United States v. Powers

United States Court of Appeals
For the First Circuit

Nos. 11-2295, 11-2359

UNITED STATES,

Appellee,

v.

MICHAEL POWERS; JOHN MAHAN,

Defendants, Appellants.

APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Nathaniel M. Gorton, U.S. District Judge]

Before

Lynch, Chief Judge,
Selya and Stahl, Circuit Judges.

Dana A. Curhan for appellant Michael Powers.
Robert L. Sheketoff, with whom David R. Yannetti was on brief,
for appellant John Mahan.
Vassili N. Thomadakis, Assistant United States Attorney, with
whom Carmen M. Ortiz, United States Attorney, was on brief, for
appellee.

December 14, 2012
 LYNCH, Chief Judge. Michael Powers and John Mahan, who

ran an employment agency from 1998 to 2004 supplying temporary

workers, were both convicted after an eight-day jury trial of

conspiracy to defraud the United States by impeding the functions

of the Internal Revenue Service ("IRS") and mail fraud. Powers was

also convicted of subscribing false tax returns and Mahan of

procuring false tax returns. All told, the tax fraud amounted to

$7,592,003.55. As part of the fraud, they underreported the amount

of the payroll to the agency's workers' compensation insurance

carriers. Powers is serving a total term of imprisonment of 84

months; Mahan, a term of 76 months. Each was ordered, jointly and

severally, to pay total restitution of $8,805,277.36 to the IRS and

two insurance carriers.

Their appeals do not contest the sufficiency of the

evidence but rather allege that there were serious errors at trial

which require that they be given a new trial.

There is a common theme to the arguments: that each error

undercut a major theory of defense. The theory was that they in

good faith believed their agency, Commonwealth Temporary Services

("CTS"), was not an employer of any of the temporary workers and

that they did not knowingly defraud the government of payroll taxes

by paying the workers in cash and not reporting their payments to

the government or to the insurers. They pointed out that they

conceded that payments were made in cash, that no Forms W-2 were

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given to the workers, that no Forms 1099 were given to anyone,

including their recruiters and subcontractors, and that Federal

Insurance Contributions Act ("FICA") tax was not withheld. Their

position was that CTS was no more than a broker for the hiring

company which needed the workers and that CTS was not the employer

who owed the taxes; rather, the CTS subcontractors were.

Most seriously, they complain that the trial judge failed

to give a defense instruction on advice of counsel, inappropriately

placing too high a burden on them to justify the instruction. They

also assert that various witnesses were allowed to testify as to

the ultimate issues, invading the role of the jury, and they should

have been allowed to call witnesses to support their defense.

I.

Because there is no challenge to the sufficiency of the

evidence, we do not recite it in the light most favorable to the

verdict. United States v. Hardy, 37 F.3d 753, 755 (1st Cir. 1994).

Rather, we provide a more neutral recitation to give context for

the claims of error. United States v. Morla-Trinidad, 100 F.3d 1,

2 (1st Cir. 1996).

A. CTS's Mode of Operation

In 1998, Powers and Mahan started CTS. CTS's Articles of

Organization listed Powers and Mahan as the agency's sole

directors, with Mahan as President and Powers as Treasurer and

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Clerk. Before starting CTS, Powers and Mahan had both worked at

another temporary employment agency, Daily A. King ("DAK").

CTS provided temporary workers to facilities such as

warehouses and recycling plants to perform manual labor. CTS

entered into contracts with client companies that set out the rates

which the clients would pay CTS per worker hour. Clients called

CTS to request a particular number of workers and CTS communicated

the client order to "recruiters," some of whom had been temporary

workers themselves before CTS approached them to recruit workers

for CTS. CTS told the recruiters how many men and women were

needed, what clothes the workers should wear, and how to get to the

client facilities. The recruiters then found workers for CTS.

Powers set the workers' rate of pay and CTS informed the

recruiters what the rate was. CTS did not ask recruiters how much

it would cost to find workers, and recruiters did not provide a

quote to CTS for how much workers would cost. Recruiters did not

send CTS invoices for finding workers. CTS paid the recruiters a

commission of fifty cents per hour for each worker, plus an extra

fifty cents per hour if the recruiters transported the workers to

the client company.

CTS provided client companies with blank timesheets that

the clients filled out and returned to CTS each week. CTS then

created invoices listing workers' names, the hours they worked, and

the billing rate, and submitted them to clients. After CTS had

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collected and added up the timesheets each week, Powers or Mahan

wrote a check for the total amount, sometimes above $100,000, that

would be cashed and the cash distributed to the workers. Powers

and Mahan divided the cash into separate quantities for each

recruiter and placed the cash in bags, working from paysheets that

listed workers' names, the hours they worked, and their pay rate.

Each bag was then given to a recruiter with a paysheet so the

recruiters could pay the workers. CTS also paid recruiters and

some CTS office workers in cash. Between January 1, 2000 and June

30, 2004, CTS cashed checks totaling $26,563,854.

B. CTS's Failure to Pay Payroll Taxes or File Forms 1099

Employers report payroll paid to employees to the IRS

each quarter using a Form 941. Employers pay FICA taxes, also

known as payroll taxes, in connection with the filing of Form 941.

The total payroll tax rate during the relevant period was 15.3% of

an employee's wages; employers are to withhold half of the payroll

tax amount from employees' paychecks, and to pay the other half

themselves. Employers are also supposed to withhold federal income

tax from employees' wages. CTS filed Forms 941, but it did not

report the cash wages paid1 and did not pay payroll taxes or

withhold any taxes. Powers and Mahan did not instruct recruiters

to withhold taxes from wages paid to temporary workers. Joseph

1
CTS filed Forms W-2 disclosing wages paid to Powers, Mahan,
and four or five other CTS employees, but did not file Forms W-2
for temporary workers or recruiters.

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Guidoboni, a revenue agent in the IRS Special Enforcement Program,

estimated at trial that the total tax due on the unreported payroll

was $7,592,003.55.

When a company uses contract laborers rather than

employees, it is still required to file a Form 1099 whenever it has

paid an individual or unincorporated business more than $600 in a

calendar year. In 2000, Powers and Mahan hired Joyce Christensen,

a certified public accountant, to prepare their corporate and

personal tax returns. Powers and Mahan told Christensen that

$1,923,155 was to be deducted on CTS's tax return as contract

labor, and that these contract laborers were temporary workers.

Christensen told the defendants that CTS needed to file a Form 1099

for anyone classified as a contract laborer and explained how to

determine if someone was an employee (requiring the filing of a

Form W-2) or a contract laborer (requiring the filing of a Form

1099). Christensen sent a letter to the defendants on March 9,

2000, reiterating that "properly classified independent contractors

should receive a Form 1099 at the end of each calendar year. If

you fail to provide the proper forms, you could have exposure to a

large tax liability." Christensen stopped working with the

defendants for the 2000 tax year because they would not follow her

advice. During the charged conspiracy period, from 2000 to 2005,

CTS did not file any Forms 1099 with the IRS.

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C. CTS's Underreporting of Payroll to Insurance Carriers

With certain exceptions not relevant here, Massachusetts

employers are responsible for maintaining workers' compensation

insurance for everyone to whom the employer makes payments. Upon

the expiration of each policy term, the insurance company audits

the employer and reviews the employer's records to determine, inter

alia, the actual remuneration paid by the employer to individuals

and businesses during the previous year, including payments to

subcontractors or contract labor. The audit then arrives at a

final premium figure for the policy term that determines whether

the employer owes additional money to the insurer or the insurer

owes the employer a rebate.

CTS was audited by its workers' compensation insurance

carriers several times. CTS failed to report all of its payroll to

its auditors, resulting in its carriers underbilling it by more

than $200,000 between June of 2000 and February of 2005.

D. Powers' and Mahan's Statements in the DAK Investigation

In April of 2000, Powers met with Federal Bureau of

Investigation ("FBI") agent Nancy McCormick and a representative of

the U.S. Attorney's office to discuss the business practices of

DAK, his previous employer. Powers explained that DAK was a

temporary employment agency, and said that the majority of DAK's

payroll involved off-the-books cash payments. Powers described how

he cashed checks for DAK, and how this cash was then divided into

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envelopes and given to "lieutenants" to distribute to temporary

workers. Powers provided Agent McCormick with a hard drive

containing Excel spreadsheets recording cash payments to temporary

workers that were not disclosed on DAK's Forms 941, and also said

that DAK's cash payments were designated as contract labor on DAK's

tax returns. Powers stated that DAK's cash payments had not been

reported to DAK's workers' compensation insurance carriers and that

DAK had withheld no tax from these cash payments. Powers was the

first person to meet with Agent McCormick and provide information

about DAK, and he ultimately spoke with Agent McCormick five times

between April of 2000 and May of 2001.

In 2002, Mahan met with Joel Burman, an IRS Criminal

Investigation special agent, to discuss DAK. During Mahan's

interview, he explained that DAK and its affiliated companies paid

their employees with cash and used "managers" to recruit, pick up,

transport, and pay their employees. Mahan stated that DAK

underreported its payroll to its workers' compensation carriers in

order to reduce its premiums.

Federal agents then obtained a search warrant on June 25,

2001 to search the offices of DAK and its affiliated companies.

The investigation culminated in the indictment, trial, and

conviction of DAK's owners for mail fraud, procuring false tax

returns, and conspiring to defraud the United States of employment

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and income taxes and to commit insurance fraud. See United States

v. McElroy, 587 F.3d 73, 74, 76 (1st Cir. 2009).

E. Massachusetts Department of Unemployment Assistance
Proceedings Against CTS

Massachusetts employers are required to contribute to the

state unemployment assistance fund in an amount determined, in

part, by how many employees they have. Employers report the

information upon which their contributions to employment assistance

are based to the Massachusetts Department of Unemployment

Assistance ("DUA") each quarter, and some employers are then

selected to be audited.

In July of 2000, Roberta Davis of the DUA notified CTS

that it had been selected for an audit focusing on CTS's operations

during 1998. CTS retained attorney Edward DeFranceschi with

respect to the DUA matter. On September 1, 2000, CTS provided

Davis with a "transaction report" that reflected a number of cash

disbursements. During a follow-up meeting with Davis, DeFranceschi

and Powers characterized the recipients of these disbursements as

"subcontractors."

Davis requested additional "documentation, whether it's

business cards, invoices, contracts, Yellow Pages, something to

show me that these people are in business for themselves," as well

as Forms 1099 and other back-up documentation. Davis asked for

more documentation about one of CTS's recruiters, Jose Gramajo, and

his wife, Delmy Gramajo, who transported workers for CTS.

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 In February of 2000, DeFranceschi sent Davis a letter,

with a copy to Powers, in which he stated:

CTS routinely calls Delmy and Jose to handle certain jobs
that it has acquired. Delmy and Jose, however, are not
CTS employees. Each of them and several others quote a
price. If the price is within the profit targets CTS
quotes the customer, they complete the job and are paid.

On February 21, 2000, DeFranceschi sent Davis another letter

stating that:

You asked about invoices from the persons who had
received large payments from Commonwealth Temp Services
(CTS). I have enclosed three invoices from 1998 and a
current invoice. . . . CTS solicits situations requiring
unskilled labor. . . . If CTS successfully bids the job,
it contacts various parties that it has done business
with in the past and inquires if they are interested in
doing the job at a fixed rate for labor and
transportation. CTS usually finds someone to organize
the labor for the job. The invoices I have enclosed
represent the billing for the jobs to CTS. . . . Please
note the detail in the February 4, 2001 invoice from
K & S Comm & Domestic Services. The job, the labor and
the transportation are all separately stated.

Two of the enclosed invoices purported to be from Delmy Gramajo.

Powers had faxed the enclosed invoices to DeFranceschi on an

undisclosed date with the note: "3 early and 1 recent invoice --

These are good representatives of the type of invoices we rec'd

then and now."

In fact, Delmy Gramajo never submitted any invoices to

CTS, much less the "invoices" that DeFranceschi provided to Davis.

Neither did Jose Gramajo. The invoice that DeFranceschi identified

as "from K & S Comm & Domestic Services" was actually a paysheet

that CTS had originally provided to Jose Gramajo.

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 On April 6, 2004, the DUA issued a determination to CTS

that twelve listed individuals "and others similarly employed" were

"in 'employment,'" making "them your employee(s) and not

independent contractor(s)."

CTS appealed and hearings were held on June 9, 2004 and

July 1, 2004, which Powers, Mahan, and attorney DeFranceschi

attended. Powers testified under oath that he did not know the

"medium of payment" between the recruiters and the temporary

workers; that for each new job he contacted the recruiters to

solicit a price from them for which they would be willing to find

workers; that the recruiters, at least initially, invoiced CTS for

the services they performed; and that he did not have direct

knowledge of the amount the temporary workers were paid. The DUA,

in an undated decision signed by review examiner Scott E. Pachico,

affirmed the determination that "an employer-employee relationship

existed between [the listed] individuals [and others similarly

employed] and Commonwealth Temporary Services, Inc." This decision

made CTS liable for unemployment contributions for its temporary

workers, and Powers and Mahan then shut down CTS's operations in

December of 2004.

F. Powers' Statements to IRS Criminal Investigators

During a 2006 interview with IRS Agent David Butka,

Powers stated that CTS used "subcontractors," but had no contracts

with these "subcontractors" and paid them in cash, which the

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"subcontractors" paid to the workers. Powers stated that the

"subcontractors" requested that the payments be in cash and that he

did not know whether the temporary workers were paid in cash.

Powers said that the "subcontractors" initially submitted invoices

to CTS but that CTS eventually began directly incorporating

information from the "subcontractors" into its internal

spreadsheets.

Powers admitted that CTS did not issue Forms 1099 to the

"subcontractors," but insisted that accountants never discussed

Forms 1099 with him and that he was not familiar with the Form 1099

filing requirements.

II.

We treat each of the claims presented on appeal.

A. Refusal to Give Advice-of-Counsel Instruction

Although the government, in its initial proposed jury

instructions given to the district court on the fourth day of

trial, requested that an advice-of-counsel instruction2 be given,

2
The government's proposed instruction stated in part that:

You have heard evidence that the defendants received
advice from a lawyer and you may consider that evidence
in deciding whether the defendants acted willfully and
with knowledge of wrongdoing.

The mere fact that the defendants may have received legal
advice does not, in itself, constitute a complete
defense. Instead, you must ask yourselves whether the
defendants:

(1) honestly and in good faith sought the advice of a

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this was apparently based on defense counsel's representation in

his opening statement that he would call attorney DeFranceschi to

testify that he advised the defendants that their position -- that

neither recruiters nor temporary workers were employees of CTS --

was "litigable" and "reasonable." By day seven of trial, the

defense had not called DeFranceschi, and the defense never did so.

At the charge conference the government stated that it was

withdrawing the request. Defense counsel asked that the

instruction be given.

The district court decided not to give an advice-of-

counsel instruction, giving two reasons: (1) "the defendants have

presented no evidence that they fully advised Attorney DeFranceschi

of their plan, received advice regarding that plan before 2000, and

followed that exact advice in good faith"; and (2) "even if there

were some basis for an advice of counsel instruction, that

instruction is subsumed by the general good-faith instruction that

the Court will give."

It is a basic tenet of criminal law that a defendant is

entitled to an instruction on his theory of defense provided that

lawyer on legal questions about which they were in
doubt;
(2) whether they fully and honestly laid all the facts
before their lawyer; and
(3) whether in good faith they strictly followed such
advice, relying upon it and believing it to be
correct.

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the theory is a legally valid one and there is evidence in the

record to support it. United States v. Rodriguez, 858 F.2d 809,

812 (1st Cir. 1988) (instruction regarding entrapment). In making

this determination, the district court is forbidden from weighing

the evidence, making credibility determinations, or resolving

evidentiary conflicts. Rather, the court must take the evidence in

the light most favorable to the defendant, to see if the inferences

and evidence can plausibly support the theory of the defense. Id.

These same rules are used for the defense of good faith

reliance on the advice of counsel. See United States v.

Christopher, 142 F.3d 46, 55 (1st Cir. 1998). We review these

determinations de novo. See United States v. Howard, 687 F.3d 13,

18 (1st Cir. 2012); United States v. Sánchez-Bérrios, 424 F.3d 65,

76 (1st Cir. 2005); Rodriguez, 858 F.2d at 812. This is different

from the abuse of discretion standard in some other circuits. See,

e.g., United States v. Bush, 626 F.3d 527, 538-39 (9th Cir. 2010).

There is no claim the good-faith instruction was flawed.

Here, it was essential to the prosecution to show beyond

a reasonable doubt that the defendants had knowingly committed the

charged offenses. The crimes with which defendants were charged

required an intent to impede or defraud, or wilfully making or

aiding a false representation. See United States v. Mubayyid, 658

F.3d 35, 57 (1st Cir. 2011) (conspiracy to defraud the IRS); United

States v. Stergios, 659 F.3d 127, 132 (1st Cir. 2011) (mail fraud);

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26 U.S.C. § 7206(1) (subscribing false tax returns), (2) (procuring

false tax returns). If the defendants had acted pursuant to advice

of counsel, this would have been very useful evidence for them of

lack of fraudulent intent or wilfulness. See United States v.

Ibarra–Alcarez, 830 F.2d 968, 973 (9th Cir. 1987).

The circuits have provided some guidance as to the types

of facts which will warrant giving an advice-of-counsel

instruction. Some have suggested a defendant must show that he or

she fully disclosed all material facts to his/her attorney before

the advice was given, that the attorney gave that advice, and that

the defendant actually relied on counsel's advice in a good faith

belief that his/her conduct was lawful. See Bush, 626 F.3d at 539;

United States v. Rice, 449 F.3d 887, 897 (8th Cir. 2006). We have

been clear that the defense "is not available to one who omits to

disclose material information to advisors or dictates imprudent

outcomes to advisors." Janeiro v. Urological Surgery Prof'l Ass'n,

457 F.3d 130, 140 (1st Cir. 2006). That principle disposes of this

claim.

At trial, the defendants chose not to testify and not to

call DeFranceschi -- whom they first consulted in 2000 to represent

them before the DUA -- as a witness. The prosecution introduced

exhibits demonstrating that Powers had faxed phony invoices to

DeFranceschi and represented to him that they were "good

representatives of the type of invoices we rec'd then and now" from

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recruiters. The government also introduced evidence that

DeFranceschi represented to Davis, copying Powers, that CTS's

recruiters "quote a price. If the price is within the profit

target CTS quotes the customer, they complete the job and are

paid." DeFranceschi would have no first-hand knowledge of this and

was likely repeating representations made to him. Legal advice

made based on material misrepresentations to counsel does not

qualify for the defense. There was no evidence that Powers

corrected this statement, which he knew to be a misrepresentation.

Defendants assert that "[i]t is clear from the record

evidence that Attorney DeFranceschi knew the material facts about

the CTS business model and advocated that the model was

appropriate." They have pointed to no evidence that this was so,

that DeFranceschi advised them that their actions were legal, or

that they relied on such advice. In light of the evidence that

attorney DeFranceschi was not told needed information and was given

false information, the instruction was unavailable.

We add that the ample good-faith instructions cured any

possible harm to the defendants. The good-faith instructions given

were as follows: concerning the general meaning of "knowingly":

"[i]f the defendant acted in good faith . . . that is a defense to

the charge that he acted in a knowingly criminal manner";

concerning the mail fraud charge: "if the defendant acted in good

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faith, he cannot be guilty of the crime"; and concerning the

charges of subscribing or procuring false tax returns:

if the defendant then under consideration in good faith
believed that he paid all the taxes he owed, he cannot be
guilty of criminal intent to evade taxes. Therefore, if
you find that the defendant then under consideration
honestly believed that he owed no taxes, even if that
belief was unreasonable or irrational, then you should
find him not guilty. However, you may consider whether
the defendant's belief was actually reasonable as a
factor in deciding whether he held that belief in good
faith.

These instructions adequately conveyed that an absence of intent to

defraud, or an honest belief that taxes were not owed, would shield

defendants from conviction. The defendants have not argued that

the instructions would not encompass a situation in which their

good-faith belief was based on the advice of counsel. We do not

suggest that the presence of a good-faith instruction invariably

eliminates the need for a court to consider an advice-of-counsel

instruction. But here, there could have been no prejudice to

defendants. See United States v. Allen, 670 F.3d 12, 15 (1st Cir.

2012).

B. Admission of Testimony on Conclusions Purportedly Related
To Ultimate Issues

We review a trial court's rulings admitting or excluding

evidence for abuse of discretion where the appellant lodged a

contemporaneous objection on the proper ground; where no such

objection was made, we review these rulings for plain error.

United States v. Perez-Ruiz, 353 F.3d 1, 10 (1st Cir. 2003).

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 1. Testimony of IRS Agent Guidoboni

Agent Guidoboni was called as a summary witness who

presented calculations of the payroll taxes due and owing after

examination of voluminous exhibits. In the course of this, he

referred to the cash payments as "cash payroll." Defendants filed

an unsuccessful pretrial motion in limine to exclude Agent

Guidoboni's testimony and renewed it at trial, again

unsuccessfully. Defendants argue that the agent's characterization

of the cash distributions to workers as "unreported payroll" was

improper. They say this was a legal conclusion reserved to the

jury.

The objection is foreclosed by United States v.

Stierhoff, 549 F.3d 19 (1st Cir. 2008), and United States v.

McElroy, 587 F.3d 73 (1st Cir. 2009). Indeed, in McElroy we

approved exactly this type of testimony, and Guidoboni was the

witness there, as well. 587 F.3d at 81-83. IRS agents may testify

as summary witnesses in tax evasion cases to "analyze facts already

introduced into evidence and spell out the tax consequences that

necessarily flow from those facts." Stierhoff, 549 F.3d at 28.

One "limitation on this type of evidence is that the agent may not

testify about the defendant's state of mind." United States v.

Mikutowicz, 365 F.3d 65, 72 (1st Cir. 2004). Nor may he testify as

to the meaning of provisions of the Internal Revenue Code. Id. at

73. Agent Guidoboni did neither.

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 Agent Guidoboni "ma[d]e assumptions concerning the proper

attribution of the income from the transactions in this case" in

identifying the tax consequences of these transactions, but his

assumptions were supported by evidence in the record. United

States v. Diez, 515 F.2d 892, 905 (5th Cir. 1975). Agent Guidoboni

calculated CTS's cash payroll by adding the value of the checks CTS

cashed during this period. His method was supported by the

testimony of Manuel Deaguiar, CTS's office manager, that CTS cashed

checks in order to pay recruiters and temporary workers and the

fact that his figure roughly matched CTS's own deductions, reported

to the IRS, for "contract labor" over this period.

Agent Guidoboni then calculated the taxes owing on this

amount by assuming that these payments went to workers who were CTS

employees. This assumption was supported by testimony at trial

that defendants: (1) controlled where and when recruiters and

temporary workers worked; (2) determined how much recruiters and

temporary workers earned; (3) distributed cash to recruiters for

direct payment to recruiters and temporary workers; (4) addressed

problems that client companies had with temporary workers; (5)

addressed temporary workers' complaints about their pay; (6)

oversaw treatment of injured temporary workers; (7) had no

contracts with recruiters; and (8) permitted recruiters and

temporary workers to quit at any time. See 26 U.S.C. § 3121(d)

(defining employee as "any individual who, under the usual common

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law rules applicable in determining the employer-employee

relationship, has the status of an employee"); Nationwide Mut. Ins.

Co. v. Darden, 503 U.S. 318, 323-24 (1992) (enumerating thirteen-

factor common-law test for determining whether a hired party is an

employee); Rev. Rul. 87-41, 1987-1 C.B. 296 (enumerating twenty

factors to consider in determining whether an individual is an

employee or an independent contractor). Further, Agent Guidoboni

explicitly conceded that his analysis rested on this assumption and

defense counsel cross-examined him on this point. The district

court did not abuse its discretion in admitting Agent Guidoboni's

testimony.

2. Testimony of Deaguiar, Novick, Brady, McKenna,
Soto, and Davis

Defendants challenge the testimony of several witnesses

on the basis that they "expressed legal or factual conclusion[s] on

key disputed issues that should have been left to the jurors." A

lay witness may offer an opinion so long as it is "(a) rationally

based on the witness's perception; (b) helpful to clearly

understanding the witness's testimony or to determining a fact in

issue; and (c) not based on scientific, technical, or other

specialized knowledge within the scope of Rule 702." Fed. R. Evid.

701; see also United States v. Sanabria, 645 F.3d 505, 515-16 (1st

Cir. 2011). "An opinion is not objectionable just because it

embraces an ultimate issue." Fed. R. Evid. 704(a).

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 Deaguiar over objection described the individuals who

recruited temporary workers for CTS as "recruiters." Defendants

argue that this term "strongly suggested the conclusion that the

government was attempting to prove." Deaguiar's term accurately

describes what these "recruiters" did for CTS, and he testified

that Powers and Mahan themselves used this term. Deaguiar also

testified that defendants used the terms "'recruiters' and

'independent contractors' . . . interchangeably." His testimony

was not on any ultimate conclusion.

Defendants argue that Bruce Novick, an accountant who

prepared tax returns for Mahan and Powers between 2000 and 2004,

expressed the opinion that the only legitimate reason for CTS not

to file Forms 1099 would be on the condition that CTS was paying

the claimed amounts to corporations. Defendants overread Novick's

testimony. In reality, Novick merely testified, over objection,

that (1) payments in excess of $600 to individuals who are not

corporations require filing of a Form 1099, and (2) Powers told him

CTS was not filing Forms 1099 because the payments for contract

labor were to other corporations. Neither statement invaded the

province of the jury.

John Brady, plant manager and human resources manager at

a CTS client, testified, over objection, that his understanding was

that temporary workers "work for the agency that I'm hiring them

through." He did so only after testifying that the temporary

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workers were not employees of his company. Mahan argues that this

was inadmissible opinion testimony on the ultimate factual issue in

the case. We see no abuse of discretion. Brady merely stated his

understanding of whom the temporary workers "worked for," and did

not attempt to explain the legal significance of this

understanding.

Andrea McKenna, a human resources manager at another CTS

client, testified, over objection, that she understood that the

recruiters "worked for" CTS. Defendants challenge this testimony

for reasons similar to those advanced regarding Brady's testimony.

Admitting this testimony was likewise not an abuse of discretion.

Mahan also argues that McKenna "opine[d], over the

defendant's objection, that with temporary workers the agency was

responsible for the payroll taxes." She did so after testifying

that temporary workers were not on the payroll of her company.

Mahan argues that she should not have been permitted to go further,

that the jury was in a better position to decide this, and that her

views were not helpful to the jury. To the extent that McKenna

expressed an opinion, it helped the jury understand why clients pay

a premium to temporary employment agencies. Further, the contract

between CTS and this client -- which was introduced without

objection -- stated that CTS "will pay all applicable local, state

and federal payroll taxes on all labor provided." McKenna's

testimony buttressed that the parties' conduct was consistent with

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the contract. It could not have been prejudicial to the

defendants.

Jose Soto, a recruiter for CTS, testified, over

objection, that he did not consider himself an independent

contractor. He explained that he understood an independent

contractor to be "somebody who works for himself and pays his own

taxes," and stated that he was not such a person because CTS was

"paying me in cash." To the extent that this statement offered a

lay opinion, it was helpful to the jury and the criteria on which

Soto relied were explicit and subject to attack. Indeed, defense

counsel cross-examined Soto on this subject, eliciting that "you

knew that the term 'independent contractor' meant that you were

responsible to pay your own taxes" and that "if you admitted you

were an independent contractor . . . that would not be a very good

thing for you."

Defendants challenge as inadmissible Davis's testimony

that temporary employment agencies often provided inaccurate

information to the DUA. In a separate argument, defendants also

argue that the court erred in (1) permitting Davis to testify that

certain individuals, including Delmy Gramajo and Jose Gramajo, were

employees of CTS; and (2) refusing to permit defense counsel to

cross-examine Davis about this conclusion.

Davis testified, over objection, that temporary

employment agencies "don't always give you the correct amount of

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names and numbers." Defendants argue that in eliciting this

testimony "the government asked the jurors to assume, based on the

past experiences of Ms. Davis with other companies in the same

business, that CTS and its agents were engaged in the same pattern

of wrongful conduct." While "[t]he threat of guilt by association

is perhaps greatest where the defendant has done little but is

closely associated with others already known to have been

convicted," Allen, 670 F.3d at 16, it is a leap too far to find

that threat here. Davis did not testify that furnishing incorrect

names or numbers to the DUA, without more, could constitute

"wrongful conduct" warranting conviction, and she did not claim

that defendants were closely associated with persons who had

committed wrongful conduct. Instead, her testimony helped the jury

understand why lengthy DUA audits were sometimes necessary. And

there was ample evidence that defendants had submitted inaccurate

reports, rendering this testimony harmless. The court did not

abuse its discretion in admitting this testimony.

On the second point, Davis did agree that "the

individuals you highlighted, including Delmy Gramajo and Jose

Gramajo, were employees," but she did so in response to a question

from defense counsel. "[A]n 'attorney can . . . waive his client's

right to raise an error on appeal by deliberately eliciting or

relying on inadmissible evidence,'" United States v. Vachon, 869

F.2d 653, 658 (1st Cir. 1989) (second alteration in original)

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(quoting J. Weinstein & M. Berger, Weinstein's Evidence ¶ 103 [02]

(1988)). Defense counsel did just that here for sensible tactical

reasons: to elicit from Davis that attorney DeFranceschi indicated

he "did not agree with that assessment and that these people,

including Delmy Gramajo and Jose Gramajo, were subcontractors."

As for the challenge to restrictions on the cross-

examination of Davis, "[w]e review this challenge de novo to

determine whether defense counsel was afforded a reasonable

opportunity to impeach adverse witnesses. Should that threshold be

reached, any restrictions that were placed on the extent and manner

of the cross-examination will be reviewed for abuse of discretion."

Mikutowicz, 365 F.3d at 72-73 (citations omitted). Defense counsel

were afforded ample opportunity to cross-examine Davis about her

conclusion that Delmy Gramajo and Jose Gramajo were CTS employees.

Defense counsel were permitted to ask Davis whether a number of

factors -- including that Jose Gramajo had business cards, had

registered businesses at city hall and with a contractors

association, "was running" between six and twelve passenger vans to

transport workers, owned a garage to maintain these vans, could

accept or reject job requests, and actually paid temporary workers

-- would have been relevant to her determination.

The district court sustained objections to only three

defense questions, and its rulings did not meaningfully constrain

the defense's cross-examination of Davis. Further, to the extent

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the district court refused to permit defense counsel to question

Davis about the legal test for identifying independent contractors,

it "impose[d] reasonable limits on cross-examination in order to

avoid confusion of the issues," id. at 72 (quoting United States v.

Gonzalez–Vazquez, 219 F.3d 37, 45 (1st Cir. 2000)). "[I]t is for

the judge, not the lawyers or the witnesses, to inform the jury of

the law applicable in the case. . . ." Nieves-Villanueva v. Soto-

Rivera, 133 F.3d 92, 100 (1st Cir. 1997).

C. Exclusion of Pachico's Testimony and Draft Opinion

Powers and Mahan sought to introduce the testimony and

draft decision of DUA Hearing Officer Pachico, who conducted two

hearings and prepared a draft opinion. That early, non-final draft

tentatively concluded that it had not been shown that an

employee-employer relationship existed between CTS and certain

workers. The DUA ultimately determined that these certain workers

were CTS employees, contrary to Pachico's preliminary conclusion.

The standard of review is not favorable to defendants.

Before trial, the government moved to exclude testimony by Pachico

about the DUA hearings, as well as Pachico's draft opinion. The

district court provisionally granted the government's motion as to

Pachico's testimony and definitively granted the motion as to

Pachico's draft opinion. At trial defendants did not renew their

objection to the government's motion and did not attempt to

introduce Pachico's testimony. Because defendants failed to

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preserve the issue, review of the district court's provisional

ruling regarding Pachico's testimony is for plain error. See

United States v. Raymond, 697 F.3d 32, 38 (1st Cir. 2012); United

States v. Whitney, 524 F.3d 134, 140 (1st Cir. 2008). We review

the district court's definitive ruling regarding Pachico's draft

opinion for abuse of discretion. See Fusco v. General Motors

Corp., 11 F.3d 259, 262-63 (1st Cir. 1993).

There was very limited evidence as to the DUA proceedings

put in by the prosecution. That evidence pertained to Powers' and

DeFranceschi's statements in response to Davis's requests for

information and Powers' testimony before the DUA. Indeed, the

conclusion of the DUA was not admitted, so it is difficult to see

how a preliminary draft opinion could be admissible under the rule

of completeness. See United States v. Millan, 230 F.3d 431, 434

(1st Cir. 2000). Further, the evidence was that the preliminary

draft's conclusion was itself based on factual misrepresentations.

The district court quite correctly concluded that further

inquiry in this area would have resulted in a mini-trial sideshow

which would have distracted attention from the real issues in the

trial. That is true, whatever minimal value the preliminary draft

(soon reversed by the final opinion) would have had in shoring up

defendants' good faith argument. To the extent that defendants are

arguing that the purpose of the offered preliminary draft was not

for its conclusion, but only for Pachico's personal conclusions

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about the defendants' good faith, that latter purpose was

impermissible. In a criminal case, "whether the defendant did or

did not have a mental state or condition that constitutes an

element of the crime charged or of a defense" is "for the trier of

fact alone." Fed. R. Evid. 704(b).

One more observation: admitting Pachico's draft opinion

likely would have harmed defendants under the very doctrine of

completeness they rely on. Had the preliminary draft come in, it

would have laid the basis for the admission of the final draft

affirming that certain workers were CTS employees. Defendants'

argument would fail even if all issues had been preserved.

III.

We affirm the defendants' convictions and sentences.

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