Introduction

This appeal arises from the conviction of Michigan personal injury attorney Carl L. Collins, III for willfully making false tax returns in violation of 26 U.S.C. § 7206(1). Central to the government’s theory was Collins’s mismanagement and commingling of funds in his Interest on Lawyers’ Trust Accounts (IOLTAs), including an undisclosed Bank of America IOLTA, and the use of those accounts to pay personal and business expenses. After a twelve-day jury trial, Collins was convicted of five false-return counts (2012 original and amended individual returns; 2015 individual and Alpha Living corporate returns; and 2018 individual return) and acquitted of seven counts of willful failure to file.

On appeal, Collins challenged two principal rulings: (1) the district court’s admission, under Federal Rule of Evidence 404(b), of evidence that the Michigan Attorney Grievance Commission investigated and disciplined him for IOLTA misuse; and (2) the denial of his post-verdict motion for a new trial under Federal Rule of Criminal Procedure 33, premised on a new expert’s critique of the IRS fraud examiner’s methodology. Collins also sought a remand for a restitution recalculation, notwithstanding his stipulation to a reduced restitution figure.

The Sixth Circuit affirmed across the board. Two themes anchor the opinion: first, that prior bar discipline and compliance training may be used as “other acts” evidence to prove willfulness in a tax prosecution when the conduct is substantially similar and temporally proximate; and second, that a cash-basis lawyer who commingles client funds and earned fees in an IOLTA recognizes income upon receipt in the trust account because commingling destroys the trust character of the funds for timing purposes. The court also reaffirmed the exceptional nature of Rule 33 relief and endorsed using supervised release conditions to order restitution in Title 26 prosecutions.

Summary of the Opinion

• Rule 404(b) admission: The court held that evidence of Collins’s Michigan bar investigation, trust-accounting seminar attendance (which warned not to use IOLTAs to conceal income), and subsequent discipline for commingling was admissible to show willfulness and knowledge. The conduct was substantially similar and close in time to the charged offenses, and its probative value was not substantially outweighed by unfair prejudice.
• Rule 33 new-trial motion: The court affirmed denial of a new trial. Collins’s post-trial expert (Perun) amplified arguments presented at trial by his testifying expert (Kaufman) and through cross-examination, but did not introduce genuinely new evidence. The issues—treatment of IOLTA deposits, timing of fee recognition for a cash-basis lawyer, and third-party obligations—were already litigated and rejected by the jury. The district court’s credibility and weight assessments were not a clear and manifest abuse of discretion.
• Tax treatment of IOLTA funds: Invoking Tax Court authority (notably Isaacson v. Commissioner), the panel underscored that cash-basis lawyers do not recognize as income amounts truly held in trust for clients, but commingling and personal use of IOLTAs cause funds to be treated as income when received (constructive receipt), notwithstanding later disbursements to third parties.
• Restitution: The district court acted within its discretion in imposing restitution as a supervised-release condition and in crediting the government’s tax-loss calculations over Collins’s expert analyses. Collins had stipulated to a reduced restitution amount ($661,032), and the order remained well below the total calculated loss.
• Result: Convictions and restitution affirmed.

Analysis

Precedents and Authorities Cited

• Rule 404(b) framework: United States v. Barnes, 822 F.3d 914 (6th Cir. 2016), and United States v. Bell, 516 F.3d 432 (6th Cir. 2008), supply the three-part test and standards of review for evaluating other-acts evidence: actual occurrence (clear-error review), proper non-character purpose (de novo), and Rule 403 balancing (abuse of discretion). The panel applied these to uphold admission based on intent/willfulness.
• Rule 33 new-trial standards:
  • United States v. Farrad, 895 F.3d 859 (6th Cir. 2018) (abuse-of-discretion review; trial courts may weigh evidence and assess credibility).
  • United States v. Hughes, 505 F.3d 578 (6th Cir. 2007) (limited appellate review: clear and manifest abuse of discretion).
  • United States v. Munoz, 605 F.3d 359 (6th Cir. 2010) (new trial appropriate if verdict is against manifest weight or legal error affects substantial rights; “interest of justice” not otherwise defined).
  • United States v. VanDemark, 39 F.4th 318 (6th Cir. 2022), and United States v. Burks, 974 F.3d 622 (6th Cir. 2020) (Rule 33 relief is “extraordinary,” reserved for verdicts that “exceed the bounds of reasonableness”).
  • Barrow v. United States, No. 96-1687, 1997 WL 31427 (6th Cir. Jan. 27, 1997) (unpublished) (no relitigation via new expert to reinterpret evidence already available).
• Tax law on trust accounts, commingling, and timing of income recognition:
  • Isaacson v. Commissioner, 119 T.C.M. (CCH) 1107 (2020) (cash-basis lawyer does not recognize income truly held in trust, but commingling and personal use convert the funds into income when received; constructive receipt principle).
  • Canatella v. Commissioner, 113 T.C.M. (CCH) 1549 (2017) (similar analysis where lawyer failed to follow IOLTA rules).
  • Ford Dealers Advertising Fund, Inc. v. Commissioner, 55 T.C. 761 (1971), aff’d, 456 F.2d 255 (5th Cir. 1972) (funds held in trust for others are not income to the holder).
• Restitution authority in tax cases:
  • United States v. Kilpatrick, 798 F.3d 365 (6th Cir. 2015) (no MVRA authority for Title 26 offenses; but restitution permissible as a supervised-release condition).
  • United States v. Vandeberg, 201 F.3d 805 (6th Cir. 2000) (government must prove loss by preponderance; abuse-of-discretion review of the amount).
  • United States v. Behnan, 554 F. App’x 394 (6th Cir. 2014) (upholding restitution order where district court credits government’s loss methodology over competing defense views).
  • U.S.S.G. § 5E1.1(a)(2) (restitution as a supervised-release condition for the “full amount of the victim’s loss”).
  • U.S.S.G. § 2T1.1 cmt. n.2 (in computing tax loss, consider all closely related conduct as part of the same course of conduct or common scheme or plan).

Legal Reasoning

1) Rule 404(b): Bar Discipline and Compliance Training as Proof of Willfulness

The government had to prove willfulness—voluntary and intentional violation of a known legal duty—for § 7206(1). The state bar’s investigation and ensuing discipline for IOLTA misuse, coupled with Collins’s attendance at a trust-accounting seminar that warned against using IOLTAs to conceal income from the IRS, tended to show knowledge of the duty and intent to evade it. The court emphasized that Collins concealed the same Bank of America IOLTA from both the bar and the IRS during the same period—conduct “substantially similar and reasonably near in time” to the charged tax offenses—satisfying Barnes’s proper-purpose prong.

On prejudice, the district court carefully weighed the evidence’s probative value against any danger of unfair prejudice: the evidence was transactional and financial, addressed by only two of seventeen government witnesses for less than two hours in a twelve-day trial, and closely intertwined with the alleged concealment. The appellate panel, deferring under the abuse-of-discretion standard, found no “definite and firm conviction” of error in admitting the evidence for intent rather than propensity.

2) Rule 33: No New Trial to Repackage Old Arguments with a New Expert

Collins’s Rule 33 motion was explicitly not premised on newly discovered evidence or the verdict’s weight; he instead invoked a broad “miscarriage of justice” rationale tied to a post-trial expert report criticizing the IRS examiner’s cash-basis methodology. The district court denied the motion after an evidentiary hearing, finding that Collins sought to relitigate the same issues with a “more compelling expert,” not to introduce truly new evidence.

The Sixth Circuit affirmed. Trial counsel had already cross-examined the government’s examiner, Kelly Williams, on outstanding IOLTA obligations, opening and closing balances, timing mismatches between services and settlements, and the availability of funds for disbursement. Defense expert Dana Kaufman likewise testified that the government overstated income by treating IOLTA deposits as current-year income and ignoring funds owed to third parties. Post-trial expert Andrew Perun echoed those critiques and attempted a recalculation using a hybrid approach, but even he conceded alignment with Kaufman’s conclusions. Greater detail did not transform the theory into “newly discovered” evidence or otherwise satisfy the “extraordinary remedy” threshold for a new trial.

Critically, the court accepted Williams’s application of cash-basis principles in light of Collins’s commingling and personal use of the IOLTAs. Citing Isaacson and related Tax Court precedent, the panel noted that while funds truly held in trust are not income, commingling and personal use “obviate” the trust accounting rationale: a cash-basis taxpayer must recognize income in the earliest year of actual or constructive receipt. Because Collins used his IOLTA as a personal and operating account—paying employees, personal expenses, and business costs—the account ceased to function as a segregated trust for timing purposes. If later-year payments were made to third parties, those disbursements would be deductible in the year paid, not retroactively against earlier income.

3) Restitution as a Supervised-Release Condition and Methodology

Although Title 26 offenses are not covered by the general restitution statutes, the court reaffirmed that restitution can be imposed as a condition of supervised release. The district court relied on a presentence report that computed a total tax loss exceeding $3.1 million across relevant conduct, but the parties later stipulated to a much lower restitution amount ($661,032), with credit for payments already made.

On appeal, Collins recycled his methodological attacks and added a “double counting” claim regarding Alpha Living dividends (2012 and 2015). The panel found no abuse of discretion in the district court’s decision to credit the government’s approach over the defense experts. As to “double counting,” the court explained that Collins’s choice to have Alpha Living taxed as a C corporation meant that corporate receipts and shareholder dividends are separate tax items. By depositing corporate checks directly into his IOLTA rather than into Alpha Living’s account and properly declaring a dividend, Collins blurred those categories, but the government’s treatment did not impermissibly double count in the restitution context—particularly given that the final stipulated restitution amount was substantially below total loss and no admission of error accompanied the stipulation.

Impact and Practical Significance

• Use of bar-regulatory history in criminal tax cases: The decision underscores that state bar investigations, discipline, and even compliance training can be powerful Rule 404(b) proof of willfulness. When the conduct is similar and proximate, prosecutors may connect ethical violations and concealment from regulators to the scienter element in tax offenses. Defense counsel should anticipate this linkage and aggressively litigate Rule 403 balancing, seek limiting instructions, and consider stipulations to reduce prejudice.
• IOLTA management and tax risk: For cash-basis attorneys, misuse of an IOLTA for personal or operating purposes not only risks bar discipline; it alters the tax consequences. Commingling and personal use push deposits into current-year income via the constructive receipt doctrine, relegating third-party payments to later-year deductions when actually paid. This opinion situates Tax Court civil doctrine squarely within a criminal § 7206(1) context.
• Rule 33 limits: The court’s emphasis that “detail does not create novelty” is a cautionary signal. Post-verdict expert re-analysis that expands on trial themes will rarely meet Rule 33’s “extraordinary” threshold, particularly where credibility determinations and weight assessments have already been made by the jury and endorsed by the trial judge.
• Restitution flexibility and stipulations: The panel again confirms that district courts may impose restitution for tax offenses as a supervised-release condition and may consider broad relevant conduct in computing loss. Stipulations to reduced restitution amounts will be respected absent clear methodological error.
• Nonprecedential but instructive: Although not recommended for publication, the opinion is a useful template for integrating professional discipline evidence into the willfulness analysis and for aligning criminal tax methodology with civil Tax Court principles on commingling and constructive receipt.

Complex Concepts Simplified

• IOLTA (Interest on Lawyers’ Trust Account): A client trust account that must hold client or third-party funds separately from the lawyer’s own funds. Strict ethical rules require prompt disbursement to clients and immediate removal of earned fees, with no commingling.
• Cash-basis accounting for individuals: Income is recognized when actually or constructively received; expenses are deducted when actually paid. For lawyers, earned fees become income when the lawyer has control and entitlement to them.
• Constructive receipt: A taxpayer has income when funds are credited to the taxpayer’s account or made available without substantial limitations. Commingling client funds and personal funds can establish such availability.
• Rule 404(b) “other acts” evidence: Evidence of prior wrongs cannot prove propensity but may be admitted to show motive, intent, knowledge, absence of mistake, etc., if substantially similar and near in time, and not unduly prejudicial.
• Rule 33 “interest of justice” new trial: An extraordinary remedy available when the verdict is against the manifest weight of the evidence or legal error affected substantial rights. It is not a vehicle to present a “better” expert after losing at trial absent newly discovered evidence.
• Restitution as a supervised-release condition: Courts may order restitution in Title 26 cases by conditioning supervised release, and may account for all related tax misconduct as relevant conduct, proven by a preponderance.

Conclusion

The Sixth Circuit’s decision in United States v. Collins affirms three important propositions. First, where a lawyer’s bar discipline and related compliance training bear directly on knowledge and intent to conceal income, that history is admissible under Rule 404(b) to prove willfulness in a tax prosecution, provided it is similar in kind and close in time and passes Rule 403 balancing. Second, for cash-basis lawyers, misuse and commingling in IOLTAs can transform trust deposits into taxable income upon receipt, rendering later payments to third parties deductible in later years—aligning criminal tax enforcement with Tax Court doctrine on constructive receipt and commingling. Third, Rule 33 relief remains a narrow avenue: a post-trial expert’s refined critique of the government’s method will not suffice where the jury heard, and the district court credited, substantially the same theory at trial.

Although nonprecedential, this opinion is a clear, practical guide for litigating willfulness and income-recognition issues in cases involving lawyer trust accounts, and it underscores the interconnection between professional ethics compliance and federal tax criminal exposure. Prosecutors and defense counsel alike should take note of the court’s analytical path and its insistence on deference to district court discretion in evidentiary balancing, credibility assessments, and restitution calculations.