12-3471 documents james stuart opening appellate brief

No. 12-3471_____________________________________________________

UNITED STATES COURT OF APPEALSFOR THE SEVENTH CIRCUIT

_____________________________________________________

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

VS. NO. 12-3471

JAMES A. STUART, JR.,

Defendant-Appellant._____________________________________________________

Appeal From the United States District Courtfor the Eastern District of Wisconsin at Milwaukee

Case No. 10-00288Honorable Judge Charles N. Clevert, Jr.

_____________________________________________________

BRIEF AND REQUIRED SHORT APPENDIX OFDEFENDANT-APPELLANT, JAMES A. STUART, JR. _____________________________________________________

MICHAEL E. SCHOLL Tennessee Bar No. 162848 South Third Street, 4 Floorth

Memphis, Tennessee 38103Telephone: 901.529.8500Facsimile: 901.524.1803Email: [email protected]

Attorney for Defendant-Appellant,James A. Stuart, Jr.

_____________________________________________________

ORAL ARGUMENT REQUESTED_____________________________________________________

Case: 12-3471 Document: 12-1 Filed: 01/14/2013 Pages: 42 (1 of 52)

i

DISCLOSURE STATEMENT

The undersigned counsel for Defendant-Appellant furnishes the following list

in compliance with Federal Rule of Appellate Procedure 26.1:

1. The full name of every party or amicus the attorney represents in the

case: James Arthur Stuart, Jr.

2. Said party is not a corporation.

3. The names of all law firms whose partners or associates have appeared

for a party in the district court or are expected to appear for the party in the case:

Michael E. Scholl of The Scholl Law Firm; and the following attorney in the district

court: Robert G. Bernhoft of The Bernhoft Law Firm


ii

TABLE OF CONTENTS

DISCLOSURE STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I

TABLE OF AUTHORITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii

JURISDICTIONAL STATEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

ISSUES PRESENTED FOR REVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Whether the District Court erred by denying Defendant’s Motion for NewTrial or in the Alternative, Motion for Judgment of Acquittal based uponineffective assistance of counsel?

STATEMENT OF THE CASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

STATEMENT OF FACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

SUMMARY OF ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

The District Court erred by denying Defendant’s Motion for New Trial or inthe Alternative, Motion for Judgment of Acquittal based upon ineffectiveassistance of counsel.

A. Standard of Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

B. Established Law Regarding Trial Counsel’s Ineffective Representation 14

C. Ineffective Performance by Trial Counsel . . . . . . . . . . . . . . . . . . . . . . . 15

C. Trial Counsel’s Ineffective Performance in Not Calling James Stuart to Testify . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

D. Counsel’s Ineffective Assistance Prejudicedthe Outcome of the Case. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

CERTIFICATE OF COMPLIANCE WITH CIRCUIT RULE 32 (a)(7)©. . . . . . 34

APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . App. I

CERTIFICATE OF COMPLIANCE WITH CIRCUIT RULE 30. . . . . . . . . . . . App. ii

APPENDIX TABLE OF CONTENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . App. iii


iii

TABLE OF AUTHORITIESPAGE

CASES

Brooks v. Tennessee, 406 U.S. 605, 92 S.Ct. 1981 (1972). . . . . . . . . . . . . . . . . 29

Kitchen v. United States, 227 F.3d 1014 (7 Cir. 2000). . . . . . . . . . . . . . . . . . 14th

Mosley v. Atchison, 689 F.3d 838 (7 Cir 2012) . . . . . . . . . . . . . . . . . . . . . . . . 15th

Nichols v. Butler, 953 F.2d 1550 (11 Cir.1992). . . . . . . . . . . . . . . . . . . . . . . . 29, 30th

Rock v. Arkansas, 483 U.S. 44, 107 S.Ct. 2704 (1987) . . . . . . . . . . . . . . . . . . . 30

Rodriquez v. United States, 286 F.3d 792 (7 Cir. 2002) . . . . . . . . . . . . . . . . . 14th

Strickland v. Washington, 466 US 668, 104 S.Ct. 2052 (1984). . . . . . . . . . . . 13,14,15

United States v. Booker, 981 F.2d 289 (7 Cir. 1992). . . . . . . . . . . . . . . . . . . . 14th

United States v. Fudge, 325 F.3d 910 (7 Cir. 2003) . . . . . . . . . . . . . . . . . . . . 14th

United States ex rel. Simmons v. Granley, 915 F.2d 1128 (7 Cir. 1990) . . . . 14th

United States v. Taglia, 922 F.2d. 413 (7 Cir. 1991). . . . . . . . . . . . . . . . . . . . 14th

United States v. Teague, 953 F.2d at 1525 (11 Cir. 1992). . . . . . . . . . . . . . . . 29th

United States v. Walker, 772 F.2d 1172 (5 Cir.1985) . . . . . . . . . . . . . . . . . . . 30th

United States. v. Zarnes, 33 F.3d 1454 (7 Cir. 1994). . . . . . . . . . . . . . . . . . . . 14th

STATUTES

18 U.S.C. § 2255 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

26 U.S.C. § 1441 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,18

26 U.S.C. § 1442 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,18,19

26 U.S.C. § 1443 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,19

26 U.S.C. § 1461 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,19

26 U.S.C. § 7701 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,18,22

OTHER AUTHORITIES

Treasury Decision 8734 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20


1

JURISDICTIONAL STATEMENT

Defendant-Appellant states that:

(I) subject matter jurisdiction in this cause was vested in the United States

District Court for the Eastern District of Wisconsin upon the filing of an indictment on

December 21, 2010 naming the United States of America as Plaintiff and James A.

Stuart, Jr. As Defendant by virtue of 18 U.S.C. § 3231, which grants original

jurisdiction to the District Court over all offenses against the laws of the United States;

(ii) Appellate jurisdiction in this cause was vested in this Court upon the

filing of a Notice of Appeal by Defendant-Appellant on October 26, 2012 from the

judgment and commitment entered on October 18, 2012, by virtue of 28 U.S.C. § 1291

which grants the Circuit Court of Appeals jurisdiction to review all final decisions of

the District Courts;

(iii) This appeal is from a judgment disposing of all claims with respect to the

Defendant-Appellant.


2

ISSUE PRESENTED FOR REVIEW

1. Whether the District Court erred by denying Defendant’s Motion for New Trial

or in the Alternative, Motion for Judgment of Acquittal based upon ineffective

assistance of counsel?


3

STATEMENT OF THE CASE

This is a direct appeal by Defendant/Appellant James A. Stuart, hereinafter

referred to as “Defendant” or “Stuart” from a criminal judgment and commitment

entered in the United States District Court for the Eastern District of Wisconsin.

On December 21, 2010, the Federal Grand Jury returned an indictment charging

James A. Stuart with three (3) counts of Income Tax Evasion pursuant to 26 U.S.C. §

7201. The offenses involved willful evasion of Defendant’s income taxes for the years

2005, 2006 and 2007. (R.1 Indictment). On January 19, 2011, Stuart was arraigned

and entered a plea of not guilty. (R.3 Arraignment). Attorney, Robert Bernhoft entered

an appearance on January 28, 2011 and represented Stuart through his trial. (R.9,

Notice of Attorney Appearance).

On December 5, 2011 there was a jury trial in this matter that lasted until

December 7, 2011 (R.58, Minutes) and on December 7, 2011 there was a verdict

finding Stuart guilty on all counts. (R.61, Jury Verdict).

Following the trial of this matter on December 19, 2011, current counsel,

Michael Scholl filed a Notice of Appearance (R.63, Notice of Appearance) shortly

thereafter filed a Motion for New Trial or in the Alternative, Judgment of Acquittal

and for Additional Time to Amend. (R.66, Motion for New Trial). On December 30,

2011, affidavits in support of the motion for new trial were filed. (R.67, Affidavit)(R.68,

Affidavit). A Motion to Withdraw was filed on behalf of Robert G. Bernhoft, Robert R.

Barnes and Daniel J. Treuden and their representation was terminated. (R.69, Motion

to Withdraw).


4

A response to the Motion for New Trial was filed by the Government on January

4, 2012 (R.70, Response by USA to James A. Stuart, Jr.)(R66, Motion for New Trial)

and a reply was filed on behalf of Stuart on July 3, 2012. (R.81, Reply). The Motion for

New Trial was partially heard on July 11, 2012. (R.84, Minute Order). The Motion for

New Trial and Sentencing was continued and additional proof was heard on October

1, 2012. (R.89, Minute Order). After a hearing, the Motion for New Trial was denied

(TR 10-01-12, p. 113-117) and sentencing proceeded forward at which time Stuart was

sentenced to thirty-three (33) months imprisonment with three (3) years of supervised

release. All counts were run concurrently and a six thousand dollar ($6,000.00) fine

was imposed. (R.90, Judgment).


5

STATEMENT OF FACTS

From 2005 to 2007, James Stuart lived in Wisconsin with his wife and was

majority owner of a company in Wisconsin called New Age Chemical.(TR 12-05-11, p.

3). Mr. Stuart worked with his sister, Beverly Schlipp who was a minority owner. His

daughter, Erin Stuart started working there in 2009 in an effort to eventually run the

company. Before 2005, James Stuart had timely filed and paid his taxes.

Just prior to 2005, Mr. Stuart was faced with paying an alternative minimum

tax. His accountant at that time was Mr. Pat Walsh. In an effort to research this type

of tax, Mr. Stuart spoke with his accountant and began researching the alternative

minimum tax and its meaning. (TR 10-01-12, p. 34,35). In doing so, Mr. Stuart came

across a book by the name of Breaking the Code by Peter Hendrickson. This book gave

Mr. Stuart some insight on attempting to try and understand the tax code. (TR 10-01-

12, p. 35).

In performing his research, Mr. Stuart began to have questions concerning what

particular section of the code required him to pay tax or have a tax liability. Mr. Stuart

began to question whether he had any tax liability at all. He then began to seek the

advice of several professionals and continued to do his own research. (TR 10-01-12, p.

35)(R.66, Motion for New Trial)(R.67, R.82, Affidavits). He was unable to find anyone

that could point him to the Internal Revenue Code section that made him liable for an

income tax. He even began to send letters to the Internal Revenue Service in order to

get answers. (TR 10-01-12, p. 49)

Mr. Stuart continued to perform his research and continued to consult with tax


6

professionals. Mr. Stuart concluded that according to the tax code and the way his

company did payroll, that under his circumstances, he was not liable to pay an income

tax. (TR 10-01-12, p. 37)(R.82, Affidavit). Mr. Stuart concluded that New Age

Chemical was acting as a withholding agent on behalf of the Internal Revenue Service

as was their payroll company Payroll Data Services.

Mr. Stuart looked for the definition of withholding agent in the Internal Revenue

Code and found it located in one place, 26 U.S.C. §7701(a)(16). Upon reviewing this

definition, Mr. Stuart was referred to four other sections of the Internal Revenue Code.

These were sections 1441, 1442, 1443 and 1461. Upon review of these sections, along

with the review of other code sections and Treasury Decisions, it became apparent to

Mr. Stuart that if his company (and the payroll service they were using) was defined

as a withholding agent, then it was his interpretation that he had no tax liability. (TR

10-01-12, p. 39)(R.82, Affidavit).

Mr. Stuart discussed this with the company payroll service and with his

accountant. Neither could provide Mr. Stuart with an explanation as to whether he

was right or wrong. Mr. Stuart decided he had no tax liability and stopped filing and

paying his income taxes in 2005. Mr. Stuart, however, had placed enough money in a

bank account and set it aside in the event that it was determined that he indeed did

have a tax liability. (R.66, Motion for New Trial)(R.68, Affidavit).

Mr. Stuart began the process to stop his withholding because of his beliefs. His

Sister had several conversations with him and expressed her understanding of his

beliefs. In 2009, after Erin Stuart began to work at New Age Chemical and an internal


7

audit was performed. It was discovered that Beverly Schlipp had been embezzling

money from the company. After confronting Ms. Schlipp, she was eventually

terminated because of this in 2010. (TR 10-01-12, p. 45, 85).

Mr. Stuart was indicted for willful evasion of income taxes for the years 2005,

2006 and 2007. After Mr. Stuart was indicted, he retained the services of Robert

Bernhoft. During the period prior to trial, Mr. Stuart and his daughter would attempt

to meet counsel in an effort to discuss the facts and circumstances surrounding Mr.

Stuart’s case. Although Mr. Bernhoft would meet with Mr. Stuart and his daughter,

he never discussed the theory surrounding Mr. Stuart’s good-faith defense. (TR 10-01-

12, p. 40-43,75-76). Mr. Bernhoft originally assigned attorney, Robert Barnes to be the

lead trial counsel in Mr. Stuart’s case. Approximately one month before trial, Mr.

Bernhoft and Mr. Barnes ended their business relationship. Mr. Bernhoft began the

process of moving his offices and told Mr. Stuart and his daughter that he was taking

over as lead counsel less than a month before trial. Mr. Stuart and his daughter

continued to make efforts to meet and discuss the facts and circumstances surrounding

Mr. Stuart’s case along with this good-faith defense. They also made several attempts

to have Mr. Bernhoft prepare Mr. Stuart to testify, if necessary. Although efforts were

made by Mr. Stuart and his daughter during these meetings, Mr. Bernhoft made no

effort to discuss the facts and circumstances surrounding Mr. Stuart’s case, nor did he

make an effort to prepare Mr. Stuart to testify. Prior to trial, Mr. Bernhoft was given

names of witnesses to talk to and was given information to be used to impeach key

witnesses for the government including, but not limited to, Beverly Schlipp. (TR 10-01-


8

12, p. 40-43, 75-76).

Mr. Stuart went to trial in December 2011. The government called the first

witness, Kristy Morgan and introduced evidence of existing and the nonexistence of tax

records on behalf of Mr. Stuart with the Internal Revenue Service. Records were

introduced for the years 2002 through 2005. (TR 12-5-11, p. 32-33). Information

concerning the lack of returns was introduced for the years 2006 through 2010 without

objection from defense counsel. (TR 12-5-11, p. 39-40). Other various records and

information were introduced concerning the financial situation and make up of New

Age Chemical. Ms. Morgan also discussed the tax filing history of New Age Chemical

for the years 2002 through 2010 without objection from defense counsel. She also

introduced numerous letters from the Internal Revenue Service and from Mr. Stuart

to the Internal Revenue Service. All of Mr. Stuart’s letters to the Internal Revenue

Service were not introduced into evidence. Many of these letters discussed various

positions that did not represent Mr. Stuart’s beliefs fully. On redirect of Ms. Morgan,

the government continued to put forth a piecemeal version of the Defendant’s position

without providing an overall accurate picture of his true beliefs.

Witness, David Schwarz testified on behalf of Payroll Data Services. He

discussed the services provided to New Age Chemical and various correspondence that

took place between him and James Stuart. While dealing with Payroll Data Services,

Mr. Stuart went from using W-2's to using 1099's all of which eventually stopped. The

remainder of the employees at New Age Chemical continued to receive W-2's (TR 12-

16-11, p. 146, 158, 162). Mr. Stuart sent Payroll Data Services a letter requesting that


9

the 1099 form addressed to James Stuart be corrected for various reasons as stated in

the letter. Mr. Stuart met Mr. Schwarz in person and requested corrective action be

taken on his 1099's at which point his 2006 1099 was reversed. (TR 12-16-11, p.

146,147). Mr. Stuart sent Payroll Data Services additional letters disputing their

payroll procedures with his company, to which Payroll Data Services eventually

responded by severing the relationship. (TR 12-16-11 p. 150, 151).

The government next called Beverly Schlipp to testify. She’s the sister of James

Stuart who worked at New Age Chemical until March 2010, at which time she claims

to have retired. Ms. Schlipp was actually terminated. (TR 10-1-12, p. 45, 85). She

described New Age Chemical as a manufacturer of metalworking fluids located in

Delafield, Wisconsin. That the business had started in 1985 and had been at that

particular location for twelve (12) years. She emphasized that she had been working

there for twenty(20) years or more and at the time of her “retirement“ she was vice

president. (TR 12-16-11, p. 155). She became a thirty percent (30%) owner of the

company in March 2010. She stated that both her and her brother received a salary

from the company, as did her husband. (TR 12-16-11, p. 156, 162-163). During her

testimony, her retirement is often referenced. The company maintained two (2) bank

accounts. She stated during this time, James Stuart had her contact Payroll Data

Services in order to have them stop taking out payroll taxes from his check. (TR 12-16-

11, p. 160, 163). He had explained to her that he didn’t think that payroll taxes were

legal. Eventually payroll for Mr. Stuart was done through the company. Ms. Schlipp

would not sign the checks. (TR 12-16-11,p. 164). She stated that she received a salary


10

up until 2007, at which point she received a K-1. (TR 12-16-11, p. 164). Mr. Stuart

began to get paid by check directly from the company. Those checks were issued on the

general account of the company by Ms. Schlipp. (TR 12-16-11, p. 165). She stated that

she was instructed by Mr. Stuart not to withhold any taxes. She stated that she was

fearful that she would lose her job, because Mr. Stuart had told her this multiple times.

(TR 12-16-11, p. 165,170). However, Mr. Stuart disagrees. According to Ms. Schlipp,

Mr. Stuart set up a type of limited company for the purpose of flying under the radar

concerning any tax problems. (TR 12-16-11, p. 174). James Stuart and Erin Stuart both

had information to the contrary.

Allison Reece testified that she was the niece of Mr. Stuart and the daughter of

Ms. Schlipp. (TR 12-16-11, p. 194). She has a degree in accounting. (TR 12-16-11, p.

189). Mr. Stuart had discussed his tax beliefs with Ms. Reese on multiple occasions.

(TR 12-16-11, p. 197-198). As a result of the information she received from her uncle

and mother, she began to perform research concerning James Stuart’s beliefs. (TR

12-16-11, p. 201- 202). She confronted Mr. Stuart with her findings in two different

meetings, to which Mr. Stuart adamantly disagreed. (TR 12-16-11, p. 204-206). During

her meetings with her uncle, she did not advise him as to what specific section of the

Internal Revenue Code made him liable for the federal income tax. (TR 12-16-11, p.

219-220).

Pat Walsh testified as to his dealings with Mr. Stuart and New Age Chemical.

Mr. Walsh is a certified public accountant (TR 12-16-11, p. 224) and had a very close

relationship with Mr. Stuart’s father. He stated in 1997, New Age Chemical changed


11

from a C-corporation to a S-corporation, which is more like a partnership. After James

Stuart’s Father’s death, his Mother became the majority owner of the company. In

2003, she sold and transferred her ownership to James Stuart, Jr. and Beverly Schlipp.

During this time, Mr. Walsh gave general business and tax advice to the company as

well as prepared tax returns. (TR 12-16-11, p. 229-230). He also prepared personal tax

returns for James Stuart, Jr. from around 1990 until 2004. Mr. Walsh stated that he

stopped doing Mr. Stuart’s returns in 2004, because he felt what Mr. Stuart was doing

was unlawful and that he could not participate in the filing of those returns. He had

several discussions with Mr. Stuart about his beliefs to which they never agreed. (TR

12-16-11, p. 233-235,245,246). Mr. Walsh provided Mr. Stuart with information about

the tax code, however, he never referred Mr. Stuart to what section of the code made

him liable for federal income tax, nor the section of the code that required Mr. Stuart

to file a form 1040. In fact, Mr. Walsh did not know what sections of the code required

these actions. (TR 12-16-11, p. 259- 260).

The government next called Mr. Daniel Hau who is a certified public accountant.

(TR 12-16-11, p.262). Mr. Hau began working with New Age Chemical in 2008 for the

purpose of dissolving the S corporation and setting up an LLC. (TR 12-16-11, p. 266-

267). Mr. Stuart began to discuss his position with Mr. Hau and he tried to dissuade

him from his beliefs. (TR 12-16-11, P. 269-270). Mr. Hau did not participate in the

preparation of Mr. Stuart’s individual tax returns. Once again, during their discussion,

Mr. Hau did not provide Mr. Stuart the section of the Internal Revenue Code that

made him liable for income tax, nor did he provide Mr. Stuart the section of the


12

Internal Revenue Code that required him to file a form 1040. (TR 12-16-11, p.283).

Joel Nettesheim testified concerning the income and monies made by New Age

Chemical after 2008. He also verified that he spoke with Mr. Stuart about his beliefs

surrounding the tax system and found him to be very passionate about those beliefs.

He also stated that he could not point to a section in the code that would make Mr.

Stuart liable for an income tax. (TR 12-16-11, p. 303-304). Mr. Netteshiem testified

about Mr. Stuart’s actions after 2006 without objection from counsel.

The defense failed to put on any proof, Mr. Stuart did not testify under the

direction of counsel. Mr. Stuart was eventually found guilty of tax evasion. Mr. Stuart

filed a motion for new trial based on his counsel’s ineffective assistance and

insufficiency of the evidence.

Defendant filed several affidavits with his motion for new trial. During his

motion for new trial hearing, the defense called three main witnesses. These witnesses

were James Stuart, Erin Stuart, and Joel Nettesheim. Each of these witnesses painted

a picture of Mr. Stuart’s position that was very different than what was presented at

trial. James Stuart and Erin Stuart provided information that would have refuted

several accusations by key government witnesses. Said motion was denied and Mr.

Stuart was sentenced to pay a fine of six thousand dollars ($6,000.00) and spend thirty-

three (33) months in jail. (R.90, Judgment). The Defendant timely filed a notice of

appeal in this matter which is now before this Court. (R.92, Notice of Appeal).


13

SUMMARY OF THE ARGUMENT

The District Court erred by denying Defendant’s Motion for New Trial or in the

Alternative Motion for Judgement of Acquittal based upon ineffective assistance of

counsel.

The Supreme Court in Strickland v. Washington, 466 US 668, 104 S.Ct. 2052

(1984), set out the standard in determining whether an attorney was deficient in their

representation of a defendant. Further, this deficiency must have prejudiced the

outcome of the case. In the case at hand, trial counsel for the Defendant failed to put

on any proof or put forth a defense that reflected Mr. Stuart’s true position as to why

he did not owe an income tax. The case put forth by trial counsel was completely

different than the true facts surrounding Mr. Stuart’s reasoning. Trial counsel failed

to properly meet with Mr. Stuart to discuss the facts of the case or prepare him to

testify. In addition, trial counsel failed to put forth key evidence that would contradict

the elements of the offense as put forth by the Government and impeach key

government witnesses. He also failed to object to evidence that should have been

excluded. Had these facts been put forth, witnesses called, and Mr. Stuart been

provided with effective assistance of counsel, there is a reasonable probability that the

outcome of this case would have been different.


14

ARGUMENT

THE DISTRICT COURT ERRED BY DENYING DEFENDANT’S MOTION FOR NEWTRIAL OR IN THE ALTERNATIVE, MOTION FOR JUDGMENT OF ACQUITTALBASED UPON INEFFECTIVE ASSISTANCE OF COUNSEL.

STANDARD OF REVIEW

The standard of review for this Court in reviewing a District Court’s ruling on

ineffective assistance of counsel is de novo. Rodriquez v. United States, 286 F.3d 792

(7 Cir. 2002). See also, Kitchen v. United States, 227 F.3d 1014 (7 Cir. 2000).th th

Whether a defendant “received ineffective assistance of counsel is a mixed question of

law and fact reviewed de novo, with a strong presumption that his attorney performed

effectively.” United States v. Fudge, 325 F.3d 910 (7 Cir. 2003). See also Unitedth

States ex rel. Simmons v. Granley, 915 F.2d 1128 (7 Cir. 1990). These claims areth

reviewed under the principles set forth in Strickland v. Washington, 466 US 668, 104

S.Ct. 2052 (1984).

ESTABLISHED LAW REGARDINGTRIAL COUNSEL’S INEFFECTIVE REPRESENTATION

Ineffective assistance of counsel claims are best brought before the district court

by way of motion for new trial or a claim under 18 U.S.C. § 2255. U.S. v. Zarnes, 33

F.3d 1454 (7 Cir. 1994); U.S. v. Booker, 981 F.2d 289 (7 Cir. 1992). Such claims areth th

typically supported by affidavits along with a request to proffer evidence in support

thereof. U.S. v. Taglia, 922 F.2d. 413 (7 Cir. 1991). Strickland v. Washington, 466th

U.S. 668, 104 S. Ct. 2052 (1984) set forth the standard for an effective assistance of

counsel claims. Strickland requires the defendant to show that counsel’s performance


15

fell below an objective standard of reasonableness and that the defendant was

prejudiced as a result of that deficient performance. Id.

In reviewing the performance prong of this standard, if the defendant has

identified certain errors or omissions, then the court must determine “whether, in light

of all the circumstances, the identified acts or omissions were outside a wide range of

professionally competent assistance.”Id at 690. The court in Mosley v. Atchison, 689

F.3d 838 (7 Cir 2012) stated “Strickland establishes a deferential presumption thatth

strategic judgments made by defense counsel are reasonable.” 466 U.S. at 690-91, 104

S.Ct. 2052. The presumption applies only if the lawyer actually exercised judgment.

See Id. (“ Strategic choices made after less than complete investigation are reasonable

precisely to the extent that reasonable professional judgments support the limitations

on investigation.”)

In reviewing the prejudice prong of Strickland, the defendant must show that

“there is a reasonable probability that, but for counsel’s unprofessional errors, the

result of the proceeding would have been different.” Strickland at 694. The court in

Strickland further stated that a reasonable probability is “a probability sufficient to

undermine confidence in the outcome.” Id. at 694. (“For the issue is not whether

[petitioner] is innocent, but whether if he had had a competent lawyer he would have

had a reasonable chance (it needn't be a 50 percent or greater chance) of being

acquitted....”) See Mosley v. Atchison at 851.

INEFFECTIVE PERFORMANCE BY TRIAL COUNSEL

In reviewing the case at hand, the Court must first look to whether or not


16

counsel’s performance fell below an objective standard of reasonableness. The

Defendant in this matter retained the services of attorney Robert Bernhoft to represent

him in the trial of this matter. Mr. Stuart tried to discuss with Mr. Bernhoft his good-

faith defense to the charges of tax evasion along with the fact that he did not willfully

evade taxes. However, counsel did not entertain such a discussion. Paramount to such

a defense is Mr. Stuart’s state of mind, intent and the ability for him to explain what

he relied upon in order to make his decisions. One of the main issues being whether

Mr. Stuart truly believed that he didn’t have to pay an income tax.

Mr. Bernhoft was deficient in his representation in several ways. Each of which

will be discussed in further detail. Mr. Bernhoft failed to adequately investigate the

case and failed to adequately determine and establish the truthful facts of the case.

He failed to ascertain Mr. Stuart’s correct reasoning behind the thought process for his

good-faith defense. He failed to interview and call key witnesses, in particular James

Stuart, Erin Stuart and Joel Netteshiem. He further failed to put on accurate

testimony as to the actual facts behind how Mr. Stuart came to his conclusions. He

further failed to put into evidence the fact that Mr. Stuart had the money for his taxes

actually sitting in a bank account ready to pay and was not hiding the money. (R.66,

Motion for New Trial)(R.68, Affidavit). Mr. Bernhoft failed to properly impeach the

Government’s key witness, Beverly Schlipp. Although counsel mentioned some

speculation about impeachment in opening statement and in closing argument, he

failed to put on any proof regarding these issues. These statements by counsel are not

evidence. Each of these acts and omissions resulted in the deficient representation of


17

Mr. Stuart by his attorney and prejudiced the outcome of Mr. Stuart’s case. These

actions and inactions by trial counsel constituted a pattern of ineffectiveness which

prejudiced Defendant’s case.

In looking at trial counsel’s ineffective representation, it is seen from the

beginning of trial that counsel never had a clear grasp of the facts surrounding Mr.

Stuart’s thought process in this case. Counsel started from his opening statement

outlining the wrong procedure and fact pattern regarding Mr. Stuart’s thought process.

Mr. Bernhoft immediately in his opening statement outlined an incorrect set of facts

about Stuart meeting some individuals in church who were questioning whether there

was an actual law that made citizens liable for income tax. (TR 12-05-11, p. 14,15).

This statement reflected none of what Mr. Stuart had actually done and was

completely inaccurate . (TR 10-01-12, p.33, 34).

Mr. Bernhoft failed to outline Mr. Stuart’s position at all. The true facts are that

Mr. Stuart started researching the Internal Revenue Code because he was faced with

paying an alternative minimum tax due to inflation. He was having to pay more tax

than he had ever paid before and wanted to know why. He had asked his accountant

what could be done about this. (TR 10-01-12, p. 34,35).

Mr. Stuart began to research this issue on the internet and came across a book

called Cracking The Code by Peter Hendrickson. This book discussed a lot of issues in

the Internal Revenue Code and dealt with a lot of definitions in Title 26. (TR 10-01-12,

p. 35). Mr. Stuart then began to research these definitions and came across the

definition of withholding agent. Mr. Stuart was aware that his company, New Age


18

Chemical was acting as a withholding agent on behalf of the Internal Revenue Service

as was their payroll company, Payroll Data Services. His company, along with Payroll

Data Services, were withholding taxes from his paycheck. Upon reviewing the

definition of withholding agent in the Internal Revenue Code, Mr. Stuart found the

following:

26 U.S.C. 7701(a)(16)

“(a) When used in this title, where not otherwise distinctly expressed ormanifestly incompatible with the intent thereof-

(16) Withholding agent. The term”withholding agent”means any personrequired to deduct and withhold any tax under the provisions of section1441, 1442, 1443 or 1461.”

Mr. Stuart determined that this was the only definition of withholding agent in the

Internal Revenue Code. He then went to the sections that the definition of withholding

agent referred to and realized that none of these sections applied to him.

The Internal Revenue Code defines the sections as follows:

§ 1441. Withholding of tax on nonresident aliens

(a) General rule.--Except as otherwise provided in subsection ©, all persons, inwhatever capacity acting (including lessees or mortgagors of real or personalproperty, fiduciaries, employers, and all officers and employees of the UnitedStates) having the control, receipt, custody, disposal, or payment of any of theitems of income specified in subsection (b) (to the extent that any of such itemsconstitutes gross income from sources within the United States), of anynonresident alien individual or of any foreign partnership shall (except asotherwise provided in regulations prescribed by the Secretary under section 874)deduct and withhold from such items a tax equal to 30 percent thereof, exceptthat in the case of any item of income specified in the second sentence ofsubsection (b), the tax shall be equal to 14 percent of such item.

§ 1442. Withholding of tax on foreign corporations


19

(a) General rule.--In the case of foreign corporations subject to taxation underthis subtitle, there shall be deducted and withheld at the source in the samemanner and on the same items of income as is provided in section 1441 a taxequal to 30 percent thereof. For purposes of the preceding sentence, thereferences in section 1441(b) to sections 871(a)(1)© and (D) shall be treated asreferring to sections 881(a)(3) and (4), the reference in section 1441(c)(1) tosection 871(b)(2) shall be treated as referring to section 842 or section 882(a)(2),as the case may be, the reference in section 1441(c)(5) to section 871(a)(1)(D)shall be treated as referring to section 881(a)(4), the reference in section1441(c)(8) to section 871(a)(1)© shall be treated as referring to section 881(a)(3),the references in section 1441(c)(9) to sections 871(h) and 871(h)(3) or (4) shallbe treated as referring to sections 881© and 881(c)(3) or (4), the reference insection 1441(c)(10) to section 871(i)(2) shall be treated as referring to section881(d), and the references in section 1441(c)(12) to sections 871(a) and 871(k)shall be treated as referring to sections 881(a) and 881(e) (except that forpurposes of applying subparagraph (A) of section 1441(c)(12), as so modified,clause (ii) of section 881(e)(1)(B) shall not apply to any dividend unless theregulated investment company knows that such dividend is a dividend referredto in such clause).

§ 1443. Foreign tax-exempt organizations

(a) Income subject to section 511.--In the case of income of a foreign organizationsubject to the tax imposed by section 511, this chapter shall apply to incomeincludible under section 512 in computing its unrelated business taxable income,but only to the extent and subject to such conditions as may be provided underregulations prescribed by the Secretary.

(b) Income subject to section 4948.--In the case of income of a foreign organizationsubject to the tax imposed by section 4948(a), this chapter shall apply, exceptthat the deduction and withholding shall be at the rate of 4 percent and shall besubject to such conditions as may be provided under regulations prescribed bythe Secretary.

§ 1461. Liability for withheld tax

Every person required to deduct and withhold any tax under this chapter ishereby made liable for such tax and is hereby indemnified against the claims anddemands of any person for the amount of any payments made in accordance withthe provisions of this chapter.

After reviewing these sections, Mr. Stuart came to the conclusion that if his


20

company was acting as his “withholding agent,” then according to the Internal Revenue

Code, no money should be withheld from his check. (TR 10-01-12, p. 37-39). Mr. Stuart

did some further research that strengthened his conclusion by looking at Treasury

Decision 8734. Examining the plain text, Treasury Decision 8734 explained the legal

effect of the payor’s duty and responsibilities when acting as a withholding agent.

Treasury Decision 8734 states “As a general matter, a withholding agent (whether U.S.

or foreign) must ascertain whether the payee is a U.S. or a foreign person. If the payee

is a U.S. person the withholding provisions under chapter 3 of the Code do not apply.”

Mr. Stuart could find no other mention of the definition of withholding agent and since

his company and Payroll Data Services was considered Mr. Stuart’s withholding agent

for the Internal Revenue Service, Mr. Stuart felt he was following the definitions as

spelled out directly in the Internal Revenue Code and determined he had no tax

liability.

This analysis formed the basis for Mr. Stuart’s thought process in coming to his

decision that he had no tax liability. The defense that Mr. Bernhoft put forth was a far

cry from these facts. Although counsel did mention Mr. Stuart’s issues regarding his

company withholding taxes in his opening statement, he never presented the reasoning

behind Mr. Stuart’s issues, nor did he present any proof as to where and how Mr. Stuart

came to his conclusion. Exhibit 1 to sentencing hearing was never placed in evidence

during trial. It referenced the issue Mr. Stuart had with withholding with his company.

Further, counsel never made any references to the Internal Revenue Code sections

mentioned above, nor did he place these code sections into evidence before the jury. By


21

failing to do so, counsel prevented Mr. Stuart’s state of mind and thought process from

being heard by the jury. Instead counsel relied upon letters that were placed into

evidence piecemeal. The letters, as presented, do not completely or even closely reflect

Mr. Stuart’s entire thought process. Although there was some mention of the

withholding issue, Mr. Bernhoft never presented evidence about the issue.

Mr. Stuart had tried to inform counsel of his theory prior to trial and had given

him Exhibit 1 prior to trial. (TR 10-01-12, p.38)(R.87, Exhibit 1).Counsel simply would

not discuss the matters and did not use the evidence he had access to. Counsel failed

to adequately ascertain Mr. Stuart’s state of mind and failed to adequately interview

Mr. Stuart in order to establish the correct facts surrounding this case. In fact, counsel

never sat down and discussed the details and facts of the case at all with Mr. Stuart.

(TR 10-01-12, p. 39, 40, 67, 74, 75).

By failing to meet with Mr. Stuart and ascertain the correct facts of the case, key

evidence was left out of trial. In addition, counsel was unable to appropriately cross-

examine key witnesses and argue evidence that would have been favorable to Mr.

Stuart. One key piece of evidence surrounded the witness, Mr. Schwarz. If argued and

developed properly, this witness’ testimony could have properly shown that Mr. Stuart

was trying to take steps to pursue what he believed to be the correct legal avenue

concerning his tax liability and the actions of Payroll Data Services as a withholding

agent.

Mr. Schwarz, while being employed with Payroll Data Services, was acting as the

third-party payor and withholding agent for New Age Chemical. He testified as to


22

having had several discussions with Mr. Stuart with respect to this belief as to the

erroneous reporting to the Internal Revenue Service of his income if New Age Chemical

was considered a withholding agent. Stuart explained the precise procedures that

Schwarz’s company were required to follow if New Age Chemical was a withholding

agent under Mr. Stuart’s theory. Mr. Schwarz admitted that the company would not

change its policy, and further admitted that he felt that submitting information returns

to the Internal Revenue Service applies to everybody, despite the fact that Stuart in a

specific situation intended for the withholding agent to follow its purpose as defined in

26 U.S.C. § 7701. Mr. Bernhoft never developed or argued these facts further.

If the jury would have been able to hear all of this information, they would have

possibly been able to follow the reasoning Mr. Stuart had concerning the definitions of

the Internal Revenue Code. Whether this theory was correct or incorrect made no

difference since it was the true belief of Mr. Stuart. This would have put forth the legal

defense which Mr. Stuart embraced that if an employer is defined as a withholding

agent, then under the definition of withholding agent in the Internal Revenue Code his

employer was either not authorized to withhold money from his pay or he was not liable

to pay taxes. The key to this is that by Mr. Bernhoft failing to put forth the true and

correct facts and theories that Mr. Stuart believed, the jury was without the benefit of

the accurate facts in order to determine if Mr. Stuart truly had a good-faith belief as to

why he did not have a tax liability. It is unfairly prejudicial to the defendant and his

case to not allow a jury to correctly assess the accurate facts surrounding the case

because of his lawyer’s ineffective assistance. A defendant has no reasonable chance of


23

acquittal if the lawyer makes no effort to ascertain the correct facts and properly argue

them to a jury.

Mr. Bernhoft further failed to interview and call to testify Erin Stuart. In doing

so, Ms. Stuart would have been able to verify several of the facts set forth above. In

addition, Ms. Stuart was able to testify as to the dealings that Mr. Stuart had with his

attorney. Ms. Stuart was present with her father during the meetings that he had with

his attorney. (TR 10-01-12, p. 74,75). She explained her testimony in the Sentencing

Hearing that they made several requests to speak with Mr. Bernhoft about her father’s

reasoning and the facts surrounding the case. (TR 10-01-12, p. 73,74). However, Mr.

Bernhoft never discussed the details and facts surrounding Mr. Stuart’s case with Mr.

Stuart, nor did he prepare him in any way to testify. Although Mr. Stuart made

several requests to do so, Mr. Bernhoft made a unilateral decision for Mr. Stuart not to

testify, and therefore stated that he did not need to prepare Mr. Stuart to testify. Mr.

Stuart questioned this decision because similar cases always required the defendant to

testify. (TR 10-01-12, p. 74,75).

During trial, Mr. Bernhoft went as far as to take Mr. Stuart out in the hallway

outside of court and pretend to discuss whether or not Mr. Stuart was going to testify

after the governments case in chief already knowing that Mr. Bernhoft himself that

made this decision. (TR 10-01-12, p. 82). Ms. Stuart testified in the motion for new trial

that her father had expressed to her that Mr. Bernhoft had not presented a lot of things

needed for the case and that he should have testified. However, he said he was not

prepped and therefore, did not know what to do. (TR 10-01-12, p. 98).


24

Erin Stuart further testified that her Father expressed concerns that Mr.

Bernhoft did not know the reasoning behind why her Father stopped paying taxes and

did not know how his position could be put before a jury without him testifying (TR 10-

01-12, p.76). She testified about how their concerns became greater after Mr. Bernhoft’s

opening statement and for the remainder of the trial they attempted, without success,

to express their concerns to Mr. Bernhoft as to how he was going to get Mr. Stuart’s

position across to the jury. (TR 10-01-12, p. 79, 80, 81). She explained how Mr. Bernhoft

did not like to be questioned and her Father did not feel he could testify without being

prepared and was more than a little intimidated by Mr. Bernhoft. (TR 10-01-12, p. 79,

80, 81). Mr. Bernhoft would always tell her and her Father to trust him and that

everything would be summed up in closing argument. However, there was never any

additional evidence put before the jury. (TR 10-01-12, p. 82).

Erin Stuart’s testimony during the motion for new trial established that Mr.

Bernhoft failed to adequately investigate and discuss the correct facts of the case and

failed to obtain the correct theory and basis for Mr. Stuart’s good-faith defense. The

proof that was put before the court in the motion for new trial was uncontradicted.

If Erin Stuart would have been called to testify during trial, she would have been

able to tell the jury that she was an accountant. That her Father had presented her

with the book, Cracking the Code in an effort to try and help her understand the law

as it pertained to his tax status. She would have been able to testify that it did not look

like the tax code, as Mr. Stuart viewed it, applied to him and she could not tell him

which parts of the code did. (TR 10-01-12, p. 77, 78). Ms. Stuart would have also been


25

able to testify that her Father had put money aside to pay his taxes. She would have

been able to testify as to the amount and where it was located. (R.66, Motion for New

Trial, p.6) (R.68, Affidavit of Erin Stuart). This key piece of evidence would have

directly contradicted evidence by the government concerning the act of evasion.

Erin Stuart would have also been able to testify about the credibility surrounding

a key witness by the name of Beverly Schlipp. Ms. Schlipp is the aunt of Erin Stuart

and the sister of James Stuart. Ms. Stuart would have been able to testify to a jury that

after she started working for the company in 2009, she performed an audit of the

company books and discovered that Ms. Schlipp has been embezzling from the company.

She would have been able to testify that her and Ms. Schlipp had a heated argument

about the transactions. (TR 10-01-12, p. 83, 84). This led to Erin Stuart firing Ms.

Schlipp from her position at New Age Chemical in 2010. (TR 10-01-12, p. 85,86). Some

of the money which Ms. Schlipp embezzled was used towards attorneys surrounding the

Internal Revenue Service investigation. At the sentencing hearing, Erin Stuart testified

that she provided this information to Mr. Bernhoft on several occasions. However, Mr.

Bernhoft failed to investigate it further. (TR 10-01-12, p. 85,86). This information was

drastically important, because Ms. Schlipp was a key witness as to the acts of evasion.

Her credibility was very important to this case. Ms. Schlipp was the one who testified

that Mr. Stuart was doing things with he payroll to fly under the radar. (TR 12-06-11,

p. 174). However, the defense had actual proof as to her motive to lie and failed to

adequately investigate and present that proof to the jury. Mr. Bernhoft, at least, could

have cross-examined Ms. Schlipp about these events and been able to elicit testimony


26

that she had been fired. This could have gone to the credibility of both her and her

daughter, as her daughter would have benefitted from Ms. Schlipp’s continued

employment. Failure of Mr. Bernhoft to develop this line of questioning or to submit

this proof to the jury was blatantly ineffective. There was a strong possibility that the

jury could have viewed her testimony differently had they had these facts.

Erin Stuart would have further testified that any money that Mr. Stuart received

from the company was reported. That Ms. Schlipp’s job was never in danger, because

of her refusal to sign any checks and she faced no discipline because of this fact. She

would have testified that her Father had discussed his theories often with Ms. Schlipp

and she found them to be interesting and thought about adopting them. Ms. Schlipp,

during her testimony, made a statement to the effect that Mr. Stuart was performing

some of these acts in order to “fly under the radar”. Erin Stuart would have been able

to testify that according to the numerous conversations she had with Ms. Schlipp that

this statement was inaccurate. (TR 10-01-12, p. 91). If Ms. Stuart had been called to

testify, it would have placed in great dispute the issue of evasion. It would have shown

that Ms. Schlipp had a motive to lie about her brother’s actions. It would have also

shown and elaborated on Mr. Stuart’s thought process, as well as shown the jury that

Mr. Stuart was not hiding money and that all of the money for his taxes was sitting

there to be paid if he owed a tax liability.

Mr. Bernhoft also failed to adequately interview and properly cross-examine

another key witness, Joel Netteshiem. During the trial the government had put forth

representation that Mr. Stuart’s accountants began to leave his employment because


27

they disagreed with his tax position. (TR 12-05-11, p. 12). His testimony became very

important, because the government painted a picture of Mr. Stuart as being a difficult

man that fired each of his accountants because they strongly disagreed with his beliefs.

However, if counsel had properly cross-examined each of the witnesses and called James

Stuart and Erin Stuart to testify, the jury would have seen that this was far from the

truth. Mr. Netteshiem would have testified that Mr. Stuart’s previous accountant, Mr.

Hau did not leave the employment of Mr. Stuart because of his individual tax position.

(TR 10-01-12, p. 100). He would have testified that Mr. Stuart thoroughly discussed his

theory concerning his tax liability. He would have been able to testify that he had

discussed Mr. Stuart’s beliefs with the Internal Revenue Service and that he was not

in a position to verify if they were correct. He would have also testified that he believed

that Mr. Stuart was passionate about what he believed and understood from his

research. (TR 10-01-12, p. 102). Mr. Nettesheim would have testified that he was unable

to tell Mr. Stuart whether he was correct or incorrect about his beliefs. He would have

been able to testify that he consulted with his partner who had a Masters in Tax and

a friend who was a tax attorney who represented individuals in tax matters and was

still unable to tell Mr. Stuart whether he was correct or incorrect about his beliefs. He

also stated in the motion for new trial hearing that he at least told Mr. Bernhoft about

his tax partner. (TR 10-01-12, p. 102, 103). During the motion for new trial, on cross

examination, he admitted that as a C.P.A., he did not know what was the basis for the

federal government’s ability to tax people. He just knew that he accepted it as fact

because it was such a dominating force in the nation. (TR 10-01-12, p. 104). Mr.


28

Bernhoft had an opportunity in he failed to develop any of these facts. This was because

he lacked knowledge of the correct facts.

Looking at each of these facts and witnesses it becomes blatantly apparent that

trial counsel was ineffective. First and foremost, the failure to interview your client to

obtain the correct set of facts falls below even the most basic line of practice for any

attorney. Trial counsel in this case had the ability with little effort to ascertain that the

facts he set forth throughout the case were incorrect. He had the ability with little effort

to show that Mr. Stuart did not hide money and that the money was available in an

account to pay the taxes if necessary. This goes directly to the acts of evasion. If the

Defendant had the money sitting in an account, then the government’s theory that he

was hiding money would fail. Trial counsel also had the ability to contradict much of the

government’s case with information readily available to him through his client.

Therefore, counsel was ineffective because each of the following:

1. Failing to properly interview his client;

2. Failing to set forth an accurate account of how Mr. Stuart came to his

decision not to pay taxes;

3. Failing to call Mr. Stuart to testify;

4. Failing to impeach Beverly Schlipp concerning her embezzlement and

reasons for leaving New Age Chemical;

5. Failing to put on proof that showed a different reason as to why Mr. Stuart

parted ways with his accountants;

6. Failing to put on proof that Mr. Stuart was not hiding money and that he


29

had the money to pay his taxes sitting in a bank;

7. Failing to call Erin Stuart testify;

8. Failing to put on proof that Joel Nettesheim had consulted with his tax

partner and a tax attorney and still was unable to answer Mr. Stuart’s questions

concerning the law that made him liable for income tax;

9. Counsel wrongfully admitted in closing argument that the defendant had

a tax liability and tax due and owing without Mr. Stuart’s consent; and

10. Counsel wrongfully allowed proof of Mr. Stuart’s tax situation in the state

of Wisconsin to be admitted without objection and allowed proof of his tax situation

after 2007.

Each of these acts individually and collectively fell below the line of reasonable

practice for trial counsel. Each of these acts individually and collectively show proof of

trial counsel’s ineffective representation, which denied Mr. Stuart his Sixth Amendment

right to effective assistance of counsel.

TRIAL COUNSEL’S INEFFECTIVE PERFORMANCEIN NOT CALLING JAMES STUART TO TESTIFY

It is important to discuss separately trial counsel’s ineffective performance in

placing the Defendant in a position where he did not testify. “A criminal defendant

cannot be compelled to remain silent by defense counsel.” United States v. Teague, 953

F.2d at 1525 (11 Cir. 1992). “Testifying is both a tactical decision for defendant andth

also constitutional right.” Brooks v. Tennessee, 406 U.S. 605, 92 S.Ct. 1981 (1972). The

Eleventh Circuit in Nichols v. Butler, 953 F.2d 1550 (11 Cir.1992) held that “it isth


30

beyond question that an attorney cannot threaten to withdraw during a trial order to

coerce the defendant to relinquish his fundamental right to testify.” Id. “The most

important witness for the defense in many criminal cases is the defendant himself.”

Rock v. Arkansas, 483 U.S. 44, 107 S.Ct. 2704 (1987). “Where the very point of the trial

is to determine whether an individual was involved in criminal activity, the testimony

of the individual himself must be considered of prime importance.” Nichols v. Butler at

1554 quoting United States v. Walker, 772 F.2d 1172 (5 Cir.1985).th

First and foremost, Mr. Stuart’s testimony is paramount in this case. In order to

establish a good-faith defense, the jury needs to know the thought process of the

Defendant and needs to judge his sincerity as to whether he truly believed his position.

The question becomes did Mr. Bernhoft coerce Mr. Stuart from testifying? Although

there is no direct threat to withdraw, trial counsel placed Mr. Stuart in a position where

he had no choice about testifying. Mr. Bernhoft made the decision that Mr. Stuart was

not testifying. He made this decision knowing nothing about the correct facts. (TR 10-

01-12, p. 42-44). James Stuart had never been in a trial before. Mr. Bernhoft never

prepared him to testify. He met with Mr. Stuart during trial, prior to being questioned

by the court, and told him what to say. (TR 10-01-12, p.43, 82). Although not making

any threatening statements, Mr. Bernhoft made the decision for Mr. Stuart. Mr. Stuart

was afraid. (TR 10-01-12, p. 42). James Stuart and Erin Stuart both testified that Mr.

Stuart felt intimidated and that he had no choice in the matter. (TR 10-01-12, p.42, 80-

81). The real problem is how could trial counsel make a decision to not have Mr. Stuart

testify if he did not know all the facts of the case and what Mr. Stuart had to say. Trial


31

counsel did not exercise judgment after sufficient investigation. Further the limits of

the investigation did not support counsel’s judgment.

COUNSEL’S INEFFECTIVE ASSISTANCE PREJUDICEDTHE OUTCOME OF THE CASE

It is clear from the trial record, that there is a reasonable probability that the

outcome of this case would have been different had Mr. Stuart not received such

effective assistance of counsel. The government in this case painted a picture of Mr.

Stuart as an arrogant individual who bullied people and refused to listen to anyone.

Someone who was hiding his money to keep from paying taxes. All of which could of

been disputed.

Of course there is a reasonable probability that the outcome of this case would

have been different, because Mr. Bernhoft did not even put forth the correct facts. Mr.

Stuart was denied the opportunity for the jury to hear the true and correct reasoning

behind his good-faith decision that he had no tax liability. He was denied the

opportunity for the jury to hear how he analyzed the definitions in the Internal Revenue

Code and how he applied the definitions to his facts and circumstances in making this

determination. The jury was denied the opportunity to hear that Mr. Stuart actually

had the money to pay his taxes set aside in a bank account and was not hiding his

money. This would have contradicted the acts of evasion. If James Stuart’s counsel had

not been ineffective, the jury would have been able to fairly assess the credibility of

Beverly Schlipp and her daughter. The jury would have been able to hear that

accountants, such as Joel Nettesheim did not necessarily disagree with Mr. Stuart, but


32

that he and other professionals could not provide Mr. Stuart with an answer to his

questions. The jury, without objection from trial counsel, was provided inappropriate

information such as Mr. Stuart’s dealings with the state of Wisconsin and Mr. Stuart’s

tax situation after 2007. It is apparent from all the above that had Mr. Bernhoft

performed in an effective manner, the jury would have deliberated over a much different

case. But for Mr. Bernhoft’s ineffective assistance, there is a reasonable probability

that the result of the trial would have been different.


33

CONCLUSION

It is clear from the facts of this case and the testimony of witnesses at all

proceedings that trial counsel rendered ineffective assistance to Mr. Stuart. Further,

it is clear that but for the deficient performance of trial counsel, there is reasonable

probability that the outcome of this case would have been different. For these reasons,

this Court should vacate the verdict in this matter and send this case back to the

District Court for a new trial on the merits.

s/Michael E. Scholl MICHAEL E. SCHOLL


34

CERTIFICATE OF COMPLIANCE WITH FED. R. APP. P. 32(a)(7)(C)

The undersigned certifies that this brief complies with the volume limitations of

Federal Rule of Appellate Procedure 32(a)(7)(C) and Circuit Rule 32 in that it contains

9,602 words and 912 lines of text as shown by WordPerfect used in preparing this brief.


Dated: January 14, 2013


35

CERTIFICATE OF SERVICE

I, the undersigned, do hereby certify that a copy of the foregoing brief was

delivered electronically through ECF to Matthew L. Jacobs, Assistant United States

Attorney, Eastern District of Wisconsin at 517 East Wisconsin Avenue, Room 530,

Milwaukee, WI 53202 on the 14 day of January, 2013.th



i

APPENDIX


ii

CERTIFICATE OF COMPLIANCE WITH CIRCUIT RULE 30

The undersigned counsel for Defendant-Appellant, hereby states that all of the

materials required by Circuit Rule 30(a) and 30(b) are included in the Appendix to this

brief.


Dated: January 14, 2013


iii

APPENDIX TABLE OF CONTENTS

Certification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii

R3 Arraignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-3

R9 Entry of Attorney Appearance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

R58 Minutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-6

R61 Jury Verdict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-8

R63 Notice of Appearance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

R66 Motion for New Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-19

R67 Affidavit of James Stuart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

R68 Affidavit of Erin Stuart. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

R69 Motion to Withdraw . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22-23

R70 Government’s Response to Defendant’s Post Trial Motions . . . . . . . . . . . . . 24-43

R81 Reply to Government’s Response . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44-50

R82 Affidavit of James Stuart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51-53

R84 Minute Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54-55

R87 Minute Order Exhibit 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56-58

R89 Minute Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59-60

R90 Judgment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61-66

R92 Notice of Appeal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

TR 10-01-2012 p. 113-117 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68-72


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