United States v. Edward J.S. Picardi , 739 F.3d 1118 ( 2014 )

United States Court of Appeals
For the Eighth Circuit
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No. 13-2041
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United States of America
lllllllllllllllllllll Plaintiff - Appellee
v.
Edward J.S. Picardi, MD
lllllllllllllllllllll Defendant - Appellant
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Appeal from United States District Court
for the District of South Dakota - Rapid City
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Submitted: October 24, 2013
Filed: January 10, 2014
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Before LOKEN, GRUENDER, and SHEPHERD, Circuit Judges.
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GRUENDER, Circuit Judge.
A jury found Edward J.S. Picardi guilty of thirteen counts of federal tax related
offenses. On appeal, Picardi challenges the district court’s1 (1) replacement of two
jurors with alternate jurors; (2) exclusion of a defense exhibit; (3) limitation of a
1
The Honorable Jeffrey L. Viken, Chief Judge, United States District Court for
the District of South Dakota.
defense witness’s testimony; and (4) refusal to give a proffered theory-of-defense
instruction. We affirm.
I. Background
Picardi was a surgeon in western South Dakota. In the mid-1990s, Picardi
became a client of Anthony Kritt, an attorney and a certified public accountant. From
1997 until 2003, Picardi participated in an “employee leasing program” promoted and
run by Kritt that required Picardi to enter a contract with Montrain Services, Ltd., an
Irish corporation, to lease his services as a physician. Montrain Services contracted
with Professional Leasing Services, Inc., a Nevada corporation that was operated by
Kritt, to provide Picardi’s services to Professional Leasing Services. In turn,
Professional Leasing Services contracted with Picardi’s medical group to “lease”
Picardi’s services to it.
Picardi’s income from this program was distributed in a manner designed to
avoid taxes. Picardi’s medical group paid Professional Leasing Services a “leasing
fee” for Picardi’s medical services. Professional Leasing Services then paid Picardi
a small portion of this “leasing fee” as wages, which Picardi reported as income on
his tax returns. In a series of complex transactions, the other, larger portion of the
“leasing fee” was transferred into foreign financial accounts set up for Picardi.
Picardi did not report this portion as income on his federal income tax returns from
1999 until 2003. On paper, the unreported portion of Picardi’s income was “deferred
compensation” inasmuch as he was supposed to be unable to access it until he retired
or turned seventy years old. Picardi did, however, access and use the funds through
another series of complex transactions made to look like loans. Picardi further
reduced his taxes by categorizing the portion of his income sent overseas as
“professional leasing services” expenses on his medical practice’s corporate income
tax returns. In April 2003, Picardi withdrew from the “employee leasing program,”
but he continued to maintain his interest in the foreign accounts containing his
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“deferred compensation.” For the 2004 to 2008 tax years, Picardi failed to disclose
to the Internal Revenue Service (“IRS”) his financial interest in the foreign accounts.
A federal grand jury returned a superseding indictment charging Picardi with
five counts of income tax evasion, in violation of 26 U.S.C. § 7201; five counts of
filing a false return, in violation of 26 U.S.C. § 7606(1); and three counts of failing
to file with the IRS a required form regarding his interests in foreign accounts, in
violation of 31 U.S.C. §§ 5314 and 5322 and 31 C.F.R. §§ 103.24 and 103.27(c).
Picardi proceeded to a jury trial. At trial, Picardi claimed that he had a good faith
belief that the “deferred compensation” component of the “employee leasing
program” was legal and that he relied upon the expert and legal advice of Kritt. The
jury found Picardi guilty of all thirteen counts, and he was sentenced to 60 months’
imprisonment. Picardi then timely filed this appeal.
II. Discussion
A. Replacement of Two Jurors
Twelve jurors and three alternate jurors were selected to serve on Picardi’s
jury. On the third day of trial, the district court announced that it had dismissed juror
S.R. the previous night because S.R. “had a change in life circumstance.” The court
replaced S.R. with one of the alternate jurors. At the beginning of the ninth day of
trial, the district court notified the parties that it had excused juror M.K. because M.K.
“was finding the rigors of serving on this jury to be too burdensome . . . . [b]y virtue
of age and the strain of trial.” The court replaced M.K. with an alternate juror.
Picardi did not object to the district court’s decisions to replace either S.R. or M.K.
Instead, in the case of S.R., Picardi stated that he had no issues to raise with the court
before trial recommenced, and in the case of M.K., Picardi volunteered that M.K. was
eighty years’ old in order to “complete[] that issue for record purposes.”
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Picardi first argues that the district court abused its discretion by dismissing
jurors S.R. and M.K. because the record does not provide a legitimate basis for the
court’s decision. We generally review a district court’s decision to replace a juror for
abuse of discretion. United States v. Cannon, 475 F.3d 1013, 1023 (8th Cir. 2007).
However, because Picardi did not object, we review the district court’s decision for
plain error. See United States v. Thompson, 866 F.2d 268, 272 (8th Cir. 1989). To
show plain error, Picardi must establish that there is “(1) ‘error,’ (2) that is ‘plain,’
and (3) that it ‘affect[s] substantial rights.’” Johnson v. United States, 520 U.S. 461,
466-67 (1997) (alteration in original) (quoting United States v. Olano, 507 U.S. 725,
732 (1993)). If Picardi establishes all three conditions, we may exercise our
“discretion to notice a forfeited error, but only if . . . the error ‘seriously affect[s] the
fairness, integrity, or public reputation of judicial proceedings.’” Id. at 467
(alteration in original) (quoting Olano, 507 U.S. at 732).
Picardi has failed to demonstrate that the district court committed error, much
less plain error. A district court may impanel alternate jurors to replace original
jurors “who are unable to perform or who are disqualified from performing their
duties.” Fed. R. Crim. P. 24(c)(1). “The substitution of an alternate for a juror for
reasonable cause is within the prerogative of the trial court and does not require the
consent of any party.” United States v. Bad Cob, 560 F.2d 877, 879 (8th Cir. 1977)
(quoting United States v. Ellenbogen, 365 F.2d 982, 989 (2d Cir. 1966)). While the
record here may not be developed fully because Picardi did not object and seek
further explanation, it sufficiently discloses the district court’s reason for replacing
each juror. With respect to S.R., the court found that S.R. could not continue because
of a “change in life circumstance.” With respect to M.K., the court found M.K. “was
finding the rigors of serving on this jury to be too burdensome . . . . [b]y virtue of age
and the strain of trial.” Picardi does not dispute that these are reasonable grounds for
replacing a juror, and he has not presented any evidence that these grounds were not
present. Accordingly, “we cannot say that [Picardi’s] claim amounts to plain error.”
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Thompson, 866 F.2d at 272 (quoting United States v. Udey, 748 F.2d 1231, 1240 (8th
Cir. 1984)).
Picardi next argues that by dismissing the two jurors outside of his presence
and that of his attorney, the district court violated his right to be present at a critical
stage of the proceedings against him as guaranteed by the Sixth Amendment, the Fifth
Amendment’s Due Process Clause, and Federal Rule of Criminal Procedure 43.2
Again, since neither Picardi nor his attorney objected to their absence when the jurors
were dismissed, we review for plain error. See id.; see also United States v. Runyon,
707 F.3d 475, 517-18 (4th Cir. 2013). “[T]he right to personal presence at all critical
stages of the trial . . . [is a] fundamental right[] of each criminal defendant.” Rushen
v. Spain, 464 U.S. 114, 117 (1983). “A criminal defendant’s right to be present at
every stage of a criminal trial is rooted, to a large extent, in the Confrontation Clause
of the Sixth Amendment and is protected to some extent by the Due Process Clause
of the Fifth and Fourteenth Amendments.” United States v. Smith, 230 F.3d 300, 309
(7th Cir. 2000) (internal citation omitted). Rule 43 codified this right; the codified
right expressed in Rule 43, however, “is broader than the constitutional right, and
includes the right of the criminal defendant to be present during all stages of his or
her trial.” Id. at 309-10; see also United States v. Gunter, 631 F.2d 583, 589 (8th Cir.
1980).
First, Picardi’s Sixth Amendment rights have not been implicated, “as no
witness or evidence against the defendant was presented” when the district court
dismissed the jurors. Smith, 230 F.3d at 310; see also Olszewski v. Spencer, 466 F.3d
47, 64 (1st Cir. 2006) (“We see no basis for Olszewski’s claim that the judge’s action
2
Without providing any analysis or development in his briefs, Picardi claims
that the manner in which the district court replaced the jurors “also implicates his
right to effective assistance of counsel.” Because Picardi did not develop this issue
in his briefs as required, he has waived his argument. United States v. Frausto, 636
F.3d 992, 998 (8th Cir. 2011).
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in excusing the juror violated his Sixth Amendment rights.”). Second, even if we
were to assume that the district court violated Picardi’s due process rights or Rule 43,
Picardi “has failed to show that the district court’s error satisfies the third prong of
Olano—to wit, that the error affected [Picardi’s] ‘substantial rights.’” Runyon, 707
F.3d at 517 (quoting Olano, 507 U.S. at 732). The district court notified Picardi of
the court’s dismissal of each juror, and in each instance, the court provided him with
an opportunity to object or make a record. At no point did Picardi object, and in the
case of M.K., Picardi even volunteered her age in order to “complete[] that issue for
record purposes.” The district court replaced M.K. and S.R. with alternate jurors who
were subject to and selected during the same voir dire process, at which both Picardi
and his attorney were present, as the two dismissed jurors. Thus, the two replacement
jurors did not create a “drastic shift in the jury’s composition.” United States v.
Evans, 352 F.3d 65, 70 (2d Cir. 2003). The replacement of the jurors occurred before
the case was sent to the jury for deliberations, and there is no indication that the
remaining jurors were adversely influenced by the district court’s decision to replace
each juror. See id. at 69-70.
The lack of prejudice in this case is particularly clear because “counsel was
informed of the communications [when trial reconvened] at which time there was no
suggestion of actual or potential prejudice.” Olszewski, 466 F.3d at 64-65. “Had
there been any risk of prejudice from the substitution[s], one would have expected
[Picardi’s] lawyer to have vigorously objected . . . . It would set a poor precedent to
allow a party to remain silent when a substitution is announced, await the verdict, and
lodge an objection only when the jury’s determination was adverse.” Runyon, 707
F.3d at 518. Accordingly, Picardi’s claim “fails not only under Olano’s third prong,
but its fourth prong as well, as our refusal to reverse does not result in any
‘miscarriage of justice.’” Runyon, 707 F.3d at 518 (quoting Olano, 507 U.S. at 736).3
3
In his reply brief, Picardi suggests that the district court’s dismissal and
subsequent replacement of the two jurors outside of his presence constitutes structural
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B. Exclusion of Exhibit 621
“We review a district court’s evidentiary rulings for clear abuse of discretion,
reversing only when an improper evidentiary ruling affected the defendant’s
substantial rights or had more than a slight influence on the verdict.” United States
v. Summage, 575 F.3d 864, 877 (8th Cir. 2009) (quoting United States v. Two Shields,
497 F.3d 789, 792 (8th Cir. 2007)).
error, and thus, prejudice should be presumed. As Picardi conceded at oral argument,
he first raised this contention in his reply brief. Generally, we do not consider
arguments raised for the first time in a reply brief, United States v. Griggs, 71 F.3d
276, 282 (8th Cir. 1995), and we decline to do so in this case. Even if we were to
consider this argument, however, we would reject it. Indeed, it is an open question
whether an unpreserved structural error automatically satisfies the third prong of the
plain-error test. Puckett v. United States, 556 U.S. 129, 140-41 (2009). We would
not need to answer that question here because the district court’s replacement of the
two jurors does not constitute structural error. Structural errors are “defects affecting
the framework within which the trial proceeds, rather than simply an error in the trial
process itself.” Becht v. United States, 403 F.3d 541, 547 (8th Cir. 2005) (quoting
Neder v. United States, 527 U.S. 1, 8 (1999)). These errors “call into question the
very accuracy and reliability of the trial process,” United States v. Jones, 662 F.3d
1018, 1027-28 (8th Cir. 2011) (quoting McGurk v. Stenberg, 163 F.3d 470, 474 (8th
Cir. 1998)), cert. denied, 132 S. Ct. 2733 (2012), and “deprive defendants of ‘basic
protections’ without which ‘a criminal trial cannot reliably serve its function as a
vehicle for determination of guilt or innocence,’” Neder, 527 U.S. at 8-9 (quoting
Rose v. Clark, 578 U.S. 570, 577-78 (1986)). Structural errors “have been recognized
in a very limited set of circumstances, such as ‘the complete denial of counsel, a
biased judge, racial discrimination in jury composition, denial of a public trial, and
a defective jury instruction on the reasonable-doubt standard of proof.’” United
States v. Jones, 662 F.3d 1018, 1027-28 (8th Cir. 2011) (quoting Becht, 403 F.3d at
547), cert. denied, 132 S. Ct. 2733 (2012). The error alleged by Picardi would not be
structural because “[u]nlike such defects as the complete deprivation of counsel or
trial before a biased judge,” it “does not necessarily render a criminal trial unfair or
an unreliable vehicle for determining guilt or innocence.” Neder, 527 U.S. at 9.
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During Picardi’s cross-examination of IRS Special Agent Christopher Wright,
Picardi sought to introduce Exhibit 621, an email sent to Kritt containing an editorial
that criticizes the IRS’s policies regarding offshore bank accounts and describes a
new “amnesty” program offered by the IRS. Kritt had forwarded the email to Randy
Brodnik, another physician who also participated in an “employee leasing program”
run by Kritt, but not to Picardi.4 The Government objected to the admission of the
exhibit. The district court found that the unknown identity of the author of the
editorial, the author’s opinions about the IRS’s policies, and the explanation of the
changes in the IRS’s regulations of offshore accounts would likely confuse the issues
for the jury. Thus, the district court excluded Exhibit 621 under Federal Rule of
Evidence 403, concluding the evidence was “not relevant in such a way as to have
probative value that would overcome its likely confusion of issues for the jury.”
Picardi first argues that the district court abused its discretion by applying the
incorrect standard for exclusion of evidence under Rule 403. Picardi observes that
the district court’s explanation for refusing the exhibit differs from the text of Rule
403, which permits the exclusion of relevant evidence only “if its probative value is
substantially outweighed by a danger of . . . confusing the issues.” Fed. R. Evid. 403
(emphasis added). Picardi asserts that this discrepancy in phrasing demonstrates that
the district court applied the wrong standard, considering whether the risk of jury
confusion outweighed the probative value of the evidence rather than whether it
substantially outweighed the probative value. However, a trial court is not required
to quote an evidentiary rule verbatim when making a ruling. Wise v. Bowersox, 136
F.3d 1197, 1203 (8th Cir. 1998) (“The court did not quote the [legal] standard
verbatim in making its finding, but it was not required to do so: ‘Trial judges are
presumed to know the law and to apply it in making their decisions.’” (quoting
Walton v. Arizona, 497 U.S. 639, 653 (1990))); see also Wheeling Pittsburgh Steel
4
Brodnik was indicted separately and acquitted on tax charges similar to those
brought against Picardi.
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Corp. v. Beelman River Terminals, Inc., 254 F.3d 706, 716 & n.1 (8th Cir. 2001)
(upholding the district court’s evidentiary ruling under Rule 403, even though the
district court did not explicitly mention the rule). Therefore, we are not convinced
that the district court applied the incorrect standard.
Picardi next argues that the district court abused its discretion by excluding
Exhibit 621 under Rule 403. Picardi argues that the district court should have
admitted Exhibit 621 because it supported his good faith belief and reliance-on-
counsel defenses. Picardi claims Kritt’s failure to forward the article to Picardi
suggests that Kritt knew the program was illegal and sought to hide the IRS amnesty
program from Picardi. “The court may exclude relevant evidence if its probative
value is substantially outweighed by a danger of . . . confusing the issues [or]
misleading the jury.” Fed. R. Evid 403. “In reviewing a district court’s evidentiary
ruling under Rule 403, we accord ‘great deference [to] the district court’s
balancing. . . .’” United States v. Pumpkin Seed, 572 F.3d 552, 558 (8th Cir. 2009)
(alteration in original) (quoting United States v. Ruiz, 412 F.3d 871, 881 (8th Cir.
2005)).
We conclude that “reversal is inappropriate because the record demonstrates
that the district court engaged in the required balancing process and properly found
that admitting [Exhibit 621] would violate Rule 403.” Id. Exhibit 621 had limited
probative value because it did not establish that Kritt never informed Picardi about
the amnesty program. And we agree with the district court that the unknown editorial
author’s unsubstantiated opinions about the IRS’s regulations of offshore accounts
contained in Exhibit 621 were likely to confuse the jury. Therefore, the district court
did not abuse its discretion by excluding Exhibit 621. Additionally, Exhibit 621 was
cumulative of Picardi’s testimony. Picardi testified that Kritt never advised him of
any IRS amnesty program and that he was unaware of such a program. Thus, Picardi
was able to testify to the same information that he sought to convey through Exhibit
621. Therefore, the district court’s exclusion of Exhibit 621, even if it were improper,
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did not affect Picardi’s “substantial rights” nor did it have “more than a slight
influence on the verdict,” making reversal inappropriate. See Summage, 575 F.3d at
877 (quoting Two Shields, 497 F.3d at 792).
C. Limitation on the Scope of Brodnik’s Testimony
During his case-in-chief, Picardi called Brodnik as a witness. On cross-
examination, Brodnik testified that he had amended his 1998 to 2003 federal income
tax returns to include his “deferred compensation” and paid additional taxes for those
years. He also testified that he was aware that Picardi had not amended his tax
returns nor paid any additional back taxes. On re-direct, Picardi sought to ask
whether he had told Brodnik that he did not do so based on Kritt’s advice. The
Government objected. The district court sustained the objection, holding that this
issue was “completely irrelevant” to the elements of the charges or to the defense’s
theory.
Picardi argues the district court abused its discretion by limiting Brodnik’s
testimony because the solicited testimony was relevant to his reliance-on-counsel
defense. As explained above, “[w]e review a district court’s evidentiary rulings for
clear abuse of discretion, reversing only when an improper evidentiary ruling affected
the defendant’s substantial rights or had more than a slight influence on the verdict.”
Summage, 575 F.3d at 877 (quoting Two Shields, 497 F.3d at 792). We may affirm
a district court’s evidentiary ruling on any ground supported by the record even if that
ground was not a basis for the district court’s ruling. United States v. Wintermute,
443 F.3d 993, 1000 (8th Cir. 2006). The testimony Picardi sought to elicit from
Brodnik was inadmissible hearsay. Picardi wanted Brodnik to testify to Picardi’s out-
of-court statement to prove the truth of the matter asserted—that Picardi did not
amend his tax returns and pay back taxes based on Kritt’s advice. Therefore, the
district court’s exclusion of the testimony that Picardi sought to elicit was proper
because it is inadmissable hearsay, whether or not it was relevant to Picardi’s
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reliance-on-counsel defense. See Fed. R. Evid. 801. Picardi does not argue that this
excluded testimony falls within an exception to Federal Rule of Evidence 801, and
it does not. Thus, the district court did not abuse its discretion by excluding the
testimony.
D. Theory-of-Defense Instruction
Picardi argues that the district court abused its discretion by refusing to give
his proposed theory-of-defense instruction, which stated that a defendant could not
form the requisite intent to violate a vague or highly debatable tax law.5 “We review
a district court’s rejection of a defendant’s proposed instruction for abuse of
discretion, and we recognize that district courts are entitled to broad discretion in
formulating the jury instructions.” United States v. Ironi, 525 F.3d 683, 688 (8th Cir.
2008) (quoting United States v. Hayes, 518 F.3d 989, 994 (8th Cir. 2008)).
5
Picardi’s proposed instruction reads:
Where the tax law is vague or highly debatable, a
defendant lacks the requisite intent to violate it. Criminal
prosecution for the violation of an unclear duty itself
violates the clear constitutional duty of the government to
warn citizens whether particular conduct is legal or illegal.
A defendant cannot be guilty of willfully evading and
defeating income tax when the law surrounding the
deductibility of certain expenses is unsettled and there is
no direct authority pointing to a ready answer. The tax law
is “unsettled” where individuals could plausibly reach
directly opposing, reasonable and well-supported,
conclusions regarding the law’s interpretation.
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A defendant is not entitled to a jury instruction regarding an issue reserved for
the court. See United States v. Hiland, 909 F.2d 1114, 1127 n.17 (8th Cir. 1990).
Picardi’s proposed theory-of-defense instruction presents an issue reserved for the
court because the question of whether a tax law is void for vagueness is a question
of law for the court to decide, not the jury. United States v. Mallas, 762 F.2d 361,
364 n.4 (4th Cir. 1985); see id. (“The uncertainty of a tax law, like all questions of
vagueness, is decided by the court as an issue of law.”); see also Hiland, 909 F.2d at
1127 n.17 (“The issue whether the vagueness doctrine precluded conviction of [the
defendant] . . . presented a question of law for the court to decide, not the jury.”).
Therefore, the district court did not abuse its discretion by refusing to give Picardi’s
proposed instruction. See United States v. House, 684 F.3d 1173, 1207 (11th Cir.
2012) (finding no abuse of discretion where the district court refused to give the
defendant’s instruction because “the issue of whether a [law] is void for vagueness
is a question of law for the court to determine” (alteration in original) (quoting United
States v. Paradies, 98 F.3d 1266, 1284 (11th Cir. 1996)).
III. Conclusion
For the reasons explained above, we affirm.
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