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[92-1 USTC ¶50,052] United States of America , Appellee v. Rob ert L. McGill, Defendant-Appellant

(CA-1), U.S. Court of Appeals, 1st Circuit, 91-1145, 1/3/92, Affirming an unreported District Court decision

[Code Sec. 7201 ]

Attempt to evade tax: Jury instructions: Admissibility of evidence.--A taxpayer's conviction of tax evasion was upheld because the lower court did not err in its jury instructions or in the admission of evidence that met the business records exception. Although the jury instructions were not given in the wording requested by the taxpayer, they sufficiently conveyed the taxpayer's theory. The banking deposit slips met the business records exception to the hearsay rule because, although there was a deviation in the procedure of transcribing a taxpayer identification number in the process of completing some of the forms, they were prepared by a bank employee using the regular bank procedure.

Wayne A. Budd, United States Attorney, Boston, Mass. 02109, Shirley D. Peterson, Assistant Attorney General, Yoel Tobin, Rob ert E. Lindsay, Alan Hechtkopf, Department of Justice, Washington, D.C. 20530, for appellee. Michael L. Altman, Mark W. Corner, Helen E. Morgan, Rubin and Rudman, 50 Rowes Wharf, Boston, Mass. 02110, for defendant-appellant.

Before BREYER, Chief Judge, COFFIN, Senior Circuit Judge, and SELYA, Circuit Judge.

SELYA, Circuit Judge:

Defendant-appellant Rob ert L. McGill was convicted on three counts of willfully evading the payment of income tax owing to the federal government. ¹ On appeal, McGill raises claims of error involving both the district court's jury instructions and the court's rulings in respect to the introduction of certain evidence. Finding no cognizable error, we affirm the judgment below.

I. Jury Instructions

The appellant attacks the court's charge on two fronts. Our response conforms to his battle plan.

A.

McGill first claims that the district court erred in failing adequately to instruct the jury that a mistake of law constitutes a complete defense to a charge of willful tax evasion. In addressing this claim, we acknowledge the self-evident: "It is hornbook law that an accused is entitled to an instruction on his theory of defense so long as the theory is a valid one and there is evidence in the record to support it." United States v. Rodriguez, 858 F.2d 809, 812 (1st Cir. 1988); see also Mathews v. United States, 485 U.S. 58, 63 (1988); United States v. Victoria-Peguero, 920 F.2d 77, 86 (1st Cir. 1990), cert. denied, 111 S. Ct. 2053 (1991). Nonetheless, a defendant has no right to put words in the judge's mouth. So long as the charge sufficiently conveys the defendant's theory, it need not parrot the exact language that the defendant prefers. United States v. Nivica, 887 F.2d 1110, 1124 (1st Cir. 1989), cert. denied, 494 U.S. 1005 (1990); United States v. Cintolo, 818 F.2d 980, 1004 (1st Cir.), cert. denied, 484 U.S. 913 (1987); United States v. Coast of Me. Lobster Co., 557 F.2d 905, 909 (1st Cir.), cert. denied, 434 U.S. 862 (1977).

In this case the government had the burden of showing that the appellant voluntarily and intentionally violated a known legal duty to pay taxes on certain unreported income. See United States v. Pomponio [76-2 USTC ¶9695 ], 429 U.S. 10, 12 (1976) (per curiam); United States v. Monteiro, 871 F.2d 204, 209 (1st Cir.), cert. denied, 493 U.S. 833 (1989). Because ignorance of the law is a defense in tax evasion cases, see Cheek v. United States [91-1 USTC ¶50,012 ], 111 S. Ct. 604, 609 (1991), the jury, had it concluded that McGill possessed a good-faith, subjective belief that he did not owe taxes on the income in question, would have been duty bound to acquit. See id. at 610-11; United States v. Aitken [85-1 USTC ¶9209 ], 755 F.2d 188, 191-92 (1st Cir. 1985). Thus, McGill, upon timely request, enjoyed the right to have the jury instructed on this defense.

The appellant fully availed himself of this right, asking the district court to give a specific instruction that he could not "be held criminally liable if in good faith he misunderstood the requirements of [the] law, or in good faith believed that his income was not taxable." While the court declined to give this instruction in haec verba, it did tell the jury that the government had to prove the defendant "attempt[ed] to evade income tax willfully, intentionally, not by accident or mistake, knowing that he had a legal duty to report the income in question and to pay a tax on it." Later in the charge, the court reiterated the government's burden of proving that McGill had the "requisite knowledge and understanding that during the tax year involved in a particular count he had income which was taxable and which he was required by law to report."

In determining whether a district court's instructions to the jury adequately conveyed a specific concept, a reviewing court must focus on the charge as a whole. See United States v. Park, 421 U.S. 658, 674 (1975); Cupp v. Naughten, 414 U.S. 141, 146-47 (1973); Nivica, 887 F.2d at 1125; United States v. Serino, 835 F.2d 924, 930 (1st Cir. 1987); Cintolo, 818 F.2d at 1003; New England Enterprises, Inc. v. United States, 400 F.2d 58, 71 (1st Cir. 1968), cert. denied, 393 U.S. 1036 (1969). Here, the lower court, though spurning the exact phraseology which the appellant sought, accurately communicated the meat of the defense's theory. The fact that the court's instructions on mistake of law were dispersed throughout the charge neither diminished their force nor robbed them of their inherent vitality. The jury was adequately instructed that, if McGill's failure to report the income and pay the resultant taxes stemmed from an honest mistake as to the extent of his legal obligations, an acquittal must follow. The concept was stated plainly and unequivocally. No more was eligible.

B.

Appellant urges that the charge was flawed in another respect as well: notwithstanding a timely request, the court did not instruct the jury that "careless disregard, negligence, even gross negligence does not amount to willfulness sufficient to find [the defendant] guilty." The trial court's refusal to give a particular instruction constitutes reversible error only if the requested instruction was (1) correct as a matter of substantive law, (2) not substantially incorporated into the charge as rendered, and (3) integral to an important point in the case. See United States v. Gibson, 726 F.2d 869, 874 (1st Cir.), cert. denied, 466 U.S. 960 (1984).

In this instance, the assignment of error is hoist upon the second prong of the test. The court repeatedly cautioned the jury that the government had to prove willfulness anent McGill's underreporting of taxable income. The court also told the jury, quite pointedly, that McGill could not be found guilty if his actions were the result of "an honest mistake with respect to what he had to report." Though the judge never used the precise words favored by the defendant--"careless disregard," "negligence," "gross negligence"--the alternate language that he employed covered substantially the same ground. See Pomponio [76-2 USTC ¶9695 ], 429 U.S. at 12-13 (willfulness "means a voluntary, intentional violation of a known legal duty"). When, as here, the trial court's instructions adequately communicated the relevant law to the jury, the fact that some other judge might have phrased a particular point better, or more elegantly, is an irrelevancy. See, e.g., Monteiro [89-1 USTC ¶9246 ], 871 F.2d at 209 (willfulness instruction in tax cases does not have to follow any particular formulation). Because the substance of appellant's requested instruction was substantially covered in the court's instructions, there was no error. See United States v. Passos-Paternina, 918 F.2d 979, 984 (1st Cir. 1990), cert. denied, 111 S. Ct. 1637, 2808 (1991); United States v. Noone, 913 F.2d 20, 30 (1st Cir. 1990), cert. denied, 111 S. Ct. 1686 (1991).

II. Admission of Certain Evidence

Appellant's remaining claim of error involves the admission of a number of deposit tickets under the business records exception to the hearsay rule. ² McGill does not contest the admission of the documents per se; instead, he argues that certain taxpayer identification numbers which were transcribed onto the tickets when they were removed from their mailing envelopes should have been redacted. We approach this claim mindful that the usual array of threshold questions pertaining to the admissibility of business records come within the ambit of the district court's discretion. These usual questions include, of course, questions as to whether a proper foundation was laid or whether sufficient indicia of trustworthiness were shown. See, e.g., United States v. Arboleda, 929 F.2d 858, 869 (1st Cir. 1991); United States v. Ladd, 885 F.2d 954, 956 (1st Cir. 1989); United States v. Patterson, 644 F.2d 890, 900-01 (1st Cir. 1981).

A.

In the case at hand, the prosecution's theory was that the defendant failed to report, and thereafter pay tax upon, interest income earned on certain United States Treasury notes (T-notes) purchased through the Bank of New England (BNE). The evidence showed that, in order to deposit these sums, the noteholder would clip the interest coupon from the T-note, fill out a deposit slip, put the coupon for the relevant period and a deposit slip into a standard coupon deposit envelope provided by BNE, and transmit the envelope to the bank. An instruction printed on the envelope directed the depositor to write his taxpayer identification number on the back of the envelope. ³ When the envelope was received at BNE, a bank employee would transpose the identification number from the deposit envelope to the deposit ticket at the same time as he/she credited the funds to the designated account. The identification number was thereafter used by the bank to report taxable interest income to the Internal Revenue Service. The deposit envelopes themselves were discarded.

The evidence further showed that there were ten deposits of T-note interest into the defendant's checking account during the period at issue. All the deposit tickets bore defendant's name and bank account number. Three of these bore the taxpayer identification number of defendant's father, who had died in 1980; three bore no identification number; and the remaining four bore the defendant's identification number. ⁴ There was no direct evidence as to who completed which deposit tickets, although the defendant admitted that he sometimes filled out such tickets. He also testified, however, that his wife sometimes performed this task. The defendant claimed that he could not recall marking the deposit envelopes. And, he proclaimed himself unable to imagine how his father's taxpayer identification number came to appear on certain deposit tickets.

The defendant did not report as taxable income any of the interest income deposited by means of deposit tickets bearing either his father's taxpayer identification number or no number at all.

B.

The defendant argues that the trial court abused its discretion in allowing the deposit tickets into evidence without first excising the taxpayer identification numbers appearing thereon. We disagree. While defense counsel labors valiantly to style each number as a hearsay statement coming from McGill (i.e., "this is the identification number that McGill requested the Bank to use for income tax purposes"), it is clear that in each instance the challenged statement is coming from a bank employee performing his or her routine duties (i.e., "this is the identification number that appeared on the deposit envelope"). In other words, by transcribing the taxpayer identification number from the mailing envelope onto the deposit ticket, a bank employee, rather than the defendant, is making the challenged assertion. It follows inexorably that, because the assertion originated with a bank employee acting in the ordinary course of the bank's business, the testimony before the district court constituted a proper foundation for the admission of the unredacted deposit tickets as business records under Evidence Rule 803(6).

This foundation is constructed principally out of the testimony of Nelson Soto, the assistant supervisor of the bank's coupon collection department during the time frame in question. Soto described in considerable detail BNE's regular procedure for processing coupon deposit tickets. His testimony laid a solid foundation for the evidence and sufficiently established its trustworthiness. See Patterson, 644 F.2d at 901; 4 J. Weinstein, Weinstein's Evidence, ¶803(6) [02]; see also Wallace Motor Sales, Inc. v. American Motors Sales Corp., 780 F.2d 1049, 1061 (1st Cir. 1985) (qualified witness need only be person who can explain how record was kept, not necessarily the person who actually prepared the record).

Appellant's attempt to impugn the trustworthiness of the bank's procedures by pointing to the lack of a taxpayer identification number on three of the tickets is unsuccessful. The mere fact that errors or deviations have occurred from time to time does not destroy the inference of underlying trustworthiness which a judge may choose to draw from proof of a general practice. See Patterson, 644 F.2d at 901 ("The fact that a regular practice is occasionally broken is not enough to avoid application of the business records rule; otherwise, the rule would be swallowed up by an exception for less-than-perfect business practices."); see also Kassel v. Gannett Co., 875 F.2d 935, 944-45 (1st Cir. 1989); United States v. Hathaway, 798 F.2d 902, 907 (6th Cir. 1986); United States v. Keplinger, 776 F.2d 678, 694-95 (7th Cir. 1985), cert. denied, 476 U.S. 1183 (1986). Whether the numbers were missing because McGill failed to inscribe them on the mailing envelopes or because the bank failed to transcribe them was not critical to the finding of trustworthiness.

Appellant's reliance on United States v. Berkowitz, 429 F.2d 921 (1st Cir. 1970), is similarly misplaced. Passing the fact that Berkowitz was decided prior to the enactment of the Federal Rules of Evidence, thus limiting its precedential force, there is a more fundamental flaw in appellant's argument. Berkowitz involved a hearsay statement regarding the value of goods which was put forth for the truth of the stated value by a witness who had no firsthand knowledge of the actual value. Id. at 927. In the case at bar, however, the critical statement, properly visualized, involved the numbers recorded on a series of mailing envelopes--a matter as to which the bank employee who received the envelopes clearly possessed firsthand knowledge.

We need go no further. Because the bank's procedures for processing coupon deposit tickets and envelopes possessed sufficient indicia of trustworthiness and were adequately explained to the court by a sufficiently knowledgeable witness, we find no abuse of discretion in the admission of the unredacted deposit tickets into evidence under the aegis of Evidence Rule 803(6).

Affirmed.

¹ The statute of conviction provides in pertinent part:

Any person who willfully attempts in any manner to evade or defeat any tax imposed by [the Internal Revenue Code] or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be [punished as prescribed].

26 U.S.C. §7201 (1988).

² The exception excludes from the operation of the hearsay rule:

A memorandum, report, record, or data compilation, in any form, of acts, events, conditions, opinions, or diagnoses, made at or near the time by, or from information transmitted by, a person with knowledge, if kept in the course of a regularly conducted business activity, and if it was the regular practice of that business activity to make the memorandum, report, record, or data compilation, all as shown by the testimony of the custodian or other qualified witness, unless the source of information or the method or circumstances of preparation indicate lack of trustworthiness.

Fed. R. Evid. 803(6).

³ In the case of an individual taxpayer, the taxpayer identification number would be the individual's social security number. 26 C.F.R. §301.6109-1(a) (1991).

⁴ A fifth deposit ticket bearing defendant's identification number reflected the deposit of T-note principal, which McGill was not required to report.

 

 

[75-1 USTC ¶9416] United States of America , Plaintiff-Appellee v. Frank F. Colacurcio, Defendant-Appellant

(CA-9), U. S. Court of Appeals, 9th Circuit, No. 74-2767, 514 F2d 1, 4/7/75, Reversing unreported District Court decision

[Code Sec. 7201]

Criminal penalties: Evidence: Easts from prior trial.--Taxpayer's conviction for tax evasion for his taxable years 1967 and 1969 was reversed and remanded. The lower court had charged the jury with respect to payments received by the taxpayer from another based on facts from a previous trial of the taxpayer. However, such information was not essential to the resulting judgment of that earlier trial and thus was not subject to collateral estoppel. Further, taxpayer's tax return for 1965 was admitted to show possible fraudulent admissions of income by the taxpayer. The appellate court concluded that the instruction and the admission of the tax return were tied together and that both were prejudicial to the taxpayer and constituted reversible error.

Irwin Schwartz, Assistant United States Attorney, Seattle , Wash. , for plaintiff-appellee. William A. Helsell, Helsell, Paul, Fetterman, Todd & Hokanson, 1610 Washington Bldg., 1325 Fourth Ave., Seattle, Wash., George Martin, Sr., Martin, Niemi, Burch & Mentele, 1127 Washington Bldg., 1325 Fourth Ave., Seattle, Wash., for defendant-appellant.

Before MERRILL and TRASK, Circuit Judges, and JAMESON,* District Judge.

Opinion

JAMESON, District Judge:

Defendant-appellant appeals from his conviction, following a jury trial, of income tax evasion for the years 1967 and 1969 in violation of 26 U. S. C. §7201. ¹

Background

The indictment charged the omissions of taxable income from appellant's tax returns as follows:

                                              Claimed

                                          Corrected          Unreported

Year                   Reported              Income              Income

1967 ......         $ 68,411.24         $134,900.61         $ 66,489.37

1968 ......           85,375.36          117,480.31           32,104.95

1969 ......           81,012.24          144,912.16           63,899.92

Totals ....         $234,798.84         $397,293.08         $162,494.24

The net worth method ² was used to prove the unreported income. The Government established that the appellant earned most of his income during the years in question from concealed interests in various night clubs and taverns, interest on loans, and receipts from an unlawful bingo operation run by Charles Berger in Seattle .

[Earlier Trial]

In 1971 the appellant was found guilty of conspiring with Berger and Harry Hoffman to use the facilities of interstate commerce to promote the operation of bingo games contrary to the laws of the State of Washington and in violation of 18 U. S. C. §1952. ³ The court made special findings of fact, including the following:

"Originally Berger operated one establishment and paid the defendant Colacurcio $1,000 per month. Thereafter, Berger was directed by Colacurcio to open an additional establishment across the street and was required to pay $1,000 per month on that establishment. A third one was later opened and the total payments to defendant Colacurcio were in excess of $3,000 per month. Berger testified he made payments to insure the operation of the clubs, otherwise they would be closed by the police."

Berger testified for the Government at the prior conspiracy trial, but was not called as a witness in this case. Rather, the Government, relying on the doctrine of collateral estoppel, submitted an instruction with respect to sums of money received by appellant during the years in question, based on testimony at the prior trial. Over the objection of the appellant, the court instructed the jury as follows during the Government's case in chief:

"Ladies and Gentlemen, the jury is instructed that it shall consider the following as a fact proven in these proceedings. The weight if any, to be attached to the fact is for you alone to decide.

"You are instructed that the defendant received the following sums of money from a Seattle businessman in payment stemming from that person's business operations in the City of Seattle :

1965 ....         $13,000

1966 ....          24,000

1967 ....          24,000

1968 ....          36,000

1969 ....          27,000

 

and that these payments have not previously been the subject of evidence in this trial.

"The court does not mean by this instruction to tell you that these payments did or did not constitute taxable income."

The total payments by Berger to appellant in each of the five years from 1965 through 1969 were not set forth in the special findings in the prior case. However, the information necessary to arrive at the figures given to the jury was contained in Berger's testimony. Berger testified further that it was his understanding that of each $1,100 payment to appellant, $1,000 was going to the Seattle police and $100 to appellant for handling the matter. This testimony was not mentioned in the court's instruction in this case.

[Tax Return Introduced]

The Government attempted to introduce appellant's tax returns for the years 1961-1965. The court initially ruled that none of the returns would be admitted. ⁴ Later, however, over appellant's objection, the court admitted appellant's 1965 return on the basis of Hamman v. United States [65-1 USTC ¶9161], 340 F. 2d 145, 149 (9 Cir.) cert. denied, 380 U. S. 977 (1965).

Testifying in his own behalf, appellant denied having been given any money by Berger in 1965 for his own use. He testified that the amounts received from Berger in 1965 were monies left with him for safekeeping while Berger was out of town. He estimated that he received approximately $20,000 for his own use from Berger in 1966, "twenty some thousand" in 1967, $25 or $26,000 in 1968 and $15,000 or so" in 1969. Appellant testified that the sums received from Berger for his own use were included in the "miscellaneous income" on his tax returns.

[Income Indadvertently Unreported]

Appellant testified further that he had honestly endeavored to pay income taxes on his earnings and that any tax deficiency was attributable to his inadvertent use of an improper income reporting method. Appellant kept personally a book showing income from sources which he "was unable to divulge to the bookkeeper". He recorded as "ins" all of his business receipts and as "outs" all of his business disbursements. At the end of each quarter he subtracted the "outs" from the "ins", carried the net amount forward to a new page and discarded the old page. At the end of each year, he gave the net total to the person who prepared his income tax returns, and this amount was reported as "miscellaneous income".

Based on his claim that his failure to report income was the result of inadvertence and bona fide mistake, appellant offered two instructions on "willfulness", to the effect that his acts in connection with the income tax return resulting from bona fide mistakes, negligence, carelessness, or honest misunderstanding could not be considered "willful" or support a conviction of income tax evasion. The court refused the offered instructions and gave its own instructions on willfulness.

In his charge to the jury, the court, over objection of appellant's counsel, repeated in substance the instruction given during the Government's case with respect to the payments by Berger.

Appellant contends that the court erred in (1) instructing the jury that appellant received specified sums of money from a Seattle businessman (Berger) during the years 1965-1969, (2) admitting appellant's 1965 income tax return, and (3) failing to expressly instruct the jury that mere mistake, inadvertence, carelessness or negligence would not justify a conviction.

I. 1965-1969 Receipts from Berger

With respect to the court's instructions as to the amounts received by appellant from Berger, appellant argues that (1) collateral estoppel may not be applied in a criminal case against the defendant; and (2) in any event, the doctrine was improperly applied in this action since (a) the facts recited in the instruction were not essential to the court's conclusion in the prior action; (b) the facts were not "ultimate" but "evidentiary" facts in the prior action; (c) the instruction deprived appellant of his Sixth Amendment right of trial by jury and his right to be confronted with the witnesses against him; and (d) the instruction omitted significant portions of Berger's testimony and its repetition after appellant testified unfairly cast him as a liar.

A. Applicability of Collateral Estoppel in Criminal Cases

As stated by this court in Pena-Cabanillas v. United States, 394 F. 2d 785, 786 (1968):

"The doctrine of collateral estoppel is an aspect of the broader principle of res judicata, United States v. Marakar, 300 F. 2d 513 (3 Cir. 1962), vacated on other grounds 370 U. S. 723 . . . and a common statement of the doctrine is that where a question of fact essential to the judgment is actually litigated and determined by a valid and final judgment, the determination is conclusive between the parties in a subsequent action on a different cause of action. Hoag v. State of New Jersey , 356 U. S. 464, 470 . . . (1958)."