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United States v. Phillips

United States Court of Appeals, Seventh Circuit

March 14, 2014

UNITED STATES OF AMERICA, Plaintiff-Appellee,
v.
BETTY PHILLIPS, Defendant-Appellant

Argued February 12, 2014.

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 11 CR 34 -- James B. Zagel, Judge.

For United States of America, Plaintiff - Appellee: Shoshana L. Gillers, Office of The United States Attorney, Chicago, IL.

For Betty J. Phillips, Defendant - Appellant: Michael Bernard Nash, Chicago, IL.

Before POSNER, FLAUM, and HAMILTON, Circuit Judges.

OPINION

Page 830

Flaum, Circuit Judge.

Betty Phillips and her husband Wayne perpetrated a tax fraud scheme in 2009 and 2010, in which they filed tax returns claiming that they had overpaid the IRS and were entitled to more than $800,000 in refunds. In response to one of these tax returns, the IRS issued a refund check for about $350,000, which the couple cashed. A jury convicted both of them. This appeal concerns only Betty Phillips. She challenges her conviction, arguing that the district court improperly admitted evidence, and that the government constructively amended the indictment and violated her right against self-incrimination. We affirm.

Page 831

I. Background

In 2009 and 2010, Betty and Wayne Phillips perpetrated a partly successful tax fraud scheme. For tax year 2008, they submitted two tax returns to the IRS. They submitted the first return in March 2009 on behalf of a Betty Jean Phillips Trust. Mrs. Phillips signed this tax return, and she was listed as the trustee. This trust claimed income of $47,997. The couple filed the second return in April on behalf of a Wayne Phillips Trust. Wayne Phillips signed this tax return, but Betty Phillips was again listed as the trustee. This return reported income of $1,057,585. Both returns claimed that all of the trusts' income had gone to pay fiduciary or trustee fees, which meant that the trusts had no taxable income. Accordingly, the returns claimed that the trusts had overpaid federal taxes and were entitled to refunds. For 2008, the Wayne Phillips Trust claimed a refund of $352,528, and the Betty Phillips Trust claimed $15,999. In May 2009, the IRS issued a refund check for $352,528. The check was made out to " Wayne Phillips, Betty Jean Phillips--TTEE." (TTEE stands for trustee.) That month, Mr. and Mrs. Phillips both endorsed the check and deposited it into a joint bank account.

These tax returns were fraudulent. The IRS had no record of any taxes being paid by these trusts. On December 3, 2009, the IRS served summonses on Mr. and Mrs. Phillips, requiring them to give testimony and produce documents. During the rest of the month, the couple withdrew from their bank account the $244,137 remaining from their refund proceeds by making withdrawals from thirteen different locations.

The couple followed the same strategy for tax year 2009. In April 2010, Wayne Phillips filed a 2009 tax return on behalf of the Wayne Phillips Trust, this time naming himself as trustee. This return listed income of $1,056,000 and claimed a $352,000 refund. Betty Phillips changed her name to Samara Beth El Bey and submitted a return in April on behalf of the Samara Beth El Bey Trust. She again listed herself as trustee. (For simplicity, we will refer to both returns in her name as " the Betty Phillips Trust returns." ) This return claimed income of $441,000 and sought a refund of $147,000.

The IRS never paid refunds to the Betty Phillips Trust for 2008 or 2009, nor to the Wayne Phillips Trust for 2009. The IRS has no record of either Mr. or Mrs. Phillips inquiring into the ...


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