Tuesday, April 10, 2018

Financial Tax Docs Were Not Testimonial; Other Arguments and Sentence Enhancements Affirmed in Tax-evasion Case

U.S. v. Stegman, 873 F.3d 1215 (10/20/17) (Kan. published.) - The 10th affirms the convictions and sentence for tax evasion by a business owner raising a lot of issues. The 10th finds no Confrontation Clause problem with the admission of documents Ms. Stegman's deceased tax preparer sent to the IRS. All except the fax cover page were Ms. Stegman's financial documents, which were not testimonial and so did not present a Confrontation Clause issue. The 10th rejects Ms. Stegman's argument that the IRS destroyed exculpatory records in bad faith in violation of due process. The IRS previously audited Ms. Stegman's business and found some cash, but found no tax issues. Agents sent the file to archives where it was destroyed without the agents' knowledge. The 10th Circuit rules it was not a violation of Ms. Stegman's privilege against self-incrimination for the prosecutor to ask who owned or controlled Ms. Stegman's subpoenaed business ledgers and for the witness to say he assumed they belonged to Ms. Stegman. Under Braswell v. U.S., 487 U.S. 99 (1988), the government cannot present evidence that an individual produced subpoenaed corporation's records, but it can use those records against an individual defendant.

With respect to sentencing, the Court holds it was okay for the district court to aggregate the individual and corporate tax losses for guideline purposes under USSG § 2T1.1(c)(1)(D), even though the court acquitted Ms. Stegman on the corporate tax charges. The court acquitted only because of indictment flaws. The 10th okays the sophisticated means enhancement as well. Ms. Stegmand did more than not give information to her accountant. She created multiple limited liability corporations (LLCs), used straw purchases and bought money orders to make payments, An obstruction of justice enhancement was also warranted. Ms. Stegman directed employees to shred receipts, altered ledger entries and directed a witness to testify a certain way. It didn't matter that the document-related conduct concerned the corporation. The acts of personal and corporate tax evasion were inextricably intertwined. It also didn't matter that the witness tampering was unsuccessful. Attempts fall squarely within USSG § 3C1.1.