities of a partnership, or any increase in a
partnerʹs individual liabilities by reason of the assumption by
such partner of partnership liabilities, shall be considered as a
contribution of money by such partner to the partnership.”).
Under Simon’s theory, when a third party loaned money to
JAS Partners, and Simon, as a general partner, became liable to
repay that amount, his basis in the partnership increased by
that amount. Any distributions to Simon up to the amount of
those loans would be non‐taxable under Simon’s formulation
because the distributions would not exceed Simon’s basis in
the partnership. Simon continued to maintain that the money
he received from JAS Partners was in the form of legitimate
loans that he intended to repay. But if the jury determined that
the JAS Partners loans were not bona fide, then he intended to
argue in the alternative that the disbursements could be recast
as non‐taxable constructive distributions that did not exceed
his basis in the partnership. He therefore argued that evidence
regarding loans by third parties to the partnership was
relevant to his basis in the partnership and thus to the question
of whether loans or distributions from JAS Partners to him
were taxable. R. 114.
The next day, before resuming testimony, the court ruled
on the evidentiary challenge. The court framed the issue as
whether there was legal support for Simon’s proposition that
a loan to a partnership is a loan to a general partner. As the
court interpreted Simon’s written filing, the nature of outside
No. 11‐1837 25
loans is important for tax purposes because loans can affect the
partner’s adjusted basis in the partnership. In particular, Simon
argued that a partner’s guarantee of a partnership loan is the
equivalent of a recourse liability under the Treasury regula‐
tions. The court quoted Simon’s argument that ”outside loans
to the partnership are directly relevant in determining whether
such debt should be included in the general partner’s tax bases
[sic] and to ultimately determine whether subsequent partner‐
ship distributions to them are tax free.” Trial Tr. at 638‐39. See
also Defendant’s Memorandum of Law Regarding Evidence of
Loans to a Partnership, R. 114, at 3. The court concluded that
this argument was a “long way from a loan to a partnership
being the same as a loan to the general partner.” Trial Tr. at
639. Without additional legal support for the proposition that
loans to JAS Partners increased Simon’s basis in the partner‐
ship, the court was unwilling to allow evidence of those loans.
The court was concerned that any minimal value of this
evidence would be outweighed by the risk of confusing the
jury. Trial Tr. at 640. More importantly, though, the court noted
that there was a factual gap in the defendant’s theory because
Simon had no witness to testify about his basis in the partner‐
ship. Trial Tr. at 639. The court was also concerned that
Simon’s experts intended to testify to general legal principles,
and so the court confirmed its earlier ruling on the motion, and
extended it to exclude “all testimony, expert or otherwise,
regarding the manner in which partnerships function for tax
purposes, and the tax treatment of partnerships, as well as any
testimony about JAS Partners receiving loans from anyone other
than the Simons.” Trial Tr. at 640‐41 (emphasis added). The
court thus did not prevent Simon from presenting factual
26 No. 11‐1837
evidence regarding funds that he personally and directly
supplied to the partnership. The court denied the govern‐
ment’s motion to exclude evidence about JAS Partners and its
purpose under the Economic Substance Doctrine. Finally, the
court addressed the government’s objection to the proposed
testimony of Simon’s expert Howard Richshafer. The court
concluded that Richshafer, an expert on tax controversy, would
not be barred but that he could not “tell a jury about the law.”
Trial Tr. at 642‐43. Instructing the jury on the law was solely
within the province of the trial court, and the court therefore
precluded Richshafer from testifying to a general overview and
operating rules of the tax code, the meaning of certain legal
doctrines, an overview of grantor trust rules under the tax
code, and a number of other legal matters.
As trial was about to resume, counsel for Simon asked
whether he would be allowed to present evidence that the
Simon Family Trust sold its interest in a company called Eye
Pro, and that the proceeds then were loaned by the Trust to
JAS Partners. Trial Tr. at 647‐48. Counsel clarified Simon’s
theory that the sale of Eye Pro and other contributions to JAS
Partners with after‐tax dollars created a sufficient basis in JAS
Partners to allow Simon to remove money from the partner‐
ship tax‐free. The court then asked counsel to detail every piece
of evidence that would be excluded by counsel’s understand‐
ing of the court’s ruling in limine. Counsel responded that he
wished to present evidence of a $2 million after‐tax contribu‐
tion to the Simon Family Trust that went into the partnership
when the Trust and Partnership were established; the sale of
the Eye Pro business by the Simon Family Trust and the
subsequent loaning of the proceeds of that sale to JAS Partners;
No. 11‐1837 27
loans to JAS Partners by three individuals; an inheritance to
Simon from his mother’s estate that went into the Simon
Family Trust and was then loaned to JAS Partners; and the sale
of a home for $147,000 that went into the Simon Family Trust
and was then loaned to JAS Partners.
With regard to the sale of Eye Pro, the court asked, “If the
stock to the business belonged to the family trust and the stock
or the proceeds from the stock were given to the partnership,
why doesn’t that create a basis for the trust, rather than for Mr.
Simon, if the stock belonged to the trust?” Counsel replied:
It’s a grantor trust, Judge. The taxes have already
been paid on that, and Mr. Simon contributed his
after‐tax dollars to this grantor trust, and so there’s
no tax consequence. When he puts it into the part‐
nership, it increases his basis. It’s like him just
putting after‐tax dollars that he had right into the
partnership. What he did, he added to the trust, but
he put the trust assets into the partnership.
The point is, it’s after‐tax dollars, so there’s no tax
consequence that affects Mr. Simon in this way. It’s
just like putting – the money goes into the partner‐
ship, and then he takes it out, and it’s the money
that he already paid tax on, so it shouldn’t be taxed.
Trial Tr. at 658. After hearing still more argument from both
Simon and the government, the court concluded that Simon
was free to argue to the jury that the money Simon received
from JAS Partners was a loan or that it was a distribution but
that he had failed to provide legal support for his argument
that money transferred from the Simon Family Trust to JAS
28 No. 11‐1837
Partners and loans from outside parties to JAS Partners
increased Simon’s basis in the partnership. The court therefore
reaffirmed its ruling in limine.
On appeal, Simon contends that the court erroneously
barred evidence (including expert testimony) related to his
defense theory that the distributions he received were not
taxable because the court misunderstood the legal issue.
Specifically, he maintains that the court did not understand
that partnership distributions are tax‐free to the extent that
they did not exceed the partner’s adjusted basis of his interest
in the partnership. The adjusted basis, in turn, is determined
by the adjusted basis of property contributed to the partner‐
ship when it is formed, and further adjusted when the part‐
ner’s share of partnership liabilities changes, as when there is
a loan to the partnership. The specific basis evidence that
Simon sought to introduce included loans by third parties to
JAS Partners, $2 million in assets from the Simon Family Trust
that was transferred to JAS Partners, an inheritance from his
mother that was loaned to JAS Partners through the Trust, and
the proceeds of the sale of a house that were transferred to JAS
Partners through the Trust.
The government does not now disagree with the general
proposition that a partner is taxed on distributions removed
from a partnership only to the extent that the distributions
exceed the partner’s adjusted basis in the partnership. 26 U.S.C.
§731(a). In reviewing the written and oral exchanges at trial
surrounding this issue, it is apparent that the district court
(against all odds, given the manner in which it was argued)
also understood this general legal proposition but simply did
not agree that the evidence Simon sought to introduce was
No. 11‐1837 29
relevant to demonstrating his adjusted basis in the partnership.
That is, the court found that Simon did not demonstrate how
distributions among and between third party lenders, the
Simon Family Trust and JAS Partners affected Simon’s basis in
the trust. The court expressly allowed Simon to present
evidence regarding his own personal contributions to JAS
Partners because it was clear to the court that Simon’s own
direct contributions would increase his basis in the partner‐
ship. But Simon failed to timely provide legal support for his
convoluted, ever‐evolving argument that third‐party loans to
JAS Partners and funds channeled through the Simon Family
Trust into JAS Partners increased his basis in JAS Partners.
We review the courtʹs decision to admit or exclude evidence
for abuse of discretion. United States v. Thornton, 642 F.3d 599,
604 (7th Cir. 2011); United States v. Boone, 628 F.3d 927, 932 (7th
Cir. 2010); United States v. Cooper, 591 F.3d 582, 590 (7th Cir.
2010); United States v. Wescott, 576 F.3d 347, 355 (7th Cir. 2009).
We will reverse and order a new trial only if any evidentiary
errors are not harmless. Thornton, 642 F.3d at 604; Boone, 628
F.3d at 932; Cooper, 591 F.3d at 590; Fed. R. Crim. P. 52(a). Of
course, a decision that rests on an error of law is always an
abuse of discretion. United States v. Smith, 454 F.3d 707, 714‐15
(7th Cir. 2006). Thus, if Simon is correct that the district court
misunderstood the legal basis for the admission of the evi‐
dence, the decision to preclude Simon from presenting the
evidence could constitute an abuse of discretion.
However, the court fully understood Simon’s theory that
the disbursements he received from JAS Partners were either
legitimate loans or partnership distributions that did not
exceed his basis in the partnership. The court excluded the
30 No. 11‐1837
evidence of loans to JAS Partners by Willis and Scheumann
because Simon failed to supply legal support for his claim that
loans to the partnership increased his basis as a general
partner. Indeed, after arguing that the loans increased his basis
because “a partnership liability guaranteed by a partner is
classified as a recourse liability under the Treasury regula‐
tions,” and “recourse liabilities are includible in the tax basis of
partnership interests held by general partners,” defense
counsel conceded that Simon did not guarantee the payment
on loans to JAS Partners by Willis and Scheumann. See R. 114,
at 3 (arguing that recourse liabilities, including a partnership
liability guaranteed by a partner, increase a partner’s basis in
the partnership); Trial Tr. at 655 (“Mr. Scheumann and Mr.
Willis, when they loaned money to the partnership, and Mr.
Simon being a general partner in the partnership and, therefore
as a general partner – I think I may have misstated, Your
Honor, with regard to this, but what I meant to say was that he
didn’t guarantee the payment. As a general partner, he would be
liable for the promissory note that the partnership had with
Mr. Willis and Mr. Scheumann.”) (emphasis added). Simon
also failed in the district court to present any legal support for
his claims that money he funneled through the Simon Family
Trust to JAS Partners in undefined transactions increased his
basis in JAS Partners. His sole support for that claim was an
assertion that the Simon Family Trust is a grantor trust, but he
cited no statutes, regulations or case law connecting that
asserted fact to his personal basis in JAS Partners. See Trial Tr.
at 664 (where the court noted, “We’re here on Day Four of the
trial, and I’ve seen no law at all. I’ve heard that there’s experts
that would testify that that is what the law is, but that’s a
No. 11‐1837 31
separate order in limine, no law to support this theory and,
accordingly, will leave the order in limine where it is.”).
Nor did he supply factual support for his basis in JAS
Partners. Nothing in the record put the district court on notice
that Simon’s experts or fact witnesses would present factual
support for his basis in JAS Partners. Simon sought to demon‐
strate his basis theory primarily through experts, including
Herbert Long and Howard Richshafer. Simon’s Notice of
Proposed Testimony of Herbert Long, however, covered only
his theory that the disbursements from JAS Partners were
legitimate loans that Simon intended to repay and had the
ability to repay. R. 82. A review of Simon’s Notice of Proposed
Testimony of Howard Richshafer reveals that Simon intended
for Richshafer to instruct the jury largely on legal principles. R.
104. For example, Richshafer was to testify to “a general
overview and the operating rules of Subchapter K of the
Internal Revenue Code” and give “an overview of the grantor
trust rules under Subchapter J of the Internal Revenue Code,”
among other things. R. 104, ¶¶ 5, 8. The court was correct to
preclude any witness from generally explaining the law to the
jury. United States v. Farinella, 558 F.3d 695, 700 (7th Cir. 2009).
“District judges, rather than witnesses, must explain to juries
the meaning of statutes and regulations.” Farinella, 558 F.3d at
700. See also United States v. Caputo, 517 F.3d 935, 942 (7th Cir.
2008) (the meaning of the statute and regulations is a subject
for the court, not for testimonial experts); United States v.
Jungles, 903 F.2d 468, 477 (7th Cir. 1990) (trial court properly
excluded expert’s simple recitation of legal principles sur‐
rounding the “independent contractor” relationship). The jury
is to apply the law as it is given by the court in its instructions,
32 No. 11‐1837
and may not apply a legal opinion given by a witness, includ‐
ing an expert witness. Farinella, 558 F.3d at 700. Nonetheless,
the court did allow Simon to present evidence of his own direct
contributions to the partnership.
In the end, Simon simply failed to connect the dots of his
complex transactions, and failed to timely supply legal
authority that would support his theory that the transactions
among and between his various business entities increased his
basis in JAS Partners. The district court therefore committed no
legal error and did not abuse its discretion in refusing to allow
Simon to present this evidence to the jury. To the contrary, the
district court took extreme care in deciding whether to allow
this evidence, and gave Simon multiple opportunities to
provide legal support for his claim that this evidence was
relevant to his partnership distribution defense theory.
Moreover, a significant portion of the unreported income
was entirely unrelated to JAS Partners. In particular, Simon
received more than $663,000 from Elekta and JS Elekta, which
were corporations, not partnerships. His main theory of
defense for those disbursements was that they were loans that
he intended to repay, a theory that he was fully able to present
to the jury and that the jury clearly rejected. It is thus difficult
to discern how Simon could have been harmed by the court’s
decision to exclude evidence related to JAS Partners when a
significant portion of the income he failed to report (approxi‐
mately one‐third of the total amount) came from unrelated
corporations. The partnership distribution defense could not
have applied to money Simon received from Elekta and JS
Elekta, providing a further reason for affirming Simon’s
conviction on the false tax return counts. See Thornton, 642 F.3d
No. 11‐1837 33
at 605 (in determining whether an evidentiary error is harm‐
less, we consider whether, in the mind of the average juror, the
prosecutionʹs case would have been significantly less persua‐
sive had the improper evidence been excluded); United States
v. Klebig, 600 F.3d 700, 722 (7th Cir. 2009) (same). Again,
though, we find no error in the court’s decision to exclude
certain evidence. But if the court had committed error in
excluding evidence relating to the funding of JAS Partners, it
is unlikely that error would have affected the verdict in light of
the abundant evidence of unreported income Simon received
from Elekta and JS Elekta.
Finally, the government also asserted that Simon’s tax
returns were false because he did not disclose on Schedule B
that he held signature authority over foreign accounts. Part III
of Schedule B, labeled “Foreign Accounts and Trusts,” specifies
that filers “must complete this part if you … (b) had a foreign
account; or (c) received a distribution from, or were a grantor
of, or a transferor to, a foreign trust.” Filers are asked to check
either a “yes” or “no” box in response to the question, “At any
time during [the filing year in question] did you have an
interest in or a signature or other authority over a financial
account in a foreign country, such as a bank account, securities
account, or other financial account?” Filers are then directed
to further instructions regarding the filing requirements for
FBARS. Simon concedes he did not check the “yes” box for any
of the years in question even though he had signature author‐
ity over a number of foreign accounts during those years. Both
Simon and the government treated this issue as coterminous
with the FBAR issue. That is, if Simon prevailed on the FBAR
issue, he could prevail on the Schedule B issue. On the other
34 No. 11‐1837
hand, if he lost on the FBAR issue, he also lost on his Schedule
B defense. Notice 2010‐23 specified:
Provided the taxpayer has no other reportable
foreign financial accounts for the year in question, a
taxpayer who qualifies for the filing relief provided
in this notice should check the “no” box in response
to FBAR‐related questions found on federal tax
forms for 2009 and earlier years that ask about the
existence of a financial interest in, or signature
authority over, a foreign financial account.
Notice 2010‐23, at ¶ 3. We have already determined that Simon
was not a taxpayer “who qualifies for the filing relief provided
in this notice” and so he was also not entitled to any relief for
his failure to check the proper box on Schedule B. He has
presented no separate argument concerning the government’s
charge that his tax returns were false in part because he failed
to check the proper box on Schedule B. We therefore affirm his
convictions on the false return counts.
C.
Simon also contends that the court erred when it overruled
his objection to a jury instruction regarding materiality. The
instruction states, “A line on a tax return is a material matter if
the information required to be reported on that line is capable
of influencing the correct computation of the amount of tax
liability of the individual or the verification of the accuracy of
the return.” Trial Tr. at 1053, 1080. The instruction came from
the Seventh Circuit Pattern instructions, and defines material‐
ity specifically for 26 U.S.C. § 7206, the statute under which
Simon was charged. Simon offered the instruction himself
No. 11‐1837 35
prior to the start of trial, but later objected because he had not
been “allowed to put in the basis of Mr. Simon’s interest in JAS
Partners,” and thus the jury could not determine the correct
computation of his tax liability. Trial Tr. at 1053‐54. “We
review jury instructions de novo, but we will reverse a convic‐
tion only if the instructions as a whole misled the jury as to the
applicable law.” United States v. Joshua, 648 F.3d 547, 554 (7th
Cir. 2011). Simon does not contend that the instruction mis‐
stated the law. Instead, his objection to the instruction is simply
an extension of his argument regarding the court’s decision to
limit the evidence he could present regarding his basis in JAS
Partners. As we have already concluded, the court did not err
in limiting this evidence because Simon failed to timely supply
legal support for the relevance of the evidence. The court
committed no error in giving a pattern jury instruction
defining materiality for the jury.
Simon also contends that the court’s inclusion of this
instruction, in combination with the in limine ruling, deprived
Simon of his right to have the jury instructed on his theory of
defense. There are a few problems with this contention. First,
the court did not preclude Simon in general from making out
his defense regarding distributions from the partnership that
were not taxable to the extent that they did not exceed his basis
in the partnership. The court simply limited certain pieces of
evidence by requiring that Simon supply legal support
demonstrating that a particular item or category of evidence
was relevant to the computation of his basis. The court thus
expressly allowed Simon to present evidence of his own direct
contributions to JAS Partners because Simon supplied statu‐
tory support showing the relevance of this evidence. The court
36 No. 11‐1837
also explicitly allowed Simon to present his defense that
money he received from JAS Partners was a non‐taxable
distribution. See Trial Tr. at 663 (“the Defense is free to shift at
any time right through final argument from saying, ‘This was
a loan,’ to, ‘This was a distribution.’ There’s no prohibition
against that. The Defendant doesn’t have to disclose its defense
other than alibi or insanity upfront.”).
More importantly, the jury was not instructed on Simon’s
distribution theory not because of any error by the district
court but because Simon did not ask for jury instructions
setting forth this theory until the final day of trial, even though
he earlier had multiple opportunities to submit proposed jury
instructions to the court. R. 87 (Defendant’s Proposed Jury
Instructions, submitted prior to the start of trial); R. 105
(Defendant’s Supplemental Proposed Jury Instructions,
submitted on the first day of trial). The court then refused to
give the instructions because they were untimely, especially in
light of the court’s ruling days earlier that experts would not be
allowed to explain the law, and that only the court could
explain the law to the jury. Trial Tr. at 643 (where the court
declined to allow Simon’s experts to “tell a jury about the law,”
noting that “telling the jury about the law is my job, as the trial
judge, and not the job of a witness, no matter how much
expertise the witness brings to the stand.”). R. 122 (Defendant’s
Supplemental Proposed Jury Instructions, submitted on the
last day of trial); Trial Tr. at 1065‐66 (where the court con‐
cluded, “I don’t think I can find, in light of last Tuesday’s
ruling on the motion in limine, that it was a last minute
discovery yesterday or today that witnesses weren’t going to
be able to testify to what the law is, so I will sustain the
No. 11‐1837 37
objection to those late‐filed instructions.”). The court was
concerned that the government had no adequate opportunity
to respond to the late‐filed instructions, and it was within the
court’s discretion to disallow the instructions under these
circumstances. Trial Tr. at 1066. Notably, Simon has not
appealed from the court’s ruling that his final round of
proposed instructions was untimely. But even if the court had
found that the additional proposed instructions were timely,
they were woefully incomplete in explaining the relevant law
to the jury. Only two instructions addressed Simon’s tax‐free
partnership distribution theory. The first stated, “If a loan from
a partnership to a partner does not constitute a loan, the
transaction can constitute a tax free distribution if it doesn’t
exceed its partners [sic] adjusted tax basis in the partnership.”
R. 122, at 4. The second stated, “To determine whether partner‐
ship distributions are tax free to a partner, the partners [sic]
adjusted basis of his interest in the partnership must be
determined.” R. 22, at 11. Even if we take both of these propo‐
sitions as true (and ignore the inherent contradiction in the first
one), neither explains how the jury is to go about calculating
Simon’s basis, a crucial step in making out his defense. Simon
apparently intended to have his tax experts explain the law
regarding the calculation of basis to the jury, and the court
properly excluded this testimony. That obliged Simon to
propose legally‐supported jury instructions on his defense, so
that the court could instruct the jury. Having failed to submit
the instructions, he cannot now complain that the court
deprived him of his defense.
38 No. 11‐1837
D.
We finally turn to Simon’s claims that reversal on some
counts requires reversal on other counts. In particular, Simon
argues that reversal on the FBAR counts alone would require
reversal on the false income tax return counts because it would
be unclear whether the jury convicted because he failed to
report all of his income or because he failed to check the box on
Schedule B indicating that he had signature authority over
foreign accounts. He also contends that reversal on the false
return counts would require a new trial on the fraud counts
because those counts were based, in part, on Simon falsely
understating his income. See Yates v. United States, 354 U.S. 298,
311‐12 (1957), overruled on other grounds by Burks v. United
States, 437 U.S. 1 (1978) (a verdict must be set aside in cases
where the verdict is supportable on one ground, but not on
another, and it is impossible to tell which ground the jury
selected). Because we have determined that both the FBAR
counts and the false tax return counts will stand, there is no
basis to challenge the remaining counts under Yates. The
judgment of the district court is therefore
AFFIRMED.