6th Circuit Affirms Convictions and Holds that § 7206(2) Does Not Require Filing of the Fraudulent Return (6/30/22)

In United States v. VanDemark, ___ F.4th ___, (6th Cir.
6/30/22), CA6 here and GS here [to come], the Court affirmed the conviction of VanDemark, rejecting Vandermark’s
appeals from denials of his motions for “acquittal on three of these counts and
a new trial on all six counts.” The six counts were (Slip Op. 4):

Counts One and Two dealt with the Supermarket’s 2013 and
2014 corporate returns. Counts Three and Four concerned Vandermark’s 2013 and
2014 personal returns. Count Five charged VanDemark with structuring payments,
in violation of 31 U.S.C. § 5324(a)(3). And Count Six charged VanDemark with
making false statements to federal agents, in violation of 18 U.S.C. § 1001.

VanDemark is described (Slip Op. 1) as “a millionaire car
salesman who tried to hoodwink the IRS” and the owner of “the Used Car
Supermarket, which sells cars from two lots in Amelia, Ohio.”  (I had never heard of Amelia, Ohio, so I just
point to the Wikipedia entry for Amelia, here.)  Basically, he skimmed cash receipts in large
amounts, in the time-honored way that many cash retail businesses do so, but
customized to his particular business. Since this is a variation of garden
variety tax evasion, I won’t go into the detail on the skimming.

Some interesting items:

1. How did he use the cash he skimmed? The Court says (Slip
Op. 3):

             It turned
out that VanDemark used most of this cash to pay the mortgage on his
multimillion-dollar mansion. Wary of attracting the IRS’s attention, VanDemark
asked an employee at his bank to confirm the IRS reporting threshold. She told
VanDemark that the bank had to report “[a]nything over 10,000 in cash” to the
IRS. (R. 73, Trial Tr. (Luck), PageID 1086-87.) So with this information in
hand, VanDemark began to make cash payments toward his mortgage several times a
month, keeping each payment below $10,000.

Note that the VanDemark’s employee made the inquiry to the bank,
but the bank employee answered to VanDemark. 
(No explanation of the missing link there.)

2. The bank inquiries (enquiries?) resulted (Slip Op. 3):

His enquiries at the bank had raised some eyebrows. The bank
employee reported her conversation with VanDemark to her Bank Secrecy Act
officer. This information made its way to the IRS, which deployed a special
agent to investigate.

 3. Then, two significant events occurred. The IRS did a sting
on VanDemark, sending an incognito agent to inquire about buying the business.
(Slip Op. 3-4.)  VanDemark made damaging
admissions to the sting agent. Then, the IRS executed search warrants on the
three residential properties and the two Supermarket car lots. During that
process, the agents (Slip Op. 4):

found VanDemark at his paddleboat-shaped house and
interviewed him for over three hours. He told the agents that his QuickBooks
files contained all of his business records. At no point did he mention the
ledger books. Asked whether he had skimmed cash from his dealership, VanDemark
claimed that his employees deposited everything into the Supermarket’s bank

Basically, he lied in that interview, hence the Count for
violating 28 USC 1001.

4. The only noteworthy point of the opinion (which made it a published
opinion) is in outline par. III.B. of the opinion (Slip Op.9-10, which I copy
and paste here:

B. Motion for Acquittal: Count Three

            Count Three
charged VanDemark with assisting in the preparation of a false personal return.
VanDemark argues that “one of the elements of 26 U.S.C. Section 7206(2) is that
a return has to be filed.” (Appellant Br. at 41.) And because the IRS has no
record of receiving VanDemark’s 2013 personal return, the argument goes,
VanDemark deserves an acquittal.

only support for this argument is an outlier from the Ninth Circuit. In United
States v. Dahlstrom
, the Ninth Circuit held that “the filing of a return is
in fact an element of a section 7206(2) violation.” 713 F.2d 1423, 1429 (9th
Cir. 1983). But Dahlstrom does not get VanDemark very far. n7  For starters, the case is non-binding in our
circuit. And to the extent that it conditions liability on “filing” alone, it
contradicts the statute’s plain meaning. Section 7206(2) imposes liability on
“[a]ny person who . . . [w]illfully aids or assists in, or procures, counsels,
or advises the preparation or presentation” of a fraudulent return.
(emphasis added). It’s well-established that “every word . . . is to be given
effect” in a statute, and interpretations that cause words “to have no
consequence” are best avoided. Delek US Holdings, Inc. v. United States,
32 F.4th 495, 498 (6th Cir. 2022) (quoting Nielsen v. Preap, 139 S. Ct.
954, 969 (2019)). We must give non-redundant meanings to “preparation” and
“presentation.” Not least because Congress chose to say, “preparation or
presentation,” and not “preparation and presentation.”  All this is to say that a defendant is guilty
even if he helps prepare, without presenting, the fraudulent return. And it
stands to reason that the act of filing the tax return falls under
“presentation,” but not “preparation.”
   n7 Dahlstrom, in turn,
relies on two cases: one from the Supreme Court and the other from our circuit.
See United States v. Habig, 390 U.S. 222 (1968); Butzman v. United
, 205 F.2d 343 (6th Cir. 1953). At first blush, there is dicta that
appears to support VanDemark. See Habig, 390 U.S. at 223 (noting that
violations of § 7206(2) are “committed at the time the return is filed”); Butzman,
205 F.2d at 351 (“No crime was committed by [defendant] until the Application
was filed.”). But neither of these cases addressed the specific question at
hand. Both involved taxpayers who filed the tax return in the end. Habig,
390 U.S. at 222-23; Butzman, 205 F.2d at 346, 351. And in that specific
context, the two cases held that the limitations period began at the date of
filing. Habig, 390 U.S. at 223; Butzman, 205 F.2d at 351. Indeed,
this is precisely the point that the dissent made in Dahlstrom. 713 F.2d
at 1431 (Goodwin, J., dissenting).

            In fact,
other sister courts have said just that. See United States v. McLain,
646 F.3d 599, 604 (8th Cir. 2011) (“We agree with the district court that
liability under section 7206(2) can attach even if a false return is never
filed.”); United States v. Borden, 269 F. App’x 903, 905  [*10] (11th Cir. 2008) (concluding that “the
evidence [was] sufficient to sustain [defendant’s]  conviction” because “a person may be
convicted . . . under 26 U.S.C. § 7206(2) if that person either prepares or
presents the relevant return,” and defendant “[did] not dispute her involvement
in the preparation of the return in question”). We said the same thing in United
States v. Feaster
, 843 F.2d 1392, 1392 (6th Cir. 1988) (per curiam)
(unpublished table decision) (holding that because the statute’s text “provides
that a violation occurs if a person aids, assists, counsels, or advises [in]
the preparation or presentation of a fraudulent tax return,” the filing of a
tax return is not “a required element of 26 U.S.C. § 7206(2)”).

            And to the
extent that the term “preparation” has any meaning (which it must), it
encompasses these facts. VanDemark’s tax preparer completed the 2013 personal
return. He then tried to file it electronically, but the submission didn’t go
through. So he mailed the return instead, and now the IRS says that it has no
record of receiving it. In other words, VanDemark, through his tax preparer,
completed every step just shy of placing the return in the IRS’s hands. However
narrow or broad the scope of “preparation” may be, it surely applies here. n8
 VanDemark’s conviction for Count
Three stands. n9
   n8 We leave the task of
defining the precise scope of “preparation” for another day. For this appeal,
it’s enough for us to say that the term has some meaning.
   n9 Perhaps VanDemark
“presented” his 2013 personal return as well. After all, VanDemark apparently
expected and intended that his preparer would file with the IRS. The First
Circuit, for example, emphasized that it does “not equate ‘filing’ with
‘receipt by the IRS’ in a situation involving an intermediary.” United
States v. Monteiro
, 871 F.2d 204, 210 (1st Cir. 1989); see also United
States v. Cutler
, 948 F.2d 691, 694-95 (10th Cir. 1991). But we need not
resolve that question today.