Admissibility 1 Page4

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You are further instructed that a taxpayer's return which does not contain financial information enabling the Internal Revenue Service to determine the party's tax liability, if any, is not a return within the meaning of the Internal Revenue Code or the regulation adopted by the Commission of Internal Revenue Service. ⁷

The correct standard of review to be applied to challenges to jury instructions is whether the court's charge as a whole was a correct statement of law. United States v. Arguelles, 594 F. 2d 109, at 112, n. 3 (5th Cir. 1979). See also United States v. Chandler, 586 F. 2d 593 (5th Cir. 1978); United States v. Sanfilippo, 581 F. 2d 1152 (5th Cir. 1978).

Appellant does not object to the first part of the excerpted charge, which we agree accurately sets forth the elements of the crime charged in the information. He argues instead that the "you are further instructed" part of the charge had the effect of directing the jury to find the second element of the offense set forth immediately before, namely, "that the defendant failed to make such a return . . .." We cannot agree. This language merely instructed the jury, in light of the evidence that had been introduced at trial, how it might find the existence of the second element of the offense charged, and was an accurate statement of the law. See United States v. Wade, 585 F. 2d 573, 575 (5th Cir. 1978); United States v. Johnson, 577 F. 2d 1304, 1311 (5th Cir. 1978). The responsibility to find the second element of the offense was clearly the jury's under the charge as given.

For the reasons stated above, the judgment is Affirmed.

^* Fed. R. App. P. 34(a); 5th Cir. R. 18.

¹ Record, p. 1.

² Trans., Vol. 1, p. 2:

"MR. GROTE: Well, I respectfully decline, because this court lacks jurisdiction."

At p. 5:

"MR. COLLINS: At this time, Your Honor, I would ask that the Court enter a plea of Not Guilty for Mr. Grote. Mr. Grote has some disagreement about what has been filed against him and the jurisdiction of the Court in this case. I would ask the Court to enter a plea of Not Guilty for him and set it for trial."

³ "Arraignment shall be conducted in open court and shall consist of reading the indictment or information to the defendant or stating to him the substance of the charge and calling on him to plead thereto. He shall be given a copy of the indictment or information before he is called upon to plead." Fed. R. Crim. P. 10.

⁴ Trans., Vol. 1, pp. 3-6.

⁵ Trans., Vol. 2, at p. 49:

"Q: Now, would you look at the return itself? Was it an acceptable return in the eyes of the Internal Revenue Service during 1972?

A: Yes, Sir.

MR. COLLINS: Your Honor, I object to the terminology of acceptable. That's yet to be determined by the Court under the law."

At p. 51:

"Q: And is that [Grote's 1973 return] a proper filing of an Internal Revenue requirement form allowing you to be able to adequately compute whether a tax would be owing or not?

A: It is.

Q: Is that an acceptable Internal Revenue form for that reason?

A: It is acceptable.

MR. COLLINS: I object to the same word, Your Honor. The use of acceptable."

At p. 58:

"Q: All right. Now, what does that mean?

A: That means Mr. Grote did not file a tax return for the calendar year 1975.

Q: All right. Does that mean an acceptable tax return that would allow you to--

MR. COLLINS: Your Honor, I'm going to object to that terminology again, with regard to whether or not they will accept a tax return."

At p. 60:

"A: It shows that--There is no return has [sic] posted to Mr. Grote's master file account.

Q: Does that mean a return acceptable under the law by the Internal Revenue Service which would allow the Internal Revenue Service to compute whether or not he owed taxes for the year, calendar year 1976?

A: Such return has not been filed.

Q: Now, Mr. Clore, as a matter of fact, were papers filed by Mr. Grote during the calendar years 1975 and 1976 with the Internal Revenue Service?

A: Certain documents were.

Q: All right. Were you able, based on those documents, to be able to compute whether or not a tax was owing, as required by law, by Mr. Grote for the years 1975 or 1976?

A: No, Sir."

⁶ Trans., Vol. 2, p. 63.

⁷ Trans., Vol. 2, pp. 127-28.

On Petition for Rehearing and Petition for Rehearing En Banc

Before HILL, GARZA, and THOMAS A. CLARK, Circuit Judges.

PER CURIAM:

The defendant on petition for rehearing strongly urged that in our original opinion we overlooked the defendant's contention that the Internal Revenue Service had violated the notice and comment provisions of the Administrative Procedure Act, 5 U. S. C. §552(a)(I)(D) and (E). ¹ Defendant contends that the Internal Revenue Service had previously determined not to prosecute cases such as his, and had changed this policy without complying with the statute.

Defendant relies on the following testimony from David Clore, Chief of Criminal Investigation Staff at the Internal Revenue Service South Center :

Q. Okay. Have you ever seen a tax return like this before? [Petitioner's 1975 and 1976 income tax returns]

A. Many of them.

Q. Okay. Has the Internal Revenue Service ever accepted this particular tax return?

A. Based upon my knowledge, I think prior to our procedure at that time, there may have been returns filed that were accepted by the Internal Revenue Service.

Q. So, these in particular--This type of return has before been accepted by the Internal Revenue?

A. That's correct . . .:

Q. (By Mr. Collins) What is the date that the Internal Revenue--I'm assuming that that is correct, quit accepting this particular type of return?

A. In 1974.

Q. In 1974. And it is your--Your answer to that question is since 1974 they will not accept [this] type of return; is that correct?

A. That is correct.

Defendant also points to the testimony of David Martin who stated that such tax returns had been accepted by the Service prior to appellant's filings to show that the Government had determined not to prosecute cases such as this.

Such evidence is not enough. It does not relate to criminal prosecutions. The defendant has directed us to no previously existing policy of either the Internal Revenue Service or the Justice Department indicating that there was an established practice or policy not to prosecute persons who filed returns similar to those filed by the defendant in this case.

Our original opinion disposed of any contention of the defendant that he might have been selectively prosecuted. His claim that the Internal Revenue Service changed a substantive rule of general applicability without having offered any evidence of the existence of such a rule approaches the frivolous.

The Petition for Rehearing is Denied and no member of this panel nor Judge in regular active service on the Court having requested that the Court be polled on rehearing en banc (Rule 35 Federal Rules of Appellate Procedure; Local Fifth Circuit Rule 12) the Petition for Rehearing En Banc is Denied.

¹ The statute reads as follows:

(a) . . ..

(1) Each agency shall separately state and currently publish in the Federal Register for the guidance of the public--

. . . .

(D) substantive rules of general applicability adopted as authorized by law, and statements of general policy or interpretations of general applicability formulated and adopted by the agency; and

(E) each amendment, revision, or repeal of the foregoing.

To substantially the same effect is 26 C. F. R. §601.702(a)(iv) and (v).

 

 

[80-1 USTC ¶9251] United States of America , Appellee v. Stanley R. King, Appellant

(CA-8), U. S. Court of Appeals, 8th Circuit, No. 79-1689, 616 F2d 1034, 2/27/80, Aff'g unreported DC decision

[Code Sec. 7201]

Crimes: Tax evasion: Sufficiency of evidence: Other defenses.--A pastor was properly convicted on two counts of tax evasion. The evidence was sufficient in that it showed a consistent pattern of not reporting large amounts of income. Comments made by the prosecutor were not unduly prejudicial and, in any event, the trial court sustained an objection to the comments. Certain evidence was properly introduced. A claim with regard to the defendant's Fifth Amendment rights was raised for the first time on appeal and could not be considered. The trial judge did not err in refusing to give a lesser included offense instruction.

Thorwald H. Anderson, Jr., United States Attorney, Donald F. Paar, Assistant United States Attorney, Minneapolis , Minnesota 55401 , for appellee. J. Christopher Cuneo, Henry H. Feikema, Smith, Juster, Feikema, Malmon & Haskvitz, 1250 Builders Exchange Building , Minneapolis , Minnesota 55402 , for appellant.

Before LAY and STEPHENSON, Circuit judges, and THOMAS ^*, Senior District Judge.

THOMAS, District Judge:

Taxpayer appeals from his conviction by a jury in a suit charging appellant with two counts of wilful tax evasion for the years 1972 and 1973, in violation of Title 26, United States Code, Section 7201. Appellant was found guilty of both counts.

The Government contended, first, that appellant had taken improper deductions, especially for 1972. Secondly, the Government charged that in both years he received taxable income which was not reported.

Affirmed.

The indictment was handed down in February 1979. Because of technical flaws, an information was substituted for the indictment with appellant's consent. The information concerned itself with tax years 1972 and 1973. Appellant was tried before a jury in the United States District Court for the District of Minnesota, the Honorable Donald D. Alsop, presiding. The trial began on April 16, 1979, and concluded on April 30, 1979. He was found guilty as charged. On June 20, 1979, he was committed to the custody of the Attorney General for a term not to exceed fourteen months. Execution of that sentence was stayed pending appeal. Appellant's initial petition to proceed in forma pauperis was denied. On reconsideration, the petition was granted.

Appellant's activities in 1972 and 1973 formed the basis of two separate types of charges regarding his alleged evasion of taxes for those years. The Government contended, first, that appellant had taken improper deductions, especially for 1972. Secondly, the Government charged that in both years he had received taxable income which was not reported.

Improper Deductions

In 1971, the appellant Stanley R. King was one of the founders of Twin Cities Open Door Fellowship (TCODF) Church, located in St. Paul , Minnesota . He served as pastor during the years 1972 and 1973. He was ordained by a local church in Phoenix , Arizona , but not by an accredited theological seminary. King received compensation of $300.00 per month. Such compensation was termed "love offerings" in light of King's request that he receive no salary. Appellant claimed a $3,600.00 housing allowance on both his 1972 and 1973 tax returns. In support of this a document was submitted by King's tax accountant showing a $2,640.00 per year housing allowance from TCODF which was prepared by King and signed by the Finance Minister at King's request. ¹ However, such an allowance had not been authorized by the TCODF Church .

In 1972 King claimed charitable deductions of approximately $13,000.00 to the TCODF Church . Of this amount approximately $12,000.00 was for the down payment on a house, hereinafter discussed.

In 1972 King needed housing but was unable to secure financing. He proposed to TCODF that it purchase a house because it could acquire the necessary financing and he could not. King was to donate the down payment. The plan was accepted. He deposited $12,000.00 in the TCODF account for the earnest money and down payment. The house, though purchased in the church's name, never appeared on the church's assets. King made the mortgage payments and remodeled the house and occupied the house as a parsonage.

The house was sold in 1975. The profit from the sale exceeded $19,000.00. A check for that amount was endorsed by the Finance Minister without using a TCODF endorsement stamp. Subsequently, King deposited the check in the TCODF's Minister's Fund account over which he had sole control. Such proceeds were later used by King for personal debts as well as living expenses. King and his wife were listed as sellers of the house, not TCODF.

Failure to Report Income

Appellant failed to maintain any personal checking account in his own name. He did, however, have an account in the name of Human Resources Consultants, which he used as his personal checking account.

The Government claimed that in 1972, King failed to report the following consulting fee income:

First 

Minnesota

 Construction

Company .........................         $14,450.00

Intercontinental Development

Company .........................           7,000.91

United National Development

Company .........................           3,000.00

 

The Government claimed that in 1973, King failed to report income and consultant fees in the following:

Bethlehem Square Limited

Dividend Corp. ..............         $52,000.00

MIA Limited Dividend

Corporation .................          14,025.00

MIA Properties ..............           4,850.00

.............................           6,935.00

Lambrecht Realty ............           5,000.00

Monthly "Love Offerings"

from the 

TCODF
 
Church

 .......           3,300.00

Universal Enterprises

Unlimited ...................           4,100.00

Chapdelaine Properties ......           2,000.00

Cecil Newman Courts .........             555.00

 

Appellant's living expenses for 1972 were between $45,000.00 and $50,000.00. He admitted, on cross examination, to having seen a copy of the Bethlehem Square Limited Dividend Corporation partnership return. He admitted having received a check for $50,000.00. This amount was not reported to his tax accountant.

Inasmuch as the appellant raises the issue of the sufficiency of the evidence to prove his guilt beyond a reasonable doubt, it is necessary to review the facts at length.

Much of the dispute resulted from appellant's involvement in a number of "HUD 236" housing projects. HUD 236 housing projects were part of a program under which the Government insured mortgages on apartment complexes for law and moderate income families. A portion of the mortgage was subsidized when qualified low-income renters were occupying the project. HUD regulated the kinds of rents that could be charged, and regulated the cost of construction of the project. The project sponsors had to comport with its rules and regulations. There had to be a separate legal entity sponsoring each individual project.

Appellant first became interested in the prospect of developing this type of project in the Twin City area in 1967. At that time he was the executive director of Twin Cities Opportunity Industrial Center (TCOIC). He was attending an O. I. C. Conference in Washington, D. C., when the then Secretary of HUD announced that this new housing program would be launched. When appellant returned to the Twin City area he met with members of the Minneapolis Housing and Redevelopment Association, the Mayor of Minneapolis, and other people in the community. With his assistance, the Midwest Improvement Association (M. I. A.) was founded. M. I. A. hired a housing specialist to act as a consultant in putting together a package to present to HUD. Appellant worked as project coordinator. He was also the executive secretary of M. I. A.

Finally, in 1970, the first of the projects was constructed. M. I. A. was the nonprofit sponsor. The first project was called Cecil Newman Plaza . M. I. A. was also the sponsor for what became known as Cecil Newman Courts, which was completed sometime in 1971. At the same time M. I. A. was trying to develop a housing project in St. Paul , which would eventually become known as Lonnie Adkins Courts.

When Cecil Newman Plaza began operation, a firm was hired to manage the rental operations. There were immediate problems with cash flow. Because of increased costs subsequent to the submission of the original budgets, as well as HUD's refusal to increase rents, there was not enough money to pay for expenses incurred. The original manager pulled out after about six months of managing the project. They had been training a young man to assist in the project management. However, that individual soon left, leaving both Cecil Newman Plaza and now Cecil Newman Courts without anyone to do the housing management. It was at that point that appellant helped organize M. I. A. Properties, Inc., to serve that function.

It was also at this point in time that appellant was asked by the non-profit sponsor of a similar project to serve as a paid consultant in order to get the project off the ground. Appellant was successful in organizing and putting together this non-profit project. It was brought to the construction stage by the middle of 1972.

During this time appellant was still involved in developing the Lonnie Adkins Courts project through his association with M. I. A. It became apparent that Lonnie Adkins Courts could not get HUD approval for funding if it continued to operate with a non-profit sponsor. Therefore, the concept of a limited dividend corporation was explored. Appellant testified that he was probably told of the possibility of a limited dividend corporation by the mortgage company that was the interim lender on the St. Phillips Gardens project. Although a limited dividend corporation sponsorship does not receive the same percentage of guaranteed mortgage funds from HUD, it is able to attract investors in order to make up the construction costs. Appellant thus helped form MIA Limited Dividend Corporation to serve as a corporate general partner in the limited partnership which would sponsor the Lonnie Adkins project. He served as its president. The initial endorsement on the Lonnie Adkins project occurred somewhere in the early part of 1973.

The other housing project with which appellant was involved was called the Bethlehem Squa