In the
United States Court of Appeals
For the Seventh Circuit
No. 14-2069
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
GEORGE W. CURTIS,
Defendant-Appellant.
Appeal from the United States District Court for the
Eastern District of Wisconsin.
No. 1:13-cr-00113-WCG— William C. Griesbach, Chief Judge.
ARGUED DECEMBER 3, 2014 — DECIDED MARCH 31, 2015
Before MANION, ROVNER, and HAMILTON, Circuit Judges.
ROVNER, Circuit Judge. George W. Curtis was convicted of
three misdemeanor counts of failure to pay income taxes, in
violation of 26 U.S.C. § 7203. On appeal, he contends that the
district court abused its discretion in admitting evidence of
other wrongdoing and in instructing the jury on the meaning of
“willfulness.” We affirm.
2 No. 14-2069
I.
George W. Curtis has been a lawyer for more than fifty
years. He was running his successful law practice as a sole
proprietorship at the time of the events relevant to this appeal.
His tax difficulties began in 1996 and 1997, when he filed
returns reporting tax obligations of $218,983 and $248,236,
respectively, but made no payments toward those debts.
According to Curtis, around that time, a law partner withdrew
money from the practice and declared bankruptcy without ever
repaying the debt of nearly $600,000. Curtis also underwent an
expensive divorce during this time period. In 1999, when the
Internal Revenue Service (“IRS”) noticed that Curtis still had
not paid the taxes for 1996 and 1997 and had failed to file a
return for 1998, the agency assigned Revenue Officer Pamela
Pfeffer to address Curtis’s issues. As a result, Curtis entered into
an installment agreement with the IRS, making monthly
payments toward his outstanding tax debt. Not surprisingly,
the amount owed was increased by interest and penalties. The
IRS warned Curtis that he would be required to make estimated
tax payments going forward.
In 2003, Revenue Officer Pfeffer again worked with Curtis
in an attempt to bring his tax obligations current after he filed
a return for 2000 but failed to pay more than $90,000 in taxes
owed. He entered into a second installment agreement to pay
those taxes as well as an amount remaining from 1997. He was
again reminded of his obligation to make estimated payments
going forward. Notwithstanding that reminder, shortly after
agreeing to the second installment plan, he filed a return for
2003 reflecting an unpaid tax liability of $176,802. Pfeffer again
contacted him to discuss options for paying the taxes, including
No. 14-2069 3
reducing his personal expenses or selling assets. Nevertheless,
he filed a return for 2004 reflecting an unpaid tax liability of
$61,000.
In February 2006, after Pfeffer retired from the IRS, the
agency assigned a second Revenue Officer, Hans Bichler, to
work with Curtis. Curtis failed to make estimated payments for
that year and had stopped making payments on the installment
plan. At the time, Curtis had outstanding tax obligations for
1997, 2000, 2003 and 2004. In 2006, Curtis made some progress
in paying off his pending tax debts. He paid $65,000 toward his
2005 liabilities, and another $42,000 to finally satisfy the 1997
debt. In 2007, Curtis sold some real estate and Revenue Officer
Bichler applied $167,000 from the sale to resolve Curtis’s 2000
tax debt.
But that was not the end of Curtis’s tax woes. He timely filed
returns for 2007, 2008 and 2009, years for which he owed
$151,906, $113,354, and $112,973, respectively, but he had paid
nothing toward these liabilities at the time of filing. By this time,
Revenue Officer Bichler had also retired from the IRS, and no
new agent was assigned to address Curtis’s liabilities. Instead,
the IRS referred the matter for criminal investigation, and Curtis
was charged with three misdemeanor counts of willfully failing
to pay the taxes he owed for 2007, 2008 and 2009, in violation of
26 U.S.C. § 7203.
Prior to trial, the government indicated its intention to offer
evidence under Rule 404(b), including evidence of Curtis’s
history of failing to pay his taxes, his past dealings with the IRS
and its efforts to collect back taxes, and his withdrawals of
money from his law practice to pay personal expenses. Curtis
4 No. 14-2069
did not object to any of this evidence, conceding that it was
relevant to his intent and knowledge during the charged years.
But he did object to the government’s proposed evidence that
he failed to pay payroll taxes for his law firms’s employees for
the third and fourth quarters of 2013. The government argued
that this evidence was relevant to Curtis’s intent and especially
relevant to rebut his anticipated defense that he acted in good
faith. Curtis objected that any violations of the tax laws subse-
quent to the charged years did not bear on his state of mind
during the time of the charged offenses. Instead, he maintained,
the government’s use of this evidence demonstrated nothing
other than propensity to commit the crime, a forbidden use of
such evidence. Curtis also argued that the evidence was not
relevant to his intent because payroll taxes are different in kind
from income taxes, payroll taxes are often paid by office
administrators, and the failure to pay those taxes post-dated the
offense conduct by several years. The evidence would also
cause undue prejudice, Curtis argued, because it would imply
that he was harming his employees as well as the government.
In short, he contended that the payroll tax evidence did not
meet the standards for admission under Rule 404(b). The district
court agreed that the evidence demonstrated propensity, and
tentatively granted Curtis’s motion to exclude the payroll tax
evidence from the trial.
The court later reversed course and allowed the government
to bring in this evidence after Curtis testified during the defense
case-in-chief that he was current on his tax obligations for 2010,
2011 and 2012. Curtis declined the court’s offer of a limiting
instruction on this Rule 404(b) evidence. As we will discuss
below, Curtis asked the court to instruct the jury that willful-
No. 14-2069 5
ness required proof of a bad motive. He also asked the court to
give an instruction on good faith. Although the court gave
Curtis’s proposed instruction on good faith, it declined to
modify the pattern instruction to include a requirement for bad
motive, instead using the pattern instruction on willfulness. The
jury convicted on all three counts, and Curtis appeals.
II.
On appeal, Curtis first contends that the court erred when it
allowed the government to admit evidence that he had not paid
payroll taxes for two quarters in 2013. He also maintains that
the court abused its discretion when it declined to give the
willfulness instruction he requested and instead gave the
pattern instruction. We review the district court's decision to
admit evidence under Rule 404(b) for abuse of discretion only.
United States v. Johnson, 584 F.3d 731, 736 (7th Cir. 2009). “We
review jury instructions de novo, but we will reverse a conviction
only if the instructions as a whole misled the jury as to the
applicable law.” United States v. Simon, 727 F.3d 682, 698
(7th Cir. 2013); United States v. Joshua, 648 F.3d 547, 554 (7th Cir.
2011).
A.
Curtis faced three counts of willful failure to pay tax, in
violation of 26 U.S.C. § 7203. To sustain a conviction under
section 7203, the government was required to prove: (1) that
Curtis was required to pay taxes; (2) that Curtis failed to pay the
taxes; and (3) that Curtis acted willfully in failing to pay. United
States v. Hassebrock, 663 F.3d 906, 919 (7th Cir. 2011); United
States v. Beall, 970 F.2d 343, 347 (7th Cir. 1992). Curtis conceded
that he was required to pay taxes for the three charged years
6 No. 14-2069
and that he failed to pay them. At trial, he contested only the
element of willfulness. Failure to pay taxes under section 7203
is a specific intent crime. United States v. Birkenstock, 823 F.2d
1026, 1028 (7th Cir. 1987). In criminal tax cases, willfulness
“requires the Government to 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.” Cheek v.
United States, 498 U.S. 192, 201 (1991). See also United States v.
Pomponio, 429 U.S. 10, 12 (1976) (the word “willfully” in the tax
statutes “generally connotes a voluntary, intentional violation
of a known legal duty”); Birkenstock, 823 F.2d at 1028 (the
willfulness element in section 7203 requires proof of an inten-
tional violation of a known legal duty).
As we noted above, the district court tentatively concluded
before trial that the government could not introduce evidence
of Curtis’s failure to pay payroll taxes for his law business in the
third and fourth quarters of 2013. Although the government
sought to introduce the evidence to demonstrate Curtis’s
willfulness in failing to pay his taxes, the court concluded that
the evidence appeared to prove that point only by way of a
propensity inference, in violation of Rule 404(b). The court also
opined that the potential for unfair prejudice outweighed the
probative value of the evidence. See Fed. R. Evid. 403.
But the court reversed course during the defense case-in-
chief after Curtis’s counsel posed several questions to Curtis
regarding a summary exhibit for tax years 1996 through 2012.
For each of those years, Exhibit 1000 listed, among other things,
the amount of taxes owed, penalties and interest accrued, taxes
paid toward the year’s liabilities, the year paid, and whether the
No. 14-2069 7
taxes for a given year were fully satisfied. For example, the first
row, representing 1996, showed $555,320.00 in taxable income;
$218,983.00 in taxes owed; $112,080.74 in penalties; $71,618.79
in interest; $402,682.53 as the total owed and the total paid; 2001
as the year the amount was paid in full; and $0 as the amount
paid during the year the taxes were due. The chart also showed
that tax years 2003, 2004, 2007, 2008 and 2009 were not paid in
full as of the time of trial, and in fact, Curtis had made no
payments toward the obligations for the charged years of 2007
through 2009. Finally, the chart indicated that Curtis paid his
taxes in full for tax years 2010, 2011 and 2012, completing each
year’s payments during the subsequent year. With this exhibit
before the jury, defense counsel engaged in the following
exchange with Curtis:
Q: And as Exhibit No. 1000 indicates—And do you
have that in front of you?
A: I do.
Q: Your tax obligations for the years 2010, 2011,
and 2012 are fully paid; is that correct?
A: That’s what the record shows.
Q: And—and do you still have significant obliga-
tions with respect to the charged years here and
some obligation with respect to the—a couple of
years earlier than that? Is that also true?
A: That’s what the record shows.
Q: And during the period of time for the years that
are reflected in Exhibit No. 1000 you agree with
the fact that you paid almost $2 million to the
8 No. 14-2069
IRS and your tax obligations for that same
period of time were something just short of
$1,900,000?
A: That’s right. I—I paid 1.917,807.
Q: Can you tell the court and jury whether or not
you believed that you would have the capacity
through one method or another of adjusting
your living style which may even mean liqui-
dating assets, that you were going to liquidate
all of the tax liabilities that were reflected on
your tax returns for the years 2007, 2008, 2009,
and any other years for which there remained a
delinquency?
A: Absolutely. That was discussed with Mr.
Bichler. And I believe that the 167 grand that I
engineered in selling those two properties
would certainly take care of more than one of
those years and that David had already made
an agreement to buy an additional chunk of
land for a quarter million dollars.
Q: Was there ever a time during the period of your
dealing with the collection agents when you
believe[d] that your tardiness in making your
tax payment would bring you to court as a
defendant in a criminal case?
A: Absolutely not. I felt I had a very positive
understanding relationship with both Pam and
Hans, who were sometimes complimentary
No. 14-2069 9
about my efforts. I just candidly discussed how
things were going. I had listed our properties
with three different Realtors, reported to them
the snags, and they encouraged me.
R. 51, Tr. at 529-31.
Following this exchange, the government again moved to
admit evidence that Curtis had failed to pay payroll taxes for
his law firm’s employees in the last two quarters of 2013. The
government argued that Curtis’s proposed jury instructions
suggested that he would claim a defense of mistake, and that
the evidence that he had recently failed to pay taxes was
relevant to show that his earlier failure to pay was not due to a
mistake. The government also contended that Curtis’s testi-
mony that he had fully paid his 2010, 2011 and 2012 taxes
implied to the jury that he was current with his recent tax
obligations when he in fact was not; he had failed to turn over
to the IRS the payroll taxes that he had withheld from employ-
ees in the last two quarters of 2013. Curtis countered that
income taxes and payroll taxes are different in kind, that the
charged conduct was too remote in time from the payroll tax
evidence, and that this evidence was in actuality propensity
evidence. The court ultimately ruled that Curtis opened the
door to admission of the evidence by suggesting to the jury that
he had paid in full his recent tax obligations. The government
then questioned Curtis about his failure to pay the payroll taxes.
R. 51, Tr. at 568-72. Specifically, the government questioned
Curtis regarding how he spent money that he withdrew from
his law firm and how he decided which bills to pay. The focus
of the questioning was that Curtis chose repeatedly to pay other
obligations instead of paying taxes, including the payroll taxes.
10 No. 14-2069
The government made no further mention of Curtis’s failure to
pay the payroll taxes in two quarters of 2013.
After the trial, we clarified the law governing Rule 404(b)
evidence in an en banc opinion in United States v. Gomez, 763 F.3d
845 (7th Cir. 2014):
In sum, to overcome an opponent's objection to the
introduction of other-act evidence, the proponent of
the evidence must first establish that the other act is
relevant to a specific purpose other than the person's
character or propensity to behave in a certain way.
See Fed.R.Evid. 401, 402, 404(b). Other-act evidence
need not be excluded whenever a propensity infer-
ence can be drawn. But its relevance to “another
purpose” must be established through a chain of
reasoning that does not rely on the forbidden infer-
ence that the person has a certain character and acted
in accordance with that character on the occasion
charged in the case. If the proponent can make this
initial showing, the district court must in every case
assess whether the probative value of the other-act
evidence is substantially outweighed by the risk of
unfair prejudice and may exclude the evidence under
Rule 403 if the risk is too great. The court’s Rule 403
balancing should take account of the extent to which
the non-propensity fact for which the evidence is
offered actually is at issue in the case.
Gomez, 763 F.3d at 860.
The government offered two reasons in support of admitting
the payroll tax evidence, neither of which relied on a forbidden
No. 14-2069 11
inference that Curtis had a certain character and acted in
accordance with that character during the three charged counts.
First, the evidence was relevant to rebut the implication that
Curtis had fully paid his recent tax obligations. As his counsel
conceded at oral argument, his testimony that he had fully paid
his 2010, 2011 and 2012 taxes was not generally relevant to his
intent for the charged years. In essence, though, that testimony
implied that his recent compliance demonstrated good faith.
With Curtis having opened the door to the relevance of his tax-
paying behavior after the charged conduct, the district court did
not abuse its discretion when it ruled that the government was
free to walk through that door. See United States v. Schmitt, 770
F.3d 524, 536 (7th Cir. 2014), cert. denied, — U.S. —; 2015 WL
998658 (Mar. 9, 2015) (a defendant “opens the door” to other-
wise inadmissible evidence when he affirmatively and genu-
inely places at issue the specific matter that the evidence is
being offered to establish). And the government used that
evidence in a manner that did not raise the wrongful propensity
inference. Instead, the government simply noted that Curtis had
used his earnings from his law firm to pay other expenses and
had neglected to pay the payroll taxes. When Curtis implied
that he was up-to-date with his tax obligations in 2010, 2011 and
2012 (some of which he paid in 2013), he placed at issue his non-
payment of other taxes in that same time frame.
The payroll tax evidence was also relevant to Curtis’s
anticipated defense that he acted with a good faith misunder-
standing when he failed to pay his taxes in the charged years.
Curtis contended in his defense that he mistakenly believed he
was in compliance because IRS agents allowed him repeatedly
to negotiate late payments through installment plans. See R. 51,
12 No. 14-2069
Tr. at 648 (where defense counsel argued in closing: “And it is
the defense in this case that George Curtis, by reason of his
experience with the Internal Revenue Service, had a good faith
understanding that his paying his taxes in an untimely fashion
was okay. It was not a crime.”). Had he known that he was
violating a criminal law, he implied, he would have paid his
taxes. That theory was refuted by evidence that he failed to pay
his payroll taxes even after he had been charged with a crime
for failing to pay income taxes, at a time when he could no
longer claim a good faith belief that late payments constituted
compliance with criminal laws. Although income taxes and
payroll taxes are different in kind, as a sole proprietor of his law
firm, Curtis was personally responsible for paying the payroll
taxes in the same way he was personally responsible for paying
his income taxes. And contrary to his claim that the incidents
were too far apart in time to be relevant, Curtis’s failure to pay
the payroll taxes was essentially contemporaneous with late
payments he made on his 2012 income taxes. Finally, this
evidence was highly relevant to the sole issue in the trial,
Curtis’s intent. In short, the court did not abuse its discretion by
allowing the evidence.
True, the district court could have explained its reasoning
more fully on the record. As we said in Gomez, the court must,
in every case, “assess whether the probative value of the
other-act evidence is substantially outweighed by the risk of
unfair prejudice and may exclude the evidence under Rule 403
if the risk is too great.” 763 F.3d at 860. Gomez was decided after
Curtis’s trial and so the district court did not have the benefit of
its reasoning. The court did not expressly engage in that
analysis on the record here, but any error was harmless. See
No. 14-2069 13
Fed. R. Crim. P. 52(a); Gomez, 763 F.3d at 863 (evidentiary errors
are subject to review for harmlessness). The test for harmless
error is whether, in the mind of the average juror, the prosecu-
tion's case would have been significantly less persuasive had the
improper evidence been excluded. Simon, 727 F.3d at 697; United
States v. Klebig, 600 F.3d 700, 722 (7th Cir. 2009). The govern-
ment produced substantial evidence that Curtis knew he was
obligated to pay his taxes, had the money to do so, and chose to
use that money to pay for other things instead. The payroll tax
evidence was lost in a sea of far more damning evidence
demonstrating Curtis’s intent. For example, during the three
charged years, Curtis had adjusted gross income of more than
$1.4 million but paid none of it toward his corresponding tax
liabilities of approximately $378,000 for that same time period.
Instead, he spent more than $1.1 million on personal expenses
that included $142,916 in life insurance premiums; $43,266 for
a new Lincoln Navigator luxury SUV; $17,730 worth of wine;
$32,775 in donations and political contributions; $6,945 on
jewelry; and $10,891 on his pets. Presented with these expendi-
tures and a list that also included gifts, firearms, restaurants,
department stores, and other purely discretionary spending,
any jury would conclude that Curtis had the money to pay his
taxes (at least in part) and simply chose not to. The govern-
ment’s case would have been equally persuasive without the
payroll tax evidence. Any error was therefore harmless.
B.
We can dispense with Curtis’s remaining issue in short
order. He asked the court to modify the pattern jury instruction
for willfulness to include a requirement that the government
prove that he acted with a bad motive or purpose. He also
14 No. 14-2069
asked for an instruction regarding his defense of good faith. The
court gave the requested good faith instruction but declined to
modify the pattern instruction. And the court was correct to do
so. The Supreme Court has expressly rejected a formulation of
the willfulness instruction that requires anything more than
proof of a voluntary, intentional violation of a known legal
duty. Pomponio, 429 U.S. at 12. The Court in fact rejected a court
of appeals holding that the criminal tax statute required “a
finding of a bad purpose or evil motive.” 429 U.S. at 11. More
recently, in Cheek, the Supreme Court again stated a formulation
of the meaning of “willfulness” that required “the Government
to 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.” Cheek, 498 U.S. at 201. It is not
necessary for the government to prove more than this and the
district court was correct to reject Curtis’s proposed instruction.
In any case, the court’s good faith instruction was sufficient to
address his asserted defense. As the instructions given were a
correct statement of the law, the court did not err. Simon, 727
F.3d at 698; Joshua, 648 F.3d at 554.
AFFIRMED.