Klein Conspiracies Require “Deceitful or Dishonest Means” and Advice-of-Counsel Must Be Instructed Across Counts: United States v. Kearney (10th Cir. 2025)

Klein Conspiracies Require “Deceitful or Dishonest Means” and Advice-of-Counsel Must Be Instructed Across Counts: United States v. Kearney (10th Cir. 2025)

Introduction

In United States v. Kearney, the Tenth Circuit vacated a § 371 conspiracy conviction in a tax case, holding that two instructional defects amounted to plain error. First, where the indictment charged a “defraud clause” conspiracy (a so‑called Klein conspiracy) to obstruct the Internal Revenue Service (IRS), the trial court erroneously instructed the jury using elements aligned with the “offense clause,” and omitted the essential requirement that the government prove obstruction “by deceitful or dishonest means.” Second, the court’s advice‑of‑counsel instruction expressly linked the defense only to the substantive false‑return count, not to the conspiracy count, even though the defendant’s theory and evidence supported that defense as to both counts. The court found overlapping prejudice from these errors, vacated the conspiracy conviction, and remanded.

The decision clarifies, in pragmatic and precedent‑integrated terms, that a Klein conspiracy under § 371’s defraud clause has its own core mental‑state requirement—deceitful or dishonest means—and that advice‑of‑counsel, when supported by the evidence, must be made available to the jury for all counts to which it logically applies. The ruling also underscores that pattern instructions are guides, not shields; reading the indictment to the jury or relying on counsel’s arguments cannot cure an omitted element; and plain error can lie even when the court uses a pattern instruction.

Summary of the Judgment

A jury convicted Victor Kearney of (1) filing a false tax return (26 U.S.C. § 7206(2)) and (2) conspiracy to defraud the United States by impeding the IRS (18 U.S.C. § 371). He appealed only the conspiracy conviction, challenging jury instructions. Applying plain‑error review, the Tenth Circuit held:

  • It was error—plain and prejudicial—to instruct the jury as though the case charged an “offense clause” conspiracy, rather than a “defraud clause” conspiracy, thereby failing to require proof that Kearney conspired to obstruct the IRS by deceitful or dishonest means. The indictment was defraud‑clause; the instruction wrongly tracked the offense clause.
  • It was also plain error to limit the advice‑of‑counsel instruction to the false‑return count. The defense applied to both counts, especially to the deceitful‑or‑dishonest‑means element of the Klein conspiracy. Omitting it as to the conspiracy count compounded the prejudice from the first error.

Because the errors affected substantial rights and seriously affected the fairness and integrity of the proceedings, the court vacated the conspiracy conviction and remanded for further proceedings.

Detailed Analysis

1) Precedents Cited and How They Shaped the Decision

  • Structure of § 371
    • Dennis v. United States, 384 U.S. 855 (1966): Recognizes § 371’s two “alternative clauses”—the offense clause and the defraud clause.
    • United States v. Feola, 420 U.S. 671 (1975): Under the offense clause, the government must prove “at least the degree of criminal intent necessary for the substantive offense itself.”
    • Haas v. Henkel, 216 U.S. 462 (1910), and Hammerschmidt v. United States, 265 U.S. 182 (1924): Define “defraud the United States” to include impeding a lawful governmental function “by deceit, craft or trickery, or at least by means that are dishonest.” Financial loss is not required; impairment of lawful function by dishonest means suffices.
  • Klein conspiracy
    • United States v. Adkinson, 158 F.3d 1147 (11th Cir. 1998) (citing United States v. Klein, 247 F.2d 908 (2d Cir. 1957)): Labels IRS‑focused defraud‑clause prosecutions as “Klein conspiracies.”
    • United States v. Scott, 37 F.3d 1564 (10th Cir. 1994): A defraud‑clause instruction must make clear that the government must prove “dishonest or deceitful means,” because merely making the IRS’s job harder through lawful means is not a crime.
    • United States v. Caldwell, 989 F.2d 1056 (9th Cir. 1993): Reverses where the instruction omitted the deceitful‑or‑dishonest‑means element in a defraud‑clause case.
  • Indicting under one clause, instructing on another
    • United States v. Haga, 821 F.2d 1036 (5th Cir. 1987): Reversal where the defendant was indicted under the offense clause but convicted under the defraud clause after a bench trial—underscoring the clauses’ fundamental differences.
    • United States v. Khalife, 106 F.3d 1300 (6th Cir. 1997); United States v. Alston, 77 F.3d 713 (3d Cir. 1996): Emphasize that § 371’s defraud clause is self‑contained; no need to prove a separate substantive offense’s elements.
  • What cannot cure a bad instruction
    • United States v. Bedford, 536 F.3d 1148 (10th Cir. 2008): No plain error there because the trial court actually instructed the jury on what “defraud” means. Distinguished in Kearney because here, the court never defined the deceit/dishonesty element and instead gave the offense‑clause framework.
    • Bland v. Sirmons, 459 F.3d 999 (10th Cir. 2005); United States v. Walters, 913 F.2d 388 (7th Cir. 1990): Lawyers’ arguments do not substitute for accurate jury instructions; counsel’s statements are not law or evidence.
  • Plain error and pattern instructions
    • United States v. Olano, 507 U.S. 725 (1993); United States v. Gonzalez‑Huerta, 403 F.3d 727 (10th Cir. 2005) (en banc); United States v. Dominguez Benitez, 542 U.S. 74 (2004): Set out the four‑part plain‑error framework and prejudice standard (“reasonable probability” of a different outcome).
    • United States v. Powell, 767 F.3d 1026 (10th Cir. 2014); United States v. Wardell, 591 F.3d 1279 (10th Cir. 2009): An error is plain when it contradicts well‑settled law or clear statutory text.
    • United States v. Kepler, 74 F.4th 1292 (10th Cir. 2023); United States v. Freeman, 70 F.4th 1265 (10th Cir. 2023): Pattern instructions are guides, not talismans; they do not foreclose a finding of plain error when they misfit the case.
  • Defense‑theory instructions (advice of counsel)
    • United States v. Maryboy, 138 F.4th 1274 (10th Cir. 2025); United States v. Britt, 79 F.4th 1280 (10th Cir. 2023): It is plain error to refuse or effectively omit a defense‑theory instruction where supported by evidence and properly requested.
    • United States v. Toledo, 739 F.3d 562 (10th Cir. 2014): In assessing entitlement to a defense instruction, the court credits the testimony most favorable to the defendant.
    • United States v. Piette, 45 F.4th 1142 (10th Cir. 2022); United States v. Duran, 133 F.3d 1324 (10th Cir. 1998): Erroneous instructions that undermine a supported affirmative defense affect the fairness and integrity of the trial.
    • United States v. Benford, 875 F.3d 1007 (10th Cir. 2017); United States v. Wolfname, 835 F.3d 1214 (10th Cir. 2016): Reversal is appropriate when evidence on an omitted element is neither overwhelming nor uncontroverted.

2) The Court’s Legal Reasoning

The Tenth Circuit walked step‑by‑step through the plain‑error framework:

  • Error: The indictment charged a defraud‑clause conspiracy (impeding IRS functions). The court’s instruction described an offense‑clause conspiracy (“conspire to commit an offense against the United States”) and never required the jury to find that Kearney agreed to use deceitful or dishonest means. Because § 371’s clauses are fundamentally different, omitting the deceit/dishonesty element misdescribed the charged crime. The government’s arguments and the reading of the indictment did not cure the missing element, nor could counsel’s closing substitute for proper instruction.
  • Plainness: The error contravened clear statutory structure and well‑settled Supreme Court and Tenth Circuit law, notably Hammerschmidt and Scott, requiring deceitful or dishonest means for a defraud‑clause conspiracy. The use of a pattern instruction did not save the day, especially because the pattern did not differentiate between § 371 clauses and failed to describe the charged offense.
  • Substantial Rights: There was a reasonable probability of a different outcome had the jury been told it needed to find deceitful or dishonest means and that it could acquit if Kearney in good faith relied on counsel. The government’s case on fraudulent intent hinged on testimony from Kearney’s lawyer‑CPA (Fiser), whose credibility was heavily impeached. The record included evidence that Kearney reasonably relied on professional preparers, received forms suggesting no reportable income, and struggled with reading. The government’s “he signed five returns” point was not responsive to the omitted deceitful/dishonest means element or to good faith reliance.
  • Fairness/Integrity: Failing to instruct on an essential element and simultaneously diluting the defendant’s supported defense theory seriously impugns trial fairness. The court emphasized that the government’s evidence on the missing element was neither overwhelming nor uncontroverted.

On the separate advice‑of‑counsel error, the court held that limiting the instruction to the false‑return count wrongly suggested the defense did not apply to the conspiracy count, even though it directly bore on the deceit/dishonesty element and Kearney’s state of mind. That omission independently satisfied the plain‑error standard and compounded the prejudice from the first error.

3) What This Decision Adds to the Law and Practice

  • Charge‑instruction alignment: A trial court must tailor § 371 instructions to the clause charged in the indictment. Indict on the defraud clause; instruct on the defraud clause—with the deceitful‑or‑dishonest‑means requirement spelled out.
  • Pattern instructions are not safe harbors: A pattern instruction that does not track the charged clause (or omits an essential element) can be plain error. Courts and practitioners must customize.
  • Reading the indictment is not enough: Merely reading a defraud‑clause indictment to the jury does not cure an instruction that omits the deceit/dishonesty element. Nor can counsel’s argument cure the omission.
  • Advice‑of‑counsel must cover all relevant counts: When a defendant presents evidence supporting reliance on counsel, the instruction must expressly apply to any count for which it negates mens rea—including a § 371 defraud‑clause conspiracy. Limiting it to only one count can be plain error.
  • Overlapping prejudice recognized: The court highlights how a misdescribed mental‑state element and a truncated defense instruction can compound one another, strengthening a defendant’s showing under plain‑error prongs three and four.

Impact and Practical Implications

  • For trial judges:
    • Verify which § 371 clause is charged; select or craft instructions accordingly. For defraud‑clause prosecutions, include that the defendant agreed to impede a lawful governmental function “by deceit, craft, or trickery, or by means that are dishonest.”
    • Ensure defense‑theory instructions (like advice‑of‑counsel) are explicitly linked to each count to which they logically apply. Placement alone (after all elements) is not a substitute for clarity.
    • Do not rely on reading the indictment or counsel’s arguments to supply missing elements.
  • For prosecutors:
    • Tailor proposed instructions to the charged clause. In Klein cases, propose an instruction that defines “defraud the United States” as obstruction of a lawful function by deceitful or dishonest means, consistent with Hammerschmidt and Scott.
    • When the defense raises advice‑of‑counsel and there is supporting evidence, consider proposing a unified instruction expressly applicable to all counts for which mens rea is at issue to avoid reversible error.
    • Anticipate that appellate courts will scrutinize reliance on pattern instructions where the pattern does not differentiate between § 371’s clauses.
  • For defense counsel:
    • Object on the record if a defraud‑clause indictment is paired with offense‑clause elements. Request the deceit/dishonesty element explicitly.
    • Request that advice‑of‑counsel be tied to each count to which it applies, and marshal evidence of good‑faith reliance (seeking advice, full disclosure, receiving approval, reliance in good faith).
    • On appeal, emphasize that counsel’s arguments and indictment recitals cannot cure an omitted element; highlight overlapping prejudice if multiple instructions misdirect the jury on mens rea.
  • Pattern instruction reform:
    • Kearney will likely prompt revisions to Tenth Circuit criminal pattern instructions to bifurcate § 371 into offense‑clause and defraud‑clause models, with the latter including the deceit/dishonesty element and IRS‑impairment formulation for Klein cases.
  • Substantive tax enforcement:
    • Kearney narrows prosecutorial latitude in Klein conspiracies by emphasizing that mere noncompliance or making the IRS’s job harder is insufficient absent deceitful or dishonest means. Expect more litigation over whether conduct is “dishonest” or merely tax‑minimizing but lawful.

Complex Concepts Simplified

  • Defraud clause vs. offense clause (18 U.S.C. § 371):
    • Offense clause: Agreement to commit another specific federal crime; the mens rea is imported from the underlying offense.
    • Defraud clause: Agreement to impede a lawful government function (here, the IRS) by deceitful or dishonest means. No separate underlying statute is required; deceit/dishonesty is the essential mental‑state element.
  • Klein conspiracy:
    • A shorthand for a defraud‑clause conspiracy targeting the IRS’s lawful functions (assessing and collecting taxes), requiring proof that the defendant agreed to impair those functions by deceitful or dishonest means.
  • Advice‑of‑counsel defense:
    • Not a free‑standing excuse but a way to negate unlawful intent. A jury may find no unlawful intent if the defendant: (i) sought legal advice before acting; (ii) fully disclosed relevant facts; (iii) received advice that the conduct would be lawful; and (iv) relied on that advice in good faith.
  • Plain error (four‑part test):
    • (1) Error; (2) Plain (clear or obvious under current law or text); (3) Affects substantial rights (reasonable probability of a different outcome but for the error); (4) Seriously affects fairness, integrity, or public reputation of judicial proceedings.
  • Why reading the indictment or counsel’s argument does not cure a bad instruction:
    • The jury must receive accurate law from the court’s instructions. The indictment is an accusation, not law; counsel’s arguments are not evidence or legal instructions.

Suggested Model Language for Future Instructions (Defraud Clause)

Courts and counsel may consider language along these lines, adapted to the case:

  • To “defraud the United States” under § 371 means to agree to impair, impede, obstruct, or defeat a lawful function of a government agency, here the IRS, by deceit, craft, or trickery, or at least by means that are dishonest.
  • You must unanimously find beyond a reasonable doubt that the defendant knowingly and voluntarily joined an agreement whose objective was to impair the IRS’s lawful function by deceitful or dishonest means, and that at least one overt act was committed in furtherance of that agreement.
  • If you find that the defendant, in good faith, followed the advice of counsel after full disclosure of all material facts, you must acquit because such reliance is inconsistent with the unlawful intent required for this conspiracy charge.

Conclusion

United States v. Kearney crystallizes several vital propositions for § 371 prosecutions and trial practice:

  • You must instruct the jury on the clause of § 371 that is actually charged. In defraud‑clause (Klein) cases, that means instructing that the agreement must aim to impede a governmental function by deceitful or dishonest means.
  • Pattern instructions are not one‑size‑fits‑all and do not insulate trials from plain‑error review. Courts must tailor them to the indictment and the governing law.
  • Advice‑of‑counsel is a mens‑rea‑negating theory that must be linked to each count to which it logically applies; limiting it to a subset of counts can be plain error.
  • Reading the indictment or relying on counsel’s arguments cannot cure an instruction that omits an essential element.

By vacating Kearney’s conspiracy conviction, the Tenth Circuit reinforces Hammerschmidt’s core teaching for defraud‑clause conspiracies and provides concrete guidance on aligning charges, instructions, and defenses. The ruling will influence the drafting of future jury instructions, the framing of Klein conspiracy cases, and the strategic deployment of advice‑of‑counsel in tax and other white‑collar prosecutions.

Case Details

Year: 2025
Court: Court of Appeals for the Tenth Circuit

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