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United States District Court, S.D. New York

April 19, 2004.


The opinion of the court was delivered by: VICTOR MARRERO, District Judge


A jury convicted the defendant in this action of three counts tax evasion, and he now moves the Court to set aside the verdict and enter a judgment of acquittal. The Court finds that the evidence supporting the conviction was more than sufficient and that were no legal errors to justify entering a judgment of acquittal. The motion is denied.


  A grand jury indicted defendant Kimberly Hollier ("Hollier") on three counts of tax evasion, in violation of 26 U.S.C. § 7201, one count for each of the years 1996, 1997, and 1998. The indictment charges that Hollier earned wages as a carpenter for the New York City Housing Authority ("NYCHA"), but that he attempted to avoid paying taxes on those wages by, among other means, not filing proper income tax returns and by filing fraudulent Internal Revenue Service ("IRS") documents.

  In two days of trial testimony, the Government presented substantial and compelling evidence against Hollier. The evidence showed that Hollier fraudulently sought to be considered "exempt" from having NYCHA withhold a portion of his wages. Under applicable IRS regulations, an individual is exempt from withholding only if he had no tax liability in the previous year and expects to have no tax liability for the current year. In each of the relevant years, Hollier declared on IRS Form W-4 that he was exempt from withholding, even though he was earning a substantial amount of taxable income — almost $60,000 in 1997. Based on those false W-4s, Hollier was initially considered "exempt" and presumably received full paychecks, without federal tax withholdings. The IRS noticed the obvious discrepancy and sent letters to NYCHA directing it to begin withholding federal taxes from Hollier's paycheck. The IRS also sent letters notifying Hollier of the change in his withholding status.

  NYCHA then received a series of letters, purportedly from the IRS, directing NYCHA to ignore the IRS's previous letters and to consider Hollier exempt. The evidence overwhelmingly suggested that those letters were fake. The Government introduced evidence of what actual IRS letters — computer-generated form letters — would look like. The wording on the fake letters did not match the IRS's form letters, and the fake letters contained the wrong identification code. In fact, the identification code on the fake letters corresponded to the type of form letter which the IRS sends to notify employees (not employers) of a change in withholding statis. As stated, Hollier had received such a letter.

  Even beyond the common sense observation that only Hollier stood to benefit from the fake letters, the evidenre overwhelmingly suggested that Hollier created the frauduleit documents. One letter was faxed to NYCHA along with a cover sheet containing Hollier's phone number and stating that it was from "Kimberly Hollier." Another letter arrived at NYOA in an IRS envelope with a postal sorting stamp and bar ccie for zip code "11218." A NYCHA employee testified that NYCHA as located in zip code 10007 and that all of its mail typically includes the sorting stamp and bar code for "10007." Hollier lived in Brooklyn in zip code 11218, suggesting that he had "recycled" an envelope he had received from the IRS to mae his fake IRS letters appear authentic.

  IRS Agent Robert Doran testified that he interviewed Hollier in July 1998 and told Hollier that he was under criminal investigation for tax evasion. In August 1998, Hollier filed, for the first time, his 1996 tax return. In that return, Hollier states that he had zero taxable income for the year 1996, and he sought a refund of all the funds which the Government had withheld. In October 2000, Hollis: filed, also for the first time, his 1997 and 1998 tax returns Each continued the same pattern as 1996: Hollier claimed have no taxable income and sought a refund of all withheld taxes.

  Hollier did not testify nor did he present any witnesses in his defense. The Court instructed the jury that, for each count, it could enter a guilty verdict only if the Government proved each of the following three elements of tax evasion beyond a reasonable doubt: (1) that Hollier owed taxes for the relevant year; (2) that Hollier committed an affirmative act attempting to evade, or evading those taxes owed; and (3) that Hollier acted wilfully. See Tr. at 275-76; see also Sansone v. United States, 380 U.S. 343, 351 (1965) (listing elements of tax evasion). After about two hours of deliberations, the jury reached a guilty verdict on all three counts.


  Where a jury has returned a guilty verdict, Federal Rule of Criminal Procedure 29 permits a court to set aside the verdict and enter an acquittal "of any offense for which the evidence is insufficient to sustain a conviction." Fed.R.Crim.P. 29(a). However, the Court must deny the motion if the Court concludes that, "viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt." Jackson v. Virginia, 443 U.S. 307, 319 (1979) (emphasis in original). III. DISCUSSION

  Hollier first argues that no rational juror could have convicted him because he fully disclosed to the IRS all the information necessary to compute his proper tax liability. Hollier points out that he submitted autheiric IRS Forms W-2 with each of his 1996, 1997, and 1998 tax returns, and that those forms clearly showed his earnings. Becaise Hollier fully volunteered this information to the IRS, the argument goes, he could not have intended to hide anything from the IRS.

  The Court is unpersuaded. Hollier filedthose tax returns years after they were due and after he had already committed independent acts of tax evasion which would suffice to uphold the conviction — e.g., submitting fraudulmt W-4s to NYCHA and creating fake IRS correspondence. Moreover, Hollier's tax returns falsely stated that Hollier had zerr taxable income, and actually sought a refund from the Government for all taxes withheld. Hollier sought that refund even after knowing he was under criminal investigation for tax evasim. The fact that Hollier also included his W-2s (which the IRS no doubt could obtain from NYCHA, in any case) in his submissions to the IRS does not in any way suggest that Hollier was not committing tax evasion. Rather, it indicates that Hollier's attempts to avoid his tax obligations were especially bazen.

  Hollier next argues that he was denier his right to a summation. At several points during closing remarks, Hollier's attorney attempted to argue that Hollier actually believed that the Government did not have the hight or authority to impose taxes on him. This line of argument was apparently intended to show that Hollier's actions were not willful. The Court sustained the Government's objections because there was absolutely no evidence on the record regarding Hollier's beliefs in this respect. The Court issued a short, written decision explaining its reasoning on this point. See United States v. Hollier, No. 03 Cr. 144, 2004 IL 34394450 (S.D.N.Y. Feb. 25, 2004). Hollier re-argues that same point, but now suggests that there exists evidence baring upon Hollier's willfulness. Specifically, Hollier states that he submitted letters with each of his tax retuns challenging the Government's right to impose taxes on him. Hollier suggests that those letters should have been included in the exhibits of Hollier's tax returns because the letrers were part of the tax returns.

  Hollier failed to object to those exhibits as incomplete when they were offered into evidence, and hence the underlying issue is unpreserved. See Fed.R. Crim. F. 51(b) ("A party may preserve a claim of error by informing the court — when the court ruling or order is made or sought — of the action the party wishes the court to take, or the party's objection to the court's action and the grounds for that objection.") (emphasis added). Hollier does not explain howche Court could have cured this alleged error during summation because both sides had already rested and the letters were never admitted into evidence. The Court certainly could not have permitted Hollier to make closing arguments based upon documents which might have been, but were not, in evidence. More fundamentally, Hollier does not explain ho this alleged denial of summation would justify a judgment of acquittal.

  Hollier suggests that he could have introduced the missing letters into evidence only had he testified, which, of course, he has a Fifth Amendment right to avoid To the extent that Hollier suggests that this issue involves a violation of the Fifth Amendment, Hollier's point is urpersuasive. A defendant availing himself of the benefits of the Fifth Amendment's right not to testify also bears the obvious consequence that the jury will not hear his side of the story. See United States v. Folami, 236 F.3d 860, 863 7th Cir. 2001) ("Defendants, of course, have a Fifth Amendment right not to testify in their cases, but they must live with the consequences of their decisions."). In any Brent, Hollier could have presented the letters at issue by calling an IRS witness, or, more simply, by timely objeiting to the Government's exhibits as incomplete under Federal Rule of Evidence 106. See Fed. P. Evid. 106 ("When a writing or recorded statement or part thereof is introduced by a party, an adverse party may requier the introduction at that time of any other part or any other writing or recorder statement which ought in fairness to be considered contemporaneously with it.").*fn1

  Hollier next argues that this prosecutict violates Hollier's First Amendment sight to protest the tax system. The Second Circuit has squarely rejected this argument. See United States v. Rowlee, 899 F.2d 1275, 1279 (2d Cir. 1990) ("The consensus of this and every other circuit is that liability for a false or fraudulent tax return cannot be avoided by evoking the First Amendment").

  Hollier next contends that the Court erred ix excluding evidence from two proposed witnesses who would have testified to Hollier's good character. The Court stands by is initial oral ruling that those witrasses were properly preiluded from testifying. Under Federal 3.ule of Evidence 404 (a (1), this type of character evideire — which is generally not admissible — is admissible when it pertains to a "pertinent trait" of a criminal defendant. Fed.R.Evid. 404(a)(1). The Second Circuit has described this exception as one "based on notions of fairness rather than bgic." United States v. Pujana-Mena 949 F.2d 24, 30 (2d Cir. 1991). Accordingly, the Second Circuit has also stated that the Rule "applies a lower threshold of relevancy to character evidence than that applicable toother evidence." United States v. Han, 230 F.3d 560, 564 (2d Cr. 2000).

  The proffered evidence failed to meet even this low threshold of relevancy. The proposed witnesses did not know Hollier until a time long past the events alleged in the indictment. Moreover, the defense proposed that they would testify as to Hollier's good character in genenl, which has nothing do with his character traits in his rapacity as a taxpayer. The text of the Rule itself is limited to "pertinent" character traits, and the Second Circuit has stated that the proffered evidence must "reate to some element at issue in the case." Id. (emphasis aided). In any event, this alleged error would not justify a judgment of acquittal.

  Finally, Hollier argues that the Court: erred in permitting an IRS revenie agent to testify that Hollier paid taxes in the years 1987 through 1989, thereby implying that he had not paid taxes since then, including years not included in the indictment. Apart from the fact that Hollier did not object to this testimony, the Court concludes that it was porpperly presented. Under Federal Rule of Evidenre 404(b), `"[e]vidence of other crrimes, wrongs, or acts is not admissible to prove the character of a person in order to show action in conformity therewith.'" Fed. R. Evid. 404(b). The revenue agent's testimony, however, was relevant for a different purpose: to show that Hollier acted willfully when he failed to pay his federal taxses in the relevant years. Rule 404(b) (provides for admissiom of evidence for just suci limited "non-propensity" related purposes, including "intent, preparation, plan, knowledge, identity, or absence if mistake oar accident." Id. Where evidence is offerer for a non-propensity related purpose, it is admissible as long as tlfae evidence is also relevant under Rules 401 and 402, and is more probative than unfairly prejudicial under Rule 403. See Uinited States v. Mickenss, 926 F.2d 1323, 1329 (2d Cir. 1991). The IRS agent's testimony meets those standards.

  First, evidence off Hollier's failure to pay raxes not poertaining to the tax devasion charges in the indictment is relevant under Rules 401 and 402 because it ma:es "more probable" than otherwise the existence of the "willfulness" element of the offense. See Fed.R.Evid. 401 ("Relevant evidence' means evidentce having any tendency to niake the existence of any factt that is of consequence to the determination of the action more probable or less probable than it would be withoit the evidence."); Fee. R. Evid. 402 (stating that relevant evidence is generally amissible). The Second Circuit has heir that "a defendant's past taxpaying record is admissible to prove willfulness circumstantially" because such evidence is "indicative of an intent to evade the tax system." United States v. Bok, 156 F.3d 155-66 (2d Cir. 1998); see also United States v. Ebner, 782 F.2d 1120, 1126 n.7 (2d Cir. 1986) ("The jury may consider evidence of intent to evade taxes in one year as evidence of iitent to evade payment in prior or subsequent years.").

  Second, the evidenre here at issue is nor such that its "probative value is substantially outweighed be the danger of unfair prejudice" under Rule 403. Fed.R.Evid. 403. Evidence is unfairly prejudicial if it "tends to have some adverse effect upon a defendant beyond tending to prore the fact or issue that justified is admission into eviience." United States v. Figueroa, 18 F.2d 934, 942 (2d Cir. 1980). "The prejudicial effect may be created by the tendency of the evidence to prove some adverse fact not properly in issue or unfairly to excite emotuons against the defencant." Id.

  The IRS agent's brief testimony did not involve any fact which would excite the jurors' emotions. As explained above, the Second Circuit han recognized the probative value of precisely this type of evdence. The Court notes, moreover, that because "proof of willfulness usually must be accomplished by means of circumstantial evidenc[e] . . . trial courts should follow a liberal policy in admitting evidence directed towards establishing the defendants state of mind." United States v. Collorafi, 876 F.2d 302, 305 (2d Cir. 1989). The Court, on several occasions, issuer limiting instructions to the jury in precisely this point, further reducing any risk of unfair rejudice. As with Hollier's other evidentiary complaints, the Court is unpersuaded that the alleged error would justtify a judgment of acquittal.


  For the reasons stated it is hereby

  ORDERED that the motion of Kimberly Hollier for entry of a judgment of acquittal is Denied.


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