SW Legal studies in Business

Willful Blindness to Duty to Pay Taxes Allows Enhanced Sentence
Description

Appeals court held that when one intentionally evades paying income taxes then one is willfully blind to a legal obligation. That fact plays a role in the trial and in the sentencing, which can mean a stronger sentence than would be imposed otherwise.

Topic Criminal Law
Key Words

Income Tax Evasion; Willful Blindness

C A S E   S U M M A R Y
Facts

In 1998, Anthony and his spouse filed a joint tax return with zeros entered for income and taxes owed. They received a refund for all taxes withheld during the year. They attached a three-page statement that stated that they had no duty to pay federal income tax or to file a return and that it had been a mistake for them to file returns in earlier years. Anthony filed forms with his employer claiming exemption from federal income tax withholding. They filed an all zero tax return in 1999 and no returns in following years. During that time, Anthony opened a bank account in Cyprus and transferred most assets there; in all, $870,000. In 2004, learning that a criminal investigation was underway, Anthony began to file overdue returns and pay what was owed, although he stated to the IRS that it was his belief he owed nothing. Despite his efforts to file back returns, he was convicted of tax evasion and sentenced to 33 months in prison. The court determined that Anthony was willfully blind to his obligations and an enhanced sentence was appropriate. He appealed.

Decision

Affirmed. The evidence supported that Anthony was willfully blind. He recognized the likelihood that he was in violation of the law, yet proceeded. A willful blindness instruction is appropriate if: 1) the defendant claims a lack of knowledge, 2) the facts suggest a conscious course of deliberate ignorance, and 3) the instruction cannot be misunderstood as mandating an inference of knowledge. His actions indicated a voluntary, intentional violation of a known legal duty. This is true in most income tax evasion cases. The fact that Anthony had a bunch of material that stated that people do not have to pay taxes on income carried no weight and need not be allowed in evidence.

Citation

U.S. v. Anthony, 545 F.3d 60 (1st Cir., 2008)

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