## Facts

- IRS agents, while investigating accountant Robert Gross, seized records from Gross’s office that included financial documents for Ronald Bencs and Diversified Financial Enterprises.
- Agents concluded Bencs’s reported income did not explain an approximate $1.2 million net worth and conducted a net-worth investigation using public records, bank records, tax returns, and interviews.
- Bencs claimed Diversified earned money from varied legitimate ventures and that his wealth came in part from nontaxable loans; he denied illegal income.
- The government presented evidence that Bencs participated in large-scale marijuana distribution, including testimony that substantial quantities were sold to or for Bencs over multiple years.
- To prove tax evasion, the government used a net-worth method for years 1983–1988, calculating increases in net worth (plus living expenses) exceeding reported taxable income after accounting for known nontaxable sources and liabilities.
- Bencs disputed the government’s opening net worth, asserting he owned significant coins, Krugerrands, and jewelry at the start of the period; his expert incorporated these claimed assets to raise the starting figure.
- Agents testified the claimed coin holdings were not supported by financial statements or tax records; witnesses who said they saw coins could not place them at the opening date; a jewelry supplier indicated purchases averaging about $5,000 per year over a decade.
- A jury convicted Bencs of multiple offenses including tax evasion, money laundering, and structuring transactions to avoid currency-transaction reporting requirements; on appeal he challenged all convictions except conspiracy.

## Issues

1. Whether the government’s net-worth method proof of tax evasion was insufficient because the opening net worth allegedly omitted substantial coins, Krugerrands, and jewelry.
2. Whether alleged evidentiary and disclosure errors, including asserted Brady and Jencks Act violations, required reversal.
3. Whether the jury instructions on the structuring counts misstated the offense elements, requiring reversal of those convictions.

## Decision

- The court affirmed the convictions on all counts other than structuring.
- The court held the net-worth evidence was sufficient because the government established a reasonably certain opening net worth and reasonably investigated leads regarding claimed assets and nontaxable sources.
- The court found no reversible error in the district court’s handling of witness-statement production and related disclosure disputes.
- The court reversed the structuring convictions (counts 16 and 17) because erroneous jury instructions failed to require proof of a necessary element, and remanded for a new trial on those counts.

## Legal Principles

- In net-worth tax evasion cases, the government must establish a reasonably certain opening net worth and show increases not attributable to reported income or verified nontaxable sources.
- The government need not disprove every theoretical nontaxable source with mathematical precision if it conducts a reasonable investigation of leads supplied by the taxpayer.
- The Jencks Act governs the timing of production of qualifying witness statements; Brady does not compel earlier production where the material is produced consistent with Jencks timing rules.
- A criminal jury must be instructed on every essential element of the charged offense; an instruction that omits or misstated an element requires reversal of the affected convictions.

## Conclusion

The Sixth Circuit upheld Bencs’s tax evasion and related convictions, finding the government’s net-worth proof and disclosure practices legally adequate, but vacated the structuring convictions because the jury was improperly instructed on the offense elements and ordered a retrial limited to those counts.


United States v. Bencs, 28 F.3d 555 (6th Cir. 1994)