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Individual Challenges Tax Crime Conviction in Second Circuit

JAN. 21, 2020

United States v. Michael J. Little

DATED JAN. 21, 2020
DOCUMENT ATTRIBUTES

United States v. Michael J. Little

UNITED STATES OF AMERICA,
Appellee,
v.
MICHAEL J. LITTLE, AKA Sealed Defendant 1,
Defendant-Appellant.

United States Court of Appeals
for the
Second Circuit

ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK

PRO SE BRIEF FOR DEFENDANT-APPELLANT

MICHAEL J. LITTLE
Defendant-Appellant Pro Se
#66890-054
Moshannon Valley Correctional Institution
555 Geo Drive
Philipsburg, PA 16866


CONTENTS

TABLE OF CONTENTS

TABLE OF AUTHORITIES

PRELIMINARY STATEMENT

ISSUES PRESENTED

Issue 1. Does failure to notify the IRS deprive an alien of Tax Treaty benefits.

Issue 2. Is a defendant's subjective good faith belief his actions are lawful a complete defense to criminal tax charges, including conspiracy.

Issue 3. Prosecutorial Misconduct.

Issue 4. Substance over Form.

Issue 5. Can a District Court overrule the provisions of a tax treaty.

ARGUMENT

Issue 1. Does failure to notify the IRS deprive an alien of Tax Treaty Benefits

A. An alien qualified for Treaty benefits is eligible for a waiver

B. Residency status determined under 26 U.S.C§871-2 not 7701

C. Last in Time provisions of the 2001 Treaty prevail

Issue 2. Is a defendant's subjective good faith belief his actions are lawful a complete defense to criminal tax charges, including conspiracy

A. Court denied request for jury instruction that good faith was complete defense

B. District Court's preclusion of any reference to my understanding of the law was prejudicial error

C. District Court's inclusion of Fed.R.Evid 404(b) breached Revenue Rule

D. Court's denial of testimony of deceased witnesses prejudicial error

E. District Court's denial of motion to discuss Counts 2-8 founded on multiple errors of law

Issue 3. Prosecutorial Misconduct

A. Does presentation of evidence tailored to deceive rise to Giglio standard and require reversal

B. Do a prosecutor's remarks rise to misconduct if they cumulatively distort evidence and improperly bolster government witness testimony

Issue 4. Substance over Form

A. The substance over form doctrine precludes the IRS from re-characterising transactions to create criminal charge of tax evasion

B. Can a potentially misleading but literally true statement be true as a matter of law

Issue 5. Can a District Court overrule the provisions of a tax treaty

CONCLUSION

TABLE OF AUTHORITIES

Cases

Boulware v United States 552 US 421,429-30 S.Ct [2008]

Boyve v. Soundview Tech. Grp. Inc. 464 F.3d 376,385 (2d Cir, 2006)

Briggs v. Goodyear Tire & Rubber Co. 797 F. Supp 2d 288, 236-37 (W.D.N.Y. 1999)

Bronston v United States 409 US 362 SCT (1973)

Carliss v. Bowers, 281 U.S. 376, 378, 50 S. Ct. 336 (1930)

Cook v United States 288 US102, 120 [1933]

Fitzgerald v. Henderson, 251 F.3d 345,365 (2d. Cir. 2001)

Helvering v. Gregory 69 F.2d 809, 810 (2d. Cir. 1934)

Kappus v Comm'r of Internal Revenue, 337 F.3d 1053, 1057 [D.C. Cir. 2003]

Minnesota Tea Co v Helvering 302 US 609, 613 S.Ct [1938]

Moore v. Mitchell, 30 F.2d 600,604 (2d. Cir. 1929)(L. Hand J., concurring)

Morrissette v United States 342 US 246263 [1952] Id at 434

Owner-Operator Indep. Drivers Ass'n v United States 724 F.3d 230, 234 D.C. Circuit. 2013

South Dakota v Bowland 508 U.S. 679, 687 113 S. Ct. 2309 [1993]

Summa Holdings, Inc. v. Commissioner o Internal Revenue Service, 848 F.3d 779, 785-789, (2d, Cir. 2017)

Superintendent of Ins. v. Ochs 377 F.3d 209, 214 (2003)

Towne v. Eisner 245 U.S. 418, 425, 38 S. Ct. 158 T.D. 2634, 15 Ohio L. Rep. 562 (1918)(Holmes J.)

Truesdell v Commissioner, 89 T.C. 1280 (1987)

United States v. Aguilar 839 F.3d at 221

United States v Biaggi, 909 F.2d 662, 692 (2d Cir 1990)

United States v. Borello 766 F.2d at 58

United States v Brandt, 196 F2d 653, 657 (2d Cir 1952)

United States v Stefan Buck : [13-cr-239 (JSR) SDNY, Dkt.# 135, Tr. 2033-34]. Page XIV [XIV-a]

United States v. Certified Envtl Servs 753 F.3d 72, 96 2d Cir. 2013

United States v Collorafi 876 F2d at 305 (citing Vineris v Byzantine Maritime Corp 731 F2d 1061, 1066 2d Cir.1984) Collecting cases)

United States v Daugerdos 837 F.3d 212,229 [2016] CA2

United States v. Farhane, 634 F.3d 127,172 (2d. Cir 2011) (Raggi, J concurring) (quoting United States v. Cardascia, 951 F.2d 474, 488 (2d. Cir. 1991). Id

United States v. Federative Republic of Brazil, 784 F.3d 86,92 (2d. Cir. 2013)

United States v Golitschek 808 F2d195, 202 (2d Cir 1986)

United States v. Kohan, 806 F.2d 18,22 (2d. Cir. 1986)

United States v Litvak 808 F.3d 160, 190 (2d Cir.2015)

United States v. Marinello 855 F.3d 455, 459 (2d Cir. 2017) dissent by D. Jacobs, J

United States v. Pedroza, 750 F.2d 187,200 (2d Cir. 1984)

United States v. Puzzo, 928 F.2d 1358, 1365 (2d. Cir. 1991)

United States v Regan 937 F.2d 823, 827 [1991]CA2

Whitney v Robertson 124 U. S. 190, 194,8 S. Ct. 456, [1888]

Statutes, Regulations, Treaties & Rules

18 U.S.C. §371

18 U.S.C. § 1343(2)

26 C.F.R. § 301.6114-1(c)(2)

26 U.S.C. § 871-2

26 U.S.C. § para 672(f)(4)

26 U.S.C. § 6048( c)

26 U.S.C.§ 6012 (b)

26 U.S.C.§7201

26 U.S.C. §7212(a)

26 U.S.C. §7701-9

Fed.R.Evid 404(b)

Fed. R. Evid. 401

I,R.C. §7852(d)(2)

Tax Reform Act (1986)

United States Const. art VI cl. 2

US/UK 2001 Tax Treaty

US-UK Tax Treaty [Article 1(3)(a), Article 26]

US-UK Tax Treaty 1975 [Article 4]

Misc

Bittker & Eustice para. 8.05(9), at 8-51

David P. Hariton, Sorting Out the Tangle of Economic Substance, 52 Tax Law 235, 236-41 (1999)

Soren Kierkegaard: Works of Love, [1847]


PRELIMINARY STATEMENT

This brief discusses five issues:

1) the tax residency of an alien greencard holder;

2) good faith as a complete defense to criminal charges including conspiracy

3) prosecutorial misconduct

4) the substance over form doctrine.

5) Can a District Court overrule the provisions of a tax treaty

Defendant-Appellant, Michael Little, pro se, submits this supplemental brief in further support of my appeal. The issues and arguments I raise are in addition to those raised by my counsel, Robert A Culp Esq, in his principal brief, filed on December 18, 2019 and incorporated by reference here.

ISSUES PRESENTED

Issue 1. Does failure to notify the IRS deprive an alien of Tax Treaty benefits.

A. Does the IRC require a green card holder claiming US non-resident status to notify the IRS by Form 8833 if profit from independent personal services earned in the US is less than $100,000 in a calendar year.

B. Does a green card holder who left the US in September 1983 and became tax resident in his home country remain a US non-resident if he does not establish a permanent home in the US.

C. Does the “last in time” rule determine the law when the IRC and a Tax Treaty are in conflict.

Issue 2. Is a defendant's subjective good faith belief his actions are lawful a complete defense to criminal tax charges, including conspiracy.

A. Is a defendant's good faith belief that he was not conspiring with others to defraud the United States evade taxes or file false tax returns a complete defense to a charge of tax conspiracy.

B. Is the District Court's failure to squarely present the issue of good faith to the jury prejudicial error

C. Did the District Court's 404 (b) ruling, allowing evidence of my UK tax filings, breach both the revenue rule and undermine my good faith defense

D. Was the Court's refusal to allow documentary evidence from my deceased accountant prejudicial error

E. Was the Court's denial of my pre-trial motions to dismiss counts 2-8 incorrect as a matter of law

Issue 3. Prosecutorial Misconduct.

A. Does the presentation of evidence tailored to deceive rise to the Giglio standard and require reversal?

B. Do a prosecutor's remarks in summation rise to misconduct if they cumulatively distort the evidence, introduce presumptions as facts not in the record and improperly bolster government witness testimony?

Issue 4. Substance over Form.

A. Does the substance over form doctrine preclude the IRS from arbitrarily re-characterising transactions to support criminal prosecutions?

B. Is a misleading but literally true statement false as a matter of law

Issue 5. Can a District Court overrule the provisions of a tax treaty.

ARGUMENT

Issue 1. Does failure to notify the IRS deprive an alien of Tax Treaty benefits.

Conviction on Counts Two through Eight must be reversed because the IRS cannot deprive a dual resident taxpayer of his non-resident status.

Counts Two through Eight can only lie if, and only if, I am found to be a resident of the US via the US tie-breaker rules. This issue was decided by the UK Competent Authority on April 13, 2013. DD239-3.

The IRS cannot abrogate the role of Congress. The US/UK 2001 Tax Treaty is the supreme law of the land. The Government narrowed the indictment by further and better particulars on 9/13/2013. DD83. I am charged with failing to file a Form 1040.

As a non-resident, pursuant to 26 U.S.C. 6012 (b) I am required, if at all, to file a return on Form 1040 NR, before applying any of the other benefits and exemptions the Treaty provides. On this ground alone Counts Two through Eight must be reversed.

A. An alien qualified for Treaty benefits is eligible for a waiver granted by the Treasury found in 26 C.F.R. 301.6114-1(c)(2). He does not have to notify the IRS he is taking a Treaty position if his income is less than $100,000 in any calendar year.

B. It was unchallenged I expatriated from the US and returned to live permanently in the UK in September 1983. [TR1880]. Therefore my residency status was determined under 26 U.S.C. 871-2 and not 7701. See 26 U.S.C. 7701-9 Special rules mandating the provisions of 26 U.S.C. 871-2 for aliens not present in the US at the end of 1983. Under 871-2 and the 1975 Tax Treaty Article 4 provisions I became a non-resident of the United States for tax purposes, and have so remained to date.

C. The “last in time” provisions of the 2001 Treaty prevail over any conflicting provisions in Internal Revenue code statutes and regulations. Black letter law confirms the Treaty's provisions, when in conflict with Code IRC §7852(d)(2) states neither treaty nor code should have preference, but refers only to treaties in effect at the time §7852 was enacted. §7852 has no prospective application and therefore the Treaty is the controlling law [Cook v United States 288 US102, 120 [1933]]. 26 U.S.C. § 7852 (d)(2) contains amendments to apply notwithstanding treaties. Following amendments made by [Tax] Reform Act [of 1986] shall apply notwithstanding any treaty obligation of the United States in effect on the date of the Reform Act. [Emphasis added.]

“The Constitution places treaties and federal statutes on equal footing — both are "the supreme law of the Land." United States Const. art VI cl. 2. Courts therefore approach conflicts between treaties and statutes the way they would a conflict between two treaties or two statutes: the more recent legal pronouncement controls. Whitney v Robertson 124 U. S. 190, 194,8 S. Ct. 456, [1888]. This is known as the last-in-time rule. Kappus v Comm'r of Internal Revenue, 337 F.3d 1053, 1057 [D.C. Cir. 2003]. But though the last-in-time rule tells courts how to resolve clashes between statutes and treaties, courts prefer to avoid such conflicts altogether. Thus, we presume that newly enacted statutes do not automatically abrogate existing treaties. See South Dakota v Bowland 508 U.S. 679, 687 113 S. Ct. 2309 [1993].” Owner-Operator Indep. Drivers Ass'n v United States 724 F.3d 230, 234 D.C. Circuit. 2013. Here, by application of the holding of Owner-Operators, and its supporting precedent, the US/UK Tax Treaty remains the supreme law of the land. This is the reason this issue comes before the Court as a matter of first impression and not because of the clarity of the law, as the prosecution alleged in pre-trial proceedings DD 234 p12-13. To emphasise the confusion even among the prominent and well-advised, see the current British Prime Minister (a dual US/UK citizen at the time), Boris Johnson's refusal to pay (and presumably file) US taxes. As an American citizen, Mr Johnson was not able to take advantage of the Treaty's “savings clause” exemption for green card holders and was therefore liable to file and pay tax on his world-wide income. [DD 223-1; 2001 Treaty, Art 1, para 4].

Issue 2. Is a defendant's subjective good faith belief his actions are lawful a complete defense to criminal tax charges, including conspiracy.

The District Court's failure to squarely present to the jury the defendant's good faith belief in his interpretation of the law was prejudicial error and mandates reversal.

A. The Court below denied my request for a jury instruction that good faith was a complete defense to the 371 conspiracy charge. Notwithstanding reference to Judge Rakoff's charge in United States v Stefan Buck : [13-cr-239 (JSR) SDNY, Dkt.# 135, Tr. 2033-34]. Page XIV [XIV-a] the Court declined.

But this Court has confirmed District Court jury instructions in complex tax conspiracy cases where good faith defense is a complete defense to the 371 conspiracy charge per se.

“Good faith is a complete defense to each of the charges in the indictment (1) one count of conspiracy to defraud the Internal Revenue Service (IRS), in violation of I8 U.S.C.§371, see 26 U.S.C.§7201 and 18 U.S.C. §1343(2) for counts of client tax evasion in violation of 26 U.S.C. §7212(a) and District Court elaborated on what good faith could mean in this context.” United States v Daugerdos 837 F.3d 212,229 [2016] CA2.

B. The District Court's preclusion of any reference to my understanding of the law was prejudicial error and mandates reversal.

“However the issue for the jury was not how the District Court interpreted section 1058, it was how the defendants, in good faith, interpreted it. The District Court's failure to squarely present this issue to the jury was a prejudicial error that tainted all of the tax hierarchy charges.” United States v Regan 937 F.2d 823, 827 [1991]CA2.

The District Court sustained objections to any matter that touched on my good faith understanding of the relevant law and any attempt to adduce evidence in support of my good faith belief that my actions were lawful. See generally TR. 1482, 1484, 1485, 1728-482, 1175-1177, 1180-1182, 2110, 2117, 4, 5, 6, 7, 1843, 1865, 1869, 1888, 1892, 1903, 1908, 1909. Sometimes state of mind includes knowledge of a legal requirement. United States v Golitschek 808 F2d195, 202 (2d Cir 1986).

“Trial courts should follow a liberal policy in admitting evidence directed towards establishing the defendant's state of mind.” United States v Collorafi 876 F2d at 305 (citing Vineris v Byzantine Maritime Corp 731 F2d 1061, 1066 2d Cir.1984) Collecting cases). And see United States v Litvak 808 F.3d 160, 190 (2d Cir.2015) “No events or actions which bear even remotely on [intent or lack of good faith] should be withdrawn from the jury . . . quoting United States v Brandt, 196 F2d 653, 657 (2d Cir 1952).

“[W]here evidence of a defendant's innocent state of mind, critical to a fair adjudication of criminal charges, is excluded this Court has not hesitated to order a new trial.” United States v Biaggi, 909 F.2d 662, 692 (2d Cir 1990). Judge Castel's pre-trial ruling, the day before trial, precluding any mention of my arrest and good faith proffer to AUSA Okula of scores of exculpatory documents provided by Muellhaupt was abuse of discretion and mandates reversal.

The Court ordered that no mention be made as to the meeting at trial or the documents presented '[their] probative value [is it] substantially outweighed by the danger of unfair prejudice." [DD 339 Tr. 35-41] "The government is not on trial here. Mr. Okula is not on trial here."[Ibid] The meeting was pre-indictment and the government provided me with a [wholly inaccurate] memorandum. I responded with the noting brief my daughter took of the meeting. I was unable to resolve the different accounts with Okula. [PSA1-11/GX 2514, PSA12-40/AJL 2012-07-24 Notes] The core elements of my good faith defense were undercut by the ruling. Facing one count of conspiracy supported by weak evidence, my good faith proffer gave the prosecution sufficient ammunition to add 18 counts to the indictment. And Judge Castel's ruling ensured I could gain no good faith credit from the jury.

During my cross-examination, AUSA DiMase used GX 2514 to impeach me without permission of the Court. [Tr. 1968-69]. DiMase's sleight-of-hand used GX 2514 to "refresh my recollection" of the meeting. DiMase then accused me of lying to IRS Agent Fox by stating I had met with Harry in person at Bridgeport Hospital, the day before Harry died. [GX 2514 para. 21]. But my daughter, Anneliese Little's noting brief, page 7-8 (PSA18-19)last para recounts what was said and could be confirmed by Harry's PA: that I called Harry's office the day before he died from England as I was to be out of contact for a considerable time. The PA gave me the hospital number and my deathbed conversation with Harry ensued.

The improperly excluded evidence of good faith was also significant. In its absence, the jury was left without vital context and corroboration for the defendant's defense of good faith and lack of criminal intent. As already noted, while the intent element differed . . . “the complex regulatory background against which the defendant's conducted their activities made their professions of good faith relevant, directly or indirectly, to every question of knowledge and intent in dispute in this case. Furthermore, the defendant's protestations of good faith bore directly on assessment of their good faith and the improper exclusion of corroboration of their good faith undermined the fairness of that evaluation.” United States v. Certified Envtl Servs 753 F.3d 72, 96 2d Cir. 2013.

C. The District Court's inclusion of Fed.R.Evid 404(b) evidence relating to my UK tax filings breached the Revenue Rule and constitutes prejudicial error.

"We review a district court's rulings on the admissibility of evidence for abuse of discretion. See Boyve v. Soundview Tech. Grp. Inc. 464 F.3d 376,385 (2d Cir, 2006) "An out-of-court statement offered for some other purpose, such as to show that a statement was made, United States v. Kohan, 806 F.2d 18,22 (2d. Cir. 1986), to demonstrate the statements effect on the listener, United States v. Puzzo, 928 F.2d 1358, 1365 (2d. Cir. 1991), or to show the circumstances under which subsequent events occurred, United States v. Pedroza, 750 F.2d 187,200 (2d Cir. 1984) is not hearsay. In this case, the proffered evidence was not offered for its truth but to show they provided a good faith basis for the defendant's actions. United States v. Certified Envt'l. Servs. 753 F.3d 72,90 (2d. Cir. 2013). "With respect to temoral relevance, we have held that [a] suggestion that an item of evidence relates to a period that is too remote goes to both the items' relevance and weight." Fitzgerald v. Henderson, 251 F.3d 345,365 (2d. Cir. 2001). At the same time, our case law "recognized the possibility that an expression of state of mind on one occasion may be relevant to state of mind at a later time where the statement reflects a "continuous mental process" United States v. Farhane, 634 F.3d 127,172 (2d. Cir 2011) (Raggi, J concurring) (quoting United States v. Cardascia, 951 F.2d 474, 488 (2d. Cir. 1991). Id. While evidentiary rulings are reviewed for abuse of discretion, the question of the defendant's intent and good faith was a contested issue in this case, and the definition of relevance under Fed. R. Evid. 401 is very broad. Id.

The District Court explicitly refused to allow any mention of the substantial diversity of the US and UK tax reporting regimes. The jury was allowed to consider as a factor toward my guilt the timeliness of the filing of my UK tax returns. The jury was not instructed nor could they be expected to understand the intricacies of wholly different fiscal system of a sovereign nation whose regulations are wholly different to those of the US.

In addition, allowing the jury to weigh, as a matter of fact, that my late filing of my UK tax obligations was somehow a “wrong” and this by implication related to the US tax filing charges could only cause jury confusion and is therefore prejudicial error requiring reversal of Counts Two through Eight.

That the court allowed UK tax filing requirements to be a part of jury considerations flies in the face of the Revenue Rule. "Our own court has followed suit, with Learned Hand expanding on the [Revenue] rule's rationale. Judge Hand explained the danger in requiring United States courts to "pass upon the provisions of the public order of another state, something that is or at any rate should be beyond the powers of a court". Moore v. Mitchell, 30 F.2d 600,604 (2d. Cir. 1929)9L. Hand J., concurring) aff'd on other grounds, 505 S. Ct. 175, (1930). Judge Hand further noted that enforcement of foreign criminal laws would enmesh courts in "the relations between the states themselves," a matter outside judicial competence and, in any event, "entrusted to other authorities' under our system of separation of powers. Id. United States v. Federative Republic of Brazil, 784 F.3d 86,92 (2d. Cir. 2013). My counselled brief underscored the district court's error in instructing the jury they could consider whether my belief was "actually reasonable" [CB pp 69-70; A130-31,Tr. 2155-56]. The Cheek and Pabiscz courts dealt with issues raised by beliefs held by US citizens about US tax law. Here, in direct contrast, a UK citizen had his subjective belief that the US/UK tax treaty rendered him a UK resident for tax purposes confirmed by his sovereign taxing authority, HMRC. [DD 264-3]. The district court precluded any mention of HMRC's ruling; at trial, the court evidently forgot it had earlier characterized the British sovereign's ruling as advice of counsel in its dismissal of my motion to dismiss counts 2-8 [Tr. 6-15, 1306-13; SPA-9]. The district court's ruling there was to be no reference to this evidence in my testimony was prejudicial error. HMRC's confirmation of what was "a continuous mental process' beginning in 1983 and continuing into 2013 when I sought confirmation of the legality of my actions from HMRC. Such confirmation could only be rendered: ex post facto. A properly Cheek-instructed jury, asked to consider my actions subjectively, would be challenged to form a conviction of guilt, beyond a reasonable doubt, without hearing evidence from me of my understanding of the law. A Cheek instruction presents its own challenge. It requires a juror to perform a conscious mental somersault and view the law through my eyes. But unlike the Cheek and Pabiscz defendants, here issues of US, UK and Tax Treaty law are in issue. As the Danish philosopher, Soren Kierkegaard, wrote: "The majority of men are subjective toward themselves and objective toward all others. Terribly objective sometimes. But the real task is, in fact, to be objective toward oneself and subjective toward all others." [Works of Love, 1847]. For a jury to decide on guilt or innocence, properly instructed, as to a defendant's beliefs about US tax law would be a challenge. For a jury, as here, improperly instructed, to decide on my guilt without any knowledge of my knowledge of UK, US and Treaty law would not be possible. The convictions on Counts 2-8 must be reversed.

D. The Court's denial DD283 of testimony of deceased witness was prejudicial error mandating reversal of Counts Two through Eight.

Robert Gordon and Christopher Sandison were respectively my US and UK accountants at critical times relevant to Counts Two through Eight. Specifically, their documentary evidence was all I could rely on to support advice of accountant good faith defense.

The citation from the holdings of Brandt, Litvak, Biaggi and Collorafi relevant to the inclusion of evidence in support of a good faith defense compel a review of the District Court's denial.

The Court also denied inclusion of any material from Sandison's office manager's production, supported by a 3505 certification.

Sandison was my accountant for at least 14 months of the time period included in the charges. Gordon was my accountant on my return to the UK in 1983. Their evidence would have been an important element in my defense. Its exclusion was prejudicial error that mandates reversal.

E. Appellate review of the District Court's denial of my motion to discuss Counts Two through Eight must find the denial founded on multiple errors of law mandating reversal.

The provisions of the Treaty confirming my non-resident status, confirmed by the UK Competent Authority as detailed above and more completely discussed in my counsel's brief, mandate reversal.

Significant prejudice attached to the inclusion of these charges at trial. Dismissal at the pre-trial stage would have eliminated any spill over damage caused by the charges' erroneous inclusion at trial.

Issue 3. Prosecutorial misconduct

A. Does the presentation of evidence tailored to deceive rise to the Giglio standard and require reversal.

B. Do a prosecutor's remarks in summation rise to misconduct if they cumulatively distort the evidence, introduce presumptions as facts not in the record and improperly bolster government witness testimony.

The jury were given the impression that, during my pre-indictment proffer session with AUSA Okula, I had lied to Agent Fox when in fact Fox did not tell the truth. Fox and Lisella were both absent from the meeting room making copies of the documents I gave the government — see Anneliese Little's noting brief — and could not make an accurate record. The Court did not stop the breach of his order; my standby counsel, who had conducted my examination failed to object and again, my good faith defense was stymied by a prosecutor's low blow.

Although defense counsel at times failed to object, plainly improper bolstering continued through the government's case in chief and into the government's summation. We will not likely overlook such repeated violations of clearly announced rules. See Borello 766 F.2d at 58 ('for us to disapprove of the present procedure permitting the bolstering of the witness testimony and then declare it harmless error would make our remarks in the previous cases purely ceremonial').

Here, the government's misconduct commenced with its manipulation of evidence purporting to show that a number of IRS 'notice of deficiency' had been sent to my last known address and were ignored. IRS agent Morgan, carefully corrected herself "The address that was . . . the record that I researched is 225 E.48th St. . . ." Without disclosing the fact to the jury, Morgan and DiMase read into evidence 2008 data that was updated by the government's own 2009 and 2010 data that indicated my home address. See counselled brief page 58 citing O'Rouke. But O'Rouke requires the IRS to produce a postal form 3877 showing a notice of deficiency was sent to taxpayer by certified mail. Morgan produced no evidence of a certified mailing. Thus the jury were under the false impression I was ignoring IRS letters wilfully.

Witness bolstering and mis-statements of law in prosecutors' summations.

Peahen & Lixam:

“Lixam was incorporated in the British Virgin Islands, of all places. It's not a real company. It was [set up] to engage in tax evasion.” [Tr. 2226].

"There is no reason to doubt that economic substance remains the right touchstone for characterizing funds received when a shareholder diverts them before they can be recorded on the corporation's books, while they "never even pass through the corporation's hands". Bittker & Eustice para. 8.05(9), at 8-51, even diverted funds may be seen as dividends or capital distributions for purposes of para.'s 301 and 316(a), see Truesdell v Commissioner, 89 T.C. 1280 (1987)(treating diverted funds as "constructive" distributions in civil tax proceedings). The point again, is that taxation is not so much concerned with the refinements of title as it is with actual command over the property taxed — the actual benefit for which the tax is paid. Carliss v. Bowers, 281 U.S. 376, 378, 50 S. Ct. 336 (1930)" Boulware v. United States 552 U.S. 421, 430, 128 S. Ct. 1168 (2008). Here, Anne Seggerman had no command over the property [Lixam funds], payments to her were not made out of Lixam the company [Muellhaupt was the legal owner] or the trust but rather from Muellhaupt directly or, post 2010 from my account to Anne directly on Stein's advice [A 196 para 4, A 368].

It is trite law that for there to be tax evasion, there has to be a tax deficiency.

"Defendant had the exact same structure at the exact same bank. That was Peahen." [Tr. 2302]

Lixam was incorporated as a corporate/trust structure in St.Vincent and the Grenadines. Its bank accounts were with various Swiss banks and it was controlled by Muellhaupt's law firm in Zurich. [A 323]. Peahen was a British Virgin Island corporation, owned by my wife and I. Its bank account was at Barclays Bank in Guernsey.

[See Donna Francis testimony generally]. That a criminal intent inference be allowed to lie because of such misstatement is prejudicial error.

Steiner Productions — a Sham

The Court denied the introduction of substantive evidence confirming Anne Seggerman's sincere intention of make a film of 'Our Lady of Guadalupe' citing my testimony and that of Anne's children that it was ' a sincerely held belief'. When I objected citing Henry's testimony that there was never any intention to make a film, the Court ruled it was excluding DX 1017. "Well listen, I'm excluding it under 403danger of unfair prejudice" [Tr. 1848-49].

In summation, Dember exploited the Steiner sham theme. Bolstering, John, Henry and Yvonne's testimony: "if [Steiner] never produced a movie before he died, it never produced a movie after he died. They were going to create the illusion that Steiner Productions was a real company, which it wasn't. [Tr. 250,288,441, 612, 731, 798, 1668, 2227-28]. "Anne is loaning money to herself, That's bogus, its's a scam". [Tr. 2230] This cullmalative bolstering of testimony was prejudicial error.

Suzanne's Phoney Mortgage

"Gordon and Little both helped Suzanne with her phoney mortgage" [Tr. 2234]. The record states the exact opposite: "I didn't introduce you to Bob Gordon to do something illegal? — [Tr. 865]

"You had no dealings with me in respect of your mortgage transaction or your inheritance — Correct" [Tr. 849]

Cosgrove & Stein

Dember stated I lied repeatedly to Cosgrove and Stein about the gift issue. [Tr. 2240-48]. But I was not the sources of Stein's information. Stein told the grand jury he had gleaned the facts to form his [gift] analysis from his partner, Joe Bainton, who, Stein testified, told Stein 'they came from Dr. Muellhaupt". [DD-444 GJ excerpt attached to motion]. And Cosgrove was aware that for a month before he spoke to Bainton, his firm was aware Anne was receiving payments from a Swiss trust. [DD66-1].

After McCleod failed to recall Stein to rebut Bainton's uncontested testimony that the gift analysis had come from Stein, she bolstered his testimony and attempted to deflect the jury from words that could not have been clearer "there was an offshore trust for the benefit of Anne [A-368]. Stein didn't remember writing it and if he did it was factually incorrect. It wasn't contemporaneous. It was part of back and forth prior to going to the grand jury. It was a year from the instant events and Stein's grand jury excerpt [DD-444] indictated clarity of recall.

At the end of her rebuttal summation, McCleod provided me with a colorable good faith defense to the failure to file and FBAR charges. A Cheek-instructed jury might have acquitted me on her words alone: "The Defendant thought deeply about these legal concepts.

He thought a lot about the US-UK Tax Treaty. He thought a lot about domicile and residence. And he tried to figure out what legal position he could take that would be best and most advantageous for tax purposes." [Tr. 2303]. This nugget of truth does not militate from the cumulative effect of prosecutorial bolstering and mis-statements of law, as detailed above, that comprise reversible error.

The government allowed Stein to testify falsely as to the legal meaning of a constructive trust.

Indeed, the existence of a written agreement has already been held by a number of courts in this Circuit to bar a constructive trust. See e.g. Briggs v. Goodyear Tire & Rubber Co. 797 F. Supp 2.d 288, 236-37 (W.D.N.Y. 1999)(Where there exists a valid and enforceable written contract governing a particular subject matter, quasi contractual claims for unjust enrichment and constructive trust are not allowed. Settled law indicates that the equitable claims of unjust enrichment and constructive trust are unavailable where plaintiffs have rights under a valid and enforceable contract)(internal quotation marks and citations omitted). Superintendent of Ins. v. Ochs 377 F.3d 209, 214 (2003). Here, Stein was knowingly allowed to give false testimony on the legal significance of the law as applied to the facts: Gullworthy was a legally enforceable contract, there was no constructive trust. Stein had told the grand jury the exact opposite. The Court failed to instruct the jury on the law of constructive trust, the jury were left under the impression I had lied to Stein in my telephone call, chiding Stein for sitting on his hands [A 250, GX 516, Tr. 1038] and telling him that a constructive trust and that funds came out of [Harry's] estate were "antithical" to what we were saying [A 250]. My follow-up email evidencing my frustration at Bainton's absence and Stein's incompetence —" I'd like Gordon to prove it [in reference to the estate and constructive trust]" [ GX 516] were truthful. There was no constructive trust. There was a written agreement. Unchallenged evidence showed Gullworthy was not included in Harry's estate [Cite]. The contents of the call and follow up email were true and but for Stein's perjury [which the government were aware of] the jury would have credited the call and the email to my defense. In summation, AUSA Dember shamelessly emphasised this deception on the court and the jury by disingenuously pretending not to be able to pronounce "antithical' — underscoring Stein's government endorsed flat out lie and mis-interpretation of the law. [Cite].

Issue 4. Substance Over Form

A. The substance over form doctrine precludes the IRS from re-characterising transactions to create a criminal charge of tax evasion.

Counts Ten through Nineteen, according to the government, concerned a tax evasion scheme. TR 2226-2227. But the substance of the Lixam structure was to drip feed funds back to Anne Seggerman. At any time the trustees could decrease or stop payments to Anne and divert the funds for the ultimate benefit of the second beneficiaries. A trustee with such powers can categorise such payments as a gift. 26 U.S.C. 6048(c).

“A given result at the end of the straight path is not made a different result by following a devious path.” Minnesota Tea Co v Helvering 302 US 609, 613 S.Ct [1938] quoted in Boulware v United States 552 United States 421,429 S.Ct [2008].

“Even if there were compelling reasons to extend 7201 to cases where no taxes are owed it bears repeating that the spirit of the doctrine which denies the federal judiciary power to create crimes . . . should not enlarge the reach of enacted crimes by constituting them from anything less than the incriminating components contemplated by the words used in the statute.” Morrissette v United States 342 US 246263 [1952] Id at 434.

"And in the case of Little, he was not in the business of tax fraud for people who are inheriting from offshore accounts. He was a friend of the father. [Sentencing Transcript p.29, PSA69].

"The mother was not prosecuted also, and she was the prime beneficiary of the schemethe government elected not to prosecute the widow of Harry who benefited . . . more than anyone from this scheme." [Sentencing Transcript p.30, PSA70]

"There has been a myth that has developed around this case — I'll call it a false narrative — that once upon a tme, Harry Seggerman, the father opened offshore accounts. And lo and behold, upon his death, the children were forced to make a decision whether or not to report this on an estate tax return, and they didn't. And they made this terrible mistake and everything else has followed from that. That is what I call a myth." [sentencing Transcript p.37. PSA77].

But the mother committed no tax evasion — a prosecution for tax evasion cannot stand without a tax loss. Anne's inheritance interests Gullworthy and 1/6 Cetura, whether they were declared in the estate return or not, were bartered for a series of payments made, or not made, at the complete discretion of her trustees.

This was the essence of the Gullworthy Agreement. Anne had no tax liability for the payments she received from Muellhaupt. [See Counselled brief pp.43-44]. Henry Seggerman confirmed i was not aware that the Cetura assets were not included in the estate filing. [Tr. 698]. Bob Gordon, who was aware of Gullworthy, asked Greg Hayes, the estate attorney, if Gullworthy should be included in the estate return [it was tax neutral, spousal exemption]. After hearing from Gordon, Hayes called Henry who admitted lying to Hayes, about, inter alia, Gullworthy. [Tr. 707]. But as far as Anne was concerned, this was a pointless lie. Anne inherited tax-free and his testimony was tailored to obscure the difference in inheritance treatment of spouses and children, thus tarring me with the family tax-conspiracy brush.

“As to legislative history, the panel relies on its absence to distinguish this case from Aguilar 839 F.3d at 221, that is a thin reed, and in any event, there is relevant legislative history for 7212 (a), and it confirms my view Finally, unlike the panel, I decline to defer to the Department of Justice's views to determine the scope of a criminal statute”. Id.

Even if the majority is correct — even if any limit to the omnibus clause is insupportable — then we should have gone in banc to determine whether such a limitless statute is constitutional. At some point, prosecutors must encounter boundaries to discretion, so that no American prosecutor can say, "Show me the man and I'll show you the crime" United States v. Marinello 855 F.3d 455, 459 (2d Cir. 2017) dissent by D. Jacobs, J.

Counts Ten through Eighteen were a make weight. There was no criminality involved. I deliberately instructed Joe Bainton to use Anne's accountants to get her into compliance, knowing full well IRS CID were crawling all over Cosgrove's office investigating the Seggerman siblings for tax fraud [Re, 2083-87, 1409, GX 509]. “Given the inevitable shoe dropping from the hand of one of Anne's children, we need to be on parade, with our shoes shined and ready for inspection” [GX 509] — Royal Marine syntax [DD 440] indicating “everything we submit [to the IRS] will be microscopically examined.”

26 U.S.C. para 672(f)(4) Re-characterization of purported gifts. “In the case of any transfer directly or indirectly from a partnership or a foreign corporation which the transferee treats as a gift or bequest, the Secretary may re-characterize such a transfer in such circumstances as the Secretary determines to be appropriate to prevent the avoidance of the purposes of this subsection.

(5) Special rules where the grantor is a foreign person. If —

(A) but for this subsection, a foreign person would be treated as the owner of any portion of a trust, and

(B) such trust has a beneficiary who is a United States person, such beneficiary shall be treated as the grantor of such portion to the extent such beneficiary has made (directly or indirectly) transfers of property (other than for sale for full and adequate consideration) to such foreign person. For the purpose of the preceding sentence, any gift shall not be taken into account to the extent such gift would be excluded under Section 2503(b).”

Section 672 gives the IRS sweeping powers to re-classify a purported gift to a trust payment. The ongoing investigation into the Seggerman family's finances, including Anne's, would necessarily invite further government scrutiny of her 3520 submissions. The trustees had Bainton and Stein's legal opinion, and the Gullworthy agreement contained a secrecy clause requiring its production [A-359 Clause 6] only pursuant to “an applicable legal procedure” eg. in response to a demand from the IRS.

“Before long, allegations of tax avoidance begin to look like efforts at tax avoidance. What started as a tool to prevent taxpayers from placing labels on transactions to avoid tax consequences they don't like runs the risk of becoming a tool that allows the Commissioner to place labels on transactions to avoid textual consequences he doesn't like. The substance over form doctrine, it seems to us, makes sense only when it holds true to its roots — when the taxpayer's formal characterization of a transaction fails to capture economic reality and would distort the meaning of the Code or the process. But who is to say that a low tax means of achieving a legitimate business end is any less "substantive" than the higher-taxed alternative? "There is no patriotic duty to increase one's taxes" as Judge Learned Hand memorably told us in the case that gave rise to the economic-substance doctrine. Helvering v. Gregory 69 F.2d 809, 810 (2d. Cir. 1934). "Any one may so arrange his affairs that his taxes shall be as low as possible, he is not bound to choose that pattern which will best pay the Treasury" Id. If the Code authorizes the "formal" transactions the taxpayer entered into, then. 'it is of no consequence that it was all an elaborate scheme to get rid of income taxes" Id, See Also David P. Hariton, Sorting Out the Tangle of Economic Substance, 52 Tax Law 235, 236-41 (1999).

Although the distinction between transactions that obscure economic reality and Code-compliant, tax advantaged transactions may be difficult to identify in some cases, the transactions in this case are clearly on the legitimate side of the line.

"A word is not a crystal, transparent and unchanged, it is the skin of a living thought." Towne v. Eisner 245 U.S. 418, 425, 38 S. Ct. 158 T.D. 2634, 15 Ohio L. Rep. 562 (1918)(Holmes J.). And all that. But purpose must be grounded in text. If it cannot be grounded in text, it cannot be invoked to save the statute from itself. Summa Holdings, Inc. v. Commissioner of Internal Revenue Service, 848 F.3d 779, 785-789, (2d, Cir. 2017).

B. Can a potentially misleading but literally true statement be true as a matter of law.

This issue relates specifically to counts 10-19 and counts as constructively amended.

My statement to Anne Seggerman's accountants included a confirmation of Doug Stein's understanding of the law applied to the facts GX 532, and a letter to Jim Cosgrove GX A253, stating Walter Mullhaupt was the legal owner of the funds in Lixam and the support payments to Anne were provided to her as a gift, was literally true. GX 535 [Tr.1112, 1394, 1822, 1984]..

The accountants were fully aware of Lixam's trust status GX1200 [Tr,1286, 1313, 2084, 2115, 2240] and were also aware that it was Joe Bainton and Doug Stein's legal opinion the payments should be re-characterised as gifts id[Tr. 1414-16].

“It may be that the pat answers were not guileless but shrewdly calculated to evade, nevertheless we are constrained to agree with Judge Lumbard who dissented from the judgement of the Court of Appeal that any special problems arising from the literally true but unresponsive answer are to be remedied through questioner's acuity and not a federal perjury prosecution. Bronston v United States 409 US 362 SCT [1973].

Cosgrove did not need me to mention there was a trust/gift issue in my letter [A253]; Cosgrove and Stein were fully aware this was the key issue (A-368, Tr. 1388]. As Anne's trustee my concern was penalties for failure to disclose a trust were 35% as opposed to 25%; a difference of $300,000 in penalties.

Cosgrove three times denied knowing anything about Anne Seggerman's offshore payments, until finally: “I see where you're going with that” [Tr. 1410-16]. His firm had represented Harry Seggerman for decades and its founder was a close personal friend of Harry's [Tr. 406-7]. Cosgrove was under investigation by the IRS for is preparation of Suzanne Seggerman's false tax returns [Tr. 1409]. Since the 1980s all Seggerman siblings shared in the benefits. Each was provided with a home, business funding, use of the family's estate in St Maarten. Each individually actively assisted, or turned a blind eye toward their father's tax crimes. [Tr. 315, 498-9, 749, 836, 1650]. That forty years of serial evasion went by unnoticed by a sophisticated tax practise — preparers of Harry's estate filing [Tr. 1408] — strains credulity. Bainton and Stein's legal analysis is what I relied on and my letter to Cosgrove ended with “I hope the above assists . . . please don't hesitate to contact me if I can be of any further assistance.” GX535. Cosgrove made no further contact and of course was aware of the trust structure from my earlier contact with his colleague.

The District Court did not instruct the jury on a “Bronston” charge, nor was one suggested by me. However, on plain error review, the omission is per se prejudicial in light of the Court's constructive amendment of the second object of the conspiracy “falsely claiming transfers of funds were gifts when in fact they were not.” TR 2180. The error mandates reversal.

For the prejudicial error of not presenting the substance over form doctrine to the jury, the conviction on Counts Ten through Nineteen mandates reversal.

Issue 5. Can a District Court overrule the provisions of a tax treaty.

Can a District Court award the IRS restitution as part of a sentence for failure to file a tax return when the tax in question has been paid to a treaty partner and is subject to a pending tax treaty adjudication.

Counselled brief, at page 80. asks the court to consider the impact of the US-UK Tax Treaty on that portion of the Restitution Order concerning the failure to file charges, $134,449.71 [SPA-69]. This amount remains the subject of an unresolved negotiation between the relevant sovereign Competent Authorities. It has not been disputed that my tax liability for 2005-2010 has been fully reported and paid to HMRC, the British taxing authority.[DD-334,335 I made a timely request for assistance to resolve this issue to Shaun Thomas, the then Competent Authority for the UK. [DD-280,281, 451, 463]. This request was accepted and forwarded to the IRS, who have yet to respond with any claim it may have to the taxes paid to the UK. [See Carmel Aldridge letter dated 13th November 2019, which states: “I can confirm that I am still waiting for a response from the IRS and until both competent authorities reach agreement, the MAP case remains open.”] [PSA95] Restitution and an IRS treaty claim would amount to double jeopardy.

The Competent Authorities have been designated by Congress to have exclusive authority to determine disputes arising from sovereign taxation conflicts that are the subject of the Treaty. [Article 1(3)(a), Article 26]. The IRS cannot use a District Court's restitution powers to override Congress's the will of Congress. The award of restitution attributed to my failure to file charges must be reversed.

CONCLUSION

For the foregoing reasons, the Court should vacate the convictions of Counts One, Two through Eight and Ten through Nineteen, reverse the conviction on Count Nine and grant a new trial, and further grant Defendant-Appellant such relief as this Court deems appropriate.

Dated January 21, 2020

Philipsburg Pennsylvania

Michael J Little Pro Se
66890-054
MVCC
555 Geo Drive
Philipsburg
PA 16866

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