Admissibility
1 Page4
You
are further instructed that a taxpayer's return which does not contain
financial information enabling the Internal Revenue Service to determine
the party's tax liability, if any, is not a return within the meaning of
the Internal Revenue Code or the regulation adopted by the Commission of
Internal Revenue Service. 7
The
correct standard of review to be applied to challenges to jury
instructions is whether the court's charge as a whole was a correct
statement of law.
United States
v. Arguelles, 594 F. 2d 109, at 112, n. 3 (5th Cir. 1979). See
also United States v. Chandler, 586 F. 2d 593 (5th Cir. 1978); United
States v. Sanfilippo, 581 F. 2d 1152 (5th Cir. 1978).
Appellant
does not object to the first part of the excerpted charge, which we
agree accurately sets forth the elements of the crime charged in the
information. He argues instead that the "you are further
instructed" part of the charge had the effect of directing the jury
to find the second element of the offense set forth immediately before,
namely, "that the defendant failed to make such a return . .
.." We cannot agree. This language merely instructed the jury, in
light of the evidence that had been introduced at trial, how it might
find the existence of the second element of the offense charged, and was
an accurate statement of the law. See
United States
v. Wade, 585 F. 2d 573, 575 (5th Cir. 1978);
United States
v. Johnson, 577 F. 2d 1304, 1311 (5th Cir. 1978). The
responsibility to find the second element of the offense was clearly the
jury's under the charge as given.
For
the reasons stated above, the judgment is Affirmed.
*
Fed. R. App. P. 34(a); 5th Cir. R. 18.
1
Record, p. 1.
2
Trans., Vol. 1, p. 2:
"MR.
GROTE: Well, I respectfully decline, because this court lacks
jurisdiction."
At
p. 5:
"MR.
COLLINS: At this time, Your Honor, I would ask that the Court enter a
plea of Not Guilty for Mr. Grote. Mr. Grote has some disagreement about
what has been filed against him and the jurisdiction of the Court in
this case. I would ask the Court to enter a plea of Not Guilty for him
and set it for trial."
3
"Arraignment shall be conducted in open court and shall consist of
reading the indictment or information to the defendant or stating to him
the substance of the charge and calling on him to plead thereto. He
shall be given a copy of the indictment or information before he is
called upon to plead." Fed. R. Crim. P. 10.
4
Trans., Vol. 1, pp. 3-6.
5
Trans., Vol. 2, at p. 49:
"Q:
Now, would you look at the return itself? Was it an acceptable return in
the eyes of the Internal Revenue Service during 1972?
A:
Yes, Sir.
MR.
COLLINS: Your Honor, I object to the terminology of acceptable. That's
yet to be determined by the Court under the law."
At
p. 51:
"Q:
And is that [Grote's 1973 return] a proper filing of an Internal Revenue
requirement form allowing you to be able to adequately compute whether a
tax would be owing or not?
A:
It is.
Q:
Is that an acceptable Internal Revenue form for that reason?
A:
It is acceptable.
MR.
COLLINS: I object to the same word, Your Honor. The use of
acceptable."
At
p. 58:
"Q:
All right. Now, what does that mean?
A:
That means Mr. Grote did not file a tax return for the calendar year
1975.
Q:
All right. Does that mean an acceptable tax return that would allow you
to--
MR.
COLLINS: Your Honor, I'm going to object to that terminology again, with
regard to whether or not they will accept a tax return."
At
p. 60:
"A:
It shows that--There is no return has [sic] posted to Mr. Grote's master
file account.
Q:
Does that mean a return acceptable under the law by the Internal Revenue
Service which would allow the Internal Revenue Service to compute
whether or not he owed taxes for the year, calendar year 1976?
A:
Such return has not been filed.
Q:
Now, Mr. Clore, as a matter of fact, were papers filed by Mr. Grote
during the calendar years 1975 and 1976 with the Internal Revenue
Service?
A:
Certain documents were.
Q:
All right. Were you able, based on those documents, to be able to
compute whether or not a tax was owing, as required by law, by Mr. Grote
for the years 1975 or 1976?
A:
No, Sir."
6
Trans., Vol. 2, p. 63.
7
Trans., Vol. 2, pp. 127-28.
On
Petition for Rehearing and Petition for Rehearing En Banc
Before
HILL, GARZA, and THOMAS A. CLARK, Circuit Judges.
PER
CURIAM:
The
defendant on petition for rehearing strongly urged that in our original
opinion we overlooked the defendant's contention that the Internal
Revenue Service had violated the notice and comment provisions of the
Administrative Procedure Act, 5 U. S. C. §552(a)(I)(D) and (E). 1
Defendant contends that the Internal Revenue Service had previously
determined not to prosecute cases such as his, and had changed this
policy without complying with the statute.
Defendant
relies on the following testimony from David Clore, Chief of Criminal
Investigation Staff at the
Internal
Revenue
Service
South
Center
:
Q.
Okay. Have you ever seen a tax return like this before? [Petitioner's
1975 and 1976 income tax returns]
A.
Many of them.
Q.
Okay. Has the Internal Revenue Service ever accepted this particular tax
return?
A.
Based upon my knowledge, I think prior to our procedure at that time,
there may have been returns filed that were accepted by the Internal
Revenue Service.
Q.
So, these in particular--This type of return has before been accepted by
the Internal Revenue?
A.
That's correct . . .:
Q.
(By Mr. Collins) What is the date that the Internal Revenue--I'm
assuming that that is correct, quit accepting this particular type of
return?
A.
In 1974.
Q.
In 1974. And it is your--Your answer to that question is since 1974 they
will not accept [this] type of return; is that correct?
A.
That is correct.
Defendant
also points to the testimony of David Martin who stated that such tax
returns had been accepted by the Service prior to appellant's filings to
show that the Government had determined not to prosecute cases such as
this.
Such
evidence is not enough. It does not relate to criminal prosecutions. The
defendant has directed us to no previously existing policy of either the
Internal Revenue Service or the Justice Department indicating that there
was an established practice or policy not to prosecute persons who filed
returns similar to those filed by the defendant in this case.
Our
original opinion disposed of any contention of the defendant that he
might have been selectively prosecuted. His claim that the Internal
Revenue Service changed a substantive rule of general applicability
without having offered any evidence of the existence of such a rule
approaches the frivolous.
The
Petition for Rehearing is Denied and no member of this panel nor Judge
in regular active service on the Court having requested that the Court
be polled on rehearing en banc (Rule 35 Federal Rules of Appellate
Procedure; Local Fifth Circuit Rule 12) the Petition for Rehearing En
Banc is Denied.
1
The statute reads as follows:
(a)
. . ..
(1) Each agency shall separately
state and currently publish in the Federal Register for the guidance of
the public--
. . . .
(D)
substantive rules of general applicability adopted as authorized by law,
and statements of general policy or interpretations of general
applicability formulated and adopted by the agency; and
(E)
each amendment, revision, or repeal of the foregoing.
To
substantially the same effect is 26 C. F. R. §601.702(a)(iv) and (v).
[80-1 USTC
¶9251]
United States of America
, Appellee v.
Stanley
R. King, Appellant
(CA-8), U. S. Court of Appeals,
8th Circuit, No. 79-1689, 616 F2d 1034, 2/27/80, Aff'g unreported DC
decision
[Code Sec. 7201]
Crimes: Tax evasion: Sufficiency of evidence: Other defenses.--A
pastor was properly convicted on two counts of tax evasion. The evidence
was sufficient in that it showed a consistent pattern of not reporting
large amounts of income. Comments made by the prosecutor were not unduly
prejudicial and, in any event, the trial court sustained an objection to
the comments. Certain evidence was properly introduced. A claim with
regard to the defendant's Fifth Amendment rights was raised for the
first time on appeal and could not be considered. The trial judge did
not err in refusing to give a lesser included offense instruction.
Thorwald
H. Anderson, Jr., United States Attorney, Donald F. Paar, Assistant
United States Attorney,
Minneapolis
,
Minnesota
55401
, for appellee. J. Christopher Cuneo, Henry H. Feikema, Smith, Juster,
Feikema, Malmon & Haskvitz, 1250
Builders
Exchange
Building
,
Minneapolis
,
Minnesota
55402
, for appellant.
Before
LAY and STEPHENSON, Circuit judges, and THOMAS *, Senior
District Judge.
THOMAS,
District Judge:
Taxpayer
appeals from his conviction by a jury in a suit charging appellant with
two counts of wilful tax evasion for the years 1972 and 1973, in
violation of Title 26, United States Code, Section 7201. Appellant was
found guilty of both counts.
The
Government contended, first, that appellant had taken improper
deductions, especially for 1972. Secondly, the Government charged that
in both years he received taxable income which was not reported.
Affirmed.
The
indictment was handed down in February 1979. Because of technical flaws,
an information was substituted for the indictment with appellant's
consent. The information concerned itself with tax years 1972 and 1973.
Appellant was tried before a jury in the United States District Court
for the District of Minnesota, the Honorable Donald D. Alsop, presiding.
The trial began on April 16, 1979, and concluded on April 30, 1979. He
was found guilty as charged. On June 20, 1979, he was committed to the
custody of the Attorney General for a term not to exceed fourteen
months. Execution of that sentence was stayed pending appeal.
Appellant's initial petition to proceed in forma pauperis was denied. On
reconsideration, the petition was granted.
Appellant's
activities in 1972 and 1973 formed the basis of two separate types of
charges regarding his alleged evasion of taxes for those years. The
Government contended, first, that appellant had taken improper
deductions, especially for 1972. Secondly, the Government charged that
in both years he had received taxable income which was not reported.
Improper Deductions
In
1971, the appellant Stanley R. King was one of the founders of Twin
Cities Open Door Fellowship (TCODF) Church, located in
St. Paul
,
Minnesota
. He served as pastor during the years 1972 and 1973. He was ordained by
a local church in
Phoenix
,
Arizona
, but not by an accredited theological seminary. King received
compensation of $300.00 per month. Such compensation was termed
"love offerings" in light of King's request that he receive no
salary. Appellant claimed a $3,600.00 housing allowance on both his 1972
and 1973 tax returns. In support of this a document was submitted by
King's tax accountant showing a $2,640.00 per year housing allowance
from TCODF which was prepared by King and signed by the Finance Minister
at King's request. 1 However,
such an allowance had not been authorized by the
TCODF
Church
.
In
1972 King claimed charitable deductions of approximately $13,000.00 to
the
TCODF
Church
. Of this amount approximately $12,000.00 was for the down payment on a
house, hereinafter discussed.
In
1972 King needed housing but was unable to secure financing. He proposed
to TCODF that it purchase a house because it could acquire the necessary
financing and he could not. King was to donate the down payment. The
plan was accepted. He deposited $12,000.00 in the TCODF account for the
earnest money and down payment. The house, though purchased in the
church's name, never appeared on the church's assets. King made the
mortgage payments and remodeled the house and occupied the house as a
parsonage.
The
house was sold in 1975. The profit from the sale exceeded $19,000.00. A
check for that amount was endorsed by the Finance Minister without using
a TCODF endorsement stamp. Subsequently, King deposited the check in the
TCODF's Minister's Fund account over which he had sole control. Such
proceeds were later used by King for personal debts as well as living
expenses. King and his wife were listed as sellers of the house, not
TCODF.
Failure to Report Income
Appellant
failed to maintain any personal checking account in his own name. He
did, however, have an account in the name of Human Resources
Consultants, which he used as his personal checking account.
The
Government claimed that in 1972, King failed to report the following
consulting fee income:
First
Minnesota
Construction
Company ......................... $14,450.00
Intercontinental Development
Company ......................... 7,000.91
United National Development
Company ......................... 3,000.00
The
Government claimed that in 1973, King failed to report income and
consultant fees in the following:
Bethlehem Square Limited
Dividend Corp. .............. $52,000.00
MIA Limited Dividend
Corporation ................. 14,025.00
MIA Properties .............. 4,850.00
............................. 6,935.00
Lambrecht Realty ............ 5,000.00
Monthly "Love Offerings"
from the
TCODF
Church
....... 3,300.00
Universal Enterprises
Unlimited ................... 4,100.00
Chapdelaine Properties ...... 2,000.00
Cecil Newman Courts ......... 555.00
Appellant's
living expenses for 1972 were between $45,000.00 and $50,000.00. He
admitted, on cross examination, to having seen a copy of the Bethlehem
Square Limited Dividend Corporation partnership return. He admitted
having received a check for $50,000.00. This amount was not reported to
his tax accountant.
Inasmuch
as the appellant raises the issue of the sufficiency of the evidence to
prove his guilt beyond a reasonable doubt, it is necessary to review the
facts at length.
Much
of the dispute resulted from appellant's involvement in a number of
"HUD 236" housing projects. HUD 236 housing projects were part
of a program under which the Government insured mortgages on apartment
complexes for law and moderate income families. A portion of the
mortgage was subsidized when qualified low-income renters were occupying
the project. HUD regulated the kinds of rents that could be charged, and
regulated the cost of construction of the project. The project sponsors
had to comport with its rules and regulations. There had to be a
separate legal entity sponsoring each individual project.
Appellant
first became interested in the prospect of developing this type of
project in the
Twin
City
area in 1967. At that time he was the executive director of Twin Cities
Opportunity Industrial Center (TCOIC). He was attending an O. I. C.
Conference in Washington, D. C., when the then Secretary of HUD
announced that this new housing program would be launched. When
appellant returned to the
Twin
City
area he met with members of the Minneapolis Housing and Redevelopment
Association, the Mayor of Minneapolis, and other people in the
community. With his assistance, the Midwest Improvement Association (M.
I. A.) was founded. M. I. A. hired a housing specialist to act as a
consultant in putting together a package to present to HUD. Appellant
worked as project coordinator. He was also the executive secretary of M.
I. A.
Finally,
in 1970, the first of the projects was constructed. M. I. A. was the
nonprofit sponsor. The first project was called
Cecil
Newman
Plaza
. M. I. A. was also the sponsor for what became known as Cecil Newman
Courts, which was completed sometime in 1971. At the same time M. I. A.
was trying to develop a housing project in
St. Paul
, which would eventually become known as Lonnie Adkins Courts.
When
Cecil
Newman
Plaza
began operation, a firm was hired to manage the rental operations. There
were immediate problems with cash flow. Because of increased costs
subsequent to the submission of the original budgets, as well as HUD's
refusal to increase rents, there was not enough money to pay for
expenses incurred. The original manager pulled out after about six
months of managing the project. They had been training a young man to
assist in the project management. However, that individual soon left,
leaving both
Cecil
Newman
Plaza
and now Cecil Newman Courts without anyone to do the housing management.
It was at that point that appellant helped organize M. I. A. Properties,
Inc., to serve that function.
It
was also at this point in time that appellant was asked by the
non-profit sponsor of a similar project to serve as a paid consultant in
order to get the project off the ground. Appellant was successful in
organizing and putting together this non-profit project. It was brought
to the construction stage by the middle of 1972.
During
this time appellant was still involved in developing the Lonnie Adkins
Courts project through his association with M. I. A. It became apparent
that Lonnie Adkins Courts could not get HUD approval for funding if it
continued to operate with a non-profit sponsor. Therefore, the concept
of a limited dividend corporation was explored. Appellant testified that
he was probably told of the possibility of a limited dividend
corporation by the mortgage company that was the interim lender on the
St. Phillips Gardens project. Although a limited dividend corporation
sponsorship does not receive the same percentage of guaranteed mortgage
funds from HUD, it is able to attract investors in order to make up the
construction costs. Appellant thus helped form MIA Limited Dividend
Corporation to serve as a corporate general partner in the limited
partnership which would sponsor the Lonnie Adkins project. He served as
its president. The initial endorsement on the Lonnie Adkins project
occurred somewhere in the early part of 1973.
The
other housing project with which appellant was involved was called the
Bethlehem Squa