UNITED STATES OF AMERICA, Plaintiff - Appellee, v. MICHAEL QUIEL, Defendant - Appellant. UNITED STATES OF AMERICA, Plaintiff - Appellee, v. STEPHEN KERR, Defendant - Appellant.

No. 13-10503, No. 13-10504

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

595 Fed. Appx. 692; 2014 U.S. App. LEXIS 24049; 114 A.F.T.R.2d (RIA) 6984

December 10, 2014, Argued and Submitted, San Francisco, California

December 19, 2014, Filed

NOTICE: PLEASE REFER TO FEDERAL RULES OF APPELLATE PROCEDURE RULE 32.1 GOVERNING THE CITATION TO UNPUBLISHED OPINIONS.

SUBSEQUENT HISTORY: US Supreme Court certiorari denied by Quiel v. United States, 135 S. Ct. 2336, 191 L. Ed. 2d 982, 2015 U.S. LEXIS 3313 (U.S., 2015)

Post-conviction relief denied at, Motion for new trial denied by, Motion denied by, Request denied by United States v. Kerr, 2015 U.S. Dist. LEXIS 92023 (D. Ariz., July 14, 2015)

Motion denied by United States v. Kerr, 2016 U.S. Dist. LEXIS 95897 (D. Ariz., July 22, 2016)

PRIOR HISTORY: [**1] Appeal from the United States District Court for the District of Arizona. D.C. No. 2:11-cr-02385-JAT-2. D.C. No. 2:11-cr-02385-JAT-1. James A. Teilborg, Senior District Judge, Presiding.

United States v. Kerr, 2013 U.S. Dist. LEXIS 116327 (D. Ariz., 2013)

DISPOSITION: AFFIRMED.

CASE SUMMARY:

OVERVIEW: HOLDINGS: [1]-Sufficient evidence supported defendants' convictions for willfully making and subscribing false tax returns in violation of 26 U.S.C.S. ß 7206(1) because the jury could have concluded that defendants knew they had a duty to report income from their foreign accounts given their attorney's testimony that the accounts were set up using nominees under defendants' control in order to evade reporting requirements; [2]-Defendants waived attorney-client privilege by relying on an advice-of-counsel defense; [3]-The district court's blanket ban on recross examination did not violate defendants' right under the Confrontation Clause to confront the attorney regarding exhibits admitted on redirect because those exhibits did not constitute "new matter."

OUTCOME: Judgment affirmed.

CORE TERMS: recross, willfully, new matter, ban, de novo, business activities, quotation marks omitted, constitutional right, attorney-client, testimonial, conspiracy, favorable, admitting, redirect, disclose, blanket, plainly

LexisNexis(R) Headnotes

Criminal Law & Procedure > Appeals > Standards of Review > De Novo Review > Sufficiency of Evidence to Convict

[HN1] A federal court of appeals reviews de novo claims of insufficient evidence. The appellate court will uphold a conviction if, viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt.

Tax Law > Federal Tax Administration & Procedure > Audits & Investigations > Fraud (IRC secs. 6662-6664, 6674, 6690, 7204-7207, 7268, 7434, 7454, 7623) > Fraudulent Returns & Other Documents

Banking Law > Federal Acts > Bank Secrecy Act

Criminal Law & Procedure > Juries & Jurors > Province of Court & Jury > Factual Issues

[HN2] In the context of the offenses of willfully making and subscribing false tax returns and of willingly failing to file foreign bank account reports (FBARs), the question of whether defendants willfully failed to report income and file FBARs is one of fact for the jury.

Criminal Law & Procedure > Juries & Jurors > Province of Court & Jury > General Overview

Criminal Law & Procedure > Appeals > Standards of Review > De Novo Review > General Overview

Evidence > Privileges > Attorney-Client Privilege > General Overview

[HN3] A district court's conclusion concerning whether statements are protected by an individual attorney-client privilege is a mixed question of law and fact which a federal court of appeals reviews independently and without deference to the district court.

Evidence > Privileges > Attorney-Client Privilege > Waiver

[HN4] A party who affirmatively places its attorney-client communications at issue in a litigation implicitly waives the privilege.

Constitutional Law > Bill of Rights > Fundamental Rights > Criminal Process > Right to Confrontation

Criminal Law & Procedure > Trials > Defendant's Rights > Right to Confrontation

Criminal Law & Procedure > Appeals > Standards of Review > De Novo Review > General Overview

[HN5] A federal court of appeals reviews whether limitations on the scope of questioning at trial constitute a violation of the confrontation clause de novo.

Criminal Law & Procedure > Witnesses > Presentation

Criminal Law & Procedure > Trials > Defendant's Rights > Right to Confrontation

Criminal Law & Procedure > Trials > Examination of Witnesses > General Overview

Constitutional Law > Bill of Rights > Fundamental Rights > Criminal Process > Right to Confrontation

Criminal Law & Procedure > Trials > Judicial Discretion

[HN6] Allowing recross is within the sound discretion of the trial court except where new matter is elicited on redirect examination, in which case denial of recross as to that new matter violates the Confrontation Clause.

Criminal Law & Procedure > Discovery & Inspection > Brady Materials > Duty of Disclosure

Criminal Law & Procedure > Discovery & Inspection > Brady Materials > Brady Claims

[HN7] To warrant disclosure of evidence by the State (1) the evidence at issue must be favorable to the accused; (2) the evidence must have been suppressed by the State, either willfully or inadvertently; and (3) prejudice must result from the failure to disclose the evidence.

COUNSEL: For United States of America, Plaintiff - Appellee (13-10504): Frank Phillip Cihlar, Esquire, Senior Counsel, Gregory Victor Davis, Attorney, Alexander Patrick Robbins, Attorney, Doj - U.S. Department of Justice, Tax Division/Appellate Section, Washington, DC; Monica N. Edelstein, Assistant U.S. Attorney, USPX - Office of the U.S. Attorney, Phoenix, AZ; Timothy Stockwell, Special Assistant U.S. Attorney, Office of The U.S. Attorney, San Diego, CA.

For Stephen Kerr, Defendant - Appellant (13-10504): Michael Kimerer, Esquire, Attorney, Rhonda Elaine Neff, Esquire, Attorney, Kimerer & Derrick, P.C., Phoenix, AZ.

For United States of America, Plaintiff - Appellee (13-10503): Frank Phillip Cihlar, Esquire, Senior Counsel, Gregory Victor Davis, Attorney, Alexander Patrick Robbins, Attorney, Doj - U.S. Department of Justice, Tax Division/Appellate Section, Washington, DC; Monica N. Edelstein, Assistant U.S. Attorney, USPX - Office of the U.S. Attorney, Phoenix, AZ; Timothy Stockwell, Special Assistant [**2] U.S. Attorney, Office of The U.S. Attorney, San Diego, CA.

For Michael Quiel, Defendant - Appellant (13-10503): Ashley Arnett, Michael Louis Minns, Law Office of Michael Louis Minns PLC, Houston, TX.

JUDGES: Before: O'SCANNLAIN, N.R. SMITH, and HURWITZ, Circuit Judges.

OPINION

[*694] MEMORANDUM^*

* This disposition is not appropriate for publication and is not precedent except as provided by 9th Cir. R. 36-3.

Michael Quiel and Stephen Kerr appeal their convictions for willfully making and subscribing false tax returns, in violation of 26 U.S.C. ß 7206(1). Kerr also appeals his conviction for willfully failing to file foreign bank account reports ("FBARs"), in violation of 31 U.S.C. ßß 5314, 5322(a) and 31 C.F.R. ßß 1010.350, 1010.306(c)-(d). We affirm.

1. [HN1] "We review de novo claims of insufficient evidence." United States v. Chhun, 744 F.3d 1110, 1117 (9th Cir.), cert. denied, 135 S. Ct. 131, 190 L. Ed. 2d 100 (2014). We will uphold a conviction if, "viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt." Jackson v. Virginia, 443 U.S. 307, 319, 99 S. Ct. 2781, 61 L. Ed. 2d 560 (1979). [HN2] The question of whether Defendants willfully failed to report income and file FBARs is one of fact for the jury. See Rykoff v. United States, 40 F.3d 305, 307-08 (9th Cir. 1994). The jury could have concluded that Kerr and Quiel knew they had a duty to report the income from their foreign accounts, because Christopher Rusch, their attorney [**3] and business partner, testified that the accounts were set up using nominees under Kerr's and Quiel's control in order to evade reporting requirements. Even without Rusch's testimony, the jury could have inferred control because (a) the accounts were traded in Kerr's and Quiel's stock for their benefit; (b) the foreign firms never served their stated purpose of finding investors; and (c) these firms were not actual, functioning businesses. Additionally, even without Rusch's testimony, the jury could infer motive from Kerr's having recently paid high tax rates and Quiel's recent payment of a large tax penalty before either engaged in these transactions. With regard to Kerr's conviction for willful failure to file FBARs, the evidence was sufficient to convict him given the jury instructions, to which Kerr did not object.

2. The district court did not err by admitting Rusch's testimony. [HN3] "The district court's conclusion concerning whether statements are protected by an individual attorney-client privilege is a mixed question of law and fact which this court reviews independently and without deference to the district court." United States v. Richey, 632 F.3d 559, 563 (9th Cir. 2011) (internal quotation marks omitted). Defendants waived the protection [**4] of the privilege by relying on an advice-of-counsel defense. Rock River Commc'ns, Inc. v. Universal Music Grp., Inc., 745 F.3d 343, 353 (9th Cir. 2014) ( [HN4] "A party who affirmatively places its attorney-client communications at issue in a litigation implicitly waives the privilege.").

3. The district court did not violate Kerr's and Quiel's constitutional right to confront Rusch by imposing a blanket ban on recross examination. [HN5] We review [*695] "[w]hether limitations on the scope of questioning at trial constitute a violation of the confrontation clause . . . de novo." United States v. Jones, 982 F.2d 380, 383 (9th Cir. 1992). [HN6] "Allowing recross is within the sound discretion of the trial court except where new matter is elicited on redirect examination, in which case denial of recross as to that new matter violates the Confrontation Clause." United States v. Baker, 10 F.3d 1374, 1404 (9th Cir. 1993), overruled on other grounds by United States v. Nordby, 225 F.3d 1053 (9th Cir. 2000). Although the district court may have imposed a blanket ban on recross examination, this ban did not violate Kerr's and Quiel's constitutional right to recross Rusch regarding three new exhibits admitted on redirect, because the exhibits were not "new matter." The exhibits merely bolstered Rusch's prior testimony. See United States v. Croft, 124 F.3d 1109, 1121 (9th Cir. 1997). In any event, at Defendants' request, Rusch remained subject to the Government's subpoena after his testimony and the Defendants declined to recall him. See United States v. Ross, 33 F.3d 1507, 1518 (11th Cir. 1994).

We reject the Defendants' separate Confrontation Clause argument [**5] that the exhibits constituted testimonial hearsay from a declarant not subject to crossexamination. Defendants failed to object to the exhibits on the basis of the Confrontation Clause, and we find that the district court did not plainly err. See United States v. Olano, 507 U.S. 725, 731-32, 113 S. Ct. 1770, 123 L. Ed. 2d 508 (1993). The exhibits did not contain testimonial statements. See Crawford v. Washington, 541 U.S. 36, 51-53, 124 S. Ct. 1354, 158 L. Ed. 2d 177 (2004).

4. We review the district court's decision to allow extensive evidence of Defendants' business activities and to allow the Government to argue that Defendants' activities were fraudulent for plain error, because, although Kerr and Quiel contend that admission of this evidence violated Fed. R. Evid. 403 and 404(b), they failed to make contemporaneous objections to this evidence. United States v. Archdale, 229 F.3d 861, 864-65 (9th Cir. 2000). The district court did not plainly err, because the evidence was (a) intrinsic to the charged offenses; (b) more cumulative than prejudicial; and (c) addressed by a limiting instruction. Additionally, we conclude that the district court did not abuse its discretion by refusing to order a mistrial. See United States v. Guerrero, 756 F.2d 1342, 1347-48 (9th Cir. 1984).

5. To the extent Defendants challenge the Government's characterization of their business activities as fraud during closing, they have not shown that the prosecutor's statements "so infected the trial with unfairness as to make the resulting conviction [**6] a denial of due process." Towery v. Shriro, 641 F.3d 300, 310 (2010) (internal quotation marks omitted).

6. On de novo review, we find that the district court did not err by refusing to order the Government to turn over a special agent's report or to disclose Quiel's individual tax master file. See United States v. Si, 343 F.3d 1116, 1122 (9th Cir. 2003). [HN7] To warrant disclosure (1) "the evidence at issue must be favorable to the accused"; (2) "the evidence must have been suppressed by the State, either willfully or inadvertently"; and (3) "prejudice must result from the failure to disclose the evidence." Benn v. Lambert, 283 F.3d 1040, 1052-53 (9th Cir. 2002). Defendants failed to show that the evidence was clearly exculpatory and did not make the plausible showing of that fact required to warrant in camera inspection. See Pennsylvania v. Ritchie, 480 U.S. 39, 58 n.15, 107 S. Ct. 989, 94 L. Ed. 2d 40 (1987).

[*696] 7. The district court did not abuse its discretion by admitting evidence that Kerr filed FBARs in later years. Kerr stipulated to the admission of the FBARs and does not now claim that his stipulation was involuntary. See United States v. Molina, 596 F.3d 1166, 1169 (9th Cir. 2010). Further, the FBARs were not remedial measures under Fed. R. Evid. 407.

8. The district court did not abuse its discretion by refusing to order a new trial after Defendants were acquitted of conspiracy, see United States v. King, 660 F.3d 1071, 1076 (9th Cir. 2011), because Defendants cannot identify evidence that was admitted against them solely because of the conspiracy [**7] charge.

AFFIRMED.