Tax Evasion, Fraud Charges Affirmed
US v. Thompson, 2008 WL 650009 (10th Cir. Mar. 12, 2008):
The Tenth affirms the defendants' convictions on various conspiracy, tax fraud, and tax evasion charges. The opinion is long and detailed, so this is very summary and written late in the day.
Defendants Mr. and Mrs. Mower owned three corporations, Neways US, Neways Australia, and Neways Malaysia, that used an Avon-style system to market personal care products (quick description: company sells to distributors at a discount, who then sell to the public at retail price; distributors can recruit more distributors and get bonuses based on their sales). Anyway, Neways US needed money to pay creditors and didn't want to go through a bank, so it started getting money from Neways Australia, some of which was called "prepayment" for product later shipped to Neways Australia and some of which was called "loans." Accounting was not good. The defendants also got checks from distributors in Malaysia. The Mower Defendants had also set up a wholly controlled Mower Family Trust, which owned their personal residence. The Mowers also bought an expensive property called Hobble Creek, that Defendants Mowers bought and put into the "Trust." The property was purportedly bought using a loan from Neways Australia, but documentation was lacking, and then created and backdated. The evidence was that there was no such loan. Investigation began, and it all unraveled. It appeared that it was necessary to file amended personal tax returns for the years 1994, 1995, and 1996, to include other money the Mowers had received. But the Mowers did not file the amended returns prepared by their accountant. Instead, he prepared and filed amended corporate tax returns for Neways US. There was evidence of lots of commission checks from the various Neways companies that were not reported as income. Mr. and Mrs. Mowers were charged with conspiracy and tax fraud and evasion; Mr. Thompson only with conspiracy and corruptly endeavoring to interfere with the administration of the internal revenue laws. All three defendants were convicted and the Tenth finds sufficient evidence to support all the convictions.
The Court rejects arguments that some counts were brought outside the 6-year statute of limitations period because they were brought within six years of the last affirmative act of evasion, the filing of false amended tax returns for Neways US on Jan. 6, 1998.
Admission of "summary charts" by the government (presumably summarizing the voluminous financial info) was not error. "The government's evidence was incredibly voluminous" and "would have been incomprehensible." The court noted that everything in the summaries was cross-referenced to a specific piece of evidence.
The district court did not err in granting the government's motion to compel the grand jury testimony of the Mowers' attorneys on the basis that the testimony sought was not privileged because the purported conversations and documents were in furtherance of a crime or fraud. Other claims regarding jury instructions were also rejected.
At sentencing, the court did not err in aggregating the tax loss amounts for the different years to determine an offense level. The district court did not apply the guidelines mandatorily, and the sentence (within the GL range) was presumptively and therefore substantively reasonable. There was no plain error in the court applying the 2001 GL Manual. It did err in applying the 2005 GL for calculating tax loss, but since there was no difference between the 2001 and 2005 GL in that regard, the error was harmless.
The Tenth affirms the defendants' convictions on various conspiracy, tax fraud, and tax evasion charges. The opinion is long and detailed, so this is very summary and written late in the day.
Defendants Mr. and Mrs. Mower owned three corporations, Neways US, Neways Australia, and Neways Malaysia, that used an Avon-style system to market personal care products (quick description: company sells to distributors at a discount, who then sell to the public at retail price; distributors can recruit more distributors and get bonuses based on their sales). Anyway, Neways US needed money to pay creditors and didn't want to go through a bank, so it started getting money from Neways Australia, some of which was called "prepayment" for product later shipped to Neways Australia and some of which was called "loans." Accounting was not good. The defendants also got checks from distributors in Malaysia. The Mower Defendants had also set up a wholly controlled Mower Family Trust, which owned their personal residence. The Mowers also bought an expensive property called Hobble Creek, that Defendants Mowers bought and put into the "Trust." The property was purportedly bought using a loan from Neways Australia, but documentation was lacking, and then created and backdated. The evidence was that there was no such loan. Investigation began, and it all unraveled. It appeared that it was necessary to file amended personal tax returns for the years 1994, 1995, and 1996, to include other money the Mowers had received. But the Mowers did not file the amended returns prepared by their accountant. Instead, he prepared and filed amended corporate tax returns for Neways US. There was evidence of lots of commission checks from the various Neways companies that were not reported as income. Mr. and Mrs. Mowers were charged with conspiracy and tax fraud and evasion; Mr. Thompson only with conspiracy and corruptly endeavoring to interfere with the administration of the internal revenue laws. All three defendants were convicted and the Tenth finds sufficient evidence to support all the convictions.
The Court rejects arguments that some counts were brought outside the 6-year statute of limitations period because they were brought within six years of the last affirmative act of evasion, the filing of false amended tax returns for Neways US on Jan. 6, 1998.
Admission of "summary charts" by the government (presumably summarizing the voluminous financial info) was not error. "The government's evidence was incredibly voluminous" and "would have been incomprehensible." The court noted that everything in the summaries was cross-referenced to a specific piece of evidence.
The district court did not err in granting the government's motion to compel the grand jury testimony of the Mowers' attorneys on the basis that the testimony sought was not privileged because the purported conversations and documents were in furtherance of a crime or fraud. Other claims regarding jury instructions were also rejected.
At sentencing, the court did not err in aggregating the tax loss amounts for the different years to determine an offense level. The district court did not apply the guidelines mandatorily, and the sentence (within the GL range) was presumptively and therefore substantively reasonable. There was no plain error in the court applying the 2001 GL Manual. It did err in applying the 2005 GL for calculating tax loss, but since there was no difference between the 2001 and 2005 GL in that regard, the error was harmless.
posted by Anonymous at 5:24 PM
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