United States v. Williams ( 2022 )

Case: 22-30007 Document: 00516257999 Page: 1 Date Filed: 03/29/2022
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
March 29, 2022
No. 22-30007 Lyle W. Cayce
Clerk
United States of America,
Plaintiff—Appellant,
versus
Jason R. Williams; Nicole E. Burdett,
Defendants—Appellees,
consolidated with
_____________
No. 22-30008
_____________
United States of America,
Plaintiff—Appellant,
versus
Nicole E. Burdett,
Defendant—Appellee.
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Appeals from the United States District Court
for the Eastern District of Louisiana
USDC No. 2:20-CR-55 & No. 2:20-CR-139
Before Smith, Costa, and Wilson, Circuit Judges.
Gregg Costa, Circuit Judge:
A federal grand jury indicted lawyer Jason Williams for lying on his
taxes and failing to report large cash transactions to the IRS. In a lengthy
pretrial order, the district court admitted some evidence, excluded other
evidence, and deferred certain rulings until it had the benefit of the context
that trial provides. For the rulings it did make, the court reserved the right
to revisit those decisions at trial. Despite the possibility of reconsideration,
the government appealed the pretrial exclusion of certain evidence of
Williams’s tax history from the years predating the charged conduct. We
consider whether the district court abused its discretion in concluding that
this evidence was improper “other act” evidence under Rule 404(b) and,
alternatively, inadmissible under the Rule 403 balancing test.
I
The grand jury charged Williams and his law partner Nicole Burdett
with eleven counts. The first was conspiracy. U.S.C. § 371. The indictment
alleges that between 2011 and 2019, Williams and Burdett conspired to
defraud the United States by (1) filing fraudulent tax returns and (2) failing
to report cash payments of over $10,000. As part of their conspiracy,
Williams and Burdett allegedly worked with a tax preparer to inflate
Williams’s form 1040 Schedule C business expenses on five years of returns.1
1
A few months after Williams and Burdett were indicted, the government charged
the tax preparer with fraud related to his own Schedules C. The tax preparer pleaded guilty
to one count.
2
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Those business expenses reduced Williams’s taxes by $200,000. Williams
and Burdett also asked the tax preparer to amend earlier returns from years
predating the conspiracy to reduce his existing tax debt.
The remaining ten counts are an encore to the conspiracy count. Five
counts allege that Williams and Burdett aided or assisted tax fraud for years
2013 through 2017. See 26 U.S.C. § 7206(2). Defendants allegedly
“misclassified Williams’s personal expenses as business expenses and
provided this false information” to the tax preparer to include in Williams’s
Schedules C. The other five counts allege that Williams and Burdett failed
to “file forms 8300 relating to cash received in trade or business,” in
violation of 31 U.S.C. § 5331.
Before trial was set to begin, the government filed a notice of intent to
introduce “other acts” evidence. See Fed. R. Evid. 404(b)(3). The notice
sought to introduce testimony and documents about Williams’s “handling of
his income taxes prior to the tax years charged in the indictment.” According
to the government, the evidence showed that starting in 2002, Williams filed
and paid his taxes late. His recurrent tardiness resulted in IRS debt and liens,
some of which existed when the conspiracy began in 2011. The government
also wanted to show that Williams “had conversations with the IRS about
these tax issues.” These tax issues, the government argued, showed
Williams’s intent to commit tax fraud.
After a hearing, the district court ruled on several evidentiary issues
including the government’s Rule 404(b) notice. The court first allowed the
government to introduce limited evidence about Williams’s tax history to the
extent that it was necessary to explain how the conspiracy began—that is, to
explain how Williams hired the tax preparer in 2011 to amend his prior
returns by increasing business expenses, thus lowering his existing tax
burden. It also allowed evidence about Williams’s improperly deducting his
3
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overdue tax payments as business expenses during the years for which the
government charged him.
But the district court excluded the rest of Williams’s tax history
predating the conspiracy—including evidence of his late filings and payments
and his related back-and-forth with the IRS—under Rules 404(b) and 403. It
reasoned that the evidence is “classic propensity evidence,” probative only
of Williams’s propensity to cheat the IRS, and thus barred by Rule 404(b)(1).
Setting aside Rule 404(b), the district court then gave the government the
benefit of the doubt, assuming that the evidence is “marginally probative of
Williams’s willfulness to commit tax fraud.” The district court nevertheless
excluded the evidence under Rule 403, concluding that the unfair prejudice,
juror confusion, and delay that might result from introducing the evidence
would substantially outweigh its probative value.
Three weeks before trial, the government appealed.
II
The government may seek interlocutory review of an order
“excluding evidence” if “the United States Attorney certifies to the district
court that the appeal is not taken for purposes of delay and that the evidence
is a substantial proof of a fact material in the proceeding.” 18 U.S.C. § 3731.
This one-sided jurisdictional statute reflects the government’s inability to
appeal an evidentiary ruling either during trial or after an acquittal. Id. (not
allowing such appeals if “made after the defendant has been put in jeopardy
and before the verdict”); see also Serfass v. United States, 420 U.S. 377, 388
(1975) (“In the case of a jury trial, jeopardy attaches when a jury is empaneled
and sworn.”); Kepner v. United States, 195 U.S. 100, 129–30 (1904) (holding
that the Double Jeopardy Clause prevents appeals from an acquittal). Pretrial
review is usually the government’s only option to appeal erroneous
evidentiary rulings.
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Despite our jurisdiction, it is awkward for an appellate court to
consider run-of-the-mill pretrial evidentiary rulings that depend on the
broader evidentiary canvas of a case. This lack of context is typically not a
problem for the most common uses of section 3731: appeals of pretrial rulings
suppressing evidence or statements, which typically involve self-contained
issues such as whether reasonable suspicion supported a traffic stop. See, e.g.,
United States v. Wise, 877 F.3d 209, 215 (5th Cir. 2017) (appeal of pretrial
Fourth Amendment ruling); United States v. Cavazos, 668 F.3d 190, 193 (5th
Cir. 2012) (appeal of pretrial Miranda ruling). In contrast, applications of
many of the Federal Rules of Evidence, especially Rules 403 and 404(b), “are
usually predicated on a background of interwoven fact patterns, and the facts
set out in the record, either in the indictment or affidavits accompanying the
motion, are often insufficient to permit an informed decision.” Scott J.
Shapiro, Note, Reviewing the Unreviewable Judge: Federal Prosecution Appeals
of Mid-Trial Evidentiary Rulings, 99 Yale L.J. 905, 912 (1990) (proposing
midtrial government appeals of evidentiary rulings).
Our pretrial review, which takes place without knowledge of the
evidence or arguments on which the trial will turn, is consequently impaired.
Cases take shape and color at trial, where lawyers argue, witnesses testify,
and jurors listen, observe, and react. Trial developments could make
evidence that seemed irrelevant or marginally probative at the outset instead
appear crucial for one purpose or another—such as impeaching a witness or
discrediting a defense theory. What better place to answer questions about
probative value, prejudice, jury confusion, or delay than at trial? See Shapiro,
supra, at 912 (“[T]he determination of prejudice may necessitate that the
judge acquire a ‘feel’ for the case.”). Indeed, the district court recognized
the ephemeral nature of pretrial evidentiary rulings, adding to its order “the
proviso that evidence at trial may change the complexion of what informs [its]
rulings.” See also United States v. Decinces, 808 F.3d 785, 789 (9th Cir. 2015)
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(recognizing that pretrial evidentiary rulings “are by their very nature
nonfinal”). 2 The district court’s qualified ruling on issues so heavily
dependent on what happens at trial means that our pretrial review has a
tentative flavor to it.
Mindful of these impediments to our pretrial review and the nonfinal
nature of the ruling before us, we nonetheless must exercise the jurisdiction
Congress has granted us. But given our more detached view of the case, we
review a district court’s exclusion of evidence for abuse of discretion. United
States v. Sharpe, 193 F.3d 852, 867 (5th Cir. 1999). Trial court discretion is
at its zenith in Rule 403 balancing, so such rulings are disturbed only for a
“clear abuse of discretion.” United States v. Fields, 483 F.3d 313, 354 (5th
Cir. 2007).
A
Before deciding whether the exclusion of evidence was proper, we
must determine what evidence the district court’s order actually excluded.
Although only the district court can definitively resolve the order’s
ambiguities, we read the order to allow evidence showing that Williams had
lingering tax debt and liens when the conspiracy began and asked the tax
preparer to amend the earlier returns to reduce his tax liability. We also see
nothing in the order that excludes evidence of how much tax debt Williams
had when he hired the tax preparer. In fact, the district court expressly
allowed evidence of how Williams deducted his late tax debt payments as
2
Section 3731 is anomalous in allowing appeals of nonfinal rulings. See Decinces,
808 F.3d at 790 (recognizing that section 3731 allows appeals of orders excluding evidence
even though they are not final). Most appeals lie only after a final judgment has issued, see
28 U.S.C. § 1291, and even interlocutory appeals typically require finality as to the discrete
issue being appealed, see Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 545 (1949)
(observing that interlocutory appeals are appropriate when the ruling has “a final and
irreparable effect on the rights of the parties”).
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business expenses in the charged years. What the district court did exclude
were granular details of Williams’s late filings, late payments, liens,
enforcement actions, and communications with the IRS that were resolved
before he met the tax preparer. Williams agrees with our interpretation of
the district court’s order, conceding that the government can introduce
evidence of “why [the tax preparer] was hired, when he was hired, the
reasons that Mr. Williams went to see him.”
Oddly, the government refuses to accept the concession. It argues
that the district court’s order makes it “impossible” to explain why Williams
hired the tax preparer to amend his old tax returns. But the district court
agreed with the government—it ruled that “insofar as the government seeks
to introduce evidence concerning the genesis of the alleged conspiracy,”
including how and why Williams hired the tax preparer, “such evidence is
admissible intrinsic evidence.” It thus allowed the evidence that the
government needs to provide “the immediate context of events in time and
place.” United States v. Rice, 607 F.3d 133, 141 (5th Cir. 2010) (quotation
omitted). The government’s reluctance to accept its win is puzzling. 3
3
A proper reading of the ruling also alleviates the government’s concerns that the
district court excluded evidence intrinsic to the charged offenses and thus not subject to
the restrictions of Rule 404(b). As we have said, evidence of other acts is intrinsic when
“it is inextricably intertwined with the charged offense, when both acts are part of the same
criminal episode, or when the ‘other act’ was a necessary preliminary step toward the
completion of the charged crime.” United States v. Crawley, 533 F.3d 349, 354 (5th Cir.
2008). The district court’s order allowed all the evidence that the government contends is
intrinsic—“namely, evidence of Williams’s then-current tax liabilities from tax years
2002–2008, including the associated liens.”
In contrast, the excluded evidence involves conduct that is too dissimilar and
distant in time from the charged offenses to be intrinsic. Compare United States v. Heard,
709 F.3d 413, 430 (5th Cir. 2013) (holding that evidence of bankruptcy fraud was extrinsic
to employment tax fraud because no evidence linked the two), with United States v. Watkins,
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B
We turn, then, to whether the district court abused its discretion by
excluding the more granular details of Williams’s tax history. Rule 404(b)
prohibits using evidence of “any other crime, wrong, or act” to “prove a
person’s character in order to show that on a particular occasion the person
acted in accordance with the character.” Fed. R. Evid. 404(b)(1). It
does, however, allow using other-act evidence for “another purpose, such as
proving motive, opportunity, intent, preparation, plan, knowledge, identity,
absence of mistake, or lack of accident.” Id. 404(b)(2). Even if the evidence
clears the Rule 404(b) admissibility hurdle, it is still subject to Rule 403. That
rule excludes evidence when “its probative value [for a permissible use] is
substantially outweighed by a danger of one or more of the following: unfair
prejudice, confusing the issues, misleading the jury, undue delay, wasting
time, or needlessly presenting cumulative evidence.” Fed. R. Evid. 403;
see also United States v. Beechum, 582 F.2d 898, 911 (5th Cir. 1978) (en banc)
(outlining the two-step test involving Rules 404(b) and 403).
Williams’s tax history may well have permissible uses under Rule
404(b), like proving his willful intent or knowledge of tax obligations. See
Heard, 709 F.3d at 429–30 (holding that evidence of bankruptcy fraud was
admissible to prove intent in an employment tax fraud case); United States v.
Boyd, 773 F.3d 637, 643 (5th Cir. 2014) (holding that evidence of late filings
and warning notices from the IRS was admissible to prove defendant’s
willfulness in evading taxes and knowledge of tax system); see also United
States v. Daraio, 445 F.3d 253, 264 (3d Cir. 2006) (allowing history of tax
noncompliance in a tax evasion case); United States v. Bok, 156 F.3d 157, 165–
591 F.3d 780, 784–85 (5th Cir. 2009) (admitting intrinsic evidence of drug runs from a few
months earlier in a drug conspiracy case). As the government concedes, the district court
did not err in deeming that evidence extrinsic.
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66 (2d Cir. 1998) (allowing evidence of failure to file returns in a prosecution
for lying on tax forms because it was “indicative of an intent to evade the tax
system”). That is especially so because Williams plans to assert that he relied
in good faith on his tax preparer. See Boyd, 773 F.3d at 643 (allowing other-
act evidence to disprove a good-faith defense).
But even assuming some permissible Rule 404(b) uses, the district
court did not clearly abuse its discretion in alternatively excluding the
evidence under Rule 403. The probative value of Williams’s tax history for
any permissible use does not seem high. Other acts are more probative of
intent when they are similar to the charged acts. See Beechum, 582 F.2d at
913; United States v. Farr, 701 F.3d 1274, 1281 (10th Cir. 2012) (holding that
prior IRS penalties were admissible because they were “virtually identical”
to the ones in the case). Paying taxes late is not the same as lying on tax forms.
And although Williams’s tax delinquencies and communications with the
IRS might show his familiarity with how taxes work in general, they say little
about his knowledge of Schedule C business expenses.
In contrast, the district court identified substantial risks from
admitting Williams’s tax history. Admitting the evidence gives the jury the
chance to decide the case on an improper basis: Williams is guilty because he
is the type of person who doesn’t follow the tax laws. This concern is
“particularly great” when, as here, the other acts have gone unpunished.
Beechum, 582 F.2d at 914. On top of this, risks of confusion and delay abound.
The exhibits the government seeks to introduce span close to a decade,
raising the strong possibility of minitrials over late filings and civil IRS
disputes that might distract the jury from the charged conduct. See Harpring
v. Continental Oil Co., 628 F.2d 406, 410 (5th Cir. Unit A 1980) (affirming
the exclusion of evidence because it would have involved “trying another
lawsuit within the existing lawsuit”). The district court did not commit a
clear abuse of discretion in predicting that risks of undue prejudice,
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confusion, and waste of time would substantially outweigh the other acts’
probative value.
The government seeks a remand of the district court’s Rule 403
balancing, arguing that it was tainted because the district court did not
recognize all possible Rule 404(b) uses of the other-act evidence. True, the
district court did not acknowledge the potentially permissible use of showing
Williams’s knowledge of the tax code. 4 Still, the district court conducted its
Rule 403 balancing after assuming that the evidence was probative of
Williams’s willfulness to commit tax fraud, which was the use that the
government pressed most zealously below. And the outcome of the district
court’s balancing flows largely from its assessment of the other side of the
equation—the weighty concerns about unfair prejudice, juror confusion, and
delay. This is not one of the rare cases in which a district court clearly abused
its “especially high” Rule 403 discretion. United States v. Meza, 701 F.3d
411, 429 (5th Cir. 2012). 5
4
The district court did not address motive or plan-and-preparation either. But a
review of the government’s Rule 404(b) notice, its briefing at the district court, and the
evidentiary hearing transcript, indicates that the motive and plan-and-preparation
arguments were not adequately raised at the district court. Similarly, the government’s
only mention of Williams’s lying to the IRS that Hurricane Katrina destroyed his business
records was a fleeting reference during the evidentiary hearing. The Rule 404(b) notice
itself did not mention that evidence. One can hardly fault the district court for not
addressing arguments that the government did not press.
5
The government fails to cite a single Fifth Circuit case reversing a Rule 403
determination. Our thorough search of published Fifth Circuit criminal cases revealed only
two from the last two decades reversing a Rule 403 balancing. In one, the court vacated a
criminal conviction because the district court excluded evidence offered by the defendant
that was highly probative and not very prejudicial. United States v. Gluk, 831 F.3d 608, 616
(5th Cir. 2016). In the other, the court vacated a criminal conviction because the district
court admitted inflammatory evidence of a prior conviction. United States v. Jackson, 339
F.3d 349, 357–58 (5th Cir. 2003). This dearth of cases further confirms that the district
court did not abuse its discretion.
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The bigger reason not to remand for Rule 403 rebalancing is one we
have already noted: The district court ruling is subject to modification.
Because of the difficulties of making Rule 404(b) and 403 assessments in the
vacuum of pretrial review, we double down on the district court’s caveat.
Nothing we have said limits the district court’s ability to reassess the
challenged ruling (or others that were part of its lengthy order and not subject
to appeal), given the protean and illuminating nature of a trial. Our holding
is only that the district court did not clearly abuse its discretion in excluding
the evidence based on what it knew at that time. 6
***
We AFFIRM. As the trial has been on hold pending this appeal, the
mandate shall issue forthwith.
6
To avoid confusion on part of the reader, we note that Judge Martin Feldman,
who excluded the evidence, died while his ruling was on appeal. Nothing in this opinion is
an indication of what rulings the new judge should make as the case proceeds.
11