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United States v. West

United States Court of Appeals, Eighth Circuit

July 22, 2016

United States of America, Plaintiff- Appellee
Chet Lee West, Defendant-Appellant

          Submitted: April 14, 2016

          Corrected July 22, 2016

         Appeal from United States District Court for the District of Nebraska - Omaha

          Before LOKEN, BEAM, and SMITH, Circuit Judges.

          BEAM, Circuit Judge.

         Chet Lee West was convicted by a jury on three counts of tax evasion in violation of 26 U.S.C. § 7201 and sentenced to fifty-one months' imprisonment and three years' supervised release. He appeals the district court's exclusion of certain evidence and its imposition of two special conditions of supervised release. We affirm in part, reverse in part, and remand.

         I. BACKGROUND

         Computer Specialist Inc. (CSI) hired West as a computer technician in June 2006. West submitted a Form W-4 to CSI claiming he was exempt from any federal income tax withholdings. He also represented in writing to CSI that he was exempt from all income tax and withholding and he instructed CSI not to submit reports concerning his wages to the Internal Revenue Service (IRS). As a consequence, CSI did not withhold federal income tax from West's earnings. West deposited his income from CSI into bank accounts opened in the name of companies he had formed in an effort to conceal his income from the IRS. In June 2009 the IRS notified CSI it would be levying West's wages. Learning that CSI intended to comply with the levy, West resigned his position and began subcontracting for CSI through his own company, Positive Flow Systems LLC (PFS). Going forward, CSI made payment to PFS and that income was directed to West without any federal income tax withholding deducted. As a result of these actions and neglecting to file federal income tax returns for 2007, 2008, and 2009, West paid no federal income tax for those years.[1] West set out his beliefs that his earnings from CSI are not taxable income and that he is not a taxpayer in several pieces of correspondence with the IRS and with CSI.

         West proselytized his beliefs in an e-book self-published and sold through, entitled Are You a Taxpayer? Really? Prove It!. In addition, the presentence investigation report (PSIR) identified West as "the owner/manager of several websites and/or online blogs which promote his fraudulent tax scheme and contain non-taxpayer propaganda, among other information." The first website the PSIR identifies is a blog West maintains detailing his travails in the instant litigation. The second is a website that West appears to neither own nor maintain; rather, the website is dedicated to beliefs shared by West, and one of its many pages summarizes "The Remarkable Redemption of Chet and Valerie West's 20011040."[2] The third website identified in the PSIR is no longer available, but according to the PSIR West worked for the website as a "nontaxpayer advocate." In addition, West assisted an acquaintance, Teresita Reed, in avoiding paying federal income tax. He organized a company, Southern Sweets LC, with PFS as its registered agent. With West's assistance, Reed arranged for her employer to contract with PFS, with the income directed by PFS–sans federal income tax withholding and less a fee–to Southern Sweets, who employed Reed. West also used PFS to employ his son, Brandt West, and pay him without withholding taxes or reporting the income to the IRS.

         West was indicted on three charges of tax evasion for failing to pay federal income tax in 2007, 2008, and 2009. Before trial, the district court granted the government's motion in limine, prohibiting West from offering argument that purported to instruct the jury on the law. Specifically, West was prohibited from offering evidence that federal tax laws are unconstitutional, that West is not subject to them, and that wages are not income subject to taxation under the Internal Revenue Code (IRC). West represented himself at trial, and his defense appears to have been that he did not earn taxable income from 2007 to 2009. At times, he stated this defense in terms of an absence of willfulness. In his opening statement he told the jury, "I didn't think I was doing anything wrong." In his closing argument he stated, "No knowledge of the legal duty equates to the impossibility of making a willful intent." And one of West's proposed, unadopted jury instructions stated: "The defendant's attitude toward the Internal Revenue Service or the reporting and payment of taxes generally may be considered by you in determining his willfulness with respect to each of the allegations contained in the indictment."

         West presented his defense almost entirely through cross-examination of the government's witnesses. One of these was IRS agent Richard Troester, a so-called "summary" witness, who discussed application of the tax code generally to the particular facts of West's case. See United States v. Ellefsen, 655 F.3d 769, 780 (8th Cir. 2011) (describing role of summary witness in tax evasion case). West cross-examined Troester and attempted to impeach his knowledge of the IRC and contradict his testimony by referencing the IRC's definition of "United States" and "employee." The district court sustained the government's objection to each of these lines of questioning and did not permit West to recite the IRC's definitions of "United States." During his case-in-chief, West called his son Brandt, who had assisted West in writing his e-book. When West attempted to enter the e-book into evidence, the district court sustained the government's objection on relevance.

         The jury found West guilty on all counts and the district court sentenced him to fifty-one months' imprisonment and three years' supervised release. At the request of the IRS the district court imposed, among others, the following two special conditions of supervised release:

13. The defendant shall not engage in the creation of or establish any new websites, and he is required to remove any websites, past or present, which are currently active.
14. The defendant is prohibited from using or possessing any computer(s) (including any handheld computing device, any electronic device capable of connecting to any online service, or any data storage media) without the prior written approval of the U.S. Probation Officer. This includes, but is not limited to, computers at public libraries, Internet cafes, or the defendant's place of employment or education. Furthermore, he shall consent to ...

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