IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
November 20, 2009
No. 08-31168 Charles R. Fulbruge III
Clerk
UNITED STATES OF AMERICA,
Plaintiff-Appellee
v.
GARLAND D. MILLER,
Defendant-Appellant
Appeal from the United States District Court
for the Western District of Louisiana
Before JONES, Chief Judge, and GARZA and STEWART, Circuit Judges.
CARL E. STEWART, Circuit Judge:
Defendant-Appellant Garland Miller appeals a conviction and sentence,
following a jury trial, on a two-count indictment alleging tax evasion in violation
of 26 U.S.C. § 7201. We AFFIRM.
I. BACKGROUND
Dr. Garland Miller (“Miller”) was a general practitioner with an office in
Zwolle, Louisiana. He employed six staff members, including his then-wife,
Rhonda Miller (“Mrs. Miller”),1 a registered nurse who worked with him to
manage the practice. Miller owned a clinical building that he leased to DeSoto
1
The Millers separated in July 2002 and divorced in 2003.
No. 08-31168
Regional Health System (“DeSoto”), a hospital in Mansfield, Louisiana. Miller
and DeSoto executed a lease agreement for the facility effective January 19,
2000. On January 6, 2000, Miller executed an employment agreement with
DeSoto, also effective January 19, 2000. Under that agreement, DeSoto paid all
the clinic’s expenses, set the fee schedules, retained ownership of records, and
was owed all income received after January 19, 2000, generated from patient
care or treatment at the clinic.2 In return, Miller and his staff became employees
of DeSoto. Miller was permitted to keep his accounts receivable earned prior to
the effective date of the agreement, and received a salary and bonuses. Miller
and DeSoto re-executed the employment agreement in March 2000 to reflect an
increase in Miller’s salary.
In 2002, a dispute arose over DeSoto’s salary payments to Miller.3 On
December 16, 2002, Miller and DeSoto mediated their differences and reached
a tentative agreement. The proposed agreement released both parties from all
claims related to past salary payments to Miller. The elements of the agreement
were handwritten and signed by Miller and DeSoto’s representatives, and were
subject to approval by DeSoto’s board of directors. Later that day, DeSoto’s
board held a special meeting to consider the proposed terms. The board initially
voted to reject the proposed settlement, but subsequently withheld voting until
the terms could be further clarified. On December 30, 2002, during its regular
meeting, the board agreed to draft an acceptable mediation settlement after
determining that the terms would indemnify Miller solely for past
2
The agreement included exceptions for some fees which are not relevant to this
appeal.
3
Due to a payroll error, Miller was paid at the salary rate under the first employment
agreement, not the increased rate in the second employment agreement.
2
No. 08-31168
compensation.4 The minutes of the December 30 meeting reflect that a letter
was sent to Miller terminating the employment agreement effective 30 days from
the letter’s mailing, and that the board planned to terminate the lease
agreement.
A few days after the December 30 board meeting, employees in DeSoto’s
billing department reported that Miller’s clinic was not disclosing all patient
visits and bills to DeSoto as required by Miller’s employment agreement. These
concerns were relayed to Ron Wolff (“Wolff”), DeSoto’s interim CEO.5 Wolff
conducted inquiries and determined that patient bills were being distributed and
collected directly by the clinic, instead of being sent to DeSoto to collect payment.
In addition, the funds collected were being deposited in Miller’s personal
business account, not into the clinic’s account established by DeSoto. These
actions violated the express terms of Miller’s employment agreement.
At a board meeting in mid-January 2003, Wolff disclosed his findings, and
the board decided to terminate Miller’s employment agreement effective
immediately. On January 24, 2003, Wolff and employees of DeSoto entered the
clinic to search for and remove patient files and billing records. After reviewing
Miller’s computers, they determined that the clinic’s Medical Manager software
(related to billing) contained two sets of invoices. The billing records and
invoices were turned over to local law enforcement officials, who in turn
contacted the IRS.
On March 28, 2007, Miller was indicted on two counts of tax evasion.
Specifically, Miller allegedly earned taxable income in 2000 and 2001 for which
taxes were due, but attempted to evade the tax by: (1) failing to timely file tax
4
The board did not vote to approve the settlement; instead, it decided to vote on the
agreement at a later time. No evidence was presented regarding whether the board
subsequently addressed the agreement.
5
Wolff joined DeSoto as interim CEO on January 2, 2003.
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No. 08-31168
returns; (2) failing to pay tax on the income; (3) “converting . . . payments to him
or his wife to cash and money orders”; and (4) “embezzling payments due to
DeSoto . . . which he then converted . . . to cash and money orders,” all in
violation of 26 U.S.C. § 7201.
Prior to trial, the district court denied Miller’s motion to admit evidence
of the mediation and negotiations related to his contract dispute with DeSoto.6
The district court ruled that the evidence was not admissible under Federal Rule
of Evidence (“FRE”) 408 or its exceptions. Even if the evidence was admissible,
the compensation claim was not relevant to the claims of embezzlement because
the alleged embezzlement was not a topic of the mediation, nor was it addressed
by DeSoto’s board when it considered the mediation settlement. The district
court also granted the Government’s motion in limine to exclude documents and
videotapes related to Miller’s membership in Save-A-Patriot Fellowship (“Save-
A-Patriot”), an organization which advocates that Americans are not obligated
to pay taxes based on interpretations of the Internal Revenue Code.7 Also
excluded was Miller’s proposed testimony regarding his beliefs about the
constitutionality or validity of the tax laws.
At trial, the Government presented extensive testimonial and
documentary evidence that Miller failed to maintain a personal bank account
during the tax years 2000 and 2001, and intermingled business and personal
transactions. The evidence also showed that Miller’s taxable income for 2000
and 2001 totaled $501,716.21, of which $89,130.35 remained outstanding.
6
Miller proffered the evidence at the conclusion of trial, including: (1) an unsigned
proposed receipt and release between Miller and DeSoto; (2) the handwritten “Elements of
Agreement” signed by the parties; (3) minutes from DeSoto’s board meetings held on December
16 and 30, 2002; and (4) summary of proposed testimony from the attorney who represented
Miller during the mediation.
7
The court ruled that Miller could testify at trial about his reliance on the Save-A-
Patriot materials.
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No. 08-31168
Further, the evidence demonstrated that Miller purchased approximately
$137,000 in money orders and cashier’s checks during 2000 and 2001. The high
volume of cash-based transactions made it difficult to determine Miller’s tax
liability for 2000 and 2001. Moreover, Miller failed to file tax returns or pay
income tax for tax years 1995 through 2001, but later resumed filing them for
tax year 2002.
Mrs. Miller testified, over Miller’s objections, regarding ongoing
conversations with Miller during their marriage in which they disagreed about
Miller’s decision not to file income tax returns. She also testified that she
ultimately consented to Miller’s decision, even though she believed that she was
committing a crime by failing to file. In a hearing outside the jury’s presence,
the court ruled that the testimony was not protected by the confidential marital
communications privilege because the conversations related to joint participation
in criminal activity—i.e., tax evasion.8
Miller was the sole witness for the defense. He testified that in 1995, after
being audited by the IRS, he joined Save-A-Patriot. He also studied materials
provided by Save-A-Patriot. Based on his study of the materials and of the
Internal Revenue Code, he believed that the income tax system was voluntary
and that he was not required to pay taxes, though he had filed tax returns in the
past. Because of this deeply held belief, he did not file tax returns for tax years
1995 through 2001. After DeSoto removed the billing records from the clinic,
Miller consulted legal counsel, who advised him to recommence filing returns.
He also testified that Mrs. Miller disagreed with his decision not to file tax
returns.
At the jury charge conference, Miller objected to the following jury
instruction regarding willful blindness or deliberate ignorance:
8
Mrs. Miller was not charged with any violations of the Internal Revenue Code.
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No. 08-31168
You may find that a defendant had knowledge of a fact if you find
that the defendant deliberately closed his eyes to what would
otherwise have been obvious to him. While knowledge on the part
of the defendant cannot be established merely by demonstrating
that the defendant was negligent, careless, or foolish, knowledge can
be inferred if the defendant deliberately blinded himself to the
existence of a fact.
The district court overruled Miller’s objection, and the instruction was read to
the jury at the close of trial.
On July 10, 2008, the jury returned a verdict of guilty on both counts.
Miller timely filed a motion for judgment of acquittal or, alternatively, for a new
trial. On October 31, 2008, the district court denied Miller’s motion. The district
court concluded that the evidence at trial supported the jury’s decision that
Miller actively and willfully attempted to evade paying income taxes. In
addition, the willful blindness/deliberate ignorance instruction was properly
before the jury given the evidence raised at trial regarding Miller’s conversion
and embezzlement activities. Miller was then sentenced to 48 months
imprisonment and was ordered to pay $55,470.94 in restitution to DeSoto,
$89,130.35 in outstanding tax obligations, and a $200 assessment. He timely
filed a notice of appeal.
II. DISCUSSION
Miller contends that the district court erred when it: (1) excluded evidence
that Miller and representatives of DeSoto negotiated a tentative settlement
agreement regarding disputed payments under Miller’s employment contract;
(2) overruled Miller’s objection to testimony from Mrs. Miller regarding
communications during their marriage, and assertion of the confidential marital
communications privilege; (3) included a deliberate ignorance instruction to the
jury at the end of the trial; and (4) denied Miller’s motion for acquittal.
6
No. 08-31168
A. Admissibility of Settlement Negotiations
The trial court’s evidentiary rulings are reviewed for abuse of discretion.
United States v. De Leon, 170 F.3d 494, 497 (5th Cir. 1999). Even if we find an
abuse of discretion, the exclusion of evidence is subject to harmless error
analysis. United States v. Haese, 162 F.3d 359, 364 (5th Cir. 1998), cert. denied,
526 U.S. 1138 (1999). Unless the exclusion of evidence affects a substantial
right of the defendant, we will affirm the district court’s evidentiary ruling. Id.
In addition, FRE 403 permits evidence to be excluded if “its probative
value is substantially outweighed by the danger of unfair prejudice, confusion
of the issues, or misleading the jury . . . .” F ED. R. E VID. 403. We have excluded
evidence that might require additional fact-finding to clarify issues for the jury.
Streber v. Hunter, 221 F.3d 701, 738 (5th Cir. 2000); see United States v.
Saldana, 427 F.3d 298, 307 (5th Cir. 2005).
The evidence regarding settlement negotiations in this case is excludable
on the grounds of relevance. As the district court correctly noted in the pre-trial
colloquy, the settlement evidence did not relate to Miller’s alleged embezzlement
activities. Instead, the negotiations were limited to resolving a dispute over
salary to Miller under the two employment contracts. The minutes of the board’s
meeting on December 30, 2002 reflect the board’s concern that the tentative
settlement not extend beyond compensation issues. Moreover, in December
2002, when the salary dispute was mediated, DeSoto’s board of directors was not
aware of any embezzlement. Evidence of the embezzlement arose in January
2003, after Wolff reviewed the terms of the agreement and billing records. The
evidence’s minimal probative value is outweighed substantially by the potential
to confuse the jury, as it is unrelated to the specific charges of tax evasion in the
indictment. See Saldana, 427 F.3d at 307.
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No. 08-31168
For these reasons, the district court did not abuse its discretion in
excluding the evidence regarding settlement negotiations. We therefore affirm
the district court’s ruling on this issue.9
B. Marital Communications
As stated, the trial court’s evidentiary rulings are reviewed for abuse of
discretion. DeLeon, 170 F.3d at 497.
The marital privilege encompasses two distinct privileges. The first
permits a married witness to refuse to testify adversely against his or her
spouse. The witness may neither be compelled to testify nor foreclosed from
testifying. Trammel v. United States, 445 U.S. 40, 53 (1980). The second bars
one spouse from testifying as to the confidential marital communications
between the spouses. United States v. Ramirez, 145 F.3d 345, 355 (5th Cir.
1998). The confidential communications privilege survives the marriage and
may be asserted by either spouse with respect to communications that occurred
during the marriage even after the marriage has terminated. See United States
v. Entrekin, 624 F.2d 597, 598 (5th Cir. 1980). The privilege applies only to
communications; it does not apply to acts. United States v. Koehler, 790 F.2d
1256, 1258 (5th Cir. 1986).
We have recognized an exception to the confidential marital
communications privilege for those “conversations between husband and wife
about crimes in which they are jointly participating . . . .” Ramirez, 145 F.3d at
355 (internal quotation omitted); United States v. Chagra, 754 F.2d 1181, 1183
9
The district court also ruled that the negotiations evidence was not admissible under
FRE 408, which forbids the admission of offers of compromise or negotiations for compromise
in certain civil cases, or its exceptions. FED . R. EVID . 408. Though we have held that Rule 408
applies in criminal cases, see United States v. Hays, 872 F.2d 582, 588-89 (5th Cir. 1989), there
is a split in authority in our sister circuits on this issue. See United States v. Bailey, 327 F.3d
1131, 1144-47 (10th Cir. 2003) (discussing circuit split). We decline to address the
applicability of FRE 408 to this criminal case, however, because the evidence regarding
settlement negotiations is excludable on the grounds of relevance.
8
No. 08-31168
(5th Cir. 1985). The testifying spouse need not be charged with a crime, so long
as the testimony conveys joint criminal activity. Ramirez, 145 F.3d at 355.
In a mini-hearing held outside the jury’s presence, Mrs. Miller testified
about the billing practices and procedures she handled at the clinic and
discussions she had with Miller during their marriage wherein they disagreed
about his decision not to file taxes. The district court determined that these
topics did not fall within the confidential marital communications privilege
relying on our holdings in Koehler and Ramirez.
The district court correctly overruled Miller’s objections. Mrs. Miller
testified regarding Miller’s practice of processing payments that were made to
the medical clinic. This testimony is not privileged because it refers to acts, not
communications. Koehler, 790 F.2d at 1258. She also testified about
conversations with Miller in which they discussed how to process checks and
whether they should go into business or personal accounts. This testimony
involved conversations about a joint criminal activity and thus is not protected
by the confidential marital privilege. Ramirez, 145 F.3d at 355-56. That Mrs.
Miller was not charged with any crime does not preclude a finding that there
was joint criminal activity. Id. at 355.
Mrs. Miller also testified that Miller decided not to file taxes after joining
Save-a-Patriot because he believed that filing taxes was not necessary and
unconstitutional. This statement is not privileged because, as noted, it involves
discussion of joint criminal activity. Ramirez, 145 F.3d at 355-56. Further, it
is not prejudicial because it is consistent with Miller’s testimony that he had a
good faith belief, based on his reliance on Save-A-Patriot materials, that he did
not have to pay taxes.
Miller also takes issue with the following testimony from Mrs. Miller:
Q. And do you think that during the time period of
‘96 to when you separated [from Miller] that you
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No. 08-31168
had been committing the crime of failing to file
your income taxes?
[Defense counsel’s objection, and the court’s
overrule]
A. Yes, ma’am.
Miller believes that this testimony only demonstrates “guilt by association.”
This argument fails because the testimony’s probative value is not substantially
outweighed by any danger of prejudice. See Saldana, 427 F.3d at 307. The
district court correctly determined that Mrs. Miller’s testimony described her
belief that she and her husband were involved in joint criminal activity, which
is both highly probative and important for determining whether the marital
privilege applies.
The district court did not abuse its discretion in overruling Miller’s
objection to Mrs. Miller’s testimony regarding discussions during the marriage
and his assertion of the confidential marital communications privilege.
Accordingly, we affirm the district court’s ruling on this issue.
C. Deliberate Ignorance Jury Instruction
We review the trial court’s decision to issue a deliberate ignorance
instruction for abuse of discretion. United States v. Orji-Nwosu, 549 F.3d 1005,
1008 (5th Cir. 2008). The district court may not instruct the jury on a charge
not supported by the evidence. United States v. Conner, 537 F.3d 480, 486 (5th
Cir. 2008). We consider whether “the charge, as a whole, was a correct
statement of the law and whether it clearly instructs jurors as to the principles
of the law applicable to the factual issues confronting them.” Orji-Nwosu, 549
F.3d at 1008 (internal citations omitted).
In assessing whether the evidence reasonably supports a charge, we
consider the evidence and all reasonable inferences that may be drawn from it
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No. 08-31168
in the light most favorable to the government. Conner, 537 F.3d at 486. Even
if the district court errs in its decision to give the deliberate ignorance
instruction, any such error is harmless “where substantial evidence of actual
knowledge was presented [at trial].” United States v. Ricardo, 472 F.3d 277, 286
(5th Cir. 2006).
The deliberate ignorance instruction at issue here is included as an
optional second paragraph to the definition of “knowingly” in our pattern jury
instructions. 5th Cir. Pattern Jury Instructs. No. 1.37. We have held that the
deliberate ignorance instruction is appropriate when the evidence shows that:
(1) the defendant was subjectively aware of a high probability of the existence
of illegal conduct, and (2) the defendant purposely contrived to avoid learning of
the illegal conduct. Conner, 537 F.3d at 486; United States v. Wisenbaker, 14
F.3d 1022, 1027-28 (5th Cir. 1994).
Miller timely objected to the deliberate ignorance instruction and was
overruled by the district court. This ruling will not be disturbed. The evidence
demonstrates that Miller was subjectively aware of a high probability of
existence of illegal conduct. He testified that he filed tax returns prior to 1996,
which supports a finding that he knew that filing was required. Further, Mrs.
Miller testified that Miller decided not to file tax returns after joining Save-a-
Patriot because he felt that filing was unnecessary and unconstitutional. These
facts are similar to Wisenbaker, in which defense witness testimony regarding
the defendant’s mental state defense was sufficient to support defendant’s
awareness of the existence of illegal conduct. 14 F.3d at 1027. Here, Mrs.
Miller’s testimony speaks directly to Miller’s mental state defense—i.e., a good
faith belief that he did not have to pay taxes—and purported “lack of guilty
knowledge.” Id.
Moreover, the district court’s ruling should not be disturbed because the
evidence demonstrates that Miller purposely contrived to avoid learning of the
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No. 08-31168
conduct. Miller testified that he did not consult with any attorneys or tax
professionals from 1996 through 2002, the tax years for which he did not file
returns. Like the defendant in Wisenbaker, Miller also chose not to file tax
returns after Mrs. Miller, who managed the clinic’s bookkeeping, disagreed with
him about his decision. Id. at 1027-28. In addition, he re-commenced filing in
2003 only after DeSoto investigated the clinic’s billing and accounting records,
and upon the advice of legal counsel. This evidence supports an inference that
Miller purposefully contrived to avoid learning of the illegal conduct.
Even if the instruction was improper, the error is harmless because, as
noted, there is ample evidence presented regarding Miller’s knowledge of the
illegality. For example, he knew that the Medical Manager software at the clinic
had two sets of books, both directly and from conversations with Mrs. Miller,
who managed the billing procedures. He also knew that he was required to file
taxes because he had done so in the past.
As a whole, the deliberate ignorance charge was a correct statement of the
law and clearly instructed jurors as to the principles of the law applicable to the
factual issues confronting them. Orji-Nwosu, 549 F.3d at 1008. The district
court did not abuse its discretion by including the charge. Therefore, we affirm
the district court’s ruling on this issue.
D. Motion for Acquittal10
Because Miller timely moved for a post-trial judgment of acquittal, we
review the denial of the motion de novo. United States v. McDowell, 498 F.3d
308, 312 (5th Cir. 2007). In deciding the sufficiency of the evidence, we
determine whether, viewing the evidence and the inferences that may be drawn
from it in the light most favorable to the verdict, a rational jury could have found
the essential elements of the offenses beyond a reasonable doubt. Id. We accept
10
Miller filed a motion for acquittal and, alternatively, for a new trial. Neither party
addresses the arguments regarding a new trial; accordingly, we do not address the issue.
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No. 08-31168
the jury’s credibility determinations “[u]nless a witness’s testimony is incredible
or patently unbelievable.” United States v. Lopez, 74 F.3d 575, 578 (5th Cir.
1996).
The relevant section of the Internal Revenue Code states:
Any person who willfully attempts in any manner to evade or defeat
any tax imposed by this title or the payment thereof shall, in
addition to other penalties provided by law, be guilty of a felony and,
upon conviction thereof, shall be fined not more than $100,000
($500,000 in the case of a corporation), or imprisoned not more than
5 years, or both, together with the costs of prosecution.
26 U.S.C. § 7201. The elements of a violation of 26 U.S.C. § 7201 are: (1)
existence of a tax deficiency; (2) an affirmative act constituting an evasion or an
attempted evasion of the tax; and (3) willfulness. United States v. Nolen, 472
F.3d 362, 377 (5th Cir. 2006).11
Affirmative acts that satisfy the second element may include keeping
double sets of books, concealment of assets, or “any conduct, the likely effect of
which would be to mislead or to conceal.” Spies v. United States, 317 U.S. 492,
499 (1943); see also United States v. Robinson, 974 F.2d 575, 577 (5th Cir. 1992).
To prove willfulness, the third element, the government must show that: (1) the
law imposed a duty on the defendant; (2) the defendant knew of that duty; and
(3) the defendant voluntarily and intentionally violated that duty. Cheek v.
United States, 498 U.S. 192, 201 (1990); United States v. Simkanin, 420 F.3d
397, 404 (5th Cir. 2005).
The evidence at trial sufficiently demonstrates Miller’s evasion. It is
undisputed that he failed to file tax returns for tax years 2000 and 2001, as
charged in the indictment. Further, Miller acted affirmatively when he
converted payments made to the clinic to cash, money orders, and cashier’s
11
The parties agree that the evidence is sufficient to prove the first element, the
existence of a tax deficiency; accordingly, that element is not at issue in this appeal.
13
No. 08-31168
checks. Witnesses testified that Miller’s practice of converting payments made
to the clinic made it difficult for the IRS to determine his income. These
affirmative acts had the “likely effect of mislead[ing]” the IRS, and precluded the
agency from effectively assessing his tax liability. Spies, 317 U.S. at 399;
Robinson, 974 F.2d at 577. Moreover, Wolff testified that the Medical Manager
software on Miller’s clinic’s computers included double sets of billing records.
Viewing the evidence in the light most favorable to the verdict, the affirmative
acts of keeping double records and conversion, coupled with the failure to file,
support a finding of evasion.
In addition, the evidence supports the jury’s finding of willfulness under
the Cheek standard. Miller testified that he withheld taxes after becoming a
member of Save-A-Patriot and studying the tax laws in late 1995. Miller,
however, permitted taxes to be withheld from his earnings prior to 1996, which
demonstrates that he knew of the duty to pay appropriate income tax. Miller
also did not consult with any tax professionals regarding his failure to file taxes
for 2000 and 2001, though he had done so in the past. Based on this evidence,
the jury could have reasonably determined that Miller knew he had a duty to
pay taxes and knowingly violated that duty.
III. CONCLUSION
Miller has failed to demonstrate that the district court abused its
discretion in its evidentiary rulings or jury instruction. He also has not
demonstrated that the district court incorrectly applied the law in denying his
motion for an acquittal. For the foregoing reasons, we AFFIRM his conviction
on both counts.
14