7203 - Admissibility 1 Page 4

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7203 - Accountant-Client Privilege
7203 - Accrual Basis
7203 - Admissibility 1 p1
7203 - Admissibility 1 p2
7203 - Admissibility 1 p3
7203 - Admissibility 1 p4
7203 - Admissibility 1 p5
7203 - Admissibility 1 p6
7203 - Admissibility 2 p1
7203 - Admissibility 2 p2
7203 - Admissibility 2 p3
7203 - Admissibility 2 p4
7203 - Admissibility 2 p5
7203 - Admissibility 3 p1
7203 - Admissibility 3 p2
7203 - Admissibility 3 p3
7203 - Admissibility 3 p4
7203 - Admissibility 3 p5
7203 - Admissibility 4 p1
7203 - Admissibility 4 p2
7203 - Admissions p1
7203 - Admissions p2
7203 - Advice of Counsel p1
7203 - Advice of Counsel p2
7203 - Amendment
7203 - Appeal Right to
7203 - Appeal Timeliness
7203 - Appeal Waiver
7203 - Appeal without merit
7203 - Arrest
7203 - Fraudulent Return
7203 - Defeat & Evade Income Taxes p1
7203 - Defeat & Evade Income Taxes p2
7203 - Defeat & Evade Income Taxes p3
7203 - Defeat &  Evade Income Taxes p4
7203 - Attorney Disqualified
7203 - Attorney's Testimony p1
7203 - Attorney's Testimony p2
7203 - Attorney's Testimony p3
7203 - Attorney's Testimony p4
7203 - Bail
7203 - Bank Records &  Net Worth Increases 1 p1
7203 - Bank Records &  Net Worth Increases 1 p2
7203 - Bank Records &  Net Worth Increases 1 p3
7203 - Bank Records &  Net Worth Increases 1 p4
7203 - Bank Records &  Net Worth Increases 1 p5
7203 - Bank Records &  Net Worth Increases 1 p6
7203 - Bank Records &  Net Worth Increases 2 p1
7203 - Bank Records &  Net Worth Increases 2 p2
7203 - Bank Records &  Net Worth Increases 2 p3
7203 - Bank Records &  Net Worth Increases 2 p4
7203 - Bank Records &  Net Worth Increases 2 p5
7203 - Bank Records &  Net Worth Increases 3 p1
7203 - Bank Records &  Net Worth Increases 3 p2
7203 - Bank Records &  Net Worth Increases 3 p3
7203 - Bank Records &  Net Worth Increases 3 p4
7203 - Bank Records &  Net Worth Increases 3 p5
7203 - Bank Records &  Net Worth Increases 4 p1
7203 - Bank Records &  Net Worth Increases 4 p2
7203 - Bank Records &  Net Worth Increases 4 p3
7203 - Bank Records &  Net Worth Increases 4 p4
7203 - Bank Records &  Net Worth Increases 4 p5
7203 - Bank Records &  Net Worth Increases 5 p1
7203 - Bank Records & Net Worth Increases 5 p2
7203 - Bank Records & Net Worth Increases 5 p3
7203 - Bank Records & Net Worth Increases 5 p4
7203 - Bank Records & Net Worth Increases 5 p5
7203 - Base Sentence p1
7203 - Base Sentence p2
7203 - Base Sentence p3
7203 - Base Sentence p4
I7203 - Bill of Particluar Conspiracy
7203 - Bill of Particulars
7203 - Books and Records
7203 - Burden of going forward with evidence
7203 - Burden of Proof
7203 - Carryback Offset
7203 - Changing Plea
7203 - Character witness p1
7203 - Character witness p2
7203 - Circumstanial Evidence p1
7203 - Circumstanial Evidence p2
7203 - Circumstanial Evidence p3
7203 - Circumstanial Evidence p4
7203 - Collateral Estoppel
7203 - Collection
7203 - Commitment by U.S. Commissioner
7203 - Communication to Jury
7203 - Compromise
7203 - Consolidation
7203 - Conspiracy p1
7203 - Conspiracy p2
7203 - Conspiracy 1 p1
7203 - Conspiracy 1 p2
7203 - Conspiracy 1 p3
7203 - Conspiracy 1 p4
7203 - Conspiracy 1 p5
7203 - Conspiracy 1 p6
7203 - Conspiracy 1 p7
7203 - Conspiracy 1 p8
7203 - Conspiracy 2 p1
7203 - Conspiracy 2 p2
7203 - Conspiracy 2 p3
7203 - Constitutional Grounds 1 p1
7203 - Constitutional Grounds 1 p2
7203 - Constitutional Grounds 1 p3
7203 - Constitutional Grounds 1 p4
7203 - Constitutional Grounds 1 p5
7203 - Constitutional Grounds 2 p1
7203 - Constitutional Grounds 2 p2
7203 - Constitutional Grounds 2 p3
7203 - Constitutional Grounds 2 p4
7203 - Constitutional Grounds 2 p5
7203 - Constitutional Grounds 3 p1
7203 - Constitutional Grounds 3 p2
7203 - Constitutional Grounds 3 p3
7203 - Constitutional Grounds 3 p4
7203 - Constitutional Grounds 3 p5
7203 - Constitutional Grounds 4 p1
7203 - Constitutional Grounds 4 p2
7203 - Constitutional Grounds 4 p3
7203 - Constitutional Grounds 4 p4
7203 - Constitutional Grounds 5 p1
7203 - Constitutional Grounds 5 p2
7203 - Constitutional Grounds 5 p3
7203 - Constitutional Grounds 5 p4
7203 - Constitutional Grounds 5 p5
7203 - Constitutional Grounds 6
7203 - Contempt Finding Ag. Defendant's Counsel
7203 - Continuance p1
7203 - Continuance p2
7203 - Continuance p3
7203 - Conviction Required
7203 - Copies of Records p1
7203 - Copies of Records p2
7203 - Corporation Officer
7203 - Costs
7203 - Credit for Time Served
7203 - Criminal Contempt
7203 - Cross-Examination PART 1 p1
7203 - Cross-Examination PART 1 p2
7203 - Cross-Examination PART 1 p3
7203 - Cross-Examination PART 1 p4
7203 - Cross-Examination PART 1 p5
7203 - Cross-Examination PART 2
7203 - DefendantHaving Facts Available p1
7203 - DefendantHaving Facts Available p2
7203 - DefendantHaving Facts Available p3
7203 - Degree of Proof p1
7203 - Degree of Proof p2
7203 - Depositions
7203 - Different Statute Cited
7203 - Discovery, Scope Of
7203 - Documentary Evidence in Jury Room
7203 - Double Jeopardy 1 p1
7203 - Double Jeopardy 1 p2
7203 - Double Jeopardy 1 p3
7203 - Double Jeopardy 1 p4
7203 - Double Jeopardy 1 p5
7203 - Double Jeopardy 2 p1
7203 - Double Jeopardy 2 p2
7203 - Double Jeopardy 2 p3
7203 - Double Jeopardy 2 p4
7203 - Enhanced Sentence Sophisticated Means p1
7203 - Enhanced Sentence Sophisticated Means p2
7203 - Enhanced Sentence p1
7203 - Enhanced Sentence p2
7203 - Entrapment
7203 - Erroneous calculation of tax
7203 - Exclusion of Oral Testimony
7203 - Exercise Privilege-Exclusion from Courtroom
7203 - Expert Witness p1
7203 - Expert Witness p2
7203 - Expert Witness p3
7203 - Expert Witness p4
7203 - Extenuating Circumstances
7203 - Fact Finding p1
7203 - Fact Finding p2
7203 - Fact Finding p3
7203 - Fact Finding p4
7203 - Fact Finding p5
7203 - Failure of IRS to File Return
7203 - Failure to Assess Tax
7203 - Failure to Prosecute p1
7203 - Failure to Prosecute p2
7203 - Failure to Prosecute p3
7203 - Failure to Prosecute p4
7203 - Failure to Prosecute p5
7203 - Failure to Report Income 1 p1
7203 - Failure to Report Income 1 p2
7203 - Failure to Report Income 1 p3
7203 - Failure to Report Income 1 p4
7203 - Failure to Report Income 1 p5
7203 - Failure to Report Income 1 p6
7203 - Failure to Report Income 2 p1
7203 - Failure to Report Income 2 p2
7203 - Failure to Supply Information
7203 - False Return
7203 - Fictitious names
7203 - Fraud Case Procedures p1
7203 - Fraud Case Procedures p2
7203 - Fraud Case Procedures p3
7203 - Fraud Case Procedures p4
7203 - General Exception
7203 - Good Faith p1
7203 - Good Faith p2
7203 - Good Faith p3
7203 - Good Faith p4
7203 - Government Agent Prosecuting Claim
7203 - Grand Jury 1 p1
7203 - Grand Jury 1 p2
7203 - Grand Jury 1 p3
7203 - Grand Jury 1 p4
7203 - Grand Jury 1 p5
7203 - Grand Jury 2 p1
7203 - Grand Jury 2 p2
7203 - Hearsay Evidence p1
7203 - Hearsay Evidence p2
7203 - Hearsay Evidence p3
7203 - Hearsay Evidence p4
7203 - Hearsay Evidence p5
7203 - Hostility of the Court p1
7203 - Hostility of the Court p2
7203 - Hostility of the Court p3
7203 - Hypnosis
7203 - Identification
7203 - Ignorance of Law
7203 - Immunity p1
7203 - Immunity p2
7203 - Immunity p3
7203 - Impeachment p1
7203 - Impeachment p2
7203 - Improper Comment PART 1 p1
7203 - Improper Comment PART 1 p2
7203 - Improper Comment PART 1 p3
7203 - Improper Comment PART 1 p4
7203 - Improper Comment PART 1 p5
7203 - Improper Comment PART 2 p1
7203 - Improper Comment PART 2 p2
7203 - Improper Comment PART 2 p3
7203 - Improper Comment PART 2 p4
7203 - Improper Comment PART 2 p5
7203 - Improper Comment PART 3
7203 - Improper Question
7203 - Incrimination 1 p1
7203 - Incrimination 1 p2
7203 - Incrimination 1 p3
7203 - Incrimination 1 p4
7203 - Incrimination 1 p5
7203 - Incrimination 2 p1
7203 - Incrimination 2 p2
7203 - Incrimination 2 p3
7203 - Incrimination 2 p4
7203 - Incrimination 2 p5
7203 - Incriminaton Before Grand Jury p1
7203 - Incriminaton Before Grand Jury p2
7203 - Instructions to Jury 1 p1
7203 - Instructions to Jury 1 p2
7203 - Instructions to Jury 1 p3
7203 - Instructions to Jury 1 p4
7203 - Instructions to Jury 1 p5
7203 - Instructions to Jury 2 p1
7203 - Instructions to Jury 2 p2
7203 - Instructions to Jury 2 p3
7203 - Instructions to Jury 2 p4
7203 - Instructions to Jury 2 p5
7203 - Instructions to Jury 3 p1
7203 - Instructions to Jury 3 p2
7203 - Instructions to Jury 3 p3
7203 - Instructions to Jury 3 p4
7203 - Instructions to Jury 3 p5
7203 - Instructions to Jury 4 p1
7203 - Instructions to Jury 4 p2
7203 - Instructions to Jury 4 p3
7203 - Instructions to Jury 4 p4
7203 - Instructions to Jury 4 p5
7203 - Instructions to Jury 5 p1
7203 - Instructions to Jury 5 p2
7203 - Instructions to Jury 5 p3
7203 - Instructions to Jury 5 p4
7203 - Instructions to Jury 5 p5
7203 - Instructions to Jury 6 p1
7203 - Instructions to Jury 6 p2
7203 - Instructions to Jury 6 p3
7203 - Instructions to Jury 6 p4
7203 - Instructions to Jury 6 p5
7203 - Instructions to Jury 7 p1
7203 - Instructions to Jury 7 p2
7203 - Instructions to Jury 7 p3
7203 - Instructions to Jury 7 p4
7203 - Instructions to Jury 7 p5
7205 Convictions p1
7205 Convictions p2
7205 Convictions p3
7205 Convictions p4
7205 Convictions p5
7205 Double Jeopardy
7205 Exemption Certificates
7205 Hostility of the Court
7205 Indictment
7205 Information
7205 Intent to Deceive Lacking
7205 Right to Counsel
7205 Trial, Timeliness
7205 Variance
7205 Venue
7205 Willfulness
7206 False Returns 1 p1
7206 False Returns 1 p2
7206 False Returns 1 p3
7206 False Returns 1 p4
7206 False Returns 1 p5
7206 False Returns 2 p1
7206 False Returns 2 p2
7206 False Returns 2 p3
7206 False Returns 2 p4
7206 False Returns 2 p5
7206 False Returns 3 p1
7206 False Returns 3 p2
7206 False Returns 3 p3
7206 False Returns 3 p4
7206 Basis for Allegation of Fraud
7206 Concealment of Assets p1
7206 Concealment of Assets p2
7206 Conspiracy 1 p1
7206 Conspiracy 1 p2
7206 Conspiracy 1 p3
7206 Conspiracy 1 p4
7206 Conspiracy 2 p1
7206 Conspiracy 2 p2
7206 Constitutionality p1
7206 Constitutionality p2
7206 Constitutionality p3
7206 Costs
7206 Disclosure of Returns
7206 Estoppel p1
7206 Estoppel p2
7206 Estoppel p3
7206 Evidence 1 p1
7206 Evidence 1 p2
7206 Evidence 1 p3
7206 Evidence 1 p4
7206 Evidence 1 p5
7206 Evidence 2 p1
7206 Evidence 2 p2
7206 Evidence 2 p3
7206 Evidence 2 p4
7206 Evidence 2 p5
7206 Evidence 3 p1
7206 Evidence 3 p2
7206 Evidence 3 p3
7206 Evidence 3 p4
7206 Evidence 3 p5
7206 Evidence 4 p1
7206 Evidence 4 p2
7206 Evidence 4 p3
7206 False Claims Against U.S.
7206 False Documents p1
7206 False Documents p2
7206 False Statements in Return 1 p1
7206 False Statements in Return 1 p2
7206 False Statements in Return 1 p3
7206 False Statements in Return 1 p4
7206 False Statements in Return 1 p5
7206 False Statements in Return 2 p1
7206 False Statements in Return 2 p2
7206 False Statements in Return 2 p3
7206 False Statements in Return 2 p4
7206 False Statements in Return 3 p1
7206 False Statements in Return 3 p2
7206 False Statements in Return 3 p3
7206 False Statements in Return 3 p4
7206 False Statements in Return 3 p5
7206 False Statements in Return 4 p1
7206 False Statements in Return 4 p2
7206 False Statements in Return 4 p3
7206 False Statements in Return 4 p4
7206 False Statements in Return 4 p5
7206 False Statements in Return 5 p1
7206 False Statements in Return 5 p2
7206 False Statements in Return 5 p3
7206 False Statements in Return 5 p4
7206 False Statements to IRS Agents p1
7206 False Statements to IRS Agents p2
7206 False Statements to IRS Agents p3
7206 Forgery
7206 Grand Jury
7206 Guilty Plea p1
7206 Guilty Plea p2
7206 Immunity
7206 Indictment 1 p1
7206 Indictment 1 p2
7206 Indictment 1 p3
7206 Indictment 1 p4
7206 Indictment 1 p5
7206 Indictment 2 p1
7206 Indictment 2 p2
7206 Instructions to Jury 1 p1
7206 Instructions to Jury 1 p2
7206 Instructions to Jury 1 p3
7206 Instructions to Jury 1 p4
7206 Instructions to Jury 1 p5
7206 Instructions to Jury 2 p1
7206 Instructions to Jury 2 p2
7206 Instructions to Jury 2 p3
7206 Instructions to Jury 2 p4
7206 Instructions to Jury 2 p5
7206 Instructions to Jury 3 p1
7206 Instructions to Jury 3 p2
7206 Instructions to Jury 3 p3
7206 Instructions to Jury 3 p4
7206 Instructions to Jury 3 p5
7206 Jury Verdict Disregarded
7206 Jury p1
7206 Jury p2
7206 Jury p3
7206 Lesser Included Offense p1
7206 Lesser Included Offense p2
7206 Motion For Continuance
7206 Motion to Sever
7206 Motion to Transfer
7206 Motion to Vacate Sentence
7206 Net Worth Statement
7206 Offer in Compromise
7206 Perjury
7206 False or Fraudulent Returns p1
7206 False or Fraudulent Returns p2
7206 False or Fraudulent Returns p3
7206 False or Fraudulent Returns p4
7206 False or Fraudulent Returns p5
7206 Prior Convictions
7206 Prior Law
7206 Probation
7206 Prosecutor's Comment p1
7206 Prosecutor's Comment p2
7206 Restitution
7206 Right to Counsel p1
7206 Right to Counsel p2
7206 Sentence p1
7206 Sentence p2
7206 Sentence p3
7206 Sentence p4
7206 Sentencing Guidelines 1 p1
7206 Sentencing Guidelines 1 p2
7206 Sentencing Guidelines 1 p3
7206 Sentencing Guidelines 1 p4
7206 Sentencing Guidelines 1 p5
7206 Sentencing Guidelines 2 p1
7206 Sentencing Guidelines 2 p2
7206 Sentencing Guidelines 2 p3
7206 Statute of Limitations p1
7206 Statute of Limitations p2
7206 Venue
7206 Willfulness Defined p1
7206 Willfulness Defined p2
7206 Willfulness Defined p3
7206 Willfulness Defined p4
7207 Conviction
7207 Defenses
7207 Motion to Dismiss
7207 Sentencing
7207 Willfully Defined
7210 Willful Failure to Obey Summons
7212 Assault
7212 Bribery
7212 Constiutionality
7212 Indictment
7212 Interference p1
7212 Interference p2
7212 Interference p3
7212 Interference p4
7212 Jury Instructions
7212 Rescue of Seized, Levied Property p1
7212 Rescue of Seized, Levied Property p2
7212 Sentence p1
7212 Sentence p2
7212 Statute of Limitations
7212 Suppresion of Evidence
7215 Constitutionality
7215 Conviction
7215 Corporation
7215 Defenses
7215 Evidence
7215 Intent
7215 Speedy Trial
7216 Consent
7216 Preparer Defined
7216 Scope of Statute
7217 IRS Employees

 

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 Square project. It was located in Pueblo , Colorado . A minister friend of appellant's had purchased property in that area. Knowing of appellant's burgeoning experience in the field, he asked appellant to see if low-income housing could be built on the land that he had purchased. That is what eventually happened. Another limited partnership was formed, having as one of its general partners a Bethlehem Square Limited Dividend Corporation. Appellant was a signatory on the Bethlehem Square Limited Dividend Corporation account, but was not an officer of that corporation.

The checks that made the basis of the Government's claim that appellant failed to report taxable income were made out either to appellant or to Human Resources Consultants (HRC), a company owned by appellant. Those checks appear in summary form on Government's Exhibit 53-13. These amounts have heretofore been set out.

The Government made similar contentions with regard to unreported income for 1973. The amounts have heretofore been set out.

Appellant had no personal savings or checking accounts in 1972 and 1973. All of his transactions went through the H. R. C. account. Appellant contended that monies received in the H. R. C. account were used to bail out existing housing projects that were experiencing financial crises, and to that extent, appellant was merely a conduit for funds. Because of HUD regulations, money could not be transferred directly from one source to another. Yet without those transfers, the projects would have collapsed. Therefore, it became a matter of borrowing against the future to keep alive what had theretofore been established.

King testified that the amounts claimed by the Government as unreported income were loans and remain unpaid. They did not appear as creditors on the Record of Bankruptcy Proceedings, filed by King on June 4, 1977. 2

Appellant raises five (5) issues on appeal upon which he bases his allegations of trial court impropriety.

I. Was the Evidence Sufficient to Prove Appellant Guilty Beyond a Reasonable Doubt?

The critical inquiry on review of the sufficiency of the evidence to support a criminal conviction is whether the record reasonably supports a finding of guilt beyond a reasonable doubt. Appellant would have us believe that viewing the record in a light most favorable to the government, the evidence was insufficient as a matter of law to convict him. Such a claim is without merit.

Willfulness as used in Title 26, United States Code, Section 7201, means a voluntary intentional violation of a known duty. United States v. Bishop [73-1 USTC ¶9459], 412 U. S. 346, 93 S. Ct. 2017 (1973); United States v. Olson [78-1 USTC ¶9439], 576 F. 2d 267 (8th Cir. 1978). The record clearly indicated appellant's voluntary and intentional evasion of taxes for the years 1972 and 1973.

The question of willfulness is for a jury to decide. United States v. Gaskill, 491 F. 2d 981 (8th Cir. 1974); Bollinger v. United States , 208 F. 2d 108 (8th Cir. 1953). The jury's decision was in the affirmative.

Evidence of a consistent pattern of not reporting large amounts of income is in itself, evidence of willfulness. See, Holland v. United States [54-2 USTC ¶9714], 348 U. S. 121 (1954); United States v. Vavelli [79-1 USTC ¶9257], 595 F. 2d 420 (8th Cir. 1979); United States v. Rischand [73-1 USTC ¶9151], 471 F. 2d 105 (8th Cir. 1973). The record is replete with such action by appellant. King, in his sworn testimony to Grand Jury, denied having received the $50,000.00 check from the partnership in Denver and that he never saw the partnership return. But admitted on cross-examination in trial to the contrary. He testified that all or most of his consulting fees were loans which remained unpaid. Yet he admits, and the Bankruptcy Court records show, that he did not list the various sources as creditors on his tax returns. Appellant asserts in his brief that he relied on his tax accountant as to the housing allowance and other deductions. Yet King himself did not tell his tax accountant that the church had not authorized a housing allowance, nor did he tell his tax accountant that the receipt for the charitable contribution was also unauthorized. He asserts that the discrepancies in his returns are due primarily to the fault of his accountant, together with his lack of knowledge as to methods of proper records keeping and not willfulness on his part. This was the question for the jury to decide. We find the evidence amply sufficient.

II. Was There Prosecutorial Misconduct of a Magnitude to Require a Reversal of the Trial Court's Decision?

Appellant alleges reversible error as a result of what he deems disparaging comments made by the prosecutor to the jury throughout the trial, and especially during closing arguments. While appellant cites numerous instances of such conduct, we will focus on that which we believe to require the closest scrutiny as possibly having adverse effects.

During his closing argument to the jury, the Government prosecutor argued:

Now how are we going to or how are you, because I don't have that problem anymore, that was a decision I had to make before I brought this case into Court and presented it to a grand jury and had an arraignment and got it before you, and that was a decision I had to make way back when as to whether or not what we call management fees, consulting fee advances or consulting fees or what have you was income or whether or not those other items were in fact wrongful, improper, fraudulent type of deductions on a tax return. It is now going to be up to you * * *

Objection was made to this statement. The objection was sustained.

Such comments must, we feel, be read in light of this Court's decision in United States v. Splain, 545 F. 2d 1131, 1134 (8th Cir. 1976), opinion by Judge Gibson.

Despite the objectionable nature of prosecutorial comments on defendant's guilt, courts have not yet adopted a per se rule mandating reversal of a conviction in all cases where such a comment is made. 3 See generally, Annot., 50 A. L. R. 2d 766 (1956); 5 Wharton's Criminal Law and Procedure §2084 (1957); Splain, supra; Contra, Greenberg v. United States [60-2 USTC ¶9577], 280 F. 2d 472, 475 (1st Cir. 1960).

The facts of each case must be reviewed independently to ascertain whether the comment was "unduly prejudicial", United States v. Greene, 497 F. 2d 1068, 1085 (7th Cir. 1974), cert. denied, 420 U. S. 909, 95 S. Ct. 829, 42 L. Ed. 2d 839 (1975), or was "plainly unwarranted and clearly injurious". Mellor v. United States, 160 F. 2d 757, 765, (8th Cir. 1947), cert. denied, 331 U. S. 848, 67 S. Ct. 1734, 91 L. Ed. 1858 (1947). Reversal is in order only if the court determines that the jury verdict could reasonably have been affected by the argument. United States v. Tortora, 464 F. 2d 1202, 1207 (2d Cir. 1972), cert. denied sub nom., Santoro v. United States, 409 U. S. 1063, 93 S. Ct. 554, 34 L. Ed. 2d 516 (1972); Devine v. United States, 403 F. 2d 93, 96 (10th Cir. 1968), cert. denied, 394 U. S. 1003, 89 S. Ct. 1599, 22 L. Ed. 2d 780 (1969).

One important factor to consider in determining whether a closing argument is so prejudicial to require reversal of the conviction is the amount of evidence indicating defendant's guilt. If the evidence of guilt is overwhelming, an improper argument is less likely to affect the jury verdict. United States v. Socony-Vacuum Oil Co., 310 U. S. 150, 239, 60 S. Ct. 811, 84 L. Ed. 1129 (1940); United States v. Hamilton, 455 F. 2d 1268, 1270 (3rd Cir. 1972). On the contrary, if the evidence of guilt is weak or tenuous, the existence of prejudice is more easily assumed. Berger v. United States , 295 U. S. 78, 88-89, 55 S. Ct. 629, 79 L. Ed. 1314 (1935).

We have, in the present case, substantial and persuasive evidence which is highly implicative of King's participation in the tax evasion scheme. The overwhelming evidence of guilt in this case convinces us that the prosecutor's comment could not have prejudiced King or affected the jury verdict. United States v. Chrisco, 493 F. 2d 232, 237-38 (8th Cir. 1974), cert. denied, 419 U. S. 847, 95 S. Ct. 84, 42 L. Ed. 2d 77 (1974).

In this case, counsel's objection to the argument was sustained, at which time Judge Alsop stated, "The jury will not take that into account in their deliberations." Consequently, even if it could be considered error, it was corrected by the Court.

III. Were There Errors in the Introduction of Evidence Which Prejudiced Appellant's Right to a Fair Trial?

Appellant cites two instances by the trial court in its admission of evidence which he claims prejudiced his right to a fair trial. The first occurred when the trial court allowed certain government documents which were highlighted with a magic marker to go to the jury in such fashion. When the documents were received into evidence the highlighting had already been done. The trial court gave limiting instructions in its charge to the jury in regard to what emphasis should be placed on the highlighting. The Government contends and we agree, that error, if any, should have been claimed when stipulations to the evidence were made. Such evidence did not in our opinion, prejudice appellant's right to a fair trial. See , United States v. Tempesta [78-2 USTC ¶9844], 587 F. 2d 931, 936-937 (8th Cir. 1978).

Ms. Jane Sweet was called as a summary witness by the Government. She is an I. R. S. agent, trained as a certified public accountant. After demonstrating her expertise, Ms. Sweet was qualified as an expert witness. See, Rule 702, Federal Rules of Evidence. Ms. Sweet testified after having heard all the testimony in the case and having reviewed all the evidence. The testimony of a summary witness may be received so long as she bases her summary on evidence received in the case and is available for cross-examination. United States v. Esser [75-2 USTC ¶9654], 520 F. 2d 213 (7th Cir. 1975).

The Government offered several organizational charts, prepared by Ms. Sweet, for the different projects which were discussed. Objection was taken by appellant to the introduction of these charts on the ground that the organization of housing projects was not within Ms. Sweet's expertise. Additionally, objection was made as to the inaccuracy of several of the exhibits and to the characterization of transactions portrayed in said exhibits. The evidence was allowed to be used over the objections. Concededly, the trial judge was satisfied that the summaries were reasonably accurate and that there was evidence to support them. From that determination we shall not differ. Where charts which fairly summarize the evidence are used as an aid in understanding the testimony already introduced and the witness who prepared the charts is subject to cross-examination with all documents used to prepare the summary, the use of charts is proper. Gordon v. United States , 438 F. 2d 858 (5th Cir. 1971). Evidential use of such summaries rests within the sound discretion of the trial judge, whose action in allowing their use may not be disturbed by an appellate court except for an abuse of discretion. United States v. Smallwood, 443 F. 2d 535, 540 (8th Cir. 1971). We find no such abuse.

The appellant objects to the introduction of evidence as to facts which occurred after the tax years in question. These facts were properly included in the Government's case. The Government introduced evidence to show that the proceeds from the sale of appellant's house and the charitable contribution ended up in appellant's personal account and were then used for his personal expenses. The evidence was necessary in order for the jury to properly decide whether the church actually owned the house and if it was only a paper transaction. The appellant claims error in that the court refused to allow him to stipulate these facts under Rule 403 of the Federal Rules of Evidence. We see no error in this.

As stated in U. S. v. Spletzer, 535 F. 2d 950 at pg. 955:

It is true that as a general rule a party may not preclude his adversary's proof by an admission or offer to stipulate.

Nonetheless, this principle, like and rules of evidence, is subject to the provision that where the probative value of relevant evidence is substantially outweighed by its potential for unfair prejudice, it should be excluded.

Such is not the case here.

As stated in Parr v. United States, 255 F. 2d 86, 88 (5th Cir. 1958)

It is a general rule that "A party is not required to accept a judicial admission of his adversary, but may insist on proving the fact." 31 C. J. S. Evidence §299, p. 1068. The reason for the rule is to permit a party "to present to the jury a picture of the events relied upon. To substitute for such picture a naked admission might have the effect to rob the evidence of much of its fair and legitimate weight."

IV. Was There Plain Error With Regard to Appellant's Exercise of His Fifth Amendment Rights?

This issue is raised for the first time on appeal. While appellant states the correct status of the law as to the impermissible practice of penalizing a defendant for exercising his constitutional right to remain silent when under custodial interrogation, Miranda v. Arizona, 384 U. S. 436, 86 S. Ct. 1602, 16 L. Ed. 2d 694 (1966), he concedes the failure of counsel to raise such an objection at the trial level. These claims were not raised before the District Court and, accordingly, will not be considered for the first time on appeal. United States v. Librach, 536 F. 2d 1228 (8th Cir. 1976). Appellant's claim that he should not be made to pay for such nonfeasance is without merit.

V. Did the Trial Court Err in Refusing to Give an Instruction on a Lesser Included Offense?

A defendant is entitled to an instruction on a lesser included offense if: (1) a proper request is made; (2) the elements of the lesser offense are identical to part of the elements of the greater offense; (3) there is some evidence which would justify conviction of the lesser offense; (4) the proof on the element or elements differentiating the two crimes is sufficiently in dispute so that the jury may consistently find the defendant innocent of the greater and guilty of the lesser included offense; and (5) there is mutuality, i. e., a charge may be demanded by either the prosecution or defense (Emphasis omitted)

United States v. Thompson [75-1 USTC ¶9346], 492 F. 2d 359, 362, (8th Cir. 1974); United States v. Brown, 551 F. 2d 236, 239 (8th Cir. 1977).

The Supreme Court has stated:

But a lesser offense charge is not proper where, on the evidence presented, the factual issues to be resolved by the jury are the same as to the lesser and greater offenses. (Citations omitted.) In other words, the lesser offense must be included within but not, in the facts of the case, be completely incompassed by the greater. A lesser-included offense instruction is only proper where the charged greater offense requires the jury to find a disputed factual element which is not required for conviction of the lesser-included offense.

Sansone v. United States [65-1 USTC ¶9307], 380 U. S. 347 (1969), 85 S. Ct. 1004, 1009.

The elements of Title 26, United States Code, Section 7201, are wilfulness and the existence of a tax deficiency with the intent to evade. The elements of Title 26, United States Code, Section 7207 are wilfulness and the commission of the prohibited act, i. e., the filing of the document known to be false or fraudulent. Sansone v. United States, supra, 1010. Applying the foregoing principles to the case before us, we must examine the Government's three areas of proof: (1) Unreported consultant fees; (2) Improper claim for charitable deduction for down payment on a house; (3) Improper deduction for housing allowance.

Appellant alleged that the consultant fees were either loans, or advances for expenses; that his salary was a gift (love offering); that he truly believed he was entitled to a housing allowance set off, and that the down payment for the purchase of the house was a gift to the church. The defense offered no evidence to rebut the Government's computation of total amounts or of tax deficiencies.

Accordingly, as the Government submits, there is no factual dispute wherein the jury may consistently find the defendant innocent of the greater and guilty of the lesser-included offense, nor is there a showing that the false or fraudulent statements did not result in a tax deficiency. United States v. Brown, supra; Sansone v. United States, supra.

We agree with the Government's contention that the trial judge did not err in refusing to instruct on Title 26, United States Code, Section 7207.

AFFIRMED.

* The Honorable Daniel H. Thomas, Senior United States District Judge, Southern District of Alabama, sitting by designation.

1 Government Exhibit 14-3

2 Government Exhibit 59.

3 There is a line of cases holding it not to be reversible error for the prosecutor to state his personal belief in the guilt of the accused if the opinion is based on the evidence adduced at trial and if the jury is not led to believe that the opinion is based on evidence not included in the record. Schmidt v. United States , 237 F. 2d 542, 543 (8th Cir. 1956).

 

 

[80-1 USTC ¶9126] United States , Appellee v. Joseph J. Karsky, Appellant

(CA-8), U. S. Court of Appeals, 8th Circuit, No. 79-1102, 610 F2d 548, 12/14/79

[Code Sec. 7203]

Criminal penalties: Failure to file return: Willfully defined: Constitutional provisions.--The taxpayer's conviction of willfully failing to file a return for 1975 was upheld. On the basis of his constitutional objections to disclosing the information requested on his income tax return, the taxpayer wrote "object" on lines requiring information concerning his income, deductions and filing status. Various objections to the trial court proceeding were rejected, including claims that admission of prior returns to prove intent was an abuse of discretion and failure to instruct the jury that the fifth amendment justified his refusal to file a properly prepared return.

Rob ert D. Hiaring, United States Attorney, Shelley M. Stump, Assistant United States Attorney, Sioux Falls, South Dakota 57102, for appellee. Wayne Gilbert, Gunderson, Farrar, Aldrich, Warder & DeMersseman, 516 Fifth Street, Rapid City, South Dakota 57709, for appellant.

Before BRIGHT, ROSS, and STEPHENSON, Circuit Judges.

PER CURIAM:

Joseph J. Karsky appeals his conviction for willfully failing to file an income tax return in violation of 26 U. S. C. §7203 (1976). Instead of filing information concerning his income for 1975, Karsky turned his income tax Form 1040 into a protest. Thereafter, the United States commenced this prosecution. A jury found Karsky guilty and the district court 1 sentenced him to a one-year term of imprisonment. We affirm.

On appeal Karsky contends that the district court erred in refusing to instruct the jury (1) that conduct in reckless disregard of the law is not "willful" within the meaning of section 7203; (2) that individuals desiring fifth amendment protection for disclosures on their tax return must claim the privilege on their return or lose it; and (3) that as a defense to the charge the jury should consider appellant's good faith but mistaken belief that the Internal Revenue Code is unconstitutional and that the fifth amendment permits a taxpayer to refuse to answer inquiries on an income tax form. Karsky also argues that the district court abused its discretion in admitting three prior tax returns which he had signed and filed with the Internal Revenue Service (the Service). 2 For reasons set forth below, we reject these contentions.

Karsky, a twenty-two-year-old independent contractor in the janitorial business, filed a "protest" Form 1040 3 with the Service for the year 1975. The Service advised him by letter that the return did not fulfill legal requirements and sent him additional forms with which to prepare a valid return. Thereafter Karsky several times asked the Service how to fill out a Form 1040 correctly without violating his "constitutional rights," but received no response. Karsky earned a gross income of over $9,000 in 1975 and thus was a person required to file a return under the Internal Revenue Code. Karsky's defense at trial was that he acted out of a good faith misinterpretation of the law and therefore lacked the requisite intent to commit the criminal offense charged.

On appeal, Karsky first claims that the district court erred in refusing to instruct the jury that conduct in reckless disregard of the law is not "willful" within the meaning of section 7203. See United States v. Bengimina [74-2 USTC ¶9513], 499 F. 2d 117, 119-20 (8th Cir. 1974). The district court instructed the jury on this issue in language identical (except for the substitution of the appropriate pronoun) to that suggested in United States v. Pohlman [75-2 USTC ¶9677], 522 F. 2d 974, 976 and 977 n.2 (8th Cir. 1975) (en banc), cert. denied, 423 U. S. 1049 (1976). 4 The district judge reiterated that "a good faith misunderstanding of the law may negate willfulness, [but] a good faith disagreement with the law does not." The Supreme Court has approved our construction of section 7203's willfulness requirement. See United States v. Pomponio [76-2 USTC ¶9695], 429 U. S. 10, 12-13 (1976) (per curiam). See also United States v. Ojala [76-2 USTC ¶9760], 544 F. 2d 940, 946-47 (8th Cir. 1976). We conclude that the district court's willfulness instructions correctly and adequately apprised the jury of the law.

At trial Karsky testified that he had received instructions at seminars conducted for tax protestors that a taxpayer could object to specific questions on his tax return, and that failure to do so would result in a waiver of his fifth amendment privilege. He further testified that he believed that the Service could initiate a criminal prosecution for innocent mistakes made on a tax return. Karsky now argues that, in order to assess his good faith defense, the jury should have been informed that Karsky's beliefs were partially correct. Karsky proposed a jury instruction to the effect that an individual must claim his privilege against self-incrimination on his income tax return or lose the right to rely on it in a subsequent criminal prosecution employing disclosures made in the return. See Garner v. United States [76-1 USTC ¶9301], 424 U. S. 648 (1976).

While appellant's proposed instruction correctly states the law, it is only tangentially relevant to this case. Karsky made no valid claim of his fifth amendment privelege against self-incrimination. 5 Karsky's defense was that he acted out of a good faith misunderstanding of the law. Karsky testified regarding his beliefs at the time he claimed the fifth amendment privilege on his return; his attorney argued his good faith belief to the jury, and the district court instructed the jury on this issue. In view of these circumstances, we cannot say the district court erred in refusing appellant's proposed instruction.

Appellant also argues that the district court erred in instructing that the Internal Revenue Code was constitutional, and the fifth amendment privilege no defense to the crime charged, without reiterating that a good faith misunderstanding of the law did constitute a defense. However, the district court had already twice stated in its willfulness instruction that good faith misunderstanding was a defense. We find no error in the district court's refusal to repeat appellant's requested instruction at every stage of the instructions. The jury was adequately instructed on the defense of misunderstanding.

To prove Karsky's willfulness in failing to file a 1975 return, the Government at trial introduced income tax returns for the years 1972, 1973, and 1974, which Karsky had signed and filed with the Service. The district court admitted these returns over Karsky's objection that they were irrelevant to a determination of his state of mind when he filed his nonconforming return. 6 Karsky argues that the district court abused its discretion in admitting the prior returns.

We cannot agree. Evidence is relevant if it has a tendency to make the existence of a consequential fact more or less probable than it would be without the evidence. Fed. R. Evid. 401. The district court did not abuse its discretion in judging the probative value of the prior returns to outweigh their potentially prejudicial effect. See Fed. R. Evid. 403. Cf. United States v. Rifen [78-2 USTC ¶9534], 577 F. 2d 1111, 1113 (8th Cir. 1978) (evidence of defendant's prior taxpaying history considered in weighing sufficiency of the evidence to sustain conviction under section 7203).

We have carefully considered the issues raised by appellant pro se and by his counsel. We find no merit in their contentions. Accordingly, we affirm.

1 The Honorable Andrew W. Bogue , United States District Judge, District of South Dakota, presiding.

2 Karsky further argues that the district court erred in denying his motion to dismiss because of the Service's failure to comply with notice requirements of the Privacy Act, 5 U. S. C. §552a (1976), specifically those imposed by §552a(e)(3)(D). This argument is without merit.

On appeal Karsky has filed a pro se brief in addition to that filed by his attorney. In it Karsky urges that the evidence was insufficient to support his conviction, that the sixteenth amendment did not authorize an individual income tax, that the district court lacked jurisdiction, and that he was denied competent counsel. These contentions are devoid of merit. see, e.g., United States v. Rifen [78-2 USTC ¶9534], 577 F. 2d 1111 (8th Cir. 1978); Kasey v. C. I. R. [72-1 USTC ¶9307], 457 F. 2d 369 (9th Cir.), cert. denied, 409 U. S. 869 (1972). We note that appellant's court-appointed counsel has ably represented him at trial and on appeal.

3 On lines which required information concerning his income, deductions and filing status, Karsky entered "Object".

4 Willfulness is an essential element of the crime of failure to file an income tax return. The word "willfully" used in connection with this offense means a voluntary, intentional violation of a known legal duty, or otherwise stated, with the wrongful purpose of deliberately intending not to file a return which defendant knew she should have filed, in order to prevent the Government from knowing the extent of, and knowing the facts material to, the determination of her tax liability.

Defendant's conduct is not "willful" if she acted through negligence, inadvertence, or mistake, or due to her good faith misunderstanding of the requirements of the law. It should be pointed out, however, that disagreement with the law is not a defense. It is the duty of all citizens to obey the law whether they agree with it or not. [522 F. 2d at 977 n. 2 and 976.]

5 Karsky never suggested that he was involved in any activity in which he wished not to incriminate himself. He claimed the fifth amendment privilege on his return solely because of what he had been told by speakers at tax protest seminars.

6 On appeal Karsky also points to evidence that he did not personally prepare the prior returns.

 

 

[79-1 USTC ¶9371] United States of America , Plaintiff-Appellee v. Joel H. Dark, Defendant-Appellant

(CA-6), U. S. Court of Appeals, 6th Circuit, No. 78-5237, 597 F2d 1097, 5/4/79, Affirming an unreported District Court decision

[Code Sec. 7203]

Crimes: Willful failure to file return: Intent.--The defendant was properly convicted of failure to file returns for two years. A CPA, his defense that the failure was not willful due to his inability to file because of the complicated and cumbersome nature of his personal accounting system was insufficient. Errors by the trial judge were not significant, especially in light of the overwhelming evidence of guilt.

Hal D. Hardin, United States Attorney, Nashville, Tenn. 37203, Richard L. Windsor, Assistant United States Attorney, Nashville, Tenn. 37203, for plaintiff-appellee. Walter S. Clark, Phyllis L. Bateman, 415 Stahlman Bldg., Nashville , Tenn. 37201 , for defendant-appellant.

Before ENGEL and MERRITT, Circuit Judges; PECK, Senior Circuit Judge.

PER CURIAM:

Appellant Dark was convicted of two counts of willfully failing to file income tax returns, in violation of 26 U. S. C. §7203 (1976), after a jury trial in the United States District Court for the Middle District of Tennessee. He was sentenced to five months' imprisonment on count one and to one year's imprisonment on count two, the latter sentence suspended in favor of three years' probation.

The government's evidence was plainly sufficient to support the verdict. During 1973 and 1974, Dark was self-employed as a certified public accountant, he taught elementary accounting at Tennessee State University in Nashville , and he attended law school at night. His total receipts on accounts receivable from his accounting practice amounted to $36,331.10 in 1973 and $40,779.22 in 1974. In 1973 he received a salary of $5,420 from Tennessee State . He failed to file income tax returns for either year, despite the fact that he had been specifically warned by the Internal Revenue Service of his obligation under the law to file timely returns. Dark had failed to file his returns for the years 1967-1971 until March 1973, when he learned that he was under investigation by the IRS. At that time, Dark assured the IRS that he would comply with all filing requirements in the future.

Dark's defense was that his failure to file had not been "willful." He testified that his financial books and records were simply "not in shape to file a tax return" on the respective due dates, principally because of the complicated and cumbersome nature of his personal accounting system, and that the pressures of his accounting practice and legal studies had distracted him from properly maintaining his books. The jury deliberated only five minutes before returning its verdict of guilty on both counts.

Dark raises numerous claims of erroe in appeal, most of which are wholly without merit. He contends that the testimony of certain witnesses subpoenaed by the government should have been excluded at trial because the Assistant United States Attorney had instructed the Marshal not to place the returned subpoenas in the case file in the district clerk's office, thereby preventing defense counsel from looking at the case file to find out who was going to testify for the government. The short answer to this claim is that defense counsel was not entitled to know, in advance of trial, who was going to testify for the government. United States v. Conder, 423 F. 2d 904, 910 (6th Cir.), cert. denied, 400 U. S. 958 (1970).

Dark contends that the district judge committed reversible error during jury selection by telling the panel, in the course of explaining the presumption of innocence and burden of proof in a criminal case, that "Neither side has the edge." Read in context, the remark was apparently calculated to impress upon the prospective jurors that both parties in a criminal case come before the court with equal dignity and that neither should be arbitrarily favored out of prejudice for or against the government or defendants as a class. While perhaps better left unsaid, the remark could not have confused the jury, especially in light of the district judge's more than adequate explanation of the defendant's presumption of innocence and the government's heavy burden of proof in his other comments to the panel during jury selection and in his instructions at the close of the trial.

Dark also argues that the trial judge erred in refusing to order the government to turn over to defense counsel, as "statements" under the Jencks Act, the contents of IRS Special Agent Hollingsworth's case file after Hollingsworth's testimony at trial, without at least inspecting the file in camera to determine whether it contained any Jencks material. Agent Hollingsworth's written case reports are not his "statements" under 18 U. S. C. §3500(e), and the trial court was under no obligation to examine the file in camera, since there was "no basis for belief that Jencks Act 'statement' existed other than those already furnished defense counsel." United States v. Nickell, 552 F. 2d 684, 687-90 (6th Cir. 1977), cert. denied, 436 U. S. 904 (1978).

Dark's two remaining claims of error are more troublesome. Both involved actions of the trial court, which, Dark argues, unfairly hampered the presentation of his defense.

Dark sought to introduce in evidence some of his personal financial records in an effort to corroborate his claim that his personal record-keeping system was so complicated that it would have been difficult, if not impossible, to prepare accurate tax returns by the dates required by law. The trial judge ruled that the records were irrelevant and refused to admit them. We think this was error. The records were plainly relevant to Dark's defense, lame though it might have been.

The other incident occurred during the prosecutor's cross-examination of Dark. Dark testified, "I do not think I could have done [the 1973 and 1974 tax returns] under the circumstances under which I was laboring. On the due date my books were not in shape to file a tax return." At that point, the trial judge interrupted to ask the following question: "Well, the reason your books were not in shape is that you elected to spend time making money off somebody else and not keep your own books up, is that not correct?"

This Court has only recently had occasion to observe that "potential prejudice lurks behind every intrusion into a trial made by a presiding judge" and that, when such intrusion occurs, the judge must "sedulously avoid all appearances of advocacy as to those questions which are ultimately to be submitted to the jury." United States v. Hickman, Nos. 78-5148-49 (6th Cir. February 15, 1979), slip op. at 3. The question propounded by the trial judge here came dangerously close to violating this principle, for it could have created the impression in the minds of the jurors that the trial judge was unsympathetic to Dark's defense, a matter which was for the jury, and the jury alone, to evaluate.

In light of the overwhelming evidence of Dark's guilt, however, we do not believe that either the erroneous exclusion of Dark's financial records or the trial judge's isolated intrusion into the cross-examination of Dark affected Dark's substantial rights. Rule 52, FED. R. CRIM. P.

Accordingly, it is Ordered that the judgment of conviction be, and hereby is, affirmed.

 

 

[77-1 USTC ¶9371] United States of America , Plaintiff-Appellee v. Philip Hollinger, Defendant-Appellant

(CA-7), U. S. Court of Appeals, 7th Circuit, No. 76-1223, 553 F2d 535, 4/22/77, Affirming unreported District Court decision

[Code Secs. 7201 and 7206--result unchanged by '76 Tax Reform Act; 18 U. S. C. §1951]

Crimes: Fraud and false statements: Attempt to evade tax: Obstruction of commerce by extortion: Assertion of miscellaneous errors: Improper instructions to jury: Improper exclusion of evidence: Insufficient indictment: Improper closing argument by prosecutor.--A municipal president's convictions for making false declarations under penalty of perjury, willful attempts to evade tax, and obstruction of commerce by extortion were affirmed. There was no reversible error in the trial court's instructions to the jury (concerning taxable income, the duty to report such income and the use of evidence), exclusion of a letter, or failure to dismiss the indictment for obstruction of commerce by extortion, nor did the prosecutor's improper closing argument merit reversal of the convictions. However, the conviction for making false declarations under penalty of perjury was remanded for resentencing.

Samuel K. Skinner, United States Attorney, John L. Gubbins, Assistant United States Attorney, Chicago, Ill., for plaintiff-appellee. Sherman C. Magidson, 221 N. La Salle St., Room 1938, Chicago, Ill., for defendant-appellant.

Before SWYGERT, PELL, and BAUER, Circuit Judges.

PELL, Circuit Judge.

The defendant, Philip Hollinger, was charged in a fourteen count indictment on October 30, 1975. Counts 1, 3, 5, 7, and 9 charged that Hollinger wilfully and knowingly subscribed 1969 through 1973 income tax returns which he did not believe to be correct as to every material matter reported, in violation of 26 U. S. C. §7206. 1 Counts 2, 4, 6, 8, and 10 charged that Hollinger wilfully and knowingly attempted to evade and defeat a large part of the income tax due and owing by filing false and fraudulent returns for the years 1969 through 1973, in violation of 26 U. S. C. §7201. 2 Counts 11 through 14 charged that Hollinger obstructed commerce by extortion by knowingly obtaining money from various named individuals and companies with their consent induced by the wrongful use of fear of economic harm and under color of official right, in violation of 18 U. S. C. §1951. 3

After a jury trial, Hollinger was convicted on all counts of the indictment and was subsequently sentenced to the custody of the Attorney General for a period of four years on each count. 4

During the years 1969 through 1973, Hollinger received cash payments of approximately $93,000 which he did not report as income on the tax returns he filed jointly with his wife, Anne M. Hollinger. During that period, Hollinger reported a total adjusted gross income of $47,620, calculated total taxable income as $32,309, and paid $5,587 in federal income taxes.

Viewing as we must the evidence in the light most favorable to the Government, Hollinger, serving as president of the Village of Brookfield, and by way of extortionate conduct, received during the years 1969 to 1971 the sum of $58,230 from William Hall, owner of the Berwyn-Stickney Tree Service. Similarly, Carl Rauschert, vicepresident of National Power Rodding, paid over to the defendant the sum of $5,911.03 during the years 1969 to 1973, calculating his payments on the basis of five cents per lineal foot for sewer cleaning. Albert Berg, president and sole shareholder of A. E. Berg Company, Inc., contractor in 1972 for the construction of Brookfield 's new municipal building, paid over to the defendant during that year the sum of $6,500. Louis Graben, a salesman for Business Interiors, which supplied the furniture for the new municipal building, paid over to the defendant during 1973 the sum of $5,500.

In sum, the individual victims named in counts 11 to 14 of the indictment paid out to the defendant a total of $76,141.03. Additionally, Hollinger received during the period the sum of $11,700 from Donald Smith, a licensed architect with the firm of Smith and Neubeck, which did the architectural work on the new municipal building. Frank Novotny, president of Frank Novotny and Associates, who acted as Brookfield 's consultant on civil engineering during the years 1969 through 1973, delivered approximately $5,782 to Hollinger. Thus, the testimony indicated that Hollinger's real taxable income during the period was somewhere between $124,754 and $125,059. Hollinger paid taxes in the amount of $5,587, but the real tax liability was somewhere in the range $28,489 to $30,068.

Seven witnesses with first-hand knowledge and profuse supporting documentation testified to making coerced cash payments totalling over $92,000 to Hollinger over a five year period. Indeed, the defendant admitted receiving money from a number of the witnesses but explained that he kept cash contributions for Brookfield's People's Economy Party, using the funds according to the needs of PEP by making cash deposits into its bank account and by paying PEP bills with cash, Hollinger denied receiving monies other than approximately $25,000, which he characterized as "political contributions." The defendant's attempt to establish a political contributions defense did not explain what happened to a considerable portion of the monies. Viewing the evidence in the light most favorable to the Government over $60,000 in cash payments which represented the proceeds of extortion was never accounted for.

No question of the sufficiency of the evidence arising in this appeal, the defendant urges reversal of the conviction on the grounds of instruction errors, the erroneous exclusion of Defendant's Exhibit No. 4, improper closing argument by the prosecutor, and the court's failure to dismiss the indictment.

I. Claimed Errors in Instructing the Jury. The defendant claims that the trial court committed reversible error in giving Instructions Nos. 42, 43, and 53. The Government contends that Hollinger cannot seek review of these instructions because of inadequate compliance with the requirements of Rule 30, Fed. R. Crim. P. As in Hetzel v. Jewel Companies, Inc., 457 F. 2d 527, 534 (7th Cir. 1972), we think that some comment is appropriate regarding the district court's method of dealing with instructions and objections thereto.

The core of Hollinger's defense to the tax counts was that the monies he had received were political contributions which, even if extorted, would not constitute "taxable income" because such money was not "gain," and, therefore, not income as defined by law. During the initial conference on tendered instructions, the defendant objected to the Government's proposed instructions defining taxable income (No. 42) and the duty to report such income (No. 43). Further, the defendant objected that a cautionary instruction regarding the limited use of evidence regarding Hollinger's actions and/or conduct prior to October 31, 1970, was inadequate (No. 53).

At the first instructions conference, the trial judge essentially agreed with the defendant that the instructions on taxable income were inadequate. The judge deleted the last two sentences of the Government's tendered No. 42, and the defendant acquiesced in that change. As to Instruction No. 43, the judge suggested a possible modification; and the Government counsel indicated that he would undertake to rewrite the instruction. 5 However, neither the Government attorneys nor the defense counsel ever rewrote the instruction to highlight the so-called political contributions defense, and the judge's charge to the jury actually included the original and unmodified Instruction No. 43. 6 Similarly, the trial judge attempted to formulate language that would satisfy defense counsel as to the claimed inadequacy of No. 53. The judge indicated that defense counsel could redraft it if they wanted to. One of the defense team indicated that it should be redrafted, but no defense attorney did so.

At the second instructions conference, there was no discussion of the modified Instruction No. 42. As to No. 43, the trial judge did not formally reread it. Defense counsel indicated that, apart from its lack of any language dealing with the element of wilfulness, they saw nothing wrong with it as it stood. Finally, as to No. 53, the trial judge determined that it would be better to leave the language the way it was originally.

After the charge to the jury had been delivered and the jury had retired, the defense objected to the wording of Instruction No. 43, referring back to the objection they had raised in the initial instructions conference. The court noted that nobody had presented it with an instruction which, in effect, would have told the jury that if they found that any portion of the proceeds of the extortion was in fact a campaign contribution, that part of the monies was not taxable income. One of the defense team suggested that his co-counsel had presented such an instruction, but the court correctly noted that no one had done so. The court refused to recall the jury to "give them an instruction which would highlight something that nobody asked me to give them before."

The gist of the Government's argument is that Hollinger may not seek review of any of the challenged instructions because he did not properly preserve the error, if any. As to No. 43, it concedes that the federal prosecutors had agreed to rewrite it but points to a subsequent assertion by one of the defense counsel that his co-counsel had undertaken a redrafting as an indication of some ambiguity in the record. Although the transcript contains the assertion, we find in the record no ambiguity regarding the trial judge's directive to the Government counsel. The Government argues, first, that Hollinger did not state distinctly and specifically the grounds of his objection to No. 43. Second, citing United States v. Wright, 542 F. 2d 975, 983-86 (7th Cir. 1976), cert. denied, -- U. S. --, 45 U. S. L. W. 3508 (January 25, 1977), the Government argues that specific objections must be voiced after the charge to the jury. Thirdly, as a corollary to its timeliness contention, the Government contends that "defense counsel's objection cannot be bolstered by his attempt to incorporate by reference the instructions conference discussions . . .." 7

We shall approach the Government's three essential arguments in reverse order. First, as to the incorporation by reference, the trial judge may have misled defense counsel. After the Government's rebuttal argument, we find this colloquy:

MISS LAVIN [Defense counsel]: Your

Honor, may the record just show that our discussions in chambers--

THE COURT: Any objections that were made--

MISS LAVIN: As provided by Rule 30?

THE COURT: Yes. Any objection made--

MISS LAVIN: That the discussion in chambers will satisfy the Rule 30.

THE COURT: Yes. Any objection made by counsel to any refusal to give any instructions or the giving of certain instructions will be considered as having been repeated after the argument. [query: the charge?]

MISS LAVIN: Thank you.

The only possible meaning that defense counsel could attach to the judge's remarks was that he would allow objections to be incorporated by reference.

In Wright, supra at 984, this court explained that incorporation by reference of earlier objections was found not to be in compliance with Rule 51 in Hetzel, supra. Although Hetzel was technically only a ruling regarding the procedure to be used in a civil case, its disapproval of incorporation by reference was implicitly extended to the criminal context of Rule 30, Fed. R. Crim. P., in United States v. Lawson, 507 F. 2d 433, 443-44 (7th Cir. 1974), cert. denied, 420 U. S. 1004 (1975). At the date of trial in the instant case, defense counsel under the law of the circuit should not have been seeking nor should the trial judge have acquiesced in the use of incorporation by reference as that method had been condemned as a way of complying with either Fed. R. Civ. P. 51 or Fed. R. Crim. P. 30.

At this point we need not speculate as to the reasons why trial judges have disregarded our previous decisions condemning incorporation by reference. Pershaps they have discovered, like those in the Ninth Circuit, that the procedure of noting for the record at the close of the instructions that counsel adopts the objections made earlier while then making in full any new objections not previously presented

saves time . . . [and] is generally acceptable to counsel . . . [particularly where] opportunity is given for further objections, in addition to those previously made and incorporated by reference.

Merchant Plumbers Association, supra at 744.

Apart from Hetzel and its progeny, there is no impediment to district court approval of incorporation by reference. The plain language of Fed. R. Crim. P. 30 and Fed. R. Civ. P. 51 does not directly prohibit resort to such a practice. On balance, we can find no crippling deficiency in a procedure whereby the trial judge confers in advance of argument with the opposing attorneys and, using the services of a court reporter, allows the attorneys to set out plainly, distinctly, and specifically their objections to tendered instructions. An on-the-record instructions conference provides a suitable means for meeting the requirements of Rule 51, Fed. R. Civ. P., and Rule 30, Fed. R. Crim. P., and clearly enables the trial judge, in advance of instructing the jury, to have erroneous aspects pointed out to him.

However, the phenomenon of inadvertent error is not always avoided by such conferences. Largely for that reason, the Hetzel opinion stated that Rule 51 "necessitates deferring the process of formally stating their objections until the charge has been given in its entirety." Hetzel, supra at 535. Of course, no one can quarrel with the advisability of bringing to the trial court's attention the matter of correcting errors which somehow have gotten into the charge as it is actually given despite the consideration of the instructions in advance of the jury charge. See Wright, supra at 983. Thus, Wright found Hetzel's postponement of the formal statement of the grounds of an objection to the postcharge time frame a workable and desirable method of eliminating any inadvertent errors that might emerge.

At the same time, Wright noted that there was no utterly compelling reason why the language of Rule 30 must always be interpreted as requiring the voicing of specific objections "immediately before the jury retires." Id. at 982. Nor did Wright find any a priori reason for interpreting the language of Rule 30 as necessarily requiring that objections must be pressed "between the final arguments and the retirement of the jury for deliberation." Id. By following Hetzel's Rule 51 requirement, Wright placed an additional restriction on the way in which trial judges could settle the instructions in criminal cases.

Upon reflection, we think that Hetzel and Wright, supra, have imposed too restrictive a "timeliness" requirement. Because the language of Fed. R. Civ. P. 51 and Fed. R. Crim. P. 30 does not itself require that objections be voiced after the jury charge, this court's decisional imposition of that requirement has placed an extra burden on attorneys and trial judges alike. Of course, if the trial judges in this circuit prefer to do so they are empowered to require the voicing of objections after the charge is given. Having considered many cases where an earlier delineation of specific objections to tendered instructions would have proved helpful to the trial judge, we think that a universal requirement of post-charge formalization on the whole would impede rather than promote the efficient settling of instructions.

First, imposition of a timelines requirement beyond that directly mandated by Fed. R. Civ. P. 51 and Fed. R. Crim. P. 30 impinges upon the broad discretion which trial judges would otherwise possess in formulating the means for achieving compliance with the rules. Further, a requirement that invariably pushes to a post-charge time frame the former articulation of objections to tendered instructions devitalizes earlier on-the-record instructions conferences. Attorneys who realize that their remarks must be repeated in great detail after the charge might conceivably attach little significance to the earlier discussions to the detriment of the judge's understanding of a possible instructional defect. The earlier conference becomes something far less than a serious consideration, and the trial judge's preparation for the actual charge can suffer in direct proportion.

Ordinarily, trial judges will derive considerable benefit from a serious exchange of views by opposing counsel regarding the proper formulation of the applicable rules of law before they must charge the jury. Accordingly, we shall exercise our supervisory power by withdrawing our present requirement that the formal statement of objections be deferred to the post-charge time frame. Henceforth, specific and distinct objections voiced in an earlier instructions conference held in the presence of a court reporter will be considered timely under Fed. R. Crim. P. 30 and Fed. R. Civ. P. 51. Moreover, where previously-voiced objections have met the requirement that the matter to which a party objects and the grounds thereof have been stated distinctly, 8 we shall henceforth allow counsel to incorporate them by reference. While the process of stating for the record that such pre-charge objections are incorporated by reference is a somewhat pro forma exercise, we are nevertheless of the opinion that the better practice would be for counsel to see that the record affirmatively shows that counsel has renewed his specific objections by the incorporation method.

To the extent that Wright imposes different or additional requirements in the settling of instructions in a criminal case under Fed. R. Crim. P. 30, it is hereby overruled. To the extent that Hetzel and its progeny impose different or additional requirements in the settling of instructions in a civil case under Fed. R. Civ. P. 51, they also are hereby overruled. 9

In so doing, we do not in any way intend to indicate that the trial judge must require a formal statement of objections prior to the giving of the charge. Whether the distinct statement of the matter to which counsel objects and the grounds of the objections are stated before or after the giving of the charge remains in the discretionary choice of the judge. If, however, the judge conducts only an informal conference prior to the giving of the charge as to what requests will be granted or denied and what instructions the judge intends to give, a full opportunity must be given after the jury has been instructed, but before it begins to deliberate, for counsel to make a full record on their objections to the charge as given as well as to the denial of requests. Further, even if the objections are stated distinctly and on the record before the giving of the charge and need not be repeated subsequent thereto but may be incorporated by reference as we now hold, nevertheless full opportunity must be given after the statement of the charge and before the retirement of the jury to state any additional objections which may have developed as a result of the giving of the charge.

Our overruling of previous authorities does not compel a favorable ruling on the defendant's contentions regarding instruction errors, and we turn now to a particularized examination of those claims of reversible error.

A. Instruction No. 42

The first of the Government-tendered instructions dealing with taxable income consisted of four sentences. 10 After looking at the instruction, the trial judge remarked that there was something wrong with the instruction. The remark might well have applied to the use of the double negative in the last sentence, but the record provides no basis for determining whether or not this was the case. After both defense counsel had agreed that the first two sentences of the proposed instruction were true, one of them adverted to the words "cash payments" in the third sentence and to a possible relation to political contributions. 11

Making no distinct reference to his legal theory that the political contributions were neither gain nor taxable income, the defendant's counsel never pinpointed directly the offensive matter. More to the point, neither was there a distinct statement that the proposed instruction was equating cash payments with illegal or unlawful gain. The third sentence of the Government-tendered instruction would have allowed a guilty verdict only if the jury found that any cash payments received by Hollinger were gain, either legal or illegal. Defense counsel never adverted to the phrase "such a sum of money" in the fourth sentence.

Nevertheless, the trial judge grasped the fundamental nature of the defendant's objection. The court agreed with the defense and struck the last two sentences, the only portion of the instruction which the defendant found unacceptable. Thus, the court gave No. 42 in the form which the defense counsel regarded as a true statement of law and to which they had consented. The defendant is in no position to claim reversible error in such circumstances.

B. Instruction No. 43

Similarly, there was no reversible error in the district court's refusal to recall the jury to give a modified formulation of Instruction No. 43. At the time of the second instructions conference, defense counsel were aware, or should have been aware, that the Government attorneys had failed to comply with the court's indication that reference to political contributions should be included. If a proper instruction on the political contributions defense was essential to the proper formulation of the charge, the defense attorneys could have submitted one at that point. The record clearly establishes that the second conference was primarily concerned with review of the defense-tendered instructions. The breach by the Government attorneys of their commitment to redraft the instruction is regrettable, but the defendant's assertion that the failure of the Government to rewrite the instruction "was a direct cause of his conviction on the tax counts" is extravagant.

Essentially, the defendant complains of an omission from the charge of the judge's proposed modification. Viewing the case in that manner, the error here pressed falls into the category of inadvertent mistakes made in the actual giving of the charge. We can assume that the defendant's counsel thought that the court would instruct the jury in accord with its suggested modification, even though a written formulation of the revised No. 43 had not been presented by the attorneys. But when the trial judge gave the original Government-tendered instruction, defense counsel could not wait until after the jury retired to deliberate its verdict before bringing the mistake to the attention of the court. As the judge pointed out when the objection was belatedly lodged, bringing the jury back at this point would in effect highlight something which no one had presented in an instruction. 12

Here, the record establishes that the jury had retired to begin its deliberations before the objection was voiced, although the defendant was not precluded from objecting prior to retirement. The plain language of Rule 30 requires that objections be pressed before the jury retires. Once defense counsel became aware that the judge had inadvertently failed to give a modified version of No. 43, they were obliged to note their objection upon the completion of the charge. Their failure to do so precludes appellate review of the claimed inadequacies of the instruction. 13

C. Instruction No. 53

The defendant claims that the trial was characterized by a melange of evidence suggesting criminal liability, but relating to some events unquestionably beyond the statute of limitations and, in any event, uncharged in the indictment. The defendant does not challenge the admissibility of this melange of evidence, but rather argues that the court's failure to give clear and unequivocal instructions describing the limited purpose for which much of the Goverment's evidence was offered permitted the jury to use such evidence improperly.

The only limiting instruction given on the subject of other offenses was Instruction No. 53. 14 While a clearer explanation of the narrow purpose for which the evidence of other, similar extortionate acts could be used might well have merited consideration, the record establishes that the district court wrestled with the wording of the cautionary instruction. The court invited the help of defense counsel and was open to their suggestions. Indeed, the defense submitted orally during the first conference a suggested modification. On the following day, when the trial judge read back that formulation of No. 53, defense counsel asserted that they didn't understand it. When the trial judge indicated that he would give the instruction as tendered, the defendant's response was a general objection.

Absent the tender of any limiting instruction, the defendant's present claim of reversible error has a hollow ring. If the defendant had "stated distinctly" the matter to which he objected and the grounds of his objection, the district court no doubt would have been in a better position to delineate more precisely the uses of similar act evidence which the jury could properly make. In United States v. Bastone, 526 F. 2d 971, 987 (7th Cir. 1975), cert. denied, 425 U. S. 973 (1976), this court ruled that, where the defendant failed to offer an instruction on the basis of a similar acts theory, it would not reverse unless there was a showing of plain error under Rule 52(b), Fed. R. Crim. P. While we think the matter could have been put more precisely than in the language of the instruction given here, we also think that its final formulation was within the limits of the trial court's discretion, which discretion was not abused. Cf. United States v. Rajewski, 526 F. 2d 149, 160 (7th Cir. 1975), cert. denied, 426 U. S. 908 (1976). The use of Instruction No. 53 was not plain error.

II. Erroneous Evidentiary Ruling. The defendant asserts that the district court erred by refusing to allow into evidence a letter written on March 25, 1974. The defendant had been interviewed by I. R. S. Special Agents William Witkowski and Wayne Bubeck on October 17, 1973. During the course of that interview, Hollinger stated, inter alia, that he did not have a safety deposit box, that he had never maintained one, and that he had not had stock transactions at Paine, Webber, Jackson & Curtis since 1967. In fact, Hollinger was the named lessee of a safety deposit box rented from Florida Federal Savings and Loan Association since May 14, 1956. Moreover, he had purchased thousands of dollars of stock from Paine, Webber in 1968.

The letter in question which the defense was not permitted to introduce into evidence would, the defendant argues, by correcting the October misstatements, have countered the effect of the Government's testimony that Hollinger had evinced a consciousness of guilt in the statements he made to the special agents.

We find no merit in this contention. As an initial matter we are unable to give any fair evaluation of the content of the letter because it was not brought to this court as a part of the record. We will assume, however, the correctness of the statement in the defendant's brief that the letter was not only on the stationery of Hollinger's attorney but was signed by the attorney. We fail to see how a letter written by the lawyer some five months after the events in question could in any way reflect upon whether Hollinger's attitude at the time of the interview was to cover up some of his financial transactions.

Finally, irrespective of whether the letter merely factually corrected earlier statements or went further and attempted to offer explanations of why he had made the statements, and because of the absence of the exhibit from the record brought up we are uncertain as to what it did say, the record does establish that on both direct and cross examination, Hollinger testified regarding his prior misstatements. He also explained that he was unprepared for the interview. The introduction of the letter would have added nothing to the testimony Hollinger did give and its exclusion was not error.

III. Improper Argument by the Prosecutor. The defendant claims that he was deprived of due process of law because of Government counsel's closing argument. Specifically, he charges that the prosecutor made erroneous statements about grants of immunity in order to bolster the credibility of the Government's witnesses and also exhorted the jury to disregard fundamental principles of fairness because of the crimes with which the defendant was charged.

A. Immunity

In closing argument, Government counsel attempted to clarify for the jury what "immunity" was. 15 Defense counsel immediately objected to the explanation as a misstatement of the law. Simultaneously, defense counsel reserved a motion for a mistrial.

The trial judge's immediate reaction to the objection was that "[i]t could be on the recommendation of the prosecutor, but the Court is the one that determines whether immunity should or should not be granted." The defendant complains that the prosecutor continued to urge the jury to believe its witnesses because of their immunity. 16 Subsequently, at a side bar conference, defense counsel correctly pointed out that the prosecutor's statement laying responsibility for immunity on the court was not true. Essentially, counsel explained that the court's role was purely ministerial if all the proper papers were filed. The court acknowledged that the defense objection was proper and that the prosecutor's statement should not have carried the implication that the prosecutor doesn't have very much to do with the grant of immunity. Recognizing that the court's role in an immunity order was purely ministerial if all the proper papers were filed, the court indicated that it would instruct the jury to that effect. In the charge, the trial judge read the relevant portions of 18 U. S. C. §6003 in order that the jury might understand the circumstances under which grants of immunity are made.

Examination of the trial record discloses that defense counsel not only withdrew its mistrial motion but expressed the view that an instruction telling the jury that the court was required to grant immunity upon a proper request made by the prosecutor would be curative of the prosecutorial mistake. On appeal, the defendant admits that the court did read 18 U. S. C. §6003 and did not explain that "if the Petition is in proper order setting forth these facts [required by subsection (b) of the statute], then the Court issues the Order," but argues that the court's language was not sufficiently clear, explicit and correct as to obviate any possibility of jury confusion. Specifically, the defendant complains that the trial judge did not fulfill his promise to advise the jury that a judge is "required" to grant immunity when the papers requesting immunity are in proper order.

We reject the defendant's argument. At the instructions conferences, the defense maintained its objection to an earlier-formulated immunity instruction (No. 32A) as containing an argumentative sentence. But with respect to the trial judge's determination to read 18 U. S. C. §6003 exactly, the defense counsel acquiesced in that resolution of the problem posed by the prosecutor's misstatement of law. Under such circumstances, the defendant has waived his claim that the instruction as given was insufficiently curative.

At this point, it is appropriate to note once again that the records before us have too often disclosed prosecutorial arguments which, while not rising to the level of plain error, were nevertheless questionable, if not improper. See United States v. Spain, 536 F. 2d 170, 176 (7th Cir. 1976), cert. denied, -- U. S. --, 45 U. S. L. W. 3250 (October 4, 1976). It has long been established that a district judge has no discretion to deny a request by the United States Attorney that a witness be granted immunity, so long as the request is proper in form. See generally In re Daley, 549 F. 2d 469 (7th Cir. 1977). See also Thompson v. Garrison, 516 F. 2d 986 (4th Cir. 1975), cert. denied, 423 U. S. 933; In re Lochiatto, 497 F. 2d 803 (1st Cir. 1974); In re Grand Jury Investigation, 486 F. 2d 1013 (3d Cir. 1973), cert. denied, 417 U. S. 919. To the extent that the prosecutor's statement in the instant case carried a suggestion that the Government witnesses were telling the truth because district court judges had independently seen fit to grant then immunity, it was inaccurate and misleading. This court has previously instructed federal prosecutors in this circuit to conform their arguments to the standards set by the Supreme Court in Berger v. United States, 295 U. S. 78 (1935). Failure to do so by advancing improper insinuations and assertions calculated to mislead the jury, see Spain , supra at 174-76, will mean that the prosecution will face the substantial risk of having a conviction set aside.

B. Prosecutorial Invitation to Ignore Defendant's Rights

The defendant also complains that the prosecutor's concluding remarks to the jury asked them to ignore Hollinger's rights in determining whether he had violated the law. 17 The defendant contends that this closing comment represented a form of "give-the-defendant-the-same-justice-he-give-his-victim" argumentation condemned in People v. Jackymiak, 381 Ill. 528, 46 N. E. 2d 50 (1943).

In Spain , this court noted that it did not intend to discourage a prosecutor from vigorous argument or frank comment on the evidence or the character of a witness. Id. at 175. Applying those principles to the instant case, we do not think that the characterization of the conduct in Brookfield under the defendant's presidency as "outrageous" was undignified or unduly intemperate. See Berger, supra at 85. While we will concede that the last sentence of the prosecutor's argument was harsh, we do not regard it as an invitation to ignore Hollinger's rights.

In any event, no objection was made to the argument and while we have a question as to the propriety of the remarks, we cannot say that they constituted plain error.

IV. Sufficiency of the Indictment. The defendant argues that the denial of his motion to dismiss the indictment for insufficiency due to the absence of an adequate factual basis to charge interference with interstate commerce was error. We find no merit in the argument. Clearly, an indictment must allege the essential elements of the offense charged. See United States v. Eichhorst, 544 F. 2d 1383, 1388 (7th Cir. 1976). In the instant case, Counts 11 through 14 fairly informed Hollinger of the interstate commerce element. The standards set forth in Russell v. United States, 369 U. S. 749, 763-64 (1962), were met. An accused must be informed of the charges against him so that he can prepare his defense and so that he may be protected against a second prosecution for the same offense. United States v. Cassell, 452 F. 2d 533, 536 (7th Cir. 1971). When those standards are met, it is well settled that in order for a variance between indictment and proof to be fatal, the evidence offered must prove facts materially different from those alleged in the indictment. See United States v. Warden, 545 F. 2d 32, 35 (7th Cir. 1976). We hold that the district court did not err in refusing to dismiss the indictment.

For the reasons hereinabove set out, the judgment of conviction is affirmed; however, the case is remanded for resentencing as to Counts 1, 3, 5, 7, and 9.

1 26 U. S. C. §7206, in pertinent part, provides:

Any person who--

(1) Willfully makes and subscribes any return, statement, or other document, which contains or is verified by a written declaration that it is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter . . .

shall be guilty of a felony and, upon conviction thereof, shall be fined not more than $5,000, or imprisoned not more than 3 years, or both, together with the costs of prosecution.

2 26 U. S. C. §7201 provides:

Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $10,000, or imprisoned not more than 5 years, or both, together with the costs of prosecution.

3 18 U. S. C. §1951, in pertinent part, provides:

(a) Whoever in any way or degree obstructs, delays, or affects commerce or the movement of any article or commodity in commerce, by robbery or extortion or attempts or conspires so to do, or commits or threatens physical violence to any person or property in furtherance of a plan or purpose to do anything in violation of this section shall be fined not more than $10,000 or imprisoned not more than twenty years, or both.

(b) As used in this section--

* * *

(2) The term "extortion" means the obtaining of property from another, with his consent, induced by wrongful use of actual or threatened force, violence, or fear, or under color of official right.

(3) The term "commerce" means . . . all commerce between any point in a State, Territory, Possession, or the District of Columbia and any point outside thereof; all commerce between points within the same State through any place outside such State; and all other commerce over which the United States has jurisdiction.

(3) The term "commerce" means . . . all commerce between any point in a State, Territory, Possession, or the District of Columbia and any point outside thereof; all commerce between points within the same State through any place outside such State; and all other commerce over which the United States has jurisdiction.

4 The final judgment order stated that Hollinger was to be committed "for a period of FOUR (4) YEARS on each count of the indictment, said sentences are to run concurrently." Inasmuch as the sentence imposed exceeds the statutory maximum for Counts 1, 3, 5, 7, and 9, we, while affirming the convictions, are remanding as to Counts 1, 3, 5, 7, and 9 for resentencing, said new sentences not to exceed the statutory maximum of three years as to each count.

5 The record reveals this colloquy:

Mr. Conlon [Assistant United States Attorney]: Shall we rewrite that [No. 43] in the evening, this evening, and bring it back to you?

The Court: Yes. Rewrite it.

* * *

The Court: . . . [W]ell, go ahead and rewrite it.

Mr. Marcus [Assistant United States Attorney]: Okay.

Miss Lavin [Defense counsel]: Yes. Please.

6 As originally presented, the instruction read as follows:

Now, if you find from the evidence beyond a reasonable doubt that the defendant, Philip J. Hollinger, received taxable income, as defined in these instructions [Instruction No. 42], from William Hall, Albert Berg, Frank Novotny, Carl Rauschert, Lou Graben, Don Smith, and/or Richard Scott, then I instruct you that he was under an obligation to report the money as income on his tax return for the year in which he received it.

If modified in accordance with the judge's suggested modification, the phrase "for any purpose other than campaign contributions" would have been inserted immediately after the name "Richard Scott."

7 The Government relies on Wright, supra, as authority for the impropriety of an attempt to use incorporation by reference. We think it clear that Wright disapproved of this procedure only because of the Hetzel approach to the analogous problem in a Rule 51, Fed. R. Civ. P., context. The author of Wright expressly noted, 542 F. 2d at 983, a preference for the procedure approved in the Ninth Circuit, which allows incorporation by reference. See Las Vegas Merchant Plumbers Association v. United States, 210 F. 2d 732, 744 (9th Cir. 1954), cert. denied, 348 U. S. 817.

8 Fed. R. Crim. P. 30, in pertinent part, provides:

No party may assign as error any portion of the charge or omission therefrom unless he objects thereto before the jury retires to consider its verdict, stating distinctly the matter to which he objects and the grounds of his objection. Opportunity shall be given to make the objection out of the hearing of the jury and, on request of any party, out of the presence of the jury.

Fed. R. Civ. P. 51, in pertinent part, provides:

No party may assign as error the giving or the failure to give an instruction unless he objects thereto before the jury retires to consider its verdict, stating distinctly the matter to which he objects and the grounds of his objection. Opportunity shall be given to make the objection out of the hearing of the jury.

9 This opinion has been circulated among all judges of this court in regular active service. No judge favored a rehearing en banc on the question of overruling Wright, and Hetzel and its progeny.

10 The instruction, as originally tendered, read as follows:

Under the law income for federal tax purposes means any gain from whatever source, legal or illegal. An unlawful gain received by a person such as the proceeds of bribery or extortion is income and under the law must be reported on that person's federal income tax return. Therefore, I hereby instruct you that if you find beyond a reasonable doubt that the defendant Phillip J. Hollinger received cash payments in the years alleged by the government and if you find that it was income as described above, then under the law the defendant was required to report that money as income on his federal income tax return. If on the other hand you are not convinced from the evidence beyond a reasonable doubt that the defendant did not receive such a sum of money in a particular year charged, then there was no duty to report that sum of money on the defendant's federal tax return, and you should then find the defendant not guilty as to that count.

11 The record reveals this colloquy:

Mr. Calihan [Defense counsel]: But "cash payments" could be--you might get into, I mean, you might get into political contributions, which under that Stratton case are just not income. I mean, the first paragraph, I am sorry, I mean, that's--

The Court: The first sentence?

Miss Lavin [Defense counsel]: That is right. It's all right. Just as you say, just the first sentence.

Mr. Calihan: The first two sentences.

The Court: Well, all right. I think that some of the rest of it is kind of misleading.

Mr. Conlon [Assistant United States Attorney]: From "therefore" is out?

The Court: Yes. That's out. All right, No. 42 given, with that change.

12 We are aware that some district court judges who prefer to receive the distinct statement of objections subsequent to the giving of the charge, recognizing that the statement must be made prior to the jury's retirement to consider its verdict, will tell the jury members that even though they are retiring to the jury room they should not commence their deliberations until the judge sends them word to do so. Others follow the practice of telling the jury not to commence deliberations until the exhibits are delivered to them upon which the judge holds the exhibits until he has had a chance to hear any final objections from the attorneys. It would appear that resort should be had to some similar procedure irrespective of whether the distinct statement of the matter and the grounds of objections is made before or after the giving of the charge because of the constant possibility, as was demonstrated in the present case, that some ground of objection may surface during the actual giving of the charge. We do not purport to lay down specific procedural guidelines in this respect, leaving the matter to the good judgment of the trial judge to see that the matter is handled prior to the jury's retirement for deliberation.

13 We have not deemed it necessary to address ourselves to the question of whether the instruction as given is prejudicially erroneous. We do note, however, that after the substantial excision from No. 42, taxable income was confined to "gain" and the objectionable reference to "cash payments" which might arguably have included political contributions was eliminated. No. 43, if it had been modified as was discussed, see note 6 supra, would have presented the anomalous concept of receipt of "taxable income" "for any purpose other than campaign contributions," an inconsistent combination inasmuch as the campaign contributions would not have been taxable income even though they would have been cash payments. We have some difficulty in seeing that the jury would have been misled into thinking that campaign contributions should be considered as taxable income. If the defense desired greater emphasis on the non-taxable income status of the campaign contributions, it should have tendered an instruction to that effect.

14 Instruction No. 53, as read to the jury, stated:

Now, the defendant may not be convicted of any offense charged in Counts 11 and 14, which are two of the extortion counts, unless the offense was committed after October 31st, 1970, however, you may consider Hollinger's actions and/or conduct prior to that date, that is, October 31st, 1970, in determining whether or not the acts committed after October 31st, 1970, constituted extortion beyond a reasonable doubt, as charged in the indictment.

15 While attempting to make this explanation, the prosecutor stated:

Defense counsel has made reference to the fact that some of the government witnesses have immunity. There is no question about it. But let's see exactly what "immunity" is. Nothing you say can be used against you, provided you tell the truth. It is not what I say it is or what the government says that it is, that's what "immunity" is. Some of the immunity was court ordered by judges in this building like Judge Decker, and you heard testimony to that effect.

The government has no control over the judiciary. We have no control over the federal judges. If that's what the judge says that it is, then that's what it is, whether we like it or not.

16 Immediately after the trial judge's remark, the prosecutor continued:

With this immunity, our witnesses are free to speak the truth because they have nothing to hide. They have no motive to lie. That's the only way that they can get into any trouble is if they lie. What possible motive with immunity could any of our witnesses have for telling you anything but the truth?

17 The federal prosecutor concluded his argument in the following manner:

I ended my opening statement by telling you "From the bottom of the sewers to the tops of the trees you will see and hear how the citizens of Brookfield were robbed by that man, Philip Hollinger." You have seen and heard what totally outrageous, outrageous conduct existed in that village under President Hollinger. This conduct existed from 1961 through 1975. It began with Frank Novotny and ended in '75 with Carl Rauschert. I now ask you to apply the same justice that President Hollinger gave the citizens of his community and vote a verdict of "guilty" as to all counts.

 

 

[77-1 USTC ¶9204] United States of America , Plaintiff v. Edward S. Dunn, Defendant

U. S. District Court, Dist. Kan., Case No. 76-30-CR5, 422 FSupp 172, 10/12/76

[Code Sec. 7201--result unchanged by 1976 Tax Reform Act]

Crimes: Tax evasion: Evidence: Suppression of: Misrepresentations.--The court denied a motion, made by a man charged with tax evasion, for suppression of oral and documentary evidence obtained from him by IRS agents during their civil investigation that preceded the criminal investigation. He failed to establish that the evidence was obtained by affirmative misrepresentations rising to the level of fraud, deceit or trickery.

E. Edward Johnson , United States Attorney, Topeka , Kan. 66601 , for plaintiff. Charles D. McAtee, Edison, Lewis, Porter & Haynes, 1300 Merchants National Bank Bldg., Topeka, Kan. 66612, Thomas E. King, Morris, Larson, King, Stamper and Bold, 2420 Pershing Rd., 4th Floor, #2 Crown Center, Kansas City, Mo. 64108, for defendant.

Memorandum and Order

ROGERS, District Judge:

Defendant, Edward S. Dunn, has filed a motion to suppress all oral and documentary evidence obtained from him by agents of the Internal Revenue Service (hereinafter IRS) between April 24 and July 3, 1973, and any evidence derived therefrom. He asserts that the evidence was seized in violation of the fourth and fifth amendments to the Constitution by Revenue Agent Allen K. Olmstead who, by deceit, trickery and fraud, affirmatively misrepresented the nature of the inquiry into defendant's tax and financial records. Defendant is charged with the willful failure to report portions of income tax due for the years 1969-72, in violation of 26 U. S. C. §7201. After conducting an evidentiary hearing, the parties have submitted memoranda supporting their respective positions. The Court, after hearing the evidence, considering the statements by counsel and the memoranda filed in support thereof, makes the following findings and order.

[Prior Cases]

Defendant's motion to suppress certain oral and documentary evidence requires the Court to consider a taxpayer's constitutional rights when subjected to a civil tax audit which precedes and produces evidence utilized in a subsequent criminal tax investigation. On July 3, 1973, defendant was given the Miranda-type warnings required after a taxpayer's income tax audit is referred to the IRS Intelligence Division. See Beckwith v. United States [76-1 USTC ¶9352], 48 L. Ed. 1 (1976). Defendant's attorneys do not contend nor would the evidence support a finding that the revenue agent obtained the evidence in question by overbearing defendant's will. Beckwith v. United States, supra at 7. However, if Revenue Agent Olmstead obtained evidence to be used in this criminal prosecution against the defendant by fraud, deceit or trickery, such would constitute an unlawful seizure of incriminating evidence from defendant in violation of the fourth and fifth amendments to the Constitution. The standard for considering such a claim is precisely stated in United States v. Prudden [70-1 USTC ¶9336], 424 F. 2d 1021, 1033 (5th Cir. 1970).

The mere failure of a revenue agent . . . to warn a taxpayer that the investigation may result in criminal charges, absent any acts by the agent, which materially misrepresent the nature of the inquiry, do not constitute fraud, deceit or trickery. Therefore, the record here must disclose some affirmative misrepresentation to establish the existence of fraud, and this showing must be clear and convincing.

Thus, a stated in United States v. Lehman [72-2 USTC ¶9534], 468 F. 2d 93 (7th Cir. 1972),

[a] revenue agent must not affirmatively mislead a taxpayer into believing that the investigation is exclusively civil in nature and will not lead to criminal consequences.

For similar holdings, see United States v. Marra [73-2 USTC ¶9578], 481 F. 2d 1196 (6th Cir. 1973); United States v. Rob son [73-1 USTC ¶9381], 477 F. 2d 13 (9th Cir. 1973); United States v. Stribling [71-1 USTC ¶9210], 427 F. 2d 765 (6th Cir. 1971) (following Prudden, supra); United States v. Sclafani [73-2 USTC ¶9635], 265 F. 2d 408 (2d Cir. 1959); United States v. Trnka [75-1 USTC ¶9350], 385 F. Supp. 628 (D. N. D. 1974); United States v. Wohler [75-1 USTC ¶9213], 382 F. Supp. 229 (D. Utah 1973); and see Cohen v. United States [69-1 USTC ¶9132], 405 F. 2d 34 (8th Cir. 1968).

Silence or evasiveness can be equated with fraud only where there is a legal or moral duty to speak or where an inquiry left unanswered would be intentionally misleading. United States v. Prudden, supra at 1032. However, a taxpayer's awareness that his returns are under audit may provide sufficient notice of the potential of criminal prosecution. United States v. Squeri [68-2 USTC ¶9493], 398 F. 2d 785 (2d Cir. 1968). Such a finding, however, appears to depend somewhat upon the business or legal experience of the taxpayer. Circuit courts of appeal impose an extremely high burden of proof upon the taxpayer who makes such allegations. This stems from a willingness to allow the revenue agent substantial leeway in routine civil tax audits. The revenue agent may thus be encouraged to avoid making unwarranted referrals of civil tax audits to the IRS Intelligence Division for possible criminal tax investigations and to avoid causing the stigma which relates thereto.

A routine tax audit is generally initiated with a civil tax audit of the taxpayer's records for specified years. Such audits are conducted by revenue agents. Revenue agents are guided in such proceedings by §10.09 of the Internal Revenue Service Audit Technique Handbook. It provides in pertinent part:

The Internal Revenue Manual requires that a revenue agent immediately suspend his investigation, without disclosing to the taxpayer or his representative the reason for his action, when he discovers what he believes to be an indication of fraud. He should report his findings in writing to the Chief, Audit Division, through his group supervisor. . . . The purpose of the referral is to enable the Intelligence Division to evaluate the criminal potential of the case and decide whether or not a joint investigation should be undertaken. It is important, therefore, that the agent's referral report contain detailed information to enable the Chief, Intelligence Division, to make a proper evaluation.

When an agent has been alerted to the possibility of fraud, he must know at what point he should suspend his examination and prepare his referral report. If he stops too soon he may not have developed all the information necessary for the Chief, Intelligence Division, to base his decision. He may not be able to demonstrate that there is an actual understatement resulting from his findings if he has not gathered sufficient facts or sought explanations which would account for the discrepancy. Or he may not have found sufficient evidence relating to intent. If he continues his examination too far he may find it necessary to repeat some of the work done by the revenue agent in order to document the evidence required in a criminal case. He may give the taxpayer a basis for claiming that the criminal case was substantially built by the revenue agent under the guise of conducting an audit for civil tax purposes. Due to inexperience he may take actions which can jeopardize the criminal case.

Certain guidelines can be laid down to aid the agent in deciding how far to proceed in his examination where the possibility of fraud exists. The first of these would be to define what is meant by an "indication of fraud." A revenue agent can be satisfied that he has discovered an indication of fraud when he has determined that there has been a substantial understatement of income and that there is an indication that the understatement was deliberate.

These guidelines create the possibility that the revenue agent will have obtained evidence necessary for a conviction before preparing the referral report, however, this would be constitutionally permissible provided the evidence was not obtained through an affirmative misrepresentation as to the present or potential consequences of the audit. The guideline is quoted at length to illustrate the tightrope the revenue agent is forced to walk when conducting a civil tax audit. In construing the phrase "indication of fraud," the Tenth Circuit Court of Appeals in United States v. Lockyer [71-2 USTC ¶9641], 448 F. 2d 417, 421-22 (10th Cir. 1971), stated,

In our view broader meaning is intended. The detailed instructions given require the agent to continue his investigation so as to verify a substantial understatement of income and so as to obtain explanations from the taxpayer in order to discover evidence whether the understatement was deliberate. Therefore, a fair reading of the entire provision convinces us that the civil investigation was intended, consistent with the directive, to continue for sufficient time and in enough depth so as to provide the Chief, Intelligence Division, with enough information to reach his decision.

While in Lockyer, the Tenth Circuit Court of Appeals was not addressing an alleged abuse of a civil tax audit, its reading of the directive comports with those decisions which deal with alleged affirmative misrepresentations regarding the nature or potential consequences of a routine civil tax audit. While a violation of the guideline would not necessarily constitute a violation of a taxpayer's constitutional rights, United States v. Lockyer, supra, balancing a taxpayer's rights under the fourth and fifth amendments with the guidelines in a particular set of facts requires careful consideration by the Court even though the taxpayer bears the heavy burden of proving an affirmative, material misrepresentation was made regarding the nature or status of the inquiry. To further obscure the procedure, the revenue agent must consult with his group supervisor before a case may be referred to the Intelligence Division. Then, based upon the referral report, the IRS Intelligence Division determines whether an investigation for tax fraud should be conducted by its special agents. In United States v. Michals [72-2 USTC ¶9737], 469 F. 2d 215 (10th Cir. 1972), the Tenth Circuit Court of Appeals recognized that a tax audit should be referred to the Intelligence Division only after the taxpayer is allowed an opportunity to explain any possible tax discrepancies. In this context, and under these particular facts, the government agents did not improperly delay the referral of the tax audit to the Intelligence Division to obtain further evidence from Dunn without giving the proper cautionary warnings nor did they affirmatively mislead or misrepresent the nature or potential consequences of the tax audit. Thus, from the evidence, defendant has failed to sustain his burden of proving such allegations by clear and convincing evidence and the motion to suppress will be denied. The Court bases its decision upon the following facts:

[Taxpayer-Agent Meetings]

Defendant is an attorney who was admitted to the bar in 1960. He has a private law practice in Holton , Kansas , where he had served as the county attorney. His practice includes reviewing and signing income tax returns for his clients although the returns are usually prepared by his secretary. Before his own tax audit, defendant had represented a client who was subject to an income tax investigation.

Defendant asserts that on April 24, 1973, he wrote the IRS Center for the Southwest Region requesting an audit of his tax returns because he had discovered he did not have all his deposit slips when he prepared his income tax returns and further requesting assistance in filing amended returns. Revenue Agent Allen K. Olmstead was assigned Dunn's case on May 7, 1973. The file assigned to Olmstead did not contain the letter from Dunn. While the file merely called for a routine civil tax audit, Olmstead determined early in the audit that he would need all Dunn's financial records to fully clarify Dunn's tax status. Dunn and Olmstead had their first meeting on May 30, 1973. During a day-long session, Olmstead attempted to examine all the records Dunn had produced. By the end of the meeting, Olmstead had concluded that Dunn's records reflected an overstatement of expenses and an understatement of income. Olmstead, however, had not determined whether there were satisfactory explanations for such apparent discrepancies or whether they were deliberate. The following day, Olmstead called Dunn to indicate that certain apparent deposits were not supported by documentation. The taxpayer testified he felt the telephone conversation was "accusatory" in nature. Consequently, at their next meeting on June 5, 1973, Dunn testified that he inquired of Olmstead as to the specific purpose of the audit and that Olmstead replied that it was a simple routine tax audit to determine any civil tax liabilities owed, if any. Olmstead testified that he did not recall such a conversation. Defendant asserts that Olmstead's alleged statement constituted an affirmative misrepresentation as to the nature of the tax audit requiring the suppression of the evidence obtained from him on or after June 5, 1973.

Even assuming the conversation occurred, the Court finds it to be insufficient basis for suppressing the evidence subsequently obtained. First, Olmstead was under a duty to verify any overstatements or understatements and also to determine whether satisfactory explanations existed therefore. United States v. Michals, 460 F. 2d 215 (10th Cir. 1972). Second, Olmstead testified that while he found discrepancies in defendant's tax returns during or soon after the initial meeting, he found no firm indication of fraud or deliberateness until the meeting on June 26, 1973. The referral report was prepared immediately thereafter. Thus, on June 5, 1973, Olmstead was only seeking to determine Dunn's civil tax liabilities, if any. As noted in United States v. Sclafani [73-2 USTC ¶9635], 265 F. 2d 408 (2d Cir. 1959) [quoting United States v. Wolrich [54-1 USTC ¶9276], 119 F. Supp. 538, 540 (S. D. N. Y. 1954)];

'Surely defendant was aware that, if a 'routine audit' revealed evidence of criminal liability, the agent would not ignore it merely because he was primarily concerned with civil liability. . . . A statement that the purpose of an investigation is a 'routine audit' is not the equivalent of a promise that only civil liability will be considered regardless of what the examination reveals. Nor would any accountant or business man so understand it.

The Court concurs and feels that no attorney would so understand it. Third, there was some confusion in defendant's records as to the source of the funds in several accounts. After the meeting of June 5, 1973, Olmstead consulted with his group supervisor. They concluded that it would be necessary to analyze Dunn's savings accounts to determine the source of each deposit and whether or not they constituted income. Olmstead telephonically advised Dunn of this on June 8, 1973. This reflects a need for further information or explanations before Olmstead could properly analyze Dunn's civil tax status, not an effort to surreptitiously obtain evidence from Dunn for a criminal prosecution. Finally, in light of Dunn's profession and prior involvement in a tax audit of one of his clients, his question to Olmstead, if asked, implies an awareness of the potential criminal tax investigation and a desire to have Olmstead bind the IRS from going beyond a routine civil tax audit. Based upon these considerations, the Court finds that during the meeting of June 5, 1973, Dunn did not produce either oral or written evidence based upon an affirmative material misrepresentation by Olmstead.

Olmstead and Dunn met next on June 12, 1973. Dunn asserts that he asked Olmstead whether his audit was considered a fraud case and that Olmstead replied "it was not a fraud case and that at that particular point in the examination it was not possible to tell what the outcome would be." (Defendant's memoranda at 14). Again Olmstead testified he did not recall such a statement. Even assuming the conversation occurred, it does not rise to the level of an affirmative material misrepresentation. The statement was an accurate reflection of Olmstead's authority as restricted to civil tax audits. Only the Intelligence Division could determine whether a case should be investigated for evidence of tax fraud. Further, Olmstead's alleged response supports a finding that Olmstead needed to pursue the audit further to properly determine Dunn's civil tax liability.

On June 15, 1973, Olmstead and Dunn met again. Dunn indicated he wanted to file an amended tax return for the years 1971 and 1972. Olmstead, after consulting with his group supervisor, advsied Dunn that this would be futile since his records in the Austin IRS Service Center were tagged as under audit and the amended return would be automatically forwarded to Olmstead as the revenue agent conducting the audit. Thus, when Olmstead later failed to respond to Dunn's request for assistance in preparing the amended returns, he was justified in his silence in light of his previous explanation.

Olmstead and Dunn met again on June 21 and June 26, 1973. During the later meeting, Dunn produced revised computations of his taxable income for the years 1971 and 1972. Dunn stated he had determined that his 1972 income was understated by $30,000.00. It was after the June 26, 1973, meeting that Olmstead's Group Supervisor, Billy Loeffler, prepared the Referral Report for Potential Fraud Cases. Prior to June 27, 1973, Olmstead had had no contact with the IRS Intelligence Division regarding Dunn's file. Thereafter, based upon the referral report, the Intelligence Division determined that a tax fraud investigation should be conducted regarding Dunn's tax returns. When Special Agent Merritt and Olmstead met with Dunn on July 3, 1973, he was advised of his rights as required by IRS regulations.

Under the standards stated in United States v. Prudden [70-1 USTC ¶9336], 424 F. 2d 1021 (5th Cir. 1970) and similar cases, and after examining the totality of the circumstances which preceded the July 3, 1973, meeting, the Court finds that the defendant has failed to establish by clear and convincing evidence that oral or written evidence was obtained from him by affirmative misrepresentations rising to the level of fraud, deceit or trickery. Thus, defendant's rights guaranteed by the fourth and fifth amendments to the Constitution were not violated during the civil tax audit which preceded the criminal tax audit investigation which now serves as a basis for the above-entitled action. While the Court does not fully approve of the lack of clarity regarding the import of the civil tax audit of Dunn's financial and tax records, defendant has failed to establish an abuse or guise based upon an affirmative material misrepresentation by clear and convincing evidence.

It Is Therefore Ordered that defendant's motion to suppress be, and is hereby, Denied. Further the parties and their attorneys should stand ready for trial after November 1, 1976.

It Is So Ordered.

 

 

[75-2 USTC ¶9785] United States of America , Plaintiff-Appellee v. Peter Pandilidis, Defendant-Appellant

(CA-6), U. S. Court of Appeals, 6th Circuit, No. 74-1817, 10/24/75, Aff'g unreported Dist. Court Opinion

[Code Sec. 7203]

Failure to file return: Failure to state correct date on indictment: Reversible error: Motion for new trial: Abuse of discretion: Omission from jury instruction: Contradictory conduct of IRS officials.--The correction of an indictment against the taxpayer for failure to file his tax return by filing a bill of particulars was not reversible error, since the taxpayer's right to notice and fair opportunity to defend was not infringed, since he was made aware of the amendment well in advance of trial; neither was his freedom from double jeopardy infringed since the record was sufficiently detailed to protect him against a subsequent prosecution for the same offense; nor was the taxpayer prejudiced by the fact that the corrected information was not sent to the grand jury, since the taxpayer did not have a constitutional right not to be convicted except after indictment by a grand jury. The Court further held that the District Court did not abuse its discretion by denying the taxpayer's motion for a new trial based on newly discovered evidence. The Court further held that the District Court did not err by omitting the phrase "evil motive" from its jury instructions, since the instructions as given were consistent with the guidelines set forth in United States v. Bishop, 73-1 USTC ¶9459, 412 U. S. 346. The Court further held that the District Court did not err in excluding evidence of contradictory conduct by IRS officials, since such evidence is not admissible as evidence of the fact.

William W. Milligan, United States Attorney, Rob ert A. Steinberg, 722 U. S. Court-house, Cincinnati, Ohio, for plaintiff-appellee. H. Fred Hoefle, 409 Second Nat'l Bldg., John J. Kelley, Jr., 1306 Fourth & Walnut Bldg., Cincinnati, Ohio, for defendant-appellant.

Before CELEBREZZE, Circuit Judge; MCCREE, Circuit Judge; DEMASCIO, * District Judge.

DEMASCIO, District Judge:

On August 3, 1973, a grand jury returned an indictment charging the defendant with failure to file his 1968 and 1969 federal income tax returns on or before April 15 of each year, 1 in violation of 26 U. S. C. §7203. 2 The April 15 date mentioned in the indictment was erroneous because appellant had received extensions to file his 1968 and 1969 returns until May 30, 1969 and May 31, 1970 respectively. At a pre-trial conference held on September 17, 1973, the government attorney informed defendant's counsel that he intended to correct the indictment by filing a "bill of particulars" reflecting such extensions. Thus, defendant's counsel was aware of the erroneous dates and agreed to the filing of the bill of particulars. 3 The bill was filed on September 21, 1973, and provides:

I. With respect to Count I of the indictment, the United States intends to prove that the defendant, Peter Pandilidis, requested and received from the Internal Revenue Service an extension for filing his 1968 income tax return. The extension required him to file that return on or before May 31, 1969. The United States intends to prove that he did willfully and knowingly fail to make said income tax return.

II. With respect to Count II of the indictment, the United States intends to prove that the defendant, Peter Pandilidis, requested and received from the Internal Revenue Service an extension for filing his 1969 income tax return. The extension required him to file that return on or before May 30, 1970. The United States intends to prove that he did willfully and knowingly fail to make said income tax return.

Thereafter, the defendant proceeded to a jury trial on November 6, 1973, and was convicted on both counts.

On appeal, the defendant raises several allegations of error. The most substantial issue, first presented at oral argument before this court, compels us to decide whether an indictment for a misdemeanor may be amended prior to trial by filing a bill of particulars to correct a material allegation. 4

The filing of the bill of particulars effectuated an amendment to the indictment. Ordinarily, an indictment may be amended only by subsequent action of the grand jury. Stirone v. United States, 361 U. S. 212 (1960); Ex parte Bain, 121 U. S. 1 (1887). This rule, constitutional in origin, has developed within the context of the Fifth Amendment, which protects an accused from prosecution for high crimes except upon charges filed by a grand jury. In both Stirone and Bain, the Supreme Court concluded that effectuation of the Fifth Amendment protections required the preclusion of substantial variations in an indictment unless approved by a grand jury. "Any other doctrine would place the rights of the citizen, which were intended to be protected by the constitutional provision, at the mercy or control of the court or prosecuting attorney. . . ." Ex parte Bain, supra at 13. While a mere change in date is not normally considered a substantial variation in an indictment, where the date of the alleged offense affects the determination of whether a crime has been committed, the change is considered material. Since a crime is committed under 26 U. S. C. §7203 only if the defendant fails to file a return on the date established by statute, regulation or admin istrative action, time is an essential element of the offense and any change in the date as charged is a substantial variation. United States v. Goldstein [74-2 USTC ¶9664], 502 F. 2d 526 (3rd Cir. 1974). Thus, the Fifth Amendment prohibits, other than by grand jury action, the changing of a date in a felony indictment where the date is an essential element of the offense. While this defendant was convicted of a misdemeanor that could have been prosecuted by information as well as by indictment, we agree with the defendant that even in misdemeanor cases, once the prosecution elects to proceed by indictment it must follow the rules developed to govern use of indictments. United States v. Fischetti, 450 F. 2d 34 (5th Cir. 1971), cert. denied, 405 U. S. 1016; United States v. Goldstein [74-2 USTC ¶9664], 502 F. 2d 526 (3rd Cir. 1974); Fed. R. Crim. P. 7(e). Accordingly, it is apparent that the district court erred in permitting amendment to the indictment by filing a bill of particulars. The issue we must resolve is whether the rule of automatic reversal required when an essential element of a felony indictment is amended other than by grand jury action should be extended to an indictment charging a misdemeanor or whether convictions for misdemeanors charged by a subsequently amended indictment should be evaluated in light of the harmless error doctrine contained in Fed. R. Crim. P. 52(a).

The Third Circuit recently resolved this issue against the government in United States v. Goldstein, supra, where it concluded that even in misdemeanor cases, in which indictments are not constitutionally required, any amendment to an indictment without grand jury action must result in automatic reversal. This conclusion was based on a finding of per se prejudice to a defendant prosecuted by an indictment that is subsequently amended. The court noted that prejudice to a defendant necessarily follows an amendment to an indictment because the government obtains distinct advantages from the indictment procedure; it benefits from discovery through the use of the grand jury process and from the possibility that a jury verdict might be subtly influenced by the fact that an impartial grand jury found probable cause to charge the accused. 5

It may be true that the government obtains an advantage by initiating prosecution by indictment. However, it does not follow that such an advantage should result in automatic reversal of the defendant's misdemeanor conviction. Rather, we think that reversal should take place only where the amendment of the indictment results in actual prejudice to any of the interests of the defendant protected by the indictment procedure.

The rules governing the content of indictments, variances and amendments are designed to protect three important rights: the right under the Sixth Amendment to fair notice of the criminal charge one will be required to meet, the right under the Fifth Amendment not to be placed twice in jeopardy for the same offense, and the right granted by the Fifth Amendment, and sometimes by statute, 6 not to be held to answer for certain crimes except upon a presentment or indictment returned by a grand jury. Russell v. United States , 369 U. S. 749 (1962); United States v. DeCavalcanee, 440 F. 2d 1264 (3rd Cir. 1971); United States v. Bryan , 483 F. 2d 88 (3rd Cir. 1973); Gaither v. United States , 413 F. 2d 1061 (D. C. Cir. 1969). The rule preventing the amendment of an indictment should be applied in a way that will preserve these rights from invasion; where these rights are not threatened, rules governing indictments should not be applied in such a way as to defeat justice fairly admin istered.

In this case, the first two of these interests were in no way infringed by the amendment to the indictment. The defendant's right to notice and fair opportunity to defend was not infringed, since he was made aware of the amendment well in advance of trial; neither was his freedom from double jeopardy infringed since the record was sufficiently detailed to protect him against a subsequent prosecution for the same offense. Thus, defendant's argument must stand or fall on the third interest protected by the indictment procedure, viz, the constitutional right not to be held to answer for certain crimes except upon a presentment or indictment. United States v. Goldstein, supra at 529.

Defendant argues that he suffered prejudice in that, since evidence of the extension was never submitted to the grand jury, an impartial group of citizens did not have occasion to consider whether there was probable cause to prosecute. However, this function "has no relevance to an indictment which is not constitutionally required." United States v. Goldstein, supra at 532 (Hunter, J. dissenting). The Fifth Amendment provides that "[n]o person shall be held to answer for a capital, or otherwise infamous crime, unless on a present or indictment of a Grand Jury . . ." Since appellant was not charged with an infamous crime, 7 he cannot rely on the constitutional right to be convicted only after indictment by a grand jury. Neither did appellant, under federal law, have a statutory right not to be held to answer for a violation of §7203 except upon a presentment or indictment.

If we found constitutional error, we would have to determine whether the interest protected was so substantial that it could not be disregarded even if the error were "harmless beyond a reasonable doubt." Chapman v. California , 386 U. S. 18, 24 (1967). However, since the error permitting amendment to the indictment in this case did not reach constitutional dimensions, the appropriateness of reversal must be determined under Rule 52(a) Fed. R. Crim. P., which provides:

"[A]ny error, defect, irregularity or variance which does not affect substantial rights shall be disregarded."

In this case, the defendant has failed to identify any substantial rights affected by the amendment. It is apparent from this record that the defendant, himself an attorney, at all times knew that the date appearing in the original indictment was erroneous. The defendant was made aware in sufficient time prior to trial that the extended date for filing would be used. Moreover, the defendant, having consented to the filing of the bill of particulars, may not now assert surprise. Additionally, the defendant has not identified any evidence that the prosecutor may have gained through a grand jury proceeding not otherwise available from other sources. Nor can we find from this record any substantial likelihood that the jury's verdict was influenced by its awareness that an indictment had been returned by an impartial grand jury. The evidence of the defendant's guilt presented by the government was convincing beyond a reasonable doubt. Under these circumstances, we fail to see how prejudice could be identified. The error, therefore, did not affect any of the defendant's substantial rights and does not require reversal under Rule 52(a) Fed. R. Crim. P.

The defendant advanced three other objections on appeal. First, the defendant contends that the district court erred in denying his motion for new trial, which was based upon the submission of affidavits contradicting the character evidence of a government witness. The district court determined that the newly discovered evidence did not concern a material issue and, therefore, did not require a new trial. A motion for a new trial based on newly discovered evidence is addressed to the sound discretion of the district court. United States v. Crowder, 351 F. 2d 101 (6th Cir. 1965). We cannot find that there was an abuse of discretion in denying the request in this instance. Second, the defendant contends that the district court erred by omitting the phrase "evil motive" in its instruction to the jury concerning the definition of willfulness. We have reviewed the jury instructions as a whole and find them clearly consistent with the guidelines set forth in United States v. Bishop [73-1 USTC ¶9459], 412 U. S. 346 (1973). Finally, the defendant complains that the district court precluded the admission of evidence of actions taken by the Central Service Center of the Internal Revenue Service after defendant had filed his returns on February 18, 1971. The defendant sought to introduce this evidence, which the defendant thought demonstrated that an agent of the government believed the defendant guilty of no more than a civil offense, to establish that defendant was not guilty of the criminal offense with which he was charged. While evidence of contradictory statements may be used to impeach a government agent, they may not be introduced to prove the truth of the statements offered. United States v. Santos , 372 F. 2d 177 (2nd Cir. 1967); United States v. Powers, 467 F. 2d 1089 (7th Cir. 1972). United States v. Santos, supra, at 180 points out that:

"[T]he inconsistent out-of-court statements of a government agent made in the course of the exercise of his authority and within the scope of that authority, which statements would be admission binding upon an agent's principal in civil cases, are not so admissible here [against the government] as 'evidence of the fact.'"

The trial court was correct in excluding this evidence.

Accordingly, the judgment is affirmed.

* The Honorable Rob ert E. DeMascio, Judge , United States District Court for the Eastern District of Michigan, sitting by designation.

1 Count I of the indictment charged in part that the defendant ". . . during the calendar year 1968 . . . by reason of such income he was required by law, following the close of the calendar year 1968 and on or before April 15, 1969, to make an income tax return to the District Director of Internal Revenue . . . that well knowing all of the foregoing facts, he did willfully and knowingly fail to make said income tax return . . ." Count II is identical except that it charges defendant with failing to file a 1969 return on or before April 15, 1970.

2 26 U. S. C. §7203 provides as follows:

Any person required under this title to pay any estimated tax or tax, or required by this title or by regulations made under authority thereof to make a return (other than a return required under authority of section 6015), keep any records, or supply any information, who willfully fails to pay such estimated tax or tax, make such return, keep such records, or supply such information, at the time or times required by law or regulations, shall, in addition to other penalties provided by law, be guilty of a misdemeanor and, upon conviction thereof, shall be fined not more than $10,000, or imprisoned not more than 1 year, or both, together with the costs or prosecution.

3 This "agreement," however, did not constitute a waiver of indictment because it was not made by the defendant in open court. See Fed. R. Crim. P. 7(b).

4 Generally, the sufficiency of an indictment must be tested by pre-trial motion pursuant to Rule 12(b), Federal Rules of Criminal Procedure; Gaither v. United States, 413 F. 2d 1061, 1072 (D. C. Cir. 1969); United States v. Doelker [64-1 USTC ¶9236], 327 F. 2d 343 (6th Cir. 1964); United States v. Norman, 391 F. 2d 212 (6th Cir. 1968). However, we consented to decide the issue even though a pre-trial motion challenging the validity of the indictment was never filed.

5 We are troubled by the suggestion in Goldstein that a petit jury might consider a grand jury indictment as tending to prove a defendant's guilt. It is permissible for a jury to infer guilt from the fact of an indictment or information. See Mathes & Devitt, Federal Jury Practice and Instructions §806.

6 In Russell v. United States, 369 U. S. 749 (1962), prosecution by indictment was not constitutionally required for the offense as charged. However, a statutory provision required prosecution only by indictment and that Court adopted a per se rule of reversal to protect this statutory right.

7 Infamous crimes are defined as those which can result in incarceration in a penitentiary. Mackin v. United States , 117 U. S. 348 (1886). The offense of failing to file a timely income tax return is not considered an infamous crime because the maximum sentence provided (one year) precludes incarceration in a pentitentiary. See 18 U. S. C. §4083: "A sentence for an offense punishable by imprisonment for one year or less shall not be served in a penitentiary without the consent of the defendant."

 

 

[75-1 USTC ¶9366] United States of America , Appellant v. Irving Stern, Appellee

(CA-2), U. S. Court of Appeals, 2nd Circuit, Docket No. 74-2522, 511 F2d 1364, 3/12/75, Rev'g unreported District Court decision

[Code Secs. 7201 and 7206(1)]

Crimes: Tax evasion: False statements: Evidence: Admission: Attorney-client privilege.--During the trial of a union official for tax evasion and making false statements, the lower court wrongly refused to admit in evidence the tape of a conversation between the official and an attorney. There was no evidence that an attorney-client relationship existed at the time of the conversation. Nor was the attorney acting as the official's agent when, as a result of the conversation, he agreed to contact another attorney.

William I. Aronwald, Special Attorney, Department of Justice, New York, N. Y., Paul J. Curran, United States Attorney, John D. Gordan, III., Assistant United States Attorney, New York, N. Y., for appellant. Raymond Bernhard Grunewald, New York, N. Y., Joseph Beeler, Miami Beach, Fla., for appellee.

Before LUMBARD, FRIENDLY and GURFEIN, Circuit Judges.

LUMBARD, Circuit Judge:

The government appeals from an order of the Southern District of New York which suppressed, as attorney-client communications, portions of conversations between defendant-appellee Irving Stern and Walter Bodenstein, particularly the material portion of the tape recording of a May 18, 1973 conversation between the two men.

A review of the record of the suppression hearing persuades us that there was no basis for concluding that an attorney-client relationship existed between Bodenstein and Stern at the time of the conversations in question. Nor at argument was counsel able to state what legal advice Stern was seeking. We therefore conclude as a matter of law that the trial court erred in holding the conversation privileged.

[Facts]

The facts are not seriously disputed. The defendant-appellee, Irving Stern, is Vice President of the International Amalgamated Meat Cutters Union. He is under indictment, filed March 21, 1974, for violations of the Racketeer Influenced Corrupt Organizations Act (18 U. S. C. §§ 1962(c), (d)), the Taft-Hartley Act (29 U. S. C. §§ 186(a), (b)), and the Internal Revenue Code (26 U. S. C. §§ 7201, 7206(1)). Stern and his co-defendants are charged with conspiring to demand and accept, and demanding and accepting, payments from employers of members of his union. The indictment further charges the defendants with failing to report the payments so received to the Internal Revenue Service. 26 U. S. C. §§ 7201, 7206(1).

Walter Bodenstein is a New York attorney who operates G. P. Sales, Inc., a meat merchandising company for Iowa Beef Processors ("IBP"), the largest meat packing company in the United States . Bodenstein and Stern were introduced eight to ten years ago by Moe Steinman, Bodenstein's father-in-law. Since then they have met occasionally in the course of business.

In June, 1972 Bodenstein, who was under a tax investigation, informed Stern that Stern's name had been mentioned in the course of the investigation. Stern asked that he be kept informed of developments. Over the summer and fall of 1972 the two remained in contact, Bodenstein keeping Stern informed about the investigation. Upon learning that the investigation related to IBP, Stern asked Bodenstein to represent him. Bodenstein declined to do so.

At this time Stern expressed a fear that his "stock speculations" might be disclosed as a result of the IBP investigation. Stern knew that Moe Steinman, Bodenstein's father-in-law, was a subject of an investigation into bribery of supermarket officials by IBP. Moe Steinman is named in Count 1 of the original indictment against Stern as the person through whom some of the alleged bribes were paid to Stern and his co-defendants. 1

In January, 1973, Stern was subpoenaed to appear before the New York County Grand Jury, but declined to testify. Thereafter, Stern again met with Bodenstein. He told Bodenstein that in his conference at the County District Attorney 's Office there had been intimations of a connection between Steinman and himself, Stern. He again asked Bodenstein to represent him. Bodenstein again refused.

In March, 1973, Bodenstein and Steinman were indicted by a federal grand jury for filing false employers tax returns. Steinman, Currier Holman (an IBP official), and C. P. Sales, Inc. were also indicted federally and in the New York Supreme Court for other offenses.

On March 28, 1973, Stern received an IRS notification that his returns were being audited. In early April Stern spoke to Bodenstein about the audit. Bodenstein, unaware that Stern had already retained counsel and had so notified the IRS, recommended a lawyer.

In May Stern met with Bodenstein several times and discussed his fear of being unable to explain the source of $110,000 worth of bonds which he had posted as collateral for loans. Bodenstein was eager to make certain that the bonds were in no way related either to IBP or to his father-in-law, Steinman. Stern was similarly eager to steer clear of Steinman. Bodenstein taped the May 18, 1973 conversation, unbeknownst to Stern, to prove that neither he, IBP, nor Steinman was connected with the bonds. 2

The conversation itself is the most convincing evidence that it occurred not in an attorney-client context, but in the context of two men under investigation trying to protect themselves from any nuances of corruption that might spill over from one investigation to the other. The major subjects interwoven in their conversation were the investigation of the meat and supermarket industry, Stern's bonds, and expert tax counsel.

At the outset of the conversation Bodenstein repeatedly questioned Stern in an attempt to elicit statements that Steinman had never paid Stern anything on behalf of IBP. Stern answered simply "Well, it's true."

Stern then interrupted to ask about "the George George thing" (George George, a supermarket official) and to say that "Nicky is solid" (Nicholas Abondolo, later to be one of Stern's co-defendants). George George had received some publicity relative to his appearance before a grand jury. The indictment which was filed on March 21, 1974 against Stern and his co-defendants alleges, as an overt act on the conspiracy count, that George George paid Abondolo $2,000. The district court denied the motion to suppress this portion of the conversation as privileged, but granted the motion as to the rest of the conversation.

Thereafter, in this May 18 conversation, Bodenstein elicited considerable detail from Stern about the bonds and the lenders with whom the bonds had been put up as collateral. At the end of this exchange Stern reiterated that these transactions had "absolutely nothing to do with Iowa [IBP]" and expressed the fear that "they're going to try to link me up with Moe [Steinman]. . . ."

Up to this point the conversation is characterized by a mutual fear that the investigation would reveal a tie-in between IBP and Stern.

Stern then questioned Bodenstein about names of expert tax counsel. Bodenstein's response was "I'll tell you what we did when we checked." Bodenstein proceeded to run through the names of several experts, among them Lou Bender, the tax lawyer whom Bodenstein and Steinman had retained. Finally, Bodenstein suggested "Why don't you have your lawyer get in touch with Bender." This exchange is consistent with a relationship of one man under investigation seeking advice and information from another who had been undergoing a similar investigation.

The balance of the conversation concerned Stern's fears of: (1) being linked to IBP ("The one thing I don't want to link is my situation with MOE and IOWA BEEF. is my situation with MOE and IOWA BEEF. an outsider (["W]hat I'm most fearful of is that my guys find out anything about it. * * * I got nothing else, I lose them, I'm dead."); and (3) being unable to explain the source of the bonds (["U]nless they tell be something, I don't know what to do, they may try to give a rationale, some bullshit--of inheriting and something. I don't know. I don't know. There's got to be an answer. I just can't have a no answer."). 3

In response to these expressions of Stern's fear, Bodenstein repeated his own belief that Stern was not involved with IBP, citing as support for this belief his knowledge of the grand jury testimony of "every-body at IOWA BEEF," including his own. Bodenstein further offered to speak to Lou Bender, his tax expert, about the best way for Stern (who would remain anonymous) or his attorney to consult with Bender without causing any "conflict." As Bodenstein put it, "your guy may be better speaking to LOU BENDER than you. I don't know, let me talk to LOU. * * * You're not going to lose your guys, you know. They may go on a consulting basis to LOU. * * * Well let me see what LOU says. . . ."

Of course, Bodenstein and Stern were both under investigation; each was interested in protecting his own interests. Bodenstein wanted further assurances that Steinman had never bribed Stern on behalf of IBP. Stern wanted to be equally certain of not being linked with Steinman: "most important is to keep a separation." The government argues that Stern's motivation in contacting Bodenstein was to check the status of the investigation and to communicate his situation to Steinman indirectly. It is likely that this was part of Stern's motivation in speaking to Bodenstein.

Insofar as Stern confided in Bodenstein about the bonds, it was not, in the context of the conversation, with an eye to seeking legal guidance. Rather, it was in direct response to questions by Bodenstein, a potential co-defendant, whether he (Bodenstein), his father-in-law, or his business were likely to be implicated in any bribe payments to Stern.

Similarly, Stern's requests for help in choosing expert tax counsel were pleas of a frightened man looking for a solution to his problems from someone who might be implicated as a co-defendant if Stern failed to find an explanation for the bonds. Moreover, Bodenstein, having just undergone the ordeal of an investigation, was in a position to provide Stern with advice on securing expert tax counsel.

That Bodenstein was an attorney may well have been an additional factor which caused Stern to ask Bodenstein for advice. However, it was Bodenstein's status as a potential co-defendant under investigation, not as an attorney, which was of paramount importance in their relationship.

[Attornney-Client Relationship]

The burden of establishing the existence of an attorney-client relationship rests on the claimant of the privilege. In re Bonanno, 344 F. 2d 830, 833 (2d Cir. 1965). Thus, for Stern to have succeeded on his claim of privilege, he was obliged to prove that his relationship with Bodenstein fit within the privilege. According to Wigmore's formulation of the privilege which this circuit recognized in United States v. Kovel [62-1 USTC ¶9111], 296 F. 2d 918, 921 (2d Cir. 1961):

"(1) Where legal advice of any kind is sought (2) from a professional legal advisor in his capacity as such, (3) the communications relating to that purpose, (4) made in confidence (5) by the client, (6) are at his instance permanently protected (7) from disclosure by himself or the legal advisor, (8) except the protection be waived . . .." 8 Wigmore, Evidence §2292 (McNaughton Rev. 1961).

Stern has failed to sustain his burden on both of the first two elements of the privilege. Not only has he failed to demonstrate that he was seeking legal advice from Bodenstein, but, even if names of experts are construed as legal advice, Stern has been unable to establish that he sought the advice from Bodenstein in his capacity as a legal advisor. Rather, as has been amply demonstrated, he sought the advice from a potential co-defendant, from a fellow subject of investigation, from a veteran of an IRS audit. Given that there is little dispute over the material evidentiary facts, we conclude as a matter of law that there was no attorney-client relationship between Bodenstein and Stern; therefore, their conversations are not privileged.

[Agency Theory]

Nor can the district court's ruling be sustained on the alternative ground that Bodenstein was Stern's agent in dealing with attorney Bender and consequently the communications were privileged.

Although the record below is somewhat ambiguous, it appears that the district court abandoned the agency theory as a basis for its final holding. Instead, it found that "Bodenstein was more than merely an intermediary" and that Stern would not have confided in him had Bodenstein not been "someone who could have the judgments associated with attorneys." To the extent that this constitutes, as it appears to, an abandonment of the agency rationale in favor of a finding of an attorney-client relationship between Bodenstein and Stern, then our determination that no such relationship existed disposes of the problem and it is unnecessary for us to evaluate the agency theory.

To the extent that the district court found that Bodenstein would never have been employed as an agent for communication with Bender had he not had some legal knowledge, that finding was clearly erroneous.

While it was Stern who introduced the subject of tax experts during the May 18 conversation, it was Bodenstein who offered to contact Bender, his own attorney, on Stern's behalf. Moreover, this offer was made well after Stern had already poured out considerable detail about the bonds. Both of these facts are inconsistent with the notion that Stern confided in Bodenstein with an eye to Bodenstein's serving as an agent in communicating with Bender. Certainly Bodenstein's offer to contact Bender was the outcome of the conversation, but it was clearly not the purpose for which Stern's revelations about the bonds were made. Because the agency theory is so decisively contradicted by the conversation itself, it is unnecessary for us to pass on its legal merits. 4

For the foregoing reasons we find that no attorney-client relationship existed between Bodenstein and Stern. Stern's testimony that such a relationship existed in his mind is contrary to the facts and circumstances and the inferences to be drawn from them. The district court erred as a matter of law in concluding that there was an attorney-client privilege which protected the suppressed portion of the conversation from disclosure.

The order of the district court suppressing portions of the conversations between Bodenstein and Stern is reversed.

1 It should be noted, however, that these alleged payments were in no way related to IBP.

2 Bodenstein's decision to tape the May 18, 1973 conversation was prompted by the suggestion of Mr. Elkan Abramowitz, the attorney for Moe Steinman. Both the decision to tape the conversation and the conversation itself predate any cooperation by Bodenstein with the government.

3 The government urges, as an additional ground for reversal, that if Stern was seeking legal advice, it was in the commission of a fraud on the United States government and, as such, was outside the privilege. There is no necessity for our reaching this question since we find that the conversation is not privileged in the first instance. Thus, while it is unclear what advice Stern hoped to receive from Bender, it is immaterial to Stern's relationship with Bodenstein.

It should be further noted that this court does not construe anything in the record as reflecting in any way on the integrity of Louis Bender.

4 See generally Blankenship v. Rowntree, 219 F. 2d 597 (10th Cir. 1955) (holding that a memorandum prepared by a client and delivered to his attorney by an agent of the client was a privileged communication); United States v. Andreadis, 234 F. Supp. 341, 345 n. 3 (E. D. N. Y. 1964) (suggesting that the presence of an agent of the client during an otherwise privileged conversation with an attorney may not destroy the privilege where it is a prior agency such as a secretary, nurse or partner); 8 Wigmore §2311 (communications in the presence of a third party who is not an agent of either the attorney or the client destroys the privilege), §2317(1) (communications by an agent of the client to the attorney are privileged) (McNaughton rev. 1961).

 

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