The IRS was not amused by 2FT Fast Facts Tax Service, a tax preparation service owned by Sherri Davis (“Sherri”) and by Davis Financial Services, a similar follow-on operation that it contended was run by her son, Andre Davis (“Andre”), although she was its principal. Both concerns filed returns that falsely reported charitable and business deductions. With the aid of LaDonna Davis (“LaDonna”), Sherri’s niece and employee, and as it turned out, star cooperating witness, the Government indicted Sherri and Andre with conspiracy to defraud the United States by preparing and filing fraudulent and false individual income tax returns, in violation of 18 U.S.C. §§ 2, 371. Other counts charged Sherri and Andre with willfully aiding and assisting in the preparation of false returns, in violation of 26 U.S.C. § 7206(2); and Sherri was further charged with filing false individual returns, in violation of 26 U.S.C. § 7206(1) and 18 U.S.C. § 2.
At trial, the Government presented eleven witnesses who testified about Sherri’s preparation of false individual tax returns that claimed huge illicit deductions. LaDonna, for her part, related a story about being trained by Sherri on the niceties of tax fraud, to the point where ““it all became like a routine’ and she began filling in charitable deductions without even asking clients if they had receipts.” (Slip Op. at 4-5). Allegedly, after search warrants were executed, LaDonna tried to wave Andre away from coming to work for his mother but he demurred, expressing the view that “the investigation ‘wasn’t a big deal, and that it was just going to go away.’” (Slip Op. at 7).
Neither Sherri nor Andre testified, although Sherri presented witnesses as to her character and to impugn LaDonna’s. The Trial Judge dismissed as speculative one count against Andre of preparing a false tax return. The jury convicted Sherri and Andre on the conspiracy charge, convicted Sherri of several of the fraudulent preparation charges, and found Andre guilty of one charge of preparing a false tax return. (Slip Op. at 7-8).
On appeal, Andre successfully maintained that the prosecutor had made “blatant misstatements” during closing argument that substantially prejudiced his trial and that the evidence was insufficient to convict him. His mother Sherri fared less well, but secured some relief on her sentence and having the case remanded for evaluation of her ineffective assistance claim. We first turn to Andre.
1A. Andre’s core theory on appeal was that even under a daunting plain error standard the prosecution’s close was materially defective to the conspiracy conviction. He persuaded the panel (Rogers, Srinivasan & Ginsburg, JJ) of that, and then some. Writing for the court, Judge Rogers explained that under cases such as United States v. Small, 74 F.3d 1276, 1282 (D.C. Cir. 1996), “the court considers three factors in assessing whether improper prosecutorial argument sufficiently prejudiced the defendant to require reversal of the judgment of conviction: ‘ the closeness of the case,  the centrality of the issue affected by the error, and  the steps taken to mitigate the effects of the error.’”(Slip Op. at 9). Here, she pointed out, an analysis required some appraisal of the overlap between the conspiracy count and the one substantive count of conviction. Her review of that rather thin evidence, which covers pages 10-13 of the Slip Opinion, is telling. Suffice it to say that the Court of Appeals chastised the prosecutor for, inter alia, “multiple misstatements of this evidence,” which, “given the gaps in the government’s evidentiary case,” yielded a “prejudicial effect [that] is readily apparent.” (Slip Op. at 10). But that was only the warm-up. Circuit Judge Rogers – not one known for sharp words – found the prosecutor’s close to have “misleadingly minimized” Sherri’s role in committing the substantive tax preparation count for which Andre was convicted. (Slip Op. at 11). Then came the proverbial crunchers.
First, Judge Rogers looked at the line prosecutor and emphasized: “Even more critically, the prosecutor blatantly misrepresented the evidence regarding Andre’s mens rea.” (Slip Op. at 11). Next, even Government appellate counsel came under her withering gaze: “Even now, the government’s brief misstates that there was evidence LaDonna had told Andre about the criminal nature of the investigation in which she was involved.” (Slip Op. at 11-12). And as if that weren’t enough cataloguing of an effort by the Government to prop up a sagging case, Judge Rogers delved back into the record to chastise the prosecutor for both “inappropriately bolstering what little evidence there was,” without any remedial or limiting instruction given to the jury at any point to mitigate the obvious prejudice to Andre, and for the “government’s misrepresentations of key evidence….” (Slip Op. at 12-13). Citing United States v. Richardson, 161 F.3d 728, 737 (D.C. Cir. 1998), Judge Rogers observed that “Given that the evidence against Andre ‘was not such that his conviction was by any means a certainty,’ the prosecutor’s egregious misstatements of it during closing argument amount to plain error, and accordingly, require reversal of Andre’s convictions.” (Slip Op. at 12-13).
1B. That left remaining whether there was sufficient evidence to retry Andre. On that point, the panel was emphatic that there wasn’t. In Judge Rogers’ view, “the court concludes that the evidence of Andre’s mens rea was, at most, equivocal and thus insufficient to sustain his convictions.” (Slip Op. at 13-14) (citing Direct Sales Co. v. United States, 319 U.S. 703, 714 (1943); United States v. Spinner, 152 F.3d 950, 957 n.1 (D.C. Cir. 1998)). Essentially the clients’ testimony and LaDonna’s testimony confirmed that Andre had agreed to work with his mother Sherri on preparing tax returns, “[b]that alone is not the same as showing the requisite mens rea to join Sherri’s conspiracy.” (Slip Op. at 14). Crucially the Government offered no evidence of Andre’s knowledge and criminal conduct; the “evidence demonstrates that Andre agreed to work for his mother despite knowledge of some type of investigation, but it does not show that he knew his mother was committing tax fraud, much less that he was involved in falsifying tax returns, unlike the government’s clear evidence of his mother’s and LaDonna’s knowing culpability.” (Slip Op. at 15). The best the Government could do was muster the equivocal testimony of one of Sherri’s clients, who conceded that one year he had been helped by a young man, but couldn’t place him if he “bumped into him on the street.” (Slip Op. at 15-16). “It was the government’s burden to establish Andre’s intent to defraud, yet the cumulative evidence left the jury to speculate about whether Andre knowingly joined his mother’s conspiracy to defraud the United States. And, as shown, filling evidentiary gaps during closing argument to the jury is not an option that is available to the government.” (Slip Op. at 19).
2A. Sherri, as we have intimated, didn’t fare as well as her son, given the testimony of her clients and LaDonna. But she presented a “compelling” argument to the loss calculation, warranting a remand as to her sentence. (Slip Op. at 24). “Although a sentencing court need only find facts by a preponderance of evidence, that evidence must have a ‘sufficient indicia of reliability to support its probable accuracy.’” (Slip Op. at 25-26) (citing United States v. Fahnbulleh, 752 F.3d 470, 481 (D.C. Cir. 2014) (quoting United States v. Bras, 483 F.3d 103, 109 (D.C. Cir. 2007))). In particular, “the defendants identified numerous inconsistencies in the government’s evidence that cast doubt on the reliability of the information presented to the district court,” sufficiently so as to require a remand for further explanation relating to the Base Offense Level and the amount of restitution. (Slip. Op. at 26).
2B. Finally, able appellate counsel presented valid “colorable” grounds for a remand to explore claims of ineffective assistance by trial counsel. Among other issues, Sherri claimed her counsel below had failed to introduce evidence of LaDonna’s preparing false tax returns for agents; evidence from one taxpayer-witness suggesting that Sherri was unaware that he was claiming false deductions; and to request a mistrial following the faulty close. (Slip Op. at 27) (citing United States v. Mohammed, 693 F.3d 192, 202 (D.C. Cir. 2012)).
Baseball (Go Nats!!), hot dogs, apple pie and a reversal in July: The fearsome duo of Assistant Federal Defenders Lisa Wright and Beverly Dyer pitched a near-perfect game for Andre Davis. Adam Kurland, representing Sharri Davis, turned in an able performance keeping his client, Sharri Davis, in competition as a contender for purposes of at least re-sentencing.
- Steve Leckar, of counsel to Kalbian Hagerty LLP, enjoys following and occasionally arguing in the D.C. Circuit.