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United States v. Horner

United States Court of Appeals, Eleventh Circuit

April 13, 2017

UNITED STATES OF AMERICA, Plaintiff - Appellee,

         Appeals from the United States District Court for the Northern District of Georgia D.C. Docket Nos. 1:14-cr-00123-TCB-RGV-1; 1:14-cr-TCB-RGV-2

          Before TJOFLAT, HULL and O'MALLEY [*] Circuit Judges.


          This case concerns Kenneth and Kimberly Horner's indictment, trial, and conviction for: (1) assisting in the preparation of a fraudulent corporate tax return, in violation of 26 U.S.C. § 7206(2) (two counts each, tax years 2007 and 2008); and (2) filing a false individual income tax return, in violation of 26 U.S.C. § 7206(1) (also two counts each, tax years 2007 and 2008). The Horners appeal their convictions on several grounds. After review of the record and with the benefit of oral argument, we affirm.

         I. BACKGROUND

         A. Factual Background

         At all relevant times, the Horners owned and operated Topcat Towing and Recovery, Inc. ("Topcat"), an S-corporation[1] in Lithonia, Georgia. The Horners were Topcat's only owners, with Mrs. Horner owning 51% of the company and Mr. Horner owning the other 49%.

         Topcat required customers to pay in cash for a number of its services, including vehicle retrieval from impound and abandoned car auctions. From 2005 to 2008, the Horners deposited approximately $3 million in checks and $2.8 million in cash into several business accounts with Bank of America and Bank of

          North Georgia. In that same time period, the Horners deposited nearly $1.6 million in cash into their personal accounts. For 2007 and 2008 in particular, those cash deposits totaled $380, 883 and $522, 026, respectively.

         The Horners hired H&R Block to prepare both their personal tax returns and Topcat's corporate tax returns. They did not, however, tell H&R Block about any of the aforementioned cash deposits into their personal accounts. On their finalized tax returns for 2005 through 2008, the Horners did not report any of the personal cash deposits as taxable income.

         Internal Revenue Service ("IRS") investigators concluded that these personal cash deposits-not readily explainable as loans, gifts, or inheritance- were actually diverted Topcat receipts. If true, the Horners not only underreported Topcat's income, but also their own income, as any Topcat receipts would eventually have passed through to the Horners as owners. The Horners were indicted by a grand jury for assisting in the preparation of a fraudulent corporate tax return and for filing a false individual income tax return (two charges each, for tax years 2007 and 2008). No charges were brought for 2005 or 2006.

         B. Trial, Verdict, and Sentencing

         After a jury trial, the Horners were found guilty on all counts and sentenced to 18 months imprisonment, three years of supervised release, as well as $144, 455 in restitution payment to the IRS. Of particular relevance to this appeal, over the course of trial: (1) the Horners unsuccessfully filed multiple motions in limine to exclude certain evidence; (2) the government elicited testimony from IRS Agent Rosalyn Owens on the Horners' tax due; and (3) the Horners unsuccessfully requested supplemental jury instructions.

         First, the Horners filed motions in limine to exclude evidence that they "structured" their cash deposits to avoid triggering bank reporting requirements, as well as evidence that they filed false tax returns for 2005 and 2006. The court denied those motions. Regarding structuring, the United States Department of the Treasury requires banks to file a Currency Transaction Report ("CTR") for any cash transaction larger than $10, 000. The government uses these CTRs to help maintain the transparency of the transaction and also the integrity of the banking system. Structuring cash deposits "for the purpose of evading the reporting requirements"-for example, making three $9, 000 deposits over time instead of a single $27, 000 deposit-is a federal crime. 31 U.S.C. § 5324(a).

         According to the government, the deposits into the Horners' and Topcat's bank accounts showed signs of structuring. For example, on April 12, 2006, the Horners made two deposits totaling more than $10, 000-one for $9, 800 into a personal bank account and one for $3, 250 into a business account. From 2005 to 2008, the Horners did not make a single cash deposit of over $10, 000. Instead, the Horners made 177 cash deposits between $9, 000 and $9, 900. The Horners unsuccessfully moved to exclude this evidence of structuring-an uncharged, separate crime-as irrelevant and unduly prejudicial.

         Similarly, the Horners argued that any evidence of their potentially false returns in tax years 2005 and 2006-also an uncharged and separate crime-would be inadmissible. The district court again disagreed, and denied the motion.

         Second, the government elicited certain testimony from IRS Agent Owens, examining the Horners' tax status. Specifically, in preparation for trial, Owens conducted an audit and created a tax computation chart showing the additional tax due from the Horners based on the unreported cash deposited into the Horners' personal bank accounts. For 2007, the Horners reported a tax liability of zero, but Owens calculated their corrected tax liability as $116, 535. For 2008, the Horners reported a tax liability of $8, 614, but Owens calculated their corrected tax liability as $166, 476. Owens concluded that, for 2005 through 2008, the Horners owed $474, 147 in additional taxes from their unreported income.

         Owens's calculation, however, did not account for any business expenses the Horners may have paid from their personal accounts but did not claim as a deduction. During her trial testimony, Owens conceded that any such unclaimed deductions would reduce the Horners' unreported income (and, therefore the tax due) but insisted that the unclaimed deductions would not "have a really big impact, " would "not significantly" change her calculation, and would still leave "a substantial understatement." Notably, the Horners did not object to Owens's testimony. Despite Owens's calculations at trial, when calculating the amount of tax due during sentencing, the district court ultimately accepted a figure of $573, 619 in unclaimed business expense deductions for 2007 and 2008, which reduced the unreported income in that period by approximately one-third.

         Third, the Horners requested supplemental jury instructions regarding good-faith reliance on the advice of an accountant and the due diligence obligations of tax preparers generally. The district court instead gave a modified version of the Eleventh Circuit pattern instructions on good faith reliance on the advice of an attorney and did not instruct the jury as to the due diligence obligations of tax preparers.

         The jury ultimately convicted the Horners on all four counts, and, after sentencing, the Horners timely filed a notice of appeal with this Court. On appeal, Mr. and Mrs. Horner each separately raise the same four issues: (1) the government elicited and failed to correct false testimony from Agent Owens regarding the extent of unclaimed deductions; (2) the district court should have given the requested jury instructions on good faith reliance on accountants' advice and due diligence; (3) the district court should have excluded the testimony on deposit "structuring" as irrelevant and unduly prejudicial; and (4) the district court should have excluded evidence of allegedly fraudulent tax returns from 2005 and 2006 as irrelevant, unduly cumulative, confusing, and prejudicial. We address each issue in turn.


         The Horners contend that the government presented false testimony from Owens about the accuracy of her calculations vis-à-vis unclaimed deductions and that the government failed to correct that testimony, in violation of Giglio v. United States, 405 U.S. 150 (1972).

         Typically, we review such a claim of prosecutorial misconduct de novo. United States v. McNair, 605 F.3d 1152, 1208 n.79 (11th Cir. 2010). But when, as here, the defendants do not object at trial or otherwise raise the issue before the district court, such as through a motion for mistrial or for new trial, we review only for plain error. United States v. Nixon, 918 F.2d 895, 905 (11th Cir. 1990).

         To establish prosecutorial misconduct under Giglio, the Horners "must show the prosecutor knowingly used perjured testimony, or failed to correct what he subsequently learned was false testimony, and that the falsehood was material." McNair, 605 F.3d at 1208. Perjured testimony "must be given with the willful intent to provide false testimony and not as a result of a mistake, confusion, or faulty memory." United States v. Singh, 291 F.3d 756, 763 (11th Cir. 2002). The defendants are "entitled to a new trial if there is any reasonable likelihood that the false testimony could have affected the judgment of the jury." Guzman v. Sec'y, Dep't of Corr., 663 F.3d 1336, 1348 (11th Cir. 2011) (internal quotation marks omitted) (emphasis added). The "could have" standard "requires a new trial unless the prosecution persuades the court that the false testimony was harmless beyond a reasonable doubt." Id. (internal quotation marks omitted).

         Here, we find no Giglio violation. The Horners have failed at the outset to show that Owens's testimony was false, let alone willfully false. The Horners rely in particular on statements from the following exchange between Owens and defense counsel:

Q. If the checks that we have talked about were in fact business expenses that were not deducted from the tax returns filed by the Horners, that would change the tax calculation that you have done; correct?
A. Yes, but not significantly, ma'am.
Q. Now, in your calculation you assumed that no business expenses were paid from the personal account; correct?
A. Correct.
Q. So that means that your computation is wrong if business expenses were paid by the Horners from their personal bank accounts.
A. The unreported income would be reduced.
Q. But still your chart would be unreliable; correct?
A. It would be correctable.
Q. It could be correctable, but you'd have to go back and ...

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