Convictions Upheld for False 990 Responses
In United States v. Mubayyid, No. 08–1846, 2011 WL 3849749 (1st Cir. Sept. 1, 2011), the First Circuit upheld the defendant’s convictions under 26 U.S.C. §§ 7206(1) and 7212(a), based on his failure to disclose his organization’s non-charitable activities on IRS Form 990.
In 1993, Emadeddin Muntasser (“Muntasser”) incorporated Care International, Inc. (“Care”), an organization with a stated purpose of providing worldwide humanitarian aid. Samir Al–Monla (“Al- Monla”) and Muhamed Mubayyid (“Mubayyid”) served as officers of Care. Soon after incorporating Care, Muntasser applied to have the organization granted tax-exempt status by filing IRS Form 1023. In Care’s Form 1023 filing, Muntasser did not disclose the organization’s numerous activities advocating for Islamic jihad. Muntasser also denied that Care was a successor to any other organization, despite the fact that Care had replaced the Boston branch of a pro-jihad organization. Based on the information provided, the IRS approved Care’s application for tax-exempt status. In order to maintain its tax exemption, Care filed annual IRS Forms 990, disclosing the earnings and activities of the organization. None of Care’s Form 990s revealed its pro-jihad activities. Although Muntasser had failed to disclose these same activities in Care’s initial application, the defendants answered “No” when the Form 990s asked whether the organization engaged in any activities that had not previously been reported to the IRS.
At trial, the district court acquitted Al-Monla of all charges, convicted Muntasser of a false statement to the FBI, and convicted Mubayyid of scheming to conceal material facts from the IRS (18 U.S.C. § 1001(a)(1)), endeavoring to obstruct the administration of the Internal Revenue laws (26 U.S.C. § 7212(a)), and filing a false tax return (26 U.S.C. § 7206(1). The district court acquitted all the defendants of conspiracy under 18 U.S.C. § 371. The defendants and the government appealed.
The First Circuit reversed the district court’s acquittal of the defendants on the conspiracy count and affirmed the defendants’ other convictions. With respect to Mubayyid’s convictions under 26 U.S.C. §§ 7206(1) and 7212(a), the court noted that these were based on his answers to Question 76 on Care’s Form 990, which asked, “Did the organization engage in any activity not previously reported to the IRS?” For each of the charged years, Mubayyid answered “No,” an answer the government argued intentionally concealed from the IRS Care’s non-charitable purposes. Mubayyid countered that Question 76 was fundamentally ambiguous, precluding the jury from finding deliberate falsity.
Because the instructions to Question 76 required an explanation of any “significant changes” in the organization’s activities, Mubayyid argued that he was not required to report activities that were ongoing and unchanged, even if they had never previously been reported. The court determined, however, that Question 76 plainly sought the disclosure of information about activities not accurately depicted on the organization’s Form 1023, or in any other year’s return. Accordingly, the court held that sufficient evidence supported the jury’s finding that Mubayyid willfully failed to disclose on Form 990 at least one reportable activity that occurred in each of the charged years.