Filed: Jul. 23, 2009
Latest Update: Apr. 11, 2017
Summary: United States Court of Appeals FOR THE EIGHTH CIRCUIT _ No. 08-3205 _ United States of America, * * Appellee, * * Appeal from the United States v. * District Court for the * District of Minnesota. * Robert B. Beale, * * Appellant. * _ Submitted: June 10, 2009 Filed: July 23, 2009 _ Before SMITH and SHEPHERD, Circuit Judges, and LIMBAUGH,1 District Judge. SHEPHERD, Circuit Judge. Robert B. Beale was convicted on five counts of tax evasion in violation of 26 U.S.C. § 7201, one count of conspiracy
Summary: United States Court of Appeals FOR THE EIGHTH CIRCUIT _ No. 08-3205 _ United States of America, * * Appellee, * * Appeal from the United States v. * District Court for the * District of Minnesota. * Robert B. Beale, * * Appellant. * _ Submitted: June 10, 2009 Filed: July 23, 2009 _ Before SMITH and SHEPHERD, Circuit Judges, and LIMBAUGH,1 District Judge. SHEPHERD, Circuit Judge. Robert B. Beale was convicted on five counts of tax evasion in violation of 26 U.S.C. § 7201, one count of conspiracy t..
More
United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 08-3205
__________
United States of America, *
*
Appellee, *
* Appeal from the United States
v. * District Court for the
* District of Minnesota.
*
Robert B. Beale, *
*
Appellant. *
___________
Submitted: June 10, 2009
Filed: July 23, 2009
___________
Before SMITH and SHEPHERD, Circuit Judges, and LIMBAUGH,1 District Judge.
SHEPHERD, Circuit Judge.
Robert B. Beale was convicted on five counts of tax evasion in violation of 26
U.S.C. § 7201, one count of conspiracy to defraud the United States in violation of 18
U.S.C. § 371, and one count of failure to appear at trial in violation of 18 U.S.C. §
3146(a)(1). Beale appeals on the grounds that there was insufficient evidence to
support his conviction for tax evasion, the district court judge should have recused
1
The Honorable Stephen N. Limbaugh, Jr., United States District Judge for the
Eastern District of Missouri, sitting by designation.
herself because his efforts to intimidate her compromised her impartiality, he was
denied adequate resources while in jail to prepare his pro se defense in violation of
due process, and his sentence of 134 months imprisonment was unreasonable. We
affirm.
I.
From 2000 to 2004, Beale used his position as majority shareholder, chief
executive officer, and chairman of the board of directors of Comtrol Corporation
(“Comtrol”) to conceal more than $5 million in income from the Internal Revenue
Service (“IRS”) and the Minnesota Department of Revenue (“MDR”). Beale founded
Comtrol, a computer technology company, after graduating from the Massachusetts
Institute of Technology with an engineering degree. Comtrol was very successful, and
Beale became a millionaire.
Beale has been involved in the so-called tax-protest movement. “Tax protestors
offer a myriad number of arguments to illustrate the unconstitutionality, illegimacy
[sic], illvalidity [sic], or narrowness of the Internal Revenue Code.” (Appellant’s Br.
22.) As noted in Beale’s brief, “[u]nfortunately, many of these [arguments] are
written in archaic, turgid prose and are liberally laced with nineteenth and twentieth
century U.S. Supreme Court decisions which may have little relevance to the topic at
hand.” (Id.) At their core, Beale’s various philosophic, statutory, and constitutional
arguments revolve around his belief that citizens of the 50 states and Native
Americans are immune from federal income taxation unless they are employees of the
federal government or freed slaves.
The events giving rise to the instant indictment began in 2000. Until September
of 2000, Beale was paid as an employee of Comtrol. Around this time, he instructed
Eileen Johnson, an employee in Comtrol’s payroll department, to stop paying him as
an employee of Comtrol. Thenceforth, Beale wanted to be paid as an independent
-2-
consultant instead of an employee so that he could avoid income tax withholding.
Beale directed Johnson to designate retroactively the payments he had received as an
employee during the first part of 2000 as payments to an independent consultant. This
was done so that Beale could recoup the income tax that had been withheld from his
salary.
Along with Lee D. Stagni, the president and chief operating officer of Comtrol,
Beale set up a shell company called Chayil that was to provide “management
services” to Comtrol. Stagni drafted a services contract in which Chayil was to stand
in Beale’s shoes and perform the functions of board chairman and CEO for Comtrol.
Beale and Stagni completed this contract in November 2000 and then backdated it to
January 1, 2000, the point at which the modified payroll records would show that
Comtrol ceased paying Beale as an employee.
Beale and Stagni then submitted an invoice for Chayil for management services
rendered in October and November 2000. When Lee Aide, an employee in charge of
Comtrol’s cash management, confirmed with Beale by email that payment had been
sent to Chayil, Comtrol’s chief financial officer Gary Kanowitz informed Aide that
in the future he should verbally confirm payments with Beale rather than by email or
in writing. Beale and Stagni then submitted invoices for Chayil dating back to
January 1, 2000. To complete the appearance that Chayil had been rendering services
to Comtrol for the entire year, Beale wrote Comtrol a check for $571,574.87, the
amount paid in 2000 to Beale by Comtrol before Johnson changed the payroll records,
and then Comtrol paid the same amount to Chayil.
Johnson testified that, although she did not object to this arrangement at first,
she became concerned in January 2001 when Kanowitz and Stagni directed her not
to issue a Form 1099 to the IRS to report sums paid to Beale through payments to
Chayil. Johnson believed that a Form 1099 should be sent to the IRS because the
payments to Beale, even though made through Chayil, were salary that would have
-3-
been reported to the IRS through a Form W-2 if Beale had not changed his status from
employee to independent consultant. Johnson understood this to be an attempt by
Beale to hide his income from the IRS. Comtrol paid Beale approximately $650,000
in 2000. This arrangement continued until 2004, by which time Comtrol had paid
Beale approximately $5,600,000 through Chayil. No part of this sum was reported to
the MDR or the IRS.
Before they began inquiring into the Chayil arrangement, state and federal
authorities were investigating other gaps in Beale’s tax history. In June 2001, the IRS
placed a lien on Beale’s home in Collier County, Florida, for unpaid taxes from 1992
to 1995. To escape the lien on his home, Beale forged a “Certificate of Release of
Federal Tax Lien” and filed it with the Collier County Clerk. Convinced by the
counterfeit certificate, the county clerk released the lien. Another counterfeit
certificate to obtain release of a tax lien on Beale’s home in Minnesota was found on
Beale’s laptop computer after his arrest. This certificate had not been filed.
In March of 2002, the MDR instituted collection efforts against Beale for
unpaid taxes for 1998. This collection action stemmed from Beale’s sale of a
television station in Minnesota in 1998, a transaction in which he made several million
dollars. Stating that he was a resident of Florida who was exempt from the Minnesota
capital gains tax, Beale refused to pay the taxes owed to Minnesota.
After Beale failed to pay, the MDR sent Comtrol a Notice of Intent to Levy
Wages and a Third Party Levy for any property of Beale’s held by Comtrol. Comtrol
responded that Beale was not one of its employees and directed the MDR to Chayil.
In response to the MDR’s subsequent queries about Chayil, Stagni drafted a document
purporting to describe the management services provided by Chayil to Comtrol.
Stagni then gave this document to Comtrol’s outside counsel to give to MDR. Stagni
also faxed a copy of the document to Beale and explained in a cover sheet to the fax
-4-
that Beale’s name was not mentioned in the document and Chayil was described so
as to make it appear that others besides Beale were working there.
Determining that Beale was hiding his Comtrol income, the MDR placed a lien
on Beale’s Minnesota home. To release the lien, Beale paid the taxes owed to the
MDR with money loaned by Comtrol to Chayil. Beale then paid off this loan by
increasing the amount of services billed by Chayil to Comtrol.
The MDR grew more suspicious and began investigating other aspects of
Beale’s income. MDR investigator Matt Schaefer contacted the IRS to inform them
about Beale’s effort to hide his Comtrol income from the government. In 2004, the
IRS began investigating Beale. Over the next several months, Johnson and Aide
provided the IRS with information about Beale and Stagni’s activities at Comtrol.
In 2006, Beale and Stagni were indicted on five counts of tax evasion in
violation of 26 U.S.C. § 7201 and one count of conspiracy to defraud the United
States government in violation of 18 U.S.C. § 371. On August 14, 2006, the day
scheduled for trial, Beale did not appear.2 Beale was not apprehended for 14 months.
While he was a fugitive, Beale transferred $100,000 from an account in Comtrol’s
name at the Banco Unione di Credito in Switzerland to a personal account at the same
bank. He also wired $50,000 from his personal Swiss bank account to an account held
in Chayil’s name in Florida. The IRS seized the money wired to the Chayil account
in Florida. Finally, after communications with Comtrol in August 2007, the Swiss
bank refused to permit Beale to transfer $700,000 from Comtrol’s account to his
personal account. While a fugitive, Beale was indicted with an additional count of
failure to appear at trial in violation of 18 U.S.C. § 3146(a)(1).
Beale was apprehended in Orlando, Florida, in November 2007. After his
2
Stagni appeared, went to trial, and was convicted on all six counts. He was
sentenced to 43 months imprisonment and did not appeal.
-5-
apprehension, Beale elected to represent himself. After determining that he
knowingly and voluntarily waived his Sixth Amendment right to counsel, the district
court appointed stand-by counsel to assist Beale. Beale later complained that he was
being denied adequate resources to prepare his defense, specifically a private cell
phone, a more modern computer, and personal contact with visitors. Beale enjoyed
the right to make outgoing telephone calls, unlimited contact with stand-by counsel,
meetings with up to ten visitors in a video-monitored visitor area, access to a
computer, and he received all the government’s discovery and exhibits in both paper
and electronic formats. The court denied Beale’s motion for additional resources.
While in jail awaiting trial, Beale and several accomplices created a “Common
Law Court/Venue,” which they styled as “[our] one supreme court common-Law court
for the de-jure Ramsey: the county: Minnesota: the land a superior court for the
People, original jurisdiction under Almighty Yahweh exclusive jurisdiction in and for
confederation-government United States of America.” Complaint ¶ 3, United States
v. Beale, et al., No. 0:08-cr-00210-RSW-JJK (D. Minn. Apr. 14, 2008). Beale’s
“Common Law Court” drafted a fake arrest warrant with the intention of having a
“provost marshal” arrest the presiding district judge. Id. In recorded telephone
conversations, Beale stated, “I want her to be intimidated” and “Once I take down [the
presiding judge] no judge in the whole court will have anything to do with me.” Id.
at ¶ 13. Beale also proclaimed that God wanted him to “destroy the Judge. That
Judge is evil. He wants me to get rid of her.” Id. at ¶ 5. The district court judge
refused Beale’s request that she recuse herself after the machinations of his “Common
Law Court” came to light.
After his conviction, Beale filed motions for a judgment of acquittal and a new
trial. He sought acquittal on the ground that the government provided insufficient
evidence to support his conviction because the sincerity of his disagreement with the
tax laws prevented the jury from finding that he “willfully” violated the tax code. He
based his new trial motion on the argument that he was too tired to represent himself
-6-
because he was awakened each morning at 5 o’clock. The district court denied both
motions.
II.
Beale’s first challenge is that the government’s evidence of his willfulness was
insufficient to support his conviction for tax evasion under 26 U.S.C. § 7201. “This
court reviews the sufficiency of the evidence supporting a conviction de novo,
viewing evidence in the light most favorable to the government, resolving conflicts
in the government’s favor, and accepting all reasonable inferences that support the
verdict.” United States v. Farrell, 563 F.3d 364, 366 (8th Cir. 2009) (quotation
omitted). “The elements of tax evasion are willfulness, the existence of a tax
deficiency, and an affirmative act constituting evasion or attempted evasion of the
tax.” United States v. Marston,
517 F.3d 996, 999 n.2 (8th Cir. 2008). “The
willfulness element ‘requires the Government to prove that the law imposed a duty on
the defendant, that the defendant knew of this duty, and that he voluntarily and
intentionally violated that duty.’” United States v. Barker,
556 F.3d 682, 687 (8th Cir.
2009) (quoting Cheek v. United States,
498 U.S. 192, 201 (1991)). “However, where
a defendant seeks to defeat a finding of willfulness through a ‘good-faith belief that
he was not violating any of the provisions of the tax laws . . .[,] the issue is whether,
based on all the evidence, the Government has proved that the defendant was aware
of the duty at issue.” Id. (quoting Cheek, 498 U.S. at 201-02).
Beale’s sole argument is that the sincerity of his anti-tax beliefs prevents the
government from proving that he willfully violated the tax laws. According to Beale’s
trial testimony, he became interested in the anti-tax movement in 2000 when he
attended a seminar at Auburn University on tax law. After further inquiry into the
area, Beale paid an attorney in California $25,000 to assess his tax situation.
According to Beale, he learned from this consultation that the federal government is
without the power to tax the income of individuals who live in the 50 states. Under
-7-
this view, there are “three kinds of citizens . . . the citizens of the fifty states, . . . the
new U.S. citizens that were created by the Fourteenth Amendment [i.e. the freed
slaves] and . . . [those living on] Indian reservations.” (Appellant’s Br. 29.) Beale
contends that the federal government’s power to tax the income of citizens is limited
to citizens of the District of Columbia and the freed slaves who were awarded
citizenship by the Fourteenth Amendment. He also concedes that employees of the
federal government who are neither freed slaves nor residents of the District of
Columbia are subject to federal income taxation. Beale claims to believe that this
tripartite scheme of citizenship, in which citizens of the 50 states and residents of
Indian reservations are beyond the reach of the federal taxing power, is “being
intentionally hidden from people, including the employees of the government and the
Courts[,] to prevent people from knowing the truth.” (Id. at 30.)
Beale is not the first to attempt to escape his tax obligations with this type of
argument, and his arguments fare as poorly as those of his predecessors. The Supreme
Court has rejected the argument that disagreements with the philosophic or legal
underpinnings of the Internal Revenue Code constitute good-faith mistakes about what
duties the Code imposes on them. Cheek, 498 U.S. at 206 (“We do not believe that
Congress contemplated that such a taxpayer, without risking criminal prosecution,
could ignore the duties imposed upon him by the Internal Revenue Code . . . .”).
Furthermore, Beale’s interpretations of the federal tax statutes have been repeatedly
rejected by the federal courts.3 See United States v. Collorafi, 876 F.2d 303, 305-06
3
For instance, Beale’s argument that he is not a “person” subject to the tax laws
as defined in 26 U.S.C. § 7343 was rejected in United States v. Rice, 659 F.2d 524,
528 (Former 5th Cir. 1981); his argument that under 26 U.S.C. § 3401 “employee”
includes only federal wage earners was squarely dismissed in United States v. Latham,
754 F.2d 747, 750 (7th Cir. 1985) (stating that under section 3401(c) the argument
that “the category of ‘employee’ does not include privately employed wage earners
is a preposterous reading of the statute”); and, for the coup de grace, his scheme of
United States citizenship, within which the federal government cannot tax the income
of citizens of the several states unless they are federal employees or freed slaves, has
-8-
(2d. Cir. 1989) (“[P]roof that a defendant continued a tax practice that already had
been held unlawful by a federal judge is strong circumstantial evidence of wrongful
intent.”). The government provided more than enough evidence to show that Beale
knew his tax obligations and that he willfully evaded them. The premise of the Chayil
scheme was to hide his income from the government, a fact that presupposes that
Beale knew and understood what the tax laws required of him. His idiosyncratic
views on our constitutional structure, whether sincere or not, are not good-faith
mistakes about what the law is. They are disagreements about what the law should
be. See United States v. Schiff, 801 F.2d 108, 112 (2d. Cir. 1986) (noting the
difference between misunderstanding and disagreement). We affirm Beale’s
conviction on five counts of tax evasion in violation of section 7201.
III.
Beale’s next argument is that he is entitled to a new trial because the presiding
district court judge did not recuse herself after learning of the attempt by Beale’s
“Common Law Court” to intimidate her through issuing a warrant for her arrest.
Although there is some dispute as to whether Beale properly moved for recusal, the
judge asked him at the beginning of the trial whether he wanted recusal, to which he
responded, “by authority of the one Supreme Court in the original jurisdiction under
the Lord Jesus Christ, and the law of God, I order that your bond be seized and I order
that you recuse yourself from this case.” (Appellant’s Br. 41.) Regardless of whether
Beale filed a motion for recusal in the technical sense, we think this comment
sufficiently raised the issue to review for abuse of discretion instead of plain error.
See United States v. Dehghani, 550 F.3d 716, 721 (8th Cir. 2008) (“We review the
denial of a motion to recuse for abuse of discretion.”).
been rejected time and again, see United States v. Gerads,
999 F.2d 1255, 1256 (8th
Cir. 1993) (per curiam); United States v. Jagim,
978 F.2d 1032, 1036 (8th Cir. 1992);
United States v. Hilgeford,
7 F.3d 1340, 1342 (7th Cir. 1993).
-9-
The judge learned of the plot against her liberty three days before trial through
a criminal complaint detailing the statements and actions of Beale’s vigilante tribunal.4
While in jail, Beale was recorded saying that “[i]f my plans work out . . . it will be a
tremendous blessing, a tremendous blessing. God wants me to do this. This is what
he wants me to do. He wants me to destroy the Judge. That Judge is evil. He wants
me to get rid of her.” Complaint ¶ 5, Beale, No. 0:08-cr-00210-RSW-JJK. He was
also recorded stating that “[o]nce I take down [the presiding judge] no judge in the
whole Court will have anything to do with me.” Id. ¶ 13.
Recusal is required “in any proceeding in which [the judge’s] impartiality might
reasonably be questioned.” 28 U.S.C. § 455(a). “The question is whether the judge’s
impartiality might reasonably be questioned by the average person on the street who
knows all the relevant facts of a case.” Dehghani, 550 F.3d at 721 (quotation
omitted). “Because a judge is presumed to be impartial, the party seeking
disqualification bears the substantial burden of proving otherwise.” Id. (quotation
omitted). Furthermore, defendants are not “permitted to use such a plot or threat as
a judge-shopping device.” In re Basciano, 542 F.3d 950, 957 (2d. Cir. 2008), cert.
denied,
129 S. Ct. 1401 (2009).
Although Beale acknowledges that recusal is improper when a party has
threatened a judge in an effort to manipulate the judicial system, he argues that this
rule does not apply to him because the telephone conversations in which he made the
threatening statements were secretly recorded. Thus, he cannot be said to have
intended to manipulate the judicial process because he did not intend that the judge
learn of his threats.
4
Beale was subsequently indicted and found guilty on one count of conspiring
to impede an officer in violation of 18 U.S.C. § 372 and one count of aiding and
abetting the obstruction of justice in violation of 18 U.S.C. § 1503(a). He was then
sentenced to 48 months imprisonment. United States v. Beale, et al., No. 0:08-cr-
00210-RSW-JJK (D. Minn. Feb. 24, 2009).
-10-
Beale cites United States v. Greenspan, 26 F.3d 1001 (10th Cir. 1994), in
support of this proposition. In Greenspan, the court held that a trial judge should have
recused himself when he learned from the Federal Bureau of Investigation that the
defendant was involved in an alleged conspiracy to assassinate him. Id. at 1006.
Although “threats or attempts to intimidate a judge will not ordinarily satisfy the
requirements for disqualification . . .[,]” recusal was required because “[t]he judge
learned of the alleged threat from the FBI, and there is nothing in the record to suggest
the threat was a ruse by the defendant in an effort to obtain a different judge.” Id.
Greenspan might provide some support for Beale’s argument if it were not for
the fact that Beale and his colleagues on the “Common Law Court” intended to have
a “provost marshal” serve their arrest warrant on the presiding judge. Beale clearly
intended the judge to learn of this threat when she was arrested by his “provost
marshal.” The only thing he did not intend was that she would learn of his plot
through the filing of a criminal complaint by the government. Furthermore, Beale’s
intent to manipulate the judicial system was clearly expressed when he was recorded
saying that after he had intimidated the presiding judge, “no judge in the whole Court
will have anything to do with me.” Complaint ¶ 5, Beale, No. 0:08-cr-00210-RSW-
JJK. Remanding for a new trial with a different judge would be an undue reward for
an attempt to cow the entire federal bench into submission.
IV.
Beale also argues that he was denied adequate resources to conduct his pro se
defense. Although Beale was given access to a computer, telephone, visitors, and the
services of stand-by counsel, he contends that he was denied due process because he
was not allowed to have private telephone conversations, he was required to meet with
visitors in a video-monitored room, and his computer was inadequate.
-11-
We reject Beale’s due process claim. During his Faretta hearing, see Faretta v.
California, 422 U.S. 806 (1975), Beale was warned about the handicaps faced by pro
se defendants who must mount their defense within the confines of the jailhouse
setting. “[A] pretrial detainee has no abstract right to law libraries or legal assistance
. . . .” United States v. Kind,
194 F.3d 900, 905 (8th Cir. 1999) (citing Lewis v. Casey,
518 U.S. 343, 351 (1996)). Furthermore, “[w]e have serious doubts whether a pretrial
detainee who exercises his constitutional right to represent himself at trial thereby
becomes entitled to legal resources over and above what are provided to the general
inmate population.” Id. Beale was afforded all the process he was due.
V.
Finally, Beale challenges his sentence of 134 months imprisonment. His first
challenge is a reprise of his argument that Judge Montgomery should have recused
herself. We have already dealt with that claim. His second challenge is that the court
abused its discretion in denying a downward departure under United States Sentencing
Commission, Guidelines Manual, §5K2.20 for “aberrant behavior” deviating from an
otherwise law abiding life. What he fails to point out is that the court may depart
downward under §5K2.20 “only if the defendant committed a single criminal
occurrence or single criminal transaction that (1) was committed without significant
planning; (2) was of limited duration; and (3) represents a marked deviation by the
defendant from an otherwise law-abiding life.” Beale was convicted on five counts
of tax evasion, one count of fraud, and one count of failure to appear in court. The
variety and number of his criminal acts give the lie to any claim that Beale
“committed a single criminal occurrence or single criminal transaction.” His scheme
required the creation of a shell corporation, manipulation of company payroll
practices, Swiss bank accounts, and the collaboration of other business professionals
such as Stagni. Furthermore, the instant scheme continued from 2000 to 2004, hardly
a limited duration. Finally, Beale had been walking a tightrope of legality since at
least 1992, the earliest point at which the record demonstrates his failure to meet his
-12-
tax obligations. His life was law abiding only in the technical sense that he escaped
prosecution for almost a decade and a half. The district court did not abuse its
discretion in denying a downward departure under §5K2.20.
Third, Beale claims that the district court abused its discretion in applying the
section 3553(a) factors to his case. He does not allege procedural error, but
substantive unreasonableness. Beale contends that his sentence was unjust because
he has already lost his business and the respect of family and friends and because the
sentence was greater than necessary to deter future misconduct. While making
explicit reference to the sentencing factors under section 3553(a), the district court
rejected both of these contentions and noted the “havoc” and “pain and agony” Beale
had caused. Furthermore, he was sentenced within the properly calculated Guidelines
range (134 months in a range of 121-151 months), which we presume to be
reasonable. United States v. Coleman, 556 F.3d 851, 853 (8th Cir. 2009) (citing Rita
v. United States,
127 S. Ct. 2456, 2462-63 (2007)). Beale has failed to show that his
sentence was substantively unreasonable.
VI.
Accordingly, we affirm the judgment below.
___________________________
-13-
