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Date: 09-07-2021
Case Style:
United States of America v. JIMMY C. CHISUM
Case Number: 06-7082
Judge: Harris L Hartz
Court: UNITED STATES COURT OF APPEALS
TENTH CIRCUIT
Plaintiff's Attorney: Sheldon J. Sperling, United States Attorney, Robert G. Guthrie, Assistant United
States Attorney
Defendant's Attorney:
Description:
Denver, CO - Criminal defense lawyer represented defendant with four counts of tax evasion charges.
In April 2005 Mr. Chisum, a self-styled business and estate planner, was
indicted for aiding and abetting the willful attempt to evade income taxes owed
by Brian and Mitzi Chadsey for the calendar years 1997 through 2000. See 18
U.S.C. § 2; 26 U.S.C. § 7201. The government’s theory of the case was
“essentially that [Mr. Chisum] created a sham trust to attempt to conceal income
[Brian] Chadsey earned from his business, Regional Chiropractic Health Care,” a
limited liability company. R., Vol. 1, Doc. 35 at 2-3 (Bill of Particulars). Upon
being informed that Mr. Chisum wished to represent himself, the district court
appointed attorney Stephen Knorr to assist him as standby counsel.
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At trial the government introduced testimony to establish the following:
Brian Chadsey met Mr. Chisum at one of Mr. Chisum’s seminars on “business
structure, limited liability companies and trusts.” Id., Vol. 4 at 123 (Chadsey
testimony). They later entered into an arrangement in which Mr. Chadsey
allocated 95% of the income from Regional Chiropractic to CSEA Cottage
Limited, a trust established by Mr. Chisum “to take care of tax matters and
anything else that was needed.” Id. at 126. Mr. Chisum told Mr. Chadsey that
taxes would have to be paid only on the money that Mr. Chadsey took from
Regional Chiropractic as a salary and that the rest of the income “would end up in
a non-controlled foreign corporation that was not taxable under U.S. tax law.” Id.
at 129. Mr. Chadsey did “[n]ot intimately” understand the details of how the
income became nontaxable. Id. Mr. Chadsey followed Mr. Chisum’s directions
in filing tax returns for 1997 through 2000, underreporting Regional
Chiropractic’s income by about $207,000. In July 2000 the IRS began auditing
Regional Chiropractic. In accordance with Mr. Chisum’s advice, Mr. Chadsey
filed amended income-tax returns for the years 1997 through 2000, reporting that
Regional Chiropractic had no income.
In July 2001 Mr. Chisum appeared at an IRS office in response to a
summons seeking Regional Chiropractic’s records, but he refused to produce the
requested books and records. Even after a judge ordered production of the
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records, Mr. Chisum advised Mr. Chadsey that he could refuse to produce them.
Eventually, Mr. Chadsey obtained counsel and began to cooperate with the IRS.
In its case-in-chief, the government also introduced into evidence several
tax-court decisions from 1999 and 2000 holding that trusts created by Mr. Chisum
were shams.
Mr. Chisum testified at trial that he did not intend to commit the crimes
charged:
Whether or not I’ve willfully evaded a known duty is the
question before you. And it’s my opinion, it was my belief through
my own study, my own research, my own history that I never knew
there was a duty. I thought, and still believe in my heart, that the
income tax system in America is written to be a hundred percent
compatible with the scripture, and that it has a very strong voluntary
component to it.
R., Vol. 6 at 490. In rebuttal the government offered evidence of lawsuits filed
by Mr. Chisum in 2002 against tax-court judges who had issued opinions
declaring various Chisum trusts to be shams. The jury returned guilty verdicts
against Mr. Chisum on all four counts in the indictment.
The probation department prepared a presentence report calculating a
United States Sentencing Guidelines (U.S.S.G.) range of 78 to 97 months’
imprisonment based on Mr. Chisum’s category-one criminal history and offense
level of 28. The government objected, seeking a two-level upward adjustment of
the offense level under U.S.S.G. § 3B1.1(c), claiming that Mr. Chisum “was an
organizer, leader, manager, or supervisor of Mr. Chadsey’s (along with many
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others) criminal activity.” R., Vol. 8 (Feb. 26, 2006 letter to Supervising U.S.
Probation Officer at 1). The probation department opposed the adjustment,
stating that § 3B1.1(c) did not apply because “it does not appear that the other
participants initially intentionally entered into any criminal activity with [Mr.
Chisum].” Id. (Addendum to the Presentence Report at 1). At the sentencing
hearing the government asserted that under § 3B1.1(c), “it’s not necessary that
there be another criminal participant [besides Mr. Chisum]. There just has to be
criminal activity.” Id., Vol. 7 at 149.
The district court sustained the government’s objection, ruling that
§ 3B1.1(c) was applicable:
Mr. Chisum provided seminar participants with specific information
and examples of how to set up trusts to protect their property, assets,
and income from taxation. Mr. Brian Chadsey testified during the
trial in this case that his own involvement in filing false income tax
returns was due to the advice and direction of Mr. Chisum.
Likewise, Mr. Chisum has provided the same or similar directions to
many other persons, which resulted in the filing of income tax
returns which did not . . . contain complete and truthful information
regarding the legitimate taxes owed to the Internal Revenue Service.
Mr. Chisum assisted individuals in setting up sham trusts to disguise
or hide taxable income and acted as the trustee for many people, in
addition to Brian Chadsey. He also acted as tax matters partner and
interceded with the Internal Revenue Service on behalf of many of
these people when their tax returns were questioned by the IRS. . . .
[T]he Court finds by a preponderance of the evidence that
Mr. Chisum was a leader and organizer of others in the criminal
activity of tax evasion and filing of false income tax returns.
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Id. at 152-53. Accordingly, the district court increased Mr. Chisum’s offense
level by two, which made the applicable sentencing range 97 to 121 months. The
district court imposed a 97-month sentence.
Mr. Chisum appealed. We directed Mr. Knorr to file an appellate brief.
Because Mr. Knorr thought that several issues pressed by his client were
meritless, he raised them under Anders v. State of Cal., 386 U.S. 738 (1967)
(describing proper procedure for defense attorney raising meritless arguments
pressed by client). In addition, he raised two non-Anders issues.
DISCUSSION
I. Non-Anders Issues
A. Evidence of Mr. Chisum’s Lawsuits
Mr. Chisum argues that he was extremely prejudiced by evidence of his
lawsuits against tax judges. He asserts that the evidence portrayed him as a tax
protester and that it added nothing relevant because the district court had already
admitted the tax judges’ opinions finding his trusts to be shams. “We review
challenges to admissibility of evidence solely for abuse of discretion.” United
States v. Reddeck, 22 F.3d 1504, 1508 (10th Cir. 1994).
Under Federal Rule of Evidence 403, “[a]lthough relevant, evidence may be
excluded if its probative value is substantially outweighed by the danger of unfair
prejudice, confusion of the issues, or misleading the jury, or by considerations of
undue delay, waste of time, or needless presentation of cumulative evidence.”
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Evidence is relevant if it has “any tendency to make the existence of any fact that
is of consequence to the determination of the action more probable or less
probable than it would be without the evidence.” Fed. R. Evid. 401.
The intent requirement in criminal tax cases is particularly strict. As the
Supreme Court stated in Cheek v. U.S., 498 U.S. 192, 201-02 (1991):
Willfulness, as construed by our prior decisions in criminal tax
cases, 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. . . . [I]f the
Government proves actual knowledge of the pertinent legal duty, the
prosecution, without more, has satisfied the knowledge component of
the willfulness requirement. But carrying this burden requires
negating a defendant’s claim of ignorance of the law or a claim that
because of a misunderstanding of the law, he had a good-faith belief
that he was not violating any of the provisions of the tax laws. . . .
In the end, the issue is whether, based on all the evidence, the
Government has proved that the defendant was aware of the duty at
issue, which cannot be true if the jury credits a good-faith
misunderstanding and belief submission, whether or not the claimed
belief or misunderstanding is objectively reasonable.
In light of this intent requirement, the district court did not abuse its discretion in
admitting Mr. Chisum’s prior complaints. He had sued the tax judges for
attempting to “put[ ] [him] out of business” by ruling that the income received by
his trusts was taxable. R., Vol. 1, Doc. 69, Ex. 82 (Am. Compl. at 4). The
lawsuits tended to show that he was not acting in good faith in continuing his
scams. In particular, Mr. Chadsey testified that he and Mr. Chisum had talked
“about trusts that were ruled as shams. But he always assured us that they
weren’t the same as the trust that he was using.” Id., Vol. 4 at 223. To rebut any
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inference that Mr. Chisum believed in good faith that the arrangement with the
Chadseys was distinguishable from the trusts upon which the tax court had ruled,
the government was entitled to show Mr. Chisum’s hostile attitude to the prior
rulings. A jury could infer that he simply was unwilling to submit to what he
knew were authoritative statements of the law. Moreover, we see little danger of
unfair prejudice, given that the tax-court decisions had already been admitted as
evidence without objection.
B. § 3B1.1 Enhancement
Mr. Chisum argues that the district court erred in calculating his offense
level under the sentencing guidelines by applying a sentencing enhancement
based on his role as a leader and organizer of a criminal scheme. After United
States v. Booker, 543 U.S. 220 (2005), we review sentences for reasonableness.
United States v. Kristl, 437 F.3d 1050, 1053 (10th Cir. 2006). “A sentence
cannot . . . be considered reasonable if the manner in which it was determined
was unreasonable, i.e., if it was based on an improper determination of the
applicable Guidelines range.” Id. at 1055. When considering a district court’s
application of the Guidelines, “we review legal questions de novo and we review
any factual findings for clear error, giving due deference to the district court’s
application of the guidelines to the facts.” United States v. Wolfe, 435 F.3d 1289,
1295 (10th Cir. 2006).
U.S.S.G. § 3B1.1 provides:
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Based on the defendant’s role in the offense, increase the offense
level as follows:
(a) If the defendant was an organizer or leader of a criminal activity
that involved five or more participants or was otherwise extensive,
increase by 4 levels.
(b) If the defendant was a manager or supervisor (but not an
organizer or leader) and the criminal activity involved five or more
participants or was otherwise extensive, increase by 3 levels.
(c) If the defendant was an organizer, leader, manager, or supervisor
in any criminal activity other than described in (a) or (b), increase
by 2 levels.
(emphasis added). “All of the roles defined by § 3B1.1 require the involvement
of more than one participant. Although § 3B1.1(c) does not include the word
‘participant’ as subsections (a) and (b) do, the terms ‘organizer,’ ‘leader,’
‘manager,’ and ‘supervisor’ used in subsection (c) suggest the presence of
participants other than the defendant who were the defendant’s underlings or
subordinates.” United States v. Bauer, 995 F.2d 182, 183-84 (10th Cir. 1993)
(citations omitted). Under the Guidelines, “[a] ‘participant’ is a person who is
criminally responsible for the commission of the offense, but need not have been
convicted.” U.S.S.G. § 3B1.1, commentary (application note 1). See United
States v. Aptt, 354 F.3d 1269, 1285 (10th Cir. 2004).
A district court “must make specific findings and advance a factual basis to
support an enhancement under U.S.S.G. § 3B1.1.” United States v. Ivy, 83 F.3d
1266, 1292 (10th Cir. 1996) (brackets and internal quotation marks omitted).
Thus, the district court was required to find that Mr. Chisum organized, led,
managed, or supervised at least one person who was criminally responsible. But
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Mr. Chisum asserts, and we agree, that it did not do so. The district court appears
to have adopted the government’s view that a subsection (c) enhancement does
not require the involvement of a participant.
On appeal the government contends that it is “obvious” that the district
court believed that Mr. Chadsey was criminally responsible, intending to
participate in the commission of Mr. Chisum’s offenses. Aplee. Br. at 31. But
we do not view the record as that clear. The evidence of Mr. Chadsey’s guilt is
not overwhelming. See, e.g., R., Vol. 4 at 128 (Chadsey testimony that Mr.
Chisum reassured him “[s]omewhere between ten and fifty” times that the tax
arrangements were legitimate); id. at 239 (Chadsey testimony that he considered
Mr. Chisum to be his tax advisor and greatly respected Mr. Chisum’s advice); id.
at 240 (Chadsey testimony that he believed “that the tax code said that what we
had earned wasn’t income”). And “even if the record overwhelmingly supports
the enhancement, appellate fact-finding cannot substitute for the district court’s
duty to articulate clearly the reasons for the enhancement.” Ivy, 83 F.3d at 1292
(internal quotation marks omitted). Consequently, this matter must be remanded
for the entry of specific findings of fact regarding the criminal culpability of any
coparticipants.
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II. Anders Issues
A. Speedy Trial Act
Mr. Chisum argues that “the indictment should be dismissed based on a
violation of the Speedy Trial Act, 18 U.S.C. § 3161.” Aplt. Br. at 24 (emphasis
omitted). He claims that the Act was violated because (1) the trial did not begin
within 70 days of his initial appearance, and (2) the district court did not make
factual findings excluding from the 70-day period the two-month continuance he
requested and obtained. But because Mr. Chisum failed to move for dismissal
before trial, he has “waived his right to that remedy.” United States v. Gomez, 67
F.3d 1515, 1520 (10th Cir. 1995).
B. Subject-Matter Jurisdiction
Mr. Chisum contends that the district court erred in denying his motions to
dismiss for lack of jurisdiction. He claims that the federal district court for the
Eastern District of Oklahoma is “incapable of acting by Article III judicial powers
within the State of Oklahoma’s sovereign territory and without the federal zone.”
Aplt. Br. at 26-27. Our review is de novo. See Mires v. United States, 466 F.3d
1208, 1209 (10th Cir. 2006). We rejected this “hackneyed tax protester refrain”
17 years ago in United States v. Collins, 920 F.2d 619, 629 (10th Cir. 1990), and
we do so again today. The district court did not err in denying Mr. Chisum’s
motions to dismiss for lack of jurisdiction.
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C. The Paperwork Reduction Act (PRA)
The PRA, 44 U.S.C. §§ 3501-20, precludes the imposition of any penalty
against a person for “failing to comply with a collection of information” if either
(1) it “does not display a valid control number” or (2) the agency fails to alert the
person that he or she “is not required to respond to the collection of information
unless it displays a valid control number.” 44 U.S.C. § 3512(a). A § 3512(a)
defense may be raised at any time. See id. § 3512(b). Tax forms are covered by
the PRA. See Dole v. United Steelworkers of Am., 494 U.S. 26, 33 (1990).
Mr. Chisum contends that “[s]ince there was no proof that Form 1040 was a
lawful form under the [PRA], the trial court erred in failing to grant [his] request
[at the sentencing hearing] to dismiss the indictment.” Aplt. Br. at 29. But the
PRA protects a person only “for failing to file information. It does not protect
one who files information which is false.” Collins, 920 F.2d at 630 n.13 (internal
quotation marks omitted). The charges against Mr. Chisum were predicated on
the filing of false information, not the failure to file. He is therefore not entitled
to relief.
D. Sufficiency of the Evidence
In reviewing for sufficiency of the evidence, “our role is limited to
determining whether a reasonable jury could find guilt beyond a reasonable doubt,
based on the direct and circumstantial evidence, together with the reasonable
inferences to be drawn therefrom.” United States v. Sells, 477 F.3d 1226, 1235
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(10th Cir. 2007) (internal quotation marks omitted). Because Mr. Chisum did not
contest the sufficiency of the evidence below, we review for plain error. See
United States v. Goode, 483 F.3d 676, 681 (10th Cir. 2007). Accordingly, he
“must show: (1) an error, (2) that is plain, which means clear or obvious under
current law, and (3) that affects substantial rights. If he satisfies these criteria,
this Court may exercise discretion to correct the error if it seriously affects the
fairness, integrity, or public reputation of judicial proceedings.” Id. (internal
quotation marks omitted).
“To obtain a conviction for evasion, the government must prove three
elements: 1) the existence of a substantial tax liability, 2) willfulness, and 3) an
affirmative act constituting an evasion or attempted evasion of the tax.” United
States v. Meek, 998 F.2d 776, 779 (10th Cir. 1993). Mr. Chisum argues “that
there was no evidence presented that the required process to determine an
assessment was followed in this case and thus no tax liability was proven at trial.”
Aplt. Br. at 30. But “certified transcripts”—what the IRS calls “Certificate[s] of
Assessments”—were admitted at trial, R., Vol. 4 at 96, 97, and are sufficient to
establish the propriety of tax assessments in the absence of conflicting evidence,
see March v. IRS, 335 F.3d 1186, 1188 (10th Cir. 2003) (observing that
“Certificates of Assessments and Payments on Form 4340” constitute
“presumptive proof of a valid assessment” (internal quotation marks omitted));
United States v. Voorhies, 658 F.2d 710, 715 (9th Cir. 1981) (recognizing the
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presumption in a tax-evasion case). Mr. Chisum offered nothing to contradict the
information in those transcripts. There appears to have been sufficient evidence
of the existence of a tax liability. Thus, the district court did not plainly err in
refusing to dismiss the indictment for insufficient evidence.
E. Sufficiency of the Indictment
The federal tax-evasion statute proscribes attempts to evade “any tax
imposed by this title.” 26 U.S.C. § 7201 (emphasis added). Mr. Chisum argues
that the district court erred in denying his postverdict motion to dismiss the
indictment for omitting “what part of Title 26 imposed the tax that was being
evaded or defeated.” Aplt. Br. at 31. “[W]e review indictments liberally when
they are challenged for the first time after a verdict.” United States v. Avery,
295 F.3d 1158, 1176 (10th Cir. 2002); see Fed. R. Cr. P. 12(b)(3)(B).
“An indictment is sufficient if it sets forth the elements of the offense
charged, puts the defendant on fair notice of the charges against which he must
defend, and enables the defendant to assert a double jeopardy defense.” United
States v. Dashney, 117 F.3d 1197, 1205 (10th Cir. 1997). The indictment alleged
that Mr. Chisum violated 26 U.S.C. § 7201 (tax evasion) and 18 U.S.C. § 2
(principal liability) by
willfully attempt[ing] to evade and defeat individual income taxes
due and owing by [the Chadseys] . . . for the calendar year [1997,
1998, 1999, or 2000 in the four counts] by committing various
affirmative acts of evasion, including causing to be prepared false
income tax returns, utilizing trusts, concealing assets and income by
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maintaining bank accounts and off shore accounts in nominee names,
and by attempting to obstruct the [IRS] during an audit of Brian F.
Chadsey and Mitzi P. Chadsey.
R., Doc. 1 at 1, 2, 3. These allegations contain the elements of tax evasion, see
Meek, 998 F.2d at 779, provide sufficient notice of the charges, and are drawn
with sufficient specificity to foreclose further prosecution on the same charges.
The mere omission of the specific statutory authority for the Chadseys’ tax
liability does not render the indictment insufficient. Cf. United States v. Vroman,
975 F.2d 669, 670-71 (9th Cir. 1992) (indictment for failure to file income-tax
returns that cited the penalizing statutes held sufficient even though it failed to
cite the statute that requires the filing of a tax return).
Outcome: We affirm Mr. Chisum’s conviction, but we reverse his sentence and
remand for further proceedings regarding a § 3B1.1(c) enhancement. We also
deny as moot Mr. Knorr’s motion to withdraw and Mr. Chisum’s motions to
remove Mr. Knorr as counsel and to proceed pro se. Finally, we treat
Mr. Chisum’s motions to amend the opening brief and to nullify United States v.
Magallanez, 408 F.3d 672 (10th Cir. 2005), as submissions under Fed. R. App. P.
28(j), seeking to call our attention to Cunningham v. California, 127 S. Ct. 856
(2007). Mr. Chisum will have the opportunity to argue Cunningham’s
applicability on remand.
Plaintiff's Experts:
Defendant's Experts:
Comments: