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7203: Willful Failure to File Return, Supply Information, or Pay Tax: Evidence: Attorney's Testimony

 

[95-2 USTC ¶50,540] United States of America , Plaintiff-Appellee v. William J. Benson, Defendant-Appellant

(CA-7), U.S. Court of Appeals, 7th Circuit, 94-2214, 10/6/95, 67 F3d 641, Affirming an unreported District Court decision

[Code Secs. 104 and 7203 ]

Tax-exempt income: Compensation for injuries or sickness: Crimes: Failure to file: Evasion of tax: Willfulness of action.--An individual who failed to report income that he believed was a tax-exempt settlement was properly convicted on charges of willful failure to file tax returns and tax evasion. The taxpayer claimed that he received the money in a settlement with an insurance company for its breach of duty to defend him in a series of cases revolving around his relationship with the state's ( Illinois ) department of revenue. However, the funds constituted payment for work he did as an investigator on his own case both before and after the insurance company's eventual decision to represent him. Since the taxpayer's only possible claim against the insurance company was based in contract and did not have tort or tort-like attributes, the funds were not excludable under Code Sec. 104 . Furthermore, the taxpayer never filed a claim against the insurance company, discussed a claim with insurance company representatives, or signed a release form upon receiving the funds from them. His actions were willful since it was clear that both he and the insurance company understood that their relationship was a fee-for-service arrangement and that he knew that some formal document would be necessary in order for the payments to be excludable under Code Sec. 104 . Even if an ambiguity had existed over the nature of the payments, the taxpayer could have requested documentation to eliminate that ambiguity. Finally, the taxpayer's complaints about the various jury instructions were without merit.

Lowell H. Becraft, Jr., 209 Lincoln St. , Huntsville , Ala. 35801 , for defendant. Barry R. Elden, 219 S. Dearborn St. , Chicago , Ill. 60604 , for plaintiff.

Before CUDAHY , RIPPLE and KANNE, Circuit Judges.

CUDAHY , Circuit Judge:

William J. Benson was charged with two counts of the willful failure to file tax returns for 1980 and 1981, and a third charge of tax evasion for 1981. We reversed his original conviction on these charges in United States v. Benson [91-2 USTC ¶50,437 ], 941 F.2d 598 (7th Cir. 1991). A jury again convicted Benson after a second trial on the same counts. Benson again appeals. He challenges both the sufficiency of the evidence supporting his conviction and a number of the jury instructions chosen by the district court. We believe that the evidence was sufficient to support the jury's determination and that the jury instructions were not problematic. We therefore affirm.

I.

The following chronology documents William Benson's work activities over the last twentysomething years--a history integral to understanding both Benson's alleged tax evasion and his defense to the charge. Additional facts are contained in our previous opinion in Benson's case, Benson [91-2 USTC ¶50,437 ], 941 F.2d 598 (7th Cir. 1991).

Originally employed by Bethlehem Steel Corporation, Benson developed a seizure disorder from a bout of encephalitis during the late 1960's. He soon began receiving disability benefits from the Social Security Administration. He continued to accept these benefits until March 1983.

Beginning in the early 1970's, however, Benson returned to work. He apparently first began working as a bartender at a bowling alley and cocktail lounge. Next, he started assisting the Illinois Department of Revenue (IDOR) with its investigative work. In 1971, he joined forces with IDOR as an informant. He then eventually began to perform most, or all, of the tasks that IDOR's regular investigators performed. In 1974, he entered into a formal employment contract with IDOR. The employment relationship lasted until 1976, when IDOR fired him.

A fair amount of litigation eventually arose out of Benson's employment relationship with IDOR. During 1975 and 1976, individuals filed a number of lawsuits against IDOR agents generally alleging false arrests arising from an IDOR investigation of violations of Illinois 's cigarette tax laws (the cigarette tax cases). Benson was among the IDOR defendants being sued. Benson himself soon began making allegations of corruption in a number of IDOR's affairs. Because his termination from IDOR occurred around the time he began making these allegations, Benson also filed suit against IDOR, claiming that the state agency violated his First Amendment rights in a retaliatory termination.

Representation of the state defendants (including Benson) in these cases was initially undertaken by the Illinois Attorney General. However, in June 1976, the Attorney General withdrew from representation because of Benson's allegations of corruption against his codefendants. The defense of IDOR employees was thereafter undertaken by an insurance company.

During this time period, IDOR was covered by a liability insurance policy issued by Continental Insurance Company. Continental's adjuster was Underwriters Adjusting Company. Underwriters assumed the defense of IDOR employees in the cigarette tax cases. It did not, however, immediately defend Benson, waiting instead approximately two years to begin accepting responsibility for his defense. Underwriters was apparently under the impression, created by IDOR, that Benson was not an "employee" covered by the policy, but was instead an independent contractor responsible for his own defense.

Benson thus undertook his own defense for approximately one year. Then, in September 1977, attorney Andrew Spiegel began to represent him in the cigarette tax cases. In September 1978, Benson and Spiegel contacted Underwriters with documentation of Benson's employment status, and Underwriters agreed to undertake his defense. At that point, Benson had not paid any money to Spiegel for the representation rendered. By mid-November, Underwriters had paid Spiegel for all work done beginning with his entry into the case in September 1977.

Benson and Spiegel soon contacted Underwriters about work Benson had done on his own defense. They apparently prepared two different bills reflecting Benson's work. The first covered work done from November 1976 to October 1977 (when Benson was unrepresented). The second covered work from October 1977 to January 1979. They also agreed that Benson would continue to do the investigative work on his own cases.

In late 1979 or early 1980, Benson met with Charles Rhodes, Underwriters' Chicago branch manager, and asked whether Underwriters would reimburse him for the investigative work he had done defending his own case. Rhodes agreed to the requested reimbursement and told Benson to have Spiegel verify that Benson's work was necessary to his own defense. Spiegel wrote Rhodes a letter suggesting that he had employed Benson as an investigator and that he was billing Benson's time at $15 per hour. Rhodes agreed to this fee, and Speigel's periodic bills to Underwriters began to include regular charges for Benson's investigative work.

In July 1980, Underwriters paid Spiegel the first bill, which included a fee for Benson's investigative work. Thereafter, Underwriters paid the periodic bills that Spiegel would submit, each including amounts for Benson's investigative work. In March 1981, Benson was dismissed as a defendant in the cigarette tax cases, no damages having been assessed against him. In June 1981, Spiegel submitted two statements to Underwriters. The first was the final bill for the last two months of litigation, including Benson's investigative services for that time period. The second was the set of previously prepared billings for attorney's fees and investigative work performed from November 1976 to September 1978. Underwriters paid both amounts.

Benson apparently hand-carried Spiegel's bills to Underwriters and returned a couple of days later to pick up the checks and take them to Spiegel. He would then accompany Spiegel to the bank, where Spiegel would deposit the checks in his law firm's regular business account. Spiegel then paid Benson his share in cash, issuing no receipt.

In all, Underwriters paid Speigel $264,856.82, including legal fees, investigative fees and other expenses. Of that amount, Benson received $9,984.80 in 1980 and $100,706.22 in 1981. Benson never filed tax returns for these years.

A jury found Benson guilty of tax evasion and of the willful failure to file income tax returns. The district court sentenced him to four years in prison followed by five years of probation. Benson presently appeals his conviction.

II.

Benson asserts a number of complaints on appeal. His first argument concerns the sufficiency of the evidence. He contends that the amounts that he received from Underwriters under the guise of "investigator's fees" actually constituted a settlement of his claim against Underwriters for its failure to immediately undertake his defense in the cigarette tax cases. He also complains that the district court failed to give the jury instructions outlining this defense to the nonpayment of income tax, and that the district court erred in issuing several other instructions. We believe that the evidence was sufficient to support Benson's conviction, and we otherwise agree with the manner in which the district court handled matters before the jury. We therefore affirm.

A. The Sufficiency of the Evidence

Benson claims that the amounts that he received from Underwriters, ostensibly as "investigator's fees," really amounted to payment for settlement of a claim he had against Underwriters for the insurance company's breach of its duty to defend him. Because damages on account of personal injuries are nontaxable, 26 U.S.C. sec. 104(a)(2) , Benson suggests that he never owed income tax on Underwriters' payments to him. The evidence, in his view, is therefore insufficient to support his conviction for tax evasion under 26 U.S.C. sec. 7201 .

In making a challenge to the sufficiency of the evidence, a defendant shoulders a major burden. "Only where the record contains no evidence, regardless of how it is weighed, from which the jury could find guilt beyond a reasonable doubt, may an appellate court overturn the verdict." United States v. Tipton, 964 F.2d 650, 657 (7th Cir. 1992) (citations omitted). We will therefore uphold the conviction unless, viewing the evidence and all inferences drawn from it in the light most favorable to the government, some required element of the crime is not reflected in the record.

In order to sustain a conviction under 26 U.S.C. sec. 7201 , the government must demonstrate: (1) willfulness; (2) the existence of a tax deficiency; and (3) an affirmative act constituting an attempt to evade or defeat the payment of tax. United States v. Tishberg [88-2 USTC ¶9492 ], 854 F.2d 1070, 1072 (7th Cir. 1988). Here, Benson apparently contends that his taxes were not deficient because the amounts that he received were really a nontaxable settlement for damages. He also appears to suggest that the element of willfulness was lacking because of his belief that he received a settlement. We do not accept either proposition. ¹

We disagree with Benson's claim that no tax deficiency existed. Even if we were to assume that Benson received payments in the settlement of a claim he may have had against Underwriters, that money would not have been exempt from income tax. "The definition of gross income under the Internal Revenue Code sweeps broadly." United States v. Burke [92-1 USTC ¶50,254 ], 504 U.S. 229, 233 (1992). 26 U.S.C. sec. 61(a) defines gross income as "all income from whatever source derived. ..." This section generally places a taxpayer wishing to avoid tax in the position of demonstrating that his gain falls within a recognized exception to the rule articulated in sec. 61(a) . Absent exclusion under a recognized rule, however, the sum is taxable. Comm'r of Internal Revenue v. Schleier [95-1 USTC ¶50,309 ], 115 S. Ct. 2159, 2163 (1995); Downey v. Comm'r of Internal Revenue [94-2 USTC ¶50,441 ], 33 F.3d 836, 837 (7th Cir. 1994), cert. denied, 115 S. Ct. 2576 (1995). It is thus clear that the sums Underwriters paid to Benson are generally taxable--even if characterized as the settlement of a claim--unless Benson can show that they fall within a recognized exception.

26 U.S.C. sec. 104 , upon which Benson attempts to rely, contains such an exception. Section 104 excludes from taxation compensation received for injuries or sickness, and it provides that:

(a) ... gross income does not include--

(2) the amount of any damages received (whether by suit or agreement and whether as lump sums or as periodic payments) on account of personal injuries or sickness;

26 U.S.C. sec. 104(a)(2) . Courts have interpreted Section 104 to give rise to a two prong test for excludability. First, based on the treasury regulations drafted to enforce the section, a litigant must show that damages received were received "through prosecution of a legal suit or action based upon tort or tort type rights, or through a settlement agreement entered into in lieu of such prosecution." 26 C.F.R. sec. 1.104-1(c) . The Supreme Court interpreted this section in Burke narrowly, disallowing the exclusion of back-pay awards under Title VII. [92-1 USTC ¶50,254 ], 504 U.S. at 241-42. Second, the damages received must have been received "on account of personal injuries." Schleier [95-1 USTC ¶50,309 ], 115 S. Ct. at 2164-66.

Following Burke, with reference to the first prong of the test, we have stated that the touchstone in determining whether a given action was "tort or tort type" is:

the availability of a broad range of damages to compensate the plaintiff for injuries caused by the violation of a legal right, and while such damages are often described in compensatory terms, tort damages usually "redress intangible elements of injury."

Downey [94-2 USTC ¶50,441 ], 33 F.3d at 839 (citations omitted). Guided by this principle, we held that an award for back-pay and liquidated damages could not be excluded from taxation under sec. 104(a)(2) . Id. at 840. See also Scheiler [95-1 USTC ¶50,309 ], 115 S. Ct. at 2167 (distinguishing factor of tort type right is the availability of compensatory remedies often redressing intangible, nonpecuniary elements of injury).

Here, the clear premium that Burke places upon the tort-like nature of the claim for damages undercuts Benson's attempt to demonstrate that his claimed settlement is not taxable. Even assuming that Benson's gain was a sum paid in settlement for the breach of a duty to defend, Benson's underlying claim would be neither tort nor tort-like. Instead, the breach of a duty to defend provides, in general, an action in contract. See, e.g., Reis v. Aetna Casualty & Surety Co., 387 N.E.2d 700, 709 (Ill. App. Ct. 1978) (a refusal to defend breaches contract and equitably estops insurer from later using contract provision to its benefit to claim that coverage does not exist); Playboy Enters. v. St. Paul Fire & Marine Ins., 769 F.2d 425, 427 (7th Cir. 1985). "When an insurer declines to provide a defense for the insured, the insured may subsequently sue the insurer. An incorrect decision by the insurer is, of course, a breach of the insurance agreement." Rob ert E. Keeton & Alan I. Widiss, Insurance Law sec. 9.1 (West 1988). In light of this, again as a general rule, "damages in this type of case are usually limited to the policy limits." Green v. J.C. Penney Auto Ins. Co., Inc., 806 F.2d 759, 762 (7th Cir. 1986). Because, as a first cut, Burke contemplates tax exclusions only for "civil wrong[s], other than breach[es] of contract," 504 U.S. at 234, Benson cannot avail himself of sec. 104 's exclusion here.

Our conclusion on this issue is not altered by the fact that sometimes, the breach of a duty to defend can have tort-like qualities. Some commentators have suggested that a court's use of the terms negligence or bad faith to describe an insurer's conduct in refusing to defend marks a departure from strict contract to tort. Failure to Defend Insured, 20 A.L.R.4th 23, 26. And Illinois apparently recognizes the addition of a negligent or bad faith element to a breach of a duty to defend claim. See J.C. Penney, 806 F.2d at 763; Conway v. Country Casualty Ins. Co., 442 N.E.2d 245, 247-48 ( Ill. 1982). But none of this means that an action for the breach of a duty to defend has lost its contractual character for the purposes of the tax laws. As we have mentioned, the touchstone of the inquiry is whether a cause of action provides compensation "for those intangible elements of injury essential to a personal injury tort action." Downey [94-2 USTC ¶50,441 ], 33 F.3d at 839. Benson has not directed our attention to any elements of damage that might render his claim tort-like, and we cannot locate any. ²

To the contrary, Benson only received sums related to the actual costs of his defense--namely, attorney's and investigator's fees. Spiegel's itemized bills, which included costs for investigator's fees, charted the amounts that Underwriters ultimately paid Spiegel and Benson. This was the case even with regard to the final, retroactive payment for the original periods that Benson defended himself. Benson's case (assuming, again, that he had one) thus presented only a question of reimbursement for the actual costs of his defense--attorney's fees, investigator's fees and related expenses.

In addition, these were apparently the only damages that Benson could have received for the settlement of any claim he may have had. Benson was ultimately dismissed as a defendant, and no judgment was ever rendered against him. No questions involving an insured's attempt to recover an adverse judgment from an insurer therefore arose. See, e.g., J.C. Penney, 806 F.2d at 762-64. Nor did Benson's case present a problem of an insurer's bad faith or negligence, with the insured's consequent demand that the insurer be liable for a judgment in excess of the policy limits. In short, because there was no underlying judgment against Benson in the cigarette tax cases, the only possible damages arising from the alleged breach (on the facts of which Benson has made us aware) were the costs of Benson's defense. See Reis, 387 N.E.2d at 711. These amounts may have been recoverable in a suit against Underwriters, but they would only have been damages flowing from a straightforward breach of contract--not excludable under sec. 104(a)(2) as damages for personal injuries.

Benson certainly has not come forward with any authority to the contrary. He points to a number of cases permitting an insured to recover beyond the policy limits because of the presence of bad faith. ³ See, e.g., Emerson v. American Bankers Ins. Co., 585 N.E.2d 1315, 1320-21 (Ill. App. Ct. 1992) (providing laundry list of bad faith actions). Yet none of these cases tell us why damages for the breach of a duty to defend ought to be exempt from taxation under sec. 104(a)(2) . And further, they fail to demonstrate the presence of bad faith in Benson's case, which, as we have stated, presented no question of the need to recover beyond the policy limits. The record otherwise appears to us to be devoid of bad faith or negligence on the part of Underwriters. This, in any event, was the finding of the district court, which noted that the insurance company had relied upon the State's assurance that Benson was not an employee. Although Benson makes a bare allegation of bad faith, he points to neither specific facts nor caselaw to support it. Instead, he appears to be relying simply upon the fact of Underwriters' failure to undertake his defense. Under these circumstances, we believe that any tort-like attributes that a claim for the breach of a duty to defend may sometimes possess were not present in this case. Because Benson's claim, assuming that he had one, would have been contractual in nature, any sums that he received in settlement of that claim were not exempt from tax pursuant to sec. 104(a)(2) . ⁴

Benson's case is, in any event, otherwise infirm. Benson never filed a claim against Underwriters complaining of the company's conduct. Nor, for that matter, did he sign a statement releasing the company from liability for the alleged breach (a matter which we assume an insurance company would have insisted upon in effecting a settlement). Underwriters' representatives in fact contend that a possible claim arising from the alleged breach of a duty to defend was never discussed. Nor, according to Underwriters, was a settlement ever agreed upon. For the purposes of tax liability at least this fact is dispositive; a taxpayer's after-the-fact characterization of a settlement will not be respected in light of a contrary intent on the part of the payor. Knuckles v. Comm'r of Internal Revenue [65-2 USTC ¶9629 ], 349 F.2d 610, 613 (10th Cir. 1965) ("The most important fact ... in the absence of an express personal injury settlement agreement, is the intent of the payor as to the purpose in making the payment."). In addition, in light of the standard that binds us when we assess a jury's verdict, see Tipton, 964 F.2d at 657, we may be faced with the jury's determination that Underwriters, and not Benson, advanced a more credible story concerning the presence or absence of a settlement.

These factors, without more, would ordinarily convince us that Benson's conviction should be affirmed. Underwriters apparently did not intend to admit any liability or settle any claim, much less one for personal injuries. See Knuckles [65-1 USTC ¶9629], 349 F.2d at 613. And the jury apparently rejected Benson's factual allegations that circumstances were something other than Underwriters claimed. Benson argues, however, that he believed that the sums that he received were in settlement of a claim, and that this fact, in light of the ambiguous nature of the payment, negates the willful nature of his violation. See, e.g., United States v. Harris [91-2 USTC ¶50,433 ], 942 F.2d 1125, 1131 (7th Cir. 1991) (discussing the statutory necessity of a willful violation). We have previously stated that, in the realm of criminal tax liability, prosecutions must rest on a "clear rule of law." Harris [91-2 USTC ¶50,433 ], 942 F.2d at 1131. So we believe that some further discussion about the clarity of the rules governing Benson's gain is necessary.

In Harris, we found that the tax treatment of payments to mistresses was so uncertain that it provided a questionable basis for criminal liability. Because whether gain was a gift or a payment for services rendered was determined by the donor's intent, the taxpayer had little control over or knowledge of the tax status of a particular payment. [91-2 USTC ¶50,433 ], 942 F.2d at 1134. Furthermore, courts had issued different rulings on the tax treatment of sums paid to mistresses. These factors combined to create a situation that failed to provide a diligent taxpayer a clear standard of conduct. Id.

The present case, of course, is different. Benson's relationship with Underwriters was in no sense ambiguous; as his counsel admitted at oral argument, both parties understood that Benson was working as an investigator on his own case. In addition, it is relatively clear that only settlements for damages arising from personal injuries are exempt from tax. If we assume, as we must, that Benson was aware of this rule, it is not difficult to place the burden of clarification on him. Benson might suggest that the status of the sum he received from Underwriters was unclear. But this is a matter over which he had a measure of control. He could have requested documentation from Underwriters demonstrating first that the sums he received were in settlement of a claim, and second, that the claim was for damages arising from personal injury. It was, in short, within Benson's power to remove all ambiguity from the situation. He thus could have avoided criminal liability altogether.

The lack of clarity in Benson's case is therefore quite different from the lack of clarity in Harris. There, payments to mistresses had been treated differently by different courts. [91-2 USTC ¶50,433 ], 942 F.2d at 1133; in some cases they had been held taxable, and in some cases they had not. Id. It was therefore possible that the taxpayer believed she might receive the sum of money in question without income tax concerns. This factor was complicated by the informal nature of an affectionate relationship, which created a difficulty in characterizing sums as gifts or payments for services. In short, these circumstances did not provide fair notice of a possible criminal liability with the consequent demand that the taxpayer protect herself.

Here, in contrast, the rules governing settlements were clear. Some sort of formal documentation was necessary to successfully benefit from sec. 104 's personal injury exclusion. Knuckles [65-2 USTC ¶9629 ], 349 F.2d at 613. Although the nature of the payments themselves may have been uncertain, Benson was aware of that uncertainty, and he could have sought clarification at an earlier date (instead of later attempting to create or benefit from ambiguity in court). Because it was within Benson's power, in the context of his business relationship with Underwriters, to eliminate the ambiguous nature of what he claims was a settlement, we do not believe that Harris stands in the way of upholding his conviction. He cannot escape the jury's finding of willfulness by pointing to the ambiguous nature of the payments from Underwriters. ⁵

We believe, in short, that the evidence was sufficient to support Benson's conviction. Even assuming that he had settled a claim with Underwriters, the sums that he received would have been damages flowing from the breach of a contract, not damages arising from personal injuries under sec. 104(a)(2) . In addition, we have strong reservations about allowing Benson to maintain that he believed that a settlement existed here. Such a claim is supported by neither the jury's verdict nor Underwriters' intent in paying the sums of money. Benson's conviction, as to the sufficiency of the evidence, is therefore affirmed.

B. The Jury Instructions

We also believe that Benson's complaints about various jury instructions lack merit. He essentially asserts three errors. He suggests first that the district court erred in refusing to tender several instructions outlining his theory of defense to the jury. He next suggests that the district court erred in defining willfulness to the jury. Finally, he claims that the district court erred in refusing a requested instruction concerning reliance on the advice of a government official. Benson apparently failed to preserve error on these objections, however. Although he submitted his requested instructions, this alone is not sufficient to preserve error for appeal. United States v. Mounts, 35 F.3d 1208, 1221 (7th Cir. 1994), cert. denied, 115 S. Ct. 1366 (1995). Instead, a defendant must object on the record to the district court's refusal to tender the requested instructions, clearly stating the reason for the objection. Id. Because Benson failed to object to the instructions that the court decided were appropriate, we must evaluate his claims under the "plain error" standard. See id. Plain error is an error so egregious that it results in a miscarriage of justice. Id.

The present record fails to reveal a miscarriage of justice. To the contrary, we believe that the district court properly refused to submit Benson's proffered instructions to the jury. A number of instructions related to Benson's theory of defense. These instructions would have generally informed the jury of various rules about the taxation of damages, suggesting in essence that the amounts that Benson received from Underwriters were not taxable because they constituted the settlement of a claim for the failure to defend. For reasons that we have stated above, this position is legally untenable. Under the plain error standard or otherwise, the district court therefore correctly refused to submit these instructions to the jury. To the extent that the proffered instructions implied that the sums Benson received may have been exempt from taxation, they misstated the law. It is well-established that a defendant is entitled to an instruction on a theory of defense only if, among other things, an instruction accurately states the law and is supported by the evidence. See United States v. Edwards, 36 F.3d 639, 645 (7th Cir. 1994) (listing four criteria for reversal on the grounds of erroneous jury instructions). Because neither condition was fulfilled here, the district court properly refused to submit Benson's theory of defense instructions.

The district court also properly rejected an instruction concerning reliance upon the statements of government officials. Benson requested that the court tender an instruction which read: "An American citizen such as Defendant has a right to rely upon representations and statements made to him by government officials." Benson apparently intended to use this instruction in order to escape liability for the illegal receipt of social security disability benefits. He claimed that someone--either a state official at the IDOR or one of two social security agents--had assured him that he might be employed for a two-year trial period and nevertheless receive social security benefits. At trial, however, Benson himself was unclear about precisely who had made this representation to him. In light of this uncertainty, it was not plain error for the district court to refuse the instruction. Some authority holds that the defense is only available if the official upon whom the defendant claims to have relied was authorized to give the advice. See United States v. Browning, 630 F.2d 694, 702 (10th Cir.) (agent must have authority to bind government in transaction), cert. denied, 451 U.S. 988 (1981). This principle justifies the district court's refusal to give the instruction.

Finally, the district court did not plainly err in its failure to advise the jury that a good faith belief concerning the requirements of the tax laws may be subjective and need not be objectively reasonable. Although this is generally a correct statement of the law, see Cheek v. United States [91-1 USTC ¶50,012 ], 498 U.S. 192 (1991), a precise definition of good faith highlighting subjectivity is not necessary to a willfulness instruction. United States v. Hauert [95-1 USTC ¶50,045 ], 40 F.3d 197 (7th Cir. 1994), cert. denied, 115 S. Ct. 1822 (1995). Further, the reasonableness of a belief is a factor which bears upon whether the belief was in fact held in good faith. United States v. Hilgeford, 7 F.3d 1340, 1343 (7th Cir. 1993). Under these circumstances, it was not plain error for the district court to refuse to further define a good faith belief.

III.

The evidence was sufficient to support Benson's conviction. He cannot escape criminal sanction simply by characterizing the sums he received from Underwriters as a settlement of a claim because any claim that he possessed would have been contractual in nature, and any damages that he might have recovered in the prosecution of this claim would have been related to the simple costs of his defense. Under these circumstances, Benson's gain would not be excludable as damages received on account of personal injuries. We question the existence of a settlement and Benson's claimed reasonable belief in the same in any event. In light of the conflicting evidence on the issue, the jury certainly was not under any obligation to accept Benson's version of the facts. Finally, we believe that the jury instructions sufficiently apprised the jury of its deliberative tasks.

For these reasons, the judgment of the district court is AFFIRMED.

¹ Benson makes a bald assertion that the evidence is generally insufficient to support a finding on any of the required elements of tax evasion. He does not, however, offer further support for this allegation, either factually or legally. We therefore consider further arguments beyond the scope of those discussed waived. See Holzman v. Jaymar-Ruby, Inc., 916 F.2d 1298, 1303 (7th Cir. 1990); Varhol v. National R.R. Passenger Corp., 909 F.2d 1557, 1566 (7th Cir. 1990).

² We note in this regard that, in his briefing, Benson does not allege that Underwriters played any part in the activities that formed the basis for his First Amendment claim against the State (he does not, for instance, claim that the failure to defend him was retaliatory). Instead, he relies on the simple fact that Underwriters did not undertake his defense at the point in time that the Attorney General abandoned it.

³ Benson also suggests that because he was not the insured, but was a beneficiary under the policy, the refusal to defend sounded in tort and not contract. Benson has provided absolutely no support for this proposition, which we find legally questionable in any event. Depending upon the language of the insurance contract, the duty to defend can extend to others in addition to the contracting party. See, e.g., Consolidated Rail Corp. v. Liberty Mutual Ins. Co., 416 N.E.2d 758, 760-61 (Ill. App. Ct. 1981) (holding that parent of subsidiary which had contracted with the insurer was also an insured to whom the duty to defend extended). In any event, Benson has not come forward with any authority for this proposition. We therefore consider the matter waived. Holzman, 916 F.2d at 1303; Varhol, 909 F.2d at 1566.

⁴ In engaging in this analysis concerning tort or tort-type rights, we do not intend to overlook the additional requirement that a taxpayer demonstrate that amounts were received "on account of personal injuries or sickness." See Schleier [95-1 USTC ¶50,309 ], 115 S. Ct. at 2167. We simply base our holding on the first prong of the inquiry--a necessary but not sufficient condition for excludability. See id.

⁵ In addition, at oral argument, members of the panel inquired of the government whether payments to Benson as an investigator might have been gratuitous since he may not have been entitled to payment for services rendered in his own defense. This argument, however, has not been advanced or adopted by Benson (he in fact insisted that he was entitled to payment for the services). The argument is therefore waived.

 

 

[91-2 USTC ¶50,437] United States of America , Plaintiff-Appellee v. William J. Benson, Defendant-Appellant

(CA-7), U.S. Court of Appeals, 7th Circuit, 90-1572, 8/27/91, Reversing an unreported District Court decision

[Code Secs. 7201 and 7203 , and Fed. R. Evid. 702 ]

Penalties, criminal: Failure to file: Tax evasion: Evidence.--Allowing the testimony of an IRS agent was an abuse of discretion at the jury trial of an investigator. The taxpayer was charged with willfully failing to file income tax returns and tax evasion for failing to report income from investigative services, and for fraudulently receiving social security disability benefits. The testimony should not have been admitted because the agent's analysis of the transaction included conclusory opinions that did not qualify as expert opinions.

[Code Sec. 7402 and Fed. R. Crim. P. 33 ]

Constitutional arguments: Sixteenth Amendment: Motion to dismiss.--An investigator's motion to dismiss his district court case because the Speedy Trial Act period had run before his trial, was denied since time set aside by the court for the filing of motions was excluded for purposes of the Act. In addition, his motion to dismiss because the IRS knowingly presented perjured testimony was properly denied because the motion was not filed within seven days after the verdict. His motion to dismiss for vindictive prosecution was also properly denied for failure to show that it was unusual for the IRS to prosecute people who avoid paying taxes on wages over $100,000. Further, the district court properly decided to refuse an evidentiary hearing on the taxpayer's constitutional argument that the Sixteenth Amendment was improperly ratified.

[Code Sec. 7203 and Fed R. Evid. 401, 403 and 404 ]

Penalties, criminal: Failure to file: Evidence: Jury instructions.--Evidence that an investigator fraudulently received social security disability benefits to prove he failed to file a return was not improper. Such evidence was intricately related to the failure to file charge and, thus, was not excludable as evidence of another wrongful act. The evidence was not prejudicial because it was direct proof of the charged offense. In addition, testimony regarding a public statement made by the taxpayer's attorney that jurors in criminal tax cases should always vote "not guilty" was admissible to impeach the attorney and was not prejudicial. Also, the jury instruction given prior to the attorney's testimony indicating that he received immunity and, therefore, that weight given the testimony must be considered with great caution was not reversible error because it was unlikely that it would affect the jury's decision. Finally, it was proper to allow jury instructions stating that reliance on counsel was a circumstance to consider in evaluating the taxpayer's willfulness in failing to file.

Ruben Castillo, Joel D. Bertocchi, Barry R. Elden, Assistant United States Attorneys, Chicago, Ill. 60604, for plaintiff-appellee. Jeffrey A. Dickstein, P.O. Box 7306 , Missoula , Mont. 59807 , for defendant-appellant.

Before MANION and KANNE, Circuit Judges, and FAIRCHILD, Senior Circuit Judge.

MANION, Circuit Judge.

In a second superseding indictment, a grand jury charged William Benson with willfully failing to file income tax returns for 1980 and 1981, 26 U.S.C. §7203 , tax evasion for 1981, 26 U.S.C. §7201 , and perjury. (The district court dismissed the perjury charge before trial.) In 1980 and 1981, a single taxpayer (as was Benson) was required to file an income tax return if he received gross income exceeding $3,300. The indictment alleged that in 1980 and 1981 Benson received unreported income exceeding $3,300 from three sources. First, the indictment alleged that in 1980 and 1981 Benson received compensation for investigative services performed for attorney Andrew Speigel. Second, the indictment alleged that in 1981 Benson fraudulently received Social Security disability benefits he was not entitled to by working while concealing the fact that he was able to work. Finally, the indictment alleged that in 1981, Benson received interest income. The interest income by itself was not sufficient to require a return; consequently, the government's case depended upon proving that either the investigative fees or the Social Security payments were gross income to Benson.

At trial, Benson contended that he was and still is completely disabled, that he never intended to mislead anybody about his employment status, and that he was entitled, or at least in good faith believed he was entitled, to the Social Security benefits. Since Social Security benefits were not gross income unless fraudulently received, Benson contended that the benefits to him were not gross income. As to the investigative fees, Benson contended they were really proceeds of a nontaxable personal injury settlement he made with an insurance adjuster. Benson also claimed that he relied on his attorney's advice that the investigative fees were not taxable (because they were really proceeds of a settlement), and therefore his failure to report them was not willful. The jury, however, convicted Benson on all counts.

On appeal, Benson raises a plethora of issues; one, however, is dispositive. Because we conclude the district court abused its discretion in admitting purported expert testimony from an IRS agent, we reverse Benson's conviction.

I. Factual Background

Taken in the light most favorable to the government, the evidence showed the following. In the late 1960's, Benson, while working for Bethlehem Steel Corporation, contracted encephalitis. The encephalitis caused Benson to develop a seizure disorder that rendered him unable to work. In 1968, Benson applied for and was granted Social Security disability benefits. Social Security regulations allow people to receive disability benefits only if they are physically unable to perform "substantial work" or "substantial gainful employment." A recipient is required to notify the Social Security Administration concerning any return to work or change in his physical condition that might enable him to work. Yet, despite the notification requirement, from the early 1970's through 1980 and 1981, Benson was employed in several jobs--including bartending at a bowling alley and cocktail lounge, work as a criminal investigator for the Illinois Department of Revenue (IDOR), and investigative work for Speigel--without telling the Social Security Administration.

Benson's work as an investigator for Speigel arose from Benson's employment with IDOR. In 1970, Benson began to work for IDOR as an informant. Eventually, Benson began to perform all (or at least most of) the tasks IDOR's regular investigators performed. In late 1974, Benson and IDOR entered into an employment contract. The original contract called for Benson to work between 120 and 300 hours per month (approximately 30 to 60 hours per week) and for IDOR to pay Benson $750 per month, a sum that included reimbursement for Benson's expenses. In November 1975, Benson and IDOR signed a new contract that increased Benson's salary to $840 per month for the same amount of work. IDOR fired Benson in June 1976.

In 1975 and 1976, a number of lawsuits were filed against IDOR agents, including Benson. Those suits alleged false arrests arising from an IDOR investigation of violations of Illinois' cigarette tax laws. At that time, IDOR was covered under a liability insurance policy issued by Continental Insurance Company. Continental's adjuster was Underwriters Adjusting Company (Underwriters). IDOR did not tell Underwriters that Benson was an employee, so Underwriters did not consider Benson to be covered under the Continental policy. Eventually, however, Benson persuaded Underwriters that he was an employee entitled to coverage.

In July 1980, Benson told Charles Rhodes, Underwriters' Chicago branch manager, that he had done substantial investigative work on his own cases, and that Underwriters should pay him for that work. Rhodes told Benson to have Speigel (who was representing Benson in the cigarette tax cases) verify that Benson's work was necessary to his defense. Speigel wrote Rhodes a letter telling Rhodes that Speigel had employed Benson as an investigator and that he was billing Benson's time at $15 per hour. Rhodes agreed to pay the investigative fees, and Speigel's periodic bills to Underwriters began to include regular charges for Benson's investigative work.

After being dismissed as a defendant in the cigarette tax cases in 1981, Benson told Rhodes that the insurance company should pay him for investigative work he had done on his cases in 1976, 1977, and 1978. Rhodes agreed, and Speigel soon began sending bills that included charges for Benson's investigative work during this time, which Underwriters paid. All told, Underwriters paid Benson approximately $10,000 in 1980 and $101,000 in 1981.

According to Benson, IDOR's failure to tell Underwriters that he was an employee, a failure that resulted in Continental's denial of insurance coverage, was part of a campaign to harass and punish him for exposing corruption at IDOR. Benson claimed that the payments from Underwriters were part of an agreement he reached with Rhodes to settle any potential First Amendment claims against Underwriters for its alleged participation in IDOR's harassment. According to Benson, the settlement payments were disguised as investigative fees at Rhodes' suggestion because he wanted to keep the settlement secret so he would not jeopardize Continental's insurance business with the state (business that brought Continental all of $1,741 in 1979 and nothing in 1980, 1981, 1982, and 1983). Benson and Speigel testified that Benson told Speigel about the settlement, and the proposed method of payment, and that Speigel went along. Benson and Speigel also testified that Speigel told Benson that the payments were not gross income for tax purposes, since they were settlement proceeds. Rhodes, however, testified that no secret settlement ever existed, and that the payments were compensation for investigative services. Furthermore, Speigel's letter to Rhodes stated that Benson had performed investigative services; Speigel's bills contained charges for investigative fees; no written settlement agreement existed; and Benson never executed a release of claims against Continental or Underwriters.

II. Testimony of IRS Agent Cantzler

As its final witness, the government presented Internal Revenue Agent Gary Cantzler. Cantzler's purpose was to summarize the government's trial evidence and give his expert opinion as to why that evidence showed that Benson was required to file income tax returns in 1980 and 1981. Cantzler explained to the jury the filing requirements for 1980 and 1981. He also explained certain tax law concepts, such as gross income and taxable income. Cantzler calculated, based on the trial testimony, Benson's income for 1980 and 1981, and his income taxes due for 1980 and 1981.

During his testimony, Cantzler specifically opined that the payments from Underwriters and the Social Security Administration in 1980 and 1981 were gross income to Benson. To conclude that those payments constituted gross income, Cantzler first had to conclude that Benson received payments from Underwriters as fees for investigative services rather than as the result of a settlement, and that Benson was not entitled to the Social Security benefits he received. Based on the testimony and exhibits presented in the government's case, Cantzler identified specific factors supporting his conclusions that the payments from Underwriters were fees for investigative services, that the payments from Underwriters were not on account of a settlement, and that Benson was not entitled to receive Social Security disability benefits.

To fully understand any possible problem with Cantzler's testimony, it is necessary to set out some (though not all) of the factors Cantzler cited to support his conclusions. Among the factors Cantzler cited to support his conclusion that the payments from Underwriters were payments for investigative fees and not on account of a settlement were: invoices from Speigel to Underwriters for "Investigative fees"; Speigel's letter to Underwriters stating that he was employing Benson as an investigator; Speigel's 1980 tax return, which listed the money Speigel paid to Benson as a business expense for "investigator fees"; bills prepared by Benson for investigative fees; an affidavit Speigel executed in April 1981 stating that he had paid Benson as an investigator; the fact that Benson had never sued Underwriters, and had no claim against it; Rhodes' denial that any settlement existed; an analysis of two depositions Benson gave in which he gave contradictory accounts of how he arrived at the per hour charge and number of hours charged on his bills for investigative fees, and about whose idea (Benson's or Rhodes') it was to prepare the bills; and Rhodes' denial that he told Benson to prepare the bills. Among the factors Cantzler cited to support his conclusion that Benson was not entitled to Social Security benefits were: testimony by Marie Meinardi that Benson had worked for her as a bartender, and had worked as a bartender at a bowling alley; Benson's work for IDOR; testimony by Richard Dunn, an ex-IDOR employee, that Benson's employment contract with IDOR was a fraud on the Social Security Administration and that Benson had discussed his situation anonymously with the Social Security Administration and was told he would owe $20,000 back to the Social Security Administration; Benson's failure to tell Social Security employee DeVries that he worked for Meinardi; Benson's telling Social Security investigator Klaprat that his work for IDOR was part of a rehabilitation program when he knew it was not; Benson's failure to inform Bethlehem Steel (his former employer from which he was receiving disability payments), Metropolitan Life Insurance Company (from which he received a waiver of life insurance premiums because of his disability), or his treating physician that he was working full-time; and Benson's deposition testimony stating that he did not know why he had not reported his jobs to the Social Security Administration and that if he was guilty of fraud, so were others.

Benson objected to much of Cantzler's testimony early and often during trial, on a number of different grounds. Benson now argues on appeal that the district court abused its discretion in allowing Cantzler to recapitulate the government's evidence (much of which was disputed) and opine as to whether the money Benson received from Underwriters was for investigative services rather than payment of a settlement and that Benson was not entitled to receive Social Security disability benefits. We agree that much of Cantzler's testimony was not properly admissible as expert testimony.

Federal Rule of Evidence 702 states that "If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise." The touchstone of admissibility under Rule 702 is helpfulness to the jury. The crucial question is, " 'On this subject can a jury from this person receive appreciable help.' " 3 Jack B. Weinstein & Margaret A. Berger, Weinstein's Evidence ¶702[1], at 702-7 to 702-8 (1990) (quoting Wigmore, Evidence §1923, at 21 (3d ed. 1940)) (emphasis supplied by Wigmore). An expert's opinion is helpful only to the extent the expert draws on some special skill, knowledge, or experience to formulate that opinion; the opinion must be an expert opinion (that is, an opinion informed by the witness' expertise) rather than simply an opinion broached by a purported expert. See United States v. Lundy, 809 F.2d 392, 395-96 (7th Cir. 1987); cf. Mid-State Fertilizer v. Exchange Nat'l Bank, 877 F.2d 1333, 1340 (7th Cir. 1989) (rejecting an economist's "expert" opinion that drew on inferences from the record rather than any economic expertise).

Much of Cantzler's testimony consists of nothing more than drawing inferences from the evidence that he was no more qualified than the jury to draw. This problem is most apparent in Cantzler's testimony about why Benson was not entitled to Social Security disability benefits. The ultimate question concerning the Social Security benefits was whether Benson received those benefits knowing he was not entitled to them. Cantzler was no more qualified than the jury was to answer this question, and offered no special knowledge or skill that would be particularly helpful in arriving at an answer. Nothing in the record indicates Cantzler had any particular knowledge of Social Security law, or any other expertise that would give him any special insight into the mind of a person trying to cheat the Social Security Administration.

Moreover, as the government itself notes, Cantzler was required to rely in large part "on the testimony of certain witnesses whose credibility was vigorously attacked by Benson" and open to serious question. In other words, Cantzler had to make credibility determinations. Credibility is not a proper subject for expert testimony; the jury does not need an expert to tell it whom to believe, and the expert's "stamp of approval" on a particular witness' testimony may unduly influence the jury. See United States v. Azure, 801 F.2d 336, 339-41 (8th Cir. 1986); United States v. Samara [81-1 USTC ¶9220 ], 643 F.2d 701, 705 (10th Cir. 1981). This is not to say that an expert witness may not give testimony that, if accepted, will lead the jury to disbelieve a witness. Suppose, for example, that a defendant in a suit involving an automobile accident testifies that he was travelling 15-20 miles per hour when he entered an intersection and hit plaintiff's car. An accident reconstruction expert testifies, however, that based on his analysis of the angle of deflection, damage to the two cars, his estimate of the point of impact, the two cars' final resting positions, and other factors, that the defendant had to be travelling at least 40 miles per hour when he entered the intersection. That is useful expert testimony because it is based on specialized knowledge that is not within the average layman's ken. If the jury accepted that testimony, it would necessarily disbelieve the defendant but that is no reason for refusing to admit the testimony. Cantzler's testimony was different, though. He had no reason based on any special skill or knowledge he possessed for believing, for example, that Meinardi was telling the truth when she testified that Benson worked for her, or that Rhodes was telling the truth when he denied any secret settlement existed between Benson and Underwriters. Cantzler did not give helpful expert testimony that cast another witness' testimony in a good or bad light; instead, he simply told the jury whom to believe.

The government relies on our decision in United States v. Windfelder [86-1 USTC ¶13,668 ], 790 F.2d 576 (7th Cir. 1986), to support the admission of Cantzler's testimony. In Windfelder we held as a general matter that "[e]xpert testimony by an IRS agent which expresses an opinion as to the proper tax consequences of a transaction is admissible evidence. Similarly . . . an IRS expert's analysis of the transaction itself, which necessarily precedes his or her evaluation of the tax consequences, is also admissible." Id. at 581. The government contends that Cantzler's testimony was admissible because it was simply his analysis of the transactions that produced taxable income to Benson.

The government reads too much into Windfelder. An IRS agent may be allowed to testify as an expert about his analysis of a transaction, but only if his testimony qualifies as expert testimony. That testimony must still involve the application of some special skill or knowledge that will help the jury understand the case. In Windfelder, the IRS experts' opinions "were based on their evaluation of evidence (the tax returns and related financial documents) that was within the area of their special expertise." Id. at 581-82. The experts in Windfelder used their "expertise in accounting and tax matters" in reaching their conclusions. Id. at 581. That is not the case with much of Cantzler's testimony. For example, it takes no particular expertise in tax or accounting matters to conclude from invoices and bills that on their face say "Investigator fees" that they probably are for investigator fees. And Cantzler's opinion that Benson was not entitled to Social Security benefits required no application of any tax or accounting expertise. There was no complex transaction that had to be broken down so the jury could understand it, no tax law concept or accounting principle to explain. The jury was every bit as qualified to analyze the evidence concerning Benson's receipt of Social Security benefits as was Cantzler, and Cantzler had nothing to offer on this question that would assist the jury's understanding of the issue.

We conclude that it was an abuse of discretion to admit much of Cantzler's testimony. But, does that error require reversal? The trial judge concluded after hearing all of Cantzler's testimony and reflecting on it that he had made a mistake by admitting it. But the judge characterized that mistake as "probably a harmless mistake." Benson's attorney conducted a thorough cross-examination of Cantzler, exposing his lack of qualification to opine on many of the matters he did. The judge instructed the jury that it was free to accept or reject Cantzler's testimony. As one commentator has noted in discussing the issue of whether to admit expert testimony, generally "[t]he jury is intelligent enough, aided by counsel, to ignore what is unhelpful in deliberations." 3 Weinstein's Evidence ¶702[02], at 702-30.

The government, however, has placed all its bets on the argument that Cantzler's testimony was proper; it has not argued that even if it was error to admit that testimony, the error was harmless. Harmless error, like any other argument, may be waived by failing to argue it. United States v. Giovannetti, 928 F.2d 225 (7th Cir. 1991). We may overlook a failure to argue harmless error, id. at 226-27, but in this case we will not. Despite the district court's opinion that the error was harmless, and the other factors we have discussed weighing in favor of finding harmless error, we are not prepared to say from an unguided search of the lengthy trial record that admitting Cantzler's testimony was harmless. The government's case was not overwhelming; indeed, the credibility of several of its most important witnesses was open to serious question. It may be that Cantzler's status as an "expert" bolstered the credibility of those witnesses enough to make a difference to the trial's outcome. Since the government has waived the contention that admitting Cantzler's testimony was harmless error, and since we are not convinced we should disregard that waiver in this case, we must reverse Benson's conviction.

This does not mean that in any retrial the government may not present relevant expert testimony from an IRS agent. But that testimony must actually be expert testimony; the agent must apply his expertise in a way that is helpful to the jury. For example, assuming the agent has sufficient experience in analyzing settlements, it would be perfectly appropriate for the agent to discuss what business practices and documents he would expect to see if a settlement really existed, compare that to the documents and practices in this case, and express an opinion as to whether a settlement really did exist. The district court must assure, however, that the expert's opinion is based on analysis that is within his area of expertise; the expert may not simply recapitulate the trial evidence and express an opinion based on that evidence and on his judgment of witness credibility.

III. Other Issues

Even though we are reversing this case, we must decide several other arguments Benson raises that if accepted, would require dismissing charges against him. In the interest of judicial economy, we will also discuss several issues Benson raises that are likely to recur on retrial.

A. Speedy Trial Act violation

Benson contends that the district court should have dismissed, with prejudice, the failure to file counts, which were charged in the original indictment, and the tax evasion count, which was added in the first superseding indictment, because the Speedy Trial Act period had run out before trial. The Speedy Trial Act provides that the government must bring a criminal defendant to trial no more than 70 days after the later of the indictment date or the date of the defendant's initial appearance before a judicial officer of the court in which the charge was pending. 18 U.S.C. §3161(c)(1). In this case, two and one-half years passed between Benson's initial appearance and trial. The Speedy Trial Act, however, excludes certain time periods in calculating the number of allowable days between initial appearance and trial. See 18 U.S.C. §3161(h). Benson does not challenge the excludability of most of the time that passed between his initial appearance and trial. Instead, his Speedy Trial Act challenge is confined to challenging the excludability of the period between September 22, 1988, and October 31, 1988, the date the government filed its first superseding indictment against him.

The dispute arises from the following facts. On August 22, the district court granted the government's motion to disqualify Speigel as Benson's trial counsel (on the ground that Speigel was to be a trial witness) and ordered Benson to find a new trial attorney. On September 22, Benson's new attorney entered his appearance. At that time, the court was ready to rule on pretrial motions Speigel and Benson had already filed. But Benson's new attorney requested an opportunity to review the motions already filed and to file new motions if necessary. The court initially granted 10 days to file new motions and to challenge the court's rulings on the already-filed motions. Benson's attorney did not think 10 days was sufficient and asked for a month, noting that in any event he could not "see trying this case much before January." After some more discussion, the court finally granted Benson's attorney 20 days to file his pretrial motions.

After this discussion, the topic of a superseding indictment arose. The government had previously discussed filing a superseding indictment to add a tax evasion count to the original two failure to file counts. The prosecutor told the court she could present the superseding indictment to the grand jury and file it with the court in two weeks. The judge then reset the due date for filing motions to "20 days after the superseding indictment is returned," which the court assumed would be two weeks from September 22. The court subsequently issued a written order giving Benson's attorney until October 26 to file pretrial motions, and another order ruling on the already-pending pretrial motions.

The problem arises in this case because the government did not file the superseding indictment until October 31. Benson's attorney did not file any pretrial motions before then, based on the logical conclusion that there was no point in filing motions until he knew what was in the superseding indictment. On November 3, the court extended the deadline for filing motions. Benson ultimately filed several motions, one of which was a motion to dismiss for violating the Speedy Trial Act.

The district court denied Benson's motion to dismiss. We agree with that decision. The district court's written order specifically set aside the period from September 22 until October 26 to file pretrial motions. This court has held several times that any time the district court expressly allows for filing motions is excludable under the Speedy Trial Act. See, e.g., United States v. Barnes, 909 F.2d 1059, 1065 (7th Cir. 1990); United States v. Piontek, 861 F.2d 152, 154 (7th Cir. 1988); United States v. Montoya, 827 F.2d 143, 153 (7th Cir. 1987); United States v. Tibboel, 753 F.2d 608, 610 (7th Cir. 1985). Therefore, the 34-day period between September 22 and October 26 was excludable. Even if the period from October 26 until November 3 (the date the district court extended the motions filing period) is counted as time running on the Speedy Trial Act clock, only eight of the 35 days left on the clock on September 22 expired. Since Benson does not challenge the excludability of any other time periods, there was no Speedy Trial Act violation.

B. Validity of the Sixteenth Amendment

Benson argues that he did not need to file tax returns or pay income taxes because the Sixteenth Amendment was not properly ratified. (Although this is a typical "tax protester" argument, see, e.g., United States v. Thomas [86-1 USTC ¶9354 ], 788 F.2d 1250, 1253 (7th Cir. 1986), Benson's failure to file returns had nothing to do with any general tax protest, and this case is not a tax protester case.) The district court denied Benson's request for an evidentiary hearing on this issue and refused to hear any Sixteenth Amendment argument.

As the district court noted, we have repeatedly rejected the claim that the Sixteenth Amendment was improperly ratified. See, e.g., United States v. Foster [86-1 USTC ¶9327 ], 789 F.2d 457, 461-63 (7th Cir. 1986); Thomas [86-1 USTC ¶9354 ], 788 F.2d at 1253; United States v. Ferguson [86-1 USTC ¶9475 ], 793 F.2d 828, 831 (7th Cir. 1986); Lysiak v. C. I. R. [87-1 USTC ¶9296 ], 816 F.2d 311, 312 (7th Cir. 1987) (per curiam). Accord United States v. Sitka [88-1 USTC ¶9308 ], 845 F.2d 43 (2d Cir. 1988); United States v. Stahl [86-2 USTC ¶9518 ], 792 F.2d 1438 (9th Cir. 1986). One would think this repeated rejection of Benson's Sixteenth Amendment argument would put the matter to rest. But Benson seizes on language in Foster in which, after rejecting the Sixteenth Amendment argument, we stated that "an exceptionally strong showing of unconstitutional ratification" would be necessary to show that the Sixteenth Amendment was not properly ratified. [86-1 USTC ¶9327 ], 789 F.2d at 463. Benson is the co-author of The Law That Never Was, a book that purports to "review the documents concerning the states' ratification of the Sixteenth Amendment" and to show "that only four states ratified the Sixteenth Amendment [and that] the official promulgation of the amendment by Secretary of State Knox in 1913 is therefore void." Thomas [86-1 USTC ¶9354 ], 788 F.2d at 1253. Benson insists that as the co-author of The Law That Never Was, and the man who actually reviewed the state documents "proving" improper ratification, he is uniquely qualified to make the "exceptionally strong showing" we spoke of in Foster. Because of this, Benson insists, the district court should have at least granted him an evidentiary hearing on the Sixteenth Amendment issue.

Benson is wrong. In Thomas, we specifically examined the arguments made in The Law That Never Was, and concluded that "Benson . . . did not discover anything." We concluded that Secretary Knox's declaration that sufficient states had ratified the Sixteenth Amendment was conclusive, and that "Secretary Knox's decision is now beyond review." See [86-1 USTC ¶9354 ], 788 F.2d at 1254. It necessarily follows that the district court correctly refused to hold an evidentiary hearing; no hearing is necessary to consider an issue that is "beyond review."

C. Denial of Benson's post-trial motions

After the court entered the jury's verdict, Benson filed a "Motion to Dismiss or, in the Alternative, for a New Trial," pursuant to Fed. R. Civ. P. 33. In that motion, Benson argued that the court was required to set aside the verdict because the government knowingly presented perjured testimony from several witnesses, including Marie Meinardi, who testified that she had employed Benson as a bartender in 1971 and 1972. Benson also argued alternatively that the court was required to hold a new trial because the verdict was against the weight of the evidence. In particular, Benson attacked the credibility of government witnesses Rhodes, who testified about Benson's dealings with Underwriters, and Dunn, who testified among other things that Benson had admitted defrauding the Social Security Agency. Benson argues that the district court erred in denying his motion. The government responds that the court correctly denied the motion because it had no authority to grant it in the first place. We agree with the government.

Federal Rule of Criminal Procedure 33 provides that new trial motions must be filed within seven days after the verdict "or within such further time as the court may fix within the 7-day period." Federal Rule of Criminal Procedure 45(b) provides that the court may not extend Rule 33's time limit except as provided in Rule 33. The jury delivered its verdict on December 7, 1989. After discharging the jury, the court gave Benson ten days to file post-trial motions. Benson's attorney then requested sixty days, but the court refused that request. Instead, the court granted Benson ten days to file his motions and an additional 30 days to file supporting memoranda. The court specifically told Benson that the 10-day deadline was "jurisdictional." Despite that, Benson filed no post-trial motions within the 10-day period. Instead, on December 15, Benson filed a motion to extend the deadline until January 3, 1990. The district court granted this motion on December 20, two days after the 7-day period in Rule 33 for granting extensions ended. (The period ended December 18, not December 14, because Fed. R. Crim. P. 45(a) excludes weekends in computing time periods of eleven or fewer days.)

Under Rules 33 and 45(b), the district court's original order giving Benson 10 days to file his motions was proper, since the court entered that order within the original 7-day filing period. However, the extension granted on December 20 was ineffective because the court granted that extension outside Rule 33's 7-day limit. Since Benson did not file his new trial motion within the 10-day period the district court originally set, the motion was untimely. Since the motion was untimely, the district court had no authority to decide the motion. United States v. Hocking, 841 F.2d 735, 736 (7th Cir. 1988). It follows that we must affirm the district court's decision to deny Benson's motion, because it could not be error for the court to deny a motion it had no authority to grant.

The district court attempted to save Benson's untimely motion by entering an order nunc pro tunc on January 4, 1990, granting Benson 40 days to file his new trial motion as of December 7, 1989. The court reasoned that on December 7 it had "intended" to give Benson 40 days to file his motions but that it had "effected [its] intentions poorly" by mistakenly granting ten days to file motions and an additional 30 days to file supporting memoranda. The fact remains, however, that the court did not originally grant Benson 40 days to file motions; it granted him ten days. An express grant of ten days (whether mistakenly made or not) is difficult to reconcile with an "intent" to grant 40 days. More importantly, to allow the district court to retroactively extend the time to file motions would subvert our holding in Hocking that the time limits in Rules 33 and 45(b) "define judicial power to act." 841 F.2d at 737.

As we noted in Hocking, courts occasionally allow trial judges to rule on untimely post-trial motions, despite provisions forbidding the extension of time to file, in certain "unique circumstances" in which the judge induces a party to rely to his detriment on an erroneous extension of time. See id. at 737; cf. Varhol v. National R.R. Passenger Corp., 909 F.2d 1557, 1568-72 (Flaum, J., concurring) (in some unique circumstances district court may rule on untimely new trial motion despite Fed. R. Civ. P. 59's 10-day limit and Fed. R. Civ. P. 6(b)'s prohibition of extension); Government of the Virgin Islands v. Gereau, 603 F.2d 438, 442 (3d Cir. 1979) (per curiam) (untimely motion for reduction of sentence). Benson does not make any "unique circumstances" argument, however. Even if he did, it would fail because he cannot show detrimental reliance on the district court's mistaken statement that the rules set a 10-day rather than a 7-day limit. As we have seen, the court had the authority to extend the time limit to ten days. And, the court specifically told Benson that the 10-day deadline was jurisdictional, a statement that should have put Benson on notice that an irrevocable deadline approached. If Benson had indeed relied on the district court's misstatement, he would have filed his motions within ten days, and the court could have properly considered them. As it is, Benson's motion was late, his tardiness does not fall into any exception to the rules' deadlines, and the district court could not have properly granted the motion.

D. Evidence of Social Security fraud

The government alleged that in 1981, Benson was required to report Social Security disability payments he fraudulently received by concealing his employment from the Social Security Administration. Benson argues that the district court should have excluded evidence of his scheme to fraudulently obtain Social Security payments because that evidence was evidence of another wrong act prohibited by Fed.R.Evid. 404(b). Rule 404(b) does not apply to the Social Security fraud evidence, though, because evidence of the Social Security fraud was "intricately related" to the failure to file charges. See United States v. Sophie, 900 F.2d 1064, 1074, 1076 (7th Cir. 1990); United States v. D'Antoni, 874 F.2d 1214, 1216-17 (7th Cir. 1989). Social Security payments are not gross income unless fraudulently obtained. To prove that the Social Security payments were gross income to Benson, the government had to prove he obtained them by fraud. Evidence of Social Security fraud was not evidence of another act covered by Rule 404(b); it was direct evidence of an essential part of the crime charged.

Benson complains that the Social Security fraud evidence was more prejudicial than probative. See Fed.R.Evid. 403. But all evidence of the crime charged against a defendant is (or at least is supposed to be) prejudicial. Direct proof of the charged offense does not create the unfair prejudice Rule 403 is meant to prevent. Benson argues that in this case, however, the government had charged other sources of income that were more than sufficient to trigger the filing requirement. But the government is entitled to try to prove all of the sources of Benson's income, so that it might obtain a conviction even if the jury rejects one of its theories. The government is not required to try Benson with less than all of its evidence.

E. Impeachment of Speigel

When cross-examining Speigel, the government attempted to elicit testimony that Speigel had once publicly stated that people chosen for jury duty in criminal tax cases should vote "Not guilty" to cure the "problem" of criminal tax prosecutions. The government offered this testimony to impeach Speigel's fidelity to the oath he took before testifying. Benson objected to the government's questioning but after considerable discussion the district court allowed the government's questioning to proceed.

It is difficult to determine from Benson's brief the exact basis for his objection to this questioning. Benson seems to argue that evidence of the statement was not relevant. But jurors take an oath to follow the law as the judge instructs. Speigel's statement advised jurors in criminal tax cases to vote not guilty, regardless of the law. Though he did not say it in so many words, one could interpret Speigel's statement as advocating to potential jurors that they should disregard their oaths in criminal tax cases. Logically, this evidence tended to show that Speigel might not regard an oath as binding. Evidence is relevant if it has "any tendency to make the existence of any fact that is of consequence to the determination of the action more or less probable than it would be without the evidence." Fed.R.Evid. 401. Since Speigel's credibility was a "fact . . . of consequence to the determination of the action," and his statements logically bore upon his credibility, evidence of the statements is relevant under Rule 401.

Benson also mentions that the questioning created prejudice, apparently because it would tend to make the jury less inclined to believe Speigel's testimony and thus less inclined to accept Benson's defense that he relied in good faith on Speigel's advice in not filing income tax returns. Benson is apparently raising an argument based on Fed. R. Evid. 403. However, the jury was entitled to hear evidence that would help it determine whether Speigel was telling the truth when he testified. The district court moved to cure any unfair prejudice by instructing the jury to use Speigel's statements only to judge Speigel's credibility and not to hold Speigel's statements against Benson. Moreover, Benson had ample opportunity to rehabilitate Speigel on cross-examination. The district court carefully considered whether or not to allow the government's questions concerning Speigel's statements, and did not abuse its discretion in deciding that the statements' probative value was not substantially outweighed by their potential for unfair prejudice.

F. Immunity instruction concerning Speigel

Speigel was called to testify before the grand jury but invoked his Fifth Amendment right not to incriminate himself. Speigel testified before the grand jury and at Benson's trial only after being granted immunity under 18 U.S.C. §6002. At the government's urging, and over Benson's objection, the district court gave an instruction explaining to the jury that Speigel

received immunity, that is, a promise from the government that any testimony or other information he provided would not be used against him in a criminal case, except in a prosecution for perjury. You may give [Speigel's] testimony such weight as you feel it deserves, keeping in mind that it must be considered with great caution and great care.

Benson contends that the district court erred by giving the immunized testimony instruction because the instruction is meant to protect the defendant from the sometimes unreliable testimony of a witness to whom the government grants immunity to testify against the defendant. Benson cites no authority for this proposition, but it seems to make sense. If somebody receives a favor from the government to testify (such as immunity) one could logically conclude that the witness might shade his testimony in his benefactor's favor. As such, the instruction can be translated to say, "Be careful that the witness isn't shading his testimony for the government in exchange for immunity." Following this reasoning, it seems to make little sense to give the immunized testimony instruction at the government's request: it is unlikely that a witness would shade his testimony (or, in other words, lie) in the defendant's favor in return for a benefit received from the government.

However, this circuit has recently upheld a district court's decision to give the immunized witness instruction at the government's request, explaining that such an instruction aids the jury in assessing the witness's credibility. United States v. Lawrence, 934 F.2d 868, 872-73 (7th Cir. 1990). And in any event, we think it unlikely that the instruction would have had much, if any, effect on the jury's decision in this case. First, the instruction ultimately left the decision to the jury to give Speigel's testimony "such weight as you feel it deserves." Second, the instruction told the jury that Speigel's testimony could be used against him in a perjury prosecution if he lied; in other words, immunity does not excuse lying. Third, the logic of Benson's own argument suggests that if the instruction would cause the jury to look askance at any of Speigel's testimony, it would be the testimony he gave favoring the government. Why tell lies that hurt your benefactor (that is, false testimony that favors Benson), especially when your benefactor has the power to prosecute you for perjury for those lies? It was not reversible error to give the immunity instruction.

G. Vindictive prosecution

Benson moved in the district court to dismiss the charges against him because the decision to prosecute him was based on an improper vindictive motivation. The district court denied Benson's motion without allowing discovery or holding an evidentiary hearing. On appeal, Benson contends he made a sufficient showing of vindictive prosecution to at least require discovery and an evidentiary hearing.

The Fifth Amendment has been interpreted to prohibit the government from prosecuting a defendant because of some specific animus or ill will on the prosecutor's part, or to punish the defendant for exercising a legally protected statutory or constitutional right. See United States v. Goodwin, 457 U.S. 368, 372 (1982); United States v. DeMichael, 692 F.2d 1059, 1061-62 (7th Cir. 1982); United States v. Adams, 870 F.2d 1140, 1145 (6th Cir. 1989). To compel discovery on a vindictive prosecution claim, a defendant "must show a colorable basis for the claim. A colorable basis is some evidence tending to show the essential elements of the claim." United States v. Heidecke, 900 F.2d 1155, 1159 (7th Cir. 1990). To obtain a hearing, the defendant must meet a somewhat higher burden; he must "offer sufficient evidence to raise a reasonable doubt that the government acted properly in seeking the indictment." Id. at 1160.

Benson points to three circumstances that he contends raise a colorable claim of vindictive prosecution. First, Benson claims that while an IDOR employee, he exposed considerable corruption within that department, for which he has been paying ever since by having to endure a "campaign of harassment" by Illinois officials. As part of that campaign, he contends, the attorney who opposed him in litigation he brought against IDOR (see Benson v. Allphin, 786 F.2d 268 (7th Cir. 1986)) referred the original fraud case against him to the United States Attorney's office. Benson, however, does not explain how the state's attorney's vindictiveness demonstrates any vindictiveness on the federal prosecutor's part. Cf. United States v. Schoolcraft, 879 F.2d 64, 67 (3d Cir. 1989). The unsupported claim that the United States Attorney acted in concert with the vindictive state officials is not sufficient to raise a colorable vindictive prosecution claim.

Second, Benson points to the fact that he co-authored The Law That Never Was. Benson claims that because of this the IRS classified him as a "tax protestor" and singled him out for prosecution and conviction in an effort to discredit him. But prosecuting those who lead others to go astray serves to deter those who might otherwise violate the law, a legitimate interest the government may consider in deciding whether to prosecute. See Wayte v. United States, 470 U.S. 598, 613 (1985). In any event, Benson has presented no evidence to show that the government prosecuted him for his views rather than for his substantive tax law violations. Benson does point to three short notices of his conviction that appeared in the press. Only one of these notices mentions anything about tax protestors, and one does not even mention The Law That Never Was. While Benson labels these notices as "IRS press releases," there is nothing in the notices themselves that shows they came from the IRS. Benson was prosecuted for failing to report and evading taxes on approximately $100,000 of income. Benson has not even tried to show that it is in any way unusual for the government to prosecute people who have avoided paying taxes on over $100,000.

Finally, Benson claims that the then-United States Attorney, Anton R. Valukas, prosecuted him for publicly speaking out about Valukas's financial disclosure statement. In March 1986, Benson obtained Valukas's financial disclosure statement. Benson called Valukas's office and left a message saying that he intended to give a speech in which he would disclose alleged improprieties in the statement. According to Benson, when Valukas returned the call he threatened to sue Benson. Benson also claims that Valukas called him a "common criminal" after Benson questioned Valukas at a public meeting about his ownership of stock in Bally Manufacturing Company and passed out copies of Valukas's financial disclosure statement after the meeting.

Assuming the statements Benson attributes to Valukas were made (and this is just an assumption), they did not necessarily require discovery concerning vindictive prosecution. Benson not only had to produce evidence of some animus or retaliatory motive--which the statements could provide--he also had to produce evidence tending to show that he would not have been prosecuted absent that motive. Under the facts of this case, the district court did not clearly err in holding that Valukas's alleged hostility towards Benson was not sufficient to require further discovery.

The Justice Department's internal regulations place final responsibility for criminal tax prosecutions with the Assistant Attorney General for the Tax Division. United States Attorneys' Manual, §§6 -2.212, 6-218. Under those regulations, Valukas could not prosecute Benson without the Tax Division's approval. Id. at §§6 -2.240, 6-2.245-47. The government submitted to the district court in camera the records of its authorization from the Tax Division to prosecute Benson. Those documents showed that the United States Attorney received the Tax Division's approval before prosecuting Benson. After reviewing the authorizing documents, the district court concluded that Benson's prosecution resulted from a proper exercise of authority.

Benson argues that he submitted evidence showing that the Justice Department, IRS, and United States Attorney did not follow every procedure normally followed before prosecuting. But failure to follow internal operating policy in prosecuting is not enough by itself to require discovery on a vindictive or selective prosecution claim. See United States v. Mitchell, 778 F.2d 1271, 1276 (7th Cir. 1985). The important point is that the Tax Division had to, and did, approve the prosecution. Unless the Tax Division was nothing more than a rubber stamp for the United States Attorney, or had some vindictive motive of its own (and Benson has produced evidence of neither), the fact that the Tax Division had the final say in deciding whether to prosecute makes it "improbable" that prosecutorial vindictiveness was the reason for Benson's prosecution. Cf. Heidecke, 900 F.2d at 1159-60; Schoolcraft, 879 F.2d at 68 (both holding that in federal prosecution after failed state prosecution, the role of the federal prosecutor in finally deciding to prosecute renders it unlikely that state's possible motive for retaliation would have caused the prosecution).

Also undercutting any claim that the prosecution resulted from Valukas's pique is the fact that Benson has not shown that it is unusual for the government to prosecute people who avoid paying taxes on over $100,000. This fact distinguishes this case from Adams, on which Benson relies heavily. In Adams, the defendant argued that she was prosecuted for filing false tax returns only because she had sued the EEOC, her former employer, for discrimination. 870 F.2d at 1141. In remanding the case for discovery concerning vindictive prosecution, the court placed great emphasis on evidence the defendant presented showing that criminal prosecutions were unusual in cases such as hers. Id. at 1141, 1144-45. Where the prosecution is not an unusual one, it is much less likely that the government prosecuted out of some vindictive motive.

In sum, the district court correctly decided that the evidence Benson submitted, in the context of the facts of this case, did not warrant the "unusual step," id. at 1146, of allowing Benson discovery concerning the issue of prosecutorial vindictiveness. That being the case, the district court did not err in denying Benson's motion to dismiss for vindictive prosecution.

H. Reliance on counsel instruction

At trial, Benson contended that he did not willfully fail to file income tax returns based on the payments from Underwriters, or evade taxes on those payments, because he sought and acted on Speigel's advice in determining whether the payments from Underwriters were taxable. Benson and Speigel both tested that Benson told Speigel that the payments from Underwriters resulted from a settlement with Underwriters; Speigel told Benson that money received from such a settlement was not taxable. Benson tendered an instruction to the court concerning his "advice of counsel" defense which stated:

The defendant claims that he is not guilty of willful wrongdoing because he acted on the basis of advice from his attorney.

If the defendant before taking any action sought the advice of an attorney whom he considered competent, in good faith and for the purpose of securing advice on the lawfulness of his possible future conduct, and made a full and accurate report to his attorney of all material facts of which he has the means of knowledge, and acted strictly in accordance with the advice of his attorney given following his full report, then the defendant would not be willfully doing wrong in omitting something the law requires, as that term is used in these instructions.

The district court rejected Benson's proposed instruction and instead gave the government's proposed instruction: The government's instruction was similar to Benson's but differed in two main respects. First, the government's instruction told the jury that Benson's reliance on counsel was a circumstance that it could consider in determining whether Benson acted willfully, rather than a complete negation of willfulness. Second, the government's instruction told the jury not to consider Benson's reliance if his reliance was not reasonable. Benson contends that these two differences constitute reversible error.

Generally, a defendant's mistake about what the law requires is no defense to a criminal prosecution; "the common law presumed that every person knew the law." Cheek v. United States [91-1 USTC ¶50,012 ], 111 S.Ct. 604, 609 (1991). But because of the tax laws' complexity, Congress ameliorated this general rule by providing that certain criminal tax offenses (such as the ones charged against Benson) be "willful." Id. A "willful" violation requires "a voluntary, intentional violation of a known legal duty." Id. at 610 (citing United States v. Pomponio [76-2 USTC ¶9695 ], 429 U.S. 10, 12 (1976) (per curiam)). To prove a willful violation, therefore, the government must show "that the law imposed a duty on the defendant, the defendant knew of the duty, and that he voluntarily and intentionally violated that duty." Id.

Benson's reliance on counsel defense is essentially a claim that he did not act willfully. If a person who truly does not know what the law requires seeks in good faith advice from counsel and is given wrong advice that he nonetheless believes (and has no reason to disbelieve), he does not act willfully in following that advice. A person who has a good faith belief that he is not violating the law does not act willfully. "[O]ne cannot be aware that the law imposes a duty upon him and yet be ignorant of it, misunderstand the law, or believe that the duty does not exist." Id. at 611.

According to Benson, it was wrong to tell the jury that reliance on counsel was but a "circumstance" to consider in assessing whether he acted (or failed to act) willfully because it allowed the jury to convict him even if the jury found that he honestly believed and in good faith acted upon Speigel's advice--or, in other words, that he acted in honest ignorance of his legal duty to file a return and pay income tax. That is not so in this case, for at least two reasons. First, neither Benson's proposed instruction nor the instruction the court actually gave mentioned any requirement that the jury find Benson acted on Speigel's advice in good faith or that Benson honestly believed Speigel's advice and thus acted in honest ignorance of his legal duties. Seeking and relying on counsel's advice is not by itself a defense. See United States v. Conforte [80-1 USTC ¶9417 ], 624 F.2d 869, 876 (9th Cir. 1980) (Kennedy, J.); United States v. Poludniak, 657 F.2d 948, 959 (8th Cir. 1981). Reliance on counsel's advice excuses a criminal act only to the extent it negates willfulness and to negate willfulness counsel's advice must create (or perpetuate) an honest misunderstanding of one's legal duties. If a person is told by his attorney that a contemplated course of action is legal but subsequently discovers the advice is wrong or discovers reason to doubt the advice, he cannot hide behind counsel's advice to escape the consequences of his violation. See Poludniak, 657 F.2d at 659. Since Benson's proposed instruction did not require the jury to find that he relied in good faith on Speigel's advice, reliance on that advice, as Benson framed the issue, could be no more than a circumstance to consider in assessing willfulness.

In any event, the instructions as a whole were sufficient to inform the jury not to convict Benson if it believed that he was ignorant of his legal duties to file a return and pay taxes. The court correctly instructed the jury that "willfully" means "the voluntary and intentional violation of a known legal duty" and that a failure to act is willful only "if done voluntarily and intentionally, as distinguished from accidentally, inadvertently or negligently." The court also instructed the jury that "[a] good faith belief that payments made by [Underwriters] were an insurance settlement . . . negates willfulness." A jury believing Benson actually believed and in good faith relied on Speigel's advice could not convict Benson based on the Underwriters payments in light of these instructions. Indeed, a separate reliance on counsel instruction may be superfluous. We have held before that where the court properly instructs the jury on good faith and willfulness, a separate reliance on counsel instruction is unnecessary. United States v. Kelley [89-1 USTC ¶9132 ], 864 F.2d 569, 573 (7th Cir. 1989). In light of the instructions as a whole, and the way Benson himself framed the reliance on counsel issue, it was not error to instruct the jury that reliance on counsel was a "circumstance" to consider in evaluating willfulness.

This brings us to Benson's second complaint about the reliance on counsel instruction, namely that the instruction allowed the jury to consider Benson's reliance only if that reliance was reasonable. In this respect, the instruction seems to run head on into the Supreme Court's holding in Cheek. Cheek contended as a defense to charges that he willfully failed to file income tax returns and willfully evaded taxes that he honestly believed wages were not income. On appeal, this court held that the district court correctly instructed the jury that "an honest but unreasonable belief is not a defense." United States v. Cheek [89-2 USTC ¶9509 ], 882 F.2d 1263, 1267, 1268 (7th Cir. 1989). The Supreme Court disagreed and reversed Cheek's conviction. According to the Court, whether or not Cheek's belief that wages are not income was objectively reasonable was irrelevant to whether Cheek acted willfully or, in other words, whether Cheek voluntarily and intentionally violated a known legal duty. [91-1 USTC ¶50,012 ] 111 S.Ct. at 611. To be sure, the reasonableness of a belief is a factor for the jury to consider in determining whether a defendant actually believed and acted on it. The more farfetched a belief is, the less likely it is that a person actually held or would act on that belief. See id. at 611-12. "[B]ut it is not contrary to common sense, let alone impossible, for a defendant to be ignorant of his duty based on an irrational belief that he has no duty. . . ." Id. at 611.

When a defendant contends that he did not act willfully because he had an honest misunderstanding of what the law requires, and that he came by that misunderstanding because of a lawyer's incorrect advice, it is wrong to tell the jury that it may consider the defendant's reliance on that advice as a defense only if that reliance was reasonable. Following such an instruction, the jury might very well conclude that if the attorney's advice is objectively unreasonable (for example, advice that wages are not income), reliance on that advice would be unreasonable, and might very well convict the defendant even though it concluded he honestly believed that what he was doing was legal. If Benson raises a reliance on counsel defense at retrial, and the evidence supports an instruction on that defense, ¹ the district court may instruct the jury that the reasonableness of the advice is a factor it may consider in determining Benson's good faith reliance on that advice; the court may not, however, instruct the jury to disregard Benson's reliance if it finds the advice (or reliance) unreasonable.

IV.

Benson has presented numerous issues with little focus, usually an ineffective method of arguing an appeal. In this case, however, one issue has merit. Because the district court abused its discretion in admitting much of Cantzler's testimony, we must reverse Benson's conviction.

Reversed.

¹ It might be that what Benson presents as his reliance on counsel defense did not really touch on a misunderstanding about any legal duty, the Court's concern in Cheek. The only advice Speigel gave to Benson--based solely on Benson's representation that the payments from Underwriters were for a settlement--was that settlement payments are not taxable. Nobody disputed the propriety of this advice. The only question in this case was factual: were the payments from Underwriters really on account of a settlement? We leave it to the parties and court at any retrial to determine the propriety of an advice of counsel instruction, based on the evidence at that trial.

Dissenting Opinion

KANNE, Circuit Judge

In typical fashion for a tax case, the government called an expert to summarize the complex evidence it had presented in its case in chief. "The nature of a summary witness' testimony requires that he draw conclusions from the evidence presented at trial." United States v. Esser [75-2 USTC ¶9654 ], 520 F.2d 213, 218 (7th Cir. 1975), cert. denied, 426 U.S. 947, 96 S.Ct. 3166 (1976). A summary witness need not necessarily be an expert, but experts in accounting and other disciplines regularly give summary evidence of the sort envisioned by Federal Rule of Evidence 1006. 5 D. LOUISELL & C. MUELLER, FEDERAL EVIDENCE §599, at 540 (1981). See, e.g., United States v. Kapnison, 743 F.2d 1450, 1557-58 (10th Cir. 1984) (under Rule 1006, IRS agent allowed to give testimony summarizing exhibits and testimony), cert. denied, 471 U.S. 1015, 105 S.Ct. 2017 (1985); United States v. Lemire, 720 F.2d 1327, 1346-50 (D.C. Cir. 1983) (under Rule 1006, FBI agent who was Certified Public Accountant allowed to summarize bank transactions and testimony of witnesses), cert. denied, 467 U.S. 1226, 104 S.Ct. 2678 (1984).

In a case strikingly similar to the present one, we held that "[e]xpert testimony by an IRS agent which expresses an opinion as to the proper tax consequences of a transaction is admissible evidence." United States v. Windfelder [86-1 USTC ¶9402 ], 790 F.2d 576, 581 (7th Cir. 1986). We also noted that "an IRS expert's analysis of the transaction itself, which necessarily precedes his or her evaluation of the tax consequences, is also admissible evidence." Id.

With regard to the expert testimony admitted by a district judge, we are required to sustain his decision unless it was manifestly erroneous. Salem v. United States Lines Co., 370 U.S. 31, 35, 82 S.Ct. 1119, 1122 (1962). The key transaction in this case concerns whether or not the payments received by Benson from the insurance company and Social Security Administration were fraudulently obtained--thus making such payments taxable income.

In light of the language in Windfelder [86-1 USTC ¶9402 ], 790 F.2d at 581 and United States v. Toushin [90-1 USTC ¶50,201 ], 899 F.2d 617, 620 n.4 (7th Cir. 1990), I do not believe that permitting the government's expert witness to testify concerning his analysis of the transaction (payment of insurance and Social Security benefits), which necessarily preceded his evaluation of the tax consequences could be deemed manifestly erroneous. It is certainly arguable that an IRS agent could qualify as an expert by knowledge, skill, experience, and training to give an opinion on the existence of fraud for the purpose of determining taxable income. The wide discretion afforded the district judge should enable him to determine whether the transaction analyzed by the IRS agent fell within the purview of his expertise.

Even if a finding of manifest error could be made with regard to the admission of the expert's summary testimony, I disagree with the majority's rejection of the application of the harmless error doctrine. The district judge initially made a determination that any error he may have made in admitting the agent's testimony was harmless. In determining whether the district judge committed manifest error, we must necessarily address this harmless error determination, as it was incorporated into the decision to allow the testimony to remain in evidence.

For the foregoing reasons, I respectfully dissent from the reversal of the conviction.

 

 

[90-2 USTC ¶50,566] United States of America, Plaintiff-Appellee v. Elbert L. Hatchett, Defendant-Appellant

(CA-6), U.S. Court of Appeals, 6th Circuit, 89-1679, 11/7/90, 918 F2d 631, Affirming an unreported District Court decision

[Code Sec. 7203 ]

Willful failure to pay tax: Jury selection: Evidence: Sentencing.--An individual's conviction and subsequent sentencing on four misdemeanor counts of willful failure to pay federal income tax was proper; the defendant prevailed on none of the following eight errors he claimed were made by the trial court. (1) The fact that the government used its peremptory challenge to exclude a black potential juror from the jury did not render the jury selection process discriminatory inasmuch as the potential juror was excluded for valid nondiscriminatory reasons and the final jury consisted of three black members out of 12. (2) The trial court's exclusion of the defendant's (prior) attorney's testimony concerning the defendant's tax situation did not render the defendant's "advice of counsel" defense a nullity; the excluded testimony was hearsay and the defendant adequately presented the same evidence in other ways. (3) The trial court did not err in preventing that attorney from testifying as to the legal authority for the advice he gave counsel; he did testify that he had done research and further testimony would have confused the jury as to the applicable law. (4) The trial court did not err in allowing the government to impeach the testimony of the defendant's witness and law partner by raising the witness's failure to file tax returns because such information was clearly probative of his bias against the government and, therefore, his credibility. (5) The exclusion of a videotaped segment from a television broadcast that focused on the collection techniques of a local IRS office was proper because it was not relevant to the case and was hearsay. (6) The trial court did not err in sentencing the defendant on the basis of erroneous information in his presentence report inasmuch as as the court stated at the time of sentencing that it would not consider the erroneous information. (7) It was not error for the trial court to sentence the defendant without regard to national sentencing guidelines; it was not necessary to obtain a specific finding from the jury as to the completion date of the offenses because there was no question that the crimes were prosecutable before the effective date of the guidelines. (8) The trial court did not abuse its discretion in requiring the defendant to pay all back taxes as a condition of probation even though the order included taxes owed for a year not covered by the convictions. Although "restitution" is restricted in this way, an order to pay a legal obligation is not a restitution order.

Kathleen Moro Nesi, Assistant United States Attorney, Detroit, Mich. 48226, for plaintiff-appellee. William T. Coleman III, Phyllis Golden Morey, Pepper, Hamilton & Scheetz, 100 Renaissance Center, Detroit, Mich. 48243-1157, for defendant-appellant.

Before JONES and BOGGS, Circuit Judges, and GIBBONS, ^* District Judge.

BOGGS, Circuit Judge:

Elbert L. Hatchett appeals his conviction on four misdemeanor counts of willful failure to pay federal income taxes for tax years 1982, 1983, 1984, and 1986, in violation of 26 U.S.C. §7203 . On October 20, 1988, Hatchett was charged in an eight-count indictment with one count of tax evasion, in violation of 26 U.S.C. §7201 ; one count of obstruction of tax collection, in violation of 26 U.S.C. §7212(a) ; one count of concealment of property subject to levy, in violation of 26 U.S.C. §7206(4) ; and five counts of willful failure to pay income taxes. After a month-long jury trial in February and March 1989, Hatchett was acquitted on the three felony counts and one misdemeanor count (failure to pay tax for 1985). The jury returned a guilty verdict on the other four counts, for which the court sentenced Hatchett to three consecutive one-year sentences. Hatchett also received one suspended sentence and was placed on five years' probation. Hatchett was also fined $100,000 ($25,000 on each count) and ordered to pay "all back taxes" as a condition of probation.

I

Hatchett is an attorney in the Detroit area who concededly began to fall behind in his tax payments in the 1970s. Audits conducted in the late 1970s by the Internal Revenue Service (IRS) revealed that Hatchett owed back taxes for tax years 1973-1977 in the amount of $107,454.14. On August 23, 1978, he entered into an installment agreement with the IRS, whereby he would pay the government $750 per week--$500 for his 1978 estimated tax payments and $250 for his delinquent taxes. From 1979 through 1986 (with the exception of tax year 1985), Hatchett submitted tax returns without any accompanying payment at all; he also failed to make any estimated tax payments during those years.

Hatchett claims that he consulted with an attorney, Frank Gettleson, on several occasions in 1979 and 1980 in order to consider different ways of handling his tax problems. He claims that Gettleson advised him to file returns that were then overdue but to withhold payment until he was able to negotiate with the IRS a consolidated payment schedule for all taxes. Hatchett thereafter filed a timely return for tax year 1979 on April 14, 1980, but without accompanying payment. He filed a late return for tax year 1980 on April 14, 1982, the same day he filed his 1981 return. Neither the 1980 nor the 1981 return included payment.

On August 26, 1980, Hatchett wrote to the IRS to inform it that he wished to make a lump-sum settlement or, alternatively, to pay $1000 per month until his liability was liquidated. Hatchett claims that the IRS did not respond to his letter, but he nevertheless began sending $1000 monthly payments. He stopped making these payments when, on January 21, 1981, the IRS seized and sold certain real property owned by Hatchett. In March 1983, Hatchett again wrote to the IRS to request an installment payment plan; he claims that he received no response. The government, however, claims that Hatchett received a written reply in April 1984, informing Hatchett that he owed a total of $847,780.46 ($827,791.96 in income taxes, interest, and penalties, and $19,988.50 in business taxes).

The government introduced evidence that during the period covered in the indictment, Hatchett was earning large sums of money from his cases. He settled one case that resulted in $900,000 in legal fees. The government claims that Hatchett converted these monies so as to make it impossible for the IRS to levy on them. He typically exchanged his clients' checks for a series of cashiers' checks; when the IRS levied on his bank accounts, it discovered that no funds were available to satisfy the levies. He also used the money to purchase goods in other people's names. In March 1983, Hatchett paid $28,447.12 in cash for a Porsche 911 for his son. He contemporaneously spent large sums on the construction of a boxer training camp for his son in Otter Lake, Michigan. In May 1983, Hatchett bought $113,744.20 worth of car washing equipment for a business called Sparkle Car Wash, which he held in the name of his elderly father. In 1985, Hatchett purchased a foster care home in his wife's name for $100,000 cash.

In April 1984, Internal Revenue Agent Christine Gibson, newly assigned to Hatchett's case, reviewed his assets and a list of court cases in which he was involved, so that the IRS might attach any attorney's fees due him. Gibson then prepared a list of over 300 levies to be served on Hatchett's clients, opposing counsel, and insurance companies, directing that any monies owed to Hatchett be paid to the IRS.

On June 11, 1984, Agent Gibson met with Hatchett to discuss whether he was prepared to make payment on his taxes owed. When Hatchett was unwilling to disclose any financial information, Gibson served Hatchett with a summons to produce all documents regarding his assets. Gibson testified that Hatchett told her at the June 11 meeting that "he wanted to pay and he always planned to pay his taxes." Gibson also testified that her notes of a June 22, 1984 follow-up telephone conversation with Hatchett indicated that she believed he was "making moves to pay."

On July 13, 1984, Hatchett met with Gibson to review the documents requested by the summons. At this meeting, however, Gibson never looked at any of the documents Hatchett provided. At this meeting, Gibson and Hatchett discussed a number of possible payment plans that could assist Hatchett in discharging his tax liability. After this meeting, not having reached an agreement with Hatchett about a payment plan, Gibson began serving the 300 levies she had prepared. See United States v. Var-Ken, Inc., No. 88-1251 (6th Cir. May 1, 1989) (unpublished per curiam) (reversing a summary judgment against the government in an action to enforce a levy and foreclose on funds assertedly owned by Hatchett).

Throughout 1985, Hatchett made several payments toward his tax debt totalling $80,000. He discontinued his $5000 weekly payments on September 23, 1985, when the IRS seized his Rolls Royce.

Hatchett reported adjusted gross income for 1982 of $329,940 and a tax due of $98,789. He filed this return, without payment, on March 7, 1984, nearly one year late. Hatchett reported adjusted gross income for 1983 of $755,977 and a tax due of $336,799. He filed this return, without payment, a year late on April 15, 1985.

Hatchett reported adjusted gross income for 1984 of $307,410 and a tax due of $132,145. He filed this return, without payment, on April 15, 1985.

Hatchett reported adjusted gross income for 1985 of $400,788 and a tax due of $158,360. He filed this return, without payment, on April 15, 1987. On an amended return, he reported an adjusted gross income for 1985 of $571,437 and a tax due of $244,183. He filed this return, with a total payment of $100,000, on April 7, 1988, two years late.

Hatchett reported adjusted gross income of $445,535 for 1986 and a tax due of $195,699. He filed this return on April 8, 1988, one year late and without payment.

Hatchett raises eight assignments of error: one concerning the jury selection process, four concerning evidentiary rulings, and three concerning his sentencing. We consider them in that order.

II

Hatchett's first claim is that the government exercised its peremptory challenges during jury selection in a racially discriminatory manner. We find no merit in this claim.

The jury consisted of three Blacks and nine whites. The record indices that the jury venire consisted of 70 people. Fifty-five identified themselves as white, 14 as Black or Negro, and one as Asian. The prosecution was given six peremptory challenges, while the defense had ten. Each side had one additional peremptory challenge that could be exercised only against an alternate juror. The district court ruled that if a party chose to pass on the exercise of a peremptory challenge, then that peremptory was lost.

Hatchett claims that the procedure by which the government exercised--or waived--its peremptories was racially motivated and discriminatory. The original jury panel drawn contained eleven whites and one Black. The government used its first peremptory to strike the only Black juror. That juror has a son who had been criminally charged in June 1988; she also had recently been audited. After the government excused the Black juror, she was replaced by a white juror.

The government then waived each of its peremptories against remaining white jurors. Hatchett claims that the government had stronger cause to excuse several of the white jurors than it did to excuse the lone Black juror. During voir dire, for example, it came out that several of the eleven original white jurors had encounters with the government that were allegedly more unpleasant than the Black juror's. One was audited in 1980, and he admitted to the court that he wasn't "thrilled about paying [his] taxes." Another had fallen behind in his taxes five years before the trial and had to make payments over a three-year or four-year period. A third had been arrested for drunken driving in October 1985. One of the alternate jurors, a white woman, had been audited in January 1989, one month before the trial began. Hatchett claims that the reason the government did not excuse any of these white jurors was because it did not want to risk impaneling a Black replacement juror from the venire.

While the government waived each of its first four peremptories against the remaining jurors, the defense exercised each of its first four peremptories to excuse a white juror. Each was replaced by a white juror. After the government waived its fourth peremptory, the defense requested a conference outside the presence of the jurors. Hatchett, whom the court had permitted to participate in the presentation of his case, made the following appeal to the court:

It seems the impact of what the Government is doing, although she has a perfect right to do it, is negate our potential of having a certain number of black people on the jury to try me and my wife. We are entitled to a fair selection of people to sit in judgment of us, a part and parcel would be a group of people who have a peculiar identity with me. The fact that the Government has chosen to pass peremptorily on challenges means that it reduces the prospect of it reducing any of those persons by 50 percent. The only peremptory she has offered has been a challenge to disqualify a black juror, that's the only time she's exercised her prerogative to summarily remove a juror, that juror is black. You have held us tightly with respect to how many challenges we can have. . . . [T]he Court should mitigate the harm to me and my wife by giving us more challenges. We have ten black people left on the jury panel and we have none seated except an alternate and, judge, we are not going to have any representatives of the black race on this jury if the prosecution is permitted to persist in her exercise of her prerogative of not peremptorily challenging anybody.

The government offered to have an in camera hearing with the court to explain the reasoning behind its jury selection procedure. The defense had no objection. ¹ In chambers, the assistant United States attorney explained to the court her reason for excusing the Black juror and no other: only the Black juror had recently had an experience in criminal court and been audited. The other jurors' experiences were considerably more remote, and thus they were less likely to harbor resentment against the IRS. The court was satisfied by the prosecutor's explanation, and found that the government's juror selection process was not tainted by racial discrimination. The jury selection process then continued, and the government exercised no other peremptory challenges. ² After the defense exercised its peremptories and several other jurors were excused for cause, additional jurors were impaneled and the final jury consisted of three Blacks and nine whites. ³

Hatchett argues that it was pure fortuity that three Blacks were impaneled on the final jury, and that this end result does not render moot the constitutional issue of the government's allegedly discriminatory selection process. Hatchett claims that the withholding of peremptory challenges violated his fourteenth amendment right to be free from discriminatory jury selection procedures, as stated in Batson v. Kentucky, 476 U.S. 79, 89 (1986): "the Equal Protection Clause forbids the prosecutor to challenge potential jurors solely on account of their race or on the assumption that black jurors as a group will be unable impartially to consider the State's case against a black defendant." ⁴

The Batson Court enumerated three elements of a prima facie case of purposeful discrimination. First, the defendant must show that he is a member of a cognizable racial group and that the prosecutor has exercised peremptory challenges to remove from the venire members of the defendant's race. Second, the defendant is entitled to rely on the fact "that peremptory challenges constitute a jury selection practice that permits 'those to discriminate who are of a mind to discriminate.' " Third, the defendant must show that "these facts and any other relevant circumstances raise an inference that the prosecutor used that practice to exclude the venire-men from the petit jury on account of their race." 476 U.S. at 96 (quoting Avery v. Georgia, 345 U.S. 559, 562 (1953)). Once the defendant has made out a prima facie case, the burden shifts to the government to come forward with a neutral explanation for challenging Black jurors. Ibid. Hatchett argues that he has made out a prima facie case of discrimination and that the prosecutor's apparently neutral explanation is invalid.

Hatchett claims that the prosecutor's reasons for striking the Black juror were equally applicable to similarly situated white jurors, and thus the prosecutor's explanation was pre-textual. In such a case, the prosecutor's explanation does not withstand scrutiny. Garrett v. Morris, 815 F.2d 509, 513-14 (8th Cir.), cert. denied, 484 U.S. 898 (1987).

We see no clear error in the court's determination that the circumstances of the white jurors who were not challenged differed from those of the two Blacks who were excused. ⁵ The only white juror who had been audited was audited in 1968. This remoteness of his audit was an important distinction. Another white juror had fallen behind in his tax payments five years earlier, but there was no evidence that he had been audited or had had a bad experience with the IRS. The government exercised its one peremptory challenge reserved for the alternate jurors against the Black alternate rather than against the white alternate because the Black alternate had been a client of Hatchett. Although the white alternate had been audited one month before trial, there was no indication that her audit did not proceed favorably; the government saw the Black alternate as a greater risk to impartiality, for reasons apart from her race.

Furthermore, we find that Hatchett did not establish a prima facie case under Batson. All of the attendant circumstances do not raise an inference that the prosecutor excluded Blacks from the jury on account of their race. In United States v. Sangineto-Miranda, 859 F.2d 1501, 1521-22 (6th Cir. 1988), we reasoned:

If, after the jury selection process has ended, the final jury sworn has a percentage of minority members that is significantly less than the percentage in the group originally drawn for the jury (or in the whole jury pool or in the district), then that would be a factor pointing toward an inference of discrimination. If, on the other hand, the percentage of minority members in the ultimate jury is the same or greater, that would be a factor tending to negate the inference of discrimination.

In this case, the jury pool of 70 contained 14 Blacks (20%). The final jury consisted of three Blacks and nine whites (25% Black).

Furthermore, the district court credited the prosecutor's explanation for her pattern of striking or not striking certain jurors. The Supreme Court has ruled that findings of no intentional discrimination turn largely on an evaluation of credibility, which we as a reviewing court should accord great deference. Batson, 476 U.S. at 98 n.21.

Contrary to Hatchett's implication, he is not entitled to a jury composed largely of members of his race. In Batson, the Court ruled "that a defendant has no right to a 'petit jury composed in whole or in part of persons of his own race.' " 476 U.S. at 85 (quoting Strauder v. West Virginia, 100 U.S. 303, 305 (1880)). Rather, the defendant has a right "to be tried by a jury whose members are selected pursuant to nondiscriminatory criteria." Ibid. Because Hatchett was tried before a fairly selected jury, we deny his claim of racial discrimination.

III

A

Hatchett next assigns as error the exclusion, during direct examination of Frank Gettleson, of testimony by Gettleson about statements allegedly made by Hatchett to Gettleson about his tax troubles. The defense called Gettleson to testify about the tax advice he gave Hatchett in 1979 and 1980. When Hatchett's trial counsel asked Gettleson to explain to the jury the content of a conversation Hatchett had with him in 1980, the government objected that the answer would be hearsay and would be irrelevant. The district court sustained the objection, apparently on the ground of hearsay, and precluded Gettleson from testifying about any disclosures Hatchett made to him. ⁶ Hatchett now claims that the district court improperly excluded Gettleson's testimony, which was crucial to Hatchett's defense that he relied on the advice of counsel in withholding tax payments. He argues that the court's ruling improperly made proof of the "advice of counsel" defense difficult.

Hatchett argues on appeal that the testimony Gettleson would have provided would not have constituted hearsay because it would not have been offered for the truth of the matter asserted. ⁷ F.R.E. 801(c). The statements would have concerned disclosures that Hatchett made to Gettleson about his tax liabilities as of 1980. Hatchett claims that this testimony was offered not to prove the truth of the content of Hatchett's statements about his tax situation, but rather to prove that Hatchett made a full disclosure of all pertinent facts to Gettleson. Hatchett claims that the court prevented the jury from accepting Hatchett's advice of counsel defense, by disabling it from determining whether Hatchett made a complete disclosure to Gettleson. Hatchett argues that the testimony was not offered to prove its truth, but rather so that Hatchett could comply with the full disclosure requirement of his defense. See United States v. Eisenstein, 731 F.2d 1540, 1545 (11th Cir. 1984).

Hatchett declined to testify. Gettleson's testimony, therefore, was allegedly the only vehicle for getting Hatchett's advice of counsel defense before the jury. ⁸ Hatchett thus contends that the exclusion of this testimony completely deprived Hatchett of his right to make out a defense.

We hold that the district court did not abuse its discretion in refusing to admit Gettleson's proffered testimony regarding Hatchett's disclosures to him. The district court, in denying Hatchett's motion for bond pending appeal, ⁹ noted that

[a]lthough attorney Gettleson's testimony may have been admissible for the limited purpose of showing defendant made a disclosure, it was not admissible to prove the facts constituting the disclosure. The advise [sic] of counsel defense requires not only evidence of disclosure, but also evidence that the facts disclosed are relevant. . . . The relevance of the facts disclosed could only have been determined had the jury considered as truthful the out-of-court statements which attorney Gettleson was asked to recite.

Had defense counsel represented to the Court the evidence of the factual basis underlying the disclosure would be tied in through a different witness, or asked that the statements be admitted for the limited purpose of showing disclosure and with a cautionary instruction to the jury, this Court's ruling may have been different. However, no such request or representation was made.

(Emphasis supplied.) Having determined that Gettleson's testimony was offered to prove the truth of Hatchett's out-of-court disclosures, and in the absence of a proffer by Hatchett's counsel of other evidence that could prove the truth of the disclosures, the court properly ruled that Hatchett's declarations came within the definition of hearsay and were inadmissible.

We find that the court's ruling could not have undermined the jury's ability to determine the strength of the advice of counsel defense. The defense managed to get the substance of Hatchett's statements to Gettleson before the jury by other means. Although the court sustained the government's objection to the question asking Gettleson directly what Hatchett told him, Gettleson nevertheless testified to several disclosures by Hatchett:

--Hatchett "tried to pay the tax and apparently met with some opposition in that regard;"

--"he couldn't pay it all at one time and it was a fair amount of money at that time and he was going to try and make some orderly payments;"

--Hatchett owed "probably one hundred seventy-five to two hundred thousand, something in that area;"

--"I knew he had been audited incessantly prior to that time;"

--"I knew he had made payments, he had made some payments along the way;"

--"he was concerned if there would be any other ramifications, such as criminal ramifications, that may befall him."

On cross examination, Gettleson admitted that:

--he did not know exactly when Hatchett had been on an installment payment program;

--he did not know that the installment payment program was stopped at the end of 1978 because Hatchett was bouncing checks;

--he did not know that Hatchett had failed to make estimated tax payments for the 1979 tax year;

--they "didn't really discuss" whether Hatchett would make current estimated tax payments in 1980;

--Hatchett never told him whether the IRS had required Hatchett, as a condition of the installment payment program, to remain current with his estimated tax payments.

This testimony was sufficient for the jury to determine whether Hatchett had made a full disclosure to Gettleson of all pertinent facts.

Furthermore, nothing said in closing arguments could have confused the jury as to Hatchett's advice of counsel defense. The government did not claim that Hatchett's defense must fail because there was no proof of full disclosure (proof, Hatchett would argue, that was impermissibly kept from the jury). The government simply argued, in its initial closing and in its rebuttal closing, that the advice of counsel defense should not protect Hatchett prospectively, because Gettleson never explicitly advised Hatchett not to pay taxes from 1981 to 1986. Hatchett in turn argued in his closing that "[Gettleson did not] have to tell me not to pay in '81, '82, '83, he already told me that when I sat down and talked to him." At no point was the jury misled either as to the elements of an advice of counsel defense or as to the quantum of proof necessary to find "willfulness" in Hatchett's failure to pay. Under these circumstances, we find no abuse of discretion in preventing Gettleson from testifying directly as to the truth of Hatchett's disclosures.

B

Hatchett next contends that the district court abused its discretion by precluding attorney Gettleson from explaining the legal authority for the advice he gave Hatchett. The government objected to the proffered testimony on the ground that the witness would be testifying to the jury about legal issues. The court limited Gettleson's testimony to statements about the general legal authority on which he relied in advising Hatchett, "without going into any specifics."

Hatchett asserts that the testimony would have proved that Gettleson conducted specific research on the issue of withholding payment from the IRS in good faith. If Hatchett could have shown the jury that the legal principles underlying the advice upon which he relied were well established in the case law, he claims that he could have made out his advice of counsel defense. Moreover, Hatchett insists that Gettleson's testimony would not have invaded the court's province to instruct the jury on the applicable law. Gettleson's proffered testimony allegedly bore only on his competence in correctly advising Hatchett on the law, while the court retained the ultimate authority to instruct on the law.

We find no abuse of discretion in limiting Gettleson's testimony to statements about the general legal authority on which his advice rested. Testimony about the specific results of Gettleson's legal research was properly excluded. Before the government objected, Gettleson was able to testify that:

I did some research back at that time and I was confident in the research that I did, based upon the statute and based upon the case law that I found as a result of that research, that the position he had taken was a sound position and I told him as much. And I based it in part on the case of--

The court then sustained the government's objection that any further statements would constitute legal argument in front of the jury. The court did not, however, prevent Hatchett from proving that Gettleson was competent to give him sound advice. The court merely restricted the means by which Hatchett could present his argument, so as to limit jury confusion.

In United States v. Curtis [86-1 USTC ¶9195 ], 782 F.2d 593, 599 (6th Cir. 1986), we noted that witnesses "do not testify about the law because the judge's special legal knowledge is presumed to be sufficient, and it is the judge's duty to inform the jury about the law that is relevant to their deliberations." This rule is necessary to prevent the potential confusion that can arise if the law as presented by the witness conflicts with the law as instructed by the court. Id. at 600. Given the soundness of this rule, the district court did not abuse its discretion by excluding references to specific case law under the circumstances presented here.

C

Hatchett also complains about the government's cross examination of one of Hatchett's law partners, Marvin Smith, who became an associate in Hatchett, Dewalt, Hatchett, Mitchell, Morgan & Hall in 1981 and a partner in Hatchett, Dewalt, Hatchett & Hall (of which Hatchett is managing partner) in 1983, testified at trial as to the nature of the law partnership. He further testified about Hatchett's efforts to obtain loans from the partnership in order to pay his taxes. On cross examination, the district court permitted the government to attempt to impeach Smith's credibility by questioning whether he himself had filed any income tax returns for tax years 1981-1986. Smith responded that he had not filed any such returns.

The defense objected to this cross examination on the ground of relevance. The prosecution argued that the questioning was relevant because it concerned the witness's bias. There had been extensive testimony about the partnership's dealings with the IRS, and this line of questioning was designed to illuminate the partners' general failure to cooperate with the IRS. The court was persuaded that the prosecution should be permitted to pursue this questioning, especially on cross examination.

Mr. Smith's cross examination was then continued to the next day. That next morning, before the jury entered the courtroom, the court entertained the defense's motion for a mistrial based on the previous day's cross examination of Smith. Although Hatchett had, on the previous day, objected to the prosecution's line of questioning only on the basis of Fed. R. Evid. 609 (Impeachment by Evidence of Conviction of Crime), the memorandum in support of the motion for a mistrial rested primarily on Fed. R. Evid. 608 (Evidence of Character and Conduct of Witness). Rule 608(b) states in pertinent part:

Specific instances of the conduct of a witness, for the purpose of attacking or supporting the witness' credibility, other than conviction of crime as provided in rule 609, may not be proved by extrinsic evidence. They may, however, in the discretion of the court, if probative of truthfulness or untruthfulness, be inquired into on cross-examination of the witness (1) concerning the witness' character for truthfulness or untruthfulness, or (2) concerning the character for truthfulness or untruthfulness of another witness as to which character the witness being cross-examined has testified.

Rule 609 allows for impeachment only through evidence of a felony conviction. Hatchett argues that Rule 609 did not apply to Smith, and Rule 608 was inapposite because Smith's failure to file timely returns did not relate to his character for truthfulness or untruthfulness. Thus, Hatchett contends, cross examination based on Smith's failure to file or to pay his taxes was inadmissible to attack his credibility. The defense requested that if the court was unwilling to grant a mistrial, it should at least give a curative instruction to the Jury.

The court ruled:

I'm going to give them an instruction that the only purpose is to attack his credibility and that his tax problem or his failure to pay taxes is not an issue in this case. I'm not granting a motion for mistrial.

Hatchett's counsel and the court then engaged in this exchange:

[DEFENSE COUNSEL]: I would like to know whether the Court is making a specific finding that the activity elicited relates to [Smith's character for truthfulness or untruthfulness].

THE COURT: I'm saying the questions and the answers tend to bring out any interest or bias that this witness may have and that this bears upon his credibility and I believe that's fair cross-examination.

Hatchett's argument rests on the notion that the testimony permitted on cross examination was inadmissible because it was not relevant to Smith's character for truthfulness or untruthfulness. Hatchett claims that the court, in finding that Smith had "a motive to be untruthful," merely found that it would have been advantageous to Smith to give false testimony; the court did not, and could not, find that Smith had a reputation for being untruthful. The specific acts of not filing tax returns provided Smith a motive to lie, but did not shed light on his character for truthfulness. Hatchet insists that failure to file tax returns and pay taxes is unrelated to character for truthfulness or untruthfulness.

We agree with the district court that Smith's failure to pay taxes was clearly probative of his credibility. Hatchett does not disagree that the government's cross examination of Smith was intended to show bias; he merely contends that evidence of bias is not an attack on credibility. However, a showing of bias is designed to attack a witness's credibility. See, e.g., Davis v. Alaska, 415 U.S. 308, 316 (1974) ("A more particular attack on the witness' credibility is effected by means of cross-examination directed toward revealing possible biases, prejudices, or ulterior motives of the witness"). This rule is sound because evidence of bias allows jurors to draw appropriate inferences about the reliability of the witness. See United States v. Smith, 831 F.2d 657, 662 (6th Cir. 1987) (quoting Delaware v. Van Arsdall, 475 U.S. 673, 680 (1986) (quoting Davis, 415 U.S. at 318)), cert. denied, 484 U.S. 1072 (1988). An attack on a witness's credibility by demonstrating bias is permissible under Fed. R. Evid. 608(b)(1) precisely because it goes to the witness's character for truthfulness.

The impeachment testimony in fact confirmed Smith's bias by revealing a common pattern of activity with Hatchett: flouting the tax laws by not filing returns or paying taxes when they were due. Smith's behavior was directly relevant to his credibility, and his testimony was admissible.

D

Hatchett's next claim is that the district court abused its discretion by excluding from evidence a videotaped segment from a "60 Minutes" television broadcast that focused on the collection techniques of a local IRS office. During his cross examination of IRS agent Rob ert Bednarczyk, Hatchett attempted to show the videotape in order to convince the jury that IRS agents used oppressive collection tactics. The government objected on relevance grounds, noting that the television show was broadcast in 1981 and made reference to matters not in evidence, and on hearsay grounds. The court ordered defense counsel to proceed to another topic of examination until the court had viewed the tape and ruled on its admissibility. Two days later, the court issued a ruling denying Hatchett's request to show the videotape.

The court found that the tape was "classic hearsay." It did not "know how the Government can possibly cross-examine anything on this film. In addition . . . [t]he incidents in this case involve actions subsequent to 1981. I find it first of all hearsay and, second of all, not relevant."

Hatchett claims that the court's ruling deprived him of his right effectively to cross examine a government witness. He contends that the tape was not hearsay because it was not offered for the truth of its contents, but only to test the witness's conclusion that Hatchett's failure to file a joint return for him and his wife was unusual. Hatchett intended to show that it would have been reasonable for a person to forego the financial benefits of a joint return (as compared to separate returns) in exchange for security from the reputedly unreasonable actions of the local IRS division. Hatchett also disputes the finding that the tape was irrelevant. Although the tape referred to IRS collection procedures in 1981, the government's expert was able to testify on direct examination about tax years 1979-1982. The 1981 broadcast, by comparison, was not too remote to be relevant.

We again find that the court did not abuse its discretion by making this evidentiary ruling. Despite Hatchett's assertion that he did not intend to offer the videotape for the truth of its contents, there were no other facts in evidence by which to judge its truthfulness. No independent evidence had been admitted to prove the truth of the allegations made in the "60 Minutes" segment. In cross examining the government's witness on his opinion that Hatchett's not filing a joint return was unusual, Hatchett needed a basis for his explanation that he was attempting to avoid the alleged pressure tactics of the IRS. This basis lay only in the videotape; its truthfulness would have to have been assumed by the jury in order for Hatchett's proffered explanation to have had any validity. Furthermore, there was no way for the government to detect whether the tape had been altered, and the government would have been unable to challenge the accuracy of the broadcast. Under these circumstances, the court did not abuse its discretion in excluding this evidence.

IV

A

Hatchett contends that the court violated Fed. R. Crim. P. 32(c)(3)(D) by not adequately addressing his allegation that the presentence report contained a factual inaccuracy. He argues that the court neither made a finding as to the truth of the allegation, as required by Rule 32(c)(3)(D)(i), nor made a determination that no such finding was necessary because the matter would not be taken into account in sentencing, as required by Rule 32(c)(3)(D)(ii). Hatchett insists that the court's failure to comply strictly with the rule requires us to remand for resentencing.

The alleged error in the presentence report relates to the applicability of parole guidelines. (Hatchett was not sentenced under the Sentencing Guidelines, since the court determined that the criminal activity charged in the indictment was completed before the effective date of the guidelines.) The probation officer estimated, according to the Parole Commission's guidelines, the amount of time that Hatchett would serve in prison before being released on parole. Hatchett claims that the parole guidelines computation was inaccurate, and that the court relied on this erroneous presentence report. ¹⁰

The parole calculations are not a part of the sentence imposed by the court. Parole release is an admin istrative determination, separate from the imposition of a term of imprisonment. Furthermore, the parole guideline worksheet states that it is an estimate and that it has no binding effect, either on the sentencing judge or on the Parole Commission. The district court adequately responded to Hatchett's argument at the sentencing hearing:

THE COURT: What are you asking me to do with the guidelines? They're the guidelines of the parole commission, not this Court.

[DEFENSE COUNSEL]: However, they have been made a part of the probation officer's report. We believe they are inappropriate because they do not apply to misdemeanor offenses. We would ask the Court to disregard completely the parole guidelines assessment because we don't believe they apply.

THE COURT: Okay.

The court agreed it would disregard the contested information. No due process violation resulted, since the court ignored the alleged error in the report. In addition, Rule 32(c)(3)(D) was not violated by the absence of a written record. The rule only concerns factual inaccuracies, not calculations explicitly labelled "estimates" that are irrelevant to sentencing.

B

Hatchett's next contention regarding his sentencing is that the court should have required the jury to specify in its verdict whether his offenses were completed prior to November 1, 1987, the date the Sentencing Guidelines became effective. If the offenses that underlay the jury's guilty verdict were not completed before November 1, 1987, then Hatchett contends that he should have been sentenced under the guidelines, not under the statute, relying on United States v. Sams [89-1 USTC ¶9136 ], 865 F.2d 713, 715 (6th Cir. 1988), cert. denied, 109 S.Ct. 3187 (1989). Hatchett claims that it was plain error for the court to fail to secure a specific finding from the jury as to the completion date of the offenses.

Hatchett alleges that confusion was caused by the government's introduction of evidence that extended into 1987. There was evidence of Hatchett's expenditures on such luxury items as furs and automobiles as late as 1987. There was evidence of substantial legal fees earned by Hatchett as late as December 1987. Hatchett claims that if the jury found that his willful act of non-payment extended beyond November 1, 1987, then the court erred by not sentencing him under the guidelines.

We note that United States v. Sams does not support the proposition Hatchett suggests. The issue in Sams was not whether the crime had been completed before November 1, 1987 for guidelines purposes, but rather whether the crime had extended into the time prosecution was statutorily permitted. In Sams, we concluded that the failure to instruct the jury to specify the date on which the defendant's failure to pay his taxes became willful was not plain error, since the jury could have concluded that every element of the crime occurred within the time prosecution was permitted. [89-1 USTC ¶9136 ], 865 F.2d at 716.

Hatchett's claim is foreclosed in any event because he did not object to the absence in the jury instructions of a request for a specific finding as to the date on which the crimes were completed. As we held in Sams:

Sams did not object at trial to the jury instructions given by the district court. Thus, the issue of whether the court should have instructed the jury to specify the date on which Sams's failure to pay taxes became willful is not before us. Fed. R. Crim. P. 30.

[89-1 USTC ¶9136 ], 865 F.2d at 716 (emphasis in original). Where a party fails to object at trial, reversal is required only in those exceptional circumstances where necessary to avoid a miscarriage of justice. United States v. Hook [86-1 USTC ¶9179 ], 781 F.2d 1166, 1172 (6th Cir.) (citations omitted), cert. denied, 479 U.S. 882 (1986). As this is not such an exceptional case, we decline to overturn the sentence.

C

Hatchett's final contention is that the district court erred by conditioning probation on the payment of "all back taxes" during the period of probation. He argues that this condition demands restitution based on counts in the indictment of which he was acquitted.

Hatchett notes that 18 U.S.C. §3651 permits a court to order restitution as a condition of probation, but only for those counts on which a defendant has been convicted. Hatchett was convicted only on the misdemeanor counts of failure to pay taxes in 1982, 1983, 1984, and 1986. He was acquitted on the tax evasion counts and for failure to pay taxes for 1985. Hatchett argues that the court was limited to ordering restitution for amounts included in the four misdemeanor counts on which he was convicted. He therefore demands resentencing.

We find no abuse of discretion in the district court's order. The district court did no more than insist that Hatchett comply with the law as a condition of probation. The order should be interpreted as being limited to obligations that either have gone to judgment or are otherwise legally owed. The order cannot be taken to require the payment of tax debts that are legitimately in contest.

The order need not be limited to amounts owed for the years for which Hatchett was convicted. The payment of tax debts for other years that have been reduced to judgment or are due under 26 U.S.C. §6151 is an appropriate condition of probation, since such debts represent definite legal obligations. ¹¹ See United States v. Taylor [62-2 USTC ¶9590 ], 305 F.2d 183, 188 (4th Cir.), cert. denied, 371 U.S. 894 (1962) (the court may require, "as a condition of probation, the payment of all taxes and penalties lawfully determined to be due and collectible"). See also United States v. McMichael, 699 F.2d 193, 195 (4th Cir. 1983) (the court may order the defendant to repay taxes "whenever the amount . . . is legally determined"); United States v. Vaughn [80-2 USTC ¶9785 ], 636 F.2d 921 (4th Cir. 1980) (recognizing that conditioning probation on the payment of "all taxes, interest, and penalties presently owed to the Internal Revenue Service" is proper, but vacating the order that probation be further conditioned on reimbursing the government for the expenses of investigating the offense).

Contrary to Hatchett's contention, the district court's order was not one for restitution under 18 U.S.C. §3651. Therefore, conditioning probation on the payment of "all back taxes" was not an abuse of discretion. As in Taylor, the court could properly require "payment of those taxes reported . . . since such liability is admitted." Id. at 187. In addition to those taxes "shown by the defendant's returns to be due," the court may condition probation on the payment of those taxes found by the jury to have been willfully not paid. Id. at 188. Nothing in the probation conditions should be interpreted to prevent Hatchett from contesting, in good faith, any proposed assessment.

For the foregoing reasons, the conviction is AFFIRMED.

^* The Honorable Julia Smith Gibbons, United States District Judge for the Western District of Tennessee, sitting by designation.

¹ After the court announced the result of the in camera meeting, however, the defense did object to the court's holding a hearing in camera.

² The government did use its one available peremptory challenge for alternates to strike a Black alternate juror, who was replaced by the Asian juror.

³ Although Hatchett claims in his brief that the jury consisted of ten whites and two Blacks, all other indications are that the jury consisted of three Blacks, and Hatchett's attorney so agreed at trial. (The defense had questioned whether one juror was Black or Asian-American, but she listed herself as Black on her jury questionnaire.)

⁴ Since this was a federal trial, the fourteenth amendment, to which Hatchett appeals, is not implicated. Rather, Hatchett should be pursuing his claim under the fifth amendment. See United States v. Sangineto-Miranda, 859 F.2d 1501, 1519 (6th Cir. 1988).

⁵ The other Black who was excused was an alternate. The prosecutor tried to convince the court to strike the alternate for cause because she was one of Hatchett's former clients. When the court refused, the government exercised against her its one peremptory challenge reserved for alternatives.

⁶ The court found that the testimony was offered to prove the truth of the matter asserted.

⁷ Upon the government's objection, Hatchett's counsel initially conceded that the testimony she was trying to elicit would be hearsay.

⁸ This argument collapses under the weight of its own logic, however, because the fact that Gettleson, not Hatchett, was the vehicle for getting the statements before the jury is what distinguishes Eisenstein. In Eisenstein, the court admitted the lawyer's testimony because it was not offered to prove the truth of the matter asserted. A codefendant had already related the matters disclosed, and the lawyer's recounting of the disclosures was not needed to prove their truth. By contrast, the jury in this case would have been induced to accept the truth of the matters disclosed by Hatchett when Gettleson testified to them.

⁹ On June 15, 1989, a panel of this court reversed the order denying bond pending appeal.

¹⁰ The court actually stated: "I've had an opportunity to review this file, I've had an opportunity to review my notes, I've had an opportunity to preside over this case and I've had an opportunity to review the presentence report . . . ."

¹¹ Section 6151 provides: "When a return of tax is required under this title or regulations, the person required to make such return shall, without assessment or notice and demand from the Secretary, . . . pay such at the time and place fixed for filing the return. . . ." (Emphasis supplied.)

Dissenting Opinion

JONES, Circuit Judge, dissenting from Parts III(A) and IV(C).

I.

In Part III(A) of its opinion the majority holds that evidence offered by Frank Gettleson, Hatchett's former tax attorney, as to disclosures made by Hatchett when he sought legal advice for his tax difficulties was properly excluded as hearsay. As this testimony was vital for establishing the essential disclosure element of Hatchett's advice of counsel defense and the trial judge's improper exclusion of this evidence made proof of the advice of counsel defense substantially more difficult, I would reverse and remand.

Hatchett contends that the testimony was not offered for its truth, but instead to prove that certain disclosures were in fact made. Hatchett cites in support of his position United States v. Eisenstein, 731 F.2d 1540, 1545 (11th Cir. 1984), which in circumstances very similar to this case holds that testimony of defendant's lawyer relating to disclosure by defendant was improperly excluded as hearsay because it was offered to demonstrate the lawyer's knowledge and that defendant disclosed.

The majority holds that Gettleson's testimony as to Hatchett's disclosure was properly excluded by the trial judge as hearsay offered for the truth of the matter asserted. In reaching this conclusion, the majority has conflated two issues: first, whether the evidence was offered to demonstrate that defendant disclosed his tax situation to his attorney; and secondly, whether the content of that disclosure was true.

In answer to the first issue, there is no requirement that a litigant supply corroborating testimony in order to demonstrate that he is putting on evidence to show that certain statements were in fact made. It would be perfectly legitimate for Gettleson to testify to the fact that certain statements were made to him. The jury would then decide whether Gettleson told the truth as to the fact that the statements were made. Whether or not the statements themselves were true or not raises a wholly separate inquiry. Presumably, if Gettleson testified to Hatchett's disclosure, Hatchett would still need to produce evidence that he disclosed accurate and truthful information to Gettleson. But he need not do so with the same witness. Whether or not Hatchett ultimately put on enough evidence for the jury to infer that he had made out his advice of counsel defense has no bearing on the propriety of the trial judge's ruling on the admission of Gettleson's testimony. The appropriate procedure would have been for the trial judge to admit the testimony and give proper limiting instructions at the close of trial if they seemed appropriate.

The majority seems to place great weight on the fact that Hatchett did not testify to the matters disclosed and therefore assert their truth. The majority suggests that if Hatchett had testified, or put on other evidence that went to the truth of the disclosure he made to Gettleson, then Gettleson's statements that disclosure was made would only go to the fact of disclosure. But this argument is circular. Presumably, if the defense put on Hatchett to testify as to his conversations with Gettleson, this testimony would have been objected to as hearsay on the same grounds as Gettleson's. The defense would then have been required to corroborate Hatchett's testimony with other evidence as to the truth of his disclosure statements. The logical witness to corroborate Hatchett would be Gettleson. But then, that is where we started.

The fact of the matter is that the trial judge precluded Hatchett from putting on evidence which was essential to his only defense: advice of counsel. It was for the jury to decide whether the facts disclosed were accurate based upon a comparison of the record to the alleged disclosures to Gettleson. In order to put on Gettleson's testimony as to disclosure statements made to him by Hatchett, the defendant was not required to offer support for the truth of the disclosures independent of the facts in the record concerning the amount of his tax liability, the filing of returns, the audit, etc. The trial court and the majority are in error in ruling that independent confirmation of the truth of a statement is required when that statement is not offered for its truth.

As the exclusion of this testimony went to the heart of Hatchett's defense and therefore, to the heart of the fairness of his trial, I would reverse.

II.

I also disagree with the court's analysis and conclusions in Part IV(C) of its opinion. In that section, the majority holds that the trial court did not abuse its discretion when it made Hatchett's payment of "all back taxes" (not only those owed on indictments for which he was convicted), a condition for Hatchett's probation. The majority reasons that it was legitimate for the trial judge to include in his conditions for Hatchett's probation that Hatchett pay back taxes even on those counts for which he was acquitted because these debts represented "definite legal obligations."

The majority's reasoning here seems to me to be faulty. The fact that defendant has outstanding legal obligations unrelated to those offenses for which he was convicted should have no bearing on defendant's probation relating to his convictions. For example, it certainly would not be appropriate for the trial court to condition probation from a criminal offense on the defendant's paying his rent or his credit card debts. The absurdity and inherent danger of allowing trial courts to condition probation on the payment of debts unrelated to a defendant's convictions merely because they represent "definite legal obligations" seems clear.

In United States v. Green, 735 F.2d 1203, 1205 (9th Cir. 1984), the district court sentenced Green to three years probation for failure to file returns for the years 1975-77, on the condition that Green pay all back taxes due and owing. The Ninth Circuit ruled that the district court had overreached its authority stating that, "In criminal tax cases, the court may order restitution only of back taxes for the years involved in the conviction." Id. I agree with the Ninth Circuit's conclusion and would reverse in this case as the district court only had the authority to order restitution for the tax years in which Hatchett was convicted of a tax crime.

Such a rule makes sense not only out of basic fairness to the defendant, but also because an order to pay "all back taxes" may place an obligation on the defendant which exceeds the term of the probation and hence the court's jurisdiction over the case.

'Normal' criminal restitution remains within the equitable power of the judge who orders it; he can modify his order (or at least refuse to revoke probation for failure to comply) if the circumstances of the defendant change. When the court purports to order a particular schedule of payment extending beyond the period of the court's jurisdiction, however, the opportunity for equitable adjustment ceases.

United States v. Bruchey, 810 F.2d 456, 460 (4th Cir. 1987). Applying this reasoning in interpreting the Victim and Witness Protection Act, 18 U.S.C. §§3579 and 3580, the Bruchey court reversed the district court's conditioning defendant's 5 year probation on signing a promissory note for payment of restitution of embezzled funds over a 21 year period. While the Victim Act is not at issue here, the rationale seems apposite: the court may not order restitution which exceeds the term of probation. While the district court in the case at bar made no findings as to Hatchett's ability to pay the "restitution" ordered, it would appear given Hatchett's tenuous financial circumstances and the prior payment arrangements he negotiated with the Internal Revenue Service, that the court's order to pay "all back taxes" will involve payments beyond the 5 year probation. Thus, in addition to exceeding its authority by conditioning Hatchett's probation on the payment of debts unrelated to the convictions, the district court exceeded its authority by ordering restitution which will in all likelihood extend beyond the probation period.

I recognize that the government has an interest in recovering back taxes but it may not do so by tacking on debts unrelated to a criminal defendant's conviction by making their payment a condition of probation for offenses for which the defendant was convicted. A defendant's sentence must relate only to the crimes for which he was convicted. By allowing the government to include payment for acquitted offenses in a sentence for convicted ones, the court today unsettles this time-honored principle.

III.

For the foregoing reasons I respectfully dissent.