Opinion
3:22-CR-13-DPJ-LGI
01-18-2024
UNITED STATES OF AMERICA v. JONATHAN BAREFOOT, ET AL.
FOR THE GOVERNMENT: PATRICK ELWELL, ESQUIRE MARY FRANCES BETTY RICHARDSON, ESQUIRE ZACHARY ALFREDSON COBB, ESQUIRE U.S. DEPARTMENT OF JUSTICE - TAX DIVISION 150 M ST. NE WASHINGTON, D.C. 20002 FOR THE DEFENDANT, ADAM EARNEST: MATTHEW JAMES MUELLER, ESQUIRE FOGARTY MUELLER HARRIS, PLLC 501 E. KENNEDY BLVD., STE. 790 TAMPA, FLORIDA 33602 GRAHAM P. CARNER, ESQUIRE GRAHAM P. CARNER, PLLC 771 NORTH CONGRESS STREET JACKSON, MISSISSIPPI 39202 FOR THE DEFENDANT, CHRISTOPHER RANDELL: TERENCE L. HIGH, ESQUIRE THE HIGH LAW FIRM, PLLC 395 EDGEWOOD TERRACE dRIVE JACKSON, MISSISSIPPI 39206 JOHN C. HALL, II, ESQUIRE THE HALL LAW GROUP, PLLC 263 EAST PEARL STREET JACKSON, MISSISSIPPI 39201 FOR THE DEFENDANT, JAMES KLISH: AAFRAM Y. SELLERS, ESQUIRE SELLERS & ASSOCIATES, PLLC 395 EDGEWOOD TERRACE DRIVE JACKSON, MISSISSIPPI 39206
APPEARANCES:
FOR THE GOVERNMENT: PATRICK ELWELL, ESQUIRE MARY FRANCES BETTY RICHARDSON, ESQUIRE ZACHARY ALFREDSON COBB, ESQUIRE U.S. DEPARTMENT OF JUSTICE - TAX DIVISION 150 M ST. NE WASHINGTON, D.C. 20002
FOR THE DEFENDANT, ADAM EARNEST: MATTHEW JAMES MUELLER, ESQUIRE FOGARTY MUELLER HARRIS, PLLC 501 E. KENNEDY BLVD., STE. 790 TAMPA, FLORIDA 33602 GRAHAM P. CARNER, ESQUIRE GRAHAM P. CARNER, PLLC 771 NORTH CONGRESS STREET JACKSON, MISSISSIPPI 39202
FOR THE DEFENDANT, CHRISTOPHER RANDELL: TERENCE L. HIGH, ESQUIRE THE HIGH LAW FIRM, PLLC 395 EDGEWOOD TERRACE dRIVE JACKSON, MISSISSIPPI 39206 JOHN C. HALL, II, ESQUIRE THE HALL LAW GROUP, PLLC 263 EAST PEARL STREET JACKSON, MISSISSIPPI 39201
FOR THE DEFENDANT, JAMES KLISH: AAFRAM Y. SELLERS, ESQUIRE SELLERS & ASSOCIATES, PLLC 395 EDGEWOOD TERRACE DRIVE JACKSON, MISSISSIPPI 39206
ORDER
DANIEL P. JORDAN III CHIEF UNITED STATES DISTRICT JUDGE
Defendants Adam “Casey” Earnest, Christopher Randell, and James “Gabe” Klish were convicted for conspiring to commit tax fraud and aiding or assisting in tax fraud. They now seek judgment of acquittal or, alternatively, a new trial. See Earnest Mot. [238], Klish Mot. [239], Randell Mot. [240]. Because the evidence of their guilt was overwhelming, judgment of acquittal is denied. And because there was no error, much less prejudicial error, they are not entitled to a new trial.
I. Background
Defendants were income-tax-return preparers at Sunbelt Tax Services in Jackson, Mississippi, a company Earnest owned and managed. The Government contended that Earnest and his employees-including Randell and Klish-prepared fraudulent tax returns to generate higher refunds for their clients and thus more business for themselves. The three primary means for increasing refunds were (1) claiming education credits for taxpayers who were not in school; (2) inflating deductions on Schedule As; and (3) manipulating income and expenses on Schedule Cs.
This pattern apparently began at American Tax Services, where Earnest and Randell worked before Sunbelt. It also drew the IRS's attention. In 2012 and 2014, the IRS conducted two due-diligence audits at American Tax to address issues that included questionable education credits, Schedule As, and Schedule Cs. The audits were designed to ensure that the tax preparers were properly documenting their files and had satisfied the due-diligence requirements before including these deductions and credits on their clients' returns. Earnest and Randell received six-figure fines.
After the audits, Earnest left American Tax and, in January 2015, opened Sunbelt where he hired Randell, Klish, and other tax preparers. Though they were working under a different name, the Government says Earnest and his employees followed the same pattern of falsely claiming education credits and manipulating Schedule As and Schedule Cs. Eventually, the IRS raided Sunbelt, and the Government obtained an indictment against Earnest, Randell, Klish, and other Sunbelt employees Jonathan Barefoot, Dwight Stamey, and John Wells. The latter three pleaded guilty before trial
Count 1 charges Earnest, Randell, and Klish with violating 18 U.S.C. § 371, which makes it a crime to conspire to defraud the United States. The remaining counts charge Defendants with violating 26 U.S.C. § 7206(2), which makes it a crime to willfully aid or assist in preparing or filing a materially false tax return. The § 7206(2) counts relate to specific tax returns prepared for Sunbelt customers. The Government dropped two of those counts against Randell (Counts 9 and 10) because the taxpayer witnesses never testified. The Court later granted judgment of acquittal for all § 7206(2) counts against Klish (Counts 11 through 13) because the evidence could not link Klish to those returns.
The remaining counts were sent to the jury and resulted in convictions. Specifically, the jury found Earnest, Randell, and Klish guilty of conspiracy under § 371 as charged in Count 1. It also found that Earnest violated § 7206(2) as to the returns charged in Counts 5 through 7 and that Randell violated § 7206(2) as to the return charged in Count 8. Defendants now seek judgment of acquittal or a new trial, and the briefing has closed.
II. Standards
The factual analysis for the motions for judgment of acquittal overlaps with the analysis for the motions for a new trial. For example, Defendants say the evidence was insufficient under Rule 29 but also argue that the verdict was against the greater weight of the evidence under Rule 33. For that reason, the Court will provide the standards for both rules and then examine the sufficiency-of-the-evidence arguments together. The final section of this Order addresses Defendants' arguments for a new trial based on trial error.
A. Rule 29
Under Rule 29, the Court may set aside a jury's verdict of guilt if “the evidence is insufficient to sustain a conviction” of one or more of the offenses charged in the indictment. Fed. R. Crim. P. 29(a), (c). “The jury's verdict will be affirmed ‘if a reasonable trier of fact could conclude from the evidence that the elements of the offense were established beyond a reasonable doubt.'” United States v. Girod, 646 F.3d 304, 313 (5th Cir. 2011) (quoting United States v. Myers, 104 F.3d 76, 78 (5th Cir. 1997)). “In assessing the sufficiency of the evidence, we do not evaluate the weight of the evidence or the credibility of the witnesses, but view the evidence in the light most favorable to the verdict, drawing all reasonable inferences to support the verdict.” Id. (citingMyers, 104 F.3d at 78-79).
B. Rule 33(a)
Rule 33(a) allows the Court to “vacate any judgment and grant a new trial if the interest of justice so requires.” But “[t]he grant of a new trial is necessarily an extreme measure.” United States v. O'Keefe, 128 F.3d 885, 898 (5th Cir. 1997). Therefore, “motions for new trial are not favored, and are granted only with great caution.” Id. (citing United States v. Hamilton, 559 F.2d 1370, 1373 (5th Cir. 1977)). “A new trial is granted only upon demonstration of adverse effects on substantial rights of a defendant.” United States v. Wright, 634 F.3d 770, 775 (5th Cir. 2011) (quoting O'Keefe, 128 F.3d at 898). An error affects the defendant's substantial rights if “it affected the outcome of the trial court proceedings.” United States v. Alarcon, 261 F.3d 416, 423 (5th Cir. 2001).
When considering a motion for a new trial, the Court “may weigh the evidence and assess the credibility of the witnesses.” United States v. Arnold, 416 F.3d 349, 360 (5th Cir. 2005) (citing United States v. Robertson, 110 F.3d 1113, 1117 (5th Cir. 1997)). “The evidence must preponderate heavily against the verdict, such that it would be a miscarriage of justice to let the verdict stand.” Id. (quoting Robertson, 110 F.3d at 1118). And “any error of sufficient magnitude to require reversal on appeal is an adequate ground for granting a new trial.” United States v. Wall, 389 F.3d 457, 474 (5th Cir. 2004) (quoting 3 Charles Alan Wright, et al., Federal Practice and Procedure Criminal § 556 (3d ed. 2004)).
III. Analysis
A. Motion for Judgment of Acquittal or New Trial Based on Sufficiency of Evidence Defendants seek judgment of acquittal as to the convictions in Count 1 under § 371 and the individual counts under § 7206(2). As noted, the Court will consider the evidence under Rules 29 and 33.
1. Convictions under 18 U.S.C. § 371
Count 1 charges Defendants with violating § 371, which makes it a crime for two or more persons to conspire to commit an offense against the laws of the United States. In the tax-fraud context, the elements are:
First: That the defendant and at least one other person made an agreement to defraud the government or one of its agencies by impairing, obstructing, or defeating the lawful function of the Internal Revenue Service in the ascertainment, assessment, or collection of income taxes due, as charged in the indictment; and
Second: That the defendant knew that the purpose of the agreement was to defraud the government and joined in it willfully, that is, with the intent to defraud; and
Third: That at least one of the conspirators during the existence of the conspiracy knowingly committed at least one of the overt acts described in the indictment in order to accomplish some object or purpose of the conspiracy.C-9 (Jury Instructions) at 16 (based on Fifth Circuit Pattern Jury Instruction (Crim.) 2.15B); see United States v. Njoku, 737 F.3d 55, 64 (5th Cir. 2013). While Defendants generically say they are entitled to judgment of acquittal on Count 1, their specific arguments focus on the existence of an agreement and whether the Government proved that they knowingly joined in it.
a. An Agreement
Defendants' arguments on the agreement element are narrow. They attack two Government witnesses, former Sunbelt employees John Wells (who pleaded guilty before trial) and Jessica Cella (who was never charged), claiming that neither could “credibly establish any agreement to defraud the government.” Earnest Mot. [238] at 5 (emphasis added); see also Randell Mot. [240] at 3.
There are four threshold problems with this argument. First, both witnesses testified to facts showing an agreement at Sunbelt to falsify education credits, Schedule As, and Schedule Cs. Whether the testimony “credibly” establishes an agreement is no concern under Rule 29. See Girod, 646 F.3d at 313.
Second, Defendants' argument suggests that neither Wells nor Cella could prove that a formal agreement existed, though no such proof is required. “The existence of an agreement, as well as a defendant's knowledge of its objective and intent to join, can be established by circumstantial evidence alone.” United States v. Green, 47 F.4th 279, 291 (5th Cir. 2022), cert. denied, 143 S.Ct. 747, 214 L.Ed.2d 450 (2023), and cert. denied sub nom. Selgas v. United States, 143 S.Ct. 1058, 215 L.Ed.2d 281 (2023). “For the evidence to sustain the conviction, it is not necessary that the evidence show an express or formal agreement; evidence of ‘a tacit understanding is sufficient.'” Id. (quoting United States v. Aubin, 87 F.3d 141, 145 (5th Cir. 1996)). But “[t]he actions and the surrounding circumstances must be incriminating enough to warrant a finding that the Government proved the existence of an agreement beyond a reasonable doubt.” Id. (quoting United States v. Ganji, 880 F.3d 760, 768 (5th Cir. 2018)).
Third, even if Wells had been the only witness, ‘“[a] defendant may be convicted on the uncorroborated testimony of a coconspirator who has accepted a plea bargain unless the coconspirator's testimony is incredible,' that is, unless ‘it relates to facts that the witness could not possibly have observed.'” United States v. Martinez-Brilia, No. 21-20386, 2022 WL 6316523, at *5 (5th Cir. Oct. 10, 2022) (quoting United States v. Booker, 334 F.3d 406, 410 (5th Cir. 2003)), cert. denied sub nom. Marquez-Oseguera v. United States, 143 S.Ct. 1038, 215 L.Ed.2d 198 (2023). No one disputes that Wells worked at Sunbelt where he could have observed the fraud.
Fourth, by focusing their argument on Wells and Cella, Defendants ignore the Government's 20 other witnesses and the massive record received into evidence. Viewing the entire record easily establishes the agreement element under Rules 29 and 33:
• Wells testified that Earnest trained him at American Tax to claim false education credits and falsify Schedule As and Schedule Cs.
• Wells and Cella both said Earnest and Randell knew Sunbelt employees were filing false education credits, Schedule As, and Schedule Cs. Wells said they told him how to do it, and Cella added that sometimes she would start a return and Earnest would finish it. She noticed times when she recorded that the client had not been to school that year but, when the return was filed, the education credit had been added.
• Wells testified that Earnest and Randell told him how to avoid detection by the IRS. For example, he was instructed that when making up numbers to plug into the schedules, he should not use round numbers because the IRS would flag them as suspicious. Thattestimony was corroborated by a hand-written note found in a Sunbelt manual that Wells said was in Earnest's handwriting:
(Redacted)
G-539 at 27.
• Wells said Earnest covered up the fraud by having taxpayers sign blank questionnaires so Sunbelt could later document its due diligence. Cella confirmed the use of blank forms, and signed, blank forms were found throughout the client files when the IRS raided Sunbelt.
• Wells and Cella also explained that Earnest regularly prepared returns while using his employees' Tax Preparer Identification Numbers (TPINs).
• Wells testified that he was told how to determine the numbers he made up. For example, he says he was instructed to claim 10% of the income under Schedule A, how much to claim for education expenses (even if no expenses were incurred), and how much income would be needed to maximize the earned-income tax credit. Cella and various tax returns corroborate all three means. See, e.g., G-170.
• Along these lines, Wells identified a hand-written bell curve showing the false income he should use to maximize earned-income tax credits. See G-535. Cella confirmed that it was used.
• Wells's testimony that he would create numbers to increase refunds and that Earnest helped him do it is documented on an undercover video taken by an IRS agent posing as a new customer. On the recording, Wells tells the agent, “We got to get your income up.” G-560. Though the undercover agent said there were no side jobs, Wells falsely added self-employment income of $6,179 for janitorial services. See G-50 at 1, 12. He used that description of the work because he was taught to use fake employment similar to the taxpayer's occupation. Earnest is seen on the video checking the return Wells was preparing. See G-560. Wells never informed the undercover agent that these fake numbers would be used. He also got her to sign a blank self-employment questionnaire, further corroborating his testimony on the use of blank questionnaires to falsely document the files.
• Wells also testified that the tax preparers were incentivized to include false education credits, Schedule As, and Schedule Cs. According to him, the clients would pay additional fees when the returns included those deductions and credits. So, the more of those devices the preparers used, the higher the cost to the customer. The preparer would then receive 25% of those fees. Of course, the customers rarely paid anything themselves because they regularly received refunds from which the fees were deducted.
• Ten Sunbelt clients confirmed these practices. For example, taxpayer Harper neither worked nor paid taxes in 2015 yet received a $6,763 refund due to fraudulent deductions and credits. See G-11 at 3.
• Taxpayer Gatlin testified that Randell pulled numbers “out of the blue” when helping her obtain a refund in tax year 2015. See G-3.
• Taxpayer Johnson testified that Schedule C on her 2012 return [G-60] included business losses of over $7,000 and expenses exceeding $8,000 that she never incurred and never provided to Sunbelt. Her Schedule A had $3,965 in charitable gifts she never made. Her return also falsely claimed that she attended JSU in 2012 though she graduated thirty years earlier in 1982. Johnson testified that she never provided this information to Earnest, who prepared this return. And her returns in subsequent years had the same pattern of false statements on the same forms. See G-61-G-64.
• Taxpayer Rutledge identified Randell as the one who prepared his 2014 return. Rutledge worked that year for General Recycling, and his return [G-519] falsely listed thousands in gifts and fake business expenses that he never incurred and never provided to Sunbelt. It also listed him as attending Hinds Community College though he never did-something he and a witness from the school confirmed.
• Taxpayer Stamps brought a list of her legitimate deductions with her to Sunbelt. See G-525 at 8. Those records were in the client file confiscated when the IRS later raided Sunbelt. Despite having documentation of her actual numbers, her return increased those numbers following the same pattern of fraud as the other returns. See G-135.
• The other taxpayer clients gave similar testimony, but the pattern extended far beyond the taxpayers who testified. IRS Agent Samuel Thomas testified that he mined the IRS database for Sunbelt returns between 2014 through 2022 that claimed education credits but for which there were no corresponding 1098Ts. He found 4,509 examples. See G-605. Representatives from two local schools confirmed that those forms were required for all students claiming credit.
There's more evidence in the record, some of which the Government lists in its response. But these facts overcome the challenges under Rules 29 and 33 as to the existence of an agreement.
b. Defendants' Willful Participation in the Agreement
The second element of the conspiracy count requires proof, beyond a reasonable doubt, that the defendant knew that the purpose of the agreement was to defraud the government and joined in it willfully, that is, with the intent to defraud. Njoku, 737 F.3d at 64. To begin, Defendants suggested at trial that tax laws are nuanced and mistakes happen. But there is nothing nuanced about requiring real numbers on tax returns. Nor is it hard to understand that education credits are reserved for those with education expenses. Aside from that, the Government offered proof that each Defendant willfully participated in the scheme.
Defendant Earnest: The evidence that Earnest willfully joined the agreement starts with his knowledge that Sunbelt's practices were fraudulent. As noted, the IRS conducted two due-diligence audits in 2012 and 2014 while Earnest worked at American Tax. IRS agents John Thomas and Robert Dunaway testified that the audits were designed to ensure that the tax preparers were properly documenting their files and had satisfied due-diligence requirements before claiming credits or deductions. The audits specifically addressed the same education credits, Schedule As, and Schedule Cs charged in the indictment, and both Earnest and Randell were fined hundreds of thousands of dollars. The testimony suggested that Earnest understood what was required to properly seek those deductions and credits.
When he opened Sunbelt after the second audit, issues with education credits, Schedule As, and Schedule Cs continued. Much of this overlaps the previous section, but Wells and Cella testified that Earnest prepared false returns, and Wells said Earnest taught him how to do it. Cella said she confronted Earnest and was told not to worry. Earnest is seen on video checking Wells's numbers on a fraudulent return prepared for the undercover IRS agent. Wells testified that Earnest wrote the instructions advising his employees not to use round numbers when making up entries. See G-539. His clients, Johnson and Stamps, testified that Earnest completed tax returns for them that included fictitious numbers. Their testimony also corroborated other evidence that he used his employees' PTINs-which is itself fraudulent. And he instructed employees to have clients sign blank questionnaires to falsely document the false numbers.
Earnest is also listed as the tax preparer on Klish's personal return for tax year 2015. See G-222. That return claims that Klish was a student at Jackson State University in 2015, though he was working for Earnest that year at Sunbelt. Jackson State employee Tysha Sutton testified that Klish was never a Jackson State student, and there was no 1098T to support the claimed credit. The Government met its burden of showing Earnest's willful participation in the agreement.
Defendant Randell: The evidence of Randell's willful participation in the conspiracy is just as strong. Along with the evidence about the two IRS audits, Wells described Randell as being second in command at Sunbelt and involved in the agreement to defraud. Both Wells and Cella said Randell knew Sunbelt was filing fraudulent returns because they discussed it with him or in his presence. Wells further said Randell would help him prepare false returns.
Aside from his management functions, Randell prepared false returns. Taxpayer Gatlin identified Randell as the one who prepared her false Schedule C. And Randell used these same tactics on his own tax returns. Randell claimed education credits in 2013, 2014, and 2015 for being a student at Jackson State and for his studies at Hinds Community College. See G-211-13; G-601. Witnesses from both schools testified that he never attended either. Notably, those schools were included in a list of local schools found during the IRS raid at Sunbelt. See G-533. According to Wells, Randell generated that list for use by Sunbelt employees when claiming false education credits.
Randell's intent to inflate refunds can also be seen in the percentage of clients who received refunds. The Preparer Information Report for Randell shows the following under “Percentage with refunds”:
| 2014 | 100% |
| 2015 | 100% |
| 2016 | 100% |
| 2017 | 99% |
| 2018 | 98% |
| 2019 | 94% |
| 2020 | 96% |
See G-306. For tax preparation year 2021, which was after he was aware of the investigation and the year before he was indicted, that number dropped to 44%. Id. As with Earnest, the Government met its burden.
The Court does not recall any discussion about the “Percentage with refunds” numbers, though the documents were received in evidence. If the Court has misconstrued the evidence, it would in no way alter the results given the breadth of the Government's case.
Defendant Klish: Klish argues that he was found guilty by association. He also notes that, unlike Earnest and Randell, he was not subject to the IRS audits and “there was no evidence presented at trial that [he] had ever been placed on notice.” Klish Mot. [239] at 2. Starting there, it should not take an IRS audit to put someone on notice that you can't lie on tax returns. And in any event, other evidence shows that Klish willfully joined the conspiracy. For example:
• Wells testified that he and Klish agreed to prepare false returns at Sunbelt. He also said he helped Klish do it.
• Wells said he saw Klish use the list of local schools that Randell circulated for use when making false claims for education credits and that he witnessed Klish preparing false returns, including returns with false Schedule A deductions.
• Klish allowed Earnest to use his PTIN, as shown by Wells's testimony and taxpayer Johnson's 2015 return. See G-63 at 4. Wells said Sunbelt employees were paid a percentage of the preparer's fees when Earnest used their numbers.
• Maybe the strongest evidence of Klish's willfulness came from his own 2015 tax return [G-222], which tracked the same false accounting, including the false claim that he attended Jackson State University. Jackson State employee Sutton testified that Klish never attended that school. Earnest was listed as the tax preparer on that false return. So, if Klish reviewed his return when he signed it (as the form attests) then he knew what Earnest was doing and joined in it.
• Like Randell, Klish's Preparer Information Report indicates the extent to which his clients obtained refunds. Even if Earnest prepared some of these under Klish's PTIN, Wells said Klish was working at Sunbelt and preparing returns, and nearly every return with his number received a refund until the indictment. In 2016, every client received one. G-307. That percentage stayed no lower than 96% through 2020, before dropping slightly to 93% in 2021. Id. Klish's “Percentage with refund” numbers eventually plummeted in tax-preparation year 2022, the year he was indicted. Id.
Though the evidence did not suggest that Klish played a leadership role like Earnest and Randell, it does support the verdict that he joined the agreement willfully.
c. A Conspirator Committed an Overt Act
Defendants never directly challenge the overt-act element, and it is easily met. One of the overt acts listed in the indictment is Earnest's use of others' PTINs. The overt acts also include the charges under § 7206(2), and, as discussed next, those charges also survive the challenges under Rules 29 and 33.
In sum, the motions under Rules 29 and 33 are denied as to Count 1.
2. Convictions under 18 U.S.C. § 7206(2)
Section 7206(2) makes it unlawful to aid or help prepare fraudulent tax returns. To establish guilt, the Government must prove the following beyond a reasonable doubt:
(1) each defendant aided, assisted, counseled, or advised another in the preparation of the tax return in question; (2) the tax return contained a statement falsely claiming income, deductions, or tax credits; (3) the defendant knew that the statement was false; (4) the false statement was material; and (5) the defendant acted willfully.United States v. Morrison, 833 F.3d 491, 500 (5th Cir. 2016) (citing 26 U.S.C. § 7206(2); United States v. Clark, 577 F.3d 273, 285 (5th Cir. 2009)).
The jury convicted Earnest and Randell on four counts of violating § 7206(2). Each count related to a specific tax return the Defendant allegedly helped prepare and identified the taxpayer and tax year. As a broad observation, the evidence clearly establishes that those returns contained false information. Neither Defendant argues otherwise. The evidence is also overwhelming that both Defendants willfully joined in the broader conspiracy to defraud the government; that is, they knew what they were doing. But Earnest says the Government failed to prove he prepared the returns cited in Counts 6 and 7. And Randell challenges the strength of the Government's evidence related to Count 8.
a. Count 6 against Earnest
Count 6 addresses taxpayer Johnson's false 2016 tax return. Although the return lists Wells as the tax preparer, Johnson identified Earnest in Court as the one who prepared it. Earnest now says that is insufficient to sustain the verdict because “Wells was shown the return at issue [in Count 6], G-64, and testified on cross examination that he prepared it.” Earnest Mot. [238] at 4. That's close but not quite true. On cross, counsel showed Wells his PTIN on G-64 and asked, “That's because you prepared this return, didn't you?” He responded, “Yes, I believe so.” Wells Tr. (attached as Exhibit A) at 119 (emphasis added). Again, the Court may not weigh the evidence under Rule 29. And even under Rule 33, the jury was free to believe Johnson's clear testimony that Earnest was her tax preparer over Wells's equivocation-especially given the evidence that Earnest often used Wells's PTIN.
The return addressed in Count 5 may have a similar issue because it lists Klish as the preparer even though Johnson identified Earnest. See G-63 at 4. Earnest makes no evidence-based arguments specific to Count 5, but his use of others' numbers and Johnson's testimony would preclude relief anyway.
b. Count 7 against Earnest
Count 7 relates to taxpayer Stamps's false return for tax year 2016. Earnest disputes that conviction because the return identifies Dwight Stamey as the tax preparer. See G-135. But Stamey's number on the return means little given the substantial evidence that Earnest regularly used his employees' PTINs to hide his fraud. In addition, Stamps twice denied knowing Stamey and testified that Jonathan Barefoot and Earnest prepared her returns. According to Stamps, she used Sunbelt three times-Barefoot prepared her tax returns twice and Earnest prepared them once. Consistent with that testimony, Barefoot's number appears on the returns for tax years 2014 and 2015. See G-133, G-134. That leaves 2016-the year charged in Count 7-as the only other tax year Stamps used Sunbelt. So, if she used Earnest once, the jury could find that it was for 2016. Count 7 stands.
c. Count 8 against Randell
Count 8 claims that taxpayer Gatlin's 2015 return [G-3] included a false Schedule C that Randell prepared. Randell offers no specific arguments about this count, and there is no evidence disputing his identity as the preparer. He did seek judgment of acquittal at trial because the Government could not determine the correct income Gatlin should have reported. If Randell is reasserting that position, he fails to address the fact that the numbers Randell used on the return did not match any of the potential incomes addressed during Gatlin's testimony; indeed, Gatlin testified that Randell made the numbers up. In other words, even if her income remains unknown, the Government still proved that the numbers Randell used were fictious.
B. Motion for Judgment of Acquittal as to Counts 5 and 7 for Constructive Amendment
As he did at trial, Earnest says “the government's proof as to [Counts 5 and 7] amounted to a constructive amendment of the indictment.” Earnest Mot. [238] at 4. The Government says the indictment was sufficient and that at most a non-prejudicial variance occurred. The Court again finds that the counts should not be dismissed.
“An indictment is legally sufficient if (1) ‘each count contains the essential elements of the offense charged,' (2) ‘the elements are described with particularity,' and (3) ‘the charge is specific enough to protect the defendant against a subsequent prosecution for the same offense.'” United States v. Fairley, 880 F.3d 198, 206 (5th Cir. 2018) (quoting United States v. Cooper, 714 F.3d 873, 877 (5th Cir. 2013)). “The validity of an indictment is determined from reading the indictment as a whole, and . . . must be determined by practical, not technical, considerations ....” United States v. Markham, 537 F.2d 187, 192 (5th Cir. 1976) (citation omitted). Thus,
[i]ndictments are read for their clear meaning and convictions will not be reversed because of minor deficiencies which do not prejudice the accused. Whether or not the defendant has been prejudiced is a controlling test of the validity of an indictment....The test of sufficiency is not whether the indictment could have been more artfully or precisely drawn, but whether it states the elements of the offense intended to be charged and adequately apprises the defendant of that which he must be prepared to meet.United States v. Contris, 592 F.2d 893, 896 (5th Cir. 1979) (citations omitted).
A constructive amendment occurs when [the court] permits the defendant to be convicted upon a factual “basis that effectively modifies an essential element of
the offense charged or permits the government to convict the defendant on a materially different theory or set of facts than that with which [he] was charged.”United States v. McMillan, 600 F.3d 434, 451 (5th Cir. 2010) (quoting United States v. Hoover, 467 F.3d 496, 500-01 (5th Cir. 2006)). Or, said differently, it occurs “when the government is allowed to prove ‘an essential element of the crime on an alternative basis permitted by the statute but not charged in the indictment.'” United States v. Robles-Vertiz, 155 F.3d 725, 728 (5th Cir. 1998) (quoting United States v. Salvatore, 110 F.3d 1131, 1145 (5th Cir. 1997), abrogated on other grounds by Cleveland v. United States, 531 U.S. 12, 23 (2000)).
Variances happen “when the proof at trial depicts a scenario that differs materially from the scenario charged in the indictment but does not modify an essential element of the charged offense.” United States v. Delgado, 401 F.3d 290, 295 (5th Cir. 2005). Courts “determine whether a variance occurred by comparing the evidence presented at trial with the language of the indictment.” Girod, 646 F.3d at 316 (citing United States v. Medina, 161 F.3d 867, 872 (5th Cir. 1998)). When a variance occurs, the Fifth Circuit reverses “only if the variance prejudiced the defendant's substantial rights.” Id. (citing Delgado, 401 F.3d at 295; Medina, 161 F.3d at 872). For that, the Court “employ[s] a harmless-error analysis.” Id. (citing United States v. Ramirez, 145 F.3d 345, 351 (5th Cir. 1998); United States v. Dean, 59 F.3d 1479, 1491 (5th Cir. 1995)).
The dispute here centers on the type of false statements alleged in Counts 5 and 7. The introductory paragraph to those counts states that Earnest knowingly helped his clients claim fraudulent “deductions,” with no mention of fraudulent credits. But the specific counts state that the returns falsely Claimed Schedule A deductions and “Education Credit[s].” Indictment [3] at 5 (emphasis added). The full text states:
19. On or about the dates specified in the Counts below, in Hinds County in the Northern Division of the Southern District of Mississippi, and elsewhere, the defendant ADAM EARNEST, aided and abetted by others known and unknown to the Grand Jury, did willfully aid and assist in, and procure, counsel and advise the preparation and presentation to the Internal Revenue Service of the U.S., Individual Income Tax Returns, Forms 1040, either individual or joint, for the taxpayers and calendar years hereinafter specified. The returns were false and fraudulent as to material matters, in that they represented that the taxpayers were entitled under the provisions of the Internal Revenue laws to claim deductions for items and in amounts hereinafter specified, whereas, as the defendant ADAM EARNEST there and then knew, the taxpayers were not entitled to claim deductions in the claimed amounts.:
| COUNT | DATE TAXPAYER CALENDAR TAX YEAR | FALSELY CLAIMED ITEM | |
| 5 February 4, 2016 | “M.J.” | 2015 | Education Credit; Schedule A |
| 6 January 25,2017 | “M.J.” | 2016 | Schedule A |
| 7 February 17,2017 | “W.S.” | 2016 | Education Credit; Schedule A |
Id. Consistent with the table-but not the introductory paragraph-the evidence at trial included proof of false education credits.
It would have been clearer to state in the introductory paragraph that the returns were false because of deductions and credits. But the column for “FALSELY CLAIMED ITEM[S]” references both Schedule A deductions and “Education Credit[s].” Id.; see United States v. Cooper, 714 F.3d 873, 877 (5th Cir. 2013) (finding indictment sufficient because captions removed any ambiguity). Thus, the indictment-when read as a whole-gave Earnest notice that he was being charged with helping prepare returns that falsely claimed deductions and education credits. And the indictment otherwise contained the essential elements, described them with particularity, and protected Earnest from double jeopardy. The indictment was sufficient.
Because the indictment charges Earnest with preparing returns that included false education credits, there was no constructive amendment. Nor was there a variance. But assuming a variance could be inferred, there was no prejudice because Earnest understood the charges and tried his case accordingly. For example, he highlighted the education-credits issue in his opening statement. Finally, the Court reduced the risk of prejudicial jury confusion by granting Earnest's request for an unanimity instruction specific to Counts 5 and 7. The motion is denied as to Counts 5 and 7.
When the Government rested, Randell appeared to join Earnest's constructive-amendment argument as it related to Count 8 against him, so the Court requested briefing by the end of the day. He did not submit a brief and appeared to abandon the issue the following morning. Though abandoned, the Court still explored the matter with the Government but ultimately agreed with the Government that not even Randell was claiming prejudice. He understood the charges he faced. Randell did not revisit this issue in his post-trial brief but, even if he had, the Court would deny the motion for the same reasons stated in the Court's ruling included in the record as C-7.
C. Motion for New Trial Based on Suggested Error
Defendants say the Court erred in two ways. First, they claim the Court should have precluded other-acts evidence under Federal Rule of Evidence 404(b). Second, they dispute a summary chart offered through IRS Investigative Analyst Sam Thomas, citing Federal Rules of Evidence 1006, 403, and 702. As noted, Defendants must show an error and that it affected their “substantial rights,” that is, “it affected the outcome of the trial court proceedings.” Alarcon, 261 F.3d at 423. They have not.
1. Rule 404(b)
Defendants say the Court improperly allowed the Government to introduce three categories of character evidence:
1) IRS civil record-keeping audits of return preparers at American Tax Service-a business not charged in the Indictment and which predated the charged crimes; 2) uncharged tax returns prepared by American Tax Service return preparers prior to
the charged conspiracy at Sunbelt Tax Service; and 3) other uncharged tax returns at Sunbelt Tax Service.Earnest Mot. [238] at 6.
Rule 404(b)(1) precludes evidence of other wrongs or bad acts when used to prove a person's character and that he or she “acted in accordance with the character.” But Rule 404(b)(2) offers an exception. That subpart allows evidence of other wrongs or bad acts when offered “for another purpose, such as proving motive, opportunity, intent, preparation, plan, knowledge, identity, absence of mistake, or lack of accident.” Fed.R.Evid. 402(b)(2).
These rules apply to evidence extrinsic to the charged offense; intrinsic evidence does not fall under Rule 404(b). United States v. Yi, 460 F.3d 623, 632 (5th Cir. 2006). Evidence is “‘intrinsic' when the evidence of the other act and the evidence of the crime charged are ‘inextricably intertwined' or both acts are part of a ‘single criminal episode' or other acts were necessary preliminaries to the crime charged.” United States v. Williams, 900 F.2d 823, 825 (5th Cir. 1990) (quoting United States v. Torres, 685 F.2d 921, 924 (5th Cir. 1982)). Finally, even if the evidence is intrinsic, or can be admitted under Rule 404(b)(2), the Court must still consider Rule 403. See generally United States v. Beechum, 582 F.2d 898, 911 (5th Cir. 1978) (en banc). That rule allows the Court to “exclude relevant evidence if its probative value is substantially outweighed by a danger of one or more of the following: unfair prejudice, confusing the issues, misleading the jury, undue delay, wasting time, or needlessly presenting cumulative evidence.” Fed.R.Evid. 403.
These issues were presented before trial, and the Court proceeded with caution, initially deferring, and then holding an evidentiary hearing. See Order [183]. Even after that hearing, the Court limited its holding to the tax returns the Government used as examples during the hearing. Once the trial began, the Court continued to consider whether the evidence should be admitted and augmented its previous rulings from the bench. Nothing has changed that would bolster Defendants' arguments, and the Court incorporates those earlier holdings here.
Starting with the “uncharged” returns at Sunbelt, Earnest Mot. [238] at 6, the jury did hear about thousands of returns that were not charged under § 7206(2), mostly through Thomas's spreadsheet and summary chart. See G-605. But Count 1 charged Defendants with conspiring to defraud the United States from “on or about January 2, 2015” through “the date of this indictment”-in other words, the years that Sunbelt was open. Indictment [3] at 1. The false returns filed by Sunbelt are intrinsic to Count 1. Even if not, they satisfy Rule 404(b)(2) and would not violate Rule 403 because they show a pattern that demonstrates the existence of the agreement and Defendants' willfulness.
The American Tax evidence was perhaps extrinsic but still admissible. Starting with the audits, that evidence fell within Rule 404(b)(2) because the Government was required to prove willfulness. The audit evidence established that Earnest and Randell knew they could not engage in the very practices for which they were later charged and spoke to their knowledge, intent, lack of accident, and plan. See Fed.R.Evid. 404(b)(2); see also United States v. Grimes, 244 F.3d 375, 384 & n.18 (5th Cir. 2001). The evidence also completed the story about why Earnest tried to conceal the fraud and protect himself after the audits-like using his employees' PTINs.
Earnest nevertheless argues that this case is like United States v. Williams, where the Fifth Circuit affirmed the district court's decision to exclude the defendant's tax history. 30 F.4th 263, 267 (5th Cir. 2022). Although the Court noted that “Williams's tax history may well have permissible uses under Rule 404(b), like proving his willful intent or knowledge of tax obligations,” it found no error in excluding the evidence under Rule 403 because “[p]aying taxes late is not the same as lying on tax forms.” Id. at 267-68. According to Earnest, the civil audits at American Tax are likewise distinguishable from the charges against him “because failing to keep adequate records is not the same as preparing fraudulent tax returns.” Earnest Mot. [238] at 9. But that is not what the audit evidence shows. While Earnest and Randell were audited for their record-keeping issues, the audits focused on the lack of records supporting their clients' Schedule As, Schedule Cs, and education credits. And the auditors testified that through the course of the audits, Defendants understood the requirements for properly completing those schedules and claiming those credits. The evidence shows notice, intent, and plan.
Similarly, Earnest says the Government should have limited its proof of the audits to a single agent and that it should not have been allowed to introduce the fine amounts. Assuming Defendants made that objection at trial, there was more than one audit and more than one IRS witness with distinct relevant knowledge of those audits. As for the fines, their size speaks directly to Defendants' willfulness.
Turning to the returns prepared at American Tax, they demonstrated that Earnest and Randell had a pattern of fraud that they carried over to Sunbelt. The evidence again speaks to their intent, the lack of mistake, and their plan. This evidence also included testimony from taxpayers who followed Defendants from American Tax to Sunbelt because of the large refunds they were receiving. The evidence speaks to that but also to their familiarity with Defendants, whom they identified in Court. And the fact that these same patterns followed the individual taxpayers from American Tax to Sunbelt is again probative of Rule 404(b)(2) issues.
Defendants also claim that the considerable evidence of “uncharged” returns caused confusion and prejudice. Again, the returns from Sunbelt were not “uncharged.” And the returns from American Tax would not cause “unfair prejudice” or confusion. Fed.R.Evid. 403. As noted, the extrinsic evidence related to events at American Tax; the charges in the indictment related to acts at Sunbelt. That gave the jury an easy demarcation.
Even if there was some confusion, it did not substantially outweigh the probative value; indeed, the volume of other-acts evidence became more probative as the trial progressed. Defendants suggested to the jury that the false returns could have resulted from confusion or mistake. For example, during his opening statement, Earnest's counsel told the jury that preparing tax returns is complicated and nuanced-suggesting that his client lacked the intent to defraud. That theory continued with the cross-examination of IRS Agent Sam Thomas, who was asked to confirm that the number of suspicious returns was just a percentage of all returns Sunbelt prepared. Cella was likewise asked to confirm that Sunbelt prepared legitimate returns. Those arguments make the volume of other unsupported filings even more probative to show that this was no mistake. Similarly, the fact that Defendants and those they trained or worked with were all doing the same thing-over and over-is highly probative of the existence of an agreement. Yes, there was a lot of evidence. But the volume itself was probative, and it was not substantially outweighed by the risk of unfair prejudice or confusion.
The Court also reduced the risk of confusion and unfair prejudice by repeatedly instructing the jury about the proper use of the extrinsic, other-acts evidence during trial. Defendants were concerned that the jury might view the audit evidence as proof that the returns from American Tax were themselves fraudulent rather than as proof of notice. The Court told the jury that the “evidence is not being offered and should not be considered by you as proving whether or not those returns were accurate. The evidence is being offered by the government in hopes of proving that [Defendant] was on notice of certain requirements.” The Court then gave a standard Rule 404(b) special instruction when other evidence was offered.
The final instructions made things even more clear, explaining the proper use of other-acts evidence and stating: “There are no crimes charged in this case related to any returns prepared at American Tax Services. So, you must not consider any of this evidence in deciding if these Defendants committed the acts charged in the indictment related to Sunbelt.” C-9 at 11. The Court then explained the proper uses for the American Tax evidence, like proving notice or absence of mistake. Id. That instruction also told the jury that the American Tax evidence involved Earnest and Randell-not Klish-which addressed Klish's concern that he was tainted by it. The Court may “safely assume ‘the almost invariable assumption . . . that [the] jurors follow[ed] their instructions.'” United States v. Shah, 84 F.4th 190, 232 (5th Cir. 2023) (quoting Richardson v. Marsh, 481 U.S. 200, 206 (1987)).
Finally, even assuming error about other-acts evidence, that error would be harmless. Client after client and return after return demonstrated the same pattern of fraud at Sunbelt. As the clients testified, Defendants were simply making up numbers on Schedule As and Schedule Cs while also claiming unwarranted education credits. The practice was even caught on camera. Any error was harmless.
2. Objections to G-605 offered through Sam Thomas
As noted above, Thomas mined the IRS's database for examples of Sunbelt-prepared tax returns that claimed education credits but for which there were no corresponding 1098Ts; there were 4,509 matches. He printed those results in a 117-page spreadsheet and prepared a one-page summary of the data, collectively introduced as G-605.
Earnest opposed this evidence in a mid-trial motion in limine [215] that the Court denied after conducting a hearing. He now renews that objection, summarizing that “the government was . . . permitted to introduce a highly prejudicial summary chart through Investigative Analyst Sam Thomas that was inadmissible under Rules 1006, 403, 702 and Daubert.” Earnest Mot. [238] at 10.
Earnest first says “G-605 was admitted as a summary of 4509 tax returns titled ‘Summary of Tax Returns Filed Claiming Education Credits with No Supporting 1098T.'” Id. He argues that the spreadsheet was “not a proper summary exhibit under Rule 1006 because the underlying tax returns purportedly summarized were not made available to the defendant or the jury.” Id. But that's not what the Court held. The Court concluded that the spreadsheet constituted the original document under Rule 1001(d) and the one-page summary fell under Rule 1006.
“Federal Rule of Evidence 1001(d) defines an ‘original' of electronically stored information as ‘any printout-or other output readable by sight-if it accurately reflects the information.'” United States v. Channon, 881 F.3d 806, 810 (10th Cir. 2018) (quoting Fed.R.Evid. 1001(d)). Rule 1006 allows a proponent to
use a summary . . . to prove the content of voluminous . . . recordings . . . that cannot be conveniently examined in court. The proponent must make the originals or duplicates available for examination or copying, or both, by other parties at a reasonable time and place.
So, if the party offering the spreadsheet can lay a proper foundation for it, the spreadsheet itself would be considered an original. Channon, 881 F.3d at 810. As a result, there would be no duty under Rule 1006 to produce the database if the party lays the proper foundation and produces the spreadsheet from which the summary was prepared. Id.; cf. United States v. Valencia, 600 F.3d 389, 417-18 (5th Cir. 2010) (holding database need not be admitted when summary of its contents is offered). Earnest did not address these holdings in his post-trial motion.
Earnest next argues that Thomas gave impermissible expert testimony, but he waived that objection at trial. In his motion in limine [215], Earnest made the same Rule 702 arguments he now asserts. But when he argued that motion at trial, the Court observed that Thomas's testimony would not violate Rule 702 if he merely added the number of hits. Earnest's counsel appeared to agree so long as the Government did not solicit additional opinions, and he made no Rule 702 objections during Thomas's testimony. The objection is waived under Federal Rule of Civil Procedure 103(a). Earnest has not shown plain error.
Earnest's last argument about Thomas is linked to his Rule 702 argument. According to him, it caused unfair prejudice to allow the jury to hear Thomas's expert testimony about the reliability of his spreadsheet when only ten taxpayers testified. Earnest Mot. [238] at 10-11. He claims that this is an insufficient sample size and notes that “expert evidence can be both powerful and quite misleading.” Id. (quoting Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 595 (1993)). He made his Rule 403/Rule 702 argument about the sample size in his trial brief, but he then waived the Rule 702 issue on the record and never asserted a stand-alone Rule 403 objection during Thomas's testimony. So, if he is now challenging Thomas's methodology under Rule 403, he waived that objection at trial and has not shown prejudicial error given the overwhelming evidence of guilt.
The other Rule 403 argument Earnest made during trial was linked to Rule 404(b). When Earnest moved in limine, the Government was offering a different version of G-605 that included similar results from American Tax. Earnest argued that it would violate Rules 404(b)(1) and 403. See Earnest Mot. [215] at 4. But the Government stripped the other-acts evidence from G-605, leaving only returns at Sunbelt. Thus, that Rule 403 argument became moot by the time the parties argued the motion at trial, and Earnest made no Rule 403 arguments other than the Rule 702 argument mentioned above.
Assuming he can now argue Rule 403, he has not shown unfair prejudice that substantially outweighs probative value or that his substantial rights were violated. He does say there could be prejudice because he is not linked to every return on Thomas's summary. Even so, the evidence is probative of the conspiracy conviction. He also contends that the jury may have believed that all 4,509 returns contained false claims even though only ten taxpayers confirmed issues with theirs. That's true, but the lack of documentation for these credits remains probative of a pattern of claiming unwarranted education credits. And Earnest cites no authority suggesting that the Government was required to call the taxpayers associated with the over 4,000 returns that lacked proper documentation.
In any event, any error would not be prejudicial because there was other evidence that Sunbelt employees routinely claimed false education credits: (1) taxpayers testified that they received the credits despite not attending school; (2) Wells and Cella testified that manipulating education credits was standard practice; (3) witnesses (including two from local schools) testified that the 1098Ts were mandatory; and (4) Klish's and Randell's own returns (one of which Earnest prepared) claimed education credits for attending schools with no record of their attendance. In short, the evidence was overwhelming, and any error would be harmless.
IV. Conclusion
The Court has considered all arguments. Those not directly addressed would not change the outcome. For the reasons stated, Defendants' motions [238, 239, 240] are denied.
SO ORDERED
EXCERPT OF TRIAL TESTIMONY
TESTIMONY OF JOHN WELLS
NOVEMBER 1, 2023
JACKSON, MISSISSIPPI
REPORTED BY: TERI B. NORTON, RMR, FCRR, RDR 501 E. COURT STREET, SUITE 2.500 JACKSON, MISSISSIPPI 39201 (601)608-4186
EXHIBIT A
MR. ELWELL: Yes, Your Honor. The United States calls John Wells.
THE CLERK: If you would place your left hand on the Bible and raise your right hand, please.
(OATH ADMINISTERED.)
JOHN THOMAS WELLS, having first been duly sworn, testified as follows:
DIRECT EXAMINATION
BY MR. ELWELL:
Q. Good morning, Mr. Wells. A. Good morning. Q. Could you please tell the jury your full name. A. John Thomas Wells. Q. Would you spell that for the record? A. J-O-H-N, T-H-O-M-A-S, W-E-L-L-S. Q. Mr. Wells, where do you live? A. Columbus, Georgia. Q. Are you currently employed? A. Yes. Q. What do you do for work? A. I work my family business, construction and demolition, and I DJ. Q. How long have you been doing that? A. Since I was in my twenties. Q. Consistently, on and off? 29 A. On and off. Q. What's your highest level of education? A. High school, and I did some college, technical school. Q. Mr. Wells, do you have any degrees in accounting? A. No. Q. Are you a CPA? A. No. Q. Mr. Wells, were you charged in this case with conspiring to prepare false tax returns and preparing false tax returns? A. Yes. Q. Did you plead guilty? A. Yes. Q. In your own words
THE COURT: Let me pause just for a second. I'm going to at this point give another instruction.
All right. Before I do, because it is an important instruction, I assume the parties know the instruction I'm about to give with respect to how a jury should handle evidence that the witness pled guilty in this case. Is there any objection to giving that instruction now?
MR. ELWELL: I assume it is the standard instruction
THE COURT: It's the Fifth Circuit
MR. ELWELL: -- I believe both parties submitted.
THE COURT: Correct.
MR. MUELLER: No objection, Your Honor.
MR. SELLERS: No objection, Your Honor.
MR. HIGH: No objection, Your Honor.
MR. ELWELL: No objection.
THE COURT: Ladies and gentlemen, before we hear the rest of this testimony, I need to instruct you that you've just heard this witness state that he has entered a plea of guilt in this case. You may not transfer this witness' admission of guilt onto these defendants. In other words, the fact that this witness pled guilty offers no proof that the defendants at trial are guilty.
Is that satisfactory to both sides?
MR. ELWELL: Satisfactory for the government, Your Honor.
MR. MUELLER: Was that the entire instruction?
THE COURT: That's the Fifth Circuit special instruction.
MR. MUELLER: May we approach?
THE COURT: Please.
(THE FOLLOWING BENCH CONFERENCE WAS HELD OUTSIDE THE HEARING OF THE JURY:)
THE COURT: There's a more complete final instruction that I can -- if you're more comfortable, I can -- let me pull that up.
MR. MUELLER: That's what I was going to say, but I certainly didn't want to read that to the jury if you weren't intending to do so now, but that was the language about weighing the testimony with great care and caution. I'm paraphrasing.
THE COURT: Yeah. I mean, all of that is obviously in the final instructions. The point I want to touch now, which I think I'm required by the Fifth Circuit to touch now is that they can't transfer this admission of guilt onto your clients.
MR. MUELLER: Yes, Your Honor. We would support that.
THE COURT: Is there a need to cover anything else at this point?
MR. MUELLER: No, provided you intend to give that final instruction about weighing the evidence.
THE COURT: I definitely will give the full instruction later.
MR. MUELLER: Thank you.
(END OF BENCH CONFERENCE)
THE COURT: You may proceed.
BY MR. ELWELL:
Q. Mr. Wells, in your own words, please tell the members of the jury what you did.
A. I started working at American Tax. That's where I met Casey and Chris Randell. And they taught me how to do taxes,
how to put them in the system, in the tax return program. And at the point we were doing fraudulent tax returns.
Q. Would you tell the members of the jury what you pleaded guilty to?
A. Conspiracy to defraud.
Q. And what does that mean in your own words?
A. I fabricated income on tax returns and --
Q. Anything else?
A. I just pretty much fabricated tax returns, filed false tax returns.
Q. Did you do that alone?
A. What?
Q. Did you do that alone?
A. No.
Q. Did you do that with others?
A. Yes.
Q. Who did you do it with?
A. I did it with Casey, James, Chris, and Dwight and Jonathan.
Q. Did you agree with them to prepare false tax returns?
A. Yes.
Q. Did you sign a plea agreement in this case?
A. Yes.
Q. And as part of that plea agreement, did you agree to cooperate?
A. Yes, I did.
Q. And what does that mean to you?
A. I agreed to tell the truth.
Q. Do you hope to get something out of that?
A. Yes.
Q. What do you hope to get out of that?
A. I hope to get a reduced sentence.
Q. To be clear, is it your hope that at your ultimate sentencing, the government would make a motion for a reduced sentence based on your agreement to cooperate?
A. Yes, I hope so.
Q. And you have not yet been sentenced?
A. No, I have not.
Q. Do you know the defendants in this case?
A. Yes, I do.
Q. Could you please identify them?
A. Yes. Casey is the one right here, the third from the end.
Q. Could you please identify an article of clothing he is wearing?
A. The black coat.
Q. What color shirt?
A. It's like a pastel blue. I'm kind of colorblind. I'm sorry.
Q. Okay. Any other description of where he is sitting?
A. If you view from you, he's the third man in, the bigger
guy.
MR. ELWELL: Your Honor, may the record reflect that the witness has identified Defendant Earnest.
THE COURT: Yes.
BY MR. ELWELL:
Q. Do you recognize anybody else?
A. Yes.
Q. Please tell us.
A. James Klish. He's the one in the black -- the black jacket with the dark blue shirt.
MR. ELWELL: Your Honor, may the record reflect that the witness has identified Defendant James Klish.
THE COURT: It will.
A. And then Chris Randell, he's the one in the white jacket.
MR. ELWELL: Your Honor, may the record reflect that the witness has identified Defendant Christopher Randell.
THE COURT: Yes.
BY MR. ELWELL:
Q. Mr. Wells, how do you know the defendants?
A. I worked with them at -- I worked with Casey and Chris at American Tax, and I worked with James at Sunbelt.
Q. All right. American Tax and Sunbelt Tax, were those tax return preparation businesses?
A. Yes.
Q. Let's talk about American Tax. Where was American Tax?
A. In Jackson, Mississippi, off Raymond Road.
Q. What years did you work at American Tax?
A. 2013 and 2014.
Q. When you say you worked there, do you mean filing seasons 2013 and 2014?
A. Yes.
Q. Were you hired prior to that filing season towards the end of the year?
A. Excuse me?
Q. Were you hired prior to that filing season towards the end of the year, maybe the end of 2012?
A. Yes.
Q. Who else worked with you at American Tax in the Jackson office?
A. There was Jonathan Barefoot.
Q. And I believe you already mentioned Casey and Chris. Did they also work there?
A. Yes, that's correct.
Q. I would like to ask you about what everybody's role was at American. What was Casey's role at American Tax?
A. He prepared tax returns, and he was manager.
Q. And what were his duties as manager?
A. He overlooked the daily routines.
Q. Such as?
A. The daily routines, the -- he prepared the return checks,
tax return checks.
Q. By tax return checks, do you mean refund checks?
A. Yes, that is correct.
Q. By prepare them, what do you mean? Did he print them, sign them?
A. Yes, he printed them out.
Q. Did he supervise everybody at American Tax?
A. Yes.
Q. Did he supervise the other tax return preparers?
A. Yes.
Q. Did he help other tax return preparers?
A. Yes.
Q. In what ways?
A. If we needed -- if we had a question or if a client had a question, he helped answer those questions.
Q. And when -- when you are working at a tax return preparation business, who actually files the tax returns with the IRS?
A. Casey does.
Q. And is that done -- how does he do that?
A. Once we completed a -- completed a tax return, they go -they get batched and is sent off to the IRS.
Q. And when would he do that during the day?
A. At the end of the day.
Q. And I believe you said -- did Casey also prepare tax
returns?
A. Yes.
Q. Did he have a lot of customers?
A. Yes.
Q. What was Chris' role at American Tax?
A. He prepared tax returns.
Q. Any other role or job?
A. No.
Q. Was Chris there prior to you starting working there?
A. Yes.
Q. Do you know around how long he had worked at American Tax?
A. I think he had a year or two before I came in.
Q. What about Jonathan? What was Jonathan's role?
A. He prepared taxes.
Q. Any other role?
A. No.
Q. Did Jonathan have a lot of customers?
A. Yes.
Q. Had he been preparing tax returns for a while?
A. Yes.
Q. Did he have any supervisory duties at American?
A. No.
Q. Now, you also mentioned Sunbelt Tax. Is that a different tax return preparation business?
A. Yes.
Q. When did you start working at Sunbelt?
A. About 2015, around there.
Q. What was Sunbelt Tax?
A. It was a tax preparation office.
Q. And who owned it?
A. Casey Earnest.
Q. Did Casey start Sunbelt Tax?
A. Yes.
Q. And did he hire you to work there?
A. Yes.
Q. Did he hire anybody else to work there?
A. He hired Jonathan, hired Chris, and later on he hired Dwight and James.
Q. Did he hire other people at times too?
A. Yes.
Q. Jessica Wooten?
A. Yes.
Q. What was her role?
A. She prepared taxes.
Q. Ora Washington?
A. Yes, he was a receptionist.
Q. Somebody named Shauna?
A. Yes, she was a receptionist too.
Q. All right. Why did you all leave American Tax to go to Sunbelt?
A. The owner was not paying us properly, so we left -- we left and Casey told us we could make more money working out at Sunbelt.
Q. That's a good point. You said the owner wasn't paying you properly. Who owned American Tax?
A. Jeff Cox.
Q. And did Mr. Cox hire you to work at American Tax?
A. Yes.
Q. Prior to that, did you have any experience preparing taxes?
A. No.
Q. How much did Jeff Cox pay you at American Tax?
A. 12,000 for the year.
Q. What did Casey offer to pay you at Sunbelt?
A. About 25 percent of the preparation fees.
Q. Meaning you get a cut of whatever fees charged?
A. Yes.
Q. All right. So I would like you to just kind of sketch out everybody's roles at Sunbelt. I believe you said Casey owned Sunbelt. What was his role there?
A. He pretty much owned it, and he managed the -- he managed during the day.
Q. Did he prepare tax returns?
A. Yes.
Q. And what were his duties as manager?
A. About the same as he did with American Tax.
Q. Assist other tax return preparers?
A. Yes.
Q. Supervised them?
A. Yes.
Q. Answered questions?
A. Yes.
Q. How were tax returns filed at Sunbelt?
A. Excuse me?
Q. How were tax returns filed at Sunbelt?
A. Pretty much the same as American Tax. They were filed and then batched and then sent off to the IRS at the end of the day.
Q. Who sent them off to the IRS at the end of the day?
A. Casey.
Q. And if Casey wasn't around, who was in charge of that at Sunbelt?
A. Chris.
Q. What was Chris' role at Sunbelt?
A. Chris was kind of an assistant to Casey, and when Casey wasn't there, Chris handled the day-to-day routines.
Q. Did Chris also prepare tax returns?
A. Yes.
Q. What about Jonathan; what was his role at Sunbelt?
A. Mainly he just did tax returns.
Q. No supervisory responsibilities?
A. No.
Q. Did Jonathan have a lot of customers?
A. Yes.
Q. Was he one of the work horses of the office?
A. Yes.
Q. What about -- you mentioned James Klish. When was James Klish hired to work at Sunbelt?
A. I believe 2015.
Q. Okay.
A. It was --
Q. Like, end of 2015, like, for the 2015 filing season?
A. I believe so.
MR. SELLERS: Object to leading.
THE COURT: Sustained.
BY MR. ELWELL:
Q. I'm sorry. I just want to ask you to clarify, because in tax preparation circles, I just want to know, are you referring to the 2015 filing season?
A. No, it was like the year -- the second year of like the -second year of Sunbelt.
Q. The second year of Sunbelt Tax?
A. Yes.
Q. What was his role?
A. He prepared taxes.
Q. And I believe you mentioned there was somebody else named Dwight. What was his job?
A. He prepared taxes.
Q. And Jessica Wooten, what was her job?
A. Prepared taxes.
Q. Earlier you said you agreed with others to prepare false tax returns. Did you agree with Casey, Chris and Gabe to prepare false tax returns at Sunbelt Tax?
A. Yes.
Q. As well as Jonathan and others at Sunbelt?
A. Yes.
Q. Did you and other return preparers at Sunbelt Tax prepare false tax returns?
MR. MUELLER: Objection, leading the witness.
THE COURT: Sustained.
BY MR. ELWELL:
Q. Can you tell us whether or not you and others prepared false tax returns at Sunbelt?
A. Yes.
Q. How were they false?
A. They had self-employed, Schedule C self-employments, school credits, and Schedule A employee business -- employee business expenses.
Q. And did those -- what effect did those false items have on the customer's refund?
A. False income, false expenses, false charity, false travels and meals and entertainment.
Q. And how did that impact the customer's tax refund?
A. It increased their refund amount.
Q. How did putting those false items affect your fees?
A. The fees were increased.
Q. How is that?
A. It was -- it was a charge on the -- I'm sorry. It was a charge for the -- for the -- the -- I can't think of the name -- the --
Q. Are you trying to find the word?
A. Yes, I'm trying to find a word. I'm sorry.
Q. Okay.
A. Like, it was a charge for the Schedule C and the Schedule As, forms.
Q. Did Sunbelt charge more money when a Schedule C was added to a return?
A. Yes.
Q. Did they charge more money when Schedule As were added to a return?
A. Yes.
Q. Did they charge more money when education credits were added to a tax return?
A. Yes.
Q. Did somebody teach you how to report these false items on
a tax return?
A. Yes.
Q. And when were you first taught to prepare false tax returns?
A. American Tax.
Q. And prior to American Tax, did you have any experience preparing taxes?
A. No.
Q. Did you get any formal type of training in how to prepare taxes?
A. Yes.
Q. Tell the jury what type of training you received.
A. In Phenix City in American -- Phenix City had an American Tax there, and I was sat down with a stack of folders, and I was told to just make dummy returns, how to figure out this -explore the program Taxwise.
Q. Okay. So prior to that, did you ever attend any class on how to prepare tax returns?
A. Yes.
Q. Tell the jury about that.
A. It was like a week-long course, and I wasn't really good at completing that course.
Q. And who sent you to that course?
A. Jeff Cox.
Q. And was there an exam at the end of that course?
A. Yes.
Q. And did you pass that exam?
A. No.
Q. Was Mr. Cox aware of that?
A. Yes.
Q. He hired you to work anyways?
A. Yes.
Q. When you started -- before you started working at American Tax, I believe you said you went to American Tax in Phenix City. Did you actually work at American Tax in Phenix City?
A. No.
Q. So tell us when that was and what you did in that office.
A. I was there for about -- after the course, I was there for about a week learning the program, the tax program mostly.
Q. Okay. And around what time of year were you doing that?
A. During the summer of 2012.
Q. And during that time, did anybody teach you to prepare false tax returns?
A. Yes.
Q. Who?
A. Jake Cox -- Jake Cox, J-A-K-E.
Q. And before -- I'm going to ask a follow-up. Are Jeff and Jake Cox related?
A. Yes.
Q. How are they related?
A. They are brothers. I believe they're like step -- yeah, they are brothers.
Q. Two different people, though?
A. Yes, two different people.
Q. What did Jake Cox show you to falsify?
A. Just put mostly on the Schedule C is to put in -- put in income and then put in some expenses to make it a little more legit.
Q. What do you mean by legit?
A. Just -- if you just put, like, just income in there, it just looks like -- it just looked more false.
Q. Okay. And so did Mr. Cox teach you any other items to falsify, other than self-employment?
A. The school credit.
Q. What did Mr. Cox show you with respect to the school credit?
A. Use a college, find a local college, and then for the amount, for the expenses, you put 4,000 as their amount, because you can't go over no more than 4,000, the max on the school credit.
Q. To be clear, did Mr. Cox tell you to report school credits even if customers didn't go to school?
A. Yes.
Q. And what did he tell you to put down for the school?
A. Excuse me?
Q. What did he tell you to put down for the school?
A. I would just use a school local -- local school.
Q. After that week of training, where did you go to work?
A. American Tax in Phenix City -- I mean, not at Phenix City. Jackson.
Q. And was Mr. Cox at the Jackson office of American Tax on a daily basis?
A. No.
Q. Who was in charge of the Jackson office?
A. Casey.
Q. Once you started working in the Jackson office of American Tax, did others help you prepare false returns?
A. Yes.
Q. Who?
A. Casey would sometimes help me, and Chris would sometimes help me.
Q. And tell the jury what you mean by sometimes help you.
How would they help you?
A. When I got to American Tax, I was still a little overwhelmed and not sure of what to do, kind of like -- kind of lost. So Casey and Chris was there to help me get through, help me prepare the tax returns and handle it and work with the customers.
Q. What do you mean by work with the customers?
A. Just -- just get more comfortable, like, working with
customers.
Q. Did they also show you -- help you put false education credits on tax returns?
A. Yes.
Q. Did they also help you put false self-employment on tax returns?
MR. MUELLER: Object to leading the witness.
THE COURT: Sustained.
BY MR. ELWELL:
Q. Can you tell us whether or not they showed you anything with respect to self-employment?
A. Could you repeat that, please?
Q. Can you tell us whether they helped you report self-employment ?
A. I'm sorry. I'm losing my hearing.
Q. Did -- can you tell us whether Casey or Chris assisted you in preparing false self-employment?
A. Yes.
Q. There was another person working at Sunbelt, Jonathan.
Did you ever ask Jonathan for help?
A. No, Jonathan was pretty busy.
Q. Were you ever told whether or not to ask Jonathan for help?
A. Yes, they told me don't bother Jonathan because he is busy all the time.
Q. And who told you not to bother Jonathan?
A. Pretty much Casey and Chris.
Q. When you left American to go to Sunbelt Tax, did you continue preparing false tax returns in the same way?
A. Yes.
Q. And did others who were hired at Sunbelt Tax also learn to prepare false tax returns like this?
A. Yes.
Q. And over time, did you ever help anybody prepare false tax returns?
A. I helped -- I helped Dwight just a little bit, and I helped James just a little bit.
Q. What did you show James?
A. Whenever they needed help.
Q. What did you show James?
A. Sometimes they would get stuck on something, and I will have a look, I will have a look, and sometimes -- usually they pretty much were close at what -- was pretty much, what you would call it, close to what the tax preparer -- what the taxpayer is going to get in a return.
Q. Okay. I would like to show you what's been admitted as Government's Exhibit 170 and ask if you can walk us through how this process actually worked at Sunbelt Tax. If we could turn to the second page. Mr. Wells, do you recognize this?
A. Yes.
Q. What is it?
A. This is a tax return for Bobby Griffith.
Q. If we turn to page 5 of this tax return, is that your name listed in the paid preparer section?
A. Yes.
Q. Did you prepare this tax return?
A. Yes.
Q. Now, if we turn to page 16 of this tax return, what is this?
A. This is Bobby Griffith's W-2.
Q. How much wages did Bobby Griffith make in 2014, according to this W-2?
A. $29,962.
Q. How much federal income tax did he have withheld?
A. $153.
Q. Did Bobby Griffith provide you this W-2 information when you prepared his return?
A. Yes.
Q. Based on this information alone, was Mr. Griffith likely to receive a large tax refund?
A. No.
Q. Why not?
A. He didn't withhold enough federal income. He would end up owing.
Q. On a return like this, what information were you taught to
falsify to increase Mr. Griffith's tax refund?
A. Use the employee -- employee expenses.
Q. Anything else?
A. And the school credit.
Q. Let's look at the school credit. Will you turn to page 10? What is this form?
A. This is a 8863. It's an education credit.
Q. If we turn to page 11, do you have to report information about the school and its expenses?
A. Yes.
Q. And what information did you report here for the student name?
A. Bobby Griffith.
Q. And for the school?
A. Hinds Community College.
Q. Now, when you were taught to put a false -- when you were putting a false education credit on somebody's return, how would you determine the school?
A. I just picked a school off a list.
Q. Off a list?
A. Yes.
Q. What type of list?
A. It was a list of schools, local in Jackson.
Q. I would like to show you what's been marked -- I would like to show Mr. Wells what's been marked but has not yet been
admitted as Government's Exhibit 533. Mr. Wells, do you recognize this?
A. Yes.
Q. What is it?
A. It's a reference sheet of colleges in Jackson, Mississippi.
Q. Is this the list -- is this the same or substantially similar to the list you were referring to?
A. Yes.
Q. Where did y'all use this list?
A. Excuse me?
Q. Where did you use this list?
A. I used a list like this at American Tax and Sunbelt.
MR. ELWELL: Your Honor, at this time, we move to admit Government's Exhibit 533.
THE COURT: Any objection? 533 is admitted. (EXHIBIT G-533 MARKED)
MR. ELWELL: Permission to publish, Your Honor.
THE COURT: You may.
BY MR. ELWELL:
Q. Mr. Wells, could you please tell the jury what we are looking at here? Now that they can see it, would you please tell the jury what it is they are looking at?
A. It's a list of colleges in Mississippi, locally in Jackson, Mississippi.
Q. Did you use this list when preparing returns with false education credits?
A. Yes.
Q. Who provided you this list?
A. Chris.
Q. Chris who?
A. Chris Randell.
Q. Mr. Wells, if somebody came in with a Form 1098-T and they had a legitimate education credit, would there be any reason to consult a list of local schools?
A. No.
Q. Is the primary reason you consulted this list to prepare fraudulent tax returns?
A. Yes.
MR. MUELLER: Objection, leading.
THE COURT: Sustained.
BY MR. ELWELL:
Q. Could you tell us what the primary reason was you would use to consult this list?
A. To use it to file a fraudulent school credit.
Q. Was that true for the other return preparers in your office as well?
A. Yes.
Q. And did other return preparers in your office also have a copy of this list?
A. Yes.
Q. Who gave it to them?
A. Chris made a printed out list of these and handed them around the office.
Q. Did you see the other return preparers in your office using the school list or referencing the school list over time?
A. Yes.
Q. Who did you see using the school list?
A. Usually Dwight, James, Chris, Jonathan and Casey.
Q. Did you ever see Casey use the school list?
A. No. I believe he had them memorized.
Q. And did they likewise use the school list to prepare false tax returns?
A. Yes.
Q. So if we could turn back to Government's Exhibit 170, page 11, where does this report Bobby Griffith went to school?
A. Hinds Community College.
Q. Is that one of those schools on the list?
A. Yes.
Q. Was that one of the schools you were encouraged to use?
A. Yes.
Q. Did you use Hinds Community College frequently?
A. Yes.
Q. Any others?
A. Jackson State and Belhaven.
Q. And remind us who taught you to prepare returns with false education credits?
A. Mainly Casey, Chris and Jake -- Casey, Chris and Jake.
Q. Jake Cox?
A. Yes.
Q. And over the years, did you see the defendants prepare returns with false education credits like this?
A. Yes.
Q. Did you see Casey prepare returns with false education credits?
A. Yes.
Q. Chris?
A. Yes, that is correct.
Q. Gabe?
A. Yes.
Q. At any point, were you ever told to stop putting false education credits on tax returns?
A. Yes, but you still can use them.
Q. Explain what you mean by that.
A. Don't put the education credits on every one of them, just use them where we need -- when we absolutely need to.
Q. And who told you that?
A. Casey.
Q. And when did he tell you that?
A. About the beginning of Sunbelt.
Q. Around the time -- okay, at some point at Sunbelt?
A. Yes.
Q. All right. Did Casey tell you to stop using education credits completely?
A. No.
Q. And did you stop using education credits completely?
A. No.
Q. What exactly did he mean, then, when he said, only use it when you need them. What was your understanding of what he meant?
A. Just use it when a taxpayer wasn't happy with what they were getting -- what their refund amount was.
Q. And to be clear, when he was saying use it to -- you mean use a false education credit?
A. Yes.
MR. SELLERS: Objection to leading, Your Honor.
THE COURT: Rephrase.
BY MR. ELWELL:
Q. Would you explain what you mean by use the education credit? Are we talking about true education credits?
A. Excuse me?
Q. Could you explain what you mean by use an education credit? Are we talking about true education credits?
A. No, false education credits.
Q. If we could, turn to page 14 of this tax return. I
believe you mentioned that there are also false expenses and other deductions. I would like to direct -- first of all, I would like to ask you, do you recognize what this form is?
A. Yes, it is itemized deductions on Schedule A.
Q. Were you taught to falsify deductions on this form?
A. Yes.
Q. Who taught you that?
A. Casey and Chris.
Q. Jake didn't teach you this?
A. No. He didn't teach me -- he didn't ever teach me -- go through an example of that.
Q. Okay. What items on this form were you taught to falsify?
A. The gifts to charity, the -- let's see -- I'm trying to remember what was on this one.
Q. Well, let's focus in on gifts to charity.
A. Yes.
Q. If we could, zoom in on that section. What were you taught to do with respect to gifts to charity?
A. Just around -- kind of just around -- basically, it's like use that like they go to church, they pay tithings and stuff, usually around 10 to 15 percent of their income.
Q. When you say "like they went to church," what do you mean "like they went to church"?
A. Like they went to church every Sunday, pay tithings.
Q. Do you mean as if they went to church?
A. Yes.
Q. Regardless of whether they actually went to church?
A. Yes.
Q. And how much were you taught to do?
A. Right around 10 percent.
Q. And do you recall a second ago, I showed you Bobby Griffith's W-2?
A. Yes.
Q. Do you recall around how much his wages were?
A. Around 29,000.
Q. How much was reported here for gifts to charity?
A. $2,910.
Q. Is that around ten percent?
A. Yes.
Q. Is that what you were taught to do?
A. Yes.
Q. And who taught you to do this?
A. Excuse me?
Q. Who taught you to do this?
A. Casey and Chris.
Q. And over the years, did you ever need help doing this?
A. Yes.
Q. And who would help you?
A. Usually it would be Casey or it would be Chris.
Q. I would like to go down to line 21 of this form. What's
reported on line 21?
A. Unreimbursed employee expenses.
Q. What were you taught to do with respect to unreimbursed employee expenses?
A. Usually they told us to -- just put like a -- just put a few numbers in there and see how the refund amount will react.
Q. What do you mean "see how the refund amount" -- what were you trying to do to the refund amount?
A. I increased the refund amount.
Q. Did you have to fill out another form for unreimbursed employee expenses?
A. Yes.
Q. If you could turn to page 7. What is this?
A. This was for, like, meals and entertainment, and I believe the second page on that is travel expenses.
Q. All right. Let's look at meals and entertainment first.
Where are meals and entertainment reported on this form?
A. Line 5.
Q. And what were you taught to do with respect to meals and entertainment expenses?
A. Use about 10 percent of their -- 10 percent of their income.
Q. And whether or not they actually spent 10 percent of their income on meals and entertainment?
A. Yes.
Q. Who came up with this number?
A. I did.
Q. Is that what you were taught to do?
A. Yes.
Q. Will you turn to page 7? Sorry. For page 8, when you were reporting vehicle expenses, you have to put in -- is one of the ways of doing that is putting in mileage?
A. Yes.
Q. Does the computer software automatically calculate the expenses based on the mileage you put in?
A. Yes.
Q. Who taught you how to do this?
A. Casey and Chris.
Q. And how much mileage were you taught to put in?
A. Just go by roughly somewhere around what he made for the year. I would say -- basically, it was just put, like, a certain amount of -- do around 20 -- 24,000 miles for the year, and then do about 49 percent of the business use.
Q. Okay. So to be clear, to claim mileage, do you have to report the total vehicle mileage?
A. Yes.
Q. And then do you have to report the amount of time you used that vehicle for business?
A. Yes.
Q. When using this form, were you ever taught to actually get
a mileage log from a customer?
A. No. I never got a mileage log.
Q. How were you told to come up with these mileage amounts, then?
A. Really just can't -- really just come up with some numbers.
Q. And did you report more mileage, the higher somebody's income?
A. Yes, that is correct.
Q. Why?
A. Because if they were making more money -- if they were making more money, you had to report more mileage.
Q. And who taught you to do this?
A. Casey and Chris.
Q. And over the years, did you see the defendants prepare false returns reporting false unreimbursed expenses?
A. Yes.
MR. MUELLER: Objection, leading.
BY MR. ELWELL:
Q. Can you tell us whether you saw
MR. ELWELL: Rephrase, Your Honor.
THE COURT: All right. Please do.
BY MR. ELWELL:
Q. Could you tell us whether you saw the defendants reporting false Schedule A deductions?
A. Yes.
Q. Who did you see?
A. I would see Chris, Jonathan, Casey, and Dwight and James.
Q. Was this a common practice?
A. Yes.
Q. And over the years, did you ever help anybody report false Schedule A deductions?
A. Yes.
Q. Who did you help?
A. Sometimes James and Dwight sometimes.
Q. And I want to be clear because I think we've used a different name. How do you know James by? What name do you know James by?
A. Gabriel -- Gabe.
Q. Gabe? Is that what you call him?
A. Yes.
Q. So when you say James, are you also referring to Gabe?
A. Yes.
Q. And the person you identified earlier?
A. Yes.
Q. And how did you help Gabe?
A. He will sometimes ask me if -- does this look okay, and I will have a look at it, and I'll be, like, yeah, that's about right.
Q. And the form you were looking at, was it a false form?
A. Yes.
MR. SELLERS: Objection to leading, Your Honor.
THE COURT: You need to rephrase that.
BY MR. ELWELL:
Q. Can you tell us whether you were helping him -- whether you were telling him a false form looked right?
A. Yes.
Q. And what do you mean by "looked right"? What did that mean to you all at Sunbelt?
MR. SELLERS: Objection again. Look right is the government's word. He is saying -- counsel opposite is saying look right.
THE COURT: Well, the witness used the term "looks okay."
MR. ELWELL: I apologize, Your Honor.
BY MR. ELWELL:
Q. What do you mean by "looks okay"?
A. You can -- that the refund amount on the tax return, that was probably pretty much all they were going to get.
Q. Now, shifting gears, I believe you also mentioned self-employment.
A. Yes.
Q. What is self-employment income?
A. It's when the taxpayer did, like, a side hustle job or was self-employed and didn't work as an employee at any businesses.
Q. Were -- did you report false self-employment income at Sunbelt Tax?
A. Yes.
Q. And how would you report false self-employment income?
A. You had to put the false -- false income on a Schedule C, and I put false expenses.
Q. How would reporting additional income affect a customer's tax refund? Don't you have to pay more taxes the more money you make?
A. Could you repeat that, please?
Q. How would reporting additional income affect a taxpayer's refund?
A. If they had any kids on the tax return, you could use their earned income tax credit to increase the refund amount.
Q. I would like to show the witness what's been marked for identification as Government's Exhibit 535.
MR. ELWELL: Ms. Tice, if you could please pull up Government's Exhibit 535.
BY MR. ELWELL:
Q. Mr. Wells, do you recognize this?
A. Yes.
Q. What is it?
A. It's our -- what they would call in the tax office as the earned income credit bell effect.
Q. Do you recognize this particular drawing?
A. Yes.
Q. And who drew this particular drawing? Do you recognize the handwriting?
A. Yes. Casey.
MR. ELWELL: Your Honor, at this time I move to admit Government's 535.
THE COURT: Any objection? All right. G-535 is admitted.(EXHIBIT G-535 MARKED)
MR. ELWELL: Permission to publish, Your Honor?
THE COURT: You may.
BY MR. ELWELL:
Q. Mr. Wells, could you please explain to the jury what we are looking at?
A. This is the earned income credit bell effect.
Q. Starting on the left, what's reported there, and walk us through.
A. On the left, that shows at zero income, no earned income credit.
Q. And then towards the middle?
A. Okay. Towards the middle, for two children, around 15,000 is where you get the maximum earned income credit.
Q. Is the earned income credit a valuable credit?
A. Yes.
Q. Around how much is it worth; do you know?
A. I can't say how much earned income credit, on the exact dollar amounts, but if you had two kids and you did about. $15,000 income, I would say roughly about around five thousand.
Q. Five thousand dollars?
A. Yes, in a refund amount.
Q. All right. And is that the amount that would correlate with the max there?
A. Yes.
Q. And what about down on the right?
A. 40,000 income. That would show that the earned income credit would drop down to zero.
Q. Did anybody -- you said this is a bell curve. Did anybody use something like this to explain to you how to report false self-employment income?
A. Yes.
Q. Who?
A. Casey and Chris.
Q. What did they tell you to do with respect to self-employment income?
A. Use the self-employment to increase their income amount to help get the maximum -- get close to the maximum earned income credit.
Q. All right. I would like to show you how that -- walk through how that works with an actual tax return. I would like to show you what's been admitted as Government's Exhibit 50.
MR. ELWELL: Ms. Tice, could you please publish Government's Exhibit 50 and turn to the second page.
BY MR. ELWELL:
Q. Mr. Wells, do you recognize this?
A. Yes.
Q. What is it?
A. This is a tax return for Lorel Marshall in 2016.
Q. And did you prepare this return?
A. Yes.
Q. Directing your attention to line 7. Does this report wages?
A. Yes.
Q. Did those come from a W-2?
A. Yes.
Q. Could you turn to page 21? What are we looking at here?
A. This is a W-2 for Ms. Lorel Marshall.
Q. And is this a copy of the W-2 information Ms. Marshall would have provided you?
A. Yes.
Q. How much does it report Ms. Marshall made in wages?
A. $4,739.
Q. And income tax withholdings?
A. $281.
Q. Based on this information alone, is Ms. Marshall likely to receive a large tax refund?
A. No.
Q. What were you taught to do on a return like this to increase a customer's tax refund?
A. If she had a child on there, she needed to be around $12,000.
Q. If we could split screen this with Government's Exhibit 535. Where would Ms. Marshall's W-2 income fall on this curve? And you may actually touch the screen.
A. It should be -- on this one -- on the bell curve, that is showing for, like, for two dependents. So she would have to be 12,000, so somewhere right around there. Fifteen, somewhere probably around that area. Around the 12 -- if 15 was 12,000 -- so it will be -- it should be about there.
Q. Okay. So to be clear, that first dot, is that around where she would fall with an income of $4,739?
A. Yeah, she would need -- she would need about 12,000 for one child.
Q. And what were you taught to do in order to increase her -A. Use self-employment.
Q. Mr. Wells, since your arrest, have you learned that Ms. Marshall was, in fact, an IRS undercover agent?
A. Yes. After the arrest, I learned that Ms. Marshall was an undercover.
Q. Who posed as a customer named Lorel Marshall?
A. Yes.
Q. Have you also learned that this interaction was videotaped?
A. Yes.
Q. Have you had an opportunity to view that video in its entirety?
A. Yes.
Q. Have you also had an opportunity to review selected clips from that video?
A. Yes.
Q. And are those clips from that video -- are you depicted on that video?
A. Yes.
Q. And are those clips a fair and accurate depiction of what occurred that day?
A. Yes, that is correct.
MR. ELWELL: Permission to approach the witness, Your Honor
THE COURT: You may.
BY MR. ELWELL:
Q. Mr. Wells, do you recognize what I've just handed you?
A. Yes.
Q. What is it?
A. It's a flash drive with the footage of the undercover agent coming to Sunbelt.
Q. How do you know that?
A. I've watched it, and I've put it in the envelope and sealed it and signed it.
Q. And is that in fact the envelope that you've signed and sealed?
A. Yes, that is correct.
MR. ELWELL: Your Honor, at this time we move to admit Government Exhibit 560, which represents five clips from the undercover interaction.
THE COURT: Any objection? All right. 560 is admitted.(EXHIBIT G-560 MARKED)
MR. ELWELL: Permission to approach the witness, Your Honor?
THE COURT: You may.
BY MR. ELWELL:
Q. Now, in just a moment, I'm going to ask if we could play portions of this clip, Mr. Wells. You've had an opportunity to review this before?
A. Yes.
Q. I would just like, if you could tell the jury, is what they are about to say a fair representation of a typical customer experience at Sunbelt Tax?
A. Yes.
Q. Nothing wildly different happened in this interaction than many of your other customers?
MR. MUELLER: Object ion.
BY MR. ELWELL:
Q. Did anything wildly different happen in this interaction versus any of your other customers?
A. No.
MR. ELWELL: Your Honor, at this time, we would ask permission to publish the video.
THE COURT: How long is the video?
MR. ELWELL: It's broken into five clips, Your Honor. Probably total 15 minutes.
THE COURT: Okay. Well, I will leave it up to you. It's almost noon. Would it be better to show them all together when we come back?
MR. ELWELL: Yes, Your Honor.
THE COURT: All right. We will do that.
Ladies and gentlemen, we will take our lunch break at this point. It's ten until noon. We will come back at 1:00. And Mr. Wells, don't talk to anybody associated with the case during the break here.
THE WITNESS: Okay.
THE COURT: Anything else before I let everybody go?
MR. ELWELL: Your Honor, to be clear, may Mr. Wells be excused to go get lunch?
THE COURT: Yes, sir.
MR. ELWELL: As long as he -- I just didn't want to 72 tell him that outside the presence of
THE COURT: No, he can go get lunch. He just can't talk to anybody associated with the case. Anything else?
MR. ELWELL: Nothing from the government.
THE COURT: Anything from the defense side?
MR. MUELLER: No, Your Honor.
THE COURT: Thank you. Court is in recess. You can leave your pads in your chair.
(RECESS TAKEN AT 11:49 A.M. UNTIL 1:03 P.M.)
(JURY IN AT 1:03 P.M.)
THE COURT: Okay. Mr. Wells, you are still under oath. Ready to begin?
MR. ELWELL: Yes, Your Honor.
BY MR. ELWELL:
Q. Mr. Wells, before the break I think I was going to play you a video. There was just one question I wanted to ask, a follow-up question about Government's Exhibit 170.
MR. ELWELL: Ms. Tice, if you could pull up Government's Exhibit 170 and turn to page 11.
BY MR. ELWELL:
Q. Mr. Wells, do you recognize this form?
A. Yes.
Q. What is it, just to reorient us?
A. It's 8863 education credit.
Q. And I think I asked you about the information reported up
top, the student information, and then the college. I would like to direct your attention down below. What is reported on line 27?
A. 4,000, the adjusted qualified education.
Q. What is the significance of that?
A. They always told us to just put 4,000, no more.
Q. Do you know why?
A. That's the max you can -- that's the maximum qualification.
Q. Were you told to do that regardless of how much the taxpayer spent?
A. Yes.
Q. And to be clear, did you, in fact, ask taxpayers whether or not they went to school?
A. Repeat that.
Q. Would you, when preparing tax returns, ask customers whether or not they went to school?
A. Yes.
Q. Did you ask them whether they went to Hinds Community College and spent $4,000 to do so?
A. Can you rephrase that?
Q. Did you actually ask for the actual amount they spent on school?
A. No.
MR. MUELLER: Objection, leading, Your Honor.
THE COURT: Sustained.
BY MR. ELWELL:
Q. Could you tell us whether or not you actually asked the amount they spent on school?
A. No.
Q. What did you report?
A. I would just report 4,000.
Q. Why did you do that?
A. That's what I was told to put down.
Q. All right. And before we get into the video, there are just a couple of other things I would like to show you.
MR. ELWELL: Permission to approach the witness, Your Honor.
THE COURT: You may.
BY MR. ELWELL:
Q. Mr. Wells, starting with 539, what's been marked as 539, do you recognize this?
A. It appears to be an employee handbook.
Q. And where was this employee handbook from?
A. Capital Tax Management.
Q. Do you recognize this as an employee handbook that was available at Sunbelt Tax?
A. Yes.
MR. ELWELL: Your Honor, at this time, we would move to admit Government's Exhibit 539 into evidence.
THE COURT: Any objection? 539 is admitted.(EXHIBIT G-539 MARKED)
BY MR. ELWELL:
Q. Could you please read the exhibit number of the next exhibit you pulled?
A. Which one was it?
Q. You can set that down, Mr. Wells, 539. What is the exhibit number in your hand at this point?
A. This is 549.
Q. Do you recognize Government's Exhibit 549?
A. Yes.
Q. What is it?
A. It's a list of self-employment jobs with their corresponding job numbers.
Q. And how would you -- where do you recognize this list from?
A. It was made for Sunbelt, and we used this as a reference sheet to use them as -- use them off of the self-employment Schedule Cs.
MR. ELWELL: Your Honor, at this time, we move to admit Government's 549 into evidence.
THE COURT: Any objection? 549 is admitted.(EXHIBIT G-549 MARKED)
BY MR. ELWELL:
Q. Mr. Wells, could you please read the exhibit number of the
next item?
A. 548.
Q. Do you recognize Government's Exhibit 548?
A. Yes.
Q. What is it?
A. It's self-employment for the Schedule C. It's a questionnaire.
Q. And do you recognize this questionnaire?
A. Yes.
Q. Where do you recognize it from?
A. Sunbelt.
MR. ELWELL: Your Honor, at this time we move to admit Government's Exhibit 548.
THE COURT: Any objection? 548 is admitted.(EXHIBIT G-548 MARKED)
BY MR. ELWELL:
Q. And the last one, Mr. Wells?
A. 536.
Q. Do you recognize Government's Exhibit 536?
A. Yes.
Q. What is it?
A. It's the same self-employment questionnaire.
Q. You can open it. Are there multiple pages in there?
A. Yes. Yes, it's self-employment, and it's got the different -- the different job -- it's for different jobs for
self-employment, as in, like, photographer.
Q. How do you use those forms?
A. We used that to -- to log into -- log in, like, the gross income and the expenses.
Q. Do you recognize those forms from Sunbelt Tax?
A. Yes.
MR. ELWELL: Your Honor, we would move to admit 536 into evidence.
THE COURT: Any objection? 536 is admitted.(EXHIBIT G-536 MARKED)
MR. ELWELL: To be clear for the record, that is 536, 548, 549, and 539.
BY MR. ELWELL:
Q. Mr. Wells, before the break, we were about to play a video. You have had an opportunity to view that video?
A. Yes, that is correct.
Q. And remind us, are the video clips we are about to view a fair depiction of a typical customer interaction at Sunbelt?
A. Yes.
MR. ELWELL: Ms. Tice, could you please play the first video clip.
(VIDEO OF G-560 PLAYED)
MR. ELWELL: Ms. Tice, if we could please pause.
BY MR. ELWELL:
Q. Mr. Wells, could you please orient us to what we were just
looking at?
A. She just entered Sunbelt Tax Service, and she is sitting in the reception area.
Q. And those people off to the right, what are they doing?
A. The people off to the right, they appear to be waiting for -- waiting to get their taxes done.
Q. Okay. When she walked in, she asked to get her taxes done?
A. Yes, sir.
Q. Are they typically asked to fill out any type of questionnaires or anything like that when you first walk in?
A. Yes, it's just basic information, basic knowledge of the taxpayer.
Q. What is included in basic information?
A. Name, last names, addresses, and dependents they are going to be claiming.
Q. Identifying information?
A. Yes.
Q. What's going to happen next?
A. She is going to be approached by the receptionist, and she's going to be asked who is she going to go see.
Q. Is she going to wait for a little while before she does that?
A. Yes.
Q. So this next clip, does it show when the receptionist
ultimately comes over?
A. Yes.
MR. ELWELL: If you could play the second video clip.
(VIDEO PLAY CONTINUES)
MR. ELWELL: If you could pause here.
BY MR. ELWELL:
Q. Who is this? A. That's Shauna. Q. And who is Shauna? A. Shauna is the receptionist. Q. What is her role? A. She helps the new clients that come in to help with their -- fill out the questionnaires, get the basic information. Q. And who is behind Shauna? A. That is me. Q. And what's going to happen next? A. Shauna is going to ask who is she going to see, and Ms. Marshall is going to say
MR. MUELLER: Your Honor, the video speaks for itself. I don't think we need his preview.
BY MR. ELWELL:
Q. And I apologize, Mr. Wells, my question was vague. We can just play the video and we can ask questions.
(VIDEO PLAY CONTINUES)
MR. ELWELL: Pause it here.
BY MR. ELWELL:
Q. What is Shauna doing at this point?
A. It appears like she's -- she's filling out the questionnaire, the due diligence for, like, if the child she is claiming would -- which school that child went to.
Q. And did Shauna ask Ms. Marshall what school her child went to?
A. No. It appeared not to.
Q. Did Ms. Marshall indicate she didn't know where her child went to school?
MR. MUELLER: Your Honor, asked and answered. The video has been played.
THE COURT: I'm going to sustain that. He's not in the scene. If it was a conversation between him and
MR. ELWELL: Oh, I can clarify that, Your Honor.
THE COURT: I'm saying you are asking him about a conversation between the person in the video and the agent. I think it does speak for itself, but
MR. ELWELL: Yes, Your Honor.
THE COURT: Go ahead.
BY MR. ELWELL:
Q. Mr. Wells, where are you in this video?
A. I'm at my desk.
Q. And are you participating in this conversation?
A. I'm filling out -- when Shauna asked me a question, I just looked up a school that she asked for me to look for, and I looked it up for her and told her what school in Byram --
Q. To be clear, did you make up that school?
A. Yes, I looked it up for Shauna to put down on the due diligence.
MR. ELWELL: We can continue playing.
(VIDEO PLAY CONTINUES)
MR. ELWELL: You can pause here.
BY MR. ELWELL:
Q. Mr. Wells, I was just hoping you could orient us as to kind of where you are in this scene. Are you pictured in the video?
A. No.
Q. Where are you actually in that scene while this is all going on?
A. I'm at my desk.
Q. And what's this black thing off to the right here?
A. That's my computer screen.
Q. Where are you relative to the computer screen?
A. In front of the computer screen.
Q. And when we have been seeing male speaker responding, is that your voice on this video?
A. Yes.
(VIDEO PLAY CONTINUES)
BY MR. ELWELL:
Q. Mr. Wells, what was Shauna doing during that video?
A. She was filling out the questionnaire for the folders.
Q. Did she have any other role in the preparation of the tax return?
A. No.
Q. And which questionnaire was she actually filling out?
A. It was mostly due diligence, the qualifying child.
Q. I would like to show you what's been admitted as Government's Exhibit 510.
MR. ELWELL: Ms. Tice, could you turn to Government's Exhibit 510 and turn to the first page?
BY MR. ELWELL:
Q. Mr. Wells, what is this?
A. That's the client file checklist.
Q. Is this typically the first page of a client file at Sunbelt Tax?
A. Yes.
Q. And what do the client files at Sunbelt Tax contain?
A. Repeat that.
Q. What did you all keep in the client files at Sunbelt Tax?
A. This checklist, and from what we see, assign 8879, computer printout of 8867.
Q. So without reading all of these forms, do you keep copies of the returns and other various documents?
A. Yes.
Q. If we could turn to page 26. Are these the IDs the customer provided?
A. Yes.
Q. Does this file also contain the questionnaire that Shauna filled out?
A. Yes.
Q. If we could turn to page 23. Do you recognize this?
A. Yes.
Q. What is it?
A. That's the due diligence interview.
Q. Do you recognize this handwriting?
A. Yes.
Q. Whose is it?
A. That's Shauna's.
Q. Who actually filled out this form?
A. Shauna.
Q. Is this what we saw her doing in the video?
A. Yes.
Q. And if we turn to page 24, who filled out the answer to these questions?
A. Shauna.
Q. All right. Turning back to the return preparation process, what happens after Shauna fills out this form, after she asks the basic questions, IDs, socials, all of that?
A. I get her W-2 and I start inputting all of her information into the computer.
Q. That's a good point. Did y'all use a computer program to prepare taxes?
A. Yes.
Q. What's the name of the program?
A. At first it was Taxwise, and then the one we had, I believe, if I can remember, it was Tax Slayer.
Q. All right. If we could play the third video clip.
(VIDEO PLAY CONTINUES)
MR. ELWELL: We can pause here.
BY MR. ELWELL:
Q. Mr. Wells, why did you suggest that you needed to get the agent's income up?
A. Because her income was low.
Q. And did you ask her if she had any other income?
A. Yes.
Q. What did you ask her?
A. I asked her if she did anything else on the side.
Q. And what did she say?
A. No.
Q. If we could, turn to Government's Exhibit 510 and show page 16. Is this a copy of the W-2 that you were provided by the undercover agent?
A. Yes.
Q. And what's the total wages?
A. 4,739.
Q. Based on the income reported here, is she likely to get a high refund?
A. No.
Q. If we can split this with Government's Exhibit 535. Where would Ms. Marshall's income, based on this, fall on this curve?
A. It is going to fall low below -- on the low end of the earned income tax credit.
Q. And what were you taught to do for customers like this?
A. To use self-employment to increase the income to increase the earned income credit.
Q. To be clear, were you taught to do this regardless of whether or not they actually had any self-employment?
A. Yes.
Q. Did you expressly ask Ms. Marshall whether she had any self-employment ?
A. Can you repeat that question?
Q. Did you expressly ask her whether she had any self-employment ?
A. I asked but she said no.
Q. Did you report self-employment anyway?
A. Yes.
Q. I would like to show you what's been admitted as Government's Exhibit 50. If we could turn to page 13.
Actually, let's turn to page 2 first, just to orient us. Mr.
Wells, what are we looking at here?
A. Lorel Marshall's 2016 tax return.
Q. On line 7, did you report her wages there?
A. Yes.
Q. What did you report on line 12?
A. 4,739.
Q. And directing your attention to line 12, what did you report there?
A. 6,179.
Q. Did that increase Ms. Marshall's income?
A. Yes.
Q. If we turn to page 13, what is this?
A. That's the Schedule C for Lorel Marshal.
Q. Do you need to fill out this form when you are reporting a side hustle for somebody?
A. Yes.
Q. Under the name of the proprietor, what did you report? Box A?
A. Janitorial service.
Q. Why did you report that Ms. Marshall had a janitorial services business?
A. Because she said she did custodial work with the temporary placement.
Q. To be clear, temporary placement was her W-2 employer,
wasn't it?
A. Yes.
Q. So that was not -- W-2, that is not a side hustle, correct?
A. No.
Q. Do you need a Schedule C for a W-2?
A. No.
Q. So why did you report a janitorial services business as her side hustle?
A. To increase her income.
Q. But why that business? Why not Uber driver or, I don't know, any -- delivery driver?
A. Because she was doing custodial work at a temporary placement, and putting down janitorial service seems more believable.
Q. Were you taught to do that?
A. Yes.
Q. Who taught you to do that?
A. Casey and Chris.
Q. And is that something you learned over time?
A. Yes.
Q. And how would that actually go? Was this like a classroom setting, or how did that actually go in the day-to-day of the work?
A. Can you rephrase that?
Q. Sure. I believe you said that you reported janitorial services to make it believable. I believe that was your word. Is that correct?
A. Yes.
Q. How were you actually taught that? Was that something you were taught at one time or over time?
A. Kind of like over time.
Q. And how would that actually go? Would that happen, like, when you were preparing someone's return?
A. Yes.
MR. MUELLER: Leading the witness again.
THE COURT: Well, he said how would it go. That's not leading.
BY MR. ELWELL:
Q. So how would that go? A. Just -- you make it seem like more believable. Like, if they were doing this type of job at this business, like where they have their W-2, just go by what they were doing, as what they were doing on the W-2 job. Q. Understood. And my question really is, how were you taught to do that? How did you learn to do that over time? Did you learn this all in one session or would you ask questions as the
MR. MUELLER: Objection. He's leading the witness and it's been asked numerous times. It's been answered.
THE COURT: I don't think it has been answered. Just phrase it in a nonleading way.
MR. ELWELL: Yes, Your Honor.
BY MR. ELWELL:
Q. Can you explain to the members of the jury how exactly you learned to make these more believable? A. If they were doing a job, like a skill at a job, use a familiar job on the self-employment. Q. But who taught you that? A. Casey and Chris. Q. And how did Casey and Chris actually teach you that? A. If they are doing a job at a
MR. SELLERS: Your Honor, asked and answered.
THE COURT: Overruled.
BY MR. ELWELL:
Q. Did Casey and Chris
THE COURT: Answer the question that was just asked.
A. Yeah. Just saying, like, if someone came in, they brought a W-2 in, and that W-2 said they worked at this job, I would -say, like, they worked security at a job, and it was a low W-2, I would just use, like, well, they're security at this job, so they probably did, like, self-employment security as a side hustle, and that's what I was taught to do.
Q. In taking your hypothetical, when somebody came in with a W-2 for security, did you ever ask anybody else in the office
for help on how to fill out the Schedule C?
A. No, I just used my head, and that's what I was taught to do at the beginning.
Q. Okay. And to be clear, if you had any questions about this, who would you go to?
A. I would go -- either go to Casey or Chris.
Q. And would you go to them or would they come to you?
A. I would ask -- I would ask them to come to my desk or I would go to -- go to their desk and they would probably either pull up the tax return on their computer, because they can pull the tax return up on their computer and look at it, and they would say it looks okay, and then I would go back to my desk and finish the return.
Q. Was Sunbelt a big office?
A. I would say it would probably be about the size of this room.
Q. Okay.
A. Roughly.
Q. And on -- in part 1, directing your attention back to Government's Exhibit 50, in part one you report income here. How much income did you report?
A. 8,761.
Q. And why did you report that amount of income?
A. I was taught to report a little higher on the self-employment so I can go in and report expenses. And that
would lower the adjusted gross income to where the maximum earned income tax credit would be --
Q. And to be clear, did Ms. Marshall ever provide you this amount of income?
A. No.
Q. How did you come up with this number?
A. I just put it in -- put in a random number.
Q. Did you make it up?
A. Yes.
Q. Is that what you were taught to do?
A. Yes.
Q. This is a fairly specific number. How did you come up with 8,761?
A. I was told not to put even numbers or odd numbers at the end.
Q. Who told you that?
A. Casey and Chris.
Q. And why?
A. It just -- it seems to -- I was told that the IRS system picks up odd -- picks up even -- picks up even numbers. It shows up more of a red flag.
Q. If we could go down to expenses. Did you also report expenses here?
A. Yes.
Q. If you just needed to increase income, why would you
report expenses?
A. To make it more believable.
Q. Believable to who?
A. To the IRS.
Q. Who taught you to do that?
A. Chris and Casey.
Q. And is this something you did at Sunbelt Tax regularly?
A. Yes.
Q. And did other return preparers similarly falsify self-employment income at Sunbelt Tax?
A. Yes.
Q. Did Casey?
A. Yes.
Q. Chris?
A. Yes.
Q. Gabe?
A. Yes.
Q. Did Casey ever check on your work?
A. Yes.
Q. How did would that go?
A. I asked him to have a look at it, see if I can -- if there's anything else I can do to increase the refund amount, or if the customer wasn't really satisfied with their refund amount, I would ask him to help me out.
Q. To be clear, when you are doing that, are you asking him
to help you put fake information on the return?
A. Yes.
Q. Was Casey aware of that?
A. Yes.
Q. Did Casey encourage you all to put self-employment deductions and education credits on returns?
A. Yes.
Q. How did he do that?
A. Could you repeat that?
Q. How did he encourage you?
A. Just --
Q. What would he say?
A. Just help the client to increase their refund amount.
Q. And when the clients -- to be clear, did you all also make more money when you put these forms on returns?
A. Yes.
Q. All right. If we turn to page 4, I would like to direct your attention to line 66A of this return. How much did you report for the earned income credit for Ms. Marshall?
A. 3,373.
Q. Is that based in part on the self-employment income you reported?
A. Yes.
Q. If we scroll down to line 75, what's the refund amount?
A. 3,781.
MR. ELWELL: If we could, play video clip 4.
(VIDEO PLAY CONTINUES)
MR. ELWELL: Pause it there.
BY MR. ELWELL:
Q. Did you hear that voice in the video?
A. Yes.
Q. Who was that speaking?
A. That's Casey.
MR. ELWELL: If we could play it.
(VIDEO PLAY CONTINUES)
MR. ELWELL: Pause here.
BY MR. ELWELL:
Q. Who are we looking at in the video? It's a little grainy.
A. That's Casey.
Q. What is he doing?
A. He's checking on work, checking on the work we done.
Q. Orient us a little bit. What exactly is he looking at?
A. He's looking at my screen.
Q. Was Casey an active manager?
A. Yes.
Q. Did he check on you all regularly?
A. From time to time.
Q. Could he generally see what you were doing in the office?
A. Yes.
Q. And to be clear, is he looking over your shoulder as you
are preparing the return?
A. Yes.
Q. If you had any questions, could you ask Casey?
A. Yes.
Q. And did you?
A. Yes.
Q. And is this typical of how you would interact with Casey when preparing a return?
A. Yes.
Q. Or asking questions?
A. Yes.
MR. ELWELL: We can play it. If we could jump to clip 5.
(VIDEO PLAY CONTINUES)
MR. ELWELL: Pause there.
BY MR. ELWELL:
Q. So we jumped ahead a little bit. I think the first question was, "Do I sign here?" What stage in the return preparation process are we looking at?
A. I'm having her sign all the documents.
Q. And are you done preparing her return at this point?
A. Yes.
Q. And what's the last step when you are done preparing somebody's return?
A. Finish up having her sign everything -- sign everything in
the folder, and then that's -- I think that's about it.
Q. When you are asking the clients to sign, did you typically review all the forms with them, tell her exactly what everything is?
A. Yes, sometimes, but sometimes it was too busy, so we kind of skipped over that.
MR. ELWELL: All right. We can play the video.
(VIDEO PLAY CONTINUES)
BY MR. ELWELL:
Q. Mr. Wells, at any point in that video, did you explain, or in real life interaction, did you explain to Ms. Marshall you were reporting a false side hustle on her tax return?
A. No.
Q. Did you typically tell customers when you were reporting false stuff on their tax returns?
A. No.
Q. Was it regular practice at Sunbelt to prepare returns with false businesses or side hustles?
A. Yes.
Q. And what was the point?
A. To increase the refund amount and increase the prep fees.
Q. And did you all receive a cut of those prep fees?
A. Yes.
Q. What was your cut?
A. 25 percent.
Q. Do you know if any of the individuals you worked with were ever audited by the IRS?
A. Yes.
Q. Who?
A. From what I heard, Jonathan, Casey and Chris have been.
Q. And were they assessed penalties as a result of those audits?
A. Yes.
Q. After those audits, were you encouraged to do anything differently to protect against future audits?
A. Have the clients sign more questionnaires, say, like, the checklist stuff and the due diligence.
Q. Forms like the ones we showed earlier, the due diligence forms?
A. Yes, that is correct.
Q. Were there additional forms you were also asked to put in your files?
A. Yes.
Q. If we could turn back to Government's Exhibit 510 and turn to page 31. What is this form?
A. That's the self-employment, janitorial self-employment, the questionnaire.
Q. Who provided you this questionnaire?
A. Chris -- I believe Chris fixed them up and printed them all out.
Q. And what were you encouraged to do with these forms?
A. To use them as questionnaires and put them in the files.
Q. What is reported on this form?
A. The self-employment expenses, like the gross income, advertisement, supplies, and other expenses.
Q. Do you recognize the handwriting on this form?
A. Yes.
Q. Who actually filled out this form?
A. I did.
Q. Did you fill out this form before you asked Ms. Marshall to sign it?
A. No.
Q. Did you ask Ms. Marshall to sign a blank form?
A. Yes.
Q. Was that typical?
A. Yes.
Q. At any point did Ms. Marshall provide you any of this information?
A. No.
Q. Is this form false?
A. Yes.
Q. Were you encouraged to keep forms like this in your client files?
A. That is correct. Yes.
Q. And what's the point?
A. To make it more believable, so like if the IRS comes to check our files, this will look like it's legit when they come check it.
Q. What do you mean by legit? Like Ms. Marshall actually provided this information?
A. Yes.
Q. And were you encouraged to go back and make sure you had these forms in your files?
A. Yes.
Q. Who encouraged you to do that?
A. Casey.
Q. Now, if we turn to page 17, what is this form?
A. That's the earned income credit due diligence interview.
Q. This looks kind of similar to the other form we looked at earlier from Shauna. Is this the form Shauna filled out?
A. No, I filled it out.
Q. What does this form relate to?
A. That's for the self-employment. That's like me asking where she worked for the self-employment.
Q. If we turn to page 18, did you ask Ms. Marshall to sign this form?
A. Yes.
Q. Did you review this form with her before you asked her to sign it?
A. No.
Q. Was any of this information even filled out before you asked her to sign it?
A. No.
Q. Was that a regular practice at Sunbelt to fill out false client questionnaires?
A. Yes.
Q. Did others similarly falsify their client questionnaires?
A. Yes.
Q. And there's kind of two different types of questionnaires we have looked at, self-employment and EITC. Who typically filled out the Shauna form? Did Shauna typically fill that out?
A. Yes.
Q. Did she typically do that based on customers with questions she asked clients?
A. Can you rephrase that?
Q. Did she typically do that by asking clients questions?
A. Yes.
Q. Are these forms different from that? These self-employment forms, did y'all typically do those after the fact?
A. Yes.
Q. Did you ever ask clients to sign copies of the actual schedules themselves?
A. Yes.
Q. Turn to page 9. What is this?
A. That's a Schedule C.
Q. Is this form signed?
A. Yes.
Q. Is there a place for this form to actually be signed? Is this document normally required to be signed?
A. No.
Q. Who asked Ms. Marshall to sign this form?
A. I did.
Q. Why did you do that?
A. I just -- so it looked like that Ms. Marshall reviewed -reviewed that form, and she signed off for it.
Q. And did we see in the video, did you ever explain this form to Ms. Marshall?
A. No.
Q. Did you ever tell her that you were reporting a janitorial services business for her?
A. No.
Q. And is that typical of how you would do this?
A. Yes.
Q. Did you hand her a bunch of papers?
A. Yes.
Q. Ask her to sign?
A. Yes.
Q. Where did you learn to do this?
A. This is something I came up with.
Q. On your own?
A. I believe I got it from some -- one of -- from one of the other employees.
Q. Do you remember who?
A. I believe Chris or --
Q. Were there a lot of return preparers at Sunbelt? Were five or six of you preparing returns?
A. Yes.
Q. Did you all similarly falsify Schedule Cs?
A. Yes.
Q. And at times, did you have opportunity to review other return preparers' client files?
A. Not often.
Q. But from time to time?
A. Yes.
Q. Did you see other return preparers also ask their customers to sign copies of the Schedule C?
A. Yes.
Q. When a client came in with a W-2, did you ever ask them to sign a copy of their W-2?
A. No.
Q. Did you ever ask them to sign a copy of their home mortgage interest statement?
A. No.
Q. Did you only ask clients to sign the false or questionable items?
A. Yes.
Q. Why?
A. Just trying to make it more believable.
Q. And did the other return preparers at Sunbelt also do that?
A. I believe so.
Q. Did Chris?
A. I think so.
Q. Gabe?
A. Yes.
MR. MUELLER: Calls for speculation, Your Honor.
THE COURT: Lay the foundation for that question. Sustained.
MR. ELWELL: I believe the witness already testified he reviewed others client files from time to time and would see these.
THE COURT: But specific -- that's a different
MR. ELWELL: Understood.
THE COURT: I'm not saying you can't try to lay a foundation, but there needs to be one laid.
MR. ELWELL: Understood, Your Honor.
BY MR. ELWELL:
Q. Do you know whether other return preparers at Sunbelt Tax 104 also asked their clients to sign false or questionable schedules? A. They might have, but I'm not sure. Q. Did you see other return preparers have these schedules signed? A. Not that I can remember. Q. And I just want to clarify, because I think we're maybe not -- if you could look at
MR. MUELLER: Maybe he just doesn't remember.
THE COURT: Let's see what the actual question is, and then if it is objectionable, you can object.
BY MR. ELWELL:
Q. Do you see Ms. Marshall's signature down here on the Schedule C?
A. Yes.
Q. Did other return preparers at Sunbelt Tax also ask their clients to sign copies of the Schedule C?
A. Yes.
Q. There is something else I want to ask you about the IRS audits. After the IRS audits, do you know whether Casey ever prepared returns under anybody else's name?
A. Yes.
Q. Whose name did Casey use?
A. He would either use my name or Chris' name, or Dwight's, and Gabe's.
Q. Jonathan?
A. No, I don't think much for Jonathan because Jonathan had a lot of clients.
Q. Jessica?
A. Yes.
Q. Did you let him prepare tax returns under your name?
A. Yes.
Q. Why?
A. It was pretty much like you let -- it was -- I would have got paid for that -- for that -- for that tax return.
Q. Explain what you mean by that.
A. I would have got a percentage of the prep fees.
Q. Is that the 25 percent you talked about earlier?
A. Yes.
Q. And how do you know that Casey prepared returns in your name?
A. Because he's handed me tax returns that he prepared and they were in my name.
Q. And to be clear, was the tax return done at that point when he handed it to you?
A. Yes, and as far as in the -- in the computer, it was done in the computer.
Q. What was left undone, if anything?
A. Some of the questionnaires and the Schedule C questionnaires and all of that.
Q. What were you expected to do with that?
A. Fill out the questionnaires.
Q. And how do you know that he prepared returns in other people's names?
A. I've seen him hand people -- hand the other employees a folder with the tax returns in them.
Q. Did he tell the other employees that he did this return in their name?
A. Yes.
Q. Was it a secret?
A. No.
Q. Common knowledge at Sunbelt?
A. Yes.
MR. SELLERS: Objection to hearsay.
THE COURT: Sustained.
BY MR. ELWELL:
Q. Can you tell us whether it is common knowledge at Sunbelt? A. Yes. Q. Was it? You have to verbally answer. A. Yes. Q. Did you and other return preparers at Sunbelt also prepare false tax returns for yourselves? A. Yes. Q. Did you prepare false tax returns for yourself? A. Yes. 107 Q. What false items did you claim on your own tax return? A. The business expenses and school credits. Q. Did you do that most years you worked at Sunbelt or American Tax? A. Yes. Q. Did you always prepare your own returns when you were working there? A. The last -- the last year I -- my last year that I worked there, I didn't prepare that one. Q. Did somebody else ever prepare your return at Sunbelt Tax? A. Yes. Q. Who? A. Chris. Q. And to be clear, when Chris prepared your return, were you actually working at Sunbelt Tax at that time? A. No, that was the year that I quit. Q. All right. I would like to show you what's I believe -before we show this, what's been admitted as Government's Exhibit 235. Just to make sure. I believe that's been
MR. ELWELL: At this time -- I'm glad I asked.
MR. MUELLER: I don't believe this has been admitted.
MR. ELWELL: I'm glad I asked. At this time, we would move to admit Government's Exhibit 235.
THE COURT: Any objection? 235 is admitted.(EXHIBIT G-235 MARKED)
MR. ELWELL: Permission to publish, Your Honor?
THE COURT: You may.
MR. ELWELL: Ms. Tice, could you pull up Government's Exhibit 235 and turn to page 2.
BY MR. ELWELL:
Q. Mr. Wells, do you recognize this?
A. Yes, that's my tax return.
Q. And what year tax return is this?
A. 2017.
Q. And when would this return have been prepared?
A. That would have been prepared in 2018 for the 2017 tax season.
Q. Were you working at Sunbelt Tax in 2018?
A. No.
Q. Did you ask somebody to do your return?
A. Yes.
Q. Who did you ask?
A. I asked Chris.
Q. If we could turn to page 4 -- 5, actually. Whose name is listed in the paid preparer section?
A. Chris Randell.
Q. And the date?
A. 4/16/2018.
Q. Is that around the time you asked Chris to prepare your return?
A. Yes.
Q. Did you send Chris your information to prepare your return?
A. Yes.
Q. Did you actually go to Sunbelt in person?
A. No, I was in Columbus.
Q. So how did you send them your information?
A. I e-mailed. I scanned my W-2 and my income documents.
Q. To be clear, when you asked Chris to prepare this return, did you know whether he was going to prepare a false return?
MR. HIGH: Objection to leading, Your Honor.
BY MR. ELWELL:
Q. Can you tell us
THE COURT: Rephrase that.
BY MR. ELWELL:
Q. Can you tell us whether you were asking Chris to prepare a false return?
A. Yes.
Q. And why? What were you hoping to get?
A. Because I was -- I believe I was owing money on that tax return.
Q. And so what were you looking for?
A. Just to get out of the hole I was in so I wasn't owing on that tax return.
Q. Did you want to get a tax refund?
A. Just where I wasn't owing.
Q. Did you provide Chris any unreimbursed employee business expenses?
A. No.
Q. Will you turn to page 7. On line 1, this reports vehicle expenses of $6,636. Is that true?
A. No.
Q. Did you provide that to Chris?
A. No.
Q. Line 5, meals and entertainment, $6,843, is that true?
A. No.
Q. Did you provide that to Chris?
A. No.
Q. Who came up with those numbers?
A. He did.
Q. Did you know that's what he was going to do?
A. I believe in a way he was going to do that.
Q. Will you turn to page 12. Uniform expenses. Did y'all wear uniforms at Sunbelt?
A. No, it was just -- it was mainly just wear polos and a nice pair of pants.
Q. Did you spend $1,649 on uniforms?
A. No.
Q. Did you provide that to Chris?
A. No.
Q. Would Chris have known that, if you don't have uniforms?
A. No.
Q. Would Chris have known whether or not y'all had uniforms at Sunbelt Tax?
A. Can you rephrase that?
Q. This is a 2017 tax return?
A. Yes.
Q. Did you wear uniforms at Sunbelt Tax in 2017?
A. No, we just wore --
Q. Did Chris work with you at Sunbelt Tax in 2017?
A. Yes.
Q. Small tools for work, job supplies, other expenses, did you provide any of these?
A. No.
Q. To be clear, though, did you know Chris was going to do something like this on your return?
A. Yes.
Q. Did you ever prepare anybody else's -- any of your other employees' tax returns at Sunbelt Tax?
A. No.
Q. I would like to show you -- and I do believe this has been admitted, Government's Exhibit 212. I would like to show you what's been admitted as Government's Exhibit 212. If we could turn to page 2. Do you recognize this?
A. Yes.
Q. What is it?
A. This is a 2014 tax return for Chris Randell.
Q. Did you ever prepare Chris' tax return?
A. No.
Q. Would you turn to page 4 -- 5. I'm sorry. Would you please read whose name is listed in the paid preparer section?
A. That's my name.
Q. Did you prepare this return?
A. No, I did not.
Q. Do you know why your name is on it?
A. Chris put it in my name.
Q. And how do you know that, other than seeing this here?
A. Because I did not prepare it.
Q. Did Chris ever tell you that he would prepare a return in your name?
A. Once he was finished with it, with the return, he told me he put his tax return under my name so I will get the prep -I'll get the prep fees for that tax return.
Q. And were you okay with that?
A. It didn't bother me much, but yeah.
Q. Did you make money from this return?
A. Yes.
Q. Could you turn to page 8. Do you recognize this?
A. Yes.
Q. What is it?
A. It's an education credit.
Q. And who is the student listed?
A. Chris Randell.
Q. And where is it listed he attended school?
A. Hinds Community College.
Q. You worked with Chris in 2014; is that right?
A. Yes.
Q. Do you know whether he attended Hinds?
A. No, he did not.
Q. Is this information true?
A. No.
Q. I would like to show you what's been admitted as Government's 213. Turn to page 2. What is this?
A. This is a 2015 for Chris Randell, a tax return.
Q. Did you prepare this return?
A. No.
Q. Turn to page 5. Is that your name next to the paid preparer?
A. Yes.
Q. Did you know Chris was going to prepare this return in your name?
A. At the -- when he was done with it at the time, he told me.
Q. Were you okay with that?
A. I didn't object to it.
Q. Will you turn to page 13. Do you recognize this?
A. Yes.
Q. What is it?
A. That's the education credit.
Q. If we turn to page 14, whose student name is listed?
A. Chris Randell.
Q. Where is it listed he attended school?
A. Hinds.
Q. Did you work with Chris in 2015?
A. Yes.
Q. Did he attend Hinds Community College?
A. No.
Q. Is this true?
A. It is false.
MR. ELWELL: We are done with this exhibit. You can take it down.
BY MR. ELWELL:
Q. I would like to ask what you, Casey, Gabe, Chris, Jonathan, everybody got out of this. If we could, turn to Government's Exhibit 510 and turn to page 13. What is this sheet, Mr. Wells?
A. That is the River City Bank deposit account agreement.
Q. And does this -- what's reported here in the middle of the page, if we could zoom in there?
A. That is the preparation fees.
Q. And do some of these fees go to Sunbelt and some of them go other places?
A. Yes.
Q. Where is Sunbelt's fee listed, the primary Sunbelt fee?
A. Tax preparer fees.
Q. And this is for Ms. Marshall's return, correct?
A. Yes.
Q. How much did you charge Ms. Marshall?
A. Five hundred.
Q. Explain how that worked. Did Ms. Marshall pay you cash for that return?
A. No.
Q. How do you get paid?
A. That is deducted from the tax return.
Q. And where does the tax prep fee go then?
A. It goes to Sunbelt.
Q. Does it go to a bank account, cash?
A. Oh, yes, the refund goes to a bank account.
Q. And the prep fee?
A. Yes.
Q. Where does that go?
A. The prep fee goes to Sunbelt to a bank account.
Q. All right. How long about did it take you to prepare Ms. Marshall's return?
A. About 10 or 15 minutes.
Q. In total, how long was Ms. Marshall at Sunbelt? Around an hour?
A. Yes.
Q. Was this an abnormal amount to charge customers?
A. No.
Q. Was every tax return five hundred dollars?
A. Not every tax return.
Q. How is this fee determined?
A. If you had earned income credit.
Q. Did Sunbelt charge more for earned income credits?
A. Yes.
Q. Did Sunbelt charge more for anything else?
A. Self-employment and school credits and deductibles.
Q. I want to clarify whether the fees were based on the amount of the refund or the schedules, which one was it?
A. It was based off the earned income credit in the forms.
Q. A form-based fee?
A. Yes.
Q. Were you encouraged to charge high fees?
A. Yes.
Q. By who?
A. Casey.
Q. Did Casey ever check on the fees you were charging?
A. Yes. Yes.
Q. Did he ever give you any instruction?
A. Just make sure -- make sure if they got kids, self-employment, education credits, make sure it is over five hundred.
Q. What was Ms. Marshall's proceeds? Are those listed here?
A. Can you rephrase that, please?
Q. Down at the bottom, it says "estimated federal proceeds." What is the number listed there?
A. $,097.
Q. What is that number?
A. That's what she will -- will receive on a check for a refund.
Q. Did Sunbelt regularly generate high refunds for their clients?
A. Yes.
Q. Did that attract business?
A. Yes.
Q. Was Sunbelt busy?
A. Yes.
Q. How busy?
A. I'm pretty sure around 3,000 returns and up.
Q. In a tax season?
A. Yes.
Q. Of that $500, what was your cut?
A. 25 percent.
Q. And who calculated that?93
A. Casey.
Q. And when did he do that?
A. By the end of the season.
Q. I would like to show you what's been -- I would like to show the witness, Ms. Powell, what's been marked as Government's 544. Mr. Wells, do you recognize this?
A. Yes.
Q. What is it?
A. It's a printout of the total returns and the total fees and the average fees that was charged.
Q. And there's writing on this form?
A. Yes.
Q. Do you know whose writing that is?
A. Yes.
Q. Whose?
A. That's Casey's.
MR. ELWELL: Your Honor, at this time, we would move to admit Government's Exhibit 544.
THE COURT: Any objection? 544 is admitted.(EXHIBIT G-544 MARKED)
MR. ELWELL: Permission to publish, Your Honor?
THE COURT: You may.
BY MR. ELWELL:
Q. Mr. Wells, I know you have been looking at this, but the jury is just seeing it. Could you please explain to the ladies
and gentlemen of the jury what they're looking at?
A. This is a printout of the total returns.
Q. Does it say that there at the top left?
A. Yes, total returns 453. Total fees of 218,539.
Q. There's a name written above that. Whose name is that?
A. That's my name.
Q. What was your cut of the total fees?
A. 54,634.
Q. Is that around 25 percent of the total fees?
A. Yes.
Q. And to be clear, was this for returns you primarily prepared between January and April?
A. Yes.
Q. And Casey paid you that over the year?
A. Yes.
Q. And how were you paid?
A. By direct deposit, by check.
Q. Bi-weekly?
A. Yes, bi-weekly.
Q. Could you turn to the next page? Whose name is at the top of this form?
A. Johnny. That is Jonathan Barefoot.
Q. There were two Johns at Sunbelt?
A. Yeah, there was me, John, and then there was Jonathan, and they called him Johnny.
Q. How many returns were prepared by Jonathan?
A. 770.
Q. You said he was busy, right?
A. Yes.
Q. Did he have a lot of customers?
A. Yes.
Q. What are his total fees?
A. 300,400 -- 345,031.
MR. ELWELL: Am I reading it correctly?
THE COURT: Talk one at a time. Sir, repeat the answer.
A. It's 345,031. So it was 345,031.
BY MR. ELWELL:
Q. And what's Jonathan's cut?
A. 86,257.
Q. Again, for returns prepared between January and April?
A. Yes.
Q. Is that more than y'all were making at American Tax?
A. Yes.
Q. Would you turn to the third page? Whose name is written at the top of this one?
A. Chris.
Q. Who do you understand Chris to be?
A. Christopher Randell.
Q. What are his total returns?
A. 424.
Q. And total fees?
A. 203,577.
Q. What was Chris' cut?
A. 50,894.
Q. If y'all received 25 percent, who received the remaining 75?
A. The company, Sunbelt.
Q. And who owned Sunbelt?
A. Casey.
Q. To be clear, was Casey the only owner of Sunbelt?
A. I believe he had a partner.
Q. Do you know who his partner was?
A. Spencer Vice.
Q. Was he involved in the tax return side of the business?
A. No.
Q. Was there a different side of the business?
A. We did insurance, health insurance.
Q. Was he involved in that side of the business? Was Spencer involved in that side?
A. Yes.
Q. Do you know if Casey made a lot of money from Sunbelt?
A. Yes.
Q. How do you know that?
A. He bought houses and bought cars, bought a boat and ATVs,
went on cruises.
Q. Did he show his wealth?
A. In ways.
Q. We can take this down. Mr. Wells, were you at Sunbelt Tax when the agents came with the search warrant?
A. Yes.
Q. Did you talk with federal agents at that time?
A. Yes.
Q. When they asked you, did you initially deny preparing false tax returns?
A. Yes.
Q. Why did you do that?
A. Because I was assured that what we were doing wasn't anything bad.
Q. Who told you that?
A. Casey.
Q. Was that true?
A. It was false.
Q. Why did you tell the agents that you weren't preparing false returns?
A. I was kind of like in denial.
Q. Did you say that you didn't know whether other people prepared false returns?
A. I don't remember.
Q. Well, if you said that, was that true?
A. Excuse me?
Q. Was that true?
A. That other people were doing false returns?
Q. Did other people prepare false returns?
A. Yes.
Q. So when you told that to the special agents, that was not true?
A. Can you repeat -- can you phrase that better?
Q. Yes. When you denied preparing false returns to the special agents, was that false?
A. Yes.
Q. Are you telling the truth here today?
A. Yes.
Q. At some point, did you leave Sunbelt Tax?
A. Yes.
Q. When did you leave?
A. It was kind of by the end of the summer of 2017.
Q. Was that after the agents came with the search warrant?
A. That was -- the agents came in by the end of the tax -the filing season, and I stayed on to do the office services throughout the off season, and then I -- then I quit by around -- I believe around -- around August or September, something like that.
Q. Why did you leave?
A. I just decided I didn't want to do taxes anymore. I
didn't want to be involved in doing tax anymore.
Q. To be clear, Mr. Wells, did you know what you were doing was wrong?
A. Yes.
MR. ELWELL: A moment to confer, Your Honor.
BY MR. ELWELL:
Q. Mr. Wells, briefly, earlier I was asking you about whether Casey prepared returns in other people's name at Sunbelt. Did other people let Casey use their names to prepare tax returns?
A. Yes.
Q. Did anybody have any problems with Casey preparing returns in their name?
MR. MUELLER: Calls for speculation.
THE COURT: Sustained.
BY MR. ELWELL:
Q. Do you know whether anybody had any problems?
A. I remember one time Jessica said that she didn't like how Casey was preparing tax returns in her name.
MR. ELWELL: Thank you, Mr. Wells. Nothing further at this time.
THE COURT: Mr. Mueller.
MR. MUELLER: I was going to ask if we could take a quick comfort break.
THE COURT: Sure. Let's see. The Court will be in recess until 2:40, about 15 minutes.
(RECESS TAKEN AT 2:21 P.M. UNTIL 2:43 P.M.) CROSS-EXAMINATION
BY MR. MUELLER:
Q. Good afternoon, Mr. Wells.
A. How are you?
Q. My name is Matt Mueller. I represent Mr. Earnest in this case.
A. Okay.
Q. Isn't it true, Mr. Wells, you prepared tax returns for at least six years, correct?
A. Yes.
Q. And approximately every year between 2013 through 2017, correct?
A. Yes.
Q. Did I miss any years? Did you prepare any before that?
A. No.
Q. Prepare any returns since then?
A. No.
Q. But that's a solid six years of tax return preparation?
A. Yes.
Q. And you've told the government on a number of occasions you prepared around 400 to 500 returns a year in that period, right?
A. Yes.
Q. And isn't it true you first learned how to prepare tax
returns at American Tax Service?
A. Yes.
Q. From Jeff Cox, right?
A. Jeff wasn't the person who taught me, though.
Q. Jake Cox taught you?
A. Yes.
Q. Jeff Cox was the owner?
A. Yes.
Q. And he was Jake Cox's brother; is that right?
A. Yes.
Q. And you didn't much like working for Jeff Cox, did you?
A. No.
Q. And is that why when Mr. Earnest and others formed American Tax -- excuse me, formed Sunbelt Tax, you went along with them?
A. Yes. Yeah, Casey, Chris and Jonathan were just going to leave American Tax, and they offered me to go with them.
Q. Right. And especially during the busy season, which is about the first quarter of the year, right?
A. Yes.
Q. It is hard work, isn't it?
A. Yes.
Q. Certainly there's other probably more physically difficult work, but mentally, you are sitting at a desk all day dealing with customers, right?
A. Yes.
Q. Entering data into computers all day, right?
A. Yes.
Q. And reviewing documents?
A. Yes.
Q. And so you didn't feel like you were fairly compensated at American Tax Service, did you?
A. No.
Q. The offer to come work at Sunbelt Tax Service felt like a more fair deal from a compensation standpoint, right?
A. Yes, that is correct.
Q. And you weren't unhappy with your compensation at Sunbelt Tax Service, were you?
A. No. I believe it was very fair.
Q. At Sunbelt?
A. Yes, at Sunbelt.
Q. And when you were at Sunbelt Tax Service -- Sunbelt was open all year round, right, not just during tax season?
A. Yes, it was all year round.
Q. So although maybe the busiest time for customers to walk in and want to have taxes prepared was at the beginning of the year, you guys didn't close up and leave town. You were around all year?
A. Yes.
Q. And, in fact, some taxpayers did come at various times
during the year with questions, maybe they were contacted by the IRS, things like that?
A. Yes.
Q. And you were there?
A. Yes.
Q. You were paid through a payroll, right?
A. Yes.
Q. And at the end of the year, you got a W-2 to prepare your taxes, didn't you?
A. Yes.
Q. Payroll taxes were withheld from that check every week?
A. Yes, federal and state.
Q. Federal and state. Sunbelt Tax paid their employer share of those payroll taxes, right?
A. Yes.
Q. That didn't happen at American Tax, did it?
A. No.
Q. So it's fair to say Sunbelt Tax was run as a legitimate business, correct?
A. Yes.
Q. Now, you mentioned that there was a co-owner of Sunbelt Tax, correct?
A. Yes.
Q. And it's your testimony that he wasn't involved in the day-to-day tax preparation?
A. Yes. If we are talking about Spencer, he wasn't involved in the day-to-day tax service side.
Q. But he was nonetheless a 50-percent owner, correct?
A. Yes, I believe so.
Q. So 50 percent of the profits of Sunbelt Tax went to
Mr. Vice, correct?
A. Not to my knowledge, but that's --
Q. Did more than 50 percent go to Mr. Vice?
A. I do not -- I don't -- not to my knowledge.
Q. Do you know how much Mr. Vice made off Sunbelt Tax Service?
A. No, I do not.
Q. Now, you talked a little bit about your responsibilities at Sunbelt. I want to talk for a moment about Mr. Earnest's responsibilities at Sunbelt. You observed his working day over the years, correct?
A. Yes.
Q. So who at Sunbelt was responsible for hiring and firing employees? It wasn't you, was it?
A. No.
Q. That was Mr. Earnest, right?
A. Yes.
Q. That was something he had to take care of?
A. Yes.
Q. Who was responsible for supervising employees? That
wasn't you, was it?
A. No.
Q. That was Mr. Earnest?
A. Yes.
Q. And, now, what about the kind of emergency that pops up sometimes in an office? Mr. Earnest dealt with that, right?
A. Yes.
Q. You didn't have to deal with that?
A. No.
Q. If an employee or two had to call out sick for a particular day, Mr. Earnest had to figure out how to make the office work, right?
A. Yes.
Q. If there was a problem with the Internet or other technology, he would have to deal with that, right?
A. Yes.
Q. If there were issues with the landlord, right, he would deal with that?
A. Yes.
Q. Interacting with Capital Tax Management, that's something he would typically do, right?
A. Yes.
Q. Training new employees, that wasn't your job, was it?
A. No, it wasn't.
Q. It's fair to say you sat at your desk all day and you
prepared tax returns?
A. Yes.
Q. And you had your own desk, right?
A. Yes.
Q. Had your own computer?
A. Yes.
Q. You had what you needed to do that job?
A. Yes.
Q. You weren't sharing your computer with any other tax preparers, right ?
A. No.
Q. Weren't sharing your desk, right?
A. No.
Q. You didn't have much to say about Jonathan Barefoot, but he worked at Sunbelt Tax Service the entire time you were there, right?
A. Yes.
Q. And like you, he was just the return preparer, right?
A. Yes.
Q. He didn't have to worry about all of those issues that Mr. Earnest had to worry about, right?
A. No.
Q. He wasn't putting out all the various fires that could pop up in a building or in a business?
A. No.
Q. He also had his own desk and computer?
A. Yes.
Q. And he sat there more or less all day and prepared tax returns?
A. Yes.
Q. He prepared the most tax returns of anybody, didn't he?
A. Who, Jonathan?
Q. Mr. Barefoot.
A. Yes, he did.
Q. And he prepared more tax returns than you?
A. Yes.
Q. Although you prepared, you said, 4 to 500 a year roughly, right?
A. Yes, it was about around 400.
Q. And he had been -- he had been preparing tax returns longer than anyone else. Isn't that right?
A. Yes, that is correct.
Q. And he actually had customers who came from American Tax Service over to Sunbelt?
A. Yes.
Q. I want to ask you about this Capital Tax Management.
Where were they located?
A. I believe they were in Columbus, Georgia.
Q. Okay. Columbus, Georgia. And what was their role in terms of Sunbelt?
A. I believe that's the Service Bureau.
Q. Service Bureau? Is that what you said?
A. Yes.
Q. What does a Service Bureau do for a tax return preparation business?
A. They are to batch the returns and they separated the prep fees and all of that. I'm not too sure because I'm just going off by what --
Q. What you remember?
A. -- basic knowledge of what it is, because I wasn't involved in that part right there.
Q. You were shown a list of fees that are settled out when a tax return is filed. You saw that?
A. Yes.
Q. And so you know which one of those fees went to Capital Tax Management?
A. I do believe it was like the technology fees and the Service Bureau fees.
Q. Right. So that portion didn't go to Sunbelt, did it?
A. No, I don't think so.
Q. And that was to compensate Capital Tax Management for providing software, right?
A. Yes.
Q. So you testified I think that that Taxwise and Tax Slayer were used in different years?
A. Yes.
Q. And that platform was provided by Capital Tax Management, right?
A. Yes.
Q. Isn't it also true Capital Tax Management was a resource that preparers at Sunbelt could call with questions, right?
A. Yes, I believe so.
Q. And they also provided certain training materials about the preparation of tax returns to Sunbelt, correct?
A. Yes.
Q. And they would provide those materials each year, right?
A. I didn't get that -- say, like that book right there, I never received one of those.
Q. But they were in the office if you wanted to review them, correct?
A. Yes.
Q. You just didn't choose to review them?
A. I didn't -- I didn't have a look at it.
Q. You just sat at your desk and plugged away at what you were doing?
A. Yes, I just prepared tax returns.
Q. And so you never called Capital Tax Management if you had a particular question about a tax return?
A. No.
Q. But they were available for folks at Sunbelt, weren't
they?
A. Yes.
Q. And as a tax preparation business, Sunbelt didn't have to pay a fee to an outside service bureau for their service, did you?
A. Can you rephrase that, please?
Q. Yeah. There's nothing in the law that required Sunbelt to retain the Service Bureau to assist in the operation of the business, was there?
A. I'm not too sure on that one.
Q. I'm going to hand you what's been marked and actually admitted into evidence as Government's Exhibit 539. Can you take a look at this?
A. Sure.
Q. And I believe your testimony was that you recognize that as being a handbook that was present at Sunbelt, right?
A. Yes.
Q. And have you read that handbook?
A. Not this one.
Q. Okay. Can you turn around the back and take a look and tell me what year is on that handbook?
A. 2016.
Q. What training did you -- any outside training that you took during the time you were at Sunbelt Tax?
A. I didn't have any training out of Sunbelt Tax.
Q. But you are aware that other preparers have been provided training at Sunbelt, correct?
A. Yes.
Q. And some of them even went to Columbus, Georgia to Capital Tax Management?
A. Yes, I believe so.
Q. Do you recall who went to be trained at Capital Tax Management?
A. I believe James -- Gabe went to Capital Tax, and I'm thinking Dwight did, but I -- that's just -- just in theory for me.
Q. And you say that, what, because they were hired after you had started with American Tax Service -- or at Sunbelt Tax Service?
A. Yes.
Q. Thank you.
MR. MUELLER: May I approach, Your Honor?
THE COURT: You may.
MR. MUELLER: Ms. Powell, could I have the document camera? Just pull it up.
BY MR. MUELLER:
Q. I'm going to turn to page 19 of Government's Exhibit 539 and have you take a look at that. Do you see this page, Mr. Wells?
A. Yes.
Q. It appears to be, correct me if I am wrong, a page that gives an explanation as to how to determine a qualifying child for the earned income tax credit. Do you see that?
A. Yes.
Q. In addition to you having printed explanations, there's actually some handwritten notes on the top?
A. Yes.
Q. Do you know whose handwriting that is?
A. If I would have to guess, that would have been Casey's handwriting.
Q. Okay. What does it say on the top? Can you please read the handwritten notes?
A. "Make copies and" -- what is that? -- oh, "make copies and ask for all documents for your files. Let your clients know the possibility of" --
Q. Does that say auditing?
A. -- "of auditing. Explain to your clients."
Q. And so if you are in the tax preparation business, that's good advice, right, make sure to look for all documents?
A. Yes.
Q. Right. And to document it in the file?
A. Yes.
Q. And to let your clients know that all of these returns could be audited, so this better be accurate, right?
A. Yes.
Q. I'm going to have you take a look at page 39 of this exhibit. Do you see that, sir?
A. Yes.
Q. And on the bottom of that page, there's a portion that discusses the American Opportunity Credit, right?
A. Yes.
Q. And it starts listing off the qualifications for starting in the year 2016 tax year. Do you see that?
A. Yes.
Q. There is also some handwriting on the side in the margin. Do you see that?
A. Yes.
Q. I'm going to turn it -- I'm not going to make you turn your neck to read it. Can you read that?
A. "Only can have college credit for four years."
Q. Right. And that's one of the requirements of the American Opportunity Act Credit, right?
A. Yes.
Q. That can only be claimed for four years?
A. Yes.
Q. That's also accurate?
A. Yes.
Q. And good information for a preparer to know, right?
A. Yes.
Q. If I can turn your attention to page 41. Do you see that
page?
A. Yes.
Q. And tell me if I'm wrong. That's a 1098-T, right?
A. Yes, that is correct.
Q. Tuition statement?
A. Yes.
Q. That's something that the IRS sends to a taxpayer -- or, no, that the educational institution sends to a taxpayer and to the IRS, right?
A. Yes.
Q. Those educational institutions, they don't send a copy to the return preparer, do they?
A. Can you repeat?
Q. Yeah. The educational institution, the school, they are required to give a copy of this to the taxpayer, right?
A. Yes.
Q. They are also required to give a copy -- they file one with the IRS too?
A. Yes.
Q. But they don't send a copy to Sunbelt, the tax business, do they?
A. No.
Q. That's incumbent on the taxpayer to provide, right?
A. Yes.
Q. Do you know if this was required?
A. Yeah, that's required.
Q. Required for the taxpayer to have received one, right?
A. Yes.
Q. Did you read the writing on the bottom?
A. "This is the form needed for educational -- "for education. Must have this the year of 2016. 1098-T needed in files. $510 fine for it not being in files. Must have."
Q. Okay. So that's also good for a tax preparer to know, right?
A. Yes.
Q. Accurate information. But that was new in 2016 tax returns, wasn't it ?
A. Yes.
Q. In 2015 tax returns, there was no enhanced due diligence requirement for the education credits, were there?
A. I believe not, yeah.
Q. And going back in time there before, there weren't, right?
A. Yes.
Q. This was a new requirement in the law starting in the 2016 tax year, right?
A. Yes.
Q. Which means those were returns that y'all would have been preparing in 2017, right?
A. Yes.
MR. MUELLER: May I approach the witness, Your Honor.
THE COURT: You may.
MR. MUELLER: Let the record reflect I'm approaching the witness with what I have marked Defendant's Exhibit 2. There should be copies in the binders I provided the Court and the government.
BY MR. MUELLER:
Q. While Mr. Elwell is taking a look at the binder, can you just, without telling us what it is, take a look at it?
A. It's an office handbook from Capital Tax Management.
Q. And I'm not going to certainly ask you to read every page, but can you flip it over and see what year that's for?
A. Okay. 2017.
Q. Okay. And 2017, is that a document that you recognize as would have been kept by Sunbelt in the office in 2017?
A. Probably so.
Q. Okay. And you were present when the IRS executed a search warrant on March 22, 2017, right?
A. Yes.
Q. And they didn't take everything, did they?
A. I think they took -- yeah, I think they took everything.
Q. Would you be surprised to learn they left that behind?
A. No. I don't think -- I always saw this handbook like maybe once or twice.
Q. Is that similar to Government's Exhibit 539, only much thicker in terms of number of pages?
A. Yes.
Q. And that cover page you are looking at says "Training and due diligence"?
A. Yes.
Q. And it also reflects that it came -- appears to come from Capital Tax Management, right?
A. Yes.
Q. Thank you.
MR. MUELLER: May I approach, Your Honor?
THE COURT: Yes.
MR. MUELLER: Ms. Powell, is there any way to activate the podium here for viewing purposes?
BY MR. MUELLER:
Q. Before I -- okay. This isn't published. Thank you. I'm still getting a handle of the technology.
Of those 400 to 500 tax returns you prepared each year for six years, I would expect you can't remember everyone whose tax return you prepared?
A. No.
Q. For example, you could be at the grocery store in line with someone you may have prepared a tax return for four or five years ago and you might not recognize them?
A. No, I probably wouldn't recognize them.
Q. Has it ever happened where people come up to you in public and say, hey, there's my tax return preparer?
A. Not off the top of my head, no.
Q. You can't recall a time that happened?
A. I mean, I know some of them that I have prepared taxes for because I've had friends that come in that did -- they came in and I did their tax returns that I've met in public.
Q. So -- right. If you have a preexisting relationship with someone who you also prepared their tax returns, you would, of course, recognize them?
A. Yes.
Q. But perhaps just from even an annual encounter for business purposes, you may or may not?
A. Yeah, may or may not.
Q. You are focused on your work for the most part?
A. Yes.
Q. So I'm going to show you -- if you could take a look -- if we could publish what's been admitted as Government's Exhibit 64. Do you see that, Mr. Wells?
A. Yes.
Q. I will blow it up for you. What is that?
A. That's a 2016 tax return for Margaret Johnson.
Q. I'm going to -- I showed you the top portion of page 1. Page 1 of the return, right? This is page 2 of the exhibit. Do you see that?
A. Yes.
Q. Okay. And I think I need to -- here we go. Do you see
that return? There's wages listed on line 7.
A. Yes.
Q. When I draw your attention on page 3, it lists John Wells as tax preparer, correct?
A. Yes.
Q. That's because you prepared this return, didn't you?
A. Yes, I believe so.
Q. Now, I'm going to show you Government's Exhibit 65. Do you see this return?
A. Yes.
Q. Well, you see that it is marked Government's Exhibit 65?
A. Yes.
Q. Oh, excuse me. I had the wrong -- the wrong document. I'm going to show you what's been marked as Government's Exhibit 308. Okay, Mr. Wells? And this has been admitted, I believe.
MR. ELWELL: Yeah.
BY MR. MUELLER:
Q. This is a printout of a preparer information report for your PTIN. Do you see that?
A. Yes.
Q. I'll blow it up for you. Do you see that?
A. Yes.
Q. That was your preparer identification number that ends in 7109?
A. Yes.
Q. And it looks like this particular one relates to the tax years '14, '15, '16 and '17, right?
A. Yes.
Q. Now, for 2014, you were still -- were you with American Tax or with Sunbelt Tax?
A. 2014 --
Q. Processing -- filing, processing during that tax year, you would have been with who?
A. Yeah, I think we were at Sunbelt for filing 2014.
Q. 2014 filing year, that's your testimony, was with Sunbelt?
A. Yes.
Q. How sure are you? That was a question. How sure are you that you were preparing tax returns in 2014 for Sunbelt?
A. Let me think. We did -- American Tax, it was year '13 and '14, and then the filing season for '14, I was at Sunbelt.
Q. Right. But for -- where were you physically sitting and preparing tax returns in 2014, if you remember?
A. In 2014?
Q. 2014.
A. That's when I went to Sunbelt.
Q. In 2014?
A. Yes. But we started at Sunbelt in 2015, so it would be 2014 filing season.
Q. Okay. The question was, where were you preparing tax
returns in 2014, for the 2013 year?
A. At American Tax.
Q. Okay. I should say, this is the first time I've asked you these questions, right?
A. Well, it's the years I'm messing up because, you know, like, '14, for 2014, you file in 2015 and stuff. It gets -- it sometimes gets me backwards.
Q. No, I hear you. And we haven't had a chance to practice these questions, have we?
A. What's that?
Q. Before today, we haven't had a chance to practice this, have we?
A. No.
Q. It's the first time I've asked you these questions?
A. Yes.
Q. Now, on this page of Government's Exhibit 308, this is the filing data for the 2015 year. So this year you were at Sunbelt, correct ?
A. Yes.
Q. So this would be returns that you prepared at Sunbelt, and it shows that you prepared -- your PTIN prepared 437. Do you see that?
A. Yes.
Q. And of those, a very high percentage claimed that American Opportunity Act Credit, correct, about 88 percent?
A. Yes.
Q. Let's look for the 2016 processing year, which would have been the 2015 taxes, right?
A. Yes.
Q. Here, 657 returns, about the same percentage American Opportunity Credit, right, a very high percentage?
A. Yes.
Q. I'm now moving up. Do you see the 2017 processing year now?
A. Yes.
Q. Only 19 percent?
A. Yes.
Q. And isn't that because that documentation requirement changed, right ?
A. Yes.
Q. Folks knew -- well, folks had to have a 1098-T or some other supporting documentation to show in the file that they went to school, right?
A. Yes.
Q. But that was not a requirement in prior years, was it?
A. No.
Q. Now, Mr. Wells, I want to ask you some questions about the software that you used at Sunbelt Tax, okay?
A. Okay.
Q. And regardless of whether it was Taxwise or Tax Slayer,
did those softwares operate in a similar way?
A. I think Taxwise was more like form -- more like the forms that you will see as a regular tax return. And Tax Slayer, it was kind of a little different, maybe had a little -- maybe kind of like a TurboTax kind of feel to it.
Q. So then do you recall which years you had Taxwise and which years you had Tax Slayer?
A. I'm trying to remember. I think when we went to Sunbelt, we switched softwares, I think. Or I think we had Taxwise for that first season, but then that second year, we had to switch softwares --
Q. Depending on either software you used, correct me if I am wrong, but the software could -- would keep a log of which preparer had accessed particular tax returns, right?
A. I think so.
Q. And this was a server environment, so you could access other tax returns?
A. Yes.
Q. Do you know what I mean?
A. Yeah.
Q. Not just the ones in front of you?
A. Yes, like all the computers were linked, so it was like that little box on the back of the monitor, that box was like a drone -- it was like a drone box that was connected to one main computer.
Q. And the IRS took all of that during the search warrant, right?
A. Yes.
Q. So they have all of that information, right?
A. Yes.
Q. You were shown Government's Exhibit 535, that bell curve document?
A. Yes.
Q. And is that your understanding of basically how the earned income tax credit works?
A. Yes.
Q. So it's not inaccurate, is it?
A. No.
Q. Is that a good way if you had to explain how the earned income tax credit works to a customer, for example?
A. Yes.
Q. Maybe someone who wasn't a tax return preparer?
A. Yes.
Q. If they had a question as to why they were getting more or less of a refund than they expected?
A. Can you rephrase that?
Q. Well, surely with all the thousands of tax returns you prepared, on occasion a customer asked you a question about their refund?
A. Yes.
Q. That happened, right?
A. You got to explain why their refund is not like -- if they come in and, like, "Why is my friend's return not like my return?"
Q. Right. And one way, if it involved the earned income credit, one way to explain it to them would be to show them that bell curve?
A. Yes.
Q. Do you know the names of anyone who complained about their refund?
A. No, I don't remember.
Q. Because we haven't seen anyone yet in this trial, but I was just curious.
A. No, I don't remember any of the people that have been through out here.
Q. I'm going to pull up Government's Exhibit 544, which has already been admitted. Do you recall this exhibit, Mr. Wells?
A. Yes.
Q. This was -- well, what was this? Refresh us as to what this was.
A. That was the total amount of returns that I did for --
Q. Do you need to see the year?
A. I'm trying to see the year, yeah.
Q. Let me back up. Well, do you see any information on here which tells you what year this was? There's John. Can you
tell? We will flip through it. That's Johnny, right?
A. Yes, that's Jonathan's.
Q. And he got paid more because he prepared the most returns, right?
A. Yes, that's correct.
Q. It shows on here, at least as of when this was printed out, 770 by then?
A. Yes.
Q. And it's got Chris's. That's the last page of the document. So just seeing these totals, does that refresh your memory as to when this might have been printed out, or can you not tell?
A. I'm not too sure what year that was.
MR. MUELLER: Mr. Elwell, is there a physical document associated with that?
MR. ELWELL: It's right here.
MR. MUELLER: Thank you.
BY MR. MUELLER:
Q. I've handed the witness the physical document from the search warrant that's been admitted into evidence as Government's 544. Do you see that, sir?
A. Yes.
Q. So I'm representing to you that that was located at the search warrant, but do you know from reading the numbers whether that was 2017 or some other year?
A. I believe this will be the year of the raid.
Q. Okay. Yeah, and you were there. It felt more like a raid than the term I'm using, search warrant?
A. Yes.
Q. Why is that? Tell me how that went down.
A. When the IRS came in?
Q. Yeah. How did that work out?
A. They came in, like, they -- it was like they -- all I saw was, like -- like government vehicles coming in, and there was a bunch of agents and, like -- looked like they had body armor on, and it said, like, IRS agent or something like that. And they told us to go up against the wall --
Q. Did they have their guns drawn?
A. I can't -- I can't remember. I can't recall on that.
Q. But was it obvious that they were armed?
A. Yes.
Q. Did they have to call someone to let them in?
A. No.
Q. About what time of day was it, as you recall?
A. It was, like, around morning time. We were only there for like -- I believe we came into the office about -- it was only like 30 minutes to an hour that we were there. They swarmed in.
Q. Right. And were already customers in there or not yet?
A. No, not yet.
Q. So who all was there?
A. It was me, Gabe, Jonathan, and Chris.
Q. Okay. And that was the interview that Mr. Elwell referenced?
A. Yes.
Q. You were interviewed during that search warrant?
A. Yes.
Q. If I could have you take a look at the exhibit again, Mr. Wells. Having discussed the search warrant, does that -- that seems to refresh your recollection that this would have been numbers from 2017?
A. Yes.
Q. And so that 54,000, that was anticipated to be your sort of salary for the year, roughly?
A. Yes.
Q. And you found that to be a fair salary?
A. Yes.
Q. Particularly given you were working hard, right?
A. Yes.
Q. And, you know, more profitable than at American Tax, right?
A. Yes.
Q. A much fairer work environment, right?
A. Yes.
Q. If you can look at the total 1040 returns, it says 453.
Do you see that?
A. Yes.
Q. And not every return had a Schedule A, right?
A. No.
Q. I mean, roughly one fourth or less?
A. Yes.
Q. Same with Schedule C?
A. Yes.
Q. Same with earned income credit, right? That EIC, that means earned income tax credit?
A. Yes.
Q. So 329 out of 454, would you agree with me, is about 72 percent?
A. Yes.
Q. And isn't it fair to say that's not surprising, given your experience over the years at Sunbelt with the customers who come in, right?
A. Yeah. Most of the clients that came in, they had small kids with them, and --
Q. Yeah, this was a business that catered to working class folks, right?
A. Yes.
Q. It wasn't located in a wealthy privileged part of town, was it?
A. No.
Q. So it wasn't surprising that there was a high percentage of working class people, right?
A. Yes.
Q. So that, in and of itself, to you didn't seem unusual that 70 percent would have earned income credit, did it?
A. Yeah.
Q. And you were there for three years, right, or more? Four years?
A. Where, at Sunbelt?
Q. Yeah, before you left.
A. It was about three years.
Q. Okay. And when you were interviewed at the search warrant, do you recall who interviewed you?
A. I can't remember -- I can't recall who interviewed me.
Q. Is that -- well, you've been dealing for the last couple of years with Special Agent Rice, right?
A. Yes.
Q. Was he the one who interviewed you?
A. No. But I remember Rice being at the search warrant.
Q. Okay. What was his role at the search warrant?
A. I think he was mainly the one in, like -- that had -- that was orchestrating it.
Q. Right, he seemed to be in charge of the team?
A. He was in charge of it mainly.
Q. And did he say anything to you during the search warrant?
A. Not really.
Q. Where did your interview take place? How did that happen?
A. It took place in one of the back rooms of Sunbelt.
Q. And were you told to go back there, invited to go back there? How did that work?
A. They asked me to come back here and go over some -- they were going to ask some questions and all of that, and I agreed.
Q. And did they eventually read you your rights?
A. No. I don't -- I don't remember.
Q. Well, my question was going to be did they tell you you didn't have to go back there and talk to them, or did they give you the impression you should come back and talk to them?
A. Yeah, they weren't saying I was under arrest or anything, so I think it was like -- they didn't have to read the Miranda rights or anything because I wasn't under arrest.
Q. Did you feel like you were free to leave at any time?
A. Yes.
Q. For an interview?
A. Yes.
Q. But you chose to stay and go in the back room with them?
A. Yes.
Q. It was two agents?
A. Yes, I think so, two agents.
Q. Were they both men, both women?
A. I believe there was like a man and a woman. I'm not sure.
It was a very -- it was a very scary situation for me. That's probably why I stayed in, because I was like --
Q. Yeah.
A. Yeah, I was terrified.
Q. Not what you were expecting at work, was it?
A. Yeah, I wasn't expecting that.
Q. Okay. So as you testified on direct, you were comfortable you hadn't done anything bad, so you were happy to talk to them, even though you were a little nervous?
A. Yes.
Q. So you did, you answered their questions, right?
A. Yes.
Q. Now, during that first interview -- and you've been now interviewed a number of times, haven't you?
A. Yes.
Q. And we will go into that. But back during your first interview, you told them you'd never put any false information on a return knowingly, right?
A. Yes.
Q. Or intentionally. Right? That's what you told them, right?
A. Yes, I wasn't, like, intentionally doing -- yeah.
Q. And you told them you never put an education credit on a return without some level of support, right?
A. Yeah, something similar.
Q. And you told them no one else at Sunbelt was doing that, right, that you were aware of?
A. Not that I remember.
Q. You don't remember saying that?
A. No, I don't remember.
Q. And you said during that first interview you first learned how to prepare tax returns at American Tax Service by Mr. Cox?
A. Yes.
Q. That was where you told them that, right?
A. Yes.
Q. And that you had gone to courses and training, right?
A. Yes.
Q. And you told them you much preferred Sunbelt to American Tax, right?
A. Yes.
Q. And you told them you would get documentation from customers when they had it, right?
A. Yes.
Q. You would ask them questions while you were preparing their returns, right?
A. Sometimes if it got busy, I just skipped over the question-asking.
Q. Yeah, that's a great point. But you also told them -- you used the term you "walked folks" on occasion if they were -they seemed to have bad intentions, right? You'd tell them to
leave?
A. Not to my -- not to my recollection.
Q. And you told them Mr. Earnest did very few returns as compared to the other preparers, right?
A. Can you rephrase that question?
Q. Yeah. You told them during that search warrant interview that Mr. Earnest did very few returns as compared to the other preparers. You remember telling them that, right?
A. I think so.
Q. So basically, you told them -- now, we will get to cutting corners in a minute or when you are busy, but you effectively told them you didn't willfully or intentionally commit any kind of tax fraud, right?
A. Yes, because I was assured that I wasn't doing anything wrong at that point.
Q. Right. Well, that was how you felt. You felt that you hadn't committed any sort of intentional fraud, right?
A. That is correct.
Q. You weren't lying to them at the time. That's what you truly believed, wasn't it?
A. Yes, I was pretty much in denial right there at that time.
Q. And you didn't tell them you were part of an ongoing criminal conspiracy, did you?
A. No.
Q. You didn't tell them that. And you didn't know they were
coming that day, did you?
A. No, I did not.
Q. And you didn't have time to consult with a lawyer before you talked to them, did you?
A. No.
Q. You just told them how you felt, right?
A. Yes.
Q. Spoke from your mind, right, from your heart?
A. Yeah.
Q. You just told the truth, right?
A. I was told what to -- what was -- what I was told, that I was reassured that what we were doing was nothing wrong.
Q. Who did you talk to during that interview?
A. Who I talked to during that interview?
Q. Yeah. Did they let you go out and talk to anybody else? "Hey, guys, they are asking me some questions. Are we doing this right?"
A. No, I didn't do that. When I got out of there, everybody else was gone. The only people that were there were the agents.
Q. Right.
A. That I know of.
Q. Now, there came a time where you met with some government agents a second time, correct?
A. Yes.
Q. And was that before or after you were charged in this indictment in this case?
A. It was after the -- after the indictment.
Q. Okay. When you were -- and on the topic of the indictment, you understand and your testimony is you pled guilty to Count 1 of the indictment, right?
A. Yes.
Q. But when you were originally charged in this case, you pled not guilty, didn't you?
A. Excuse me?
Q. When you were originally charged in the indictment, your first plea entry was not guilty, correct?
A. Yes.
Q. And then you later changed your plea to guilty?
A. Yes.
Q. How many times had you met with the government before you changed your plea to guilty?
A. When I first came in here -- came to Mississippi, when they told me to report to the -- report to the Court, I had a -- I had a Public Defender, and then --
Q. Let me just be clear. I'm not asking you to tell me what any of your lawyers told you. I was asking when did you meet with the government? Was it before you entered your plea of guilty and changed your plea or was it after? That's the question. Do you remember?
A. When I changed my plea, it was after.
Q. Okay. I think the question I asked was a little confusing.
A. Okay.
Q. You have met with the government a number of times after you pled guilty, correct?
A. Yes.
Q. Did you meet with the government any time between when you first pled not guilty and then before you changed your plea to guilty; do you recall?
A. No.
Q. Okay. That's your best recollection?
A. Yeah.
Q. Well, let me ask you this. Do you recall that you changed your plea to guilty on about May 1st of 2023, this year? Does that sound right?
A. Yes, I think so.
Q. And if you remember this, I'm not trying to trick you on this, I just want to know, because my records indicate you had met with the government for what's called a proffer interview on two occasions before that; is that right?
A. Not on my recollection on that.
Q. So do you recall -
A. I remember -- from what I remember, when I was assigned to -- assigned to my lawyer, we were going to change the --
change the -- change it to, like --
Q. Let me ask you this, because, again, I'm not asking you what your lawyer told you, Mr. Wells. Do you recall meeting with the government on August 11th, 2022? Does that sound about right? That would have been last year.
A. Yes.
Q. Okay. And so that was before you changed your plea in May of this year, correct?
A. Yeah, I believe so.
Q. Okay. And where was that meeting, as best as you can recall?
A. Every meeting I had with the government was in Jackson, Mississippi.
Q. Right. In what building, whose office?
A. It was an attorney's office.
Q. In this building?
A. Yes, in this building.
Q. The United States Attorney's office?
A. Yes.
Q. And in addition to the August 11th, 2022 meeting, do you recall meeting with them on February 8th of 2023, this year, again in this building?
A. Yes.
Q. And then do you recall meeting with them again in this building on about April 2nd of 2023?
A. Yes.
Q. Okay. So does that refresh your recollection that you met with them at least 3 times before entering your plea of guilty in this case?
A. Yes. I believe -- yes.
Q. Okay. And in a moment, we will get to all the numerous times you've met with the government after your change of plea. You've met with them a bunch of times, right?
A. Yes.
Q. Let's stick with that plea deal. Now, isn't it true, sir, you pled guilty to Count 1 of the indictment because one of the benefits you received is the government agreed to dismiss the other three counts against you, right?
A. Yes.
Q. And those would be Counts 17, 18 and 19 of the indictment?
A. Yes.
Q. So just by agreeing to that basic deal, you've reduced your potential prison exposure significantly, haven't you?
A. Yes, sir, I hope so.
Q. Right. Because Count 1 carries a maximum of five years, right?
A. Yes.
Q. And then each of those other three counts that the government has agreed to drop, each carry a maximum of 3 years, right?
A. Yes.
Q. So sitting here today, again, you haven't been sentenced yet, but you already received that benefit of your exposure is capped at five years instead of 14, right?
A. Yes.
Q. Now, you know that you are going to be sentenced eventually, correct?
A. Yes.
Q. In this courtroom.
A. Rephrase.
Q. Well, eventually, you are going to be sentenced in this courtroom, correct?
A. Not that I know of.
Q. You don't know whether you are going to be sentenced or you just don't know where it's going to take place?
A. Don't know where it's going to take place.
Q. Okay. Do you know when it's going to take place?
A. Not that I know of.
Q. It was scheduled for September 20th, wasn't it, last month?
A. If that's correct.
Q. Well, you are certainly -- I'm sure you are aware of it, because the government filed a motion to continue your sentencing until after trial, right?
A. Oh, yes, that is correct.
Q. So you were aware that you were originally going to be sentenced last month?
A. Yes, yes, that's correct. Sorry.
Q. That's okay. I understand. But you understand that the government, the prosecutor sitting here at the table, wanted to push your sentencing until later?
A. Yes.
Q. Did they tell you why they wanted to do that?
A. Not that I know of.
MR. ELWELL: Objection -- no, that's fine.
MR. MUELLER: I will withdraw the question, Your Honor.
THE COURT: All right. The jury can disregard the response.
BY MR. MUELLER:
Q. But you didn't have any problem with them moving it, right?
A. Excuse me?
Q. You didn't oppose the motion to continue your sentencing until after the trial?
A. To be honest, I have no idea what -- I just came here to tell the truth, and they wanted me to be a witness of this. And after this trial, I have no idea what is going to happen.
Q. That's a good point. You don't know what your sentence is going to be other than it's capped at five years, right?
A. Yes.
Q. In addition to that benefit of being capped at five years, you know that your -- I'm sure this came up at your plea hearing, right, that your sentence will ultimately be based on what's called the Federal Sentencing Guidelines? That's been explained to you, right?
A. Yes.
Q. And do you know what your range is going to be at that sentencing?
A. No.
Q. Again, without asking you to convey any communications with your lawyer, but needless to say, you are, of course, hoping to get much less than five years, right?
A. Yes, I'm hoping so.
Q. In fact, there are explicit provisions in your plea agreement that address your agreement to testify in this trial, right?
A. I'm sorry. Can you rephrase that?
Q. Well, there are cooperation provisions in your plea agreement, right ?
A. Yes.
Q. And you understand generally what those are, right?
A. Yes. Yes.
Q. You signed the document, right?
A. Yes.
Q. And then you raised your right hand in court -
A. Yes.
Q. -- and told the judge that you understood the plea agreement, right ?
A. Yes.
Q. Okay. And so as part of that deal, you've basically agreed to meet with them as many as times as they wish, right?
A. Yes.
Q. And you've agreed to testify at any trials that they may need you to testify in, right?
A. Yes, that's correct.
Q. And at some point when they determine your cooperation is over, they get to decide whether to move the Court for a reduced sentence, right?
A. Yes.
Q. That's your understanding?
A. Yes, that's my understanding.
Q. Have I said anything that's contrary to your understanding right now?
A. No, I'm trying to understand.
Q. Okay.
A. Yes.
Q. If you don't understand, just let me know.
A. Yes.
Q. Thank you, Mr. Wells. And you are aware that your plea
agreement provides for the government to decide in their sole discretion, meaning they can decide to move for a reduction of sentence or they can decide not to, and you can't challenge it, can you?
A. I guess that is correct.
Q. Well, I want to go back to my other question. I hope you understood your plea agreement when you signed it and went into court and entered your plea, right?
A. Yes.
Q. Now, so -- and another way of looking at it, if the government is happy with your testimony today, you are hoping they are going to file what is called a 5K1.1 motion, right? Have you heard that term?
A. Yes.
Q. And that's a motion that the government can file asking the Court to reduce someone's sentence, right?
A. Yes.
Q. It would cause them to have a lower sentence than what the guidelines would otherwise dictate, right?
A. Yes, that's the way it was explained to me.
Q. Right. And that depends on the government being satisfied with your testimony, right?
A. Yes.
Q. Okay. Now, on that topic, you know, as I mentioned before, this is kind of our first back and forth on this,
right?
A. Yes.
Q. But you've had a number of times to practice those questions and answers with Mr. Elwell, right?
A. Yes.
Q. And again, on top of those at least three meetings you had with them before you pled guilty, you have had -- I mean, if you can recall, how many meetings do you think you have had since May 1st, since you came into court and pled guilty?
A. About six.
Q. About six more meetings.
A. Yeah.
Q. Let me ask you about the length of those meetings. Some of those meetings were, like, almost full-day meetings, right?
A. Yes.
Q. And then some of them were, what, a couple of hours, something like that?
A. Yes.
Q. So if we sat there with a calculator and added up all of the hours you spent in this building meeting with the government, what would you say, 40 hours, 50 hours? How many hours would you recall?
A. Somewhere probably around 40 -- about 40 or 50 hours.
Q. Okay. So you've spent about 40 or 50 hours with the government. And you've met with them as recently as last week,
October 25th, right?
A. Yes.
Q. Like Wednesday? Does that sound right?
A. Yes.
Q. For about six hours or so?
A. Yes.
Q. And let me ask you this. You have a lawyer in this matter, right?
A. Yes.
Q. Is your lawyer sitting here in court today?
A. Yes.
Q. He's the gentleman with the gray jacket and red tie?
A. Yes.
Q. Was he present at all of those meetings?
A. Yes.
Q. Who else -- was there anyone here that was present at all the meetings? I will step out of the way just so you can -
A. It was Patrick, the woman next to him, the man next to her, and pretty much the whole group right there.
Q. Pretty much the whole group, including Special Agent Rice?
A. Yes.
Q. Who you knew back from the search warrant days?
A. Yes.
Q. Now, it's fair to say your testimony has changed quite a bit from that interview at Sunbelt in March of 2017, right?
A. Yes.
Q. And your initial answers did not satisfy the government, did they?
A. I was -- basically just told them what the actual truth was.
Q. Oh, okay. So they told you what the actual truth was and then you -
A. No, I told them the actual truth.
Q. But over the course of those meetings, what you are presenting as the actual truth kind of evolved, didn't it?
A. Rephrase that.
Q. Yeah. What you are calling the actual truth changed over time, didn't it?
A. I was kind of like on the defensive, but I might as well just go ahead and tell the whole truth and nothing but the truth.
Q. Okay. And you testified -- you were testifying truthfully today, right?
A. Yes, that is correct.
Q. Both on direct examination and the questions I'm asking, right?
A. Yes.
Q. And you testified on direct that, again, at the time you were doing it, you didn't think you were doing anything bad, right? That's what your testimony was, correct?
A. Yes.
Q. And you understand certainly the difference between a mistake, being careless or even negligent, and specifically intending to commit fraud? You know the difference between those two things, right?
A. Yes.
Q. And when you are working in a busy tax preparation business during tax season, there's a temptation to cut corners, right ?
A. Yes.
Q. And maybe be careless a little bit?
A. Yes.
Q. Did we see some of that on the video that we watched?
A. Yes, I was pretty careless.
Q. Right. But again, you also have prepared hundreds of accurate tax returns too, right?
A. Yes -- in a ways, yes.
Q. Well, you started preparing tax returns in 2013, correct?
A. Yes.
Q. And you didn't just wake up every day for the next six years intending to defraud the government, did you?
A. It wasn't my intentions, but --
Q. Right.
A. But I know I made a mistake as starting to do taxes. If I could go back, I wish I had never touched a tax return.
Q. Oh, I can totally imagine that, Mr. Wells, but those mistakes that you made, in part, are that this is a pretty complicated business, isn't it?
A. Yes.
Q. And preparing tax returns is complicated, right?
A. Yes.
Q. Even -- let's just talk about education credits. There's not just one type, right? There are different types of education credits, aren't there? Or do you know?
A. What do you mean by that?
Q. Well, we looked at some documents that referred to an American Opportunity Credit. Do you know what I'm talking about?
A. Yes.
Q. But there's also a Lifetime Learning Credit, right?
A. I believe they're one and the same. I believe they changed the title on that.
Q. Well, they have different requirements, right?
A. I still think you need to put the student name and put a school name and then put adjusted amount around 4,000, I think.
Q. Do you really know the intricacies of how all of these credits work, Mr. Wells?
A. No.
Q. I appreciate your honesty. And are there times in your career as a tax preparer where you just kind of maybe felt a
little overwhelmed with what you were doing?
A. Yes.
Q. And isn't it also true the prospect of trying to go to trial and convince people that you made mistakes and maybe made some bad decisions but didn't intend to commit crimes, that was too overwhelming for you; is that right?
A. Yes.
Q. Isn't that why you decided to enter into this cooperation deal, right?
A. Yes.
Q. In fact, your first entree into the tax preparation business, you failed the test twice, right?
A. Yes.
Q. So you were never confident in your abilities as a tax preparer, were you?
A. No.
Q. But you didn't wake up every day for six years trying to cheat the government, did you?
A. No.
MR. MUELLER: May I confer, Your Honor?
THE COURT: You may.
MR. MUELLER: Nothing further, Your Honor.
THE COURT: Thank you. All right. Mr. Sellers, you look like you're
MR. SELLERS: May I proceed, Your Honor.
THE COURT: Yes, sir.
MR. SELLERS: If I can get a sip of my coffee and clear my throat. Thank you. Now may I proceed, Your Honor?
THE COURT: You may.
CROSS-EXAMINATION
BY MR. SELLERS:
Q. Mr. Wells -- excuse me -- good afternoon. I'm Aafram Sellers, and I represent Mr. Klish in this matter.
You've talked about that Mr. Klish would come to you for help at times?
A. Yes.
Q. But you just testified that you don't understand the process, right? You don't understand really what you were doing, correct?
A. The only thing I understand was how to just put the information on the tax return and to, you know -- as far as what -- what Casey and Chris and all -- and Jake and all of them told me.
Q. Let's be clear. Before you went to Sunbelt, before you met James Klish, you were doing bad taxes, correct?
A. Yes.
Q. And you were taught that by -- who was that?
A. Casey.
Q. No, at American Tax.
A. That was Jake and --
Q. Jake?
A. Yeah. And then Casey helped when I got on -- got in the field, Casey was there to help me out, and Chris was there to help me out.
Q. You've been incentivized on multiple occasions. You said that you got 25 percent, and so that's why you were filing false taxes?
A. Yes.
Q. And then today, you are testifying here today, and you said you are doing it because you are expecting a reduced sentence, correct?
A. Can you rephrase that?
Q. You are saying you are testifying here today because you are going to get a reduced sentence if you please the government in your testimony, correct?
A. Yes.
Q. Yes. So you are willing to be fraudulent in tax preparing to get a return, and you are willing to tell untruths in order to get a benefit, correct?
A. The only thing I did was tell the truth while I'm here, and that's --
Q. Every time you met with the agents or the U.S. Attorney's Office, they took notes of what you were saying?
A. Yes.
Q. And you said that when they first came in, the reason you
spoke to them is because you didn't know what you were doing wrong. Right?
A. Yes.
Q. But you have already admitted that you knew what you were doing wrong prior to even coming to Sunbelt, correct?
A. Yeah.
Q. And if the agents said they read you your rights and you said they didn't read you your rights, were they lying or you just don't recall it?
A. I don't recall.
Q. Do you recall that you stated that Mr. Klish had only been at Sunbelt maybe two years?
A. Yeah, he came in on the second year we were open.
Q. And to be clear, Mr. Klish never taught you how to do anything?
A. No.
Q. He never showed you -- sat over there and showed you how to do nothing, right?
A. No.
Q. All right. You were questioned about whether you agreed with all of these gentlemen to commit fraudulent taxes. Before you knew any of these gentlemen, you were doing fraudulent taxes, correct ?
A. Yes.
Q. Before James Klish came to Sunbelt, you were doing
fraudulent taxes, correct?
A. Yes.
Q. So you never agreed with James Klish to do fraudulent taxes, correct ?
A. I mean, we came -- can you rephrase that?
Q. You were employed at Sunbelt, right?
A. Yes.
Q. Mr. Klish was employed at Sunbelt, right?
A. Yes.
Q. You and him never agreed to do fraudulent taxes together, did you? You didn't agree with him to do fraudulent taxes?
A. No.
Q. You were shown in the video and you were asked, "Is this a fair depiction of every client interaction?" Every client interaction at Sunbelt didn't go like that, did it?
A. Not all of the time.
Q. No. That's one interaction out of how many? You said you did how many that year?
A. Over 400.
Q. And so all of them didn't go like that, correct?
A. No, I don't think so.
Q. In fact, on the video, you are the only person that's doing something -- no one else is saying -- even you see Mr. Casey on there. The only person that's saying something about doing some fraudulent on that video is you, right?
A. Yeah, that's why --
Q. You said you need to get the income up. It says you.
MR. ELWELL: I'm sorry, Your Honor. If he could let the witness finish his answer.
MR. SELLERS: I'm sorry.
THE COURT: Let him finish.
MR. SELLERS: I'm sorry, Your Honor.
BY MR. SELLERS:
Q. Is that correct?
A. What was that?
Q. You are the only person in that video doing something fraudulent?
A. Yes.
Q. You've testified that this place is busy all the time. In the video we hear the phone ringing. We hear people walking around. You don't know -- and you said you were sitting at that desk, and everyone had their own computers, correct?
A. Yes.
Q. You can't tell this jury that you knew that any of the other employees were doing false taxes, can you? You didn't see that. You can't tell the jury that, can you?
A. When I came over to review -- like, when Gabe asked me to come have a look at something, I already -- I already assumed that stuff was fraudulent.
Q. Okay. You've been asked about the number of times you met
with the agents in the U.S. Attorney's Office. You have admitted that, correct?
A. Yes.
Q. It's been several times, right? Never once did you tell them that I would stand and help Gabe with taxes, and I saw that they were fraudulent. You never told them that, did you?
A. Can you rephrase that?
Q. You have never told the agents or the U.S. Attorney's Office that you helped Gabe prepare or you saw him preparing fraudulent taxes?
A. I'm sorry. I'm having a hard time -- I'm having a hard time understanding what you were trying to say.
Q. Let me ask you this. What's your highest level of education?
A. High school.
Q. What grade?
A. High school and some college.
Q. What grade? You graduated from high school?
A. No, I got a GED.
Q. And I've seen you having trouble here today. Do you have any type of learning disabilities or anything?
A. Yes.
Q. What is that?
A. I have ADHD.
Q. Okay. Does that affect your ability to recall
information?
A. Yes.
Q. So if that's the case, then, this happened -- you were interviewed and this was going on 2015/'16. Do you agree with that?
A. Yes. Is there a way for me to kind of like just take a break, because I'm starting to see --
Q. I'm sorry?
A. I'm double-visioning -- my vision is doubling.
THE COURT: We can take a break.
MR. SELLERS: Thank you, Your Honor.
THE COURT: It's right at 4:00. Let's -- has this happened to you before?
THE WITNESS: I'm just getting very overwhelmed.
THE COURT: All right.
THE WITNESS: I just need a minute to calm my nerves.
THE COURT: And you are having double vision?
THE WITNESS: What?
THE COURT: You said you are having double vision?
THE WITNESS: My eyes are having a hard time, like, focusing.
THE COURT: Let me speak to counsel for a second.
(THE FOLLOWING BENCH CONFERENCE WAS HELD OUTSIDE THE
HEARING OF THE JURY:)
THE COURT: I didn't want to ask you this question in front of the jury. Is there any objection to taking a break and getting him some water?
MR. SELLERS: No, sir.
THE COURT: I can't tell if he's, like, anxious and doesn't want to answer or if he is really having some kind of physical episode.
MR. SELLERS: Probably the anxiousness is causing it. But no, I am perfectly fine with that. I have no problem.
THE COURT: We'll take a short break here.
(END OF BENCH CONFERENCE)
THE COURT: I am going to take a short break here. It is 4:00. Let's see how we look in about ten minutes. Leave your pads in your chairs. You are excused. I'm going to stay here for just a minute.
(JURY OUT AT 4:00 P.M.)
THE COURT: Mr. Wells -- I'm waiting to hear that door click. Ms. Powell is going to get you some water. You can kind of walk out in the hall and catch your breath, but stay away from anybody involved in the case.
THE WITNESS: Okay.
THE COURT: Court is in recess.
(RECESS TAKEN AT 4:01 P.M. UNTIL 4:12 P.M.)
THE COURT: All right. I understand the witness still needs a couple of minutes, but I thought I would take the opportunity to follow up with Mr. Mueller about my question earlier today about these statements and whether you've kind of narrowed it a little bit.
MR. MUELLER: Yes, I have. If I have one moment to pull my exhibit list, I can tell you. The ones in the amended exhibit list that I e-mailed to Ms. Powell earlier today are Exhibits 19 through 36. Those are the ones where there are two versions. There's a binder on the top of that box that I placed up there during the break, Your Honor. So the binder that has those Exhibits 19 through 36, those are the ones that I think we are talking about. Those are the duplicate memos, or the revised memos, from the conversation we had earlier. I'm not asking you. I'm just telling you that's what I'm understanding the question to be.
THE COURT: Maybe I misunderstood. Earlier I thought you were saying there might be a subset of the larger group of memos that there may be an objection over that you may actually intend to use.
MR. MUELLER: Well, I'll have to apologize. I think -- I'm not understanding the question properly probably on my end. I thought the question was what are the memos that may be potentially offered into evidence as opposed to just marked for identification. And my best prediction is that those would be the ones that could potentially actually be moved for admission, because if the Special Agent were to be called, they were drafted by him and they contradict each other. So does that help some?
THE COURT: Yeah, and I think you understand my question. I had never seen -- I still haven't seen the memos, and I didn't know whether there are 20, and of those 20 you are going to use 8. And I didn't want to read 20 memos if you are only going to use 8. But you are telling me that 19 through 36 are the ones you intend to use?
MR. MUELLER: My math could be wrong, but basically, it is just 9 interviews and two versions. So it's 18 memos, but 9 people were interviewed twice. Two reports were prepared. Excuse me.
THE COURT: Okay. Mr. Elwell, do you still think tomorrow might be the first time that that's going to come up?
MR. ELWELL: So, as I understand what Mr. Mueller is saying, he is intending to introduce these if he calls Special Agent Rice to testify during the defense case?
THE COURT: He also said earlier that he might -- you have a witness, I think Thomas, who may introduce a summary chart, not the summary witness, but a summary chart?
MR. ELWELL: Yes, Your Honor.
THE COURT: And if that summary chart contains information that these memos might speak to, I think -- Mr. Mueller, you can speak for yourself, but I thought I heard you saying you might use it in that context.
MR. MUELLER: Yes. Your Honor just reminded me. Let me read these through because there are memos that specifically relate to folks who have or we expect will testify at trial. Exhibit 21, 22, 26, 27, and then the revised versions would be 30, 31, 35, and 36. So, you know, those would I think be the most likely to come up absent Special Agent Rice testifying. I don't know that I can one hundred percent commit to that because I haven't heard those summary witnesses' testimony, but that's my best prediction for the Court to look at first.
THE COURT: I understand.
MR. ELWELL: To be clear, I don't believe Mr. Thomas is going to testify in any way about information provided by any of these witnesses. He prepared a summary chart based on IRS data from a database, and maybe that's my source of confusion.
MR. MUELLER: Well, either of the two -- I'm calling them both summary witnesses. I understand Mr. Thomas hasn't been present in the court, but he has prepared summaries. So either Mr. Thomas or Revenue Agent -- I may be saying this wrong -- Speights-Durr could be relevant for either of those had they relied on out-of-court statements from Special Agent Rice
THE COURT: My understanding from the government's bench brief is that Thomas has a chart under 1006 of IRS data, that he's not the summary witness summarizing courtroom testimony or witness statements. If that's the case, then it sounds like these memos aren't going to be relevant to that, but they would be to Agent Rice, if called.
MR. MUELLER: Right. But there's the second witness who is not only here in court but also we've been produced drafts -- like, I don't know even know, off the top of my head, how many drafts, but drafts of documents that do appear to be based on assumptions from Special Agent Rice.
THE COURT: I got you now. You are talking about the actual identified summary witness who I expect the government will call last.
MR. ELWELL: Definitely not tomorrow, Your Honor. She will likely be our last witness.
THE COURT: Mr. Wells, how are you feeling now?
THE WITNESS: Feeling a little better.
THE COURT: Okay. Mr. Elwell, just in terms of where we are in the government's case, where are we?
MR. ELWELL: Yes, Your Honor. If I may.
THE COURT: Sure.
MR. ELWELL: We are progressing. We still have a number of taxpayer witnesses to call. In the interest of disclosure, there is one taxpayer witness who, although we have served with a trial subpoena, we have been unable to locate or contact since that point, and she has not yet shown up, and we don't expect -- we frankly haven't asked for the Court to issue a warrant for her appearance because we don't expect that to be 187 fruitful. So there is one witness that we may not be able to secure. But by my count, we have one, two, three, four, five, six more taxpayer witnesses, as well as the testimony of Sam Thomas, who is really testifying to a chart, and some quicker witnesses who are testifying really to attendance records. So
MR. MUELLER: And Mr. Barefoot?
MR. ELWELL: Mr. Barefoot has also yet to testify.
THE COURT: That sounds a little lengthy and it's probably going to spill into Monday?
MR. ELWELL: Yes.
MR. MUELLER: Could I raise one point on that?
THE COURT: Yes.
MR. MUELLER: The defense has a witness on our list who lives out of state, and we are in contact with and would be able to make sure she is here. I would feel more comfortable not making her come here on Friday just in case, because it seems like the defense case won't start until Monday at the earliest. Could we, with the Court's permission, just tell her no earlier than Monday, and we will get her here by Monday?
THE COURT: That sounds like the case.
MR. ELWELL: That is correct, Your Honor. Things could happen and we could proceed, but if that's the case, we have no objection to recessing early on Friday.
THE COURT: I appreciate the concern, and I think that is fine. I'm going to -- I don't want to call this a suggestion, but I will mention something that I want the parties to at least discuss tonight, and I'm not twisting arms here. You know, you have to represent your clients in the way you see best. But if there's a series of taxpayers and their testimony is going to be, I didn't go to college, and I didn't have any expenses, and I didn't have a side job, and then the cross-examination is going to be, you swore under oath that you read all of this stuff and signed it, that perhaps the parties, at least as to one or two of them, could just stipulate that, if called, that's what they would have said, and save maybe a day. Because -- now, I will quickly acknowledge there were a couple of these taxpayers where the cross-examination went beyond that, but for a couple of them, that was sort of the routine.
Again, I'm not telling you what you have to do. You do what is best for your clients, but I do want you to at least discuss that possibility.
MR. ELWELL: Yes, Your Honor.
THE COURT: Anything else before I bring the jury back in here?
MR. MUELLER: No, sir.
MR. SELLERS: No, sir, Your Honor.
(JURY IN AT 4:22 P.M.)
THE COURT: All right. Mr. Sellers, when you are ready.
MR. SELLERS: Thank you, Your Honor.
BY MR. SELLERS:
Q. Mr. Wells, are you okay?
A. Yes.
Q. You are a little nervous, right?
A. Yes.
Q. We have never met before, we have never talked before, right?
A. No.
Q. So this is your first time hearing questions from me?
A. Yes.
Q. You were mentioning, I believe before, that -- I think you said you have ADHD, and that affects your memory at times and your recollection of things?
A. Yes.
Q. Would you agree with me, then, that your memory of things from so far back may not be as accurate as you are saying they are now?
A. Yes.
Q. All right.
MR. SELLERS: Can you pull up, please, for me, ma'am, Exhibit 308. We are going to go -- if you could scroll up, I can pull it up -- if you can keep going. Right here. This is for the year -- okay.
BY MR. SELLERS:
Q. Are you looking at this document, this preparer information report? A. Yes, preparer information report. Q. Yeah, this is 2014. You've testified about this earlier. If you look at -- let's see, outreach activity -- do you see that, where it says outreach activity? A. I have never read one of these before, so give me a minute. Q. Okay. So you are saying you never received this letter? This is your preparer information report. A. No, I've never looked over a letter like this. Q. Not the letter. You just testified about the preparer information report. Right? And I will go through it with you. If you look at the outreach activity, can you look at that part for me? A. What is he talking about
THE COURT: You can point to it on your screen.
BY MR. SELLERS:
Q. Do you see where I just touched, right beside that?
A. The warning letter?
Q. I just highlighted it. Do you see that?
A. Yeah.
Q. It says, "FY2014, DOV warning letter."
A. Okay.
Q. It says -- I'm sorry, date 1/31/14. And it is letter number 4858.
A. Yeah.
Q. That's a letter that you would have received, correct?
A. Can you explain to me what a 4858 is.
MR. ELWELL: Objection, Your Honor, I think the witness already said he doesn't know what this report is or what these things are.
BY MR. SELLERS:
Q. I'll put it this way. A 4858 is an IRS letter where it questions your earned income tax.
MR. ELWELL: Objection, Your Honor. Counsel is testifying.
THE COURT: Well, he hasn't asked the question yet.
MR. SELLERS: I will rephrase it, Your Honor.
THE COURT: Go ahead.
BY MR. SELLERS:
Q. Did you ever receive a letter from the IRS about any problems with the way you were preparing taxes? A. No, I don't think I've ever got a letter like that. Q. So you are just saying this warning letter or these two warning letters on two different days were just warning letters to warn you to have a good day? A. Excuse me? Q. I mean, this is in relation to your tax preparation 192 number, correct? A. Yes. Q. So these warning letters, I'm asking you, these warning letters are about your behavior as a tax preparer, correct? A. If that's what it is, yes. Q. In 2014? A. Yes. Q. All right. You said that the reason that you talked to -when you talked to the agents, you didn't know what you were doing was wrong. That's not true, correct? A. I never got these letters, though. Q. Regardless, you knew that was not true, correct? What you said about not knowing what you were doing in preparing fraudulent taxes, you knew that was wrong? A. That was because I was reassured by my employer that what we were doing was okay and all of that stuff. That's why I stayed there. If I would -- if they would have told me, oh, all of this stuff is fraudulent and false and stuff, I would have just -- I would have packed my bags and left. Q. Okay. The fact that you said you had already learned this prior to coming to Sunbelt, you just threw that thought out the window, that you knew that you were doing this all - A. When the agents came in, that's when I realized. Q. Did you understand it was a crime to lie to a federal agent when they were questioning you? 193 A. Yes. Q. And you did it anyway? A. Yes. I made a mistake. Q. You made a mistake. You were asked -- you said everyone is an employee. Right? A. Excuse me? Q. You told them that everyone there was an employee, correct? A. Yes. Q. At Sunbelt. You were asked, "Were you or Sunbelt employees paid incentives for getting a client a larger refund?" You said, "No," right? A. Can you rephrase that question? Q. When you were asked about whether you or Sunbelt employees were paid incentives for getting a client a larger refund, you said no. That's what you told the agents when they came in doing the search, right? A. If that's what they written down, that's what they written down. Q. Okay. You were questioned about "Have you knowingly prepared or transmitted a false tax return for yourself or your clients?" You said, "No, not that I'm aware of," correct? A. Yes, I guess so. Q. "Have you prepared any return reflecting false educational credits for any client?" And you said, "No, only if they had a 194 1098-T." Correct? A. Yes. Q. You even mentioned that -- there was a question, "What documentation do you maintain to show how -- who and when and from information was obtained?" And you mentioned Ora was a receptionist that would help with that, didn't you? A. Repeat the question. Q. Ora was the receptionist that would help with getting information, correct? A. Yes. Q. And Ora did work at Sunbelt, correct? A. Yes. Q. So that part was true. You aren't lying about that? A. No. Q. So the other parts are possibly true, right? A. Yeah. Q. You said that -- okay. You said -- you even told the agents that you try to help folks in preparing your taxes -- in their taxes, right? A. Yes. Q. You even said that when -- I think you were asked this before -- when someone came in, if they didn't have their paperwork proper, you pushed them on and sent them on their way, correct? You told the agents that, right? A. Yes. 195 Q. Now, you moved on, and you were questioned -- and that was on March 22, 2017. Now, you did a proffer with your lawyer. And a proffer is when you sit down, correct, with your lawyer and the government, right? A. Yes. Q. And they have you sign these -- initial this paperwork saying you are going to tell the truth? A. Yes. Q. Okay. This detailed story of everything and how you saw people doing taxes and fraudulent taxes, you didn't tell the government this back on August 11, 2022, did you? A. About -- Q. About the stuff you've been testifying to. You didn't talk about all of that in detail, did you? A. No, no. Q. And the government, I would assume, and -- there was some pushback, right? They were, like, we know what went on. You just need to tell us everything
MR. ELWELL: Objection to hearsay.
THE COURT: Overruled. I don't think it is being offered for the truth of the matter asserted here.
BY MR. SELLERS:
Q. That's how it went, right? Because you didn't walk out of that meeting and they believed everything you said. They felt you had more to offer, correct?
A. Yeah, I kind of was in -- I was evasive.
Q. You were evasive?
A. Yes.
Q. You mean you were untruthful?
A. No, I'm not saying that. But when they -- when I met with my lawyer and I talked to them, talked with him, I told him I' m just going to tell them the truth of what all went down.
Q. Okay. But on August 11th, you didn't tell them all that went down, what you just testified here today, did you?
A. Yes, I was evasive when I first met with the -- when they first came in with the warrants.
Q. No, when they first came in with the warrants, you were evasive. And then you met with them with your lawyer, and you still didn't tell them everything you've said today, correct?
A. Yeah, I was still scared at that time.
Q. You were still scared. And it wasn't until you had some assurances -
A. I --
Q. Let me finish my question. It wasn't until you had some assurances that you didn't have as much exposure that you start telling what you are now saying is the truth, correct?
A. Can you rephrase that, please?
Q. Prior to your plea and prior to you accepting a plea, you needed assurances that I'm going to be okay, right?
A. At this point, I still don't have, you know, the assurance
that I'm going to be okay or not. But as of right now, I'm just going to tell the truth and nothing but the truth.
Q. It's not true that you're not okay. You were facing 14 years, right?
A. Yes.
Q. Three counts have been dismissed. Before you even got on that stand, those three counts were dismissed, correct?
A. Yes.
Q. So you got a benefit already for being here?
A. That benefit is still not guaranteed.
Q. Okay. You pled to one count, right?
A. Yes.
Q. You didn't plead to the other three counts.
A. Yes.
Q. So the government has met you with part of that agreement, right?
A. Yes.
Q. Now, the next part of it is dependent upon what you say here today, right?
A. Yes.
Q. So since, again, that original proffer, since -- which was in '22, now you are giving all of this information that you've never mentioned before, correct?
A. Can you rephrase that?
Q. Your story is getting bigger. Every time you are telling
it now, it is getting bigger, right? Do you agree with that?
A. Yes, because I'm starting -- it jogs my memory and I get, like -- I get --
Q. That's fair -
A. I will get more coming out.
Q. You just said you have ADHD and you have trouble with your memory. So what is jogging your memory? The dangling of a plea deal to get lesser time?
A. No. It's going over what happened and all of that. It helps.
Q. So you are saying -
A. It brings back the memories of it.
Q. And that's a fair point. Let me ask it this way, then. So you are saying when you sit and talk with these folks right here, the more you talk with them, the more information you remember?
A. Yes.
Q. Because what they are doing is saying, well -- they are asking questions like, "Well, did you see," or "You saw folks inputting taxes on the computer," right? That's what is happening?
A. Can you rephrase it?
Q. They are saying to you, "Hey, we are going to talk about what was going on at Sunbelt," right?
A. Yes.
Q. Now, Mr. Wells, you could see other people's computers, couldn't you? They are saying that to you, right?
A. I can --
Q. No, I'm asking what the government is asking of you. Because you've never said that before, right? The first time you've ever said that you could see other people's computers and seeing their information is today, right?
A. I could at any point go and see other people's work on the other computers, and I had access to the other folders.
Q. You had access to the folders?
A. Yes, because everybody had access to the folders.
Q. Okay. So if you had access to the folders and you are incentive-driven, you could go change the taxes to benefit you because you are going to get 25 percent of you, can't you?
A. No, but I wouldn't have done that.
Q. Okay. You would agree with me that just because someone's name and PIN number appears on a return does not mean that person is the one who prepared that return. Is that correct?
A. You mean by his -- someone could put a different name on the bottom of the return?
Q. The preparer's name and PIN number doesn't mean that that's the person who did the return, correct?
A. Yes.
Q. In one of your statements to the agents, and -- you said you would go to certain people to talk to because you always
needed help, right?
A. Yes.
Q. Because you didn't know really what you were doing, right?
A. Yeah, I sometimes needed help, because if a client didn't like their return amount, yeah, I would get either Chris or Casey to help me out on that thing.
Q. They were helping you out because you were messing up taxes, and they were trying to get it right. Right?
A. In some ways.
Q. And you talk about -- I mean -- are you sitting here telling this jury that every tax you ever filed was false? You are not saying that?
A. I'm not saying a hundred percent that they were false.
Q. Okay. You were talking about Mr. Klish would ask you about a refund amount and you would see if the amount was okay. It's not illegal to make sure that the person is getting their taxes done properly, right? It's not a crime to make sure, I want to get this right. Right?
A. Yes.
Q. But why did Mr. Klish have to ask you for help and you have to go to other people for help? That doesn't make sense to me.
A. I have no idea. I have no idea why you were asking me.
Q. Probably because he didn't, right?
A. He did.
Q. I mean, you were anxious to get clients, right? But on the video, you hop up and you run to this lady, right?
A. Yes.
Q. That was you. Because you are incentive-driven, right?
A. Yes.
Q. Just like you want to get on this stand and tell all of this stuff because you are incentive-driven, right?
A. No, I didn't want to be here.
Q. Okay. But you are here, and you've been told you have to say certain things in order to get certain benefits, right?
A. It's not like I was -- it's not like I was told to say this, say this, say this. I was just told to tell the truth.
Q. Okay. You say that, and you were about to say the words, "It's not like I was coached," but you met with these agents in the U.S. Attorney's Office for an extended period of time, right?
A. Yes.
Q. Saying questions like, okay, this lawyer is going to question you this way. They may ask you this question, right? But you always say -- you just say, I'm here to tell the truth. That's what they told you to say, right?
A. No.
Q. No. When they asked you about what are you here to do, they didn't tell you you just tell the truth? That's not a conversation you had?
A. I was told just be truthful.
Q. Okay. But what's the truth? Your truth or the real truth?
A. I'm telling the real truth.
Q. Okay. You were telling the real truth on 3/22 of '17. That was the real truth?
A. No, that wasn't the exact truth in 2017.
Q. It wasn't the exact truth -- I'm sorry. Go ahead.
A. In 2017, I regret what I said to the agents on that day because that wasn't the entire truth.
Q. Okay. You weren't entirely true or telling the exact truth on August 11, 2022, were you?
A. 2022?
Q. Yes, when you met with your lawyer. You said you were evasive. You weren't telling the exact truth then, were you?
A. I was still scared at the time, but -- and I just came to my senses that I just need to tell -- just let the whole truth come out.
Q. Okay. Well, you met again on February 8th, and you didn't tell -- February 8th of 2023, this year you met, and you didn't tell all of this stuff that you said today. So you were still scared then?
A. Yes. I'm still scared at this point.
Q. Okay. Well, what are you scared of?
A. This whole situation. This whole court thing, it all
frightens me. I just want to get past this, I want to get through with this, get this past behind, move on with my life. I'm 38 years old.
Q. That's fair. But you want to get through it to benefit yourself, right ?
A. If I can get -- if I can get through this, if I have to do time or ever how much, 3 years, 14 years, whatever, if I have to do it, I will just have to do it, but I'm just here to tell the truth.
Q. So why are you scared, then? Because the truth doesn't have fear, right?
A. No.
Q. So what are you scared of?
A. It's just how -- it's just my feels.
Q. Are you scared that if you don't say the right things or how the government wants, you don't get the benefit of that plea deal?
A. I'm just going to tell the truth, and I mean, I'm not -the only thing that I want it to benefit is myself, and if it's -- and I'm not trying to give the government what their satisfactory --
Q. Okay. This is the last thing I will say. This jury is supposed to believe a person who has met with the government multiple times, and every time that story has gotten more detail, and today you come in with this elaborate story of how
you could walk up to people's computers, how you could see what they did, they are supposed to believe that today you are telling the truth? That's what you are telling this jury, to believe you today, but don't question anything you said prior to this?
A. Can you repeat that, please? I'm sorry.
Q. No, it's fine. You expect this jury -- you are telling this jury to believe what you are saying today is the truth, even though you lied on the -- you say you lied back in '17.
A. Yes.
Q. Once you got a lawyer, you say, I was still lying. You had a lawyer again on the 8th of 2023. You said again, I'm still not telling it all. After you plead guilty, the flood gates open because there is a plea deal. So they are supposed to believe what you are saying today? Everything you are saying today they are supposed to believe is the truth?
A. Yes.
MR. SELLERS: No further questions.
THE COURT: All right.
MR. HIGH: Your Honor, may we approach?
THE COURT: You may.
(THE FOLLOWING BENCH CONFERENCE WAS HELD OUTSIDE THE
HEARING OF THE JURY:)
MR. HIGH: Your Honor, I know the government wants to do redirect. Is it possible for us to finish today with him on the stand, or is this five o'clock in stone?
THE COURT: How much time are you going to have?
MR. HIGH: I'm probably going to need 10 or 15 minutes with mine.
THE COURT: I would rather finish him today.
MR. HIGH: Okay.
(END OF BENCH CONFERENCE)
CROSS-EXAMINATION
BY MR. HIGH:
Q. Mr. Wells, I'm Terence High, and I'm the attorney for Christopher Randell. Would you agree with me that based upon the tax preparers at Sunbelt, you were the least experienced tax preparer at Sunbelt? A. Yes. Q. Now, it is my understanding you met Jeff Cox through your sister, who was dating Mr. Cox at the time; is that correct? A. Yes. Q. And that's how you became associated with him and involved with American Tax? A. Yes. Q. Is that correct? Now, you testified earlier that you were paid by commission; is that correct? A. Yes. Q. And you had indicated that my client -- let me back up. Now, some employees, some of the tax preparers were made by 206 commission and some were paid by salary. Is that correct? Were you aware of that? A. No, they all -- they were all paid by commission. Q. Well - A. The preparers were paid by commission. Q. Okay. Well, based upon my investigation, some preparers were paid by commission, and some, such as Mr. Randell, were paid by salary. Do you have any evidence to dispute that here? A. Was that at Sunbelt or at American Tax? Q. Sunbelt. A. Well, from -- all the preparers were paid -- all the preparers were paid by -- by percentage of the -- the prep fees. Q. Well, Mr. Randell was paid by salary. Do you have any evidence to dispute that today, not your opinion
MR. ELWELL: Objection, Your Honor. Counsel can ask a question, but counsel is testifying.
THE COURT: Sustained.
BY MR. HIGH:
Q. Do you have any evidence to indicate that Mr. Randell was paid by commission?
A. There was a -- there was that evidence with Chris' name on it.
Q. Well, let me ask you this. Who put Chris' name on it? Because it was handwriting. Do you know who put the
handwritten name on there? Because it wasn't computerized.
A. That was Casey's handwriting.
Q. And you are referring to -- we will come back to that document. Now, you would -- you testified earlier about the software that is used, correct?
A. Yes.
Q. Now, the software that is used, in regards to education credits, it puts a cap on education credits, does it not?
A. Like the cap for like how much income --
Q. Correct?
A. Yes.
Q. So regardless of what the person's income may be, there's a cap set for what the education credit allows. Would you agree with me?
A. I'm not understanding what you are trying to explain.
Q. Well, there's a 4,000-dollar cap?
A. Yes, a 4,000-dollar cap. Yes.
Q. You would agree with me that whatever the income is, that that cap is what the cap is, correct?
A. Yeah, you do 4,000 on each education credit.
Q. Right. That's the most that they can make on that?
A. Yeah, you can -- like you can put an education credit on the taxpayer's name, and if they have, like, an older dependent, like, over 18 or so, you can put them -- you got a school credit on them, so you can have two school credits on
one tax return.
Q. Okay. Now, let's talk about Exhibit 533. Do you remember that document?
A. Can you pull it up?
MR. HIGH: Can you publish 533 for me? Okay.
BY MR. HIGH:
Q. All right. Now, that was a school list document, correct?
A. Yes.
Q. And that's just used as a reference, correct?
A. Yes.
Q. That information is available in the public domain, correct?
A. Yes.
Q. Because if needed to, if that -- if Sunbelt -- if Chris had prepared this reference list, you could just look it up online every time, correct?
A. Yes.
Q. Or you could have created it yourself, correct?
A. Yeah, but Chris made it up.
Q. I know, but there was nothing preventing you from making one as well, correct?
A. Yes.
Q. Because the information is public?
A. Yes, I could have made one myself.
Q. And there is nothing illegal about having that document;
you would agree with me?
A. Yeah, I agree.
Q. And there's nothing in the content of that document, there is nothing illegal in it, correct?
A. No.
Q. Now, I know earlier they put up Exhibit 170 that was a return for a Bobby Griffith.
MR. HIGH: Publish 170 for me.
BY MR. HIGH:
Q. As it relates to Bobby Griffith, was that the only document that you prepared for Bobby Griffith? A. Yes. Q. And as part of your preparation for this -- for trial today, did you interview -- did you review the client file for Bobby Griffith? A. The client file? Q. Yes. Was there a client file for Bobby Griffith? A. That I reviewed during the work time or just like -- Q. As the government was preparing
THE COURT: Wait. One at a time, guys.
BY MR. HIGH:
Q. As the government was preparing you for trial, did you review Bobby Griffith's client file?
A. Yes.
Q. And did you review any other returns for Bobby Griffith?
A. No.
Q. And do you recall what documentation was in his client file, as you sit here today?
A. The only thing I was shown was what I was shown in this trial.
Q. Okay. Are you just saying you just saw his tax return in the file, in the client file?
A. I didn't see the whole physical file.
Q. Okay. Did they have the whole physical file when you met with them?
A. I believe so.
Q. Okay. Did they select the documents that you were to review in Bobby Griffith's file?
A. Yes.
Q. So they didn't tell you, say, "Hey, here's the client file, review all of Bobby Griffith's client file?" They didn't tell you that?
A. No, I didn't go page to page -- page to page on Bobby Griffith's file.
Q. Right. They just pulled out the documents they wanted you to review; is that correct?
A. Yes.
Q. Now, when you would initially meet with -- we are talking about Sunbelt. All of my questions are going to be about Sunbelt.
A. Okay.
Q. When you would meet with a client initially, if they didn't have the proper documentation, would you allow them to come back later with the proper documentation?
A. Yeah, I would ask them if they could bring that documentation back, but sometimes they just didn't.
Q. Okay. Now, going back to Exhibit 539, do you recall that was an employee handbook? Do you recall that?
A. The employee handbook?
Q. Yeah. Could we publish 539?
A. Yes.
Q. And there was nothing illegal in that handbook with this content, correct ?
A. Not that I know of other than -- not that I know of.
Q. Okay. Could you publish Exhibit 536, please? And that was the self-employment questionnaire, correct?
A. Yes.
Q. And there was nothing illegal about Sunbelt having this self-employment questionnaire; is that correct?
A. I don't think it was illegal.
Q. Exhibit 548, please. Publish that for me. And here was the self-employment questionnaire for Schedule C. There's nothing about Sunbelt having this -- and this was a Sunbelt document, correct ?
A. Yes.
Q. And there was nothing illegal about the contents of this document in the form that it is; is that correct?
A. Yeah. I don't think so.
Q. Right. And there's nothing illegal about having it that way?
A. I guess not.
Q. Exhibit 549, please. And 549, if you recall, was a list of self-employment jobs. This is another Sunbelt document, correct?
A. Yes.
Q. And it was made for referencing purposes, correct?
A. Yes.
Q. And that was just to help expedite when you are doing your tax return so you didn't have to keep thumbing through looking up codes, correct?
A. That is correct. It's a reference sheet.
Q. So there's nothing illegal about the content on that document; is that correct?
A. No.
Q. And there's no illegal about that document, correct?
A. No.
Q. Now, you met with -- you met with your attorney and the government back on August 11, 2022; is that correct?
A. Yes.
Q. Okay. And then you met with them multiple times as well
as in 2023, all the way up until October of 2023; is that correct?
A. Yes.
Q. And would you agree with me that one of the things you told them was that corners were cut when things got too busy?
A. Yes.
Q. Do you recall making that statement?
A. Yes.
Q. You also stated that if a client found fraudulent information on their tax return and wanted it changed, an amended tax return would be made. Do you recall that?
A. Could you rephrase?
Q. If a client found fraudulent information on their tax return and wanted it changed, an amended tax return would be filed?
A. Yes.
Q. And there is nothing illegal about filing an amended return; is that correct?
A. That is correct.
Q. And there was nothing illegal about a tax preparer filing an amended return. Would you agree with me?
A. No, there was nothing wrong with filing an amended return.
MR. HIGH: That is all I have -- Court's indulgence, Your Honor. That is all I have for this witness, Your Honor.
THE COURT: All right. Redirect?
MR. ELWELL: Redirect, Your Honor?
THE COURT: Yes, sir.
REDIRECT EXAMINATION
BY MR. ELWELL:
Q. Mr. Wells, did you prepare false tax returns at Sunbelt Tax?
A. Yes.
Q. Did other people you worked with prepare false tax returns at Sunbelt Tax?
A. Yes.
Q. How were those tax returns false?
A. With Schedule C information, the employee expenses, and school credits.
Q. Did you come up with this scheme?
A. No.
Q. Is this something you did on your own?
A. No.
Q. Who did you do this with?
A. I did this with Jonathan, Casey, I did it with Chris, and Gabe came along, and Dwight.
Q. They also prepared false tax returns?
A. Yes.
Q. And how do you know that?
A. I've seen -- I've seen tax returns -- I've seen some of the tax returns over the years. I've seen the tax returns at
American Tax over the years.
Q. Did you see false tax returns?
A. They looked false.
MR. SELLERS: Objection to leading, Your Honor.
THE COURT: I'm not sure about that one, but
BY MR. ELWELL:
Q. Can you tell us whether or not you saw false tax returns?
A. They looked false.
Q. Did anybody show you how to prepare false returns?
A. Yes.
Q. Who showed you how to prepare false returns?
A. Jake Cox, Casey, and Chris helped too.
Q. Did you help anybody else prepare false tax returns?
A. Sometimes I had helped Gabe and Dwight.
Q. I want to clear something up. There were some questions about whether you knew what you were doing was wrong. Did you know it was wrong to put false information on a tax return?
A. Yeah, I knew it was wrong to put false information on a tax return.
Q. Did you know you were putting false information on a tax return? Were you making numbers up?
A. Yes, I was making numbers up.
Q. Did the clients provide you those numbers?
A. No.
Q. When you had an education credit, how much did you put
down for qualified expenses?
A. 4,000.
Q. Why?
A. Because that's the most you can put on it.
Q. Who told you to do that?
A. Jake, Chris, Casey.
Q. They told you to do that regardless of how much was actually spent?
A. Yes, that's the max you can put on a school credit.
Q. Did you do that regardless of whether or not they actually went to school?
A. Yes.
Q. Who told you to do that?
A. Casey, Chris.
Q. Is that something you came up with on your own?
A. No.
Q. And did other people prepare false returns with false education credits?
A. Yes.
Q. Did Casey prepare false returns with false education credits?
A. Yes.
Q. Did Chris prepare false returns with false education credits?
A. Yes.
Q. Do you know whether Gabe prepared false returns with false education credits?
A. Yes.
Q. What about self-employment? Did you prepare false returns with false self-employment?
A. Yes.
Q. Did others?
A. Yes.
Q. You were shown this handbook. If we could, pull up Government's Exhibit 539. Turn to page 4. Mr. Wells, could you please read what is written on page 27 of this document?
A. "Don't have even number of amounts on Schedule C. Every expenses will be different. Example" --
Q. Are there some examples there?
A. Yes.
Q. What are the examples below?
A. "Barber, advertising, 200" --
Q. We can skip that. What does it say below the example?
A. "Eliminate whole numbers. Nothing will cost an even number. Every purchase is taxed."
Q. Mr. Wells, when you were taught to do false self-employment, were you taught how to make up expenses?
A. Yes.
Q. Were you taught consistent with this instruction?
A. Yes.
Q. And did Casey and Chris help you with this?
A. Yes.
Q. To be clear, if you were reporting true self-employment income or expenses, do you need this instruction?
A. Yes.
Q. To be clear, if somebody comes in -
A. Wait.
MR. SELLERS: Asked and answered, Your Honor.
MR. ELWELL: I'm going to rephrase the question.
THE COURT: I'm going to allow him to rephrase it.
BY MR. ELWELL:
Q. To be clear, if someone came in with an actual Schedule C business and had receipts, did you need to make up the numbers? A. Not really, but sometimes you would have to -- if it wasn't enough, I would bump it up. Q. So even if somebody had an actual business, there were times
MR. SELLERS: Objection to leading, Your Honor.
THE COURT: Sustained.
BY MR. ELWELL:
Q. I just want to make sure I understand what you mean by that. What do you mean by you would bump them up?
A. I would try to help the client out with that to get the numbers right with the deductions and the expenses.
Q. By helping them get the numbers right, what do you mean by
that?
A. Making sure the refund amount was satisfactory to the client.
Q. You mean adding income?
A. Yes.
Q. Were you -- why were you taught to eliminate whole numbers?
A. From what they -- from what I've been told, it picks up in the IRS system. It pops up as a red flag in the IRS system.
Q. And whose handwriting did you say this was?
A. I believe that's Casey's.
MR. SELLERS: Your Honor, I object. It calls for speculation.
THE COURT: Overruled.
BY MR. ELWELL:
Q. Mr. Wells, you saw a video and you've testified extensively here about what you did at Sunbelt Tax. Did you know what you were doing when you were working at Sunbelt Tax?
A. What do you mean?
Q. Did you know you were making stuff up to put on a return?
A. Yes.
Q. That wasn't just -- was that just a mistake?
A. Yes, that was a mistake for myself.
Q. And what do you mean by that? You've used that term "mistake."
A. I was just -- I felt it was wrong, but I just went ahead and did it anyways to please -- you know, I didn't want to let someone down or --
Q. Okay.
A. You know what I mean.
Q. Earlier you were asked about customers coming in, and if customers would ever come in, Mr. Earnest would have to deal with that. Is that right, if they had issues or complaints? I believe Mr. Mueller asked you that. I know you have gotten a lot of questions. Did customers ever come into Sunbelt Tax complaining about audits?
A. Yes.
Q. And what happened?
A. We would help them with their audits.
Q. And what was audited on their returns?
A. I believe it was like expenses or Schedule C information or their school credits.
Q. To be clear, are these audits for false Schedule Cs and education credits?
A. Yes.
Q. And how did you handle those clients? What did you tell them to do?
A. We would have to, like, make a receipt book to -- for the Schedule Cs and come up with the expenses, basically make some receipts and stuff, make a logbook of, like, expenses.
Q. Who told them to do that?
MR. SELLERS: Your Honor, I would object. This appears to be outside the scope of cross. I don't think anyone crossed him on people coming in with an audit. I think it is improper redirect.
THE COURT: Mr. Elwell?
MR. ELWELL: I believe Mr. Mueller asked what
Mr. Earnest was doing, implying that he was doing other things other than nefarious things, and I'm probing what was actually happening during those encounters when he was dealing with clients.
THE COURT: Were there -- I don't recall, but the parties can tell me. Was there questioning about how the audits -- if Sunbelt helped out with an audit, how that was done?
MR. ELWELL: I believe the question was did Mr. Earnest have to help handle customers when they came in, and was that part of his duties. I'm asking what those duties entailed.
THE COURT: I'm going to sustain the objection. I think that is outside the scope of cross-examination and instruct the jury to disregard the response.
MR. ELWELL: Yes, Your Honor. Moment to confer, Your Honor.
BY MR. ELWELL:
Q. Mr. Wells, I just have a couple of questions. A lot has been made about your various different incentives and what you are incentivized to do here today. What are you doing here today?
A. I'm here testifying to tell the truth.
Q. Are you telling the jury the truth today?
A. Yes.
Q. Are you telling the jury the truth when you said you prepared false tax returns with the defendants at Sunbelt Tax?
A. Yes.
Q. You all agreed to do that?
A. Yes.
MR. ELWELL: Nothing further, Your Honor.
THE COURT: Thank you. It's a few minutes past five, so it's a good time to stop for the day. Ladies and gentlemen, I will give you the same instructions. Don't talk to anybody in or around the courthouse. Don't discuss the case with anybody, including among yourselves. Don't do any form of research whatsoever. Keep an open mind until the very end. There is still evidence to go and still instructions on the law. Don't pay attention to anything that may be in the media, and let me know about it tomorrow.
I hope you have a good night, and we will start tomorrow at 9:00. Please leave your pads in the jury room. Thank you.
(JURY OUT AT 5:11 P.M.)
THE COURT: Is this witness finally excused?
MR. ELWELL: The witness may be excused.
THE COURT: You are free to go, Mr. Wells.
(TESTIMONY CONCLUDED)
CERTIFICATE OF COURT REPORTER
I, Teri B. Norton, RMR, FCRR, RDR, Official Court Reporter for the United States District Court for the Southern District of Mississippi, appointed pursuant to the provisions of Title 28, United States Code, Section 753, do hereby certify that the foregoing is a correct transcript of the excerpt of the proceedings reported by me using the stenotype reporting method in conjunction with computer-aided transcription, and that same is a true and correct transcript to the best of my ability and understanding.
I further certify that the transcript fees and format comply with those prescribed by the Court and the Judicial Conference of the United States.
TERI B. NORTON, RMR, FCRR, RDR OFFICIAL COURT REPORTER