Admissibility
2 Page5
[80-2
USTC ¶9680]
United States of America
, Plaintiff-Appellee v. William J. Pry, Defendant-Appellant
(CA-5), U. S. Court of Appeals,
5th Circuit, No. 79-5330, 625 F2d 689,
9-12-80
, Affirming unreported District Court decision
[Code Sec. 7203]
Crimes: Failure to file return: Employer's quarterly return:
Willfulness: Good faith: Prior wrongs.--Although testimony relating
to prior, knowing failures to file employer's quarterly tax returns may
have been harmful to the taxpayer, it was relevant to his defense of a
good-faith belief that such filing was unnecessay during the years in
issue. Therefore, the testimony was admissible as evidence of his
willfulness in failing to comply with requirements of the tax law.
[Code Sec. 7203]
Crimes: Failure to file return: Trial: Change of venue.--Claims
of financial incapacity to travel to the site of his trial and of
prejudice against him within the ares in which the government's suit was
brought were insufficient to merit a change in venue. The trial court
properly exercised its discretion in denying the taxpayer's motion since
the cause of action arose and all witnesses were present in the district
from which he sought removal.
[Code Sec. 7203]
Crimes: Failure to file return: Thial: Sentencing: Conditions of
sentence: Parole.--A motion attacking the legality of the sentence
imposed by the trial court was denied. The court acted properly in
requiring that the taxpayer be treated as a parolee after serving ten
months of a one-year sentence, even though the applicable statute
provided for such treatment upon release after service of one-third of
the sentence. It was within the court's discretion to set the terms of
the sentence.
Jamie
C. Boyd, United States Attorney, Le Roy Morgan Jahn, Assistant United
States Attorney, San Antonio, Texas, for plaintiff-appellee. Lucien B.
Campbell, P. Joseph Brake,
727 East Durango Blvd.
,
San Antonio
,
Texas
, for defendant-appellant.
Before
THORNBERRY, GEE and REAVLEY, Circuit Judges.
PER
CURIAM:
Appellant
William J. Pry was convicted by a jury of failure to file employer's
quarterly tax returns in violation of 26 U. S. C. §7203. Pry claims the
district court erred in denying his motion for a change of venue, in
admitting certain evidence of his prior acts and in ordering that he be
released from prison as if on parole only after he serves 10 months of
his one-year sentence. We reject Pry's challenges and affirm.
Change of Venue
During
all times relevant to the offenses charged in the indictment, Pry lived
and worked in
Austin
, which is in the Western District of Texas. He also was required at all
relevant times to file his federal tax forms with the Internal Revenue
Service (IRS) office in
Austin
.
Pry
was indicted in the Western District and was tried in
Austin
. His counsel was a member of the Federal Public Defender's office
stationed in
San Antonio
, which is also in the Western District approximately 70 miles from
Austin
.
Sometime
prior to trial, Pry moved from
Austin
to
Houston
, which is in the Southern District of Texas.
Houston
is approximately 130 miles from
Austin
and approximately 170 miles from
San Antonio
.
All
nine of the government's witnesses were from the
Austin
area.
A
few weeks before trial, Pry moved under Fed. R. Crim. P. 21(a) and (b) 1 to have the
proceedings transferred to the Houston division of the Southern
District. In support of the motion, he claimed he was financially
ill-equipped to travel to Austin for the trial or to travel to San
Antonio to consult with his lawyer and that, because of the "great
number of government employees including the Internal Revenue Service in
Austin," he could not receive a fair trial in that city. 2 In
opposition, the government pointed out that its witnesses lived near
Austin
and that the public defender had access to travel funds. The district
court denied the motion.
Because
the tax forms Pry failed to file should have been filed in
Austin
, the Western District of Texas was a proper venue for his trial. See United
States v. Calhoun [78-1 USTC ¶9203], 566 F. 2d 969, 973 (5th Cir.
1978). We may reverse the denial of the motion for a change of venue
only upon a showing that the district court abused its discretion, United
States v. Juarez, 573 F. 2d 267, 280 (5th Cir. 1978); United
States v. Walker, 559 F. 2d 365, 372 (5th Cir. 1977). Pry has made
no such showing. Under Rule 21(b), the district court is to consider the
convenience of the witnesses as well as the convenience of the parties.
The district court in this case apparently considered the inconvenience
that would have been suffered by the Austin-area witnesses had the case
been transferred to
Houston
. The denial of the motion was within the court's range of discretion.
Prior Acts
During
all times relevant to the offenses alleged in the indictment, Pry owned
and operated Capital Specialty Blasting Company, which performed
dynamite-blasting operations for construction and road-building
companies. Pry had several employees who were paid hourly wages. The
indictment alleged that Pry was "an employer of labor and a person
required under the provisions of the Internal Revenue Code to make a
return of federal income taxes withheld from wages and Federal Insurance
Contributions Act taxes" and that, in violation of 26 U. S. C. §7203,
3 he had filed
no employer's quarterly tax return for any of the tax quarters of 1974
or for the first tax quarter of 1975.
The
government's evidence showed not only that Pry had failed to file the
required forms but also that he had withheld money from his employees'
wages purportedly to be turned over to the IRS and that he had kept the
money. During its case-in-chief, the government offered the testimony of
Marcus Erfurt, who was Pry's business partner until December, 1973, when
he left Pry to establish his own dynamite-blasting business.
Erfurt
testified that after taking over Capital's bookkeeping chores from Pry
during 1973, he found two employer's quarterly tax return forms that Pry
had filled out for the first two quarters of 1973 but that he had not
sent to the IRS.
Erfurt
mailed them in.
A
defendant's good faith belief that he need not file an employer's
quarterly tax return is a defense to a charge brought under §7203 of
"willfully" failing to file the return, see United States
v. Pinner [77-2 USTC ¶9706], 561 F. 2d 1203, 1206 (5th Cir. 1977); United
States v. Douglass, 476 F. 2d 260, 263 (5th Cir. 1973).
Pry
claims that
Erfurt
's testimony should have been excluded under Fed. R. Evid. 402, 403 and
404(b). If it may be said that the unmailed 1973 quarterly reports
proved a prior wrong and that this was harmful to Pry, it is
nevertheless relevant and admissible as evidence of Pry's knowledge and
intent. In 1973 Pry apparently knew the proper means of complying with
the law. See
United States
v. Beechum, 582 F. 2d 898 (5th Cir. 1978).
Sentence
Pry
was convicted on all five counts under which he was indicted. The
district court sentenced him to one year of imprisonment on Count One
and ordered that he be "released as if on parole after serving TEN
(10) MONTHS, pursuant to Title 18, United Sates Code, Section 4205(f) .
. ." The court also sentenced Pry to one year of imprisonment on
each of Counts Two through Five but ordered that those sentences be
suspended and that Pry be placed on probation for three years on each of
those counts. The sentences for the latter four counts were to run
concurrently with each other but consecutively with the sentence imposed
under Count One.
Pry
claims that the sentence imposed under Count One is illegal. He argues
that 18 U. S. C. §4205(f), the statute under which the district court
imposed a portion of the sentence, authorizes a district court to order
a defendant released as if on parole only if the defendant is to be
released immediately upon having served one-third of the prison term to
which he was sentenced. The district court, as noted above, ordered that
Pry be released only after he serves 10 months of the one year sentence.
18
U. S.
C. §4205(f) provides in pertinent part:
Any
prisoner sentenced to imprisonment for a term or terms of not less than
six months but not more than one year shall be released at the
expiration of such sentence less good time deductions provided by law,
unless the court which imposed sentence, shall, at the time of
sentencing, provide for the prisoner's release as if one parole after
service of one-third of such term or terms . . ..
Section
4205(f) was enacted in 1976 as part of the Parole Commission and
Reorganization Act, 18
U. S.
C. §§ 4201 et seq. Its legislative history is not enlightening.
There is a dearth of dispositive jurisprudence. Section 4205(f) is the
only provision in the body of federal law authorizing the district
courts to order, at the time of sentencing, that a defendant be released
as if on parole and after service of a portion of his sentence. The
subsection applies only to defendants sentenced to prison terms of
between six months and one year, inclusive.
Another
provision of the Act, §4205(b), grants the district courts the
discretion to determine, at the time of sentencing, when a prisoner
imprisoned for more than a year shall become eligible for parole.
Section 4205(b) permits the district courts to set that time at any
point during the first third of the prison sentence. If the district
court does not exercise that power, the prisoner will become eligible
for parole, pursuant to §4205(a), after service of one-third of his
prison sentence.
The
government argues that the portion of §4205(f) indicating that release
shall be after service of one-third of the prison term sets the
threshold and the district court may order a prisoner released at any
time after his service of at least that one-third. We find this
persuasive and consistent with the broad discretion allowed in
sentencing. To accept Pry's argument would result in holding that the
district court could sentence Pry to several years imprisonment and
suspend all or any of it but he could not sentence him to a year and
provide for his release after 10 months. We reject that overly
legalistic reading of 18
U. S.
C. §4205(f).
We
find merit in the government's further argument that adoption of Pry's
interpretation of §4205(f) would adversely affect the authority granted
by 18 U. S. C. §3651 4 for the
imposition of split sentences.
Pry
would have this court change his sentence so that he will be eligible
for release as if on parole after service of one-third of his one year
prison term. We decline to do that. It is apparent that the district
court intended Pry to serve at least 10 months in prison. We defer to
the broad discretion given to trial courts in matters of sentencing.
Pry's
conviction and sentence are AFFIRMED.
1
Fed. R. Crim. P. 21(a) and (b) provides:
(a)
For Prejudice in the District. The court upon motion of the defendant
shall transfer the proceeding as to him to another district whether or
not such district is specified in the defendant's motion if the court is
satisfied that there exists in the district where the prosecution is
pending so great a prejudice against the defendant that he cannot obtain
a fair and impartial trial at any place fixed by law for holding court
in that district.
(b)
Transfer in Other Cases. For the convenience of parties and witnesses,
and in the interest of justice, the court upon motion of the defendant
may transfer the proceeding as to him or any one or more of the counts
thereof to another district.
2
On appeal, Pry has abandoned the claim that he was entitled to a change
of venue under Fed. R. Crim. P. 21(a), dealing with prejudice in the
district in which the trial is to be held. His brief addresses only the
claim that he was entitled to a change of venue under Fed. R. Crim. P.
21(b).
3
26
U. S.
C. §7203 provides:
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 or section 6016), 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 of prosecution.
4
18 U. S. C. §3651 provides in pertinent part: Upon entering a judgment
of conviction of any offense not punishable by death or life
imprisonment, if the maximum punishment provided for such offense is
more than six months, any court having jurisdiction to try offenses
against the United States, when satisfied that the ends of justice and
the best interest of the public as well as the defendant will be served
thereby, may impose a sentence in excess of six months and provide that
the defendand be confined in a jail-type institution or a treatment
institution for a period not exceeding six months and that the execution
of the remainder of the sentence be suspended and the defendant placed
on probation for such period and upon such terms and condition as the
court deems best.
[80-2
USTC ¶9783]
United States of America
, Appellee v. Eileen Eldorado Johnson, Appellant
(CA-4), U. S. Court of Appeals,
4th Circuit, No. 79-5272, 634 F2d 735,
11/12/80
, Affirming an unreported District Court decision
[Insert A at 7401]
Crimes: False returns: Evidence: Medicare billing by
taxpayer-doctor.--In a taxpayer-doctor's trial for income tax
evasion, evidence was introduced that she had overstated Medicaid
billings, and government counsel referred to the taxpayer's
"fraudulent" submission of Medicaid forms. The Court of
Appeals affirmed the taxpayer's conviction on the grounds that no
prejudice resulted to the taxpayer from the admission of the evidence
relating to the submission of Medicaid forms, or from the government
characterization of the forms as "fraudulent". The evidence
was properly admitted because the taxpayer's defense to the income tax
evasion charge was that she was completely absorbed in her medical
practice and inadvertently understated her income. According to the
court, the introduction of evidence relating to a fraudulent act
committed by the taxpayer was a proper means of refuting the taxpayer's
assertion that she did not have the requisite criminal intent to evade
taxes. Further, the government counsel's reference to the submission of
"fraudulent" forms was cured by the trial judge in his
instructions to the jury, so that no prejudice resulted.
John
S. Edwards, Faye S. Ehrenstamm, Assistant United States Attorneys, for
appellee. S. W. Tucker, Hill, Tucker & Marsh, J. Hugo Madison for
appellant.
Before
RUSSELL, WIDENER and PHILLIPS, Circuit Judges.
PHILLIPS,
Circuit Judge:
Convicted
by a jury of federal income tax evasion under 26 U. S. C. A. §7201,
Eileen Eldorado Johnson unsuccessfully moved in the district court for a
new trial, on the grounds that evidence of her overstated Medicaid
billings was improperly admitted and that government counsel's reference
to her "fraudulent" Medicaid forms unduly prejudiced the jury.
We affirm, holding that the extrinsic acts evidence was properly
admitted under Fed. R. Evid. 404(b) and that no prejudice resulted from
the "fraudulent" reference in view of the trial court's
corrective action.
I
Johnson is a medical doctor, who inherited her practice from her
deceased brother. She filed tax returns for 1972, 1973, and 1974, which
understated her income by approximately $120,000.00 and her tax
liability by approximately $31,000.00. Her defense at trial was
inadvertence: she had had nothing to do with preparing her tax returns
because she cared nothing for money and chose, instead, to devote her
time to the demanding personal needs of her patients. To support this
defense she produced seven local witnesses--three physicians, a school
board member, a public school teacher, a mortician, and a minister--who
testified to her truthfulness, honesty, and compassion, and to the busy
nature of her practice.
In
attempted rebuttal of this portrait of Johnson as an altruistic healer
of the sick, whose concerns lay elsewhere than attending to her
financial interests and resulting legal responsibilities, the government
called Robert Pemberton, an auditor for the U. S. Department of Health,
Education & Welfare. Pemberton testified at length about his
investigation of Johnson's billings for Medicaid services for 1976-78.
His study showed that Johnson reported four times as many services per
patient as other
Virginia
doctors. Johnson did not object to the general course of Pemberton's
testimony. In fact, the following day Johnson again took the stand in
order to testify that she had not signed the Medicaid billings upon
which Pemberton had based his investigation. During cross-examination,
government counsel asked Johnson, "Who would have received the
benefit of all the fraudulent forms for Medicaid that were filed?"
Johnson's counsel objected and moved for a mistrial because use of the
term, "fraudulent," unduly prejudiced the jury. The trial
judge overruled the motion, directed government counsel to rephrase the
question, and gave the jury a cautionary instruction.
II
We hold that Pemberton's testimony was admissible under Fed. R. Evid.
404(b), which provides:
Evidence
of other crimes, wrongs, or acts is not admissible to prove the
character of a person in order to show that he acted in conformity
therewith. It may, however, be admissible for other purposes, such as
proof of motive, opportunity, intent, preparation, plan, knowledge,
identity, or absence of mistake or accident.
The
first sentence of Rule 404(b) brings forward the traditional rule that
extrinsic acts evidence is inadmissible solely to prove that defendant
is a bad character and, therefore, likely to have committed the crime
charged. See, e.g. Michelson v.
United States
, 335
U. S.
469 (1948); United States v. Woods, 484 F. 2d 127 (4th Cir.
1973); Lovely v.
United States
, 169 F. 2d 386 (4th Cir. 1948); Advisory Committee Notes to Fed. R.
Evid. 404(b); McCormick, Evidence §190, at 447 (2d ed. 1972).
Extrinsic acts evidence, however, may be admissible for other purposes
including those listed in Rule 404(b). The Rule's list is merely
illustrative, not exclusive, Wright & Graham, Federal Practice
and Procedure: Evidence §5240, at 469 (1978).
Rule
404(b) of course commits to trial judge discretion the determination
whether extrinsic act evidence shall be admitted under its second
sentence. In exercising that discretion the judge first must determine
if the proffered evidence is relevant to an issue other than the
accused's character. If so, then the trial judge must balance the
evidence's probative value against the dangers of undue prejudice
aroused by this form of evidence. This may concededly pose particularly
difficult problems. The Advisory Committee Notes to Rule 404(b) state:
No
mechanical solution is offered. The determination must be made whether
the danger of undue prejudice outweighs the probative value of the
availability of other means of proof and other factors appropriate for
making decisions of this kind under Rule 403 [confusion of issues,
misleading the jury, undue delay, waste of time, and needless
presentation of cumulative evidence].
Within
this general guideline for the exercise of trial court discretion, we
think the evidence here challenged was properly admitted. The general
prohibition contained in the first sentence of Rule 404(b) is designed
to prevent prosecutorial overreaching by a means whose obvious
effectiveness has made it an inescapable temptation for advocates over
the years. The second sentence however reflects the perception that
evidence of "other . . . acts" may sometimes be critical to
proof on a dispositive issue related to a defendant's state of mind. The
ambivalence reflected in the Rule but serves to emphasize the particular
delicacy of the discretionary rulings its administration may require.
There is no gainsaying that the ruling here posed just such a problem
for the trial judge, but we think he properly resolved it.
Particularly
where, as here, a defendant in a criminal case by her own testimony and
that of others has deliberately sought as the primary means of defense
to depict herself as one whose essential philosophy and habitual conduct
in life is completely at odds with the possession of a state of mind
requisite to guilt of the offense charged, that defendant may be
considered in effect to have forfeited any protection that the first
sentence of the Rule might otherwise have provided against the type of
"other act" evidence here challenged. See Walder v.
United States
, 347
U. S.
62 (1954). In such circumstances, testimony such as that of Pemberton
may well be the only effective way to rebut evidence designed generally
to plant in the jury's mind a reasonable doubt that such a person could
have possessed the culpability of mind requisite to convict of the crime
charged. Balancing the probative value of the challenged evidence
against its potential for unfairly prejudicing the defendant, and on the
latter point taking into account that the defendant deliberately chose
to base her defense upon evidence not otherwise effectively rebuttable,
we conclude that the district judge's admission of Pemberton's evidence
lay well within the bounds of the discretion reposed in him.
III
We think that government counsel's unfortunate reference to
"fraudulent" medicaid forms was sufficiently corrected by the
trial judge's cautionary actions so that the risk of prejudice was
adequately removed.
Finding
no merit in the defendant's other contentions, we affirm.
AFFIRMED.
Dissenting Opinion
WIDENER,
Circuit Judge, dissenting:
I
respectfully dissent and would grant a new trial.
Assuming
that the evidence of other acts is admissible for one purpose or
another, and I think, after United States v. Woods, 484 F. 2d 127
(4th Cir. 1973), even taking into consideration the later advent of the
new rules, the admissibility of such evidence is pretty well entrusted
in this circuit to the almost uncontrolled discretion of the trial
judge, Pemberton's most damning testimony is not considered by the
majority in its opinion.
Pemberton
testified that Dr. Johnson had billed for specific services not
rendered, and he ascertained that fact by asking the patients involved.
Thus, the false billing he concluded Dr. Johnson had done was proved by
statements other than those made by the declarant while testifying at a
trial or hearing and offered in evidence to prove the truth of the
matter asserted. This is hearsay pure and simple under FRE 801(c) and
inadmissible under FRE 802, for it is not subject to any exception as to
which I am advised.
An
example follows:
"THE
COURT:
Q.
And then you checked with some of the patients?
A.
Yes, sir.
Q.
And found out that the services were not rendered?
A.
In talking with the recipients, they stated that they had not received
certain services which were billed by Dr. Johnson."
Specific
instances of conduct, whether offered to rebut a defense to the merits,
as the majority treats it, or whether offered to rebut a defense of good
character, I think may no more be proved by hearsay than by any other
essential fact in the case.
The
testimony I have quoted is only a part of that introduced; other
evidence is equally as inadmissible. It may only be considered highly
prejudicial, and its admission should warrant a new trial.
[80-2
USTC ¶9580]
United States of America
, Appellee v. Michael O. Farber, Appellant
(CA-8), U. S. Court of Appeals,
8th Circuit, No. 79-1815, 630 F2d 569,
7/10/80
[Code Sec. 7203]
Conviction for willful failure to file return: Defenses: Improper
jury instructions claimed: Reliance on counsel: Fifth amendment
privilege asserted: No abuse of district court discretion: No reversible
error.--The Court of Appeals upheld the taxpayer's conviction for
willful failure to file a return and held that the jury instructions
defining the elements of willfulness were proper and expressly
recognized the fifth amendment argument presented by the taxpayer in
defense. Additionally, the court held that the admission into evidence
of documents relating to the tax paying conduct (as a tax protestor) of
the taxpayer for subsequent years was relevant to the issue of intent or
willfulness in a prior year, and that the District Court's failure to
include an instruction relating to the reliance on counsel defense for
filing a tax protestor return was justified because the taxpayer did not
demonstrate that he sought competent legal advice.
Roxanne
Barton Conlin, United States Attorney, Amanda M. Dorr, Assistant United
States Attorney, Des Moines, Ia. 50309, for appellee. Mark W. Bennett,
Allen, Babich & Bennett,
5835 Grand Ave.
,
Des Moines
,
Ia.
50312
, Michael O. Farber,
1206 Fairview Ave.
,
Spencer
,
Ia.
51301
, pro se.
Before
HENLEY and MCMILLIAN, Circuit Judges, and ROY, District Judge. *
HENLEY,
Circuit Judge:
Michael
O. Farber appeals from the judgment and sentence of the district court 1 convicting
him of willful failure to file an income tax return for tax year 1974,
in violation of 26 U. S. C. §7203. Appellant was sentenced to one year
imprisonment with provision for release after service of one-third of
this term. We affirm.
During
1974 Farber was employed as a salesman for the IMC Mint Corporation
(IMC) of
Salt Lake City
,
Utah
. His employment with this corporation began in spring of 1973 and
terminated when the organization was placed in receivership on June 21,
1974. According to uncontested evidence at trial, Farber received a
total of $24,060.07 in commission paychecks from IMC in 1974. However,
due to the confused state of the corporation's records, he apparently
did not receive a Form 1099 from either IMC or the receiver indicating
his total commissions for 1974.
Appellant
submitted a Form 1040 return for 1974, but allegedly because he lacked a
Form 1099 from which to ascertain his income, he answered key entries
with assertion of the fifth amendment. 2
On
appeal, both appellant pro se and retained counsel have submitted
briefs. Our affirmance is based on careful review of each.
Farber
contends first that the district court abused its discretion in
admitting into evidence voluminous tax documents which could fairly be
characterized as tax protester materials for years subsequent to 1974.
It
is settled that evidence of other crimes or acts is admissible under
Fed. R. Evid. 404(b) to show intent, plan, or absence of mistake, so
lang as four additional prerequisites are met, i. e., (1) a
material issue has been raised; (