United States v. Nolen , 523 F.3d 331 ( 2007 )

United States Court of Appeals
Fifth Circuit
F I L E D
REVISED JULY 25, 2007
December 12, 2006
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT Charles R. Fulbruge III
Clerk
No. 05-40859
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
ROBERT E. NOLEN,
Defendant-Appellant.
--------------------
Appeal from the United States District Court
for the Eastern District of Texas
--------------------
Before JOLLY, DAVIS, and WIENER, Circuit Judges.
WIENER, Circuit Judge:
Defendant-Appellant Robert E. Nolen, a persistent “tax
protester,” was convicted on three counts of willfully attempting
to evade the federal income tax in violation of 26 U.S.C. § 7201.
On appeal, he contends that (1) the district court violated his
Sixth Amendment rights when it revoked the pro hac vice admission
of his retained counsel, (2) the evidence at trial was insufficient
to establish the charged offense, because no tax obligation had
been formally assessed, (3) the district court committed plain
error by failing to require the jury to find an affirmative act
other than willful failure to file returns and by failing to
require the jury to find exactly the same affirmative act of
evasion that was charged in the indictment, and (4) the district
court erred by ordering restitution in a case arising under Title
26 of the United States Code.
We conclude that (1) the district court erred in failing to
demonstrate that it conducted the proper balancing of Nolen’s Sixth
Amendment rights (if it did so) when it revoked the pro hac vice
admission of his counsel, making appellate review of that order
impossible, (2) the trial evidence was sufficient to establish the
charged offense, (3) the district court’s jury instructions did not
constitute plain error, and (4) the restitution order was improper.
I. FACTS AND PROCEEDINGS
In 1992, Robert E. Nolen, a dentist practicing in Flower
Mound, Texas, decided that he should no longer be subject to
federal income taxation. Nolen filed an affidavit with the Clerk
of Tarrant County, Texas declaring that although “tax is imposed
upon the citizens and residents subject to the jurisdiction of the
United States,” he was a “‘nonresident’ to the residency and
‘alien’ to the citizenship of the 14th Amendment.” Despite his
accountant’s warning that failure to pay federal income taxes “was
illegal,” Nolen remained resolute. He filed his last federal
income tax return in October 1992 for the 1991 tax year.
Non-cash receipts from Nolen’s dental practice were deposited
into a business account from which all business expenses were paid.
2
In contrast, Nolen instructed his office manager to give him all of
the cash receipts, which averaged $1,000 per month. In December
1993, Nolen and his wife created an entity called Genesis
Enterprises, an unincorporated business organization “domiciled in
the sovereign Republic of Texas.” According to Nolen, the purpose
of Genesis was to protect his assets from malpractice litigation.
Nolen opened two new accounts, one in the name of “PJ Consultants
DBA Genesis Enterprises ABBA” (“the Genesis account”), and one in
the name of “PJ Consultants DBA Max Man Holding Company” (“the Max
Man account”).1
Nolen instructed his office manager to transfer funds from the
business account to the Genesis account, from which Nolen’s
personal expenses were paid. Nolen failed to report as income, or
pay tax on, the dental practice receipts that were used to pay his
personal expenses. He also falsely coded the transfers of money
from the business account to the Genesis account as “professional
fees.” Nolen gave his office manager authority to sign checks on
the Genesis and Max Man accounts and began paying her an additional
$1,000 per month (later increased to $1,800 per month). Neither
Genesis nor Max Man filed tax returns.
1
The Max Man account held funds transferred from the
business account for maintenance of the building in which Nolen
practiced dentistry, which he owned. Those funds are not at
issue in this case.
3
In October 1995, the IRS notified Nolen that it was aware of
his failure to file returns for the past three years and requested
that he meet with agents and produce his financial records. Nolen
did not attend that meeting and later disregarded a second such
request. Eventually, the IRS served Nolen with an administrative
summons, ordering him to appear and produce records. Nolen
disregarded that summons as well.
In June 1996, Nolen converted his dental practice from a
corporation to a sole proprietorship, changed its name, and opened
a new business bank account. Thereafter, the practice did not file
tax returns. Nolen then altered the name of the Genesis bank
account and removed his and his wife’s names from it. Nolen still
controlled the checkbook, however, by using a signature stamp
created for one of the account signatories.
In December 1996, the district court issued an order requiring
Nolen to appear and show cause why he should not be ordered to
comply with the IRS administrative summons. Nolen failed to appear
at that hearing and was finally detained by U.S. Marshals. He then
filed a petition to quash the summons, stating that he was not a
citizen or resident of the United States. The district court
enforced the summons and ordered Nolen to appear before the IRS and
produce the requested records. He appeared at that hearing, but
refused to produce any records.
In September and November 1997, the IRS sent Nolen delinquency
notices, demanding that he file tax returns and pay unpaid taxes.
4
Thereafter, Nolen moved the Genesis account to a different bank and
listed his office manager as the sole account holder. He continued
to transfer funds from the dental practice’s business account to
the Genesis account and to use funds from the Genesis account to
pay his personal expenses. In September 1998, the IRS sent Nolen
notices of deficiency for tax years 1992, 1993, and 1994. After
that, Nolen removed his name as a signatory on the business bank
account, but continued to own and control the funds in that
account.
At some point in 1997, Nolen began consulting with various
attorneys and accountants, seeking their advice as to what
strategies he should employ to “resolve” his IRS issues. On the
advice of his attorneys, Nolen began to pursue a series of document
requests and related civil lawsuits against the IRS. Between March
1999 and April 2002, while this frustration-litigation strategy was
playing out, Nolen made a series of $500 payments to the IRS, as a
“bond” against determination of tax liability. In July 2003, a
grand jury sitting in the Eastern District of Texas returned a
three-count indictment charging Nolen with willfully attempting to
evade federal income taxes for the years 1997, 1998, and 1999.
Nolen retained a California attorney, Roger Agajanian, and the
district court granted Agajanian’s motion for admission pro hac
vice. In September 2003, the government filed a motion for inquiry
into whether Nolen was receiving the effective assistance of
counsel guaranteed by the Sixth Amendment. The government alleged
5
that a legal assistant, Lawrence Maxwell, had been conducting all
or part of Nolen’s defense in Agajanian’s name but without his
control. The magistrate judge conducted a hearing and expressed
concern about Maxwell’s conduct and whether Nolen was receiving the
effective assistance of counsel. The magistrate judge also stated
that he took offense at some of the language in Nolen’s pretrial
motions challenging federal jurisdiction. The magistrate judge
then appointed an experienced criminal defense attorney from the
Eastern District of Texas, Gerald Cobb, to serve as Agajanian’s co-
counsel. The magistrate judge entered an order directing Agajanian
to cooperate with Cobb or face removal from the case.
Nolen moved the district court to review the magistrate
judge’s order, and the district court initially affirmed the order,
but later granted Nolen’s motion for reconsideration and terminated
Cobb’s appointment as co-counsel. Agajanian then refiled some
pleadings that Maxwell had authored previously, together with a new
motion to dismiss for lack of jurisdiction, arguing that the United
States does not exist in any capacity to bring a criminal
prosecution. The government then moved for a hearing to require
Agajanian to show cause why his pro hac vice admission should not
be revoked. The district court scheduled a show-cause hearing for
December 2003. At that hearing, Nolen advised the court that his
defense was based on Maxwell’s research and advice, and that he did
not want Agajanian as his attorney if Maxwell could not assist in
his defense. The court scheduled another hearing for January
6
2004, at which time Nolen was to advise the court of the identity
of his new attorney if he still wanted Agajanian to withdraw.
Ultimately, Agajanian filed a motion to withdraw, which the
district court granted.
Nolen subsequently retained attorney John Green, who entered
an appearance in March 2004. Green, who was admitted to practice
in other federal courts in Texas but not in the Eastern District,
was admitted pro hac vice. He then filed a motion for continuance
that contained a footnote in which he alleged that the magistrate
judge’s asserted reason for appointing Cobb as co-counsel was
false:
Magistrate Bush claimed [that ensuring that Nolen
received effective assistance of counsel] was his basis
for appointing Gerald Cobb as court-appointed counsel.
Though we know now that was NOT the basis for the
appointment (or it would not have been done the way it
was done and later REVERSED by the trial court after
multiple requests for de novo review and motions to
reconsider —— a huge waste of defense resources and
time), a GRANT of this continuance and the 180 days
sought by the defendant to properly prepare for trial
would go a long way toward correcting the amazing number
of inequities that have already occurred in this case.2
At a hearing on several motions in April 2004, Green ratified his
accusations about the magistrate judge’s reasons for appointing
Cobb. In an order entered later that month, the district court
granted a four-month continuance. In that order, the court noted
2
Emphasis in original.
7
that it had taken under advisement defense counsel’s statements
about the magistrate judge’s honesty.
In May 2004, the district court, sua sponte, ordered Green to
show cause why his pro hac vice admission should not be revoked for
violating the district court’s Local Rule AT-2, which incorporates
the Texas Disciplinary Rules of Conduct. The court was
particularly concerned that Green’s comments about the magistrate
judge violated Rule 8.02 of the Texas Disciplinary Rules (“Rule
8.02"), which states, in pertinent part, that “[a] lawyer shall not
make a statement that the lawyer knows to be false or with reckless
disregard as to its truth or falsity concerning the qualifications
or integrity of a judge.”3 The district court conducted the show-
cause hearing in June 2004 and subsequently entered an order
revoking Green’s pro hac vice admission and barring him from
practice in the Eastern District of Texas for five years. The
district court determined that Green violated Rule 8.02 because (1)
his accusation that the magistrate judge falsely stated his reasons
for appointing Cobb constituted a statement concerning the
integrity of a judge, and (2) that statement was at least
“recklessly false” because Green had no basis on which to question
the integrity of the magistrate judge.
Nolen sought review of the district court’s order in this
court and did not begin searching for a new lawyer until his
3
Rule 8.02 adopts the exact language of Rule 8.2 of the ABA
Model Rules of Professional Conduct,
8
interlocutory appeal was denied in October 2004. Finally, in
November 2004, only three days before trial, yet a third attorney,
Justin Low, entered his appearance as Nolen’s counsel. The
district court denied Low’s motion for a continuance, and Nolen was
tried as scheduled.
At trial, an IRS agent testified that Nolen owed income tax of
$66,095 for 1997, $74,138 for 1998, and $60,338 for 1999. The jury
found Nolen guilty of willfully attempting to evade federal income
taxes for those years, and he was sentenced to 37 months
imprisonment and three years supervised release. He also was
ordered to pay a $60,000 fine and $435,275 in restitution to the
IRS.
II. ANALYSIS
A. Revocation of Green’s Pro Hac Vice Status
Nolen contends that the district court erred in three respects
when it revoked Green’s pro hac vice admission: (1) by placing the
burden of proof on Green to show that he had not violated Rule
8.02; (2) by interpreting Rule 8.02 to reach Green’s conduct in
this case; and (3) by failing to balance the need to enforce Rule
8.02 against Nolen’s Sixth Amendment right to the counsel of his
choice.4
4
We cannot help but notice the irony of Nolen’s invoking
the United States Constitution while insisting that he is not a
citizen or resident of the United States but of the “Republic of
Texas,” and rejecting the authority of the United States to
charge and try him criminally.
9
1. Standard of Review
Courts enjoy broad discretion to determine who may practice
before them and to regulate the conduct of those who do. Our
inquiry, then, must focus on whether the trial court’s revocation
of Green’s pro hac vice admission constituted an abuse of
discretion.5 In making that inquiry, we review the district
court’s findings of fact for clear error and its application of the
relevant rules of attorney conduct de novo.6
2. Merits
a. Procedure for Disciplinary Action
In the Eastern District of Texas, the procedure for court-
initiated disciplinary action is as follows:
When it is shown to a judge of this court that an
attorney has engaged in conduct which [sic] might warrant
disciplinary action, the judge receiving the information
shall bring the matter to the attention of the full court
as to whether disciplinary proceedings should be held.
If the court determines that further disciplinary
proceedings are necessary, the court will notify the
lawyer of the charges and give the lawyer opportunity to
show good cause why he or she should not be suspended or
disbarred. Upon the charged lawyer’s response to the
order to show cause, and after a hearing if requested or
upon expiration of the time prescribed for a response if
no response is made, the court shall enter an appropriate
order.7
5
United States v. Dinitz, 538 F.2d 1214, 1219 (5th Cir.
1976).
6
United States v. Snyder, 707 F.2d 139, 144 (5th Cir.
1983).
7
E.D. Tex. R. AT-2(d)(2)(A).
10
In this case, the district judge faithfully followed the
appropriate procedure. Having taken notice of Green’s possible
violation of Rule 8.02, the district judge brought it to the
attention of the full court, which concurred in the decision to
conduct disciplinary proceedings. Green was then notified that he
was facing a possible sanction, and a hearing was set to afford him
the opportunity to show good cause why he should not be
disciplined.
b. Burden of Proof
Nolen contends that the district judge erroneously interpreted
either Rule 8.02, or the “show cause” procedure itself, as placing
the burden on Green to prove the truth of his allegedly unethical
assertions about the magistrate judge. Nolen bases his contention
on an exchange between Green and the district judge at the show
cause hearing. Green asserted that he did not have the burden of
proving that his statements about the magistrate judge were true,
to which the district judge responded, “In this case, you do,
because you’ve made a statement about the integrity of a judge.”
The judge further stated, “You cannot make a statement, a reckless
statement, about the integrity of the Court, questioning its
motives and impugning the Court’s integrity, unless you have rock-
solid proof that the Court acted with improper motives.” Finally,
the district judge asserted that when an attorney alleges that a
11
judge uttered “an untruth -- then, really, you’ve got to show why
you think such a statement . . . is true.”
We have long recognized that, in court-initiated disciplinary
proceedings, “show cause orders do not in fact shift the burden to
the attorney, rather such proceedings merely provide the attorney
with his constitutionally guaranteed opportunity to confront the
government’s evidence and rebut the same.”8 In Sealed Appellant 1,
we clarified that “the burden of proof remained at all times with
the United States Attorney.”9 Once evidence of unethical conduct
has been presented, however, the burden shifts to the attorney
facing discipline, who must be given an opportunity to rebut or
disprove that evidence. Only after weighing all the evidence may
the district court decide whether a sanction is warranted.
Here it was the district judge and not the government who
initiated disciplinary action after presenting his concern about
Green’s statements to the full district court. At the time of the
show-cause hearing, the district judge had already determined that
Green’s statements regarding the magistrate judge impugned the
integrity of the court. The only purpose for holding the show-
cause hearing was to determine whether Green’s statements were
knowingly false or made with reckless disregard for the truth. On
this point, the district judge took the position that (1) any
8
Sealed Appellant 1 v. Sealed Appellee 1, 211 F.3d 252, 255
(5th Cir. 2000).
9
Id.
12
accusation that a judge lied about his reasons for a ruling would
be regarded as presumptively false or made with reckless disregard
for the truth, and (2) to avoid being disciplined, an attorney who
makes such a statement must be able to provide evidence sufficient
to justify his good-faith belief in the truth of those assertions.
Accordingly, Green could avoid discipline only by producing some
affirmative evidence to support his contention that the magistrate
judge had lied about his reasons for appointing co-counsel to
assist Nolen’s original attorney.
We find no fault with the district judge’s position on this
issue. He did not shift to Green the burden of proving his non-
violation of Rule 8.02 in the first instance, but required only
that Green rebut the presumptively sufficient evidence of his
unethical conduct already before the court.10
10
It is noteworthy that the district judge employed the
same procedure in this case as was followed in a court-initiated
lawyer discipline case Nolen himself cites, albeit for a
different proposition. In that case,
The district court also concluded that
Kidd [in his pleadings] had violated Rule
8.2(a) of the Rules of Professional Conduct
of the Louisiana State Bar Association,
pertaining to remarks about a judge that are
false or made with a reckless disregard as to
their truth or falsity. The court set a
hearing for Kidd to show cause why he should
not be sanctioned for his conduct.
At the hearing on the order to show
cause, the district court instructed Kidd to
explain or give examples in the record to
support his allegations of judicial bias.
United States v. Brown, 72 F.3d 25, 27-28 (5th Cir.
1995)(construing the scope of Louisiana’s identical version of
13
c. Factual Basis
Nolen also contends that there is no factual basis for the
district court’s conclusion that Green’s statements were false or
made with reckless disregard for the truth. Nolen suggests that
some of the comments made by the magistrate judge on the record
justified Green’s good-faith belief that the magistrate judge
decided to appoint co-counsel for Nolen’s original attorney because
of a desire to control the litigation and not out of concern that
Nolen receive effective assistance of counsel, as stated in the
ruling. Specifically, Nolen points to several references by the
magistrate judge to the spurious or frivolous nature of motions
filed on Nolen’s behalf.
The district judge found that the comments by the magistrate
judge referenced by Green did not provide a sufficient basis for
Green’s good-faith belief in the truth of his statements impugning
the magistrate judge’s integrity. We will not disturb the district
judge’s finding on this matter now. The magistrate judge was
obviously frustrated by some of the pleadings filed by Agajanian,
Nolen’s original attorney; but, when viewed in the context of the
entirety of the proceedings before him, the magistrate judge’s
comments are far from compelling indicia of any mendacity in his
stated reasons for appointing co-counsel. Accordingly, we hold
the same ethical rule).
14
that the district judge’s determination that Green’s statements (1)
impugned the magistrate judge’s integrity, and (2) were either
knowingly false or made with reckless disregard for the truth, was
not clearly erroneous.
d. Legal Basis
i. Scope of Rule 8.02
Nolen also contends that no legal basis exists for the district
court’s ruling revoking Green’s pro hac vice status. Specifically,
Nolen argues that Rule 8.02, if properly construed and applied, does
not reach the conduct for which Green was sanctioned. Nolen cites
United States v. Brown11 for the proposition that Green’s statements
about the magistrate judge are not the kind that Rule 8.02 is
designed to address. Brown involved an appeal by a defense attorney
who was suspended and fined by the district court for stating, in
a motion for a new trial, that the district judge had permitted the
jury to perceive that he favored the prosecution’s case.12 We
reversed the district court’s sanction order, holding that “Rule
8.2's restriction on reckless statements regarding members of the
judiciary does not apply to a lawyers in[-]court comments concerning
the judge’s actual performance during the conduct of the trial,” but
rather “solely proscribes false or reckless statements questioning
judicial qualifications or integrity (usually allegations of
11
72 F.3d 25 (5th Cir. 1995)(construing Louisiana’s
identical version of Rule 8.02).
12
Id. at 27
15
dishonesty or corruption).”13 We also noted that “[n]othing in [the
ABA commentary accompanying the rule] intimates that the rule is to
be applied . . . to a lawyer’s criticism of a judge’s handling of
a trial in which the lawyer was involved made in papers filed with
that same court in the same proceeding.”14 Even though we did
recognize in Brown that “such comments could arise in the trial
context,” we cautioned trial courts to “be careful to distinguish
frivolous motions on the appearance of partiality from attacks on
the character of the court.”15
Nolen argues that “this Court in Brown did not mean to
include, within ‘dishonesty or corruption,’ an accusation of
disingenuity in a court’s legal analysis.” Perhaps not, but
Nolen’s characterization of Green’s statements as “an accusation of
disingenuity in a court’s legal analysis” is crucially misleading.
Green did not ascribe mendacity to the magistrate judge’s “legal
analysis;” he plainly accused him of giving false reasons for his
ruling based on that analysis. We cannot read Brown so broadly as
to foreclose the possibility that such obvious allegations of
judicial dishonesty may constitute a violation of Rule 8.02.
Furthermore, even though Green, like the attorney in Brown,
included his accusations in a motion filed in the same action in
13
Id. at 28-29.
14
Id. at 29.
15
Id.
16
which the alleged judicial misconduct occurred, we made clear in
Brown that it is the nature of the statements made and not the
context in which an attorney makes them, that determines whether
Rule 8.02 applies.16 Allegations that a judge has mishandled a
trial are beyond the reach of Rule 8.02, but allegations of
judicial “dishonesty” are not.17 In this case, Green’s statements
undoubtedly impugned the honesty of the magistrate judge. Green’s
motion stated that the magistrate judge gave false reasons for his
ruling, and Green ratified that position at the show-cause hearing
when he accused the magistrate judge of having acted “for impure
motives” and claimed that to have proven that the magistrate judge
had “lied.” The import of these accusations is compounded by the
fact that they involve the magistrate judge’s official reasons for
a ruling, and therefore, directly implicate the “integrity” of the
district court. Green’s conduct here cannot be equated with the
allegations of perceived partiality at issue in Brown.
Accordingly, we find no error in the district court’s determination
that Green’s statements in this case came within the purview of
Rule 8.02 —— and violated it.
ii. Rule 8.02 as Basis for Revocation of Pro Hac
Vice Status
Nolen also insists that, even if Green’s statements
constituted a violation of Rule 8.02, that violation did not
16
Id.
17
Id.
17
warrant revocation of his pro hac vice status. We noted above that
district courts have wide discretion to redress ethical violations
committed by attorneys admitted to practice before them.18 Having
found no error in the district court’s determination that Green’s
statements in this case violated Rule 8.02, we review the district
court’s chosen sanction for an abuse of discretion.19
In In Re Evans, we set forth the standard for denying an
attorney pro hac vice admission to practice before a district
court:
An applicant for admission pro hac vice who is a member
in good standing of a state bar may not be denied the
privilege to appear except “on a showing that in any
legal matter, whether before the particular district
court or in another jurisdiction, he has been guilty of
unethical conduct of such a nature as to justify
disbarment of a lawyer admitted generally to the bar of
the court.”20
In United States v. Dinitz, however, we recognized that fewer
limitations should be placed on the inherent authority of the
district court to revoke an attorney’s pro hac vice status once
that attorney has been admitted to practice before the court.21 In
18
Dinitz, 538 F.2d at 1219.
19
Brown, 72 F.3d at 28.
20
524 F.2d 1004, 1007 (5th Cir. 1975)(quoting Sanders v.
Russell, 401 F.2d 241, 247-48 (5th Cir. 1968).
21
538 F.2d at 1223-24 (holding that once an attorney is
admitted and trial proceedings have begun, “considerations are
quite different” and “[t]he interests of justice demand that a
judge have a measure of discretion” to regulate attorney
conduct).
18
Schlumberger Tech. v. Wiley, the Eleventh Circuit noted that
revocation cases generally fall into one of two categories: (1)
those involving attorney conduct that challenges the court’s
authority or threatens disruption of court proceedings, and (2)
those involving allegedly unethical attorney conduct that does not
threaten the orderly administration of justice.22 This case
indisputably belongs in the second category. In that class of
revocation cases, “the court may not simply rely on a general
inherent power to admit and suspend attorneys,” but “must clearly
identify a specific Rule of Professional Conduct which [sic] is
applicable to the relevant jurisdiction and must conclude that the
attorney violated that rule.”23
We agree with the Eleventh Circuit that once a district court
has admitted an attorney to practice before it pro hac vice, it may
revoke that attorney’s admission if, after following the proper
disciplinary procedure, it concludes that the attorney violated a
clearly identifiable ethical rule. Inasmuch as that is what the
district court did in this case, we are satisfied that it did not
abuse its discretion. Our inquiry, however, cannot end here.
e. Sixth Amendment Balancing
We have long recognized that, in criminal prosecutions, “the
Sixth Amendment requires the courts to respect a defendant’s own
22
113 F.3d 1553, 1561 (11th Cir. 1997).
23
Id.
19
particular choice of counsel.”24 And even though a “defendant’s
right to counsel is not absolute and must yield to the higher
interest of the effective administration of the courts,”25 we have
held that “acts which [sic] appear to violate the ABA Code or other
accepted standards of legal ethics do not confer upon the trial
court unfettered discretion to disqualify the attorney selected by
the party.”26 An attorney representing a defendant in criminal
proceedings may be disqualified for violating an applicable ethical
rule only if, “in light of the interests underlying the standards
of ethics, the social need for ethical practice outweighs the
party’s right to counsel of his choice.”27 Conducting such a
balancing is thus a prerequisite to disqualifying counsel of
defendant’s choice, and explicating the process on the record is a
prerequisite to appellate review.
In this case, the record contains nothing to indicate that the
district court gave any consideration to Nolen’s Sixth Amendment
rights when it sanctioned Green by terminating his right to
24
Dinitz, 538 F.2d at 1219.
25
United States v. Kitchin, 592 F.2d 900, 903 (5th Cir.
1979); Snyder, 707 F.2d at 145 n.5 (“[I]n some cases, the public
interest in maintaining the integrity of the judicial process may
outweigh the right of the defendant to counsel of his choice.”).
26
Kitchin, 592 at 903.
27
Id. at 903 (citing Woods v. Covington County Bank, 537
F.2d 804, 810, 813 (5th Cir. 1976)).
20
practice. At the show cause hearing, the district court simply
stated that:
[W]hen you state in writing in a publicly-filed document
that a judge was not telling the truth when he stated on
the record his reason for taking some action, . . . then
in my opinion, you have attacked the integrity of that
judge and you have crossed the line between respectful
disagreement and a violation of Rule 8.02 of the Texas
Disciplinary Rules of Conduct. This court has an
obligation to uphold the integrity of the judiciary and
the principles of civility and professionalism set forth
in the Texas Disciplinary Rules of Conduct as well as
Local Rule AT-3.
This court finds that you have violated Rule 8.02 . . . . Your pro
hac vice admission is revoked in this case[,] and you are barred
from admission to practice in this court for a period of five
years, effective immediately.28
We do not mean to suggest that, in making its ruling, the
district court was not mindful of Nolen’s constitutional rights, or
may not have balanced those rights against the interests of
maintaining respect for the judicial system. We mean only that the
court’s written and oral orders fail to mention Nolen’s Sixth
Amendment rights at all, much less as a factor that the court
considered in determining the appropriate sanction for Green’s
conduct. In the absence of any indication that the district court
balanced Nolen’s Sixth Amendment rights against the interests
underlying the rules governing attorney conduct, we have no choice
but to conclude that the district court abused its discretion.29
28
The court’s written order is essentially identical.
29
Even though it is likely unnecessary, we reiterate the
observation we made in United States v. Walker:
21
Accordingly, we have no choice but to suspend our determination
whether revoking Green’s pro hac vice status constituted reversible
error and remand the matter for reconsideration by the district
court, specifically for it to conduct and verbalize the necessary
balancing analysis.
B. Sufficiency of the Evidence
1. Standard of Review
In addition to his Sixth Amendment claim, Nolen asserts that
the evidence presented against him was insufficient to support his
conviction for tax evasion. As Nolen did not move for a judgment
of acquittal on this ground, we review his claim of insufficient
“[A]buse of discretion” is a phrase which
sounds worse than it really is. All it need
mean is that, when judicial action is taken
in a discretionary matter, such action cannot
be set aside by a reviewing court unless it
has a definite and firm conviction that the
court below committed a clear error of
judgment in the conclusion it reached upon a
weighing of the relevant factors.” In re
Josephson, 218 F.2d 174, 182 (1st Cir.1954).
The term “does not imply intentional wrong or
bad faith, or misconduct, nor any reflection
on the judge.” Black's Law Dictionary (5th
ed. 1979) at 10. The capable district judge
fairly and competently tried this difficult
and doubtless often vexing case. Upon a
weighing of the relevant factors, we simply
have the definite and firm conviction that,
in this one particular, []he clearly erred.
772 F.2d 1172, 1176, n.9 (5th Cir. 1985).
22
evidence only to determine whether the “record is devoid of
evidence pointing to guilt.”30
2. Merits
Nolen was convicted of violating 26 U.S.C. § 7201, which
criminalizes “willfully attempting in any manner to evade or defeat
any tax imposed by this title or the payment thereof.”31 The
Supreme Court has held that § 7201 “includes the offense of
willfully attempting to evade or defeat the assessment of a tax as
well as the offense of willfully attempting to evade or defeat the
payment of a tax.”32 “The elements of both offenses are the same:
(1) willfulness, (2) existence of a tax deficiency; and (3) an
affirmative act constituting an evasion or attempted evasion of the
tax.”33 Nolen contends that, at the government’s request, the
district court charged the jury solely on the second theory
encompassed by § 7201, i.e., evasion of payment of tax.
The district court told the jury that “Title 26, United States
Code, section 7201, makes it a crime for anyone willfully to
30
United States v. Herrera, 313 F.3d 882, 885 (5th Cir.
2002) (en banc).
31
26 U.S.C. § 7201 (emphasis added).
32
Sansone v. United States, 380 U.S. 343, 354 (1965)
(emphasis in original).
33
United States v. Hogan, 861 F.2d 312, 315 (1st Cir. 1988)
(quoting Sansone, 380 U.S. at 351).
23
attempt to evade or defeat the payment of federal income tax.”
Nolen contends that, by using only the term payment in its summary
explanation of § 7201, the district court “permanently narrowed the
possible basis of conviction, and thus of affirmance” to only one
of the two kinds of evasion recognized by the Court in Sansone,
namely the evasion of payment of income tax. He suggests further
that a formal assessment is a necessary element of that offense,
and that the absence of such an assessment renders the trial record
“devoid of evidence pointing to guilt” for that offense, requiring
in turn that we reverse his convictions, even under our narrow
standard of review. This syllogism is clever but flawed and
therefore unavailing.
We reject Nolen’s contention that the district court’s
instruction narrowed the basis of conviction to only an “evasion of
payment” of taxes. To accept that argument we would have to
disregard (1) the indictment, (2) the case as actually tried by the
government, and (3) the entire remainder of the jury charge, all of
which demonstrate beyond cavil that Nolen was tried for the general
offense of tax evasion, which occurs when one evades either the
assessment or the payment of taxes owed.
a. The indictment
Nolen was indicted for “willfully attempt[ing] to evade and
defeat the income tax due and owing by him . . . by failing to make
an income tax return . . . by failing to pay to the Internal
Revenue Service said income tax, and by concealing his income.” We
24
made clear in United States v. Masat, that when, as here, an
indictment closely tracks the wording of § 7201, there is “one
crime” charged, “the evasion of taxes,” and that crime occurs when
either the assessment or the payment of taxes owed is evaded.34
Nolen does not dispute that, as written, the scope of this
indictment is not limited to the specific offense of “evasion of
payment.”
b. The government’s proof at trial
The trial record makes clear that the government offered
evidence that Nolen (1) earned taxable income, (2) owed substantial
income tax, (3) knew that he was required to file an income tax
return, (4) wilfully failed to file an income tax return, (5)
failed to pay any income taxes, and (6) willfully attempted to
evade the tax he owed. We are satisfied that, at least as far as
the government’s conduct of the prosecution during trial, this case
was not limited to the specific offense of “evasion of payment” of
taxes. Rather, it was prosecuted and tried, as stated in the
indictment, as a full-blown “tax evasion” case, encompassing both
the evasion of assessment and the evasion of payment of taxes. The
government’s presentation of its case at trial also raises serious
doubts about Nolen’s assertion that the jury instruction suggested
34
896 F.2d 88, 91 (5th Cir. 1990)(“The charge in the
indictment directly tracked the wording of § 7201. The ‘two
crimes’ of which Masat contends he was charged come from one
statute, indeed, from one sentence. In truth, there is one crime,
the evasion of taxes . . . .”).
25
to the district court by the prosecution limited its case to only
an “evasion of payment” case, rendering meaningless most of the
evidence the government offered at trial.
c. The jury instruction
The district court began the substantive portion of its jury
instruction as follows:
Title 26, United States Code, section 7201, makes it
a crime for anyone willfully to attempt to evade or
defeat payment35 of federal income taxes. . . .
For you to find the defendant guilty of this crime,
you must be convinced that the government has proved each
of the following beyond a reasonable doubt:
First, that the defendant received gross income of
$12,200 or more . . .
Second, that the defendant failed to file an income-
tax return . . .
Third, that the defendant knew he was required to
file a return;
Fourth, that the defendant’s failure to file was
willful;
Fifth, that the defendant owed substantial income
tax;
Sixth, that the defendant failed to pay the
substantial income tax owed to the Internal Revenue
Service; and
Seventh, that the defendant willfully attempted to
evade or defeat such tax.
. . . .
The word “attempt” contemplates that the defendant
had knowledge and understanding that . . . he had income
35
Emphasis added.
26
which was taxable and which he was required by law to
report, but he nevertheless attempted to evade the tax .
. . on that income by willfully concealing income which
he knew he had during that year.
Nolen isolates the first sentence of this instruction to support
his contention that the district court limited the jury’s basis of
conviction under §7201 to only whether the government had proven
that Nolen attempted to evade “payment” of taxes. As discussed
above, however, the law is clear that §7201 criminalizes evasion of
either assessment or payment of taxes,36 and we do not read the
district court’s use of “payment” in its explanation of § 7201 to
indicate any intent to narrow the scope of the statute’s
application in this case. Neither do we see the district court’s
word choice as constructing any such limitation as a matter of law.
Moreover, by instructing the jury to consider whether Nolen had
“failed to file an income tax return” or “knew that he was required
to file a return,” and by clarifying that “concealing income” could
amount to “evasion,” the district court left no doubt that § 7201
extended to any and all efforts Nolen may have made to avoid
assessment as well as payment of income tax.
Finally, even if we were to characterize Nolen’s conviction as
a one for “evasion of payment” of taxes only, we would not be
constrained to reverse for lack of a formal administrative tax
assessment. Without unnecessarily straying down a road we need not
travel, we observe that the entirety of the caselaw on this issue
36
Sansone, 380 U.S. at 354.
27
provides less than compelling support for Nolen’s position. As the
Third Circuit recently recognized in a case argued by Nolen’s
appellate counsel, “the weight of authority favors [the] view that
an assessment is not required to prove attempted evasion of payment
under § 7201."37 The converse is indisputably true. In any event,
we certainly need not deign to settle the matter for this Circuit
on the basis of the facts presented here, and we reiterate our
rejection of Nolen’s attempt to position his case solely within the
rare and factually distinct “evasion of payment” subset of § 7201
prosecutions.
C. Jury Instructions
On appeal, Nolen asserts that the district court’s jury
instructions constituted plain error in two respects. One is the
absence of a requirement to find an affirmative act of evasion; the
second is constructive amendment of the indictment.
1. Affirmative Act of Evasion
Nolen first asserts that the district court committed plain
error by failing to instruct the jury that it must find an
affirmative act of evasion beyond any willful omission of duty
(willful failure to file a return or pay taxes). As Nolen did not
37
United States v. Farnsworth, 456 F.3d 394, 403 (3d Cir.
2006)(addressing the same argument and authorities Nolen offers
in this case)(emphasis added).
28
timely object to the jury instructions, we review any possible
misstatement of the elements of tax evasion for plain error.38
The mere failure to pay a tax voluntarily when due, even if
willful, does not establish a criminal attempt to evade. “The
difference between the [felony of attempted evasion of payment and
the misdemeanor of willful failure to pay] is found in the
affirmative action implied from the term ‘attempt,’ as used in the
felony.”39 “That is, a felony tax evasion requires willful
commission, whereas the misdemeanor merely requires willful
omission.”40 The government must prove “a willful attempt to defeat
and evade” involuntary or forced payment, by means of “conduct, the
likely effect of which would be to mislead or conceal,” as long as
“the tax-evasion motive plays any part in such conduct.”41 “[A]
defendant is entitled to a charge which [sic] will point out the
necessity for such an inference of willful attempt to defeat or
evade tax from some proof in the case other than that necessary to
make out the misdemeanors.”42
Nolen complains that the court did not explicitly instruct the
jury that the concealment required for tax evasion could not be
38
Fed. R. Crim. P. 52(b).
39
Spies v. United States, 317 U.S. 492, 498-99 (1943).
40
United States v. Doyle, 956 F.2d 73, 75 (5th Cir. 1992)
(emphasis in original).
41
Spies, 317 U.S. at 499.
42
Id. at 500.
29
established merely by showing that Nolen had willfully failed to
file a required return or to pay taxes owed; there had to be an
additional, affirmative act of concealment. He contends that the
district court should have specified that the “concealing” to which
it referred was the same type of concealment alleged in the
indictment (concealing income by placing funds that constituted his
income into misleadingly labeled bank accounts). As the court
failed to do so, he argues, the jury might have thought that
concealment of income through a mere failure to file or pay was a
sufficient basis for conviction. Nolen relies primarily on United
States v. Masat,43 and United States v. Nelson,44 two cases in which
we reversed tax evasion convictions because of flawed jury
instructions. We see both as distinguishable.
In Masat, the district court gave the jury a two-element
charge, instructing that, to convict, the jury had to find that (1)
“a substantial additional tax was due and owing,” and (2) the
defendant “knowingly and willfully attempted to evade or defeat
such tax.”45 The jury then requested more specific guidance
regarding whether a failure to file tax returns alone could
constitute tax evasion.46 We judged the court’s responses to these
43
896 F.2d 88 (5th Cir. 1990).
44
791 F.2d 336 (5th Cir. 1986).
45
896 F.2d at 98 n.4
46
Id.
30
queries to be flawed, because they “did not specify what was
required in addition to failure to file, and left the impression
that failure to file plus willfulness would be sufficient [to
convict for tax evasion].”47
In Nelson, the district court instructed the jury that, “the
affirmative act, as far as concealing is concerned, is that he
filed no tax return at all.”48 We reversed the conviction because
that instruction would “allow the jury to convict the defendant
without finding ‘some willful commission in addition to the willful
omissions’ proscribed by the misdemeanor statute of failing to file
a return.”49
According to Nolen, this precedent requires that, if the
alleged evasive act is concealment, the trial court must instruct
the jury that the mere failure to file or pay is insufficient to
establish this element. He contends further that the court must
specify that, to convict, the jury must find the same form of
concealment charged in the indictment, (here disguising income by
placing it in deceptive bank accounts, etc.). Nolen acknowledges
that, in this case, the district court properly defined “attempt”
as “willfully concealing income,” but insists that it erred by
failing to inform the jury that such concealment could not be
47
Id. at 99.
48
791 F.2d at 337.
49
Id. at 338.
31
established simply by showing that Nolen did not file or pay taxes.
The government counters that the jury instructions, when
viewed as a whole, as they must be,50 adequately informed the jury
that a mere failure to act affirmatively was not an “attempt” and
would not permit the jury to convict Nolen based solely on his
failures to file returns or pay tax. Unlike what occurred in Masat
or Nelson, the district court here gave the jury a seven-element
charge on tax evasion and a separate instruction on the lesser
included misdemeanor offense of willfully failing to file a return.
The lesser-offense charge instructed the jury as follows:
For you to find the defendant guilty of failure to
file a tax return . . . the government must prove beyond
a reasonable doubt that the defendant did everything we
discussed before [elements of tax evasion] except that it
did not prove that the defendant owed substantial income
tax or willfully attempted to evade or defeat such tax.51
In this charge, the government argues, the court made clear that a
willful failure to file a return or pay taxes —— without some
additional affirmative effort “to evade or defeat” the tax —— would
be insufficient to support a conviction for felony tax evasion. We
agree.
50
See United States v. Price, 877 F.2d 334, 338 (5th Cir.
1989)(“Specific instructions may not be judged in artificial
isolation, but must be viewed in the context of the overall
charge, and the charge's correctness is measured not by isolated
passages but in light of the charge as a whole.”).
51
Emphasis added.
32
The district court’s instructions made clear that, to convict
Nolen of tax evasion, the jury had to find that the government
proved all seven elements of tax evasion, including both the
failure to file a tax return and an attempt to evade or defeat the
federal income tax by willfully concealing income. The district
court also made clear that, if the jury did not find willful
concealment, it could convict Nolen only on the lesser offense of
willfully failing to file an income tax return. We are satisfied
that the district court’s instructions effectively communicated to
the jury that a mere failure to file could not satisfy the willful
concealment element of the felony tax evasion offense.
2. Material Variance
Nolen also maintains that the jury instructions constructively
amended the indictment to reach acts of concealment other than the
one alleged, and that this constituted plain error. The indictment
charged that Nolen “willfully attempted to evade and defeat the
income tax due and owing by him ... by failing to make an income
tax return [when due] ..., by failing to pay ... said income tax,
and by concealing his income by placing funds, which constituted
his income, in bank accounts that appeared to be controlled by a
third party, but which bank accounts were, in fact, controlled by
defendant.” Nolen insists that, as the indictment alleged only one
affirmative act of concealment, viz., the use of the third-party
bank accounts, the instructions did not limit to evidence of
Nolen’s use of such bank accounts the kind of “concealing” that the
33
jury could find to support a conviction. He notes that the
government presented testimony from his office manager that Nolen
had instructed her to give all cash receipts directly to him rather
than depositing them. He contends that the jury might have based
its determination of the concealment element of tax evasion on
this secreting of cash income rather than on the bogus deposits to
third-party bank accounts, the only method of concealment alleged
in the indictment.
The government responds that, although the instructions did
not expressly limit the jury’s consideration to willful concealment
of income accomplished by the placing of funds into third-party
bank accounts, as alleged in the indictment, neither did they
expressly instruct the jury that it could convict based on
different acts of concealment. The government further advances
that the reference to the cash receipts was brief, was only made in
passing, was not the focus of the government’s case, and was not
prejudicial in the overall context of the extensive and
overwhelming evidence and argument regarding the bank accounts. We
agree.
Nolen’s office manager testified at trial for just under an
hour. The allegedly prejudicial exchange lasted less than a
minute, while the prosecutor was questioning her regarding Nolen’s
business bank account, specifically whether all of the receipts
from Nolen’s dental practice were transferred to that account. The
office manager indicated that they were, and the government sought
34
to clarify that Nolen actually had instructed the office manager to
give any cash receipts directly to him. The office manager
confirmed this and also established that such cash receipts totaled
approximately $1,000 per month. At that point, the government
returned to its line of questioning about the third-party bank
account scheme employed by Nolen to conceal his income.
Even if we assume arguendo that the district court did err in
failing to caution the jury to consider only the evidence of
concealment involving bank accounts, we would remain convinced
that, given the extended and overwhelming evidence presented by the
government regarding the bank account scheme, the brief clarifying
testimony of Nolen’s office manager about cash receipts was in no
way prejudicial and certainly does not provide a basis for reversal
of Nolen’s conviction under the plain error standard.
D. Restitution
The district court imposed a $60,000 fine and also ordered
restitution as a separate term of Nolen’s sentence, under 18 U.S.C.
§ 3663. Nolen does not object to the fine, but contends that
restitution is not authorized by that statute. Nolen did not raise
this objection at sentencing, but because he is claiming that this
element of his sentence is illegal, we review it de novo.52
52
See United States v. Del Barrio, 427 F.3d 280, 282 & nn.
3-4 (5th Cir. 2005)(citations omitted)(recognizing that an
illegal sentence always constitutes plain error).
35
Restitution is not allowed under § 3663 as part of the
sentence in a federal tax evasion case.53 Restitution to the IRS
may be imposed as a condition of supervised release under § 3583,
but only if “the specified sum of taxes . . . has [] been
acknowledged, conclusively established in the criminal proceeding,
or finally determined in civil proceedings.”54 As the exact amount
of taxes owed by Nolen was not conclusively established at trial,
restitution was inappropriate under § 3583 as well. In addition,
the district court’s order that Nolen “comply with any IRS
requirements to pay delinquent taxes and penalties according to the
schedule of payments that the IRS imposes” should serve the same
purpose as restitution. Accordingly, we reverse the district
court’s order of restitution and remand for resentencing consistent
with this opinion.
III. CONCLUSION
For the foregoing reasons we hold that (1) the evidence
adduced at trial was sufficient to establish the charged offense,
53
United States v. Stout, 32 F.3d 901, 905 (5th Cir.
1994)(“the restitution statute permits such separate orders only
when the defendant’s offense is an offense under either Title 18
or Title 49"). Even if restitution were authorized under § 3663,
it would be limited to only the “loss” associated with the counts
of conviction. United States v. Campbell, 106 F.3d 64, 69-70
(5th Cir. 1997)(“relevant conduct” provisions of guidelines are
inapplicable to determination of amount of restitution). Based
on the years of conviction, the tax loss computed at trial was
$223,509, but the district court imposed restitution for Nolen’s
unpaid taxes going back to 1992 ($453,275).
54
United States v. Touchet, 658 F.2d 1074, 1076 (5th Cir.
1981).
36
(2) the district court did not commit plain error by failing to
require the jury to find an affirmative act other than willful
failure to file tax returns or to require the jury to find
precisely the same affirmative act of evasion as the one charged in
the indictment, (3) the district court erred by imposing
restitution as part of Nolen’s sentence, and (4) the district court
erred in failing to demonstrate on the record that, in revoking the
pro hac vice admission of Nolen’s retained counsel, it first
balanced the Sixth Amendment rights of the defendant against the
societal need for ethical practice and respect for the judicial
system and the judges and courts thereof. But for our inability to
review this issue absent an explication of balancing by the trial
court, we would affirm Nolen’s conviction. Inasmuch as this hiatus
prevents our either affirming or reversing Nolen’s conviction until
we can review his Sixth Amendment challenge, we remand to the
district court for the limited purpose of its conducting the
necessary balancing test between Nolen’s right to counsel of his
choice and the public interest in maintaining the integrity of and
respect for the judicial process.
If, on remand, the district court should determine that
Nolen’s Sixth Amendment right outweighed the court’s interest in
maintaining the standards of ethics of lawyers practicing before it
and thus the integrity of the judicial system, the court shall
vacate Nolen’s conviction and grant him a new trial. But, if the
court determines that the need to revoke the right of Nolen’s
37
counsel to practice before it was the proper and least intrusive
sanction required to maintain the integrity of the justice system
and that it outweighed Nolen’s right to be represented by this
particular lawyer, requiring Nolen to retain yet another attorney
of his choosing, the conviction will stand affirmed and the
district court shall resentence Nolen, albeit without assessing
restitution.
As our remand to the district court is thus a limited and
conditional one, this panel retains appellate cognizance over the
case for our further review following that court’s rulings on
remand —— unless the district court should grant Nolen a new trial,
in which case his conviction and sentence shall be vacated, ipso
facto. Absent such vacatur and grant of a new trial, however, the
case shall be returned to this panel for further consideration of
the Sixth Amendment issue post-balancing, as well as the new
sentence imposed.
CONVICTION CONDITIONALLY AFFIRMED SUBJECT TO LIMITED REMAND;
SENTENCE VACATED AND REMANDED FOR RE-SENTENCING, DEPENDING ON THE
RESULTS OF THE DISTRICT COURT’S BALANCING EXERCISE.
38