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State v. Burkes

Court of Criminal Appeals of Tennessee, Knoxville

May 14, 2018

STATE OF TENNESSEE
v.
JERRY REGINALD BURKES

          Assigned on Briefs October 10, 2017

          Appeal from the Criminal Court for Greene County No. 14CR180 Alex Pearson, Judge

         The defendant, Jerry Reginald Burkes, appeals his convictions of money laundering, theft, and sales tax evasion and the accompanying 18-year effective sentence that included five years of confinement. The defendant argues that (1) the trial court erred by permitting the State to introduce certain evidence in violation of Tennessee Rule of Evidence 404(b); (2) the trial court erred by concluding that certain of the defendant's convictions would be admissible for purposes of Tennessee Rule of Evidence 609; (3) the trial court violated his constitutional privilege against self-incrimination; (4) the State failed to discover and disclose exculpatory evidence; (5) the evidence was insufficient to support a conviction of money laundering; (6) the trial court erred by imposing a Range II sentence; and (7) the sentence imposed by the trial court is illegal. Because the five-year term of confinement imposed by the trial court is not authorized, we vacate the sentencing decision of the trial court and remand the case for resentencing. Additionally, because the amount of restitution ordered by the trial court cannot be satisfied under the terms ordered by the trial court, we vacate the restitution order and remand the case for the trial court to impose restitution in a manner that complies with Code section 40-35-304. We affirm the judgments of the trial court in all other respects.

         Tenn. R. App. P. 3; Judgments of the Criminal Court Affirmed in Part; Vacated in Part; Remanded

          Greg W. Eichelman, District Public Defender, for the appellant, Jerry Reginald Burkes.

          Herbert H. Slatery III, Attorney General and Reporter; Zachary T. Hinkle, Assistant Attorney General; C. Berkeley Bell, District Attorney General; and Ritchie Collins, Assistant District Attorney General, for the appellee, State of Tennessee.

          James Curwood Witt, Jr., J., delivered the opinion of the court, in which Camille R. McMullen and Robert L. Holloway, Jr., JJ., joined.

          OPINION

          JAMES CURWOOD WITT, JR., JUDGE

         In March 2014, the Greene County Grand Jury issued a presentment charging the defendant with 11 counts of money laundering, one count of forgery, one count of theft of property valued at more than $60, 000, and 12 counts of sales tax evasion. After the trial court expressed doubt about the validity of the presentment, the State obtained a superseding presentment charging the defendant with one count of money laundering, one count of forgery, one count of theft of property valued at more than $60, 000, and 12 counts of sales tax evasion.[1] The evidence adduced at the defendant's April 2016 trial established that the defendant intentionally failed to remit the required amount of sales tax due in relation to the sales of cigarettes and other tobacco products at his store, Preeminent Skate Specialty, during 2011. The defendant used the retained sales tax money to purchase more cigarettes and tobacco products, which he then sold in the store.

         Tennessee Department of Revenue Special Agent Brian McGhee testified that he began investigating Preeminent Skate Specialty in April 2012 after a Department of Revenue audit uncovered a discrepancy between the amount of tobacco products being purchased by the defendant, as reported by those tobacco wholesalers who sold inventory to the defendant, and the amount of sales tax remitted to the department in the monthly sales tax returns during 2011. Agent McGhee began his investigation by obtaining the purchase histories for Preeminent Skate Specialty from S&M Brands, Smith Wholesale, Wholesale Outlet, and Sam's Club, which histories Agent McGhee then "compared . . . to what [the defendant] reported for his taxable sales on his sales tax returns, " explaining that it was the department's "theory" that when a business is "continually purchasing inventory on a monthly basis, . . . they are staying in business and . . . continually making sales and . . . generating revenue to be able to continue to purchase inventory and stock their store." Agent McGhee calculated the total inventory purchased for each month and, assuming that the defendant sold as much as he bought, calculated the amount of gross sales. He then subtracted from the gross sales amount the amount of any manufacturer's "buydown, " before calculating the amount of sales tax that should have been collected by Preeminent Skate Specialty for each month of 2011.[2]

         Agent McGhee made the following findings with regard to the remittance of sales tax by Preeminent Skate Specialty for 2011:

Month

Inventory Purchased

Buydown Amount

Corrected Gross Sales

Sales Tax Due

Reported Gross Sales

Sales Tax Paid

January

$168, 806.89

$18, 582.90

$150, 223.99

$14, 646.84

$30, 108

$2, 935

February

$119, 932.37

$11, 838.50

$108, 093.87

$10, 539.15

$31, 783

$8, 098

March

$165, 415.52

$12, 049.50

$153, 366.02

$14, 953.19

$28, 261

$2, 755

April

$119, 710.74

$22, 626.90

$97, 083.84

$9, 465.67

$28, 841

$2, 812

May

$164, 523.14

$14, 235.50

$150, 287.64

$14, 653.04

$29, 063

$2, 834

June

$160, 702.25

$14, 262.50

$151, 439.75

$14, 765.38

$27, 448

$2, 677

July

$97, 809.18

$13, 730

$84, 079.18

$8, 197.72

$1, 744

$1, 700

August

$164, 591.42

$9, 848

$154, 743.42

$15, 087.48

$18, 060

$1, 764

September

$162, 923.12

$10, 150.30

$152, 772.82

$14, 895.35

$21, 440

$2, 088

October

$165, 466.15

$14, 154.60

$151, 311.55

$14, 752.88

$21, 790

$2, 125

November

$158, 783.51

$14, 714.40

$144, 069.11

$14, 046.74

$18, 446

$1, 798

December

$169, 251.98

$16, 513.30

$152, 738.68

$14, 892.02

$15, 824

$1, 543

         Agent McGhee's findings indicated that the defendant failed to remit $11, 711.84 in sales tax due in January; $7, 441.15 in February; $12, 198.19 in March; $6, 653.67 in April; $11, 819.04 in May; $12, 088.38 in June; $6, 497.72 in July; $13, 323.48 in August; $12, 807.35 in September; $12, 627.88 in October; $12, 248.74 in November; and $13, 349.02 in December. The total 2011 shortage was $132, 766.46.

         Agent McGhee interviewed the defendant for the first time in August 2012, and during that interview, the defendant indicated that he was the owner and manager of Preeminent Skate Specialty and that he alone was "financially responsible for everything at the store." The defendant told Agent McGhee that he paid himself a wage of $4 per hour and that he additionally kept as a sort of "salary" the buydown money he received from Phillip Morris. With regard to the collection of sales tax, the defendant said that at the end of each day, he placed 10 percent of the cash in the register into one bank bag and then put the remaining cash into another bank bag before taking both bags home with him every evening. When confronted with a previous sales tax return, the defendant admitted that "he had messed up" and said that "he had been putting the wrong amount on the gross sales tax." The defendant told Agent McGhee "that he had been setting aside for sales taxes as gross sales on that line and then taking 10% of 10%."

         During that same interview, the defendant told Agent McGhee that he did not "use banks because he didn't trust them." Following the interview, however, Agent McGhee discovered two bank accounts for Preeminent Skate Specialty. A review of the those accounts indicated that the defendant made daily over-the-counter withdrawals so that the amount of money in each account remained essentially static, with low beginning and ending balances for each month of 2011. To be sure, neither bank account contained enough funds at any given time to enable the defendant to purchase inventory and otherwise operate his business without selling the products that he purchased.

         Following his interview with the defendant, Agent McGhee confirmed that the defendant made nearly all of the inventory purchases himself, using cash "the majority of the time, " and that none of the defendant's suppliers allowed him to purchase products on credit. Agent McGhee visited Preeminent Skate Specialty and did not find any surplus inventory stored on the premises that suggested the defendant was doing anything other than selling the inventory he purchased from the wholesalers. Additionally, he did not find anything during his visit to indicate that the defendant was selling tobacco products at cost. Accordingly, Agent McGhee concluded that the defendant was selling enough tobacco products each month to cover the cost of replacing his inventory using cash. The daily cash withdrawals corroborated these findings.

         During a second interview in May 2013, the defendant told Agent McGhee that he was using a different "process that he used for the end of the day procedures and the numbers that he used to complete his sales tax returns" than he was previously. The defendant "described a different process where he actually used numbers off of the z tapes instead of setting aside 10% and putting it in a bank bag and using that number that he took 10% of the gross sales amount erroneously and put that on the sales tax return." The defendant told the agent that he took the contents of the cash register home each night and then deposited the money the next day. The defendant told Agent McGhee that he did not recall telling the agent about the two-bank-bag process in the April 2012 interview. The defendant acknowledged that he used proceeds from the sales at the business to buy new inventory and that he alone was "the manager and financially responsible" for the business. Agent McGhee said that because the defendant was responsible for running the business, collecting the money, making deposits, and purchasing all the product, the defendant should have been "very aware that the sales and the sales tax that he was completing on those returns was not adequate for what he was purchasing."

         Representatives of two of the suppliers testified that the defendant made nearly daily cash purchases of tobacco products in 2011. The State offered into evidence the records of the defendant's tobacco product inventory purchases for 2011.

         Tennessee Department of Revenue tax audit manager Mark See testified that he supervised the Retail Accountability Program ("the program"), a program created in 2012 that required "wholesalers of beer and tobacco to report sales to retailers to the department on a monthly basis." He explained that the program compared the information received from the wholesalers with "what the retailers reported their sales were for the same periods. Then when there [are] big discrepancies, then [the department] sends out assessments" for the difference in sales tax owed. To arrive at the appropriate assessment figure, the law required the program to mark up the wholesale price of tobacco products by eight percent before calculating the sales tax. Additionally, the program provided credit for buydowns when retailers reported them.

         Agent See said that the department assessed Preeminent Skate Specialty three times between the time the program began and when the business closed in 2013. He testified that in the fourth quarter of 2012, wholesalers reported sales to the defendant of $262, 965 while the defendant reported sales of $30, 000 and remitted only $2, 925 in sales tax. As a result of this discrepancy, the department issued an assessment of $24, 765 for that quarter. For the first quarter of 2013, data received from the wholesalers showed that the defendant made inventory purchases in excess of $316, 000, but the defendant reported sales of only $73, 340. As a result, the department issued an assessment of $26, 155. Finally, in the second quarter of 2013, wholesalers reported that the defendant purchased in excess of $211, 000 in inventory, but the defendant reported sales of just over $18, 000 and remitted no sales tax at all. According to Agent See, the defendant never provided any buydown information and was thus never given any credit for any buydowns.

         Following Agent See's testimony, the pro se defendant elected not to testify but chose to present proof.

         Danny Sample testified that he was a customer at Preeminent Skate Specialty and that he struck up a friendship with the defendant, whom he considered a very friendly person.

         Based upon this evidence, the jury convicted the defendant as charged of money laundering, theft of property valued at more than $60, 000, and 12 counts of sales tax evasion.[3] Following a sentencing hearing, [4] the trial court imposed Range II sentences of 18 years each for the defendant's Class B felony convictions of money laundering and theft and sentences of four years for each of the defendant's Class E felony convictions of sales tax evasion. The court ordered the sentences to be served concurrently and ordered the defendant to serve the effective 18-year sentence as five years' incarceration followed by community corrections placement. The trial court also imposed the $80, 000 in fines recommended by the jury and ordered restitution to the State in the amount of $132, 766.46 to be paid in installments of $500 per month following the defendant's release on community corrections.

         The defendant filed a timely but unsuccessful motion for new trial followed by a timely notice of appeal. In this appeal, the defendant contends that (1) the trial court erred by permitting the State to introduce certain evidence in violation of Tennessee Rule of Evidence 404(b); (2) the evidence was insufficient to support a conviction of money laundering; (3) the State failed to discover exculpatory evidence in violation of Brady v. Maryland; (4) the trial court violated his constitutional privilege against self-incrimination by asking the defendant to reveal during a pretrial hearing the date on which he was released from federal custody; (5) the trial court erred by concluding that certain of the defendant's convictions would be admissible for purposes of Tennessee Rule of Evidence 609; (6) the trial court erred by imposing a Range II sentence; and (7) the sentence imposed by the trial court is illegal. We consider each claim in turn.

         I. Evidentiary Issues

         The defendant presents three evidentiary challenges. First, he claims that the trial court erred by permitting the State to introduce evidence of the 2012 and 2013 assessments issued to Preeminent Skate Specialty by the Retail Accountability Program in violation of Tennessee Rule of Evidence 404(b). Second, he claims that the State failed to discover exculpatory evidence in the form of coupon and buydown information from two companies and then failed to provide that information to him in violation of Brady v. Maryland. Finally, he claims that the trial court erred by concluding that his convictions, which were older than 10 years, would be admissible for purposes of impeachment pursuant to Tennessee Rule of Evidence 609 and, in a related claim, that the trial court violated his constitutional privilege against self-incrimination by asking him to reveal during the hearing to discuss potential Rule 609 evidence the date on which he was released from federal custody.

          A. Tennessee Rule of Evidence 404(b)

         Tennessee Rule of Evidence 404(b) provides that "[e]vidence of other crimes, wrongs, or acts is not admissible to prove the character of a person in order to show action in conformity with the character trait." Tenn. R. Evid. 404(b). The rationale underlying the general rule is that admission of such evidence carries with it the inherent risk of the jury's convicting the defendant of a crime based upon his bad character or propensity to commit a crime, rather than upon the strength of the evidence. State v. Thacker, 164 S.W.3d 208, 239 (Tenn. 2005). This rule is subject to certain exceptions, however, including "evidence of a pertinent trait of character offered by an accused or by the prosecution to rebut the same." Tenn. R. Evid. 404(a)(1). In addition, "[e]vidence of other crimes, wrongs, or acts" may be admissible for "other purposes, " such as proving identity, criminal intent, or rebuttal of accident or mistake. The rule specifies three prerequisites to admission:

(1) The court upon request must hold a hearing outside the jury's presence;
(2) The court must determine that a material issue exists other than conduct conforming with a character trait and must upon request state on the record the material issue, the ruling, and the reasons for admitting the evidence; and
(3) The court must exclude the evidence if its probative value is outweighed by the danger of unfair prejudice.

Tenn. R. Evid. 404(b). A fourth prerequisite to admission is that the court must find by clear and convincing evidence that the defendant committed the other crime or bad act. Id., Advisory Comm'n Comments; State v. DuBose, 953 S.W.2d 649, 654 (Tenn. 1997).

         When the trial court substantially complies with the procedural requirements of Rule 404(b), this court will overturn the trial court's ruling only when there has been an abuse of discretion. See Thacker, 164 S.W.3d at 240; see also DuBose, 953 S.W.2d at 652. If, however, the strict requirements of the rule are not substantially observed, the reviewing court gives the trial court's decision no deference. See id.

         Prior to trial, the State moved the trial court to rule on the admissibility of evidence that the defendant had underpaid his sales tax in 2012 and 2013 despite having been warned by Agent McGhee in 2012 that he had previously failed to remit sufficient payments. The State argued that the evidence was admissible to show that the defendant intentionally underreported his monthly gross sales and underpaid sales tax and to show that the underpayment was not simply an accounting mistake.

         At the April 14, 2016 hearing, Agent McGhee testified as he did at trial that he warned the defendant during the August 2012 interview "[t]hat he had under reported his sales and sales tax on his sales tax returns." When the defendant told the agent that he set aside 10 percent of the total sales each day as his "gross sales" "and then took approximately 10 percent of that amount to record as the sales tax, " Agent McGhee placed the defendant "on notice" that his accounting method was incorrect. Agent McGhee also encouraged the defendant to attend the "new business owner . . . workshop" offered by the taxpayer services division.

         Agent See testified, in keeping with his trial testimony, that the department issued assessments to Preeminent Skate Specialty in "the fourth quarter of 2012, the first quarter of 2013, and the second quarter of 2013."

         At the conclusion of the hearing, the trial court deemed the evidence admissible:

So the [c]ourt finds that the probative nature of the evidence is high and it's not being offered solely as propensity evidence but to show that the defendant didn't make a mistake and that he had an intent to commit the act . . . . So I believe the [S]tate can introduce it.
But, however, with that being said, [the defendant] has certainly asked certain questions about it that I believe the jury can ascertain whether or not they feel like that information is reliable or not. That's the question.
But I think the [S]tate can introduce it for the purposes of showing [it is] lack of mistake, lack of accident, intent, common scheme or pla[n] . . . . So I'm going to allow the [S]tate to introduce it, and I find that it is sufficiently probative and not being offered solely for propensity of evidence based on intent, lack of accident, common scheme or plan, et cetera.
And I do find that even though these acts occurred afterwards, it is the law that you can under the right circumstances use subsequent acts to show intent on previous acts.

         The defendant contends that the trial court failed to find that the State had established the other bad acts by clear and convincing evidence and that the probative value of the evidence outweighed the danger of unfair prejudice before admitting the evidence. The State argues that these findings are implicit in the court's ruling and that, in any event, the evidence was admissible under the terms of Rule 404(b) to establish that the defendant acted intentionally.

         As our supreme court has observed, "'the plain language' of Rule 404(b) uses the phrase 'other crimes, wrongs, or acts' rather than 'prior crimes, wrongs, or acts, '" thus "permit[ting] the introduction of evidence of subsequent acts to establish one's intent during a prior act in appropriate cases." State v. Elkins, 102 S.W.3d 578, 584 (Tenn. 2003) (citing State v. Elendt, 654 S.W.2d 411, 414 (Tenn. Crim. App. 1983)). When "determining whether to allow the admission of evidence of subsequent crimes, wrongs, or acts in a given case, " the trial court "should be mindful of the similarity of the offenses or acts and the proximity in time." Id.

"Subsequent as well as prior collateral offenses can be put in evidence, and from such system, identity or intent can often be shown. The question is one of induction, and the larger the number of consistent facts, the more complete the induction is. The time of the collateral facts is immaterial, provided they are close enough together to indicate that they are a part of the system. A man may be honestly mistaken and have no fraudulent intent if a transaction stands alone, but the probabilities of an honest mistake diminish as the number of similar transactions, indicating a scheme or system, increases."

Thompson v. State, 101 S.W.2d 467, 473 (Tenn. 1937) (quoting Wharton's Criminal Evidence, vol. 1, pp. 527-30).

         Here, evidence that the defendant continued to under report his gross sales and underpay his sales tax even following his meeting with Agent McGhee tended to establish that the defendant acted intentionally and that his failure to remit the appropriate amount of sales tax was not the result of an accounting mistake or misunderstanding. Agent See's testimony established the subsequent acts by clear and convincing evidence, and, in our view, the probative value of this evidence outweighed the danger of unfair prejudice. Although the defendant claims that the admission of the evidence created a danger that the jury would include the amounts of the ...


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