October 23, 2015.
from United States District Court for the District of South
Dakota - Sioux Falls.
United States of America, Plaintiff - Appellee: Jeffrey C.
Clapper, Assistant U.S. Attorney, U.S. ATTORNEY'S OFFICE,
Sioux Falls, SD.
J. Fairchild, Defendant - Appellant, Pro se, Waseca, MN.
Veronica J. Fairchild, Defendant - Appellant: Neil Fulton,
Federal Public Defender, FEDERAL PUBLIC DEFENDER'S
OFFICE, Pierre, SD; Timothy J. Langley, Assistant Federal
Public Defender, Molly Quinn, Assistant Federal Public
Defender, FEDERAL PUBLIC DEFENDER'S OFFICE, Sioux Falls,
RILEY, Chief Judge, SMITH and SHEPHERD, Circuit Judges.
found Veronica J. Fairchild guilty on four counts of making
and subscribing a false tax return, in violation of 26 U.S.C.
§ 7206(1). The district court sentenced Fairchild to 33
months' imprisonment. On appeal, Fairchild argues that
(1) insufficient evidence supports the jury's finding
that Fairchild knowingly and willfully underreported her
income; (2) the district court abused its discretion in
failing to instruct the jury that it was required to
unanimously agree on which source of income that Fairchild
failed to report on her income tax return; and (3) the
district court improperly calculated Fairchild's
Guidelines range and imposed a substantively unreasonable
sentence. We affirm.
We present the facts in a light most favorable to the
verdicts, drawing all reasonable inferences from the evidence
that support the jury's verdicts." United States
v. Ramon-Rodriguez, 492 F.3d 930, 934 (8th Cir. 2007)
2009, Internal Revenue Service (IRS) Special Agent Daniel
Wright opened an investigation on Fairchild and her husband.
Agent Wright discovered that Fairchild and her husband had
not filed income tax returns since 2004. Agent Wright
obtained records from Fairchild's two primary bank
accounts dating back to January 1, 2005. These bank records
showed that a number of large cashier's checks had been
deposited into her accounts. Specifically, there were 37
deposits of checks from David Karlen totaling $1,103,647.84.
Fairchild's accounts reflected another six checks
totaling $50,000 from Paul Pietz deposited into two main
accounts in 2008. The bank records also showed $210,348.39 in
total cash deposits from 2005 to 2008.
2010, Fairchild and her husband filed joint income tax
returns for 2005, 2006, 2007, and 2008, apparently unaware of
the ongoing IRS investigation. Fairchild, a professional
adult entertainer, reported income in each of the respective
years as $122,345; $120,000; $120,000; and $151,325. The
total income reported of $513,670 was far less than the
$1,153,647.84 that Fairchild received from Karlen and Pietz
during that same time span. Additionally, the returns did not
identify any of Fairchild's cash deposits during those
years as income.
Wright interviewed Fairchild about her tax returns on July
13, 2011. During that interview, Fairchild explained "
that she actually thought all of the money, that every single
cashier's check she received from Mr. Karlen was a gift,
but that she had reported some of it to take some of the tax
burden off of him." To determine how much income to
claim, Fairchild told Agent Wright that she "
ballparked" the amount. In the same interview, Fairchild
also claimed that the money from Pietz was a gift and that he
had told her that he reported the gift on his income tax
return. Even though $30,000 of the money from Pietz was
included as income on her 2008 income tax return, Fairchild
maintained that it was really a gift that her accountant had
mistakenly included as income.
trial, Fairchild explained that in addition to the money that
she earned dancing on stage, she also made money off stage in
private rooms at the exotic dancing clubs or off the
premises. Fairchild testified that she gave private dances to
both Karlen and Pietz and maintained that these private
dances never included sex.
also testified that Karlen " knew everything about me
financially." According to Fairchild, she asked Karlen
for money for constructing her home, paying bills, getting
breast implants, and paying college tuition, and Karlen would
provide the funds. She considered it all a gift. Fairchild
testified that she thanked Karlen for the money that he
" gifted" her by giving him free private dances.
admitted that she did not file income tax returns for 2005
through 2008 until 2010, but she claimed that the delay was
due to problems that she experienced during the construction
of her new home. She claimed that when she met with her
accountant in 2010 to prepare her tax returns, she decided to
claim some of the gifts from Karlen as income to benefit him,
so that he did not have to pay the taxes on all of it. To
determine her income over the four years, she " decided
that any time [she] spent with David [Karlen], anything that
could be construed as income or considered a gray area at a
thousand dollars an hour." She testified that she spent
an average of two times per month with Karlen over the
48-month period, and she estimated that she spent
approximately four or five hours with Karlen during each
" session." She stated that she also included going
out to eat with Karlen as part of the billable time.
Fairchild calculated that she had earned " about
$120,000 a year" for each of the four years for services
that she provided to Karlen. She testified that, at the time
that she filed the tax returns, she believed that the money
in excess of what she reported as income was "
[g]ifts." But Fairchild admitted that " Karlen
never used the word 'gift' with [her]."
to Karlen, he met Fairchild in 2003 or 2004 while she was
dancing. He tipped her money when she danced on stage and
paid for private dances inside the club in a private room.
Fairchild gave her phone number to Karlen and would call him
to tell him when and where she would be dancing. In 2005,
Karlen went to watch Fairchild dance at a club; while there,
Fairchild asked Karlen if he was interested in paying for sex
with her outside of the club. Karlen testified concerning the
first time that he met with Fairchild for a " private
meeting outside the club." He stated that it occurred in
Sioux Falls and that " it was just oral sex for . . . a
thousand dollars." When asked if they had " more
meetings after that," Karlen answered that they "
probably did two, three, four of those." Karlen then
confirmed that he later met Fairchild at a hotel for
intercourse and paid her $5,000 in " [c]ash." He
testified that Fairchild charged him the same price for
future similar encounters.
to April 2005, Karlen paid Fairchild in cash. But around this
time he began writing checks to Fairchild. Karlen explained
that Fairchild would always ask him for a certain amount. For
example, Karlen wrote a check in the amount of $39,000 on
April 11, 2005, to Fairchild for sex. After Karlen started
paying with checks, that is how he continued to pay
Fairchild. Between 2005 and 2008, Karlen paid Fairchild
$1,103,647.84 with 37 checks. When asked how he "
treat[ed] the money that [he] gave to [Fairchild],"
Karlen replied, " [f]or her service. . . . For
sex." When asked whether the 37 payments were all for
sexual services, Karlen replied, " [e]very one of
those." He later confirmed that " [t]he whole $1.1
million was for sex" and that " [e]verything was
to Pietz, he first paid Fairchild $5,000 for a private dance
at his home in February 2008. Pietz testified that Fairchild
sometimes charged him $10,000 for a private show. In total,
Pietz made six payments to Fairchild totaling $50,000. Pietz
confirmed that he never paid Fairchild " money for
anything other than a private dance."
retained Certified Public Accountant Derry Anderson in 2005
because Fairchild and her husband were opening a clothing
store business and wanted advice on the type of corporation
to create. Additionally, they hired Anderson to provide
payroll services and to prepare their 2005 income tax
returns. In May 2006, after filing requests with the IRS to
file the income tax returns late, Anderson met with Fairchild
to determine her income. Because Fairchild had no other
documentation of her income, she reviewed her bank statements
with Anderson to determine which deposits were income.
Anderson testified, " I went through and had Veronica
[Fairchild] read off the deposits to me, and I ran a tape on
my calculator of the number of deposits that she would tell
me. That's what we used as the total income for the 2005
Schedule C." Through that process, they calculated
Fairchild's gross income from cash received in 2005 to be
$308,727.69. After receiving additional information related
to deductions from Fairchild in late October 2006, Anderson
completed the 2005 tax return in December 2006. Anderson met
with Fairchild and her husband on December 15, 2006, to
review the completed return. Based on the information that
Fairchild reported to Anderson, he determined that her gross
income as a professional adult entertainer for 2005 was
$311,073. As a result, Fairchild and her husband owed $56,217
in taxes, before penalties and interest.
had also prepared the income tax return for Fairchild's
clothing business and provided it to her. That return
indicated a business loss with no tax liability. Anderson
testified that he reviewed the tax returns with Fairchild and
her husband and that " there was [sic] no issues on the
gross income." He advised them to mail the returns to
the IRS. Although Fairchild and her husband did mail the tax
return for the business, they did not mail their personal
income tax return. Instead, once Fairchild and her husband
departed Anderson's office that day knowing that they
owed $56,217 in taxes, they went to the Sioux Falls Federal
Credit Union and borrowed over $100,000 to buy two Cadillac
Escalades and a boat.
Fairchild and her husband left Anderson's office, they
told him that Fairchild's income was expected to be
higher in 2006. Based on information that Fairchild provided,
Anderson began to prepare the income tax return for 2006. As
he did for the 2005 return, Anderson reviewed deposits in
Fairchild's bank accounts in 2006 and determined that her
gross income was $517,081. Anderson prepared a " working
draft for the 2006 return," and he provided Fairchild
and her husband with a copy of it.
Anderson did not prepare a 2006 income tax return for
Fairchild until 2010. Fairchild and her husband met with
Anderson in March 2010 to complete the income tax returns for
2006, 2007, and 2008. According to Fairchild, Anderson and
her husband needed to complete their tax returns to obtain
financing for a real estate purchase in Lake Okoboji, Iowa.
Prior to that time, Fairchild had not provided Anderson with
enough information to complete the returns. At the March 2010
meeting, Fairchild disclosed to Anderson that she had not
filed the 2005 income tax return that Anderson had previously
during the March meeting, Fairchild told Anderson for "
the first time" that " she actually received a
gift" from Karlen. Thus, the filed 2005 tax return
accounted for this " change in income" and resulted
in Fairchild actually requesting a refund of $1,979. Anderson
admitted that Fairchild going from owing $56,217 on the 2005
return prepared in 2006 to requesting a refund on the filed
2005 return was " quite a change." Likewise, the
taxes owed on the 2006 " working draft" went from
$117,114 to $4,922.
2006 and 2008, Fairchild completed and signed several loan
applications with financial institutions. In January 2006,
she signed and submitted an application to Keystone Mortgage
declaring her income to be $24,800 per month. In December
2006, when she borrowed money from the Sioux Falls Bell
Federal Credit Union to purchase the boat and vehicles, she
stated that her income was $17,647 per month. In March 2007,
on a loan application for a Mercedes Benz, she stated that
her annual income was $274,881. To support the loan
application, Fairchild's husband directed Anderson to
send a copy of the unfiled 2005 income tax return
that had been prepared in December 2006.
also relied on the 2006 " working draft" income tax
return to support her income level when she applied for a
loan with Sioux Falls Federal Credit Union in 2007. At
Fairchild's request, Anderson provided a copy of the 2006
" working draft" to Sioux Falls Federal Credit
Union to verify her income to obtain a loan. In June 2007,
when completing a mortgage application with Wells Fargo Bank,
she claimed that her monthly income was $37,612. In July
2007, when applying for a loan to purchase a new Corvette,
Fairchild stated that her gross annual income was $383,319.
The same annual income was reported in 2008 when Fairchild
applied for a $30,000 loan to purchase a completely restored
1970 Pontiac GTO.
September 2008, Fairchild asked Anderson to fax information
about her 2007 income for a loan application with the Air
Guard Federal Credit Union. Anderson sent a fax that stated,
" [t]he Schedule C gross income will be close to the
2006 gross income, around $300,000 based on the information
provided by Veronica [Fairchild]."
was charged with four counts of making and subscribing a
false income tax return for tax years 2005 through 2008, in
violation of 26 U.S.C. § 7206(1). A jury trial
commenced. After the close of the government's case,
Fairchild moved for judgment of acquittal under Federal Rule
of Criminal Procedure 29. The district court denied the
motion. The jury convicted Fairchild on all four counts. The
district court sentenced Fairchild to 33 months'
imprisonment on each count to run concurrently.
appeal, Fairchild argues that (1) insufficient evidence
exists to support the jury's finding that Fairchild
knowingly and willfully underreported her income; (2) the
district court abused its discretion in failing to instruct
the jury that it was required to unanimously agree on which
source of income that Fairchild failed to report on her
income tax return; and (3) the district court improperly
calculated Fairchild's Guidelines range and imposed a
substantively unreasonable sentence.
Sufficiency of the Evidence
argues that the evidence is insufficient to sustain her
convictions for making and subscribing a false income tax
return for tax years 2005 through 2008, in violation of 26
U.S.C. § 7206(1), because no reasonable jury could
conclude that she falsely reported her income or tax
liability. She further asserts that even if her declaration
of income and tax liability were " false," no
reasonable jury could find that she believed that she was
understating her income or that she willfully and
intentionally did so.
Our standard of review on this issue is quite narrow."
United States v. Smith, 104 F.3d 145, 147 (8th Cir.
1997) (citation omitted). When reviewing a district
court's denial of a motion of judgment of acquittal based
on sufficiency of the evidence, we view the evidence in the
light most favorable to the jury's verdict. Id.
The government gets " the benefit of all the reasonable
inferences that could logically be drawn from the
evidence." Id. (citation omitted). " We
must uphold the verdict if the evidence so viewed is such
that there is an interpretation of the evidence that would
allow a reasonable-minded jury to find the defendant guilty
beyond a reasonable doubt." Id. (quotation and
was convicted of violating 26 U.S.C. § 7206(1), which
prohibits " [w]illfully mak[ing] and subscrib[ing] any
return . .., which contains or is verified by a written
declaration that it is made under the penalties of perjury,
and which he does not believe to be true and correct as to
every material matter." To prove a violation of §
7206(1), the government must put forth evidence " that
the document in question was false as to a material matter,
that the defendant did not believe the document to be true
and correct as to every material matter, and that he acted
willfully with the specific intent to violate the law."
Kawashima v. Holder, 132 S.Ct. 1166, 1172, 182
L.Ed.2d 1 (2012) (citations omitted). " In general, a
false statement [under § 7206(1)] is material if it has
'a natural tendency to influence, or [is] capable of
influencing, the decision of the decisionmaking body to which
it was ...