Admissibility
1 Page2
A
stock swindler or a tax cheat may act based on a recognized personality
disorder, e.g. DSM-III-R 301.70, or he may act based on simple greed and
the belief that he can get away with it. Psychiatrists may be able to
detect mental conditions that generate criminality, and thus would
qualify as experts to testify about such conditions. But that does not
make them experts on human character.
That
is not to say there will be any shortage of candidates for the title of
expert. Among the first probably would be the clergy, who deal regularly
with sin and virtue, good and evil, and the like. Of course, once we
recognize the clergy as experts in character, we would have to avoid
offense to the First Amendment, cf., Welsh v. United States, 398
U.S. 333, 338, 26 L. Ed. 2d 308, 90 S. Ct. 1792 (1970), by recognizing
also a Coxey's army of lay moralists, ethicists, and pretty much anyone
else willing to set up a booth on the fair ground--including, as a
matter of professional courtesy if nothing else, judges. All in all,
this is not an appetizing prospect.
The
simple truth is that the notion of expert character testimony, although
it has been bandied about in the literature for some time, compare,
e.g., Curran, "Expert Psychiatric Evidence of Personality
Traits," 103 U. Pa. L. Rev. 999, 1013 (1955) (endorsing such
evidence) with, Falknor and Steffen, "Evidence of Character:
From the Crucible of the Community to the Couch of the
Psychiatrist," 102 U. Pa. L.. Re v. 980, 994 (1954) (criticizing
such evidence), is one of those ideas whose time has not yet come, and
with common sense and a modicum of luck it never will. Rule 702 of the
Federal Rules of Evidence provides that, "if scientific, technical,
or other specialized knowledge will assist the trier of fact to
understand the evidence or to determine a fact in issue, a witness
qualified as an expert ... may testify thereto." As this Court
wrote in Andrews v. Metro North Commuter R. Co., 882 F.2d 705,
708 (2d Cir. 1989), "For an expert's testimony to be admissible
under this Rule, however, it must be directed to matters within the
witness' scientific, technical, or specialized knowledge and not to lay
matters which a jury is capable of understanding and deciding without
the expert's help." Character is a subject on which jurors do not
need and therefore should not get expert guidance.
United States
v. Webb, 625 F.2d 709, 710-11 (5th Cir. 1980). To suggest
otherwise is at best unhelpful.
B.
Finally,
while fashioning an absolute rule about what sort of cross-examination
should be permitted at a trial, the majority itself appears to have
disregarded a bit of guidance on the wisdom of such appellate
rule-making that the Supreme Court provided in Michelson, supra,
albeit in the form of dictum. That case and its history are instructive.
The case originated in this Circuit, and appears to have been heard by
the Supreme Court at least in part at the request of the author of the
Circuit opinion. That author, Judge Clark, urged that the rule
permitting a reputation character witness to be cross-examined about
other bad acts of the accused in order to test the witness' grounds for
knowledge, should be changed. He doubted that trial judges could fashion
effective instructions:
"Because,
as Wigmore says, the jury almost surely cannot comprehend the judge's
limiting instruction, the writer of this opinion wishes that the United
States Supreme Court would tell us to follow what appears to be the
Illinois
rule, i.e., that such questions are improper unless they relate to
offenses similar to those for which the defendant is on trial."
United States
v. Michelson, 165 F.2d 732, 735 n. 11 (2d Cir. 1948). The
Supreme Court took the case, but left the prevailing rule undisturbed.
It wrote that despite criticism, the law as it stood "has proved a
workable even if clumsy system when moderated by discretionary controls
in the hands of a wise and strong trial court." 335
U.S.
at 486. As the majority opinion illustrates, those discretionary
controls worked well here; lest anyone miss the point, the trial court
made the obvious explicit by instructing the jury specifically on the
limited purpose for which the evidence at issue was received. Slip op.
at 8, 15; App. 1422, 1433, 1461. Those discretionary controls should not
be abandoned in favor of an inflexible rule. Justice Frankfurter,
concurring in Michelson, put the matter even more forcefully:
"Despite
the fact that my feelings run in the general direction of the views
expressed by MR. JUSTICE RUTLEDGE in his dissent, I join the Court's
opinion. I do so because I believe it to be unprofitable, on balance,
for appellate courts to formulate rigid rules for the exclusion of
evidence in courts of law that outside them would not be regarded as
clearly irrelevant in the determination of issues. For well-understood
reasons this Court's occasional ventures in formulating such rules
hardly encourages confidence in denying to the federal trial courts a
power of control over the allowable scope of cross-examination possessed
by trial judges in practically all State courts. After all, such
uniformity of rule in the conduct of trials is the crystallization of
experience even when due allowance is made for the force of imitation.
To reject such an impressive body of experience would imply a more
dependable wisdom in a matter of this sort than I can claim.
"To
leave the District Courts of the
United States
the discretion given to them by this decision presupposes a high
standard of professional competence, good sense, fairness and courage on
the part of the federal district judges. If the United States District
Courts are not manned by judges of such qualities, appellate review, no
matter how stringent, can do very little to make up for the lack of
them."
335
U.S.
at 488-89.
For
the foregoing reasons, as to part I of the majority opinion, I concur
only in the judgment.
1
Pub.L. 93-595, §3
,
Jan. 2, 1975, 88 Stat. 1959.
2
"(a) Reputation or opinion. In all cases in which evidence of
character or a trait of character of a person is admissible, proof may
be made by testimony as to reputation or by testimony in the form of an
opinion. On cross-examination, inquiry is allowable into relevant
specific instances of conduct."
3
"CAUTIONARY STATEMENT.... The purpose of DSM-III-R is to provide
clear descriptions of diagnostic categories in order to enable
clinicians and investigators to diagnose, communicate about, study and
treat the various mental disorders. It is to be understood that
inclusion here, for clinical and research purposes, of a diagnostic
category such as Pathological Gambling or Pedophilia does not imply that
the condition meets legal or other nonmedical criteria for what
constitutes mental disease, mental disorder, or mental disability. The
clinical and scientific considerations involved in categorization of
these conditions as mental disorders may not be wholly relevant to legal
judgments, for example, that take into account such issues as individual
responsibility, disability determination, and competency."
[98-2 USTC
¶50,849]
United States of America
, Appellee v. Darrell Chip Wadena, Appellant
United States of America
, Appellee v. Jerry Joseph Rawley, Jr., Appellant
United States of America
, Appellee v. Rick Clark, Appellant
(CA-8), U.S. Court of Appeals, 8th
Circuit, 96-4141, 96-4145, 96-4146, 8/11/98, 152 F3d 831, 152 F3d 831.
Affirming an unreported District Court decision
[Code
Secs. 7203 and 7602
]
Evidence: Criminal prosecution: Civil audit: Criminal investigation:
Motion to suppress.--Tribal leaders who were convicted of a variety
of financial crimes were not entitled to suppress evidence derived from
an IRS audit of a corporation that was owned by one of the defendants
and that served as a conduit for improper payments to the defendants.
The fact that the civil auditor was aware of a concurrent IRS criminal
investigation involving some of the same matters did not establish that
the IRS used the civil audit to develop its criminal investigation. The
defendants did not show that the civil auditor had firm indications of
fraud by any of the parties, and his failure to inform them that
information from the civil audit might result in a further criminal
investigation did not amount to affirmatively and intentionally
misleading them. D.M. Grunewald (CA-8), 93-1
USTC ¶50,122 , followed.
Kenneth
Wayne Saffold, Jeanne J. Graham, Assistant United States Attorney,
Minneapolis
,
Minn.
, for appellee. Ronald I. Meshbesher, Meshbesher & Spence, 1616 Park
Ave., Minneapolis, Minn. 55404, for appellant. Rick Clark,
Longby
,
Minn.
, pro se.
Before:
MCMILLIAN, LAY and BEAM, Circuit Judges.
AMENDED OPINION
LAY,
Circuit Judge:
In
June 1996, Rickie Lee Clark, Jerry Joseph Rawley, Jr., and Darrell
"Chip" Wadena were convicted in federal district court of
conspiracy, in violation of 18 U.S.C. §371, theft or bribery concerning
programs receiving federal funds, in violation of 18 U.S.C. §666,
engaging in monetary transactions in property derived from specified
unlawful activity, in violation of 18 U.S.C. §§1957 and 2, and willful
misapplication of tribal funds, in violation of 18 U.S.C. §1163. In
addition, Clark and Rawley were convicted of mail fraud, in violation of
18 U.S.C. §§1341 and 2, and conspiracy to oppress free exercise of
election rights, in violation of 18 U.S.C. §241. 1
Clark,
Rawley, and Wadena appeal their convictions. On appeal, they jointly and
severally challenge the federal court's jurisdiction to prosecute the
charges against them. They also raise several trial and procedural
errors. For the reasons discussed below, we affirm all judgments of
conviction.
I. Background
The
880,000-acre White Earth Reservation ("Reservation") is
located in northwest
Minnesota
. The Reservation is home to the White Earth Band
("Band"), one of the six constituent bands of the Minnesota
Chippewa Tribe. The Band consists of 22,000 members. Approximately 3,800
of the Band's enrolled members live on the Reservation, and the
remaining members live throughout the
United States
. The Reservation Tribal Council ("RTC") (formerly known as
the Reservation Business Committee) governs all aspects of the Band,
including its economic activity. 2
The
RTC consists of five members who serve four-year terms. The Band elects
the members by general elections held every two years. To be eligible
for election, a candidate must be an enrolled member who resides on the
Reservation. During the time frame relevant to this case, Clark, Rawley,
and Wadena all served on the RTC. Wadena served as Chairman, Rawley
served as Treasurer, and
Clark
served as Councilman.
The
offenses for which Clark and Rawley were convicted arose from three
conspiracies: (1) the construction conspiracy; (2) the commissions
conspiracy; and (3) the election conspiracy. Wadena's convictions arose
solely from the construction conspiracy and the commissions conspiracy.
We detail these conspiracies below.
A.
The Construction Conspiracy
In
1985, Congress enacted the White Earth Reservation Land Settlement Act
("WERLSA"). 25 U.S.C. §331. The purpose of the WERLSA was to
settle numerous claims involving large portions of land on the
Reservation.
Id.
As part of the Act, the
United States
appropriated $6.6 million "for economic development for the benefit
of the White Earth Band of Chippewa Indians."
Id.
In 1991, the RTC authorized the use of approximately $5 million of this
money for construction of a casino on the Reservation called the
Shooting Star Casino ("Casino"). The Casino project involved
approximately $24 million.
The
RTC appointed
Clark
to oversee construction of the Casino. 3 The RTC also
hired Indian-owned Gordon Construction, Inc. ("Gordon") to act
as general contractor for the project. Gordon subcontracted with
Northern Drywall and Construction, Inc. ("Northern") for
installation of drywall and various painting services. Northern did not
submit a formal bid for the subcontract. Prior to the subcontract in
question, Northern had only worked on small construction projects, and
in the years prior to the Casino project, Northern's gross revenues
never exceeded $50,000.
Clark
owned Northern, and he served as its president.
Construction
of the Casino began in mid-1991 and was completed within one year. The
Casino was quite successful; it created more than 1000 jobs and
generated millions of dollars in revenue. In 1993, for example, the Band
grossed $50 million, a majority of which came from the operation of the
Casino. The RTC had control over the Band's spending of all non-federal
revenue such as the revenue from the Casino.
In
1993, the civil examination unit of the Internal Revenue Service
("IRS") conducted an audit of Northern. During the audit,
examiner Greg Nygren discovered Northern had made payments to Wadena
totaling over $428,000. Northern made the first payment to Wadena in
July 1991, about four months before the drywall subcontract was
publicized. In response to inquiries about the payments, Clark and
Wadena claimed Wadena held an undisclosed ownership interest in
Northern, and the payments represented Wadena's share of profits from
Northern. However, Wadena never mentioned this alleged ownership
interest on his 1990 financial statements or on loan applications he
submitted in 1990. Further, Northern's accountant did not know of
Wadena's alleged interest. Later,
Clark
falsified and backdated Northern's corporate minutes and stock
certificates in an attempt to document Wadena's ownership interest in
the company.
In
1992, Northern also made a payment to Rawley in the amount of $15,000.
Clark and Rawley claimed the payment was for consulting services. In
reality, Northern made the payment to Rawley to secure Rawley's silence
about Northern's payments to Wadena, who was Rawley's long-time
political rival.
The
government indicted Clark, Rawley, and Wadena on August 29, 1995. The
Indictment charged defendants with eighteen counts arising from the
construction of the Casino. Count 1 alleged that all three defendants
conspired to misapply tribal funds, in violation of 18 U.S.C. §§371,
666, and 1163. The object of the conspiracy was to use tribal funds for
personal gain in the construction of the Casino. Counts 2 through 18
alleged the defendants engaged in various acts of money laundering and
misapplication of funds in furtherance of the conspiracy. 4 The jury
convicted Clark, Rawley, and Wadena of all counts related to the
construction conspiracy.
B.
The Commissions Conspiracy
The
RTC members created two commissions of which they were the sole members:
the Gaming Control Commission and the Fishing Commission
("Commissions"). The RTC members assumed no additional duties
by serving on the Commissions, and the Commissions themselves were
essentially functionless. 5 Nonetheless,
Clark
, Rawley, and Wadena received substantial payments for their service on
the Commissions. 6 At irregular
intervals, and when the desire arose, Clark, Rawley, and Wadena directed
the issuance of tribal funds to themselves, and they directed the Band's
accounting department to code the checks as payment for commission
meetings. These payments were made from the Band's general treasury, and
when combined with
Clark
's, Rawley's and Wadena's RTC salaries for the years 1990 to 1993, the
payments amounted to over $1.2 million.
In
the 1995 Indictment, the government charged Clark, Rawley, and Wadena
with ten counts arising from the Commissions conspiracy. Count 19
alleged the defendants conspired to misapply tribal funds, in violation
of 18 U.S.C. §§371 and 1163. The object of this conspiracy was to
obtain tribal funds in the form of excessive commission payments. Counts
20 through 28 alleged various acts of misapplication of tribal funds,
theft or bribery concerning programs receiving federal funds, and money
laundering. 7 The jury
convicted Clark and Wadena of at counts relating to the Commissions
conspiracy. The jury convicted Rawley of all counts's except for one
count of missapplying tribal funds.
C.
The Election Conspiracy
In
addition to the convictions set forth above, Rawley and Clark were also
found guilty under 18 U.S.C. §241 for conspiracy to oppress free
exercise of tribal election rights. As noted above, the RTC members are
elected every two years. Because most of the Band's members do not live
on the Reservation, the majority of members vote by absentee ballot. The
Minnesota Chippewa Tribe prescribes absentee ballot voting procedures
for its constituent tribes. During the time frame relevant to this case,
these procedures provided that a person who wished to vote by absentee
ballot would first request a ballot from the Band's authorities. The
voter would then complete the ballot and place it in an envelope upon
which was printed an affidavit the voter signed and had notarized. The
voter would then send the ballot directly to election headquarters where
it would be tallied. During the 1994 election, numerous absentee ballots
were fabricated and falsely notarized. Both Clark and Rawley had a hand
in improperly notarizing absentee ballots, and Clark himself forged
numerous ballots. The government emphasizes that Clark and Rawley used
the
United States
mail as well as notaries licensed by the State of
Minnesota
to perpetuate the absentee ballot fraud.
In
the 1995 Indictment, the government charged Clark and Rawley with
sixteen counts relating to the election conspiracy. The government did
not charge Wadena with any counts relating to the election conspiracy.
Count 29 alleged that Clark and Rawley conspired to injure and oppress
voters, in violation of 18 U.S.C. §241. 8 Section 241
makes it unlawful for
two or more
persons [to] conspire to injure, oppress, threaten, or intimidate any
person in any State [or] Territory . . . in the free exercise or
enjoyment of any right or privilege secured to him [or her] by the
Constitution or laws of the United States, or because of his [or her]
having so exercised the same. . . .
The object of this conspiracy was
to procure the election of certain candidates to tribal positions by
causing election officials to corruptly discharge their duties and by
causing fraudulent ballots to be cast. Counts 30 through 44 alleged
various acts of misapplication of funds, mail fraud, false statements,
and obstruction of justice. 9 The jury
convicted Rawley of all counts relating to the election conspiracy. The
jury convicted
Clark
of all counts relating to the election conspiracy except for one count
of using tribal funds to pay people to assist him and others in gaining
re-election.
II. Overall Jurisdiction
Each
defendant challenges his convictions on various grounds. First, we
address the defendants' overall challenge of the federal court's
jurisdiction to prosecute them for the charged offenses. The defendants
make two basic challenges: (1) the only federal law applicable to the
defendants, as Native Americans, are those encompassed within the Indian
Country Crimes Act, 18 U.S.C. §1152, and the Indian Major Crimes Act,
18 U.S.C. §1153; (2) alternatively, the defendants urge, even if
general federal criminal laws do apply to them, Public Law 280 (codified
at 18 U.S.C. §1162) granted Minnesota state courts exclusive
jurisdiction over crimes involving Indians and arising in Indian
country.
The
defendants' first jurisdictional challenge is broad-based and if true,
would require this court to dismiss all charges. This particular
jurisdictional claim is allegedly derived from historic interpretation
of the "patchwork" of federal statutes and early case law
affecting the sovereignty of Indian tribes in
America
. This area of the law is not easily discerned and has arisen in
numerous cases both in this court and other circuit courts of appeal. 10
The
general laws of the
United States
were made applicable to Indian Country through the Indian Country Crimes
Act, 18 U.S.C. §1152. 11 The second
paragraph of the Act contains an exception to this jurisdictional grant
for any crime committed by one Indian against another. As early as 1883,
the Supreme Court in Ex Parte Crow Dog, 109
U.S.
556, 3 S.Ct. 396, 27 L.Ed. 1030 (1883), applied this exception and
dismissed a federal prosecution for murder of one Indian by another. In
1885, in order to curb a perceived lawlessness resulting from the Crow
Dog decision, Congress passed the Indian Major Crimes Act, 18 U.S.C.
§1153, which provides the federal courts with exclusive jurisdiction
over certain enumerated crimes. 12
The
Indian Major Crimes Act allowed for federal prosecution of certain
enumerated crimes, and today, the federal government has jurisdiction
over fourteen major crimes when they are committed on an Indian
reservation. The Indian Major Crimes Act does not contain an
Indian-against-Indian exception. Nonetheless, the defendants argue that
as a result of the Indian Major Crimes Act, the federal government no
longer has jurisdiction under §1152 to prosecute crimes perpetrated by
one Indian against another, unless the crime is one enumerated in §1153.
13 In support
of this argument, the defendants cite United States v. Quiver,
241
U.S.
602, 36 S.Ct. 699, 60 L.Ed. 1196 (1916), wherein the Supreme Court
observed that the inclusion of certain offenses within the Indian Major
Crimes Act "carries with it some implication of a purpose to
exclude others." 241
U.S.
at 606, 36 S.Ct. 699.
In
sum, the defendants argue that the only crimes which may be the basis
for federal court jurisdiction are those within the Indian Country
Crimes Act and the Indian Major Crimes Act. As the defendants
acknowledge, this court has rejected this claim on several occasions. See,
e.g., Blue, 722 F.2d at 384-86; Stone v. United States, 506
F.2d 561, 563 (8th Cir. 1974); United States v. White, 508 F.2d
453, 454-55 (8th Cir. 1974). We recognize that when addressing claims
like the one made here, our court and other courts of appeal have issued
opinions that seem confusing and somewhat inconsistent. 14 However,
there are several reasons why we believe our earlier precedent controls.
First,
many courts of appeal 15 recognize
that federal courts may enforce general federal criminal laws against all
persons, including Indians within Indian country. 16 Federal
statutes of general applicability, those in which situs of the offense
is not an element of the crime, are not encompassed within the Indian
Country Crimes Act. As a result, the Indian-against-Indian exception
contained in the Indian Country Crimes Act does not apply to federal
criminal laws of general applicability.
The
Second Circuit in Markiewicz, 978 F.2d 786, and the Seventh
Circuit in Smith, 562 F.2d 453, emphasized that only federal laws
which seek to protect a "peculiar" federal interest may be
prosecuted. 17 For
example, in Smith, the offense was charged under 18 U.S.C. §111
for forcible assault on a federal officer. The Smith court found that
the district court had concurrent jurisdiction with the tribal court,
because of the "peculiarly Federal nature" of the assault. 562
F.2d at 458. However, this distinction actually is difficult to apply,
given the presumption of jurisdictional authority of Congress to pass
federal laws. If Congress passes any federal act, assuming it has
constitutional authority to do so, there always exists a federal concern
and interest. For this reason, identifying a federal interest in a
general federal law in order to override tribal sovereignty seemingly is
redundant.
At
the time that the Indian Country Crimes Act was passed, it may have been
assumed, as Felix Cohen points out, that federal laws outside of enclave
laws were not applicable to the Indian Country. See Cohen, supra,
at 296-97. However, as Indian law evolved, that premise was discarded.
General federal criminal laws directed to all persons became recognized
as applying equally to Native Americans within Indian Country. See
Federal Power Comm'n v. Tuscarora Indian Nation, 362
U.S.
99, 116-17, 80 S.Ct. 543, 4 L.Ed.2d 584 (1960); Cohen, supra, at
284-85.
Moreover,
the Indian Country Crimes Act speaks only to the "general laws of
the
United States
as to the punishment of offenses committed in any place within the sole
and exclusive jurisdiction of the
United States
. . . ." 18 U.S.C. §1152 (emphasis added). Because situs of
the offense is not an element of any of the statutory violations
committed by the defendants, none of the defendants claim the crimes for
which they were convicted were enclave laws. Thus, because the offenses
do not fall within the Indian Country Crimes Act, they are not subject
to the Act's exception relating to crimes committed in Indian Country by
one Indian against another. 18
The
Indian-against-Indian exception contained in the Indian Country Crimes
Act manifested, as Cohen observes, "a broad respect for tribal
sovereignty, particularly in matters affecting only Indians."
Cohen, supra, at 290 (citing Quiver, 241
U.S.
602, 36 S.Ct. 699, 60 L.Ed. 1196, and Crow Dog, 109
U.S.
556, 3 S.Ct. 396, 27 L.Ed. 1030). However, the application of general
federal laws to Native Americans in this case does not implicate the
tribal concerns of sovereignty addressed by the Indian Country Crimes
Act exception. There may be other federal-law prosecutions that would
implicate important tribal interests. However, we fail to see how tribal
interests are paramount to the federal interests implicated in the
various criminal charges involved here. Although the defendants are
Native Americans, and their conduct took place within Indian country,
tribal interests do not outweigh the federal interest in prohibiting
offenses such as mail fraud, money laundering, bribery, and conspiracy.
Moreover, Indian tribes are not totally independent of the
United States
. Federal jurisdiction over the offenses committed here is imperative
for the protection of all Native Americans who are
U.S.
citizens living on Indian reservations.
Public
Law 280
The
alternative jurisdictional argument raised by the defendants may be
summarily rejected. Defendants assert that even if general federal laws
are applicable, under Public Law 280, the federal government has
surrendered to the State of
Minnesota
its criminal jurisdiction over all federal offenses committed on Indian
lands. As the defendants acknowledge, this court has rejected this exact
argument in two recent cases: Stone, 112 F.3d 971, and United
States v. Pemberton, 121 F.3d 1157 (8th Cir. 1997), cert. denied,
--
U.S.
--, 118 S.Ct. 1046, 140 L.Ed.2d 111 (1998). As this court observed in Pemberton:
"Crimes of general applicability--that is, actions that Congress
has declared illegal regardless of where they occur--are not affected by
the enactment of Public Law 280 and remain within the subject-matter
jurisdiction of the federal courts." 121 F.3d at 1164.
III. Jurisdictional Challenge
to the Election Conspiracy
Clark
and Rawley do not challenge the sufficiency of the evidence to sustain
their convictions relating to the election fraud, and the evidence of
their guilt is overwhelming. However, both Clark and Rawley vigorously
assert that the exercise of federal criminal jurisdiction over the
conspiracy to commit election fraud is not authorized by Congress and
seriously impinges upon tribal sovereignty. As such, they urge the
election was within the exclusive jurisdiction of the
Tribal Court
. They conclude that under the principles enumerated in Quiver
and Crow Dog, federal courts lack jurisdiction over matters such
as tribal elections that relate to the internal affairs of the tribe.
The
district court held that the conspiracy law under §241 is a law of
general applicability because the situs of the offense--in this case,
voter fraud--is in no way an element of the crime. In other words, the
district court's rationale was that Congress has declared any conspiracy
which violates federally protected rights a crime regardless of
where the offense occurs. And, as we have previously discussed, laws of
general applicability "apply" with equal force when committed
by a Native American on a reservation. See Part II, supra.
Clark
and Rawley also challenge federal jurisdiction on the ground that the
tribe exists as an independent nation over which the federal government
has no jurisdiction concerning a local tribal election. There is no
question that Indian tribes are quasi-sovereigns and enjoy rights and
privileges of self-government and local culture. However, the Supreme
Court observed early on in Talton v. Mayes that while Indian
Nations are "possessed of . . . attributes of local self
government, when exercising their tribal functions, all such rights are
subject to the supreme legislative authority of the United States."
163
U.S.
376, 384, 16 S.Ct. 986, 41 L.Ed. 196 (1896) (citing Cherokee Nation
v. Southern Kansas Ry. Co., 135
U.S.
641, 10 S.Ct. 965, 34 L.Ed. 295 (1890)). In this regard, tribal
sovereignty "exists only at the sufferance of Congress and is
subject to complete defeasance." Wheeler, 435
U.S.
at 323, 98 S.Ct. 1079. The Supreme Court emphasized the dominance of
congressional authority over Indian tribes in Santa Clara Pueblo v.
Martinez, 436 U.S. 49, 98 S.Ct. 1670, 56 L.Ed.2d 106 (1978),
observing: "As the Court in Talton recognized . . . Congress
has plenary authority to limit, modify or eliminate the powers of local
self-government which the tribes otherwise possess." 436 U.S. at
56, 98 S.Ct. 1670 (also citing United States v. Kagama, 118 U.S.
375, 379-81, 383-84, 6 S.Ct. 1109, 30 L.Ed. 228 (1886); Cherokee
Nation v. Hitchcock, 187 U.S. 294, 305-07, 23 S.Ct. 115, 47 L.Ed.
183 (1902)). The Santa Clara court went on to emphasize that the passage
of the Indian Civil Rights Act, 25 U.S.C. §§1301-03 19
("ICRA"), serves as an example of that authority. The Court
summed up this legislation by observing: "In 25 U.S.C. §1302,
Congress acted to modify the effect of Talton and its progeny by
imposing certain restrictions upon tribal governments similar, but not
identical, to those contained in the Bill of Rights and the Fourteenth
Amendment." 20 436 U.S. at
57, 98 S.Ct. 1670.
The
ICRA was passed with the declared purpose "to secur[e] for the
American Indian the broad constitutional rights afforded to other
Americans."
Santa Clara
, 436
U.S.
at 61, 98 S.Ct. 1670 (quoting S.Rep. No. 841, 90th Cong. 1st Sess. 5-6
(1967)). The passage of the ICRA resulted from congressional concern in
the early 1960s that individual Native Americans had no constitutional
rights under their tribal governments. See Alvin J. Ziontz, In
Defense of Tribal Sovereignty: An Analysis of Judicial Error in
Construction of the Indian Civil Rights Act, 20 S.D. L.Rev. 1, 1-2
(1975). The congressional subcommittee first considering the legislation
"heard a great deal of testimony from Indians complaining of
violations of constitutional rights by the governing bodies of Indian
tribes."
Id.
at 2. These allegations included incidents such as harassment and
detention of political dissidents, corruption of tribal courts,
and--notably--election fraud. See Joseph de Raismes, The
Indian Civil Rights Act of 1968 and the Pursuit of Responsible Tribal
Self-Government, 20 S.D. L.Rev. 59, 73 (1975). Most commentators
agree that in enacting the ICRA, Congress "sought to achieve a
balance between individual rights of tribal members on the one hand and
preservation of tribal autonomy, Indian customs, law and culture on the
other." Ziontz, supra, at 2; see also Cohen, supra,
at 666-69. Initially, a bill was contemplated to impose the same
limitations on tribes as were imposed on the federal government in
regard to civil rights. Cohen, supra, at 666. The end result was
an act with only some of those restrictions.
Id.
From this reading of the legislative history, it is clear that Congress
was sensitive to the question of tribal sovereignty when drafting the
ICRA.
Section
241 prohibits a conspiracy to deny any person the enjoyment of a right
or privilege secured by the Constitution or laws of the
United States
. It is the government's position that the conspiracy under §241
was specifically directed to a law of the
United States
, i.e., violation of §1302. of the ICRA. Under this theory, we must
first address whether §241 specifically applies to fraud in a tribal
election.
Citing
an eighty-year-old case, United States v. Bathgate, 246
U.S.
220, 225, 38 S.Ct. 269, 62 L.Ed. 676 (1918), the defendants argue that
federal election fraud statutes do not extend to fraud in a general
state election, and therefore should not apply to a tribal election
either. But since the Bathgate decision, the Supreme Court has
construed §241 to include all rights or privileges secured by
the Constitution or laws of the
United States
. See
United States
v. Guest, 383
U.S.
745, 753, 86 S.Ct. 1170, 16 L.Ed.2d 239 (1966) (Section 241 protects
equal protection rights under the Fourteenth Amendment.). More
specifically, the court in Anderson v. United States, 417 U.S.
211, 226, 94 S.Ct. 2253, 41 L.Ed.2d 20 (1974) stated that "[t]he
specific intent required under §241 is not the intent to change the
outcome of a federal election, but rather the intent to have false votes
cast. . . ." Subsequent to
Anderson
, the application of §241 to fraud in non-federal elections has
been endorsed by this circuit, as well as several others. See
United States
v. Townsley, 843 F.2d 1070, 1080 (8th Cir. 1988), vacated in part
on other grounds, 856 F.2d 1189 (8th Cir. 1988); United States v.
Howard, 774 F.2d 838, 841 (7th Cir. 1985); United States v.
Stollings, 501 F.2d 954, 955 (4th Cir. 1974).
In
Townsley, our court specifically held that even though the
objective of the conspiracy was to influence a local rather than federal
election, that did not defeat the specific intent necessary to establish
a conspiracy against the rights of citizens under §241. 843 F.2d at
1080. The court stated: "Regardless of what our view might have
been were we writing on a clean slate, it is now clear that '[t]he
specific intent required under §241 is not the intent to change the
outcome of a federal election, but rather the intent to have false votes
cast. . . .' "
Id.
(quoting Anderson, 417
U.S.
at 226, 94 S.Ct. 2253). In this case, Rawley and Clark were accused of
conspiring to fraudulently cast ballots in a tribal election. Under
Anderson
, as long as the purpose of the conspiracy was the violation of a
federal law, the conspiracy is unlawful under federal law. See
417
U.S.
at 226, 94 S.Ct. 2253.
The
specific question we must then address is whether the ICRA, as a law of
the
United States
, contains a prohibition which allows enforcement of §241 under general
principles of conspiracy law. The ICRA specifically proscribes a
violation of the Tribe's equal protection laws, as well as other
constitutional rights of the Tribe. See §1302(8). Article XIII
of the Constitution of the Minnesota Chippewa Tribe reads:
All members of
the Minnesota Chippewa Tribe shall be accorded by the governing body
equal rights, equal protection, and equal opportunities to participate
in the economic resources and activities of the Tribe, and no member
shall be denied any of the constitutional rights or guarantees enjoyed
by other citizens of the United States, including but not limited to
freedom of religion and conscience, freedom of speech, the right to
orderly association or assembly, the right to petition for action or the
redress of grievances, and due process of law.
(emphasis added). By direct
incorporation, these rights are now explicitly protected by the ICRA. We
hold they are enforceable under §241, as a general federal law.
In
addressing ballot-box stuffing in federal or state elections, the
Seventh Circuit observed in United States v. Olinger, 759 F.2d
1293, 1303 (7th Cir. 1985):
[T]he right of
suffrage, whether in an election for state or federal office, is one
that qualifies under the Equal Protection Clause of the Fourteenth
Amendment for protection from impairment, "when such impairment
resulted from dilution by a false tally, cf., United States v.
Classic, 313 U.S. 299, 61 S.Ct. 1031, 85 L.Ed. 1368 (1941); or by a
refusal to count votes from arbitrarily selected precincts, cf.,
United States v. Mosley, 238 U.S. 383, 35 S.Ct. 904, 59 L.Ed. 1355
(1915), or by a stuffing of the ballot box, cf., Ex parte Siebold,
100
U.S.
371, 25 L.Ed. 717 (1879);
United States
v. Saylor, 322
U.S.
385, 64 S.Ct. 1101, 88 L.Ed. 1341 (1944)." Baker v. Carr,
369
U.S.
186, 208 and 247-48, 82 S.Ct. 691, 7 L.Ed.2d 663 (1962). This was
bluntly stated in Reynolds v. Sims, 377 U.S. 533, 554-55, 84
S.Ct. 1362, 12 L.Ed.2d 506 (1964): "[T]he Constitution of the
United States protects the right of all qualified citizens to vote, in
state as well as in federal elections. . . . The right to vote can
neither be denied outright, . . . nor diluted by ballotbox stuffing. . .
."
We believe it is clear this
protection against voter fraud has been carried over into the ICRA, as
it is applies to the facts of this case. This court previously
recognized the one-man-one-vote principle applies to tribal elections
through the ICRA. See White Eagle v. One Feather, 478 F.2d 1311,
1314 (8th Cir. 1973); Daly v.
United States
, 483 F.2d 700, 704-05 (8th Cir. 1973); Means v.
Wilson
, 522 F.2d 833, 839 (8th Cir. 1975). 21
The
defendants urge that these cases have all been implicitly overruled by
the
Santa Clara
decision. In
Santa Clara
, a female tribe member brought an action for injunctive and
declaratory relief against the
Pueblo
tribal government, alleging that a
Pueblo
ordinance which denied tribal membership to children of female members
who married outside the tribe was a violation of equal protection under
the ICRA. 436
U.S.
at 52-53, 98 S.Ct. 1670. The Supreme Court found that suits against the
tribe under the ICRA were barred by the tribe's sovereign immunity,
because nothing on the face of the ICRA purported to subject the tribes
to the jurisdiction of federal courts in civil actions for
declaratory or injunctive relief.
Id.
at 58-59, 98 S.Ct. 1670. Additionally, the Court found that the ICRA did
not impliedly authorize a private right of action against the
Pueblo
government.
Id.
at 72, 98 S.Ct. 1670.
There
are several reasons why the
Santa Clara
ruling does not control this case. First, in the case at hand, the
government is asserting jurisdiction under §241, not under the
ICRA. The only reason the ICRA needs to be referenced at all in this
case is to establish that a right to be free from fraud in a tribal
election does indeed exist under the laws of the
United States
. There is nothing in the language of
Santa Clara
to indicate that the rights under the ICRA are nonexistent or in any way
invalid. Instead,
Santa Clara
dealt with how those rights may be enforced, and concluded they could
not be enforced through a private right of action, in a civil
lawsuit. Nothing in
Santa Clara
addresses the
U.S.
government's right or obligation to assume criminal jurisdiction
when one of its laws of generally applicability is violated.
Additionally, tribal immunity is not at issue in the present criminal
case.
Second,
in
Santa Clara
the Court was faced with a challenge to a duly enacted ordinance of the
tribal government. In such a case, the threat to tribal sovereignty is
great because a federal court would be asked to sit in judgment of
legislation enacted by a legitimate tribal government. In this case, the
question is whether jurisdiction can be asserted over the illegitimate, criminal
action of fraud in a tribal election. Unlike
Santa Clara
, there is no challenge to the legitimate actions of the tribe or
its representatives. The charge is directed toward the individual
members of the RTC who conspired to deprive the members of the Band of
their civil rights guaranteed by the ICRA. The Band's right to
self-determination, which the court sought to protect in
Santa Clara
, is not being threatened by ensuring that voters are not
defrauded. In fact, the Band's right to free and open elections is
vindicated by the present criminal action.
Third,
in
Santa Clara
, the Court stressed that tribal courts are available to
vindicate rights created by the ICRA and are the appropriate forums to
do so. 463
U.S.
at 65, 103 S.Ct. 2875. But again, this is stated in the context of a civil
action. In a criminal context--when the entire tribal system
allegedly is controlled by a few corrupt individuals--there is no
effective tribal forum available to protect an individual tribal
member's civil rights.
Finally,
even if jurisdiction in this case was asserted under the ICRA,
Santa Clara
would not be dispositive, because the absence of a private right of
action does not mean absence of criminal jurisdiction.
Rawley argues that "no voter could be a victim of a §241
conspiracy if that voter could not enforce his or her voting
rights under federal law in a civil action in a federal court."
Rawley
Br.
at 28. If by this the defendant means to imply that criminal
jurisdiction cannot exist without a corresponding private right of
action, his premise is incorrect. Courts repeatedly have held that there
is no private right of action under §241, even though the statute
allows federal authorities to pursue criminal charges. See, eg., Cok
v. Cosentino, 876 F.2d 1, 2 (1st Cir. 1989) ("Only the
United States
as prosecutor can bring a complaint under 18 U.S.C. §§241-242 . . .
These statutes do not give rise to a civil action for damages."); Lerch
v. Boyer, 929 F.Supp. 319, 322 (N.D.Ind.1996) (Federal criminal
statute governing conspiracies against civil rights did not provide for
private right of action). There are numerous other criminal statutes
which the courts have found do not imply a private right of action,
including the Securities and Exchange Act, see Central Bank v. First
Interstate Bank, 511 U.S. 164, 190-91, 114 S.Ct. 1439, 128 L.Ed.2d
119 (1994); the Ashurst-Sumners Act governing shipment of prisoner-made
goods in interstate commerce, see McMaster v. Minnesota, 30 F.3d
976, 981-82 (8th Cir. 1994); the federal wire fraud statute, see
Official Publications Inc. v. Kable News Co., 884 F.2d 664, 667 (2d
Cir. 1989); and the Federal Elections Campaign Act, see Cort v. Ash,
422 U.S. 66, 79-84, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975).
For
these reasons, Clark and Rawley cannot rely on the
Santa Clara
decision to support their argument that federal jurisdiction under §241
cannot be asserted. The decision regarding private rights of
action brought under the ICRA against a tribal government does not
address the question of criminal jurisdiction asserted in this case.
In
Stone, this court recently recognized that tribal sovereignty is
"necessarily limited" and "must not conflict with the . .
. overriding sovereignty of the
United States
." 112 F.3d at 974 (quoting United States v. Sohappy, 770
F.2d 816, 819 (9th Cir. 1985)). "Federal laws of general
applicability [such as §241] 'are applicable to the Indian unless there
exists some treaty right which exempts the Indian from the operation of
the particular statutes in question.' "
Id.
(quoting Burns, 529 F.2d at 117). No such treaty right--to be
free to conduct fraudulent elections against their people--is asserted
here by the defendants.
Contrary
to the Clark and Ramsey's argument, we find there is no reason why
federal criminal jurisdiction over election fraud would work to
undermine the sovereignty of the tribe or its political integrity.
First, no tribal custom or tradition is being threatened by the
enforcement of criminal conspiracy laws. There is no tribal custom or
tradition of the Band of fraudulently using the election system to
maintain positions of power for a few corrupt individuals.
Second,
as the Supreme Court stated in
Santa Clara
, tribal courts are the preferable forum to resolve most issues
arising out of the rights granted by the ICRA. 436
U.S.
at 65-66, 98 S.Ct. 1670. This allows legitimate tribal governments to
shape their own internal policy and assert their right to
self-determination, and at the same time provides individual Native
Americans a forum to air their grievances. However, tribal members are not
able to practice self-determination when, as is alleged here, a few
corrupt individuals effectively control the entire tribal system. No
purpose of tribal autonomy is served by allowing a corrupt,
unrepresentative system to continue unabated.
Finally,
it is relevant to note that tribal governments are dependent
sovereigns--not independent foreign ones. As part of this dependent
status, the
U.S.
government serves as a trustee and has a direct responsibility as a
trustee to protect the civil rights granted by Congress to the Native
Americans living on the reservations. We believe failure of the
United States
to assert criminal jurisdiction over activity on a reservation
when the tribal government no longer operates legitimately would be an
abrogation of the
U.S.
government's trustee relationship with tribes such as the Chippewa. We
thus conclude that Clark and Rawley may be prosecuted in federal court
under §241 because such conspiracy encompassed a violation of the ICRA,
a law of the
United States
.
IV. Defendants' Other
Challenges
A.
Joinder and Severance
Before
trial, Clark and Wadena 22 moved to
sever Counts 1 through 28 (the nonelection counts) from Counts 29
through 44 (the election counts), alleging the two groups involved
separate and unrelated acts and transactions and were improperly joined.
The defendants also argued they would be prejudiced by the joinder of
the offenses because during trial, such joinder would allow the
introduction of evidence that is not relevant to some of the
conspiracies. For example, the defendants asserted that evidence related
to the election fraud conspiracy is not relevant to the conspiracies
involving the Casino or the Commissions. The government asserted joinder
was proper, alleging Clark, Rawley, and Wadena joined in multiple
conspiracies to misapply tribal funds for their personal use.
Following
a hearing on the defendants' pre-trial motion for severance, the
district court referred the matter to a federal magistrate judge for a
report and recommendation. In his report and recommendation, the
magistrate judge concluded that on the face of the Indictment, the
government did not allege a "single, common purpose connecting the
election fraud allegations to the casino and fishing commission
allegations."
United States
v. Wadena, Crim. No. 3-95-102 (D.Minn. Jan. 24, 1996)
(magistrate judge's report and recommendation on defendants' pretrial
motions). The magistrate judge recommended that the district court sever
Counts 1 through 28 from Counts 29 through 44.
Id.
The
district court 23 disagreed,
concluding the Indictment alleged three conspiracies that were a part of
a series of acts or transactions, and joinder was proper.
United States
v. Wadena, No. 3-95-102 (D. Minn. April 11, 1996) (order
adopting portions of magistrate judge's report and recommendation). The
court also noted that although "a joint trial may result in
evidence being admitted against one defendant that would otherwise be
irrelevant in the trial of a codefendant, the Court finds that any
prejudice that may result may be avoided through limiting instructions
to the jury."
Id.
The district court denied the defendants' motion to sever, finding
severance was not warranted.
Id.
During trial, the district court continued to deny defendants' motions
to sever.
In
the present appeal, Clark and Wadena dispute the district court's
joinder of Counts 1 through 28 with Counts 29 through 44. Alternatively,
they dispute the district court's denial of their motion to sever the
counts. We address the defendants' claims separately.
1.
Joinder under Federal Rule of Criminal Procedure 8
Federal
Rule of Criminal Procedure 8 establishes the requirements for joinder of
offenses or defendants in the same indictment. 24 Under Rule
8(b), defendants are properly joined "if they are alleged to have
participated in the same act or transaction or in the same series of
acts or transactions constituting an offense or offenses."
Fed.R.Crim.P. 8(b). Generally, the "same series of acts or
transactions" means acts or transactions that are pursuant to a
common plan or a common scheme. See
United States
v. Jones, 880 F.2d 55, 61 (8th Cir. 1989). "[T]he defendants
need not be charged in each count." Fed.R.Crim.P. 8(b). An
indictment must reveal on its face a proper basis for joinder. See
United States
v. Bledsoe, 674 F.2d 647, 655 (8th Cir. 1982).
This
Court reviews de novo claims of misjoinder. An error involving
misjoinder " 'affects substantial rights' and requires reversal
only if the misjoinder results in actual prejudice because it 'had
substantial and injurious effect or influence in determining the jury's
verdict.' " United States v. Lane, 474
U.S.
438, 449, 106 S.Ct. 725, 88 L.Ed.2d 814 (1986) (quoting Kotteakos v.
United States, 328
U.S.
750, 776, 66 S.Ct. 1239, 90 L.Ed. 1557 (1946)).
a.
Propriety of Joinder with Respect to
Clark
Clark
asserts joinder under Rule 8(b) was
improper because the Indictment alleges three separate conspiracies as
opposed to one overall scheme.
Clark
contends the government links the three conspiracies solely through an
"overlap in personnel" and a "common objective of making
money," and such connections are an insufficient basis for joinder.
See Clark
Br.
at 39-40. Clark also claims the government's assertions that Clark,
Rawley, and Wadena engaged in the non-election conspiracies to misapply
tribal funds, and
Clark
and Rawley engaged in the election conspiracy to further that objective,
are "unsupported by the indictment and factually impossible."
Id.
at 40-41. This is because
Clark
ran unopposed in the 1994 election, and according to the Indictment, the
non-election conspiracies were complete in March 1994--three months
before the June 1994 election.
We
disagree with
Clark
's contentions. In this case, the government charged
Clark
with all of the offenses relating to both the non-election conspiracies
and the election conspiracy. The government asserted
Clark
joined in the non-election conspiracies to misapply tribal funds for his
personal gain. The government also contended
Clark
joined in the election conspiracy to ensure his and others' elections
and his continued access to tribal funds. On its face, the Indictment
alleges more than a mere overlap in personnel and the common objective
of making money. We deem it clear that the Indictment alleges
Clark
participated in a series of acts or transactions with the sole purpose
of furthering a common scheme of using his and others' positions in
tribal government to access tribal funds and misapply those funds for
his personal gain. Thus, joinder of all counts was proper under Federal
Rule of Criminal Procedure 8(b). 25
Moreover,
were we to find joinder improper with respect to
Clark
, such error would not require reversal. See Lane, 474
U.S.
at 449, 106 S.Ct. 725.
Clark
contends reversal is required because he has made a showing that there
was a misjoinder that had a substantial and injurious effect on the
jury's verdict. Specifically, Clark claims the government used a
"regrettable parade of cumulative witnesses," most of whom
merely testified that they did not vote in the last tribal election, to
show his bad character and impermissibly influence the jury's
determination of guilt with respect to the non-election charges. See
Clark
Br.
at 42.
We
disagree with
Clark
's contentions for several reasons. First, during trial, the government
presented evidence of the charged conspiracies in three discrete phases.
Second, although the government presented numerous witnesses who
testified they did not vote in the last tribal election, it is difficult
to see how this testimony, which was specific to the election
conspiracy, influenced the jury's findings with respect to the
construction conspiracy and Commissions conspiracy. Third, the district
court instructed the jury that. each defendant was entitled to be
treated separately, and the jury must return a separate verdict for each
defendant and for each crime charged. See, e.g., Jury Inst. 12, United
States v. Wadena, No. 3-95-102 (D. Minn. June 24, 1996). The jury
ultimately acquitted one defendant of all charges and acquitted
Clark
and Rawley of one charge each. Finally, the government presented potent
evidence of
Clark
's guilt of the charges for which he was convicted. In sum, we conclude
that any alleged misjoinder did not have a substantial and injurious
effect or influence on the jury's verdict with respect to
Clark
. See Lane, 474
U.S.
at 449, 106 S.Ct. 725.
b.
Propriety of Joinder with Respect to Wadena
Like
Clark
, Wadena argues joinder in this case was improper. In particular, Wadena
claims that because the government did not allege that he was in any way
involved in the election conspiracy, he should not have been tried with
the other defendants who were alleged to have participated in all three
conspiracies. 26 For the
reasons discussed below, we conclude that even if misjoinder occurred
with respect to Wadena, any such error did not have a substantial and
injurious effect or influence on the jury's verdict, and reversal is not
required.
Wadena
alleges the government turned his trial into an "election fraud
circus" by calling 136 election fraud witnesses to the stand,
introducing nearly 600 election fraud exhibits, and stating in its
closing argument that all the defendants were guilty of
"controlling the ballot box in order to control the cash-box."
See Wadena
Br.
at 22-23. Wadena asserts he suffered "overwhelming" prejudice
in this "politically charged" trial.
Id.
at 23.
We
disagree. As noted above, the government presented evidence relating to
the three conspiracies in three distinct phases. When the government
referred to the election conspiracy in its opening statement,
case-in-chief, and closing argument, it specifically referred to the
involvement of Clark and Rawley in that conspiracy. While Wadena
correctly asserts that the government presented numerous witnesses who
testified in the election conspiracy phase of the trial, as we stated
above with respect to
Clark
, the majority of those witnesses simply testified they did not actually
vote in the 1994 election even though ballots were cast in their names. 27 Further, a
large portion of the exhibits presented during the election conspiracy
phase of the trial consisted solely of various absentee ballots.
Overall, we do not believe the evidence presented in relation to the
election conspiracy caused the jury to convict Wadena of the charges
arising from the other two conspiracies.
Wadena
also alleges he suffered prejudice because the district court failed to
instruct the jury not to consider the extensive election fraud evidence
against him. See Wadena
Br.
at 24, n. 15. This argument is specious. Perhaps the district court did
not specifically tell the jury not to consider any election fraud
evidence against Wadena. However, in essence the district court told the
jury to do the same thing when, as noted above, it admonished the jury
to treat each defendant separately and return a separate verdict for
each defendant and for each crime charged. Finally, the government
presented strong evidence of Wadena's guilt in the offenses relating to
the construction conspiracy and the Commissions conspiracy. From our de
novo review of the record, we conclude that any misjoinder with
respect to Wadena was harmless, and reversal is not required. See
Lane, 474
U.S.
at 449, 106 S.Ct. 725.
2.
Severance under Rule 14
Federal
Rule of Criminal Procedure 14 allows the trial court to order severance
even if joinder was proper under Rule 8(b). 28 The
decision to sever is within the sound discretion of the trial judge. See
Jones, 880 F.2d at 61 (citing United States v. Adkins, 842
F.2d 210, 212 (8th Cir. 1988)). "We reverse a denial of a motion to
sever only when the defendant shows an abuse of discretion that resulted
in severe prejudice."
United States
v. Crouch, 46 F.3d 871, 875 (8th Cir.1995). "Severe
prejudice occurs when a defendant is deprived of an appreciable chance
for an acquittal, a chance that [the defendant] would have had in a
severed trial."
United States
v. Koskela, 86 F.3d 122, 126 (8th Cir.1996).
a.
Propriety of the Refusal to Sever with Respect to
Clark
Clark
contends the district court's refusal to
sever the offenses and the defendants was a failure to follow Rule 14
and constitutes an abuse of its discretion.
Clark
argues this refusal to sever the election counts from the non-election
counts severely prejudiced him. In support of this assertion,
Clark
argues the trial was complex and lengthy, and the government's evidence
relating to the election conspiracy overwhelmed and confused the jury,
prevented the jury from compartmentalizing the evidence, and tainted its
verdict. He argues the district court's jury instructions failed to
"sufficiently negate the harmful error in this case." Clark
Br.
at 44.
From
our review of the record, and for the reasons discussed above with
respect to joinder, we conclude the district court's refusal to sever
did not deprive
Clark
of an appreciable chance of acquittal. Therefore, the district court's
refusal to sever was within its discretion. See Crouch, 46 F.3d
at 875; Koskela, 86 F.3d at 126.
b.
Propriety of Refusal to Sever with Respect to Wadena
Wadena
contends that when the district court repeatedly refused to sever his
trial from that of the other defendants, it abandoned its duty under
Rule 14 and abused its discretion. In support of this argument, Wadena
makes essentially the same contentions he made with respect to joinder.
From our review of the record, and for the reasons discussed above with
respect to joinder, we conclude the district court's refusal to grant
Wadena's Rule 14 motion to sever did not cause him severe prejudice. See
Crouch, 46 F.3d at 875; Koskela, 86 F.3d at 126.
B.
Alleged Misuse of Civil IRS Audit
Clark
and Wadena contend that in late 1993, the IRS conducted a civil audit of
Northern with the express and undisclosed purpose of gathering
information for a criminal investigation. Specifically, they allege the
government's chief investigator in this case, Agent Michael Nelson of
the IRS' Criminal Investigation Division ("CID"), had
knowledge that IRS auditors were preparing to conduct a civil audit at
the time the government was conducting a criminal investigation into the
same matters to be examined by the civil audit. As supporting evidence
of this contention, Clark and Wadena assert that in early November 1993,
before the IRS formally notified defendants of the upcoming civil audit,
Agent Nelson asked Greg Nygren, an IRS representative working on the
civil audit, to fax him a copy of a past tax return of Wadena's. The
civil audit was not referred to the CID until 1994.
Clark
and Wadena complain the IRS's simultaneous investigations violated their
Fourth and Fifth Amendment rights. During trial, Clark and Wadena made
various motions to suppress the evidence obtained from the civil audit
and any evidence derived therefrom. The district court denied the
motions. On appeal, Clark and Wadena claim the district court erred in
denying their motions. We review for clear error the facts supporting a
district court's denial of a motion to suppress. See
United States
v. Cunningham, 133 F.3d 1070, 1072 (8th Cir. 1998) (citing Ornelas
v. United States, 517
U.S.
690, 116 S.Ct. 1657, 1663, 134 L.Ed.2d 911 (1996)), cert. denied by,
--
U.S.
--, 118 S.Ct. 1823, 140 L.Ed.2d 960 (1998). We review de novo the
legal conclusions based upon those facts.
Id.
"[T]he
IRS may not develop a criminal investigation under the auspices of a
civil audit." United States v. Grunewald [93-1 USTC ¶50,122],
987 F.2d 531, 534 (8th Cir. 1993).
Evidence
obtained in the course of a criminal investigation, where the defendant
has not been apprised of the nature of the investigation, may be
suppressed only if the defendant establishes that: (1) the IRS
had firm indications of fraud by the defendant, (2) there is clear and
convincing evidence that the IRS affirmatively and intentionally misled
the defendant, and (3) the IRS's conduct resulted in prejudice to
defendant's constitutional rights.
Id.
(citing United States v. Meier [79-2 USTC ¶9697], 607 F.2d 215,
217 (8th Cir. 1979) and United States v. Tweel, 550 F.2d 297, 299
(5th Cir. 1977)) (emphasis added). Although Clark and Wadena allude to
the three Grunewald factors, they do not directly address the
factors or acknowledge their burden to establish the existence of those
factors. See Wadena
Br.
at 10-19; Clark
Br.
at 44-46. Instead, they focus their arguments on Agent Nelson's
knowledge of and alleged direction of the simultaneous criminal
investigation and civil audit, as well as his alleged failure to refer
the case to the CID. For the reasons discussed below, we conclude the
defendants have not shown the existence of the Grunewald factors,
and the IRS's investigations did not violate their Fourth and Fifth
Amendment rights.
An
IRS auditor conducting a civil audit who detects a firm indication of
fraud must suspend the audit and refer the case for evaluation by the
CID. See Grunewald [93-1 USTC ¶50,122], 987 F.2d at 534 (citing Audit
Guidelines for Examiners, CCH Internal Revenue Manual (Audit), §§4231,
4564.21, 9322.1). A firm indication of fraud is different than an
initial indication that fraud exists, and it is more than a mere
suspicion of fraud. See Groder v. United States [87-1 USTC ¶9259],
816 F.2d 139, 143 (4th Cir. 1987). Whether Nygren (the civil auditor)
had a firm indication of fraud and failed to suspend the civil audit is
a question of fact we review for clear error. See Cunningham, 133
F.3d at 1072. Clark and Wadena do not present any evidence showing that
Nygren had a firm indication of fraud and failed to suspend the civil
audit of Northern. Further, Nygren specifically denied he suspected any
fraud when he mailed the audit letter to Northern. Our review of
Nygren's trial testimony pertaining to the simultaneous investigations
likewise does not indicate Nygren had a firm indication of fraud and
failed to refer the case to the CID. Thus, neither Clark nor Wadena have
established the first Grunewald factor.
"[T]he
mere failure of an IRS agent to inform a defendant that information
developed in an audit may result in a further criminal investigation
does not indicate affirmative and intentional deceit by the IRS." Grunewald,
987 F.2d at 534. Clark and Wadena do not present clear and convincing
evidence that the IRS affirmatively and intentionally misled the
defendants by conducting the civil audit of Northern with the express
purpose of obtaining records for the criminal investigation. Indeed,
defendants point to nothing more than knowledge by Nygren that Agent
Nelson was conducting a criminal investigation. Neither Clark nor Wadena
have established the second Grunewald factor. Given Clark's and
Wadena's failure to establish the first two Grunewald factors, we
need not address the third Grunewald factor. In sum, we conclude
the district court did not err when it denied
Clark
's and Wadena's various motions to suppress the evidence obtained from
the civil audit and any evidence derived therefrom.
C.
Count 19 as a Cognizable Offense
As
noted above, Count 19 of the Indictment charged Clark, Rawley, and
Wadena with conspiring to misapply tribal funds, in violation of 18
U.S.C. §1163. The object of this conspiracy was to obtain tribal funds
in the form of excessive payments for serving on the Commissions. The
overt acts undertaken in furtherance of this conspiracy included the
creation of the Commissions and the defendants' receipt of various
commission payments. The jury convicted all three defendants of this
charge.
Before
trial, the defendants moved to dismiss Count 19. The district court
denied their motions. In the present appeal, Clark and Wadena contend
the district court erred in not dismissing Count 19, because the count
fails to allege a cognizable offense. 29 They argue
that all of the overt acts alleged to have been committed in Count 19
were official actions taken pursuant to their capacities as members of
the RTC, and the RTC as an entity or governmental body cannot conspire
with itself. Clark and Wadena base this contention on Runs After v.
United States, 766 F.2d 347, 354 (8th Cir. 1985), which they claim
controls this case.
In
Runs After, several members of the Cheyenne River Sioux
challenged the validity of two resolutions passed by the Cheyenne River
Sioux Reservation Tribal Council (Tribal Council). 766 F.2d at 349. The
two resolutions, passed by a vote of the Tribal Council, barred certain
tribal members from running in future tribal elections.
Id.
The plaintiffs challenged the resolutions under various federal civil
rights statutes. The court rejected the plaintiffs' challenges,
concluding, in part, that "individual members of the Tribal
Council, acting in their official capacity as tribal council members,
cannot conspire when they act together with other tribal council members
in taking official action on behalf of the Tribal Council." Id.
at 354 (citing Herrmann v. Moore, 576 F.2d 453, 459 (2d Cir.
1978) (stating there is no conspiracy if the conspiratorial conduct is
essentially a single act by a single corporation acting exclusively
through its own directors, officers, and employees, each acting within
the scope of his or her employment)).
Runs
After is a civil suit
involving a dispute between tribal members. It is not a criminal case
alleging violations of federal criminal law by a tribal entity or by
members of a tribal entity. More importantly, Runs After involved
the conduct of tribal council members regarding two official acts
of the entire tribal council--the passing of two resolutions. In the
present case, it appears there was an official act of the RTC to create
the Commissions. It also appears there was an official act by the RTC to
approve a commission payment range for each member. However, these are
not the only overt acts alleged by Count 19. The count also alleges
numerous overt acts in which Clark, Rawley, and Wadena, when they wanted
money for purchases, debts, etc., individually directed the tribe to
issue them checks labeled as commission payments. These individual
payments were not collectively approved or issued by the RTC. For these
reasons, we conclude Runs After is distinguishable from this
case. As Clark and Wadena provide no other support for this argument, we
conclude Count 19 alleged a cognizable offense, and the district court
did not err when it denied their motions to dismiss the count.
D.
Interstate Nexus in Money Laundering Counts
The
Indictment charged Clark and Wadena with various counts of money
laundering, in violation of 18 U.S.C. §1957. At the close of the
government's case, Clark and Wadena filed motions for judgment of
acquittal on these counts pursuant to Federal Rule of Criminal Procedure
Rule 29. They argued that during its case-in-chief, the government
offered no evidence to prove the element of an interstate commerce
nexus, which is an essential element of any §1957 violation. The
district court denied their motions.
In
the present appeal, Clark and Wadena contend the district court erred in
denying their Rule 29 motions. In response, the government claims the
defendants waived their right to challenge the denial of their motion
when they failed to renew the motion at the close of evidence, and even
if this court concludes the defendants did not waive their right to
appeal the denial of their motion, the government nonetheless presented
sufficient evidence to prove the element of an interstate commerce
nexus. We address the government's waiver argument first.
Generally,
a defendant waives the right to appeal a denial of a motion for
acquittal if the defendant fails to renew the motion at the close of all
of the evidence. See Edwards v.
United States
, 333 F.2d 588, 589 (8th Cir. 1964). Such a waiver limits the scope
of appellate review to a determination of whether there was plain error
or a defect affecting the substantial rights of the defendant. See
id. It appears neither Wadena nor Clark renewed their motion for
acquittal at the close of the evidence. Thus, it is likely they waived
their right to appeal the denial of the motion. See id.
Nonetheless, because the government's alleged failure to prove an
essential element of the money laundering offenses would be a defect
affecting the substantial rights of Clark and Wadena, we will address
the issue of whether the government presented sufficient evidence to
prove the element of an interstate commerce nexus.
It
appears this court has not determined the quantum of evidence necessary
to prove the element of an interstate commerce nexus in §1957 cases.
Other circuits, however, have held evidence that the transaction in
question was in interstate commerce or utilized the instrumentalities of
interstate commerce is sufficient proof of the element of an interstate
commerce nexus. See, e.g., United States v. Kunzman, 54 F.3d
1522, 1527 (10th Cir. 1995) (concluding evidence of checks drawn on
federally-insured banks and services purchased from an out-of-state
company is sufficient to support finding of interstate commerce nexus); United
States v. Peay, 972 F.2d 71, 74-75 (4th Cir. 1992) (concluding
evidence that funds were deposited and withdrawn from an FDIC-insured
institution provided sufficient proof of an interstate commerce nexus).
The government presented evidence that the checks referenced in Counts
10 through 18 were all deposited in either the First National Bank of
Detroit Lakes
,
Minnesota
or the State Bank of Winger,
Minnesota
. As these institutions are FDIC-insured, the government's evidence that
these checks were deposited into these institutions is sufficient proof
of an interstate commerce nexus. See, e.g., Kunzman, 54 F.3d at
1527. Thus, the district court did not err when it denied
Clark
's and Wadena's Rule 29 motions.
E.
Admission of Government's Exhibit 97
During
trial, the government presented exhibit 97 for admission into evidence.
Exhibit 97 consisted of a Northern check numbered 3657 in the amount of
$15,000, signed by
Clark
, and made payable to Jerry Rawley. The exhibit also consisted of the
check's register stub bearing the number 3657, the name Jerry Rawley,
and the amount of $15,000. Significantly, the stub also contained a
partially-erased pencil notation "gift." Before trial, Rawley
raised three objections to the admission of the check stub portion of
the exhibit into evidence: (1) failure to authenticate; (2) hearsay; and
(3) denial of his Sixth Amendment right to confront witnesses against
him. The district court admitted exhibit 97 into evidence.
On
appeal, Rawley contends we must reverse his convictions of Counts 1, 3,
and 4, because the district court erred in admitting exhibit 97. We
review for abuse of discretion the district court's decision that
exhibit 97 was authenticated and did not constitute inadmissible
hearsay. See
United States
v. Henneberry, 719 F.2d 941, 948 (8th Cir. 1983);
United States
v.
Jackson
, 67 F.3d 1359, 1364 (8th Cir. 1995). We review de novo the
district court's decision that admission of exhibit 97 did not violate
Rawley's Sixth Amendment rights. See
United States
v. Johnson, 56 F.3d 947, 953 (8th Cir. 1995).
We
address Rawley's authentication argument first. A party authenticates a
document by presenting evidence sufficient to support a finding that the
document is what the party claims it to be. See Fed.R.Evid.
901(a). The party authenticating a document need only prove a rational
basis for that party's claim that the document is what it is asserted to
be. See
United States
v. Long, 857 F.2d 436, 442 (8th Cir. 1988) (citing United States
v. Natale, 526 F.2d 1160, 1173 (2d Cir. 1975)). "This may be
done with circumstantial evidence."
Id.
The government offered sufficient evidence to authenticate exhibit 97.
Thus, the district court did not abuse its discretion when it decided
the government properly authenticated exhibit 97.
Rawley's
next contention is that the district court abused its discretion when it
concluded the partially-erased word "gift" on the check
register was not hearsay. A written statement that would ordinarily be
defined as hearsay is not hearsay if the statement is offered against a
party, and it is a statement of a co-conspirator of that party made
during the course of and in furtherance of a conspiracy. See
Fed.R.Evid. 801(d)(2)(E). The "gift" notation falls within the
scope of Federal Rule of Evidence 801(d)(2)(E). Therefore, we conclude
the district court did not abuse its discretion when it decided the
statement "gift" is not hearsay. Additionally, after a de
novo review of Rawley's Sixth Amendment challenge, we conclude it is
without merit.
F.
Jury Instructions
The
defendants allege four errors relating to the district court's
instructions to the jury. First, Clark 30 and Wadena
allege the district court invaded the province of the jury by
instructing the jury that the government had already proven the
essential elements of two charged offenses: theft or bribery concerning
programs receiving federal funds, in violation of 18 U.S.C. §666 and
misapplication of tribal funds, in violation of 18 U.S.C. §1163.
Second, Clark and Wadena claim the district court deprived them of due
process and a fair trial when it failed to instruct the jury regarding
the required intent of a §666 violation and a §1163 violation. Third,
Rawley contends the district court erred in submitting a jury
instruction relating to
Minnesota
notary law. Finally, Rawley contends the district court erred when it
refused to provide the jury with a theory of defense instruction he
requested. We address these arguments in turn.
1.
Instructions Regarding Essential Elements of Offenses
In
jury instruction 29, the district court cited to the jury pertinent
aspects of 18 U.S.C. §1163, including the section's definition of the
term "Indian tribal organization." The court then stated
"[t]he White Earth Band of the Minnesota Chippewa Tribe is an
Indian tribal organization." Jury Inst. 29,
United States
v. Wadena, No. 3-95-102 (D. Minn. June 24, 1996). In jury
instruction 33, the district court listed the elements of an 18 U.S.C.
§666 violation. One element of a §666 offense is that the accused must
be an agent of an Indian tribal government or any agency thereof.
18 U.S.C. §666 (emphasis added). In jury instruction 33, the court told
the jury it must find "that during the time period alleged in each
count the defendant was an agent of the White Earth Band of Chippewa
Indians." Jury Inst. 33,
United States
v. Wadena, No. 3-95-102 (D. Minn. June 24, 1996). Clark and
Wadena assert that whether the Band was an Indian tribal organization
under §1163, and whether the Band was an Indian tribal government under
§666, were questions for the jury, and the district court violated
their Fifth and Sixth Amendment rights by instructing the jury that
these essential elements of the §1163 and §666 offenses had already
been proven.
A
court may err when it instructs a jury that a fact essential to a
defendant's conviction has already been established. See Sullivan v.
Louisiana
, 508
U.S.
275, 277, 113 S.Ct. 2078, 124 L.Ed.2d 182 (1993). However, an error of
this type is subject to harmless error review. See
United States
v. Raether, 82 F.3d 192, 194 (8th Cir. 1996). Clark and Wadena have
vigorously asserted throughout this appeal that the federal courts lack
jurisdiction over this entire case because of the Band's status as an
independent sovereign and their statuses as members of the Band. Given
this position, we do not see how the court's errors in jury instructions
29 and 33, if any, could have harmed either Clark or Wadena. Thus,
without addressing whether the district court's jury instructions 29 and
33 were in fact erroneous, we conclude the claimed error was harmless.
2.
Failure to Instruct on Intent
Clark
and Wadena claim that the district court
failed to instruct the jury that, with respect to violations of 18
U.S.C. §666 and §1163, the jury must find they acted with an intent to
injure or defraud. We disagree. Neither §666 nor §1163 contain such a
requirement. See 18 U.S.C. §§666 and 1163.
3.
Instructions on
Minnesota
Notary Law
In
jury instruction 53, the district court stated: "In taking an
acknowledgment, verification, or witnessing a signature a notary must
determine, that the person appearing before him or her is the person
whose true signature is on the instrument. You are instructed that to do
otherwise is a violation of state law." Jury Inst. 53,
United States
v. Wadena, No. 3-95-102 (D. Minn. June 24, 1996). Rawley
objected to this instruction when the district court made it. On appeal,
Rawley contends this instruction was irrelevant, and "[t]he only
effect the instruction could have on the jurors was either to make the
apparent state law violation somehow appear to be an element of the
federal offenses, or to cast the failure [to properly notarize ballots]
as evidence of bad acts by the defendants." See Rawley
Br.
at 35-36. We review instruction 53 for harmless error. See
United States
v. Ryan, 41 F.3d 361, 366 (8th Cir. 1994) (citing United States
v. Voss, 787 F.2d 393, 398 (8th Cir. 1986)). In this case, the issue
of whether numerous absentee ballots were properly notarized by
state-certified notaries was an important aspect of the prosecution of
the election conspiracy and offenses arising from that conspiracy. Thus,
jury instruction 53 was not irrelevant and was not in error.
4.
Rawley's Proposed Theory of Defense Instruction
With
respect to the tribal election notarization process, Rawley also
proposed a jury instruction indicating, in part:
Under the laws
of the Minnesota Chippewa Tribe and the White Earth Band, a violation of
the requirement that an absentee vote be marked and signed in the
presence of a notary public did not invalidate any absentee vote prior
to the June 14, 1994, election. Accordingly, in order to find that a
defendant had the intent to have a false vote cast in the 1990 or 1994
election(s), you must find that the government proved such intent,
beyond a reasonable doubt, by showing evidence that the defendant
intended to cast false votes in the election other than with evidence of
a mere violation of the requirement that an absentee vote be marked and
signed in the presence of a notary public.
See Addendum to Rawley Br.
Rawley contends he was entitled to this instruction because it was
timely, supported by the evidence and set forth a correct statement of
the law (i.e. 18 U.S.C. §241). See Rawley Br. at 36-37 (citing
United States
ex rel., Means v. Solem, 646 F.2d 322, 328 (8th Cir. 1980)). We
disagree. The district court adequately and correctly instructed the
jury on the elements of the §241 offenses, and Rawley is not entitled
to particularly worded instructions regarding the §241 offenses. Cf.
United States
v. Bettelyoun, 16 F.3d 850, 853 (8th Cir. 1994).
G.
Sentencing Enhancement for Abuse of Trust in Money Laundering
Offenses
Section
3B1.3 of the sentencing guidelines allows for a two-level increase
"[i]f the defendant abused a position of public or private trust,
or used a special skill, in a manner that significantly facilitated the
commission or concealment of the offense." 31 Legal
application of the guidelines to the facts is reviewed de novo. See,
e.g.,
United States
v. Evans, 30 F.3d 1015, 1020 (8th Cir. 1994). However, the district
court's application of §3B1.3 is a factual finding, reviewed for clear
error. See
United States
v. Johns, 15 F.3d 740, 744 (8th Cir. 1994) (stating abuse of trust
adjustment is entitled to great deference and will not be disturbed
unless clearly erroneous).
In
sentencing Clark and Wadena, the district court refused to group the
money laundering counts (Counts 10-18) with the remaining charges and
convictions, finding that "the money laundering counts in this case
were not an integral part of an overall scheme" to perpetuate theft
or bribery.
United States
v.
Clark
, No. 3-95-102 (D.Minn. Nov. 26, 1996) (Statement of Reasons for
Imposing Sentence), at 4. Despite this finding, the district court still
used §3B1.3 to apply a two-level enhancement to the money laundering
charges for abuse of a position of public trust.
The
government contends that the enhancements were correct because, while
the money-laundering charges were grouped separately, the theft and
fraud counts--which involved an abuse of trust--can be considered
"relevant conduct" with respect to the money laundering. In
addition, the government argues,
Clark
and Wadena's positions allowed the defendants to engage in
money-laundering activity without questions from either the bank or the
tribal community. In this sense, the government argues, their positions
of trust "significantly facilitated" the commission or
concealment of the offense.
The
first problem with this reasoning is that, while the government argues
Clark
and Wadena's abuse of positions of trust to obtain illegal proceeds was
relevant conduct, the district court specifically found the money
laundering activity was not related to the theft and bribery
schemes. Additionally, §2C1.2 of the sentencing guidelines specifically
states that when a crime involves giving or receiving a bribe or
gratuity, a sentencing court should "not apply the adjustment in §3B1.3
(Abuse of Position or Trust or Use of a Special Skill)." U.S.S.G.
§2C1.2, comment. (n.2) (1997). 32 In other
words, if the district court had grouped the money laundering and
gratuity charges together, the guidelines would have directly prohibited
an abuse of trust enhancement under §3B1.3. By using the abuse of trust
involved in the "related" bribery conduct to enhance the money
laundering charges, the district court would be indirectly doing what §2C1.2
of the guidelines directly prohibits.
Second,
we find there is no evidence to support the assertion that the
defendants' positions as public officials "significantly
facilitated" the acts of money laundering. The indictment charges
that, on nine separate occasions, Clark gave checks from Northern
Drywall to Wadena, who subsequently deposited the checks into his
personal accounts at the First National Bank of
Detroit
Lakes
, and the Farmers State Bank of Winger. There is no proof presented that
the banks or the bank tellers knew Wadena was chairman of the tribal
council. The checks were not from or written to the tribal council, but
instead were from a private company, Northern Drywall, with
Clark
as president. Finally, there is no indication on any of the checks that
either defendant was acting in his capacity as an official of the tribal
council.
In
sum, the government has failed to carry its burden of proving Wadena and
Clark
's positions significantly facilitated the commission or concealment of
the money-laundering activities. For this reason, we reverse the
two-level abuse of discretion enhancement under §3B1.3, and remand
Clark
and Wadena's sentences to the district court.
The
judgments of conviction for each defendant are AFFIRMED. The sentences
of Clark and Wadena are remanded to the district court for resentencing.
33
1
Wadena received a sentence of 51 months in prison,
Clark
received a sentence of 46 months in prison, and Rawley received a
sentence of 37 months in prison. Each defendant was also ordered to pay
restitution, fines, and a special assessment.
2
For example, in the time period relevant to this case, the RTC
controlled the distribution of assistance funds for Band members, made
housing loans to various members, and conducted economic development
projects.
3
Initially, the RTC appointed Jim Foster, the Band's Executive Director,
to oversee the Casino construction on behalf of the RTC.
Clark
eventually replaced Foster.
4
Count 2 charged
Clark
with making the $15,000 payment to Rawley, in violation of 18 U.S.C. §666(a)(2).
Count 3 charged Rawley with accepting that payment, in violation of 18
U.S.C. §666(a)(1)(B). Count 4 charged Clark and Rawley with money
laundering and acting as principals for money laundering, in violation
of 18 U.S.C. §§1957 and 2. Count 5 charged Wadena with accepting stock
from Northern, in violation of 18 U.S.C. §666(a)(1)(B). Count 6 charged
Clark
with giving Wadena Northern stock, in violation of 18 U.S.C. §666(a)(2).
Count 7 charged Wadena with accepting $428,682.50 in payments from
Clark
, in violation of 18 U.S.C. §666(a)(1)(B). Count 8 charged
Clark
with giving Wadena $428,682.50 in payments, in violation of 18 U.S.C. §666(a)(2).
Count 9 charged
Clark
with using the mail to procure phony bids for the Casino, in violation
of 18 U.S.C. §1341. Counts 10 through 18 charged Wadena and Clark with
money laundering and acting as principals for money laundering, in
violation of 18 U.S.C. §§1957 and 2.
5
Wadena states "the purpose for creating a fishing commission was to
formalize the new tax exemption for income generated in relation to
fishing-treaty rights." See Wadena
Br.
at 5. The payments Clark, Rawley, and Wadena received from the Fishing
Commission were tax exempt.
6
These payments were in addition to the salaries Clark, Rawley, and
Wadena received for service on the RTC. In 1993, Wadena's RTC salary was
$144,000,
Clark
's RTC salary was $122,000 and Rawley's RTC salary was $102,000. The
government did not allege or charge that these salaries constituted a
misappropriation of tribal funds.
7
Count 20 charged Rawley with misapplying tribal funds for the purchase
of an all-terrain vehicle and a snow plow, in violation of 18 U.S.C. §1163.
Count 21 charged
Clark
with misapplying tribal funds for the purchase of a snowmobile, in
violation of 18 U.S.C. §1163. Count 22 charged Wadena with misapplying
tribal funds for a payment on a car loan, in violation of 18 U.S.C. §1163.
Count 23 charged Rawley with misapplying $25,000 of tribal funds, in
violation of 18 U.S.C. §1163. Count 24 charged Wadena with misapplying
$56,705 of tribal funds, in violation of 18 U.S.C. §1163. Count 25
charged
Clark
with misapplying $54,500 of tribal funds, in violation of 18 U.S.C. §1163.
Count 26 charged Rawley with misapplying $31,000 of tribal funds, in
violation of 18 U.S.C. §1163. Count 27 charged Rawley with obtaining
tribal funds by fraud and intentionally misapplying those funds, in
violation of 18 U.S.C. §666. Count 28 charged Rawley with money
laundering, in violation of 18 U.S.C. §1957.
8
Count 29 also named tribal election judge Carley Jasken, notary Peter
Pequette, Jr., and notary Henry Harper. The jury acquitted Jasken of all
charges. Pequette cooperated with and testified on behalf of the
government, Harper pleaded guilty to making a false writing, in
violation of 18 U.S.C. §1001.
9
Count 30 charged Clark with using tribal funds to pay people to assist
him and others in gaining re-election, in violation of 18 U.S.C. §1163.
Count 31 charged Rawley with using tribal funds to pay people to assist
him in gaining re-election, in violation of 18 U.S.C. §1163. Counts 32
to 41 charged Clark and Rawley with using the mails to defraud voters,
and acting as principals in that mail fraud, in violation of 18 U.S.C.
§§1341 and 2. Counts 42 to 44 charged Harper, Pequette, and Jasken
with various violations.
10
See, e.g.,
United States
v. Smith, 562 F.2d 453, 455-58 (7th Cir. 1977);. United States v.
Begay, 42 F.3d 486, 497-500 (9th Cir. 1994); United States v.
Markiewicz, 978 F.2d 786, 797-803 (2d Cir. 1992); United States
v. Blue, 722 F.2d 383, 384-86 (8th Cir. 1983).
11
Section 1152 provides:
Except
as otherwise expressly provided by law, the general laws of the
United States
as to the punishment of offenses committed in any place within the sole
and exclusive jurisdiction of the
United States
, except the
District of Columbia
, shall extend to the Indian country.
This
section shall not extend to offenses committed by one Indian against the
person or property of another Indian, nor to any Indian committing any
offense in the Indian. country who has been punished by the local law of
the tribe, or to any case where, by treaty stipulations, the exclusive
jurisdiction over such offenses is or may be secured to the Indian
tribes respectively.
This Act is sometimes referred to
as the General Crimes Act. See
United States
v. Wheeler, 435
U.S.
313, 324, 98 S.Ct. 1079, 55 L.Ed.2d 303 (1978).
12
Section 1153 provides:
(a)
Any Indian who commits against the person or property of another Indian
or other person any of the following offenses, namely, murder,
manslaughter, kidnapping, maiming, a felony under chapter 109A, incest,
assault with intent to commit murder, assault with a dangerous weapon,
assault resulting in serious bodily injury (as defined in section 1365
of this title), an assault against an individual who has not attained
the age of 16 years, arson, burglary, robbery, and a felony under
section 661 of this title within the Indian country, shall be subject to
the same law and penalties as all other persons committing any of the
above offenses, within the exclusive jurisdiction of the United States.
(b)
Any offense referred to in subsection (a) of this section that is not
defined and punished by Federal law in force within the exclusive
jurisdiction of the
United States
shall be de. fined and punished in accordance with the laws of the State
in which such offense was committed as are in force at the time of such
offense.
As will be discussed infra,
jurisdiction over the crimes enumerated in the Indian Major Crimes Act
has now been delegated to certain states pursuant to Public Law 280.
13
Although not relevant here, such argument must acknowledge that in
states not covered by Public Law 280, the federal government could still
prosecute Native Americans under the Assimilative Crimes Act, 18 U.S.C.
§13, by utilizing state law where no comparable federal law exists. Cf.
United States
v.
Butler
, 541 F.2d 730 (8th Cir. 1976). However, under the Assimilative
Crimes Act, the exception involving Indian-against-Indian crimes would
still apply. See, e.g.,
United States
v. Thunder Hawk, 127 F.3d 705, 706-08 (8th Cir. 1997).
14
For example, in Blue, our court stated "§1152 and its
exceptions do not extend or restrict the application of general federal
criminal statutes to Indian reservations." 722 F.2d at 384. See
also Stone, 506 F.2d at 563-64; White, 508 F.2d at 454-55.
This interpretation has also been made in numerous Ninth Circuit cases,
most recently in Begay, 42 F.3d at 498 (Sections 1152 and 1153
"deal[] only with the application of federal enclave law to Indians
and [have] no bearing on federal laws of nationwide applicability that
make actions criminal wherever committed.").
In
contrast, the Fourth Circuit, in United States v. Welch, 822 F.2d
460, 464 (4th Cir. 1987), reversed a conviction under the Assimilative
Crimes Act, holding that "[w]hen there is a crime by an Indian
against another Indian within Indian country only those offenses
enumerated in the Major Crimes Act may be tried in the federal
courts." In Markiewicz, the Second Circuit cited this
decision with approval, stating that this "alternative approach . .
. is more deferential to the Supreme Court's determination in Quiver
that congress's inclusion of certain crimes in the major crimes act
'carries with it some implication of a purpose to exclude other[]'
crimes." 978 F.2d at 799, (quoting Quiver, 241
U.S.
at 606, 36 S.Ct. 699).
15
See United States v. Stone, 112 F.3d at 971, 973 (8th Cir. 1997);
Blue, 722 F.2d at 384; Stone, 506 F.2d at 563-64; White,
508 F.2d at 454-55; see also United States v. Yannott, 42 F.3d
999, 1003-04 (6th Cir. 1994); Begay, 42 F.3d at 498; United
States v. Young, 936 F.2d 1050, 1055 (9th Cir. 1991); United
States v. Burns, 529 F.2d 114, 117 (9th Cir. 1975).
16
See Felix S. Cohen, Felix S. Cohen's Handbook of Federal
Indian Law 283 (Rennard Stricland et al. eds., 1982) ("Where
retained tribal sovereignty in Indian country is not invaded and no
other particular Indian right is infringed, individual Indians and their
property are normally subject to the same federal laws as other
persons."); Wheeler, 435 U.S. at 330 n. 30, 98 S.Ct. 1079
("Federal jurisdiction also extends to crimes committed by an
Indian against a non-Indian which have not been punished in tribal court
. . . and to crimes over which there is federal jurisdiction regardless
of whether an Indian is involved, such as assaulting federal
officer.")
17
Those courts reasoned that deference to tribal authority and sovereignty
should allow tribal laws to deal with relations among the members of the
tribe. Cf. Quiver, 241
U.S.
at 603-04, 36 S.Ct. 699 (It is settled policy of Congress "to
permit the personal and domestic relations of the Indians with each
other to be regulated, and offenses by one Indian against the person or
property of another Indian to be dealt with, according to their tribal
customs and laws.").
18
Defendants rely upon Quiver, 241
U.S.
602, 36 S.Ct. 699, 60 L.Ed. 1196, as authority to exempt prosecution on
the theory that all of the offenses charged fall within the exclusive
jurisdiction of the tribe's sovereignty because they relate to internal
relations of the members of the tribe. The defendants urge that Quiver
applied the exception under the Indian Country Crimes Act to a general
federal law of adultery. Our research is to the contrary. The adultery
statute applied was derived from the Act of March 3, 1887, ch. 397, 24
Stat. 635, which was directed toward the
Territory
of
Utah
. The law was later codified under "Certain Offenses in the
Territories," ch. 13, §316, 7 Fed.Stat. 968 (1916). Section 311 of
the chapter states:
[Places
within which sections of this chapter shall apply.] Except as otherwise
expressly provided, the offenses defined in this chapter shall be
punished as hereinafter provided, when committed within any Territory or
District, or within or upon any place within the exclusive jurisdiction
of the
United States
.
In
other words, §316 was an enclave statute, applying only to federally
controlled territory. Clearly Congress would have no authority to pass a
general law, such as one prohibiting adultery, outside a federal
enclave.
19
Section 1302(8) of the ICRA states in relevant part: "No Indian
tribe in exercising powers of self-government shall . . . deny to any
person within its jurisdiction the equal protection of its laws or
deprive any person of liberty or property without due process of
law." (emphasis added). As the Court in
Santa Clara
points out, this is not deemed to explicitly identify with the Bill of
Rights or the Fourteenth Amendment of the U.S. Constitution. See
436
U.S.
at 63 n. 14, 98 S.Ct. 1670.
20
In §1302(8), Congress offered reassurance that no tribal government
would deny to any members the equal protection of the Tribe's
laws. Furthermore, the ICRA does not include other constitutional
freedoms, such as the prohibition as to the establishment of religion,
the right of counsel, etc. See 436
U.S.
at 62-63, 98 S.Ct. 1670.
21
These cases are pre-Santa Clara, recognizing an implicit right to
civil action under the ICRA against tribal officers and tribal councils.
Santa Clara
rejected the rights of tribal members to bring such civil suits in
federal court, and also established that tribal counsels enjoy sovereign
immunity from suit. See infra. We cite these pre-Santa Clara
cases simply as a recognition of the one-man-one-vote principle included
in the ICRA.
22
Rawley does not contest the joinder of the counts charged in this case.
23
The Honorable Michael J. Davis, United States District Judge for the
District of Minnesota.
24
Rule 8 provides:
(a)
Joinder of Offenses. Two or more offenses may be charged in the
same indictment or information in a separate count for each offense if
the offenses charged, whether felonies or misdemeanors or both, are of
the same or similar character or are based on the same act or
transaction or on two or more acts or transactions connected together or
constituting parts of a common scheme or plan.
(b)
Joinder of Defendants. Two or more defendants may be charged in
the same indictment or information if they are alleged to have
participated in the same act or transaction or in the same series of
acts or transactions constituting an offense or offenses. Such
defendants may be charged in one or more counts together or separately
and all of the defendants need not be charged in each count.
Fed.R.Crim.P. 8.
25
Clark's contentions that joinder is improper because the election
conspiracy came later than the other two conspiracies, and because he
ran unopposed in the election, obfuscates the issue and ignores the
singular and common purpose of
Clark
's involvement in the three conspiracies.
26
Like
Clark
, Wadena also asserts the three alleged conspiracies were unrelated to
one another, and the government's attempt to link the three conspiracies
through an "overlap in personnel" and a "common objective
of making money" is an insufficient basis for joinder. As stated
above, we reject this allegation.
27
Significantly, one election conspiracy witness who did mention Wadena
indicated it was Wadena who called the sheriff when he learned from a
government investigator that certain election documents under
investigation may have been deliberately shredded.
28
Rule 14 provides:
If
it appears that a defendant or the government is prejudiced by a joinder
of offenses or of defendants in an indictment or information or by such
joinder for trial together, the court may order an election or separate
trials of counts, grant a severance of defendants or provide whatever
other relief justice requires. In ruling on a motion by a defendant for
severance the court may order the attorney for the government to deliver
to the court for inspection in camera any statements or confessions made
by the defendants which the government intends to introduce in evidence
at the trial.
Fed.R.Crim.P. 14.
29
Rawley does not raise this issue in his brief. The government, in a
footnote, also claims
Clark
did not raise this issue below and is therefore barred from making this
argument for the first time on appeal. The government provides no legal
or factual support for this contention. Moreover,
Clark
contends he raised the issue below because at the pretrial motion
hearing, he adopted Wadena's and Rawley's motions and arguments
concerning jurisdiction, and this is a jurisdictional issue. For
purposes of this appeal, we will assume
Clark
raised this issue below.
30
Clark adopts Wadena's arguments regarding jury instructions pursuant to
Federal Rule of Appellate Procedure 28(j) and Eighth Circuit Rule of
Appellate Procedure 28A(j).
31
The guideline commentary states that "the position of trust must
have contributed in some significant way to facilitate the commission or
concealment of the offense (e.g., by making the detection of the
offense or the defendant's responsibility for the offense more
difficult.)" U.S.S.G. §3B1.3, comment. (n.1) (1997).
32
While the guidelines do not explain this rule, it appears the
prohibition against using §3B1.3 to enhance a bribery conviction is an
effort by the sentencing commission to avoid "double
counting." See United States v. Kummer, 89 F.3d 1536, 1546
(11th Cir. 1996) ("[G]enerally §3B1.3 should not be applied in
these [bribery or gratuity] cases because the Guidelines took into
consideration the fact that such cases necessarily involve abuse of
positions of trust.").
33
Clark
received a sentence of 46 months based upon an offense level of 22.
Without a two-point enhancement for abuse of trust in the money
laundering offense his offense level becomes 20. Upon resentencing, the
guideline range changes from 41-51 months to 33-41 months.
Wadena
received a sentence of 51 months based upon an offense level of 22.
Without the two-point enhancement for breach of trust, his new offense
level is 20. Upon resentencing, the guideline range changes from 41-51
months to 33-41 months.
[Concurring and Dissenting
Opinion]
BEAM,
Circuit Judge
concurring
and, in part, dissenting.
I
concur in the result reached by the court in Part II and, with
qualification, 34 Part IV. I
disagree, however, with the court's conclusion in Part III that we have
jurisdiction to prosecute Clark and Rawley for a violation of 18 U.S.C.
§241. Therefore, I dissent in part.
In
asserting subject-matter jurisdiction under this general federal
criminal law, the court not only disregards the longstanding federal
policy of advancing tribal self-determination, but blatantly fails to
apply circuit precedent. We have held that "if a particular Indian
right or policy is infringed by a general federal criminal law, that law
will be held not to apply to Indians on reservations unless specifically
so provided."
United States
v. Blue, 722 F.2d 383, 385 (8th Cir. 1983) (McMillian, J.). The
right of tribal self-government has long been recognized and protected
by both the courts, see, e.g., United States v. Kagama, 118 U.S.
375, 381-82, 6 S.Ct. 1109, 30 L.Ed. 228 (1886), and Congress, see,
e.g., 18 U.S.C. §1152 (declaring that "[t]his section shall
not extend to offenses committed by one Indian against the person or
property of another Indian"). In my view, the exclusive right to
prosecute members for fraud in a tribal election is a necessary and
intimate aspect of tribal self-government. Federal prosecution of tribal
election crimes will severely interfere with the tribes' ability, as
separate sovereigns, to eradicate such corruption in their own elections
and their own government. Until Congress specifically provides for
jurisdiction over this type of internal tribal matter, we must avoid the
paternalistic temptation to assert jurisdiction based on the subjective
belief that federal intervention is the only way to protect the civil
rights of tribal members.
Jurisdiction
over a dispute arising on an Indian reservation "is governed by a
complex patchwork of federal, state, and tribal law." Duro
v. Reina,
495 U.S. 676, 680 n. 1, 110 S.Ct. 2053, 109 L.Ed.2d 693 (1990). Because
Indian tribes pre-existed the Constitution, they "still possess
those aspects of sovereignty not withdrawn by treaty or statute, or by
implication as a necessary result of their dependent status."
United States
v. Wheeler, 435
U.S.
313, 323, 98 S.Ct. 1079, 55 L.Ed.2d 303 (1978). One aspect of this
retained sovereignty includes the power to "control their own
internal relations," Duro, 495
U.S.
at 685, 110 S.Ct. 2053, which necessarily includes criminal
"jurisdiction of all controversies between" tribal members, e.g.,
In re Mayfield, 141
U.S.
107, 115-16, 11 S.Ct. 939, 35 L.Ed. 635 (1891). Congress has broad
powers to modify this retained sovereignty by conferring federal
jurisdiction over crimes committed on Indian reservations. See, e.g.,
Talton v. Mayes, 163
U.S.
376, 384, 16 S.Ct. 986, 41 L.Ed. 196 (1896). Thus, the question is
whether Congress has provided jurisdiction for this federal prosecution.
The
court correctly finds no basis for jurisdiction in the Indian Country
Crimes Act and the Indian Major Crimes Act. See 18 U.S.C. §§1152
and 1153. Faced with congressional silence, however, the court turns to
a general federal law, which by its terms applies to all persons. See
18 U.S.C. §241. Section 241 provides that it is unlawful for two or
more persons to "conspire to injure, oppress, threaten, or
intimidate any person in any State, Territory, Commonwealth, Possession,
or District in the free exercise or enjoyment of any right or privilege
secured to him by the Constitution or laws of the
United States
."
Id.
Assuming
that Congress intended to include American Indians within the scope of
laws which, by their terms, are applicable to all persons, we have
applied general federal laws to tribal crimes. See, e.g., Stone v.
United States
, 506 F.2d 561, 563 (8th Cir. 1974). However, we have refused to
extend this source of jurisdiction to purely internal tribal matters
because that would intrude upon tribal sovereignty. See, e.g., United
States v. White, 508 F.2d 453, 455 (8th Cir. 1974) (stating that
"areas traditionally left to tribal self-government, those most
often the subject of treaties, have enjoyed an exception from the
general rule that congressional enactments, in terms applying to all
persons, includes Indians and their property interests"); see
also Felix S. Cohen, Felix S. Cohen's Handbook of Federal Indian
Law, 286 (1982 ed.) (stating that "the Supreme Court has
consistently recognized the unique status of tribes, Indians, and their
lands, and has required that the congressional purpose of a conflicting
law clearly require that it apply to Indians before Indian rights are
held implicitly infringed"). Thus, the question is whether
prosecution under section 241 for tribal election fraud intrudes upon
tribal self-government.
The
court mischaracterizes this inquiry by looking to whether there is a
tribal right to use the election system fraudulently in order to
maintain a position of power. Ante at 846. Obviously, no such
right exists. What the court fails to appreciate, however, is that the
tribal right at issue is the exclusive right to prosecute tribal
election offenses, which is necessary to maintain political integrity. See
Montana
v.
United States
, 450
U.S.
544, 566, 101 S.Ct. 1245, 67 L.Ed.2d 493 (1981) (discussing the inherent
tribal power to regulate activities that "threatens or has some
direct effect on the political integrity . . . of the tribe").
Intently focused on abating the corrupt actions of a few individuals,
the court overlooks the important interest of the tribe in abating
corruption within its own government. Monitoring tribal elections is an
area traditionally left to tribal government and any contrary holding
would violate the federal policy of respecting tribal sovereignty in the
absence of express congressional authority.
Of
course, Congress could remove this aspect of sovereignty and interject
federal election policies and remedies into tribal elections. The wisdom
of such a decision is best left to Congress, which is obviously better
positioned to determine its potential impact. Rather than deferring to
Congress, the court recklessly adopts a newly minted balancing test, not
fairly supported as near as I can find anywhere within the recorded
annals of American Indian litigation, weighing federal interests against
tribal interests. See ante at 842. The result is a vague and
incoherent test for jurisdiction. We should simply limit our inquiry to
whether, on a case-by-case basis, the application of a general criminal
law would infringe on tribal sovereignty. See Blue, 722 F.2d at
385.
I
recognize that the oppression of tribal voting rights constitutes a
fundamental assault on a democratic society and a serious violation of
the civil rights of tribal members. Nonetheless, only Congress can
remove this aspect of sovereignty. Because Congress has not so acted, I
would decline to assert jurisdiction over the election conspiracy
offenses.
Even
if we did have jurisdiction, I would disagree with the court's
unprecedented extension of a federal election statute (18 U.S.C. §241)
to a tribal election. Although the Supreme Court has applied section 241
to a hybrid local and federal election, it did so because the
conspirators used a voting machine to cast votes for both federal and
local candidates. See
Anderson
v.
United States
, 417
U.S.
211, 225, 94 S.Ct. 2253, 41 L.Ed.2d 20 (1974). The Court expressly
declined to address whether section 241 would apply to a conspiracy to
cast false votes in a local election that did not include any federal
candidates.
Id.
at 228, 94 S.Ct. 2253.
Similarly,
we have applied section 241 to a local election, but only where the
conspirators destroyed absentee ballots that also included votes that
had been cast for federal candidates. See
United States
v. Townsley, 843 F.2d 1070, 1080 (8th Cir. 1988). Contrary to the
court's reading of Townsley, see ante at 844-45, we have never
endorsed the application of section 241 to purely local, much less
tribal, elections. We cautioned that "we do not reach the question
left undecided by the Supreme Court--whether 18 U.S.C. §241 extends to
conspiracies to cast votes in purely local elections in which no federal
candidate is on the ballot." Townsley, 843 F.2d at 1080 n.
10. If we were required to reach this issue, which I submit we are not,
due to our lack of jurisdiction in the first instance, I would not
extend section 241 to a tribal election. See Bathgate v.
United States
, 246
U.S.
220, 226, 38 S.Ct. 269, 62 L.Ed. 676 (1918) (discussing the
congressional policy "not to interfere with elections within a
State except by clear and specific provisions").
Accordingly,
I respectfully dissent from Part III of the court's decision.
34
The court boldly cites United States v. Bledsoe, 674 F.2d 647,
655 (8th Cir. 1982), for the proposition that "[a]n indictment must
reveal on its face a proper basis for joinder." Ante at
848-49. Notwithstanding the court's unfettered confidence in Bledsoe,
this issue equally divided the court in United States v. Grey Bear,
863 F.2d 572 (8th Cir. 1988) (en banc) (5-5 decision) (stating
that an indictment must reveal on its face a proper basis for joinder)
(Lay, C.J., Heaney, McMillian, Richard S. Arnold, and Wollman, JJ.,
joining) (stating that propriety of joinder is not limited to the face
of the indictment) (John R. Gibson, Fagg, Bowman, Magill, and Beam, JJ.,
joining). I agree with the court's conclusion here that any joinder
error was harmless, but I do not agree with the unnecessary citation to Bledsoe,
particularly when unaccompanied by an explanation.
[93-1 USTC
¶50,122]
United States of America
, Appellee v. Dale M. Grunewald, Appellant
(CA-8), U.S. Court of Appeals, 8th
Circuit, 92-2710, 3/3/93, 987 F2d 531, Affirming an unreported District
Court decision
[Code Sec.
7201 ]
Criminal tax evasion: Suppression of evidence: Motion to discover:
Jury instructions.--A physician's motion to suppress evidence
against him that was obtained by an IRS agent in a civil audit was
denied. The agent did not have firm indications of fraud until he
examined and analyzed checks issued to the physician by clinics for
which the physician served as a marketing consultant. The agent did not
mislead the physician as to the true nature of his audit or fail to
refer the investigation to the criminal investigation division in
violation of IRS internal regulations. In addition, the physician was
not prejudiced by his lack of access to the agent's original notes. The
district court's in camera review of the evidence revealed no material
difference between the agent's original handwritten notes and the
typewritten summaries that the government provided for the physician.
Finally, there was no error in the district court's jury instruction on
willfulness, which appropriately placed before the jury the
reasonableness of the physician's assertions that he relied upon his
accountant honestly and in good faith.
William
Sidney Smith and Gary A.
Rob
inson, Smith, Schneider, Stiles, Mumford, Schrage, Zurek, Wimer &
Hudson, P.C., 1000 Equitable Bldg., Des Moines, Iowa 50309, for
appellant. James A. Bruton III,
Rob
ert E. Lindsay, Alan Hechtkopf, Scott A. Schumacher, Gene W. Shepard,
Department of Justice, Washington, D.C. 20530, for appellee.
Before
MAGILL and BEAM, Circuit Judges, and LARSON, * Senior
District Judge.
LARSON,
Senior District Judge:
Dale
M. Grunewald appeals from his conviction by jury trial on three counts
of income tax evasion, in violation of 26 U.S.C. §7201
. Grunewald challenges the district court's 1 rulings on
the suppression of evidence and the production of an Internal Revenue
Service agent's notes. Grunewald also challenges the court's jury
instruction on the element of willfulness. We affirm the judgment of the
district court in all respects.
I.
Grunewald
is a physician who practiced medicine in the Medical Services
Partnership from 1975 through 1987. The partnership agreement provided
that the income from the medical services of the partners would be
divided equally among the partners. All fees for medical services,
unless otherwise agreed, were to be deposited into the partnership
account, and the partnership income from each month was to be divided
equally among the partners. Grunewald was in charge of maintaining the
partnership books and records, and was solely responsible for
calculating and paying the partners their respective partnership draws.
In
1983, Grunewald was appointed by Valley Medical Services, P.C., as
medical director of the Mercy Health and Human Services (Mercy) Skywalk
Clinic. Payments for Grunewald's services were made to Valley Medical
Services which, in turn, paid Grunewald. Grunewald placed this money
into the partnership account. In January 1985, Grunewald contracted
directly with Mercy to become the medical marketing consultant for all
Mercy clinics. Payments for these services, as well as all 1099 forms,
were sent directly to Grunewald's home; Grunewald's contract with Mercy
provided that Grunewald was responsible for paying all applicable taxes.
It is Grunewald's failure to report his annual salary of $63,000 from
Mercy in 1985, 1986, and 1987 which was at issue in the criminal trial. 2
Grunewald
did not deposit the Mercy salary checks into the partnership account.
Nor did he enter the payments in the partnership books and records.
Rather, he endorsed each of the checks and deposited them into his
personal bank account. Grunewald testified that he believed that his
work as a marketing consultant for Mercy did not qualify as medical
services and, therefore, the income from Mercy was not partnership
income. Midway through 1985, Grunewald's partners noticed that their
income had decreased, and they confronted Grunewald. Grunewald's
partners acquiesced to Grunewald's argument that the income from Mercy
was not partnership income.
The
accountant who prepared the tax returns for the partnership and for each
of the individual partners relied solely upon information provided to
him by Grunewald. Grunewald did not inform the accountant that he had
received any income from Mercy. Nor did he inform the accountant that
there was $63,000 in income each year that was not reflected in the
partnership books and records.
The
investigation of Grunewald's income taxes began in May of 1987, when one
of Grunewald's partners approached a patient, who was the Chief of
Examination, Internal Revenue Service (IRS). This individual was
informed that Grunewald was not depositing money received from Mercy in
the partnership account and that Grunewald was not reporting this income
on his personal tax returns. In May of 1988, IRS Agent Delperdang was
assigned to audit Grunewald's 1985 tax return. Agent Delperdang was
specifically requested to determine whether Grunewald's partner's
allegations were true, or merely a result of animosity toward Grunewald.
Agent Delperdang's audit, begun in September of 1988, included a meeting
with one of Grunewald's partners, three interviews with Grunewald (two
of which Grunewald's accountant attended), a bank deposit analysis,
analyses of other books, records, and tax returns from 1984 through
1987, provided by Grunewald and, eventually, a review of all canceled
checks issued to Grunewald by Mercy from 1985 through 1987.
Throughout
Agent Delperdang's investigation, Grunewald assured Agent Delperdang
that his salary from Mercy had been deposited into the partnership
account, and had been reported to the IRS by the partnership. However,
upon being informed by Mercy that Agent Delperdang had requested all
canceled checks which had been issued to Grunewald, Grunewald contacted
Delperdang and told him that the income from Mercy might not have been
reported. On February 16, 1989, the day of Agent Delperdang's last
contact with Grunewald, Grunewald admitted for the first time that the
income from Mercy had not been treated as partnership income. On
February 24, 1989, Agent Delperdang received the canceled checks from
Mercy. Upon his determination that there was a substantial deficiency
with regard to Grunewald's 1985, 1986, and 1987 income, Agent Delperdang
decided that there were firm indications of fraud by Grunewald. In March
of 1989, Agent Delperdang referred the case to the Criminal
Investigation Division (CID) of the IRS without further contact with
Grunewald. Agent Delperdang had previously contacted CID in early
February to informally discuss the facts of this case. In light of that
communication, Agent Delperdang concluded that there were insufficient
indications of fraud at that time for referral of the case to CID.
II.
A.
Suppression of Evidence
Grunewald's
motion to suppress all evidence obtained by Agent Delperdang stems from
Grunewald's belief that the evidence was obtained in a criminal
investigation, under the guise of a civil tax audit. It is clear that
the IRS may not develop a criminal investigation under the auspices of a
civil audit. See United States v. Meier [79-2
USTC ¶9697 ], 607 F.2d 215 (8th Cir. 1979), cert. denied,
445 U.S. 966 (1980); United States v. Tweel [77-1 USTC ¶9330 ],
550 F.2d 297 (5th Cir. 1977). Significantly different rights,
responsibilities, and expectations apply to civil audits and criminal
tax investigations. It would be a flagrant disregard of individuals'
rights to deliberately deceive, or even lull, taxpayers into
incriminating themselves during an audit when activities of an obviously
criminal nature are under investigation. See United States v. Tweel
[77-1
USTC ¶9330 ], 550 F.2d at 299 ("a consent search is
unreasonable under the Fourth Amendment if consent was induced by the
deceit, trickery or misrepresentation of the Internal Revenue
agent"). Therefore, once an IRS agent has developed "firm
indications of fraud" 3 in a civil
investigation, the case must be turned over to the CID.
Evidence
obtained in the course of a criminal investigation, where the defendant
has not been apprised of the nature of the investigation, may be
suppressed only if the defendant establishes that: 1) the IRS had firm
indications of fraud by the defendant, 2) there is clear and convincing
evidence that the IRS affirmatively and intentionally misled the
defendant, and 3) the IRS's conduct resulted in prejudice to defendant's
constitutional rights. United States v. Meier [79-2 USTC ¶9697 ],
607 F.2d at 217; United States v. Tweel [77-1 USTC ¶9330 ],
550 F.2d at 299. Accord United States v. Knight [90-1
USTC ¶50,246 ], 898 F.2d 436, 438 (5th Cir. 1990); United
States v. Caldwell [87-2
USTC ¶9423 ], 820 F.2d 1395, 1399 (5th Cir. 1987). However,
the mere failure of an IRS agent to inform a defendant that information
developed in an audit may result in a further criminal investigation
does not indicate affirmative and intentional deceit by the IRS. Accord
United States v. Knight [90-1
USTC ¶50,246 ], 898 F.2d at 438; United States v.
Sclafani [59-1 USTC ¶9357 ],
265 F.2d 408, 414-415 (2d Cir.), cert. denied, 360 U.S. 918
(1959).
Grunewald's
argument fails in all respects. The district court held a post-trial
hearing on the issue and considered the evidence before it. The court
made the following factual findings: (1) Agent Delperdang did not have
firm indications of fraud prior to his initial meeting with Grunewald,
(2) there were no firm indications of fraud until Agent Delperdang's
examination and analysis of the Mercy checks in March of 1989 (which
provided a basis for concluding that Grunewald had a substantial income
deficiency and a pattern of under-reporting), and (3) Agent Delperdang
did not mislead Grunewald as to the true nature of his audit, or fail to
refer the investigation of Grunewald to CID in violation of IRS internal
regulations. While Grunewald disagrees with these factual findings, our
review of the record and arguments reveals no indication that the lower
court erred. Any further elaboration of these facts and circumstances
will add nothing to our opinion. Suffice it to say that we are unwilling
to weaken the standard set forth above. If IRS agents, exercising sound
discretion and good judgment, fear suppression of evidence where no
intentional, prejudicial misrepresentation is afoot, civil audits will
prematurely and unnecessarily be referred to CID.
B.
Production of Handwritten Notes of IRS Agent
Grunewald's
next argument invokes the Jencks Act, 18 U.S.C. §3500, and Brady v.
Maryland, 373 U.S. 83 (1963). In response to Grunewald's requests
for discovery, including agent's notes, the government provided only
typewritten summaries of Agent Delperdang's handwritten notes. In its
order denying Grunewald's motion for a new trial, the district court
noted that it had reviewed the notes as well as the typewritten
summaries in camera, and that there was no material difference between
the two. In addition, the court concluded that Grunewald was not
prejudiced by his lack of access to the original notes.
Whether
information should be produced pursuant to the Jencks Act is to be
determined by the district court. The court's ruling should be upheld
unless it is clearly erroneous. United States v. Mechanic, 454
F.2d 849, 857 (8th Cir. 1971), cert. denied, 406 U.S. 929 (1972).
The district court fulfills its responsibilities if it conducts an in
camera review of the evidence. See
Anderson
v.
United States
, 788 F.2d 517, 519 (8th Cir. 1988). Here, while the more prudent
and expeditious route would have been for the government to provide the
handwritten notes, the district court's holding that the Jencks Act does
not require such production is not clearly erroneous. In our review of
challenges to the production of typewritten summaries where handwritten
notes have been destroyed, we have considered the agent's good faith in
destroying the notes, the likelihood that the typewritten notes
materially varied from the handwritten notes, and the likelihood that
the appellant was prejudiced by the destruction of the notes. United
States v. Leisure, 844 F.2d 1347, 1361 (8th Cir.), cert. denied,
488 U.S. 982 (1988). It follows that, even here where the notes may have
been available, absent a showing that the typewritten summaries departed
in substance from the handwritten notes, or that the government acted in
bad faith, the typewritten equivalent should be sufficient. We are
unable to conclude that Grunewald has been prejudiced by the
government's failure to produce the handwritten notes. 4
In
Brady v. Maryland, 373 U.S. 83 (1963), the Supreme Court held
that the government is required, pursuant to a discovery request by a
defendant, to produce all evidence favorable to the defendant, and that
the suppression of such favorable, material evidence violates due
process. Grunewald has failed to establish that the government withheld
favorable evidence. Indeed, the court's ruling indicates that the
evidence was duplicative, and Grunewald cannot show that there is a
reasonable probability that he would have obtained a different result if
he had had the opportunity to introduce the evidence.
United States
v. Bagley, 473
U.S.
667, 682 (1985). Further, Grunewald has failed to show that he suffered
any prejudice as a result of the court's alleged error. United States
v. Vitale, 728 F.2d 1090, 1093 (8th Cir.), cert. denied, 469
U.S. 825 (1984).
We
find no violation of the Jencks Act or of Brady v. Maryland in
the government's failure to produce the handwritten notes.
C.
Jury Instructions
One
of the elements of tax evasion is willfulness, which connotes a
voluntary, intentional violation of a known legal duty. United States
v. Pomponio [76-2 USTC ¶9695 ],
429 U.S. 10, 11-12 (1976). A defendant may claim as a defense that,
because of a misunderstanding of the law, he had a good faith belief
that he was not violating any of the provisions of the tax laws. The
government cannot prove that a defendant was aware of the legal duty at
issue if the jury credits the defendant's claimed good faith
misunderstanding and belief, whether or not the belief is objectively
reasonable. Cheek v. United States [91-1
USTC ¶50,012 ], --
U.S.
--, 111 S.Ct. 604, 610-611 (1991).
Grunewald
asserts that the district court's jury instruction on willfulness is
contrary to Cheek v. United States, supra, because it encouraged
the jury to use an objective standard in determining whether Grunewald
acted willfully, and it did not make clear that Grunewald's good faith
belief that he had done all that the law required of him need not be
objectively reasonable. The one paragraph of the court's lengthy
instruction on willfulness which is at issue states:
It is for you
to decide whether the defendant acted in good faith or whether he
willfully evaded and defeated taxes due and owing. In making this
determination, you are entitled to consider all of the evidence received
in his case which bears on the defendant's state of mind. You may also
consider the reasonableness of the defendant's asserted beliefs in
determining whether the belief was honestly or genuinely held. In
considering the defendant's asserted good-faith misunderstanding, you
must make your decision based upon what the defendant actually believed
and not upon what you or someone else believe or think the defendant
ought to believe. If you find that the defendant's beliefs were held in
good faith, you may not find the defendant guilty simply because you
find that the beliefs were unreasonable. The test is whether the
defendant himself believed in good faith that he had reported and paid
the entire tax due under the Internal Revenue Code.
Due to Grunewald's failure to
object to the instruction at trial, we review the instruction for plain
error. United States v. Gantos, 817 F.2d 41, 43 (8th Cir.), cert.
denied, 484 U.S. 860 (1987). Nothing in this instruction implies the
application of an objective standard of reasonableness. The
reasonableness of Grunewald's assertions that he relied upon his
accountant honestly and in good faith was appropriately before the jury.
The jury instructions, read as a whole, suffer from no error as to the
willfulness of Grunewald's actions.
III.
For
the foregoing reasons, the judgment of the district court is affirmed.
*
The HONORABLE EARL R. LARSON, Senior
United States
District Judge for the District of Minnesota, sitting by designation.
1
The Honorable Ronald E. Longstaff, United States District Judge for the
Southern District of Iowa.
2
In 1985, Grunewald failed to report only $42,000 of the total amount.
3
See Audit Guidelines for Examiners, CCH Internal Revenue Manual
(Audit), Sections 4231, 4564.21, and 9322.1 for IRS guidelines
concerning referral of cases to CID.
4
We need not meet the question of whether the notes are a
"statement" for purposes of the Jencks Act.
[92-2 USTC
¶50,555]
United States of America
, Plaintiff-Appellee v. James C. Payne, Defendant-Appellant
(CA-10), U.S. Court of Appeals,
10th Circuit, 91-8073, 10/28/92, 978 F2d 1177, Affirming, reversing and
remanding an unreported District Court decision
[Code Secs.
6531 and 7201 ]
Statute of limitations: Date of beginning: Suits by U.S.: Trials:
Documentary evidence in jury room: Evasion or avoidance of tax: Willful
evasion.--A taxpayer who provided false social security numbers to
his bank and brokerage firms, which in turn caused these payors to issue
Forms 1099 to the IRS under the false social security numbers, was
properly convicted on four counts of tax evasion. His indictment timely
commenced the prosecution for tax evasion within the six-year statute of
limitations. The taxpayer's assumption that an affirmative act commences
the running of the statute of limitations was incorrect. Therefore, the
taxpayer's claim that the failure to correct the erroneous social
security numbers satisfied the affirmative act requirement of tax
evasion was inconsequential. Further, since the taxpayer was permitted
to testify extensively concerning the basis of his good-faith
misunderstanding of the tax laws and to read the pertinent excerpts of
materials on which he allegedly relied, the district court did not abuse
its discretion in refusing to accept the proffered exhibits into
evidence.
Richard
A. Stacy, United States Attorney, Maynard D. Grant, Special Assistant
United States Attorney, John Barksdale, Assistant United States
Attorney, Cheyenne, Wyo. 82008, for plaintiff-appellee. Michael J.
Abramovitz, Theodore H. Merriam, Abramovitz, Merriam & Shaw, 1625
Broadway, Denver, Colo. 80202, for defendant-appellant.
Before
MCKAY, Chief Judge, BALDOCK and LAY, * Circuit
Judges.
BALDOCK,
Circuit Judge:
Defendant
James C. Payne appeals his convictions on four counts of tax evasion, 26
U.S.C. §7201 , and three counts
of false representations of social security numbers. 42 U.S.C. §408(a)(7)(B).
Defendant contends that the evidence was insufficient on all counts
because the affirmative acts giving rise to the criminal charges
occurred outside of the applicable statutes of limitations. Defendant
also claims that the district court erroneously excluded evidence
regarding his good faith belief that his conduct was legal. 1 Our
jurisdiction arises under 28 U.S.C. §1291 .
During
the relevant period, Defendant received interest and dividend income
from savings and brokerage accounts. When Defendant opened these
accounts between 1977 and 1984, he provided false social security
numbers to his bank and brokerage firms (collectively "the
payors"). The payors issued Internal Revenue Service
("IRS") Forms 1099 annually for the 1984-87 tax years,
reporting Defendant's income to the IRS under the false social security
numbers. Defendant received the 1099 forms for the 1984-87 tax years
from the payors, but never filed income tax returns for these years. In
March 1991, Defendant was indicted on four counts of tax evasion for the
years 1984-87 respectively and three counts of false representation of
social security numbers. Following a jury trial, Defendant was convicted
of all counts.
The
federal tax evasion statute provides that "[a]ny person who
willfully attempts in any manner to evade or defeat any tax imposed by
this title or the payment thereof shall . . . be guilty of a felony . .
.." 26 U.S.C. §7201 . The elements of a §7201 violation are an
affirmative act constituting an evasion or attempted evasion of the tax,
willfullness, and the existence of a substantial tax deficiency. Sansone
v. United States [65-1
USTC ¶9307 ], 380 U.S. 343, 351 (1965); United States v.
Swallow [75-1 USTC ¶9267 ],
511 F.2d 514, 519 (10th Cir.), cert. denied, 423 U.S. 845 (1975).
The failure to file a tax return is insufficient to establish the
affirmative act necessary for a §7201
conviction. Spies v. United States [43-1 USTC ¶9243 ],
317 U.S. 492, 499 (1943). A tax evasion prosecution must be commenced
within six years after the commission of the offense. 26 U.S.C. §6531(2) .
Defendant
argues that the evidence is insufficient on the four tax evasion counts
because the government failed to prove an affirmative act within the six
year statute of limitations. Defendant concedes that he provided false
social security numbers to the payors between 1977 and 1984, but argues
that these affirmative acts cannot support his conviction because they
occurred more than six years prior to the indictment. The government
counters by arguing that Defendant's "annual reaffirmation"--i.e.
failure to correct--the erroneous social security numbers on the 1099
forms that he received from the payors constitutes an affirmative act
within the limitations period. See United States v. Williams [91-1
USTC ¶50,197 ], 928 F.2d 145, 149 (5th Cir.) (knowingly
maintaining false W-4 form on file with employer constituted affirmative
act supporting §7201 conviction), cert.
denied, 112 S.Ct. 58 (1991).
We
need not decide whether Defendant's failure to correct the erroneous
social security numbers satisfies the "affirmative act"
element of §7201 because Defendant's
argument is premised on the erroneous assumption that an affirmative act
commences the running of the statute of limitations. Generally, the
statute of limitations does not begin to run until the crime is
complete. Toussie v.
United States
, 397
U.S.
112, 115 (1970); Pendergast v.
United States
, 317
U.S.
412, 418 (1943). "A crime is complete as soon as every element in
the crime occurs."
United States
v. Musacchio, 968 F.2d 782, 790 (9th Cir. 1991). Because a tax
deficiency is an essential element of the crime of tax evasion, Sansone
[65-1 USTC ¶9307 ],
380
U.S.
at 343; Swallow [75-1 USTC ¶9267 ],
511 F.2d at 514, the statute of limitations did not begin to run on
Defendant's §7201 violations until
Defendant incurred a tax deficiency. See United States v. Kafes [54-2 USTC ¶9492 ],
214 F.2d 887, 890 (3d Cir.) (tax evasion offense not complete until
defendant's tax payment became due), cert. denied, 348 U.S. 887
(1954). Defendant did not incur a tax deficiency until his tax liability
for the years 1984-87 became due--i.e. April 15 of each
succeeding year. See United States v. DiPetto [91-2
USTC ¶50,407 ], 936 F.2d 96, 97 (2d Cir.) (per curiam) (tax
deficiency element satisfied after April 15 of each year defendant
failed to file tax return), cert. denied, 112 S.Ct. 193 (1991).
Therefore, Defendant's earliest act of tax evasion was not complete
until April 15, 1985. See id. at 98 ("limitations period
began on the day on which the tax returns were due"). See also 85
A.L.R.Fed. Limitations Period-Tax Evasion §3 [a] at 885 (1987) (when
tax evasion based on failure to file return, statute of limitations
begins to run when return is due). The indictment, returned in March
1991, timely commenced the prosecution of Defendant for tax evasion
within the six-year statute of limitations. 2
Defendant
raises a similar statute of limitations argument relating to his
convictions for false representations of social security numbers. 42
U.S.C. §408(a)(7)(B). The statute under which Defendant was convicted
provides, in relevant part,
[w]hoever, . .
. for any . . . purpose, . . . with intent to deceive, falsely
represents a number to be the social security account number assigned by
the Secretary to him or to another person, when in fact such number is
not the social security account number assigned by the Secretary to him
or to such other person, . . . shall be guilty of a felony . . ..
Id.
As §408(a)(7)(B) does not contain its own statute of limitations, the
general five year statute of limitations for non-capital offenses
applies. 18 U.S.C. §3282. Despite the undisputed evidence that
Defendant's last false representation of a social security number to a
payor occurred in 1984, more than five years prior to the return of the
indictment, the government contends that a violation of §408(a)(7)(B)
is a continuing offense that is not completed until Defendant corrects
the false numbers, and that Defendant committed new acts of false
representation when he reaffirmed the social security numbers by failing
to correct the 1099 forms he received from the payors.
The
continuing offense doctrine "should be applied in only limited
circumstances . . . [in which] the explicit language of the substantive
criminal statute compels such a conclusion, or the nature of the crime
involved is such that Congress must assuredly have intended that it be
treated as a continuing one." Toussie, 397
U.S.
at 115. See also 18 U.S.C. §3282 (statute of limitations should not be
extended "[e]xcept as otherwise provided by law"). In Toussie,
the defendant was prosecuted for failing to register for the draft and
moved to dismissed on statute of limitations grounds because the
prosecution was initiated more than five years after he was initially
required to register. The lower courts had interpreted the statute,
which required all male citizens between the ages of eighteen to
twenty-six to register, as imposing a continuing duty to register until
the age of twenty-six. The Supreme Court reversed, finding nothing in
the language of the statute or in the nature of the crime to compel the
conclusion that failing to register was a continuing offense. Toussie,
397
U.S.
at 120-22.
Like
the statute at issue in Toussie, nothing in the plain language of
§408(a)(7)(B) nor the nature of the crime itself supports the
government's contention that Congress intended it to be a continuing
offense. Section 408(a)(7)(B) prohibits "falsely represent[ing] a
social security number." Had Congress intended the crime to
continue beyond the point that Defendant made the false representations,
Congress could easily have prohibited concealing or failing to disclose
a true social security number as it did in another subsection. See 42
U.S.C. §408(a)(4)
(prohibiting "conceal[ing] or fail[ing] to
disclose" the occurrence of an event affecting the continued right
to payment). See also United States v. Morrison, 43 F.R.D. 516,
519 (N.D. Ill. 1967) (failure to notify Social Security Administration
of beneficiary's death was a continuing course of conduct under §408(a)(4)
until notification of death was provided). However, by only
prohibiting a false representation, Congress expressed its
intention that the crime is complete at the time of the representation.
See
United States
v. Joseph, 765 F.Supp. 326, 330 (
E.D. La.
1991) (violation of §408(a)(7)(B) is complete when the false
representation is made).
Similarly,
we find no merit in the government's contention that Defendant's failure
to correct the erroneous social security numbers constituted a
reaffirmation of the false representation. After Defendant falsely
represented the social security numbers to the payors, he made no
further representations of the erroneous social security numbers nor did
he file any income tax returns. While the payors relied on Defendant's
false representation and conveyed the erroneous social security numbers
to the IRS within the limitations period, Defendant is criminally liable
only for his own false representations under the plain language of the
statute. Cf. United States v. Davis, 533 F.2d 921, 928 (5th Cir.
1976) (government agency's reliance, within five years of indictment, on
defendant's earlier false representations did not extend statute of
limitations for conspiring to violate 18 U.S.C. §1001 by knowingly and
willfully making false statements). To accept the government's
construction of the statute would require us to read into the statute an
affirmative duty by Defendant to correct the erroneous social security
numbers on the 1099 forms he received from the payors. Absent some
support in the language of the statute for the government's
construction, we decline to adopt it. Because the evidence was
undisputed that Defendant's last false representation of a social
security number occurred in 1984, and the indictment was not returned
until 1991, the prosecution for false representations of social security
numbers was barred by the five-year statute of limitations.
Finally,
Defendant contends that the district court erroneously excluded
documentary evidence relating to his asserted good-faith belief that he
had no legal duty to file income tax returns. See Cheek v. United
States [91-1
USTC ¶50,012 ], 111 S.Ct. 604, 610-11 (1991) (good-faith
misunderstanding of the law or good-faith belief that one is not
violating the law negates willfullness element in §7201
prosecution). We review for an abuse of discretion and will
reverse "only if the exclusion of the evidence is so significant
that it results in 'actual prejudice' because it has a 'substantial and
injurious effect or influence in determining the jury's verdict.' "
United States v. Fingado [91-2
USTC ¶50,528 ], 934 F.2d 1163, 1164 (10th Cir.) (quoting United
States v. Vreeken [87-1
USTC ¶9187 ], 803 F.2d 1085, 1090 (10th Cir. 1986), cert.
denied, 479
U.S.
1067 (1987)), cert. denied, 112 S.Ct. 320 (1991).
The
district court permitted Defendant to testify extensively about his
misunderstanding of the tax laws. Defendant, a retired psychiatrist who
up until at least 1978 had annually filed a tax return, testified that
he did not file tax returns for 1984-87 due to his honestly held belief
that the Internal Revenue Code ("IRC") did not require persons
to annually file an income tax return. After receiving information from
a tax protester organization, Defendant researched the tax law.
Defendant read the United States Supreme Court's opinion in Flora v.
United States [60-1 USTC ¶9347 ],
362 U.S. 145 (1960), and copied it, underlining a sentence which reads:
"Our system of taxation is based upon voluntary assessment and
payment, not upon distraint."
Id.
at 176 (footnote omitted). Defendant then looked up the definition of
"distraint" finding it to be defined as "coercion or
force." Defendant testified that this research confirmed his belief
that the act of filing a tax return was voluntary, but that if he did
not file a return, the government would bill him. Defendant testified
that he would have paid the tax if the government had sent him a bill.
Defendant
also testified that he later purchased a book entitled How Anyone Can
Stop Paying Income Taxes by Irwin Schiff which confirmed his belief
that the filing of a tax return is voluntary and that the IRS must
assess taxes and send the taxpayer a bill. The Schiff book cited to
sections in the IRC which Defendant subsequently purchased. Defendant
confirmed that the Schiff book's IRC citations were correct thereby
furthering his belief that the filing of a return was voluntary and that
the IRS would eventually bill him. During his legal research, Defendant
took a series of handwritten notes.
Defendant
sought to introduce into evidence his underlined copy of the Flora
opinion, his marked up copy of the Schiff book and the 1984 and 1987
IRC's, as well as his handwritten legal research notes. The district
court rejected the admission of these exhibits recognizing "a
danger of prejudice . . . that outweigh[ed] any evidentiary purpose that
could be served with regard to the issue of willfullness . . .."
However, the district court permitted Defendant to physically possess
the exhibits on the witness stand, to display them to the jury, and to
read all pertinent portions to the jury and explain their impact on his
alleged misunderstanding of the tax laws. Defendant quoted pertinent
passages from the Flora opinion, and the judge even read the
underlined passage to the jury. Defendant also quoted several passages
from the Schiff book and various portions of the IRC. Finally, Defendant
was permitted to explain each passage of his handwritten notes to the
jury.
Because
the willfullness element of §7201
requires the specific intent to evade taxes, a defendant in a
tax evasion prosecution "is entitled to wide latitude in the
introduction of evidence which tends to show lack of specific
intent." United States v. Brown [69-2 USTC ¶9479 ],
411 F.2d 1134, 1137 (10th Cir. 1969) (reversing tax evasion conviction
due to district court's exclusion of transcripts of testimony of the
defendant's superior, who was not available to testify, which
corroborated defendant's claimed belief that merchandise and services he
received were nontaxable). See also Vreeken [87-1
USTC ¶9187 ], 803 F.2d at 1089-90 (district court's
limitation of defendant's testimony concerning his reasoning in
structuring tax shelters was error in §7201 prosecution).
"[F]orbidding the jury to consider evidence that might negate
willfullness . . . raise[s] a serious question under the Sixth
Amendment's jury trial provision." Cheek [91-1
USTC ¶50,012 ], 111 S.Ct. at 611. Nonetheless, "Cheek
[does] not require the admission of any and all evidence showing a basis
for the defendant's belief." Fingado [91-2
USTC ¶50,528 ], 934 F.2d at 1165 n.1.
Defendant
was permitted to testify concerning the basis of his claimed good-faith
misunderstanding of the tax laws. The trial court permitted Defendant
wide latitude in reading pertinent excerpts from the Flora
opinion, Schiff book, IRC's, and his notes to the jury. Defendant was
simply not permitted to introduce these documents as exhibits. In United
States v. Hairston [87-1 USTC ¶9356 ],
819 F.2d 971 (10th Cir. 1987), we found no abuse of discretion on
similar facts noting that "[t]he court did not prevent [the
defendant] from mounting a defense . . . but rather exercised its
discretion regarding the form in which such evidence should be admitted
so as to minimize jury confusion."
Id.
at 973. See also United States v. Mann [89-2 USTC ¶9516 ],
884 F.2d 532, 538 (10th Cir. 1989). Defendant's direct testimony was far
more probative on the issue of his good faith misunderstanding of the
tax laws than the actual materials. See Mann [89-2 USTC ¶9516 ],
884 F.2d at 538; Hairston [87-1 USTC ¶9356 ],
819 F.2d at 973. See also Fingado [91-2
USTC ¶50,528 ], 934 F.2d at 1164-65 (any error in excluding
exhibits was harmless when defendant testified about claimed good-faith
misunderstanding of tax laws); United States v. Harrold [86-2 USTC ¶9543 ],
796 F.2d 1275, 1284-85 (10th Cir. 1986) (same), cert. denied, 479
U.S.
1037 (1987). Moreover, permitting legal materials into the jury room
creates the potential for undue jury confusion concerning the governing
law. See United States v. Willie [91-2
USTC ¶50,409 ], 941 F.2d 1384, 1395-98 (10th Cir. 1991)
(alternatively holding that exhibits, which included statutes, a treaty,
a historical treatise, and letters from defendant, were properly
excluded under Fed. R. Evid. 403), cert. denied, 112 S.Ct. 1200
(1992). Given that Defendant was permitted to testify extensively
concerning the basis for his claimed good-faith misunderstanding of the
tax laws and was permitted read the pertinent excerpts of the materials
on which he allegedly relied, we find no abuse of discretion by district
court in refusing to accept the proffered exhibits into evidence.
Defendant's
motion to transmit the original exhibits to this court as part of the
record on appeal is DENIED. Defendant's convictions for tax evasion are
AFFIRMED. Defendant's convictions for falsely representing social
security numbers are REVERSED. The case is REMANDED to the district
court with instructions to VACATE Defendant's convictions for falsely
representing social security numbers and for any further proceedings
consistent with this opinion.
*
The Honorable Donald P. Lay, Senior Circuit Judge, United States Court
of Appeals for the Eighth Circuit, sitting by designation.
1
Notwithstanding that Defendant has included copies of the exhibits he
claims were erroneously excluded in his appendix filed in this court,
Defendant has also brought a motion in this court to accept the original
exhibits. See 10th Cir. R. 10.2.2.
2
Several circuits have held that a prosecution under §7201 is timely if
commenced within six years of the last affirmative act of evasion. DiPetto
[91-2
USTC ¶50,407 ], 936 F.2d at 98; Williams [91-1
USTC ¶50,197 ], 928 F.2d at 149; United States v. Ferris
[86-2 USTC ¶9844 ],
807 F.2d 269, 271 (1st Cir. 1986), cert. denied, 480 U.S. 950
(1987); United States v. Trownsell [66-2 USTC ¶9661 ],
367 F.2d 815, 816 (7th Cir. 1966) (per curiam). Courts have relied on
this reasoning to extend the statute of limitations beyond six years
after the defendant incurred a tax deficiency when the defendant has
taken a subsequent affirmative act to conceal his crime. See Ferris
[86-2 USTC ¶9844 ],
807 F.2d at 272 (§7201
prosecution for evading 1976-77 taxes timely commenced in
1985 when defendant made affirmative statements in 1979 and 1983 to IRS
agents to conceal income); Trownsell [66-2
USTC ¶9661 ], 367 F.2d at 816 (§7201 prosecution for
evading 1946-53 taxes timely commenced in 1964 when defendant
transferred assets to Swiss bank account in 1961 to conceal charged
evasion). Moreover, the Supreme Court has held that when the defendant,
charged under §7201 , files a false tax
return subsequent to the due date, the statute of limitations begins
running when the return is filed rather than when the return is due. United
States v. Habig [68-1
USTC ¶9243 ], 390 U.S. 222, 224-25 (1968). We have similarly
held that when the defendant files a false amended return after the due
date, the statute of limitations in a tax evasion prosecution does not
begin to run until filing of the amended return rather than the original
due date. United States v. Samara [81-1
USTC ¶9220 ], 643 F.2d 701, 704 (10th Cir.), cert.
denied, 454 U.S. 829 (1981). We do not read these cases to stand for
the proposition that the statute of limitations always commences at the
point the defendant takes his final affirmative act to evade taxes.
Rather, these cases are consistent with our holding that the statute of
limitations in a §7201 prosecution does not
begin to run until the defendant has taken an affirmative act and
incurred a tax deficiency. Cf. United States v. Myerson [66-2 USTC ¶9753 ],
368 F.2d 393, 395 n.1 (2d Cir. 1966) (per curiam) (when defendant filed
tax return early, statute of limitations on tax evasion prosecution
began running on date return was due rather than date when defendant
filed return), cert. denied, 386 U.S. 991 (1967).
[92-2 USTC
¶50,329]
United States of America
, Appellee v. Debra L. Jones, Defendant-Appellant
(CA-2), U.S. Court of Appeals, 2nd
Circuit, 91-1559, 3/10/92, Affirming an unreported District Court
decision
[Code Sec.
7203 ]
Failure to file return: Admissibility of evidence.--A district
court did not err in admitting an IRS transcript of an individual's
federal income tax liability for a prior year because the transcript was
not introduced to prove the content of the taxpayer's return. The IRS
witness who testified as to the contents of the transcript was not
required to verify its accuracy or to be the compiler of the
information. The failure to give a limiting instruction could not be
reviewed. The record indicated that the taxpayer never asked for a
limiting instruction or objected to the omission of a limiting
instruction by the time the jury retired.
Andrew
J. Maloney, United States Attorney, Brooklyn, N.Y. 11201, Charles P.
Rosenberg, Assistant Attorney General, Washington, D.C., Shirley D.
Peterson, Assistant Attorney General,
Rob
ert E. Lindsay, Alan Hechtkopf, Brett Dignam, Department of Justice,
Washington, D.C. 20530, for appellee. Richard S. Kestenbaum, Paula
Schwartz Frome, Kestenbaum & Mark, Great Neck, N.Y., for
defendant-appellant.
Before:
WINTER and MAHONEY, Circuit Judges, and KORMAN, District Judge. *
WINTER,
Circuit Judge:
Debra
Jones appeals from her conviction by a jury before Magistrate Judge
Jordan for failure to file federal income tax returns for calendar years
1984 through 1986, in violation of 26 U.S.C. §7203
(1988). Ms. Jones claims that the district court erred in
admitting into evidence an IRS transcript of Ms. Jones' federal income
tax liability for 1982, and in failing to give a limiting instruction
regarding the admission of certain
New York
tax amnesty papers. Both contentions are without merit.
With
regard to the 1982 IRS transcript--a two-page summary purporting to
describe all transactions concerning her tax liability for that
year--Ms. Jones contends that the government should have produced her
original 1982 tax return under Fed. R. Evid. 1002 and that the IRS
witness who testified about the transcript was required either to verify
its accuracy or to have been the compiler of the information. We
disagree.
Fed.
R. Evid. 1002 requires that, "[t]o prove the content of a
writing," the original document must be introduced. However, where
evidence concerning a document is introduced to prove something other
than content, Rule 1002 does not apply. For example, in United States
v. Sliker, 751 F.2d 477, 483-84 (2d Cir. 1984), cert. denied,
470 U.S. 1058 (1985), we held that oral testimony about an insurance
policy was properly admitted to prove the existence of insurance, in
contrast to proving the terms of the policy. For similar reasons, Rule
1002 does not bar admission of the 1982 transcript in the instant
matter.
Jones'
defense was that she did not file her tax returns from 1984 through 1987
because she believed that a taxpayer could not file a return without
paying taxes due. The 1982 transcript was introduced to demonstrate that
Ms. Jones had filed her 1982 tax return without remitting payment but
made later payments on her tax obligation for that year, conduct
inconsistent with her stated belief that filing and payment had to go
together. The transcript was thus not introduced to prove the content of
her 1982 return.
The
fact that Ms. Jones testified that the subsequent payments for 1982 were
solely to remedy a miscalculation on her 1982 return for which the IRS
billed her after recomputation does not alter our conclusion. It is true
that her testimony did raise an issue as to the content of the 1982
return, by asserting that, but for the miscalculation, taxes withheld
were sufficient to cover the tax obligation reflected on the return.
However, the fact that Ms. Jones put the content of the return in issue
did not create a burden on the government to produce the return. The
transcript did not indicate that there had been a recomputation by the
IRS for which Ms. Jones had been billed and thus, even in the context of
her testimony, did not purport to speak to the content of her tax
return. We therefore agree with the Magistrate Judge that her testimony
in that regard affected only the weight and not the admissibility of the
transcript. If Ms. Jones desired documentation to support her testimony,
therefore, she should have provided it.
Appellant
further contends that the IRS witness who testified as to the contents
of the transcript should have been able to verify its accuracy or at
least have been the original compiler of the information. We disagree.
Fed. R. Evid. 803(8) allows public records and reports to be admitted
into evidence when they concern matters upon which observation and
reports by the particular government agency are required. By the very
terms of the Rule, such a record need not be verified for accuracy by
the witness and the witness need not be the person who compiled the
information. Rather, the record or report is deemed admissible unless it
appears untrustworthy. There is no such appearance of untrustworthiness
in the present matter. The Magistrate Judge therefore properly admitted
the 1982 tax transcript into evidence.
Jones
next argues that the court erred by not giving a limiting instruction
concerning appellant's filing of delinquent tax returns under a New York
State tax amnesty program. She contends that she requested an
instruction limiting consideration of that evidence to the issue of
intent. The record, however, indicates that appellant never asked for
such a limiting instruction. Defense counsel inquired as to whether the
court would give an instruction limiting consideration of the evidence
to Jones' ability to pay. When the court responded that the evidence had
been admitted on the issue of intent, counsel did not pursue the matter.
We
have held that, if the defendant does not object to the omission of a
limiting instruction by the time the jury retires, it cannot be reviewed
except in the absence of plain error under Fed. R. Crim. P. 30. We have
further held in analogous circumstances that the failure to give a
limiting instruction does not constitute plain error. See United
States v. Bermudez, 526 F.2d 89, 97 (2d Cir. 1975), cert. denied,
425 U.S. 970 (1976). We find no such plain error here. The government
advanced no argument to the jury that broadened the import of the
evidence in question, and we have no reason to speculate that the jury
gave it any such broadened consideration.
Affirmed.
*
The Honorable Edward R. Korman, U.S. District Judge for the Eastern
District of New York, sitting by designation.
[92-2 USTC
¶50,417]
United States of America
, Plaintiff-Appellee v.
Lawrence
Beall, Defendant-Appellant
(CA-7), U.S. Court of Appeals, 7th
Circuit, 91-3099, 8/6/92, 970 F2d 343, Affirming an unreported District
Court decision
[Code Secs.
7201 and 7203 ]
Crimes: Returns: Tax protestor: Tax evasion: Failure to file:
Willfulness.--A subcontractor who received earned income for
services rendered but who directed that his paychecks be made payable to
a tax avoidance organization was properly convicted of tax evasion and
failure to file income tax returns. The taxpayer's claim that the
evidence was insufficient to support the jury's verdict of guilty was
unfounded. Testimony and documentary evidence established that the
subcontractor received earned income and filed no returns; thus, the
existence of a tax deficiency was proven. Moreover, the taxpayer's
admissions to a co-worker, as well as instructions to make checks
payable to the tax protest organization, were indicative of his willful
evasion of taxes. Finally, an IRS agent's expert testimony was within
his area of expertise, and admission of that testimony was not
erroneous.
Barry
R. Elden, Diane L. Saltoun, Assistant United States Attorneys, Chicago,
Ill. 60604, for plaintiff-appellee. Raymond D. Pijon,
134 N. LaSalle St.
,
Chicago
,
Ill.
60602
, for defendant-appellant.
Before
CUMMINGS, MANION, and KANNE, Circuit Judges.
CUMMINGS,
Circuit Judge:
A
jury convicted Lawrence Beall of tax evasion for the tax years 1986,
1987, and 1988, 26 U.S.C. §7201 , and failing to
file an income tax return for the same taxable years, 26 U.S.C. §7203 . The district court
sentenced Beall to sixteen months' imprisonment, followed by three
years' supervised release and five years' probation to run concurrently
to the supervised release term, but consecutively to the term of
imprisonment. Beall appeals only his convictions. We affirm.
BACKGROUND
Beall
filed federal income tax returns from 1966 through 1969 but thereafter
stopped. During the 1986-1988 tax years involved in the indictment,
Beall worked as a subcontractor for Arthur D. Little Valuation Inc.
("A.D. Little") and Touche Ross Company ("Touche
Ross"). Although he earned $121,291.26 from such work he did not
file tax returns for those years. The evidence showed that Beall
instructed A.D. Little and Touche Ross to make his paychecks payable to
Mid-America Commodity and Barter Association (MACBA), rather than
directly to him. The evidence also revealed that MACBA was a First
Amendment organization designed to aid individuals who wished to avoid
paying taxes and detection by the IRS.
Beall,
with the aid of "shadow counsel," represented himself at
trial. 1 He chose not
to testify or put on any evidence. Pursuant to Federal Rule of Criminal
Procedure 29, he moved for a judgment of acquittal at the completion of
the government's case and again at the close of all the evidence on the
ground that the evidence was insufficient to support convictions for tax
evasion and failure to file tax returns. The district court denied both
motions, and the jury convicted Beall.
On
appeal, Beall argues that the district court erred in denying his
motions for acquittal and renews his claim that the government failed to
present sufficient evidence from which the jury could find him guilty
beyond a reasonable doubt. Additionally, he argues that he is entitled
to a new trial because the district court erroneously admitted an IRS
agent's testimony as expert testimony.
A.
Sufficiency of the Evidence
This
Court's review of the denial of judgment of acquittal based on
insufficiency of the evidence is extremely limited.
United States
v. Hagan, 913 F.2d 1278, 1281 (7th Cir. 1990). The jury's
verdict will not be overturned unless no rational trier of fact could
have found the essential elements of the charged crime beyond a
reasonable doubt. United States v. Johnson, No. 91-1857, slip op.
at 13 (7th Cir. June 12, 1992). Of course, in making this determination,
we view the evidence in the light most favorable to the government and
defer to the jury's reasonable inferences drawn therefrom.
Id.
1.
Tax Evasion
To
prove a violation of 26 U.S.C. §7201 , the government
must demonstrate the existence of a tax deficiency, that the defendant
acted willfully, and that the defendant took an affirmative step to
elude or defeat the payment of tax. United States v. Jungles [90-1
USTC ¶50,289 ], 903 F.2d 468, 473 (7th Cir. 1990). Beall
argues that there is not sufficient evidence to show a tax deficiency
because the government never proved that he received any income during
the years charged in the indictment. In support of his argument, Beall
points out that all of the checks for his services to A.D. Little and
Touche Ross were made payable to MACBA and there was no evidence that
MACBA paid any portion of that money back to him.
This
argument is unpersuasive. The government need not prove that Beall
received money from MACBA in order to obtain a conviction under §7201 , because earned
income is taxable to those who earn it. Commissioner v. Culbertson
[49-1 USTC ¶9323 ],
337 U.S. 733, 739-40 (1949). The fact that Beall directed A.D. Little
and Touche Ross to make his checks payable to MACBA does not change the
fact that these payments were made for services rendered by Beall. See
United States v. Basye [73-1
USTC ¶9250 ], 410 U.S. 441, 450 (1972) ("he who earns
income may not avoid taxation through anticipatory arrangements no
matter how clever or subtle .. . ."). Thus, the government need
only show that Beall received money for services rendered and that he
had federal income tax due. The government presented testimony and
documentary evidence that Beall earned $121,291.26 for work he performed
at A.D. Little and Touche Ross during the years 1986-1988 and that he
did not file tax returns during those years. 2 This was
sufficient to prove a tax deficiency.
Next,
Beall argues that the government's evidence was insufficient to prove
the existence of willfulness and an affirmative act of tax evasion. He
asserts that the only evidence in support of the government's position
that he willfully evaded the tax laws is that he instructed A.D. Little
and Touche Ross to make his checks payable to MACBA. According to Beall,
this arrangement with MACBA was lawful and the government presented no
direct evidence that Beall used MACBA to avoid paying his taxes.
Beall's
argument ignores the evidence in this case. The government did not
merely present evidence that Beall had his checks made payable to MACBA.
At trial, David Berkey, a former employee of A.D. Little, testified that
when he attempted to obtain a taxpayer identification number from MACBA,
all he received was a letter from MACBA, in which it identified itself
as a First Amendment organization that did not need a taxpayer
identification number. The government also called Marvin Dinter, who,
several months before Beall's trial, had pleaded guilty to filing
fraudulent income tax returns and, as part of his plea agreement, agreed
to assist the government in exposing the illegal activities of MACBA.
Dinter testified that he had heard about MACBA at a meeting of the New
Jersey Americans for Constitutional Taxation. He explained to the jury
that in order to avoid paying taxes, he would send checks he received
from his clients to MACBA and two or three weeks later he would receive
cash back from MACBA, which he did not report on his personal tax
return. The jury also heard testimony that Beall did not file tax
returns during the time he had his checks sent to MACBA and that he had
admitted to a former Touche Ross co-worker, Tom Goebelt, that he did not
pay taxes because he believed taxes were unconstitutional. Goebelt
further testified that Beall told him that he made all his purchases
with cash and did not have a savings account in order to conceal his
assets from the government.
Beall's
contention that the government's evidence proved only that Dinter
willfully evaded the tax laws is without merit. The jury was entitled to
believe Dinter's unrefuted testimony that MACBA was an organization
which aided individuals in concealing their taxable income from the
federal government. See Jungles [90-1
USTC ¶50,289 ], 903 F.2d at 472 (in furtherance of scheme to
evade income tax, the defendant instructed his employer to make
paychecks payable to MACBA a "clearinghouse for tax protesters and
persons who wished to avoid detection by the IRS"). Further,
although there was no direct evidence that Beall used MACBA to conceal
his income from the IRS, in light of Dinter's unrefuted testimony, it
was reasonable for the jury to infer that one purpose of Beall's
assignment of wages to MACBA was to evade paying income taxes. See
United States v. Morris, 957 F.2d 1391, 1396 (7th Cir. 1992)
(circumstantial evidence may provide the sole support for a conviction).
This inference is bolstered by Beall's failure to file income tax
returns during the years that he assigned his income and the admissions
he made to Goebelt.
The
government's objectives would have been better served had they presented
evidence that Beall actually received money back from MACBA. Moreover,
we cannot understand why the government did not present specific
evidence of the precise methods by which Beall used MACBA to conceal his
income. Nevertheless, viewing the evidence in the government's favor and
the jury's verdict under the limited standard of review, as we must, we
conclude that a rational jury could reasonably find that Beall requested
that A.D. Little and Touche Ross send his checks to MACBA in order to
evade the taxes which he owed. Accordingly, the evidence was sufficient
to support a conviction for willful tax evasion under §7201 . 3
2.
Failure to File Income Tax Returns
To
prove a violation of 26 U.S.C. §7203 , the government
must demonstrate that Beall was required to file a return, that he
failed to file a return, and that this failure was willful. In support
of his claim that the evidence was insufficient to sustain a conviction
under §7203 , Beall reasserts
his argument that the government failed to prove that he earned income
during the years charged in the indictment. As stated earlier, this
argument is unpersuasive.
The
evidence established that during the years 1986-1988 Beall earned
$121,291.26 for work he performed at A.D. Little and Touche Ross, that
he did not file tax returns during those years, that he attempted to
avoid paying income tax on these earnings by transferring his paychecks
to MACBA, and that he admitted to a former co-worker that he did not pay
taxes. Considering this evidence, the jury could have reasonably
concluded beyond a reasonable doubt that Beall violated §7203 .
B.
Expert Testimony
Last,
Beall argues that he is entitled to a new trial because the district
court improperly permitted expert IRS Agent Wagner to testify to matters
which exceeded the scope of his expertise and invaded the province of
the jury. Specifically, Beall contends that Agent Wagner's testimony was
inadmissible evidence under United States v. Benson [91-2
USTC ¶50,437 ], 941 F.2d 598 (7th Cir. 1991). In Benson,
this court reversed the defendant's conviction and ordered a new trial
because the government's expert witness, an IRS agent, testified to the
ultimate issues of whether the taxpayer had received income from
underwriters for investigative fees rather than as a non-taxable payment
of a settlement and whether the taxpayer was entitled to Social Security
Disability benefits.
Id.
at 605. The Benson court noted that these matters were not within
the IRS agent's area of expertise because they involved "no tax law
concept or accounting principle to explain."
Id.
As such, the expert's testimony concerning these matters consisted
merely of "inferences from the evidence that he was no more
qualified than the jury to draw."
Id.
Ordinarily
this court reviews a district court's determination of the admissibility
of expert testimony for an abuse of discretion. United States v.
Tipton, No. 90-3649, slip op. at 7 (7th Cir. May 20, 1992). However,
because Beall failed to object to the testimony at trial, this court
reviews the admissibility of the expert's testimony for plain error.
United States
v. Kladouris, No. 90-3540, slip op. at 15 (7th Cir. May 20,
1992). A defendant prevails under the plain error standard only if he
can demonstrate that the alleged error resulted in an "actual
miscarriage of justice." United States v. Torres, No.
91-1803, slip op. at 5 (7th Cir. June 2, 1992).
Here
it was not error, much less plain error, for the district court to admit
Wagner's testimony. Beall improperly characterizes Wagner's testimony as
bolstering Dinter's testimony and answering the ultimate
question--whether Beall used MACBA to conceal income from the IRS. The
record reveals that Wagner did not discuss Dinter's testimony, the
nature of MACBA, or the tax consequences of Beall's assignment of his
checks to MACBA. Rather, Wagner merely summarized the government's
documentary evidence (financial evidence such as: canceled checks,
payment vouchers, invoices, and check request forms) regarding Beall's
employment during the years 1986-1988 and testified as to the tax
consequences of Beall's relationship with A.D. Little and Touche Ross.
This testimony was within Wagner's area of expertise. See Benson
[91-2
USTC ¶50,437 ], 941 F.2d at 605.
CONCLUSION
For
the reasons stated, Beall's convictions are
AFFIRMED.
1
Attorney Raymond Pijon acted as Beall's "shadow counsel"
throughout the trial and argued Beall's motion for acquittal at the
close of the government's case.
2
Beall does not challenge the government's evidence with regard to his
employment and his failure to file tax returns during the years
1986-1988.
3
Beall does not contend that the jury instructions concerning the term
"willful" under §§7201 and 7203 did not comply with Cheek
v. United States [91-1
USTC ¶50,012 ], 111 S.Ct. 604 (1991).
[91-2 USTC
¶50,528]
United States of America
, Plaintiff-Appellee v. Donald G. Fingado, Defendant-Appellant
(CA-10), U.S. Court of Appeals,
10th Circuit, No. 89-2318, 6/4/91, Affirming an unreported District
Court decision
[Code Sec.
7203 ]
Crimes: Willful failure to file returns: Evidence: Admission:
Willfulness.--An individual's conviction for the willful failure to
file income tax returns was affirmed where a pattern of filing returns
and then failing to file returns was established. No returns were filed
for years in which there was substantial income, and attempts were made
to avoid records of income. No denial of the due process right to a fair
trial occurred where an individual was able to submit to the jury the
substance of his good-faith theory that he was not required to file a
return, even though the contents of a book describing a successful civil
case history of avoiding taxes were not admitted into evidence. Evidence
of the individual's failure to file returns for several years before the
tax years in question was properly admitted to establish that he knew of
his duty to file and willfully failed to do so. A "deliberate
ignorance" jury instruction was proper where an individual did not
consult with an attorney or accountant to verify his understanding of
the tax law, knew his interpretation differed from that of the IRS, and
attended tax avoidance seminars to bolster his beliefs.
William
L. Lutz, United States Attorney, Paula G. Burnett, Assistant United
States Attorney, Albuquerque, N.M. 87103, for plaintiff-appellee. Teresa
E. Storch, Assistant Federal Defender,
615 1st St., N.W.
,
Albuquerque
,
N.M.
87103
, for defendant-appellant.
SUBMITTED ON THE BRIEFS:
Teresa
E. Storch, Assistant Federal Defender,
Albuquerque
,
New Mexico
, Attorney for Defendant-Appellant.
William
L. Lutz, United States Attorney, and Paula G. Burnett, Assistant United
States Attorney, Albuquerque, New Mexico, Attorneys for
Plaintiff-Appellee.
Before
ANDERSON, SETH, and EBEL, Circuit Judges.
ANDERSON,
Circuit Judge:
Donald
Fingado appeals his conviction for three counts of willful failure to
file an income tax return for the years of 1981, 1982 and 1983 in
violation of 26 U.S.C. §7203 . We affirm.
Fingado
contends that the district court order affirming the jury's
determination of guilt before the magistrate should be reversed. He
argues that he was deprived of his due process right to a fair trial
because the trial court excluded the substance of information contained
in an exhibit, admitted evidence regarding Fingado's failure to file
income tax returns for the years 1974 to 1980, and improperly gave a
"deliberate ignorance" instruction. He also argues that there
was insufficient evidence to support the conviction.
I.
EXCLUSION OF SUBSTANCE OF INFORMATION CONTAINED IN EXHIBIT
Fingado
argues that he was denied his right to due process when the trial court
prohibited him from testifying about the contents of an admitted, but
sealed, exhibit. We disagree.
Fingado
offered into evidence a book entitled The Big Bluff, Tax Tyranny in
the Guise of the Law, The Constitution v. The Tax Collector, by Art
Marvin Cooley, to support his defense that he had a good faith
misunderstanding of the law and honestly believed that he was not
required to file tax returns. The book was admitted, but taped shut so
that the jury could not review its contents. The book described, among
other things, a successful civil case history upon which Fingado
allegedly relied in forming his belief that he was not required to pay
taxes. The court prohibited Fingado from testifying about the case,
ruling that the result of other litigation was irrelevant and improper
to go to the jury.
The
admission of evidence is a matter within the trial court's discretion. United
States v. Harrold [86-2
USTC ¶9543 ], 796 F.2d 1275, 1285 (10th Cir. 1986), cert.
denied, 479
U.S.
1037 (1987). We will reverse only if the exclusion of the evidence is so
significant that it results in "actual prejudice" because it
has a "substantial and injurious effect or influence in determining
the jury's verdict." United States v. Vreeken [87-1 USTC ¶9187 ],
803 F.2d 1085, 1090 (10th Cir. 1986) (quoting United States v. Lane,
106 S.Ct. 725, 731 (1986)), cert. denied, 479
U.S.
1067 (1987).
Fingado
admits that he "testified at length concerning his sincere belief,
based on his exposure to various documents and speakers, that he was not
required to file tax returns." Appellant's Brief at 20. In
addition, he submitted numerous exhibits showing the basis for his
belief including a packet of material he had received at a seminar, one
of Mr. Cooley's tax returns upon which Fingado modeled his own 1974
return, and a statement purportedly made by the Internal Revenue chief
in California in a 1975 UPI newspaper article which Fingado interpreted
to mean that he did not need to file. It is unlikely that this testimony
would have significantly added to the evidence or swayed the jury's
determination of Fingado's sincerity in his belief. Since Fingado
"was able to submit the substance of his good-faith theory to the
jury," any error from the exclusion of the testimony was harmless. 1
United States
v. Harrold [86-2
USTC ¶9543 ], 796 F.2d at 1284-85.
II.
ADMISSION OF EVIDENCE OF FAILURE TO FILE IN PRIOR YEARS
Fingado
argues that the magistrate erred in admitting evidence that he had
failed to file tax returns in the years prior to those for which he was
charged. We disagree.
The
government introduced evidence relating to Fingado's failure to file tax
returns from 1974 to 1980 under Fed. R. Evid. 404(b) which allows the
admission of evidence of prior bad acts to prove "motive,
opportunity, intent, preparation, plan, knowledge, identity, or absence
of mistake or accident." Fingado contends that the trial court
should not have admitted the evidence because the government had failed
to satisfy its burden of identifying the particular 404(b) issues for
which the evidence was offered and articulating the inferences to be
drawn from the evidence, as required by United States v. Kendall,
766 F.2d 1426, 1436-37 (10th Cir. 1985), cert. denied, 474 U.S.
1081 (1986). However, "if the transcript reflects that the
'decision to admit' was proper under the requirements of [
United States
v.] Huddleston, [485 U.S. 681 (1988),] any failure to
adhere to
Kendall
will necessarily be harmless." United States v. Porter, 881
F.2d 878, 885 (10th Cir. 1989) (quoting United States v. Record,
873 F.2d 1363, 1375 n.7 (10th Cir. 1989)), cert. denied, 110
S.Ct. 348 (1989); see United States v. Doran, 882 F.2d 1511,
1523-24 (10th Cir. 1989).
On
review of the record, we find that the admission of the evidence
complied with the four Huddleston requirements.
United States
v. Huddleston, 485
U.S.
at 691-92. First, the evidence was offered for a proper purpose--to
establish Fingado's willfulness in failing to file his tax returns
between 1981 and 1983.
Second,
the evidence was relevant to resolving a material issue in
controversy--whether Fingado knew of his duty to file and willfully
failed to do so. Evidence of failure to file in prior years is relevant
to the issue of willfulness. United States v. Bohrer [87-1
USTC ¶9141 ], 807 F.2d 159, 161 (10th Cir. 1986) (citing United
States v. Weninger [80-2
USTC ¶9560 ], 624 F.2d 163, 167 (10th Cir.), cert. denied,
449
U.S.
1012 (1980)).
Third,
the probative value of the evidence was not substantially outweighed by
its potential for unfair prejudice. While the district court did not
expressly rule on the probativeness of the evidence, it did so
implicitly. Defense counsel objected to the evidence, in part, because
it was unfairly prejudicial. The court was, therefore, "aware of
its duty to make such a determination."
United States
v. Porter, 881 F.2d at 887. By denying the motion to exclude the
evidence, the court, in essence, rejected the defendant's prejudice
argument. We do not find that such a determination was an abuse of
discretion.
And,
fourth, since Fingado did not request a limiting instruction, the
magistrate was not required to give one.
Although
all four Huddleston requirements were met, Fingado goes on to
argue that the jury instruction given at the end of trial was overly
broad and inadequately identified the 404(b) issue for which the
evidence was admitted. 2 However,
since Fingado failed to object to the instruction at trial, we will not
consider his challenge to the language of the instruction "unless
plain error amounting to a denial of a fundamental right of the accused
is demonstrated." United States v. Doran, 882 F.2d at 1525;
see United States v. Hiland, 909 F.2d 1114, 1130 (8th Cir. 1990).
Even if the instructions were imperfect, the defect clearly does not
rise to the level of plain error. Indeed, viewing the instructions as a
whole, we find that the jury was fully and adequately instructed on the
proper use of the prior bad acts evidence.
Thus,
the admission of evidence of Fingado's failure to file in years prior to
the years charged was proper.
III.
DELIBERATE IGNORANCE INSTRUCTION
The
trial court, at the government's request, gave the jury a deliberate
ignorance instruction. The instruction stated:
The
element of knowledge may be satisfied by inferences drawn from proof
that a defendant deliberately closed his eyes to what would otherwise
have been obvious to him. A finding beyond a reasonable doubt of a
conscious purpose to avoid enlightenment would permit an inference of
knowledge. Stated another way, a defendant's knowledge of a fact may be
inferred from willful blindness to the existence of the fact.
It
is entirely up to you as to whether you find any deliberate closing of
eyes, and the inference to be drawn from any such evidence. A showing of
negligence or mistake is not sufficient to support a finding of
willfulness or knowledge.
The
required knowledge is established if the accused is aware of a high
probability of the existence of the fact in question unless he actually
believes it does not exist.
Tr. Vol. III at 12-13. Fingado
argues that the evidence was insufficient to warrant giving the
deliberate ignorance instruction. He also contends that the instruction
allowed the jury to convict him solely because he should have known that
his failure to file tax returns was illegal. We disagree.
The
deliberate ignorance instruction may be given when the evidence before
the jury supports a finding of intentional avoidance of knowledge. United
States v. Glick, 710 F.2d 639, 642 (10th Cir. 1983), cert. denied,
465
U.S.
1005 (1984); United States v. Caliendo, 910 F.2d 429, 433 (7th
Cir. 1990); United States v. Hiland, 909 F.2d 1114, 1131 (8th
Cir. 1990). In assessing the propriety of the instruction, we must view
the evidence in the light most favorable to the government.
United States
v. Caliendo, 910 F.2d at 433-34;
United States
v. Hiland, 909 F.2d at 1131.
The
record supports a finding that Fingado was aware of a high probability
that his understanding of the tax laws was erroneous and consciously
avoided obtaining actual knowledge of his obligations. Fingado admitted
that, during the time at issue, he never consulted with an attorney or
an accountant to verify his understanding of the tax laws. Instead, he
bolstered his beliefs by attending seminars on tax avoidance and
speaking with others who asserted that they were not required to file.
He admitted that he knew his interpretation differed from that of the
IRS and millions of American citizens.
Fingado
did request that the IRS send him the applicable law. However, he claims
that the Service failed to send him the Constitution and the definition
of "individual." Tr. Vol. II at 94-96. The jury could
reasonably infer that the purpose of this claim was to maintain his
defense that, since he did not have all the information he needed, he
truly misunderstood the law. The mere fact that Fingado appeared to
educate himself about the tax laws does not negate the possible
inference that he selectively educated himself "in order to have a
defense in the event of a subsequent prosecution." United States
v. Alvarado, 838 F.2d 311, 314 (9th Cir.), cert. denied, 487
U.S. 1222 (1988); see United States v. Glick, 710 F.2d at 641-42
(although defendant had appraised the value of codefendant's properties
on several occasions, other facts, including the reasonableness of the
evaluations, the appraisers' qualifications and the documentary support
of those appraisers, indicated that the defendant intentionally avoided
actual knowledge of codefendant's fraudulent over valuations and
justified a deliberate ignorance instruction); United States v.
Hiland, 909 F.2d at 1131 (defendant's awareness of adverse reactions
to drug manufactured by his company and entrustment of investigation to
employee known to be unable to determine validity and accuracy of
reported dangers justified instruction).
Fingado
also argues that the instruction improperly led the jury to convict him
on the sole ground that he should have known his conduct was illegal.
However, the magistrate fully explained the requirements to convict for
deliberate ignorance in compliance with United States v. Glick,
710 F.2d 639 (10th Cir. 1983). In addition, the court expressly directed
the jury not to convict for negligence or mistake. Rather, the court
instructed the jury that they must find willfulness beyond a reasonable
doubt, defining willfulness as actions done "voluntarily and
intentionally, and with the specific intent to do something the law
forbids." The court further instructed that acts are not willful if
Fingado "acted in accordance with a good faith misunderstanding of
the law . . . as long as he honestly believed and acted upon it in good
faith," even if not legally correct. Tr. Vol. III at 12; see
United States v. Markonoulos, 848 F.2d 1036, 1040 (10th Cir. 1988); United
States v. Glick, 710 F.2d at 643. In addition, the court reiterated
these requirements to the jury near the end of the instructions.
Thus,
we do not find that the giving of the deliberate ignorance instruction
constituted reversible error since, as a whole, the instructions
"treat[ed] the issues fairly and adequately," United States
v. Diaz, 864 F.2d 544, 551 (7th Cir. 1988), cert. denied, 490
U.S. 1070 (1989), and "provided the jury with an ample
understanding of the issues and the standards applicable." Big
Horn Coal Co. v. Commonwealth Edison Co., 852 F.2d 1259, 1271 (10th
Cir. 1988) (quoting Ramsey v. Culpepper, 738 F.2d 1092, 1098
(10th Cir. 1984)).
IV.
SUFFICIENCY OF THE EVIDENCE
Fingado
contends that the evidence was insufficient to establish the element of
willfulness necessary to convict him. We disagree.
In
reviewing for sufficiency, we must examine the evidence, both direct and
circumstantial, in the light most favorable to the government and
determine whether a reasonable jury could find the essential elements of
the crime beyond a reasonable doubt. United States v. Culpepper,
834 F.2d 879, 881 (10th Cir. 1987) (citing
Jackson
v.
Virginia
, 443
U.S.
307, reh'g denied, 444 U.S. 890 (1979)). Circumstantial evidence
alone may be sufficient to sustain a conviction. United States v.
Hooks, 780 F.2d 1526, 1529 (10th Cir.), cert. denied, 475
U.S.
1128 (1986).
The
record shows that Fingado had filed income tax returns until 1974. A
pattern of filing and then failing to file is evidence of willfulness. United
States v. Bohrer [87-1 USTC ¶9141 ],
807 F.2d 159, 161 (10th Cir. 1986). In addition, he failed to file a tax
return even after his indictment. See
United States
v. Thomas [86-1 USTC ¶9354 ],
788 F.2d 1250, 1254 (7th Cir.), cert. denied, 479 U.S. 853
(1986). Fingado also admitted receiving notices from the IRS relating to
his potential tax liability and questioning him about his failure to
file the return, requesting a response. See United States v. Sempos
[85-2 USTC ¶9683 ],
772 F.2d 1, 2 (1st Cir. 1985) (reminder notices and visits from IRS
imply willfulness). The IRS even sent Fingado the Code provisions
related to tax payment requirements and instructions for preparing a
return. Given the IRS's correspondence, Fingado admitted that he thought
the IRS may have had a different interpretation of the tax laws than he
did.
Other
indications of willfulness are evidence of a substantial income in the
years during which the defendant failed to file, United States v.
Bohrer [87-1 USTC ¶9141 ],
807 F.2d at 161-62, and attempts to avoid tracing or recording of income
by minimizing use of bank accounts and dealing in cash or other
unrecorded mediums of exchange. See United States v. Turner [86-2 USTC ¶9647 ],
799 F.2d 627, 630 (10th Cir. 1986) (review totality of the evidence
including usage of bank accounts, cash transactions and involvement in
tax avoidance organizations in determining sincerity of belief); United
States v. Conley [87-2
USTC ¶9469 ], 826 F.2d 551, 557 (7th Cir. 1987) (avoidance
of bank accounts and use of cash for expense payments is evidence of
willfulness). Fingado admits that he received approximately $116,000
during the years 1981, 1982, and 1983. In addition, Agent Thomas
testified that Fingado stopped using bank accounts in 1973, the same
year he stopped filing. Fingado also requested payment in silver on
occasion, motivated in part by the fact that silver transactions are not
recorded. And, finally, Fingado testified that he entered into an
independent contractor agreement in order to avoid withholdings from his
wages.
Thus,
the jury had sufficient evidence to reasonably conclude that Fingado
willfully failed to file a return.
In
accordance with the foregoing, we AFFIRM.
1
Fingado argues that the recent Supreme Court decision, Cheek v.
United States
[91-1
USTC ¶50,012 ], 111 S.Ct. 604 (1991), requires the trial
court to permit him to testify as to anything bearing on the
reasonability of his belief. While acknowledging that reasonableness of
belief may bear on the jury's determination of the defendant's
sincerity, Cheek did not require the admission of any and all
evidence showing a basis for the defendant's beliefs. The Supreme Court
held only that the jury should be instructed to determine the
defendant's willfulness on a subjective standard and stated that
otherwise admissible evidence showing the defendant's
"awareness" of "court decisions rejecting his
interpretation of the tax laws" may properly be considered in
making that determination. Cheek v. United States [91-1
USTC ¶50,012 ], 111 S.Ct. at 611. The Court, however, did
not require the admission of these types of legal documents or
testimony regarding their contents but rather left the determination of
admissibility within the trial court's discretion.
2
The magistrate instructed the jury to use the evidence of Fingado's
prior failure to file "for such light as it may shed, in your
opinion, on his knowledge, intent, lack of accident or lack of mistake
in each of the years in question." Tr. Vol. III at 11.