[00:00:02] Speaker 04:
I guess Ms.

[00:00:03] Speaker 04:
Obermeyer, you're up first.

[00:00:05] Speaker 00:
Thank you, your honor.

[00:00:06] Speaker 00:
Good morning.

[00:00:07] Speaker 00:
May it please the court?

[00:00:08] Speaker 00:
I'm Wendy Obermeyer for Saud Alessa, and I'd like to reserve five minutes for rebuttal, and I'll watch my time.

[00:00:14] Speaker 00:
Today, I'll address the preclusion of Mr. Alessa's defense with erroneous jury instructions in this tax fraud trial.

[00:00:22] Speaker 00:
And his defense was that he did not intentionally violate a known tax duty.

[00:00:28] Speaker 00:
And the erroneous jury instructions precluded the particularly unique defenses in tax fraud cases.

[00:00:35] Speaker 00:
Most importantly, the willfully instruction, which is the mens rea for all four counts.

[00:00:41] Speaker 00:
And this jury instruction, it muddied and relieved the government of its burdens under cheek, the Supreme Court case from 1991, specifically that the tax law must clearly prohibit the conduct alleged, that the government must prove more than negligence, carelessness, or a mistake, or misunderstanding,

[00:01:02] Speaker 00:
And the government actually must disprove a good faith misunderstanding of the law.

[00:01:09] Speaker 00:
And that was all missing from the willfully instruction.

[00:01:12] Speaker 00:
And a good faith instruction was not provided with the willfully instruction, as defense requested.

[00:01:22] Speaker 02:
Could a jury have believed that he acted in good faith and found willfulness as it was defined in instruction 22?

[00:01:34] Speaker 00:
I think good faith is a complete defense to willfulness.

[00:01:37] Speaker 02:
So if there's a good faith misunderstanding... Given the way it's worded here, in order to prove that the defendants acted willfully, the government must prove beyond a reasonable doubt that they knew federal tax law imposed a duty on them

[00:01:52] Speaker 02:
and that they intentionally and voluntarily violated that duty.

[00:01:55] Speaker 02:
So they had to know, establish amount of reasonable that they knew federal tax law imposed a duty on them and that they intentionally and voluntarily violated that duty.

[00:02:06] Speaker 02:
I understand your argument that it may have been better if an explicit good faith instruction had been given, but given that wording,

[00:02:15] Speaker 02:
If a jury really had believed that he acted in good faith, they couldn't find that he knew that federal tax law imposed an obligation that he then willfully violated.

[00:02:26] Speaker 02:
They couldn't have done it.

[00:02:27] Speaker 02:
So it seems to cover the subject in different words.

[00:02:30] Speaker 02:
What am I missing?

[00:02:32] Speaker 00:
It's missing again that the government has to prove more than carelessness or negligence, and it's also missing the objective that the good faith... I don't see how it's missing negligence.

[00:02:44] Speaker 02:
It says they intentionally and voluntarily violated that duty.

[00:02:48] Speaker 02:
That doesn't seem like negligence would satisfy that.

[00:02:52] Speaker 00:
Going to the good faith, the good faith of course is not mentioned at all in the willfulness instruction.

[00:02:58] Speaker 01:
I mean the words aren't there, but what Judge, I have the same problem that Judge Collins has identified.

[00:03:09] Speaker 01:
It strikes me as it would be impossible for the jury under that instruction

[00:03:15] Speaker 01:
to have convicted your client if they believed that he acted in good faith, because acting in good faith strikes me as mutually exclusive with the words that Judge Collins quoted that were in the actual instruction.

[00:03:33] Speaker 01:
And I'd ask you to address why that's wrong.

[00:03:37] Speaker 01:
What is the scenario where under that instruction,

[00:03:42] Speaker 01:
They could have found both your client guilty and that he acted in good faith under the instruction that you proposed.

[00:03:51] Speaker 00:
The jury could have found that he acted in good faith, but that his belief was objectively

[00:03:56] Speaker 00:
unreasonable.

[00:03:58] Speaker 00:
And the good faith defense allows the belief to be objectively unreasonable.

[00:04:04] Speaker 00:
It's whether it's subjectively reasonable to the defendant.

[00:04:08] Speaker 00:
And that's what wasn't explained in the willfulness instruction.

[00:04:11] Speaker 00:
That is explained in the good faith instruction that was not given.

[00:04:16] Speaker 00:
Again, the government doesn't contest that the good faith instruction was not given.

[00:04:19] Speaker 04:
I take it you gather what my colleague said and I join with this.

[00:04:24] Speaker 04:
It seems like what you're arguing is impossible to believe in this case if you look at what the instruction actually was.

[00:04:33] Speaker 04:
They're mutually inconsistent.

[00:04:35] Speaker 04:
What are we missing?

[00:04:37] Speaker 00:
I think it's the extent to which the good faith belief, whether that has to be reasonable or not, that's what's missing.

[00:04:47] Speaker 04:
And the jury didn't know that... In light of the instruction, you don't think that was a reasonable instruction?

[00:04:53] Speaker 04:
That's pretty clear, isn't it?

[00:04:54] Speaker 00:
It's partially correct.

[00:04:57] Speaker 04:
What's missing?

[00:04:58] Speaker 04:
What would a juror not understand?

[00:05:00] Speaker 00:
Is that the tax law must clearly prohibit the conduct alleged, that the government prove more than carelessness or misunderstanding, and the government must disprove a good faith misunderstanding.

[00:05:14] Speaker 02:
And then when it's in context...

[00:05:17] Speaker 02:
they can only convict if the defendant knew federal tax law imposed a duty.

[00:05:24] Speaker 02:
So he has to actually know, okay, here's what federal tax law is, I have the duty and I know that.

[00:05:33] Speaker 02:
And so everything you're describing is a mismatch.

[00:05:37] Speaker 02:
He doesn't believe that it has a duty and the belief may be unreasonable.

[00:05:41] Speaker 02:
Actually, this would preclude

[00:05:43] Speaker 02:
conviction in that circumstance.

[00:05:45] Speaker 02:
If he doesn't believe that federal tax law imposes the duty, even unreasonably, this didn't allow convictions.

[00:05:52] Speaker 02:
I don't see how this doesn't cover the subject.

[00:05:55] Speaker 02:
It's not the wording you wanted.

[00:05:57] Speaker 02:
It may have been better written.

[00:05:59] Speaker 02:
But our cases say that the test is whether the jury instructions adequately cover the subject and give the jury the tools it needs.

[00:06:07] Speaker 02:
And it seems that that was the case here.

[00:06:11] Speaker 00:
Well, when we look at the jury instructions as a whole, combined with the erroneous instruction as to what tax law was,

[00:06:19] Speaker 00:
That's where the interplay comes.

[00:06:22] Speaker 00:
That's important because the jury couldn't meaningfully consider the defense because the tax instructions let the jurors believe that a person should necessarily know this is what income is.

[00:06:34] Speaker 00:
This is what assignment of income is not allowed.

[00:06:37] Speaker 00:
And those were incorrect statements of law.

[00:06:39] Speaker 00:
And so it negated evidence that Alessa believed his acts were legal.

[00:06:44] Speaker 00:
It negated testimony that professionals disagree on these points.

[00:06:49] Speaker 02:
I assume now you're referring to instruction 23 on when income is taxable to the person who earned it?

[00:07:00] Speaker 00:
Yes, taxable and assigned income.

[00:07:01] Speaker 02:
What specifically is missing from that instruction that should have been there?

[00:07:05] Speaker 00:
Well, that instruction, it doesn't go into anything about the numerous Supreme Court and Ninth Circuit cases that equate income with control and dominion.

[00:07:16] Speaker 00:
It's not specifically who earned it.

[00:07:19] Speaker 00:
It's also who controls and who disposes of that income, who enjoys the benefit of that income.

[00:07:25] Speaker 00:
And that is all Ms.

[00:07:26] Speaker 00:
Hayes here.

[00:07:27] Speaker 00:
She was the one under contract.

[00:07:30] Speaker 00:
Alessa did not have a contract with the distributor.

[00:07:32] Speaker 00:
He was working under her.

[00:07:34] Speaker 00:
And so she received the money, she received its benefits, and she was the one to whom it was income.

[00:07:42] Speaker 00:
And so that's what's missing from the taxable income portion.

[00:07:46] Speaker 02:
But it sounds like your position is that if you have control by virtue of an advance assignment of the income, that you escape income tax.

[00:07:58] Speaker 02:
And I'm not sure that's a correct statement of tax law.

[00:08:01] Speaker 00:
Well, I would not be one to instruct this court on tax law.

[00:08:08] Speaker 04:
Maybe I could assign my income to him and I use it, but he gets taxed on it.

[00:08:13] Speaker 04:
Would that be a good idea?

[00:08:15] Speaker 00:
No, and that's not what happened in this case.

[00:08:17] Speaker 00:
So the distributor could only pay the income to Hayes because she had the independent contractor agreement.

[00:08:25] Speaker 00:
with the distributor.

[00:08:26] Speaker 00:
Alessa simply worked for her, and so it was up to her whether she paid him or not.

[00:08:32] Speaker 00:
So the distributor could not have paid Alessa if it wanted to because there was no contract.

[00:08:35] Speaker 04:
That's not what the evidence showed, is it?

[00:08:37] Speaker 00:
Yes.

[00:08:37] Speaker 00:
There were two contracts where she was the independent contractor in 2011.

[00:08:42] Speaker 04:
If I understand it correctly, the evidence showed that he set the whole thing up, set it all up, and everybody knew it.

[00:08:50] Speaker 04:
All of the other co-employees knew it.

[00:08:53] Speaker 04:
He was doing the work.

[00:08:54] Speaker 04:
She was getting the money.

[00:08:55] Speaker 04:
He was trying to avoid some other unfortunate consequences he had from a previous problem.

[00:09:01] Speaker 04:
But if the evidence shows all of that, now is there any confusion in the part of the jury here?

[00:09:06] Speaker 00:
Well, Hayes was the only one to testify that there was this arrangement, and that's what the arrangement was for.

[00:09:14] Speaker 04:
Other workers knew that, too.

[00:09:15] Speaker 04:
As I recall, there were like four or five different people who justified, this was the deal.

[00:09:21] Speaker 04:
Everybody knew who really was doing the work.

[00:09:24] Speaker 04:
She got the money.

[00:09:24] Speaker 04:
Everybody knew it.

[00:09:26] Speaker 00:
everybody they did have slightly different testimony as to what they understood it to be some understood it because they were they thought they were married and that's why the arrangement was made that way.

[00:09:38] Speaker 00:
So it wasn't known throughout I disagree with the court's description of the evidence that I don't think Hayes testimony or the J and L employees testimony proves that there was this outright known

[00:09:51] Speaker 00:
arrangement.

[00:09:52] Speaker 00:
Yes, it was known that Alessa was working for Hayes, but there was nothing untoward about that.

[00:09:58] Speaker 00:
It was very in the open.

[00:09:59] Speaker 04:
Yes, I must have read the record incorrectly.

[00:10:01] Speaker 04:
I'm sorry?

[00:10:01] Speaker 04:
I must have read the record incorrectly.

[00:10:04] Speaker 00:
Well, to go on to the preclusion of the expert, which also has to be viewed in context.

[00:10:12] Speaker 02:
Let me stop on this because I do want to understand.

[00:10:14] Speaker 02:
Do you have any factual basis for asserting that the issue of control

[00:10:21] Speaker 02:
was relevant here apart from control acquired as a result of an assignment of income.

[00:10:31] Speaker 00:
Yes, the control was under the independent contractor contracts of Hayes with J&L, which wasn't an assignment of income.

[00:10:43] Speaker 00:
She was the independent contractor.

[00:10:46] Speaker 00:
And as an independent contractor, she could choose who does the work under her and how they are paid.

[00:10:54] Speaker 00:
and so forth.

[00:10:57] Speaker 00:
And so that's what the money was never a lesson.

[00:11:00] Speaker 04:
Isn't that a fantasy?

[00:11:01] Speaker 04:
I mean, we're talking about a situation where he was doing all the work.

[00:11:07] Speaker 04:
Everybody knew he was doing all the work.

[00:11:09] Speaker 04:
He got her involved on a titular basis with the contract, but he continued to do all the work.

[00:11:15] Speaker 04:
She didn't do any work.

[00:11:16] Speaker 04:
How can that make any sense?

[00:11:18] Speaker 00:
She did work.

[00:11:19] Speaker 00:
She sometimes went out on sales trips and she also worked to the back end, the business end.

[00:11:24] Speaker 00:
She was actually in position to take over the distributor.

[00:11:28] Speaker 00:
So she was doing a lot of the office work on the back end and then having Alessa work for her to do the sales.

[00:11:38] Speaker 00:
the sales for her and that was the independent contractor arrangement and that was told to at least the bankruptcy attorney who agreed, who knew that Alessa was doing the work for Hayes but still recommended that he file for bankruptcy and what he was doing was correct.

[00:11:56] Speaker 01:
Is it correct that your client was continually setting personal company sales records?

[00:12:05] Speaker 00:
I believe yes, during that time there was one month that he said, he was on a team that set a sales record.

[00:12:12] Speaker 01:
I thought they were and all his commissions, all the commissions that came about because of that were all reported as income to Hayes.

[00:12:25] Speaker 00:
Income to Hayes, yes, because it was paid directly to Hayes under the independent contractor agreement and then she could, he didn't have access to her bank account

[00:12:35] Speaker 00:
And she would give him a minimal allowance.

[00:12:39] Speaker 00:
He couldn't control that money, nor could the distributor pay him if he wanted to because he didn't have a contract.

[00:12:46] Speaker 00:
And if I could just move real quickly to the preclusion of an expert on assignment of income and domestic partnerships, which was precluded at trial when the court allowed other witnesses to testify as to

[00:13:01] Speaker 00:
tax law and income and allowed Smith to testify as to independent contractor and precluded the one expert that could have really gone into this assignment of income doctrine when it applies, when it doesn't, and domestic partnership.

[00:13:19] Speaker 04:
Isn't that a legal issue for the court?

[00:13:21] Speaker 00:
I'm sorry?

[00:13:22] Speaker 04:
Isn't that just a legal issue for the court?

[00:13:25] Speaker 00:
It's a legal issue for the jury as well to understand that if professionals disagree as to certain tax law definitions, then it's reasonable that a lay person has a good faith belief.

[00:13:38] Speaker 01:
Even if there's no evidence that the lay person knew nothing of this argument.

[00:13:44] Speaker 01:
Yes, that's what so so even so if it's like regulation eight point seven point nine see three little eyes that an expert can testify to that even if there is not the slightest evidence that the defendant relied on this and the there's evidence that the defendant had no idea of this it still comes in with an expert

[00:14:12] Speaker 01:
can testify as to what the law is.

[00:14:16] Speaker 00:
That is an open question in the circuit.

[00:14:19] Speaker 00:
And various circuits have taken different positions.

[00:14:21] Speaker 00:
But we believe with Cheek, there was a Supreme Court case, again, 1991, where the expert was precluded and the Supreme Court held that that expert should have testified.

[00:14:32] Speaker 00:
And there was no evidence that the defendant was aware of the dispute.

[00:14:36] Speaker 04:
Respectfully, counsel, that's a very different factual circumstance.

[00:14:38] Speaker 04:
As I understand here, you have somebody that basically would have taken the place of the court

[00:14:45] Speaker 04:
Well, the...

[00:15:00] Speaker 00:
The witnesses that were allowed to testify were limited.

[00:15:03] Speaker 00:
They were not allowed to testify as to the actual final ultimate issue.

[00:15:07] Speaker 00:
They were given hypotheticals under the facts, and the court could have done the same thing with Kane.

[00:15:13] Speaker 00:
So the jury was given this incorrect instruction on income and assignment of income, and it wasn't allowed to hear

[00:15:22] Speaker 00:
as it did on independent contractor, as it did on income, whether that was... Let's say you're right.

[00:15:28] Speaker 04:
Isn't that harmless error at most?

[00:15:31] Speaker 04:
Because ultimately the court decides what the law is, right?

[00:15:35] Speaker 00:
In tax law, the defendant has a right to show that the tax law is complicated and that even if a defendant would have gone and looked up the law, that it would have been confusing to that defendant.

[00:15:51] Speaker 00:
It's a unique area of tax law that's not present in other criminal offenses.

[00:15:56] Speaker 01:
Wouldn't the circumstance that would tee it up be more that a defendant

[00:16:04] Speaker 01:
And obviously a defendant has no obligation to testify, but a defendant testifies, I read Professor Smith's article, and here it is into evidence, and then have Professor Smith perhaps help the jury understand what this actually says.

[00:16:21] Speaker 01:
because it's relevant if the defendant relies on it, wouldn't that be closer to a situation where perhaps Professor Smith's testimony ought to be admitted, where there is evidence, because the government has to prove willful actions by the defendant, he or she read it, he testified, he was confused by it, and then Dr. Smith helped the jury understand what the words that the defendant relied on actually say.

[00:16:50] Speaker 00:
But that would certainly be different evidence than was asked to be presented here.

[00:16:55] Speaker 00:
And what Alessa did prove at trial without testifying was that he did go to professionals.

[00:17:04] Speaker 00:
He went to professionals who admitted that income is something that professionals can disagree on.

[00:17:10] Speaker 00:
But the actual anticipatory assignment of income doctrine is very complex, and it was incorrectly instructed to the jury, and then the expert was precluded as well, and I see him at the time.

[00:17:23] Speaker 04:
You want to save your time?

[00:17:24] Speaker 04:
Please do.

[00:17:26] Speaker 04:
Very well.

[00:17:27] Speaker 04:
We'll hear from Mr. Is it Detterman or Dieterman?

[00:17:31] Speaker 04:
Detterman.

[00:17:31] Speaker 03:
Okay.

[00:17:35] Speaker 03:
May it please the court, Mark Detterman for the United States.

[00:17:38] Speaker 03:
So I want to start out here with apology, I guess, because of page word limits.

[00:17:46] Speaker 03:
A footnote that was apparently fairly important got cut out of our brief.

[00:17:51] Speaker 03:
And that is that there was a good faith instruction given by the district court.

[00:17:56] Speaker 03:
And that instruction is, let me find it here, is instruction number 18.

[00:18:06] Speaker 03:
Now it was given as part of the conspiracy instruction, but it says in part that the government must prove beyond a reasonable doubt that the defendant did not have a good faith belief that he or she was complying with the law and that a belief in good faith may be, I mean,

[00:18:29] Speaker 03:
A belief may be in good faith, even if unreasonable.

[00:18:33] Speaker 02:
And so there is a good faith instruction.

[00:18:36] Speaker 02:
There's nothing about the wording of that instruction, which is embedded in the count one instructions, that would tell the jury that it carries over to counts two, three, and four.

[00:18:49] Speaker 03:
That's true, although the general language of it, again, it goes on and says an honest and good faith misunderstanding over the requirements of the law that

[00:18:58] Speaker 03:
that defendant did not act with an intent to defraud simply because his or her understanding of it was wrong.

[00:19:05] Speaker 02:
I didn't understand to be contending that there was a lack of a good faith instruction on count one.

[00:19:11] Speaker 02:
Their complaint is that there's a lack of a good faith instruction on counts two, three, and four, and the fact that there is one in one that by its terms does not extend to two, three, and four is not relevant.

[00:19:22] Speaker 03:
But I believe it would be nonsensical for the jury to have convicted him of the conspiracy and found that he was not acting in good faith.

[00:19:32] Speaker 03:
Specifically, they had to find that he was not acting in good faith on the conspiracy and then somehow found, well, he was acting in good faith on the evasion of payment.

[00:19:41] Speaker 02:
That would be a harmless error argument, but it still doesn't get you anywhere in terms of saying that the instructions for two, three, and four

[00:19:49] Speaker 02:
were adequate or covered the subject.

[00:19:50] Speaker 02:
So why don't you tell us why you think that's the case?

[00:19:54] Speaker 03:
Well, it's exactly what your honor pointed out is that the willfulness instruction requires that it be intentional, voluntary, and that it be a known violation of a legal duty, that he know the tax law and that it's a known violation of the duty.

[00:20:11] Speaker 03:
That's why the Supreme Court in Pomponio said that a good faith instruction

[00:20:17] Speaker 03:
is not required as long as the correct willfulness instruction from CHICA is given.

[00:20:23] Speaker 03:
And this court also in Solomon and I think it's Devolek also said that a good faith instruction is not necessary where a willfulness instruction is given.

[00:20:50] Speaker 02:
So I'll switch.

[00:20:51] Speaker 02:
Instruction 23, their contention about the court's instruction about attribution of income and their claim that that is legally erroneous?

[00:21:08] Speaker 03:
Yes, Your Honor.

[00:21:10] Speaker 03:
The fact that income is taxed to the person who earns it is straightforward.

[00:21:19] Speaker 03:
basic tax law.

[00:21:21] Speaker 03:
Lucas versus Earl in 1931, the Supreme Court said that the fact that you cannot assign your income to someone else in order to avoid taxes is a first principle of tax law.

[00:21:36] Speaker 02:
But her argument is that control is an essential part underpinning of that doctrine and that that element is

[00:21:48] Speaker 02:
elided from this instruction.

[00:21:50] Speaker 02:
What's your response to that?

[00:21:53] Speaker 03:
Well, he was earning the money and the evidence was that he had gone to Bowen and told Bowen to pay this to his girlfriend.

[00:22:03] Speaker 03:
So he had control over the money.

[00:22:04] Speaker 03:
He was telling his boss specifically to pay this money to his girlfriend.

[00:22:09] Speaker 03:
So the evidence at trial was that he did have control over this money and that he told

[00:22:17] Speaker 02:
his girlfriend, but it's simply wrong to say that if the money... That's a factual argument, but the point is that was the jury told it needed to make a determination about the issue of control?

[00:22:28] Speaker 02:
That's the contention, as I understand it.

[00:22:32] Speaker 03:
Yes.

[00:22:33] Speaker 03:
There is instruction 16 and 17.

[00:22:36] Speaker 03:
Instruction 16 is about independent contractors.

[00:22:43] Speaker 03:
and that instruction said that an independent contractor is not subject to the control of others and has the right to control the manner and means and performance of service.

[00:22:56] Speaker 03:
It went on to say that a person may work as an agent for an independent, this is instruction 17, and it went on to say that a person may work as an agent without compensation for services.

[00:23:10] Speaker 03:
And so it provided a door in which Alyssa could argue that he was simply working as an agent for Hayes, as an unpaid agent for Hayes.

[00:23:23] Speaker 03:
And if the jury had found that, they could have acquitted him.

[00:23:26] Speaker 03:
But the jury didn't find that.

[00:23:27] Speaker 02:
So how would that intersect with instruction 23?

[00:23:31] Speaker 02:
So your theory is that under 17, if they had believed that

[00:23:39] Speaker 02:
she had the independent contract arrangement, which was their theory of she had control, and that he was an unpaid agent of her under instruction 17, then how would that intersect and fit in with the language of instruction 23?

[00:23:58] Speaker 03:
Well, they seemed to conflict a little bit, but they could have found that he did not earn the money, that she was

[00:24:09] Speaker 03:
This was their argument at trial that she was the subcontractor, that she was earning this money, and he was simply helping Hayes out for free and in his spare time.

[00:24:22] Speaker 03:
And that was their argument.

[00:24:24] Speaker 03:
That's their argument.

[00:24:25] Speaker 01:
And instruction 23 required the jury to find beyond a reasonable doubt that he earned the money.

[00:24:33] Speaker 01:
in order to convict him.

[00:24:34] Speaker 01:
That's correct.

[00:24:35] Speaker 01:
As opposed to someone else.

[00:24:37] Speaker 01:
That's correct.

[00:24:37] Speaker 01:
Like Ms.

[00:24:38] Speaker 01:
Hayes.

[00:24:39] Speaker 01:
Yes.

[00:24:39] Speaker 03:
Thank you.

[00:24:44] Speaker 03:
Let me just point out that this court in a case called Pibram, let me see if I can get the site to that.

[00:24:54] Speaker 03:
That's 579 Fed appendix 566.

[00:25:03] Speaker 03:
said the idea that one can sign one's income in order to avoid taxation is simply not a debatable proposition of law.

[00:25:13] Speaker 03:
So this court has basically said the idea of assignment of income before assigning your income in order to avoid taxes is simply frivolous.

[00:25:23] Speaker 03:
It's a frivolous argument.

[00:25:25] Speaker 03:
And the judge went through all of

[00:25:29] Speaker 03:
all of Kane, the expert Kane's proposed testimony and found that none of her complex situations fit the situations.

[00:25:37] Speaker 03:
One of the situations was an agent that was holding money for someone else and transferring it to a different person.

[00:25:45] Speaker 03:
And they said that wasn't taxable.

[00:25:46] Speaker 03:
And other situations were family situations, but the family situations are limited

[00:25:52] Speaker 03:
to situations that involve family type of work, such as helping around the house or helping on a farm.

[00:26:02] Speaker 03:
The cases all involve family work.

[00:26:04] Speaker 03:
They don't involve situations.

[00:26:06] Speaker 03:
And the cases specifically say they don't apply to cases where there's an outside employer, there's an outside company you're working for.

[00:26:15] Speaker 03:
So this would not be a case where one of the

[00:26:18] Speaker 03:
the family situations apply.

[00:26:22] Speaker 03:
The other thing is that they did get their expert.

[00:26:24] Speaker 03:
They got Jeffrey Dean Smith, who was their expert on independent contractors, and he directly testified.

[00:26:34] Speaker 03:
And this is just improper.

[00:26:37] Speaker 03:
He contradicted the judge's instructions in his testimony that if Hayes was the independent contractor and the money went into her account, then it didn't matter who was doing the work.

[00:26:51] Speaker 03:
He testified to that.

[00:26:53] Speaker 03:
He was cross-examined.

[00:26:55] Speaker 03:
He stuck to that testimony.

[00:26:56] Speaker 03:
He said that if you earn money and you direct deposit it into your girlfriend's

[00:27:04] Speaker 03:
account and it's not a joint account, then you don't have any taxable income.

[00:27:09] Speaker 03:
That's wrong as a matter of tax law.

[00:27:12] Speaker 03:
The jury didn't buy it either.

[00:27:13] Speaker 03:
And again, I just have to get back to the facts of this case.

[00:27:17] Speaker 03:
There are 7 employees at J&L that said that during this whole period, Alyssa was working as a sales team leader.

[00:27:28] Speaker 03:
There was one person in bookkeeping

[00:27:30] Speaker 03:
that stated specifically, she was told by Bowen that there was an arrangement where Hayes was to be paid for all of Alyssa's commissions.

[00:27:42] Speaker 03:
Just to make this even more clear, there was a bankruptcy proceeding.

[00:27:48] Speaker 03:
He filed bankruptcy trying to

[00:27:52] Speaker 03:
to get rid of these tax debt that he owed.

[00:27:59] Speaker 03:
Over $300,000 by the end, it was over $500,000 in tax.

[00:28:04] Speaker 03:
So he tried to discharge that in bankruptcy.

[00:28:07] Speaker 03:
And at a bankruptcy hearing, he said that he had not worked for J&L for six years.

[00:28:15] Speaker 03:
And he said that he did not have a J&L credit card.

[00:28:21] Speaker 03:
That was during a bankruptcy proceeding where he had flown from a sales trip where he was working for J&L to the proceeding and then he flew back to another sales trip for J&L after the proceeding.

[00:28:37] Speaker 03:
So the evidence was just clear that this was willful and that it was grossly fraudulent.

[00:28:49] Speaker 03:
Does the court have any other questions on any other issues?

[00:28:52] Speaker 03:
I'd like to raise anything on the restitution.

[00:28:55] Speaker 04:
I think not.

[00:28:56] Speaker 04:
Okay.

[00:28:57] Speaker 04:
Thank you very much.

[00:28:59] Speaker 04:
All right.

[00:28:59] Speaker 04:
So Ms.

[00:29:00] Speaker 04:
Obermann, we have some rebuttal time.

[00:29:04] Speaker 00:
Thank you, Your Honor.

[00:29:07] Speaker 00:
This court is correct that the good faith instruction was given only for count one and it was not couched with the willfully instruction so the jury could assume that only applied to count one

[00:29:18] Speaker 00:
and not to count two and four.

[00:29:20] Speaker 00:
And the government mentioned the cases of Doritich and Solomon.

[00:29:25] Speaker 00:
In Doritich, the willfulness instruction did include it had to be in bad faith or evil motive, which was not included here.

[00:29:32] Speaker 00:
And Solomon is not clear what the willful instruction was.

[00:29:36] Speaker 00:
It's not

[00:29:36] Speaker 00:
described in that case.

[00:29:39] Speaker 00:
What was missing here specifically from the tax and assignment of income instruction was the issue of control.

[00:29:46] Speaker 00:
And so that is a jury issue.

[00:29:49] Speaker 00:
If they believed who had control of this money controlled

[00:29:54] Speaker 00:
defined who had its income.

[00:29:56] Speaker 00:
And they were not told the effects of this on the definition of income, and so they weren't able to meaningfully consider Alessa's defense.

[00:30:04] Speaker 00:
And the agency and independent contractor instructions talk about services, but they don't talk about income.

[00:30:11] Speaker 00:
And so income is the primary dispute here in whether he willfully evaded that income.

[00:30:18] Speaker 00:
And the government admitted in its motion in Lemonay that assignments of income by themselves are not illegal.

[00:30:27] Speaker 00:
And so I think that helps put in context how complex this doctrine is.

[00:30:34] Speaker 00:
And as the government's explaining, there's different rules for families working for families.

[00:30:39] Speaker 00:
There were witnesses that testified they have family help them with business, but they were not paid.

[00:30:44] Speaker 00:
So there's clearly misunderstanding as to the law.

[00:30:49] Speaker 00:
And again, the jury wasn't given the correct instructions to apply the defense that Alessa presented at trial.

[00:31:01] Speaker 04:
Other questions?

[00:31:01] Speaker 00:
Unless there's other questions.

[00:31:02] Speaker 00:
Thank you.

[00:31:03] Speaker 04:
Thank you very much.

[00:31:03] Speaker 04:
Thanks to both counsel for the argument.

[00:31:06] Speaker 04:
The case of United States versus Alessa is submitted.