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Brooks v. United States

United States District Court, W.D. Tennessee, Eastern Division

May 22, 2017

ISAAC H. BROOKS, JR., Petitioner,
v.
UNITED STATES OF AMERICA, Respondent.

          ORDER DENYING § 2255 MOTION, DENYING CERTIFICATE OF APPEALABILITY, CERTIFYING APPEAL WOULD NOT BE TAKEN IN GOOD FAITH, AND DENYING LEAVE TO PROCEED IN FORMA PAUPERIS ON APPEAL

          J. DANIEL BREEN UNITED STATES DISTRICT JUDGE

         Before the Court is the pro se 28 U.S.C. § 2255 motion of the Petitioner, Isaac H. Brooks, [1] to vacate, set aside or correct his sentence (Pet., ECF No. 1), as supplemented by his later-filed amendment (Am., ECF No. 31) (collectively, the “Petition”). For the reasons set forth below, the Petition is DENIED.[2]

         BACKGROUND

         Indictment and Offense Conduct

         On April 19, 2010, a federal grand jury returned a one-count indictment against Petitioner, charging him with twenty-nine counts of personal and business tax evasion in violation of 26 U.S.C. § 7201. On April 30, 2010, Assistant Federal Defender William Joshua Morrow was assigned to represent the Defendant. In February of 2011, Morrow's representation was terminated and Assistant Federal Defender M. Dianne Smothers was substituted as counsel. Several months later, Morrow rejoined the case and represented Brooks as co-counsel with Smothers. On January 6, 2012, Assistant Federal Defender Doris Randle-Holt was substituted for Smothers. (Criminal Case ECF (hereinafter “Cr-ECF”) Nos. 2, 8-9, 42, 52, 72.)

         According to the revised presentence report (“PSR”), from 1993 through 2007, Brooks owned and operated a temporary employee service called Temp Owned Temporary Services (“TOTS”). Operating as a sole proprietorship, TOTS hired and supplied temporary employees to several local companies, including Whirlpool/Maytag Incorporated (“Maytag”). (PSR at 5-6; Ch. Plea Tr., Cr-ECF No. 101 at 23-25.)

         TOTS's customers paid the company a flat rate per employee. From 2002 through 2007, Maytag paid TOTS more than $13 million dollars for temporary employees supplied by Defendant's company. TOTS withheld federal taxes, Social Security taxes, and Medicare taxes from its employees' wages. The business was responsible for forwarding these funds to the federal government. (PSR at 5-16; Ch. Plea Tr., Cr-ECF No. 101 at 24-25; Sent. Hrg. Tr., Cr-ECF No. 129 at 19-24, 27-28; Sent. Hrg., Tr., Cr-ECF No. 130 at 71, 80-111, 119.)

         As an employer, TOTS was required to file a quarterly return with the IRS reporting the total wages paid to its employees that were subject to withholdings. For the period 2000 through 2007, Brooks reported $740, 352.23 in gross employee wages. Based upon records seized from Defendant's business, however, TOTS paid gross wages of $15, 082, 066.99. (PSR at 5-6; Sent. Hrg. Tr., Cr-ECF No. 129 at 21-24, 33-35.)

         By underreporting gross wages, Brooks avoided paying to the federal government various employment taxes on the unreported wages. The employment-related business taxes that the Defendant evaded had four components: federal income taxes, including Medicaid taxes, that the Defendant withheld from this employees' wages (FITW), but failed to pay over to the U.S. Treasury; the employees' share of the Social Security tax (employees' FICA), also withheld by Defendant but not forwarded to the federal government; his unpaid employer's share of the Social Security tax (employers' FICA); and unpaid federal unemployment taxes (FUTA) which are to be paid from the employer's pocket. (Social Security and Medicare taxes are hereinafter referred to as “trust fund” taxes.) The total tax loss for the unpaid business taxes was $3, 216, 029.00. (PSR at 13-16; Sent. Hrg. Tr., Cr-ECF no. 129 at 35-36.)

         The Defendant also filed fraudulent individual income tax returns for tax years 2002 and 2003, and failed to file individual income tax returns for tax years 2004 through 2007. The total loss to the federal government of individual income tax was $444, 877.00. (PSR at 9.) The combined tax loss occasioned by Brooks's evasion of individual and business taxes was $3, 660, 905.00. (Id. at 16.)

         Plea Proceedings and Sentencing

         Pursuant to an agreement with the Government, Brooks pleaded guilty in May of 2012 to Counts 5 and 20 of the indictment for evasion of personal income taxes and employee-related taxes, respectively. (Plea Agr., Cr-ECF No. 85; Ch. Plea Tr., Cr-ECF No. 101.) Under the plea deal, the Defendant also agreed to file accurate individual and employer income tax returns for the years 2002 through 2007. (Plea Agr., Cr-ECF No. 85 at 2.) The Government agreed to dismiss the remaining charges and, conditioned on the Defendant's “continued acceptance of responsibility, ” move at sentencing for a one-level downward adjustment for Brooks's acceptance of responsibility and not oppose a two-level downward adjustment. (Id. at 2.)

         Eight months later, and one week before the scheduled sentencing hearing, Brooks moved to withdraw his guilty plea on the grounds that (1) “he did not willfully or intentionally act to evade or defeat any personal or business taxes that were due and owing” and (2) that “in deciding to enter a guilty plea, . . . he relied upon his counsel's representations that their office would retain a forensic accountant to review the records in th[e] case and determine whether the government's computations regarding the amount of tax loss . . . are correct, ” but no forensic accountant was hired. (Mot. to Withdraw Guilty Plea, Cr-ECF No. 100 at 2.)

         On the first day of the sentencing hearing, January 30, 2013, the Court denied the Defendant's motion to withdraw his plea after hearing Brooks's testimony and the parties' arguments. (Order, Cr-ECF No. 106; Sent. Hrg. Tr., Cr-ECF No. 123 at 59.) The sentencing hearing reconvened on February 11, 2013, and continued through February 12, 2013. The Government requested an upward departure in the offense level on the ground that the TOTS employees were impacted by Brooks's failure to pay their trust fund taxes. The prosecution requested that the Court not award the Defendant a downward departure for acceptance of responsibility “based on [his] submission” after his guilty plea, “of false tax returns to [the] [C]ourt.” (Sent. Hr. Tr., Cr-ECF No. 123 at 12.)

         In support of its arguments, the Government called IRS Agent Joseph Tyson to the stand. Tyson, the lead criminal investigator in Brooks's case, testified that tax returns for 2005 through 2007, which Brooks prepared and submitted to the Court pursuant to the plea agreement's terms (hereinafter, “revised tax returns”), were false in two respects. First, although the returns showed no income from Brooks's business for the three years covered by the revised returns, financial records showed that Brooks spent millions of dollars in those years on cars, housing, and gambling. Second, according to Tyson, Brooks's deductions which he labeled “contract labor” and totaling over $1.2 million for the three years, were not, in fact, payments for labor, but rather payments made by the Defendant to Maytag employee Janice Hollingsworth. He testified that the deductions, described as payments for bribes or kickbacks, are not legal deductions. (Sent. Hrg. Tr., Cr-ECF No. 129 at 51-69.)

         Morrow cross-examined Tyson regarding the gambling losses reported on the revised returns; Tyson's sampling method for determining TOTS's income; and the lack of a substantial impact on employees due to the nonpayment of their trust fund taxes to the federal government. (Id. at 7-83.)

         Randle-Holt conducted the direct examination of Brooks. The Defendant testified that he did not intend to file false revised returns, but “was trying to comply with the agreement I had made when I pled guilty, ” but filled out the forms without the help of an accountant. (Id. at 97.) With regard to the “contract labor” deductions, Brooks related that they represent extortion payments to Hollingsworth. According to Brooks, she demanded money from him under threat of pulling Maytag's business. (Sent. Hrg. Tr., Cr-ECF No. 130 at 26-36.) In support, counsel introduced a $15, 000.00 cashier's check made payable to Hollingsworth, a $5, 000.00 check made payable to “Cash, ” which contained “Janice Page Hollingsworth” in the memo line, and a check made payable to “Natasha Brooks, ” which also contained “Janice Page Hollingsworth” in the memo line. (ECF No. 130 at 26-27.) Brooks claimed that the checks were for extortion payments to Hollingsworth. (Id.) Counsel introduced photographs of Hollingsworth and Brooks “coming in and out of [a] restaurant.” (Id. at 32-34.) The Defendant stated that the photos showed him and Hollingsworth at a meeting at which he gave her $14, 000.00 in extortion money. (Id.)

         The Defendant also testified that his contract with Maytag obligated that company, not TOTS, to pay the employee-related taxes. (Id. at 37-41.) He stated that the contract introduced into evidence by Randle-Holt, which showed Maytag's obligation, was the authentic contract and contained his authentic signature. (Id.)

         Randle-Holt also called handwriting expert David Cupp as a witness. Cupp testified that the signature found on the contract produced by Maytag in the civil lawsuit and introduced by the Government was not the same as the signatures found in four samples supplied to him by Brooks and represented by Defendant as being his signatures. (Id. at 59-66.) Cupp could not say, however, whether the samples provided to him were, in fact, of Brooks's signature. (Id. at 67-68.)

         On cross-examination, Petitioner admitted that, during the years covered by the revised returns in which he reported no income, he bought a new Escalade, Mercedes Benz, and furniture; built a house costing over $400, 000.00 and furnished it; withdrew monies from TOTS for personal use but did not report those amounts as income on the revised tax returns; and collected taxes from his employees but did not forward that money to the federal government. (Sent. Hrg. Tr., Cr-ECF No. 129 at 102-33; Sent. Hrg. Tr., Cr-ECF No. 130 at 6-25.) He also admitted that the deductions he labeled as “contract labor” on the revised returns were not for that purpose. (Sent. Hrg., Tr., Cr-ECF No. 130 at 42.)

         The Court denied a one-point downward adjustment for acceptance of responsibility upon finding that the Government's decision to withhold its recommendation was not based on an unconstitutional motive. (Id. at 113-14.) The additional two-point downward adjustment, which ordinarily accompanies a guilty plea, was denied based on the Court's factual findings that (1) the Defendant falsely claimed in his revised 2005-07 tax returns that he had no income for those years and (2) falsely claimed deductions for extortion payments. The Court stated:

The other, of course, two level reduction under, I believe it's 3E1.1, and that situation -- that is what is normally attributable to one who enters a plea, but that can be not provided in instances where, for example, one has committed other criminal offenses or has committed other acts that would be contrary to the assessment or the allowance of a two level reduction for acceptance where someone clearly demonstrates acceptance of responsibility for the offense.
The government's primary argument in regard to the lack of acceptance of responsibility has to do with the submission, according to the government, of the tax returns for the years 2005, 2006 and 2007, which the government indicates were false.
I think the two primary, at least my recollection of the testimony here, focus, I suppose, of the -- by the government's interrogation of the various witnesses deals with the fact that in the wage column or box, so to speak, of the 1040 form that was -- in all three years there was a lack of any indication of any wages earned or -- earned, I guess, is the right word, by Mr. Brooks during that period of time.
And Mr. Laurenzi, in questioning Mr. Brooks, Mr. Brooks did, in fact, concede that he had drawn funds, some years different than others, but taken monies out of the company, out of TOTS during those years, but did not include them as part of the wages on the 1040 form.
In the C form that deals with the business, there are -- in each one of those years there was a inclusion of contract payments, contract employees' payments. And Mr. Brooks explained that at least, I think, two of three, possibly all three, that some of those monies dealt with -- they really weren't contract employment or employee, they were funds used -- well, maybe to some extent, funds used to pay for carpet cleaning or maybe yard work or something of that nature. But the vast majority of the funds were monies that he claimed were paid to [an] employee of Whirlpool.
And, frankly, no other way to describe it, it would have been a payment for, to allow him to continue his business with Whirlpool. Could be constituted as a bribe or -- and that these funds generally were paid through either cash payments or checks that were made out to cash, but were noted as being payments to Ms. Hollyfield (sic.)
The testimony here, the presentation of evidence only suggests that of the several hundred thousand dollars that were purportedly paid over the three years, the evidence before the court is at most probably less than -- checks that have been presented, certainly less than 50. Possibly somewhat may have been a little bit more than that, but not much more.
The court finds -- and, of course, there is testimony here that any type of payments such as that, even if the circumstances were correct, it's something that's not deductible as a payment, an expense that would be deductible.
And so, frankly, that designation seems to me by Mr. Brooks was inappropriate, and certainly not -- it was basically submitting inappropriate and false tax returns. And so the court finds that Mr. Brooks is not entitled to the additional acceptance of responsibility points, and the court so holds.

(Id. at 114-17.)

         Rejecting the Government's argument that TOTS employees were substantially affected by Brooks's failure to pay their trust fund taxes, the Court denied the prosecution's request for an upward departure. (Id. at 120-21.) The Court found that the base offense level for the convictions was 24, based on the total tax loss set forth in the PSR. See United States v. Maken, 510 F.3d 654, 657 (6th Cir. 2007) (“[A] defendant's base offense level” for “tax evasion and willful failure to file a tax return . . . is determined by the tax loss”). Brooks was sentenced to a within-guidelines prison sentence of fifty-five months and three years of supervised release. He was ordered to pay restitution in the amount of $3, 660, 905.00, an amount equal to the calculated tax loss. (Order, Cr-ECF No. 108; Sent. Hrg. Tr., Cr-ECF No. 130 at 123-25.)

         Petitioner appealed his conviction and sentence, alleging that the district court erred in denying his motion to withdraw his guilty plea and abused its discretion by denying his motion for recusal after his stepdaughter threatened the Court. The Sixth Circuit Court of Appeals affirmed the district court's judgment. See United States of America v. Brooks, No. 13-5254 (6th Cir. Apr. 3, 2014).

         BROOKS'S PETITION

         Brooks asserts the following claims:

1. Defense counsel were ineffective by failing to research statutes relating to the legality of deductions claimed on Petitioner's revised tax returns, interview, and call witnesses to prove that the deductions were for extortion, and cross-examine an IRS agent who falsely testified at the sentencing hearing that the deductions were illegal. (Pet., ECF No. 1 at 4.)
2. Defense counsel were ineffective by failing to “investigate, research I.R.S. codes and laws as to 3rd party responsibility” under 26 U.S.C. § 3505(b). (Id. at 5.)
3. Defense counsel were ineffective by failing to provide a forensic accountant to assist Petitioner in the completion of the revised tax returns, as promised in exchange for his guilty plea. (Id. at 7.)
4. The Government engaged in prosecutorial misconduct by calling to the stand at the sentencing hearing an IRS agent, who lied about the legality of Petitioner's deductions. (Id. at 8.)
5. The Government violated Brady v. Maryland[, 373 U.S. 83 (1963), ] by failing to disclose the results of a handwriting analysis. (Am., ECF No. 31 at 2-3.)
6. Defense counsel were ineffective by failing to request the results of a handwriting analysis from the Government. (Id. at 4-5.)

         ANALYSIS

         Brooks is not entitled to relief on any of his § 2255 claims. His ineffective assistance claims are without merit because he either cannot show that his attorneys' performances were deficient or that he was prejudiced, or both. Petitioner's remaining claims are without merit because he has not established the underlying factual allegations to support them.

         Legal Standard

         Section 2255(a) provides that

[a] prisoner in custody under sentence of a court . . . claiming the right to be released upon the ground that the sentence was imposed in violation of the Constitution or laws of the United States, . . . or is otherwise subject to collateral attack, may move the court which imposed the sentence to vacate, set aside or correct the sentence.

28 U.S.C. § 2255(a). The statute does not “encompass all claimed errors in conviction and sentencing.” United States v. Addonizio, 442 U.S. 178, 185 (1979); Meirovitz v. United States, 688 F.3d 369, 370 (8th Cir. 2012). Rather, a petitioner must allege "‘(1) an error of constitutional magnitude; (2) a sentence imposed outside the statutory limits; or (3) an error of fact or law that was so fundamental as to render the entire proceeding invalid.'" Shaw v. United States, 604 F.App'x 473, 476 (6th Cir.) (quoting Weinberger v. United States, 268 F.3d 346, 351 (6th Cir. 2001)), cert. denied, 135 S.Ct. 2914 (2015). When the judge who presided over the petitioner's underlying criminal case “also hears the collateral proceedings, ” he “may rely on his recollections of the trial in ruling on the collateral attack.” Blanton v. United States, 94 F.3d 227, 235 (6th Cir. 1996).

         Evidentiary Hearing

         Brooks did not move for an evidentiary hearing on his claims. Nevertheless, the Court considers whether a hearing is warranted. A § 2255 petitioner is entitled to an evidentiary hearing “[u]nless the motion and the files and records of the case conclusively show that the prisoner is entitled to no relief . . . .” 28 U.S.C. § 2255(b). “Stated another way, ‘no hearing is required if the petitioner's allegations cannot be accepted as true because they are contradicted by the record, inherently incredible, or conclusions rather than statements ...


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