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United States v. Gorrell

United States Court of Appeals, Tenth Circuit

April 29, 2019

UNITED STATES OF AMERICA, Plaintiff - Appellee,

          Appeal from the United States District Court for the Northern District of Oklahoma (D.C. No. 4:17-CR-00010-GKF-1)

          Barry L. Derryberry, Assistant Federal Public Defender (Julia L. O'Connell, Federal Public Defender, with him on the briefs), Office of the Federal Public Defender for the Northern District of Oklahoma, Tulsa, Oklahoma, appearing for Appellant.

          Jeffrey Gallant, Assistant United States Attorney (R. Trent Shores, United States Attorney, and Kevin C. Leitch, Assistant United States Attorney, on the brief), Office of the United States Attorney for the Northern District of Oklahoma, Tulsa, Oklahoma, appearing for Appellee.

          Before BRISCOE, LUCERO, and MORITZ, Circuit Judges.


         Following a six-day jury trial, Shawn Gorrell was convicted of three counts of wire fraud, 18 U.S.C. § 1343, and three counts of tax evasion, 26 U.S.C. § 7201. In this appeal he challenges only his three convictions for tax evasion and he seeks a new trial only on those counts. He frames his issue in this way: "Whether plain error occurred when the jury instructions directed the jury to consider specified theories of an affirmative act (an element of tax evasion), which were legally invalid theories of guilt as a matter of law, the jury was instructed to be unanimous in finding an affirmative act, and the jury returned a general verdict of guilt." Gorrell Opening Br. at 1. Exercising jurisdiction pursuant to 28 U.S.C. § 1291, we affirm.


         We briefly recount the relevant facts underlying Gorrell's convictions before summarizing the provided jury instructions.


         Shawn Gorrell was an insurance salesman based in Tulsa, Oklahoma. His father was an accountant in Tulsa whose clients included several dentists and Gorrell sold insurance to some of them. In 2009, Gorrell began to pitch investments to these dentists that were outside of his typical insurance products. Some dentists initially gave Gorrell modest sums to invest, but later the amounts ballooned to hundreds of thousands of dollars.

         Some of these funds were placed in a legitimate investment known as the Tax Credit Funding Group ("TCFG"). TCFG was started by John Walsh in 2011. The premise behind TCFG was simple: the federal government provided certain tax credits to businesses affected by Hurricane Katrina, and TCFG provided tax refund anticipation loans to these eligible businesses. One of Walsh's friends mentioned that Gorrell was interested in investing in TCFG, so Walsh offered the investment opportunity to him. Gorrell subsequently invested $200, 000 in TCFG on behalf of his clients.

         In June 2011, Walsh began planning a second fund, Tax Credit Funding Group II ("TCFG II"). Gorrell invested another $200, 000 in TCFG II. But TCFG II never really got off the ground, and Walsh returned the second $200, 000 investment to Gorrell in July 2011. Walsh wound down TCFG in December 2011 and returned all profits and principal to Gorrell by February 2012. But rather than return these monies to his investors, Gorrell kept both the profit or principal from the TCFG investment as well as the funds he was given to invest in TCFG II. He was also misusing investor funds in other ways. Carol Guies, a director of examination and inspections at the Oklahoma Department of Securities, testified at trial that from April 2011 to October 2012 Gorrell engaged in risky day trading through a personal E*Trade account. Gorrell initially funded the E*Trade account with his own money (and investor funds from TCFG), but later deposited the investors' money directly into the account. The investors involved had not given him permission to use their funds in this way.

         Tanner Sanders, a special agent with the Internal Revenue Service, also testified at trial. Sanders testified that he examined various financial accounts belonging to Gorrell, including his personal Bank of Oklahoma account, several personal Chase Bank accounts, his personal E*Trade account, and a business account at the Bank of Oklahoma for TCFG funds. There was ample testimony given throughout the trial that Gorrell commingled the investors' money and his business funds with his personal bank accounts and E*Trade accounts.[1]

         The government also provided evidence at trial that Gorrell stopped having his father prepare his tax returns. For several years, Gorrell's father (an accountant) had prepared Gorrell's tax returns for free. However, Gorrell later hired a different tax preparer, the Tax Defense Network, in 2013 to help him file outstanding and amended tax returns for the 2009, 2011, and 2012 tax years. Naydali Maldonado-Hurst, a certified public accountant with the Tax Defense Network, and Mark Giles, a tax analyst with the Tax Defense Network, testified at trial that Gorrell exhibited a pattern of not providing the service with the information it needed to prepare his tax returns despite repeated email communications over several weeks; that Gorrell eventually provided unsubstantiated statements regarding investment income; that several of Gorrell's explanations regarding his financial activity and income did not align with the records he provided; and that even when pressed Gorrell failed to provide documentation regarding his trading activity.

         The government also presented evidence at trial regarding Gorrell's unreported income in the 2009, 2011, and 2012 tax years. In 2009, Gorrell received $50, 000 from one investor. Gorrell deposited these funds into his business's bank account, and in April 2009 he began to transfer funds from this account to his personal bank account. He then used these funds for personal expenses. The government produced testimony at trial that, based on this activity, Gorrell failed to report $50, 000 in taxable income for the 2009 tax year.

         In 2011, Gorrell received $880, 000 from investors. He returned approximately $235, 000 to these investors during the year. However, he also used the investors' funds for personal expenses such as day trading through an E*Trade account.[2]Government witnesses testified that, based on these financial records, Gorrell failed to report $377, 708 in taxable income in the 2011 tax year.

         In 2012, Gorrell received more than $1, 300, 000 from investors. While he returned approximately $227, 000 to these investors, he also used the investors' funds for personal expenses, including day trading through his E*Trade account, personal credit card payments, and loan payments.[3] Government witnesses testified that, based on his failure to report the more than $1, 000, 000 in appropriated funds belonging to investors as taxable income, Gorrell failed to pay nearly $373, 000 in taxes for the 2012 tax year.


         When instructing the jury, the district court incorporated the affirmative act allegations contained in the Superseding Indictment, the elements of tax evasion, and the requirement that the jury be unanimous in its determination of the affirmative act that formed the basis of the conviction for each count. The jury returned a unanimous general guilty verdict on each count. Given its general verdict, the jury did not identify which affirmative act formed the basis for each tax evasion conviction. Gorrell argued that if any of the four affirmative acts he identified are legally insufficient, his convictions are invalid and he is entitled to a new trial. The government responds that each affirmative act incorporated into the jury instructions is legally sufficient to sustain Gorrell's convictions.

         Jury Instruction Number 18 lists the four elements of tax evasion under 26 U.S.C. § 7201. Instruction Number 18 provides:

To find the defendant guilty of tax evasion, you must be convinced that the government has proved each of the following elements beyond a reasonable doubt:
FIRST: The Defendant owed substantial income tax in addition to the tax liability which he reported on his income tax return for the year ...

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