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United States v. Westbrooks

United States Court of Appeals, Fifth Circuit

May 24, 2017

UNITED STATES OF AMERICA, Plaintiff - Appellee
TAMNY DENISE WESTBROOKS, also known as Tammy Westbrooks, also known as Tammy Westbrook, Defendant-Appellant

         Appeals from the United States District Court for the Southern District of Texas

          Before STEWART, Chief Judge, and HIGGINBOTHAM and COSTA, Circuit Judges.

          GREGG COSTA, Circuit Judge:

         Taxes were Tamny Denise Westbrooks's profession. She operated two businesses that helped people prepare their taxes. But it was misrepresenting profits from one of her own tax preparation business that got her into trouble. An indictment alleged that her returns falsely stated the income by grossly inflating amounts paid for wages. It also alleged that Westbrooks took steps to obscure the amount workers were actually paid. A jury found that the evidence supported those charges, convicting Westbrooks of corruptly endeavoring to obstruct the administration of the tax code and of three counts of filing fraudulent tax returns. Westbrooks challenges the obstruction count on various grounds and also appeals the restitution order. We uphold the convictions and amount of the restitution award but modify the judgment so the restitution obligation is limited to the supervised release term that is the only period during which restitution can be imposed for a tax offense.


         Westbrooks operated a tax preparation business, JATS Tax Service, in Charlotte, North Carolina. Tonya Robbins owned the company, but Westbrooks managed day-to-day operations and had signature authority for JATS's checking account. At the same time, Westbrooks co-operated another tax preparation business, CF&W Financial Services, in Houston.

         The first sign of trouble came when the IRS executed a search warrant at JATS's office in 2009, and Westbrooks received a grand jury subpoena to produce records related to JATS. United States v. Westbrooks, 780 F.3d 593, 594 (4th Cir. 2015). Westbrooks produced only "a packet of materials comprised primarily of unopened mail and refund checks for clients." Id. The government, noting that most of the documents Westbrooks had provided were not responsive and that she had not produced documents typically maintained by an ongoing business operation, moved for an order to show cause why she should not be held in contempt. Id. A federal district court in North Carolina held a show cause hearing. Id. at 595. At the hearing, Westbrooks testified that from 2005 to 2009 no W-2s or 1099s were prepared or filed for JATS workers, that she kept no records identifying the employees of JATS, did not keep track of their wages or the hours they worked, and that Robbins had already handed over all bank records responsive to the subpoena, which should support the amounts reflected as wages in the tax returns. The court found Westbrooks guilty of criminal contempt "for failure to comply with a grand jury subpoena." Id. at 594.

         A Houston grand jury later charged Westbrooks with one count of corruptly endeavoring to obstruct the due administration of the internal revenue laws (count one), and three counts of willfully filing false tax returns for 2007, 2008, and 2009 (counts two through four). The obstruction count was based on conduct occurring from 2004 through 2009, including submitting the returns that falsely stated low income for JATS. The indictment alleged that although annual compensation for all JATS workers never exceeded $30, 000, the returns listed wages or subcontractor expenses ranging from $87, 425 to $248, 400 during these years. This count further alleged that Westbrooks did not properly file IRS and social security forms documenting compensation of JATS employees and made such payments in cash. Finally, it relied on her providing false and misleading testimony at the show cause hearing.

         Westbrooks unsuccessfully moved to dismiss count one, arguing that the indictment failed to allege that there was an ongoing IRS investigation or proceeding during the obstructive conduct, that the statute was vague, and that venue was lacking. After a four-day trial, a jury convicted Westbrooks on all counts.

         The district court imposed a total sentence of 40 months. It also ordered her to pay $273, 460 in restitution to the IRS in quarterly instalments of $25 or half of prison earnings, whichever is greater, while incarcerated, and in the monthly amount of $400 or ten percent of gross earnings, whichever is greater, during the year of supervised release that would follow her prison term.



         Westbrooks contends the indictment did not allege an essential element of the tax obstruction statute because it did not assert that she acted with knowledge of a pending IRS action such as an investigation or proceeding. Westbrooks was convicted under the omnibus clause of the statute, which makes it a crime to "in any . . . way corruptly or by force or threats of force . . . obstruct[ ] or impede[ ], or endeavor[ ] to obstruct or impede, the due administration of this title." 26 U.S.C. § 7212(a). The clause does not mention a proceeding or investigation.

         Our prior cases involving section 7212(a) do not directly confront this question but treat the statute as not requiring knowledge of a pending IRS action. In United States v. Reeves, 752 F.2d 995 (5th Cir. 1985), the defendant knew he was being investigated-he violated section 7212(a) by filing a lien against the residence of an IRS agent investigating his tax returns. Id. 996- 97. Nonetheless, in defining the scope of the "corruptly" element, we recognized that the tax obstruction statute "reaches a broad category of circumstances." Id. at 1000. We thus defined "corruptly" narrowly-to require that the defendant acted "with the intent to secure an unlawful benefit, " id. at 1001-because "interference with the administration of the tax laws need not concern a proceeding in which a party stands to gain an improper advantage . . . ." Id. at 999 (emphasis added). In contrast, we noted that an obstruction statute like 18 U.S.C. § 1503 that limits obstruction to that occurring in connection with a judicial proceeding does not necessitate an "intent to benefit" finding; obstruction in response to a pending action "will almost necessarily result in an improper advantage." Id.

         After Reeves, we upheld convictions under section 7212(a) when there was no pending action: the convictions were based on defendants' corrupt efforts to trigger an investigation into others. United States v. Saldana, 427 F.3d 298, 301, 304-05 (5th Cir. 2005) (noting that that the defendant filed "false tax reports regarding several individuals for the purpose of triggering [IRS] audits and thereby harassing and intimidating these individuals"). In doing so, we rejected the defendants' contention that section 7212(a) requires intent to gain a benefit under the tax laws. Id. If section 7212(a) does not require even that intent, it would not seem to require intent to gain a benefit in a particular investigation or proceeding.

         To the extent we have not already rejected Westbrooks's position, we do so now, joining a majority of the circuits to consider the question. Of the five circuits to directly address the issue, only the first to consider the question adopted Westbrooks's position, and one judge dissented from that ruling. See United States v. Kassouf, 144 F.3d 952, 955-58 (6th Cir. 1998).[1] Four have since held that section 7212(a) does not require an ongoing IRS action. United States v. Floyd, 740 F.3d 22, 32, 32 n.4 (1st Cir. 2014) ("A conviction for violation of section 7212(a) does not require proof of either a tax deficiency . . . or an ongoing audit, " so "the filing of false tax documents" or "concealment of income or other assets from the IRS can form the basis for a violation of the statute"); United States v. Marinello, 839 F.3d 209, 222 (2d Cir. 2016) ("[S]ection 7212(a)'s omnibus clause criminalizes corrupt interference with an official effort to administer the tax code, and not merely a known IRS investigation."); United States v. Massey, 419 F.3d 1008, 1010 (9th Cir. 2005) ("[T]he government need not prove that the defendant was aware of an ongoing tax investigation to obtain a conviction under § 7212(a); it is sufficient that the defendant hoped 'to benefit financially' from [his] conduct."); United States v. Sorensen, 801 F.3d 1217, 1232 (10th Cir. 2015), cert. denied, 136 S.Ct. 1163 (2016) ("7212(a) does not require an ongoing proceeding . . . .'").[2]

         As these cases explain, Kassouf did not correctly interpret section 7212(a). Kassouf relied on United States v. Aguilar, 515 U.S. 593, 600 (1995), which held that a conviction under section 1503 requires a nexus between the underlying conduct and judicial proceedings. Id. But the text of section 7212(a) is substantially different from that of section 1503.[3] First, section 1503's "due administration of justice" provision follows a list "of specific prohibitions of conduct that interferes with actual judicial proceedings" which "supports a reading that tethers the 'due administration of justice' to actual grand jury or judicial proceedings." Marinello, 839 F.3d at 220 (quoting United States v. Wood, 384 F.App'x 698, 704 (10th Cir. 2010)). In contrast, section 7212(a) begins by referring to attempts to interfere with officers "acting in an official capacity." Id. Second, section 1503 refers to the "due administration of justice" as opposed to the "due administration of this title." Id. Both differences indicate section 7212(a) criminalizes a broader range of conduct: the IRS, through a variety of official actions, "duly administer[s] the tax laws even before initiating a proceeding." Sorensen, 801 F.3d at 1232. Courts administer justice only through proceedings.

         The history of the provisions is also different. Marinello, 839 F.3d at 221. Aguilar relies on Pettibone v. United States, 148 U.S. 197, 202 (1893). Pettibone interpreted an earlier version of section 1503, which made it a crime to "corruptly endeavor[ ] to influence, intimidate, or impede any witness or officer in any court of the United States in the discharge of his duty, or corruptly . . . endeavor[ ] to obstruct or impede[ ] the due administration of justice therein." 148 U.S. at 202 (emphasis added). Although Congress later removed "therein, " "there is no indication . . . that, in doing so, it intended to fundamentally alter the statute's meaning." Marinello, 839 F.3d at 221. Section 7212(a) has no similar predecessor tying it to a proceeding.[4]

         Finally, section 7212(a)'s purpose supports the broader reading most courts have embraced. United States v. Rainey, 757 F.3d 234, 245 (5th Cir. 2014) ("[E]ven in a criminal case, a statute's purpose may be a 'consideration [that] strongly support[s]' a textual interpretation."). The breadth of section 7212(a)'s language shows that the omnibus provision was intended to prevent frustration of tax collection efforts, a purpose which would be thwarted by Westbrooks's narrow interpretation. "In a system of taxation such as ours which relies principally upon self-reporting, it is necessary to have in place a comprehensive statute in order to prevent taxpayers and their helpers from gaining unlawful benefits by employing that variety of corrupt methods ...

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