Attorney's Testimony Page3

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We find no abuse of discretion in the district court's disqualification of Binns. It was undisputed that Binns represented the Trust and Anderskow for purposes of responding to the grand jury subpoenas. There was also a very real possibility that Anderskow might testify at trial, thereby subjecting himself to cross-examination by Binns. We noted in Moscony that "[c]onflicts of interest arise whenever an attorney's loyalties are divided, and an attorney who cross-examines former clients inherently encounters divided loyalties." 927 F.2d at 750 (citation omitted). Since there was a strong possibility that Anderskow might face cross-examination by a former attorney, there was a serious potential for a conflict of interest which, notwithstanding Voigt's attempt to downplay it on appeal, warranted disqualification. Wheat, 486 U.S. at 153, 108 S. Ct. at 1692 (disqualification due to conflict proper despite defendant's attempts on appeal to minimize its extent).

Voigt makes much of the district court's refusal to accept Anchors' and Anderskow's proffered waiver of the attorney-client privilege in the event that Binns would have to cross-examine them at trial. Nevertheless, we find no abuse of discretion in the district court's decision. As the Wheat Court noted, at the beginning of a criminal trial, "[t]he likelihood and dimensions of nascent conflicts of interest are notoriously hard to predict ... ." Id. at 162-63, 108 S. Ct. at 1699. Here, the district court obviously feared that if during trial the nature of Binns' relationship with Anderskow and Anchors turned out to be more significant than first thought, Anchors' and Anderskow's rights to a fair trial could be jeopardized, thereby generating potential appellate issues. We have recognized that the district court has "an institutional interest in protecting the truth-seeking function of the proceedings over which it is presiding ... [and] an independent interest in protecting a fairly rendered verdict from trial tactics that may be designed to generate issues on appeal." Moscony, 927 F.2d at 749. Accord Stewart, 870 F.2d at 856-57 ("Wheat emphasized the trial judge's duty to preserve the integrity of the justice system by assuring [all] defendants a fair trial."). We find nothing improper in the district court's refusal to accept Anchors' and Anderskow's proffered waiver.

Moreover, at least one codefendant vehemently refused to waive the attorney-client privilege. Travis was a member of the Trust during the grand jury investigation and had substantial interaction with Binns during that period. Apart from the fact that this only added to the district court's growing concern about the ability of Voigt's codefendants to receive a fair trial, Binns' prior interaction with Travis may have been sufficient, in and of itself, to warrant disqualification since Binns may have acquired confidential information about her.

In Stamler, for example, we held that a trial court had properly disqualified counsel for a corporation from serving as the criminal defense attorney to the corporation's former president despite the counsel's insistence that he had received no information about the president's criminal activities while acting as counsel to the corporation. "[I]t was not unreasonable for the [trial court] to find that [the lawyer] might have obtained information related to the criminal proceeding." 650 F.2d at 480. In United States v. Rogers, 9 F.3d 1025 (2d Cir. 1993), cert. denied, 115 S. Ct. 95 (1994), the Court of Appeals for the Second Circuit upheld the disqualification of a corporate attorney who sought to represent a corporate officer after having previously attended a deposition with one of the corporation's employees. The deposition concerned the same matter giving rise to the prosecution, and the employee was to testify against the officer during the criminal trial. The Second Circuit rejected the defendant's claim that the disqualification was improper because the attorney-client relationship allegedly giving rise to the conflict was between the corporation and the attorney: "in this case, [the witness], as an employee at [the corporation] when he was deposed, should be considered a privy of the company. As such his joinder in the motion to disqualify [the attorney] was sufficient to assert the adverse nature of his interest and the confidences he may have disclosed ... ." Id. at 1031.

Here, Travis was adamant that she had imparted confidential information to Binns, and she indicated that she would take the stand in her own defense at trial, thereby subjecting herself to potential cross-examination by Binns. The district court once again had an independent duty to safeguard Travis' right to a fair trial and to protect a potential judgment against her from attack on appeal. See Moscony, 927 F.2d at 751; Stamler, 650 F.2d at 480; see also Rogers , 9 F.3d at 1025. ¹⁴

In sum, we conclude that the district court acted prudently given the unenviable situation with which it was presented. James Binns had substantial involvement in the grand jury investigation and he had sent a letter to the government tacitly acknowledging his multiple representation of Voigt, Anderskow and the Trust. In light of the district court's obvious interest in safeguarding the codefendants' rights to a fair trial by avoiding the possibility that they would be cross-examined by Binns, we hold that the presumption in favor of Voigt's constitutional right to counsel of choice had been adequately rebutted. Accordingly, we reject Voigt's claim that the disquali-fication of Binns violated his Sixth Amendment right to counsel of choice.

V.

THE MONEY LAUNDERING CONVICTIONS

Voigt alleges that his convictions on two counts of money laundering in violation of 18 U.S.C. §1956(a)(1)(A)(i) ¹⁵ are legally insufficient because the government failed to prove beyond a reasonable doubt that the financial transactions forming the basis of the laundering convictions "in fact involve[d] the proceeds of specified unlawful activity." Id. We review sufficiency of the evidence claims under a deferential standard. "It is not for us to weigh the evidence or to determine the credibility of the witnesses. The verdict of a jury must be sustained if there is substantial evidence, taking the view most favorable to the Government, to support it." United States v. Schoolcraft, 879 F.2d 64, 69 (3d Cir.) (internal citations and quotation marks omitted), cert. denied, 493 U.S. 995, 110 S. Ct. 546 (1989). If "any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt," Jackson v. Virginia , 443 U.S. 307, 319, 99 S. Ct. 2781, 2789 (1979), then the verdict of the jury must be sustained.

A.

In this case, Voigt was convicted of depositing the proceeds of a certain transaction known as the "Neville Price transaction" into an account in the First Fidelity Bank in violation of 18 U.S.C. §1956(a)(1)(A)(i). The evidence adduced at trial demonstrated that on October 1, 1991, a $500,000 advance fee from the "Neville Price" transaction was deposited into codefendant Ralph Anderskow's escrow account, which at the time contained over $600,000 from other sources. On October 4, 1991, two wire transfers were made from Anderskow's account to Voigt's First Fidelity account, one for $90,000 and the other for $32,000. These deposits formed the basis of the two money-laundering convictions that Voigt now challenges. Voigt contends that because only $500,000 out of the $1.1 million in Anderskow's account was "tainted," the government failed to prove beyond a reasonable doubt that the two wire transfers, which totaled $122,000, "involve[d] the proceeds of specified unlawful activity." Id.

B.

Voigt concedes that not all of the money involved in a financial transaction that is the subject of a money laundering charge must derive from the proceeds of money laundering activity. Rather, he contends that because Congress required that the financial transaction "in fact involve[]" the "proceeds of specified unlawful activity," id. (emphasis added), the government must prove that at least one dollar (or, even, one penny) is traceable to the proceeds of unlawful activity--a mathematical impossibility in cases such as this where (1) the wire transfers came from an account in which tainted funds had been commingled with untainted funds, and (2) the amount of the transfer was less than the amount of untainted funds in the account. Both the government and Voigt characterize the issue as one involving "which side should bear the uncertainty when tracing becomes an impossibility." Government's Br. at 46.

While the trend in our sister circuits has been to reject the sort of legal sufficiency challenge raised by Voigt as a matter of statutory construction, see United States v. Cancelliere, 69 F.3d 1116, 1120 (11th Cir. 1995), we need not decide this issue, because we conclude that Voigt's claim fails on the facts. While the flow-chart that the government relied on to establish the source of the $122,000 deposit does not reveal the source of the other funds in Anderskow's account, Anderskow himself conceded on cross-examination that all but $26,000 of the funds deposited into his Continental Bank account between 1990 and 1993 were advance fees paid by borrowers of and investors in the Trust. As there was uncontroverted evidence at trial that no borrower or investor ever received any funds from the Trust, and as the jury found that the Trust was the engine of a scheme to defraud, we conclude that a rational trier of fact could easily have concluded that virtually all of the funds in Anderskow's account at the time of the $122,000 transfer represented the fruits of specified illegal activity.

VI.

THE FORFEITURE ORDER

In connection with the four money laundering counts charged in the superseding indictment, the government brought separate criminal forfeiture allegations under 18 U.S.C. §982 seeking forfeiture of certain vehicles and pieces of jewelry either as "involved in" or "traceable to" Voigt's money laundering activity, id. §982(a)(1) , ¹⁶ or as substitute assets under 21 U.S.C. §853(p)(5), ¹⁷ the CCE criminal forfeiture provision, which is incorporated in 18 U.S.C. §982(b)(1) . ¹⁸ At a nonjury proceeding conducted prior to sentencing, the district court determined that Voigt's money laundering convictions rendered him liable to the government for $1,661,960 in criminal forfeiture. In satisfaction of that amount, the court ordered forfeiture of, inter alia, two pieces of jewelry, finding "by a preponderance of the evidence" that they were "items personal property ... traceable to the money involved in the [money-laundering] violations. App. at 1246. The jewelry had been purchased with funds from an account in which money laundering proceeds had been commingled with other funds--numerous deposits and withdrawals having intervened between the deposit of the laundered funds and the purchase of the jewelry.

Voigt raises two assignments of error. First, he contends that the district court applied the wrong burden of persuasion. He maintains that our decision in United States v. Pelullo, 14 F.3d 881 (3d Cir. 1994), requires the government to prove its forfeiture allegations beyond a reasonable doubt. Second, Voigt asserts that the government failed to prove that the jewelry it sought was "traceable to" the proceeds of his money laundering activity, since it had been purchased with commingled funds from an account subject to numerous intervening deposits and withdrawals after the original deposit of the laundered funds.

Both of these contentions raise issues of first impression in this circuit. With respect to the burden-of-proof issue, we conclude, as did the district court, that the preponderance standard applies. We agree with Voigt, however, that the numerous intervening deposits and withdrawals into his account subsequent to the deposit of the tainted funds make it impossible to say that the two items of jewelry are "traceable to" property "involved in" the money laundering offense. Accordingly, we will vacate the forfeiture order that was incorporated into the judgment and remand for further proceedings.

A.

The forfeiture provision upon which the court's order was based, 18 U.S.C. §982 , provides that a district court sentencing a person convicted of, inter alia, money laundering in violation of 18 U.S.C. §1956, "shall order that the person forfeit to the United States any property, real or personal, involved in such offense, or any property traceable to such property." 18 U.S.C. §982(a)(1) . Voigt first contends that the government's burden of persuasion for criminal forfeiture under 18 U.S.C. §982(a)(1) is proof beyond a reasonable doubt. We have not yet had occasion to address the burden-of-proof issue with respect to §982(a)(1) , and to date only one other court of appeals has considered it, concluding that preponderance-of-the-evidence standard applies. United States v. Myers, 21 F.2d 826, 829 (8th Cir. 1994), cert. denied, 115 S. Ct. 742 (1995). We have, however, addressed this issue twice previously in the context of other criminal forfeiture provisions. Pelullo, 14 F.3d at 881 (RICO; reasonable doubt); United States v. Sandini, 816 F.2d 869 (3d Cir. 1987) (CCE; preponderance). A description of the Sandini, Pelullo and Myers decisions is in order.

1.

In Sandini, 816 F.2d at 869, we addressed the appropriate burden of persuasion under 21 U.S.C. §853 , the CCE criminal forfeiture provision. The defendant there argued that §853(d) 's inclusion of a rebuttable presumption of forfeitability if the government could demonstrate two factors by a preponderance of the evidence was unconstitutional to the extent it failed to require proof beyond a reasonable doubt. After discussing the history of and distinction between civil in rem and criminal in personam forfeiture, we concluded that criminal forfeiture under CCE constitutes punishment for a crime, and not a separate element of the offense, notwithstanding FED. R. CRIM. P. 7(c)(2) (requiring the indictment to specify the extent or interest of the property subject to forfeiture) and FED R. CRIM. P. 31(e) (requiring the jury to return a special verdict on same). Sandini, 816 F.2d at 875 & n.7 ("assumption" in Rule 31(e) that forfeiture is element of the offense to be tried and proved is akin to nonbinding legislative history). Because other federal statutes providing for enhanced penalties have established the government's burden of proof as a preponderance of the evidence, we concluded that §853(d) withstands constitutional scrutiny as long as the forfeiture proceeding follows a conviction by proof beyond a reasonable doubt.

Seven years later we confronted the same question in the context of 18 U.S.C. §1963, the RICO statute's criminal forfeiture provision. Pelullo, 14 F.3d at 881. We held that the beyond-a-reasonable-doubt standard governs such forfeitures. Our conclusion was premised mainly on Congress' simultaneous amendments to the RICO and CCE forfeiture statutes in 1984, and its decision not to add a rebuttable presumption provision to §1963(a) when it added such a provision to the CCE statute. See 21 U.S.C. §853(d) (discussed in Sandini, 816 F.2d at 874-75). We concluded that the omission was deliberate and, hence, dispositive: "This indicates that Congress intended the higher beyond a reasonable doubt standard to control in a §1963(a) proceeding. If Congress wanted a preponderance standard for §1963(a), it would have so stated as it specifically did for CCE." Pelullo, 14 F.3d at 905. See id. at 903 ("Most important, the CCE rebuttable presumption ... does not exist in the RICO forfeiture provisions.") (citations omitted). We distinguished our decision in Sandini on the basis that it pertained only to CCE and could not bind a future panel of this court considering a different forfeiture provision. See id. ("Sandini does not decide the issue in this case because the statute at issue there was CCE, not RICO.").

In Myers, 21 F.3d at 826, the Court of Appeals for the Eighth Circuit concluded that the government's burden of proof under §982(a)(1) was the preponderance standard. Noting that it had decided in a different case handed down the same day that the preponderance standard governed forfeitures under CCE, the court reasoned that

[t]he language of the money laundering forfeiture statute is very similar to the language of section 853(a) . By stating that "the court, in imposing sentence on a person convicted" of a money laundering offense, shall forfeit property involved in the offense, Congress indicates that forfeiture under the money laundering provision is also a sentencing sanction, not an offense or element of an offense.

Id. at 829 (alteration omitted).

2.

While Sandini and Pelullo are useful guides, we begin by observing that prior decisions of this court interpreting different criminal forfeiture provisions do not constitute binding precedent on the issue before us. Similarly, the reasoning underlying those decisions is not binding, although to the extent that the statutes are analogous it may be persuasive. We must begin the task afresh and determine which burden of proof Congress intended to apply to §982(a)(1) .

Perhaps the most striking feature of the forfeiture provision is that it requires the district court to order forfeiture "in imposing sentence on a person [already] convicted of an offense in violation of ... section 1957 ... of this title ... . " 18 U.S.C. §982(a)(1) (emphasis added). As the Myers court observed, the plain language of the statute reveals that forfeiture is a form of sentence enhancement that follows a previous finding of personal guilt. Myers, 21 F.3d at 829. As a result, we conclude that the preponderance, not the reasonable doubt, standard governs forfeiture under §982(a)(1) .

Voigt's most forceful argument to the contrary is that when Congress enacted the money laundering forfeiture statute, it specifically incorporated in §982(b)(1) , the statute's procedural component, virtually all of the subsections of 21 U.S.C. §853 , the procedural provisions of the CCE forfeiture statute, yet it omitted §853(d) , the rebuttable presumption provision we found dispositive in Sandini. Relying on Pelullo, where we attached much significance to Congress' failure to add a provision like §853(d) to RICO's forfeiture provision, Voigt argues that Congress' decision not to include §853(d) as one of the subsections incorporated via §982(b)(1) evinces an intent to require application of the reasonable doubt standard. We think Voigt's argument proves too much. At most, Congress may have decided it did not want the rebuttable presumption to apply in money laundering cases. But that by no means compels us to conclude that the reasonable doubt standard should apply in such cases.

Furthermore, acknowledging that the burden of proof is simply a means of expressing our tolerance for erroneous outcomes, there are good reasons for employing the reasonable doubt standard in the RICO context but not in the money laundering context. The RICO forfeiture provision is by far the most far reaching, requiring the district court to order forfeiture of "any interest the person has acquired or maintained in violation of section 1962," 18 U.S.C. §1963(a)(1), as well as any "interest in," "security of," "claim against," or "property or contractual right of any kind affording a source of influence over[] any enterprise which the person has established, operated, controlled, conducted, or participated in the conduct of in violation of section 1962." Id. §1963(a)(2). The statute further requires forfeiture of "any property constituting, or derived from, any proceeds which the person obtained, directly or indirectly, from racketeering activity ... in violation of section 1962." Id. §1963(a)(3). Section 1963(a)'s coverage, to say the least, is extremely broad and sweeping. See Rusello v. United States, 464 U.S. 16, 26, 104 S. Ct. 296, 302 (1983) ("The legislative history clearly demonstrates that the RICO statute was intended to provide new weapons of unprecedented scope for an assault upon organized crime and its economic roots."); Craig W. Palm, RICO Forfeiture and the Eighth Amendment: When is Everything Too Much?, 53 U. Pitt. L. Rev. 1, 27 (1991) ("The most striking aspect of RICO's forfeiture provisions is their unprecedented nature and breadth. The language of the forfeiture provisions is extremely broad and comprehensive ... ."). Indeed, §1963(a) sweeps far more broadly than the elements of the substantive RICO offense itself. See 18 U.S.C. §1962. Accordingly, since the identity and extent of property subject to forfeiture will not have been addressed in the course of proving the substantive RICO charge, a reasonable doubt burden of persuasion ensures greater accuracy in determining the scope of property subject to forfeiture.

In the money laundering context, by contrast, the forfeiture provision makes clear that the government is entitled only to property "involved in" or "traceable to" money laundering activity. See generally United States v. $448,342.85, 969 F.2d 474, 476 (7th Cir. 1992) (government entitled only to "funds" used in offense, not whole account into which such funds had been deposited). Furthermore, "property involved in a financial transaction" is part of an element of the money laundering offense, see 18 U.S.C. §1956(a)(1), and the term "transaction" is defined in the statute. See id. §1956(c)(3). Unlike the RICO context, we have no reason to doubt that the amount of the transaction that forms the basis of a substantive money laundering offense will be identified in the indictment and, thus, that its connection to money laundering activity will have been proved beyond a reasonable doubt at trial. As the government has observed, in many cases the only factual issues left for resolution after trial will be whether particular items bought with tainted funds are "traceable to" money laundering activity. Applying a beyond-a-reasonable-doubt standard to that issue appears unnecessary. Accordingly, we agree with the Eighth Circuit's decision in Myers that the government's burden for forfeiture under §982(a)(1) is the preponderance standard.

B.

Voigt next argues that the government failed to prove that the money used to purchase the jewelry in question was "traceable to" money laundering proceeds, as required by 18 U.S.C. §982(a)(1) . His argument is based on the fact that the jewelry was purchased with funds drawn from an account in which money laundering proceeds had been commingled with other funds, and that those funds were further "diluted" by numerous intervening deposits and withdrawals. Voigt asserts that if the jewelry was subject to forfeiture, it was under 21 U.S.C. §853(p)(5), the CCE substitute asset provision incorporated into the money laundering forfeiture scheme via 18 U.S.C. §982(b)(1) . The government counters by observing that criminal forfeiture is an in personam punishment, which obviates the need for strict tracing, especially where tainted and untainted funds are commingled in a bank account, making tracing a virtual impossibility.

1.

The government's observation concerning the in personam nature of criminal forfeiture is helpful to a certain extent: the amount of forfeiture to which the government is entitled under 18 U.S.C. §982 is not dictated by whether the government can prove that certain of the defendant's property is in fact property "traceable to" money laundering activity. When a defendant has been convicted of committing $1.6 million in money laundering offenses (as Voigt was here), the government has proved beyond a reasonable doubt that it is entitled to $1.6 million in criminal forfeiture; that amount represents property "involved in" money laundering activity for purposes of §982(a)(1) . What is at issue here is the question of how the government may go about seizing property in satisfaction of that $1.6 million amount. ¹⁹

The government's principal contention is that money is fungible, making it impossible to differentiate between "tainted" and "untainted" dollars in a bank account. The government also advances what is clearly a policy argument, contending that interpreting the term "traceable to" to require even some tracing "would perversely permit money launderers to escape with all of their proceeds intact simply by commingling such tainted proceeds with untainted sums--a result Congress could not have intended." Government's Br. at 53.

To support its arguments, the Government has cited a number of cases dealing with the tracing issue in the context of 18 U.S.C. §1963(a), the RICO statute's criminal forfeiture provision. See generally United States v. Rob ilotto, 828 F.2d 940, 949 (2d Cir. 1987), cert. denied, 484 U.S. 1011, 108 S. Ct. 711 (1988); United States v. Ginsburg, 773 F.2d 798, 802-03 (7th Cir. 1985) (en banc), cert. denied, 475 U.S. 1011, 106 S. Ct. 1186 (1986); United States v. Conner, 752 F.2d 566, 576 (11th Cir.), cert. denied 474 U.S. 821, 106 S. Ct. 72 (1985). These cases hold that where crime proceeds have been commingled in a bank account with untainted funds, tracing is not required. The reasoning supporting those holdings is (1) the in personam nature of criminal forfeiture, and (2) the courts' conclusion that when Congress used the term "traceable to," it could not have intended to require the government to demonstrate some nexus between the criminal activity and the property sought--at least not where cash has been deposited into a bank account.

Regardless of whether these cases were correct on their merits, however, they were decided before the President signed into law the Anti-Drug Abuse Act of 1988. Pub. L. No. 100-690, 102 Stat. 4374-75 (1988). With that act Congress added subsection (b) to §982 , which incorporates the CCE forfeiture statute's "substitute asset" provision:

[i]f any of the property described in subsection (a) of this section, as a result of any act or omission of the defendant ... has been commingled with other property which cannot be divided without difficulty; the court shall order the forfeiture of any other property of the defendant up to the value of any property described in paragraph[] ... (5).

21 U.S.C. §853(p)(5). The inclusion of the substitute asset provision in the money laundering forfeiture scheme represents Congress' express recognition that property subject to criminal forfeiture can be commingled with "untainted" property. It may also be an acknowledgement by Congress that its earlier-enacted criminal forfeiture provisions, such as RICO and CCE, were unartfully drafted to the extent that they failed to address the problem posed by commingled property.

In our view the specific inclusion in §982 of a substitute asset provision precludes us from interpreting the term "traceable to," as did the courts in the RICO context, to avoid a perceived bad policy result. See United States v. Ripinsky, 20 F.3d 359, 365 n.8 (9th Cir. 1994) ("§982 ... defines forfeitable assets to be only those associated with the underlying offense or traceable to the offense and distinguishes between 'forfeitable' and 'substitute' assets."). Because Congress has made the determination not to "perversely permit money launderers to escape with all of their proceeds intact simply by commingling such tainted proceeds with untainted sums. ...," Government's Br. at 53, we should not be in the business of overlooking the plain terms of a statute in order to implement what we, as federal judges, believe might be better policy. ²⁰Accordingly, the government's policy arguments, along with the cases supporting them, are inapposite.

Seeking to avoid our conclusion that cases decided prior to the enactment of the money laundering forfeiture statute are not controlling, the government observes that in 1986 Congress added a substitute asset provision to RICO's forfeiture scheme. Relying on In re Billman, 915 F.2d 916, 920 (4th Cir. 1990), cert. denied, 500 U.S. 952, 111 S. Ct. 2258 (1991), the government contends that the addition of a substitute asset provision to the RICO statute could not affirmatively undo the settled judicial determination that the words "traceable to" in the RICO forfeiture statute do not require tracing of commingled funds. The government therefore suggests that in the money laundering forfeiture context it can seek forfeiture of items purchased with commingled funds either as "traceable to" or as substitute assets. We disagree.

As the Ninth Circuit's decision in Ripinsky makes clear, the government's position is internally inconsistent. The substitute asset provision comes into play only when forfeitable property cannot be identified as directly "involved in" or "traceable to" money laundering activity. Clearly, if funds commingled in a bank account are sufficiently identifiable as to be considered "traceable to" money laundering activity, then the substitute asset provision should have no applicability whatsoever. Accordingly, the government's contention that the "traceable to" and substitute asset theories merely create alternative paths to forfeiture, which the government may choose at its option, is illogical.

We also do not understand why an amendment to a statute cannot affirmatively reverse, or at least cast substantial doubt on, prior court decisions interpreting earlier versions of that statute. This is especially true where, in undertaking to discern the plain meaning, those decisions essentially held (for policy reasons) that Congress simply could not have meant what it said. Indeed, if the legitimacy of the courts' interpretation of the RICO statute had been beyond doubt, then the addition of a substitute asset provision to the RICO, CCE and money laundering criminal forfeiture schemes would seem superfluous.

Furthermore, we think the government's interpretation of Billman proves too much. In Billman the Fourth Circuit cited to the prior case law holding that the in personam nature of criminal forfeiture makes tracing under the RICO statute's forfeiture provision unnecessary. It then made the unremarkable observation, which the government apparently finds significant, that "[t]hese principles are embodied in an amendment to the act, which makes provision for the forfeiture of substitute assets." 915 F.2d at 920. Contrary to the government's interpretation, however, that observation may signal the Fourth Circuit's view (which we expressed above) that Congress recognized its unartfulness in using the term "traceable to" in its forfeiture statutes. Moreover, the Fourth Circuit may have recognized that in amending forfeiture statutes to include a substitute asset provision, Congress may have appreciated that courts had been stretching to avoid the result of applying the plain meaning of the term "traceable to" to commingled property. ²¹

Even if Billman can be read to suggest that the addition of a substitute asset provision to RICO's criminal forfeiture scheme cannot undo prior judicial interpretations of the words "traceable to" in the RICO context, we simply cannot ignore the plain fact that the money laundering criminal forfeiture provision contains a substitute asset provision that appears to be addressed directly to the situation confronting us in this case. We are unaware of any decision that has imported the restrictive definition of "traceable to" prevalent in the RICO context into the money laundering forfeiture scheme.

In sum, to accept the government's argument that "traceable to" does not mean what it says for purposes of commingled property, in effect would render the substitute asset provision a nullity, in contravention of a well-settled canon of statutory construction that "courts should disfavor interpretations of statutes that render language superfluous." Connecticut Nat'l Bank v. Germain, 503 U.S. 249, 253, 112 S. Ct. 1146, 1149 (1992).

2.

We hold that the term "traceable to" means exactly what it says. ²² In light of our holding on the burden of proof, this means that the government must prove by a preponderance of the evidence that the property it seeks under §982(a)(1) in satisfaction of the amount of criminal forfeiture to which it is entitled has some nexus to the property "involved in" the money laundering offense. For example, if the defendant receives $500,000 cash in a money laundering transaction and hides the cash in his house, the government may seize that money as property "involved in" the money laundering offense. If the defendant purchased a $250,000 item with that money, the government may seek the remaining cash as "involved in" the offense, whereas the item purchased is subject to forfeiture as property "traceable to" property involved in the money laundering offense.

Where the property involved in a money laundering transaction is commingled in an account with untainted property, however, the government's burden of showing that money in the account or an item purchased with cash withdrawn therefrom is "traceable to" money laundering activity will be difficult, if not impossible, to satisfy. While we can envision a situation where $500,000 is added to an account containing only $500, such that one might argue that the probability of seizing "tainted" funds is far greater than the government's preponderance burden (50.1%), such an approach is ultimately unworkable. As the Seventh Circuit, speaking through Judge Easterbrook, has observed, a bank account is simply a number on a piece of paper:

Bank accounts do not commit crimes; people do. It makes no sense to confiscate whatever balance happens to be in an account bearing a particular number, just because proceeds of crime once passed through that account. . . . An "account" is a name, a routing device like the address of a building; the money is the "property" [for purposes of the forfeiture statute]. Once we distinguish the money from its container, it also follows that the presence of one illegal dollar in an account does not taint the rest--as if the dollar obtained from [money laundering activity] were like a drop of ink falling into a glass of water.

$448,342.85, 969 F.2d 474, 476 (7th Cir. 1992). ²³

The solution, we think, is to give effect to the substitute asset provision. See 18 U.S.C. §982(b)(1) (incorporating 21 U.S.C. §853(p)(5)). Thus, once a defendant has commingled laundered funds with untainted funds--whether in a bank account or in a tattered suitcase--such that they "cannot be divided without difficulty," 21 U.S.C. §853(p)(5), ²⁴ the government must satisfy its forfeiture judgment through the substitute asset provision. Once property subject to forfeiture under §982(a)(1) is no longer identifiable due to some act of the defendant, the government may seek any property, cash or merchandise, in satisfaction of the amount of criminal forfeiture to which it is entitled.

3.

In light of our analysis, the district court's forfeiture order, which is incorporated into Voigt's judgment of conviction and sentence, cannot stand. Even under the preponderance standard, the items of jewelry cannot be considered "traceable to" the proceeds of money laundering activity; the jewelry was purchased with funds from an account into which money laundering proceeds had been commingled with other funds, and after numerous intervening deposits and withdrawals. We therefore cannot say that, more probably than not, the jewelry is "traceable to" money laundering activity.

Notwithstanding our conclusion, the government continues to be entitled to $1.6 million in criminal forfeiture. But to the extent that the forfeiture order incorporated in the judgment required Voigt to hand jewelry over to the government under an erroneous legal determination, the government is improperly in possession of that jewelry. We do not envision that the district court will have to conduct a de novo forfeiture proceeding on remand. Since all that is at issue is the process by which the government may seize property in satisfaction of the $1.6 million to which it is lawfully entitled, on remand the government should be permitted to move to amend the judgment to reflect that the jewelry is forfeitable as a substitute asset. Cf. United States v. Hurley, 63 F.3d 1, 23 (1st Cir. 1995) (no error where, after notice of appeal from conviction was filed, government moved for and received from district court permission to seize certain property as "substitute assets"); Todd Barnet & Ivan Fox, Trampling on the Sixth Amendment: The Continued Threat of Attorney Fee Forfeiture, 22 Ohio N.U. L. Rev. 1, 55 (1995) ("The substitute assets provisions constitute a procedural alternative for collecting a forfeiture judgment and are not a form of punishment in their own right....").

VII.

THE TAX EVASION CONVICTIONS

Voigt contends that his convictions on two counts of tax evasion under 26 U.S.C. §7201 (relating to the 1990 and 1991 tax years) are legally insufficient because the government failed to adduce evidence of an "affirmative act" of tax evasion, which is an essential element of the offense.

A.

Prior to trial, Voigt moved for and received a bill of particulars relating to the tax evasion counts because the indictment failed to specify the affirmative acts on which the government intended to rely at trial. The bill of particulars indicated four separate acts of evasion: (1) Voigt's submission of a partially false and partially incomplete Internal Revenue Service ("IRS") Form 433-A understating the amount in his First Fidelity Bank account, his failure to fulfill his promise to provide the missing information to an IRS agent, and his failure to tell the agent of his advance-fee income earned in 1989 and 1990; (2) Voigt's decision not to purchase a piece of jewelry with cash when informed that a Currency Transaction Report would have to be filed with the IRS; (3) Voigt's role in requiring potential victims of the Trust to fill out bizarre confidentiality agreements that forbade them from disclosing details of their transaction; and (4) Voigt's maintenance of overseas bank accounts and his direction to Anderskow to wire funds into those accounts. At trial the government introduced evidence on all four affirmative acts.

B.

Essential to a conviction under 26 U.S.C. §7201 is "1) the existence of a tax deficiency, 2) an affirmative act constituting an attempt to evade or defeat payment of the tax, and 3) willfulness." United States v. McGill [92-1 USTC ¶50,052 ], 964 F.2d 222, 229 (3d Cir.), cert. denied, 506 U.S. 1023, 113 S. Ct. 664 (1992). Voigt claims that the government's proof at trial failed to establish the second element as a matter of law because none of the alleged affirmative acts shows that his purpose was to evade the payment of taxes. Bearing in mind that "[o] ur review of the sufficiency of the evidence is 'governed by strict principles of deference to a jury's findings,' " id. (quoting United States v. Ashfield [84-2 USTC ¶9530 ], 735 F.2d 101, 106 (3d Cir.), cert. denied, 469 U.S. 858, 105 S. Ct. 189 (1984)), we reject Voigt's legal sufficiency challenge.

1.

With respect to the first affirmative act charged by the government, the submission in September of 1990 of a materially misleading Form 433-A, Voigt claims that "[t]hese false statements could not ... have been used to evade taxes for 1990 and 1991, taxes which were not even due until April 15, 1991 and April 15, 1992, respectively." Voigt's Br. at 36. The IRS uses Form 433-A to identify potential assets with which a taxpayer who owes back taxes can pay them and to establish a method of collection. Since the form at issue dealt with payment of taxes owed in (or prior to) 1990, and since it was submitted before the deficiencies that are the focus of the tax evasion charges arose, Voigt contends that it cannot have been calculated "to mislead the government or conceal funds to avoid payment of an admitted and accurate deficiency" as a matter of law. McGill [92-1 USTC ¶50,052 ], 964 F.2d at 230 (emphasis added).

In McGill we addressed the question whether an affirmative act can predate the existence of a tax deficiency and cited to conflicting authority on that issue. We declined to answer that question definitively, however, because the crime charged in the indictment pointed to the date the deficiency arose as the date of the offense: "The indictment by its terms required the jury to look forward in time for evidence of affirmative acts." Id. at 231. Once again, we decline the parties' invitation to rule as a general matter on whether predeficiency conduct can satisfy the statute's "affirmative act" element. For here, as in McGill, the superseding indictment charged Voigt with violating 26 U.S.C. §7201 "[o]n or about April 15, 1991" and "[o]n or about April 15, 1992." App. at 432, 433. Accordingly, even if conduct predating the existence of a deficiency can constitute proof of an affirmative act of tax evasion, the government's failure to include the predeficiency period in the indictment's specification of the offense charged precludes it from relying on conduct predating the existence of the deficiency as substantive evidence of affirmative acts of evasion. McGill [92-1 USTC ¶50,052 ], 964 F.2d at 231 ("The Government must prove attempted evasion for each count beginning at the dates [charged in the indictment]."). ²⁵

This same reasoning applies to the government's contentions that Voigt's failure to fulfill his promise to provide the IRS agent with income information missing from his Form 433-A and his failure to disclose to the IRS agent advance-fee income earned in 1989 and 1990 constitute affirmative evasive acts. These actions, like the submission of the false Form 433-A in the first place, were taken in the context of a collection action for delinquent taxes from prior years, and preceded the tax liabilities on which the evasion charges are based. As with the submission of the false Form 433-A, we believe that the circumstances do not warrant a finding that these prior acts were affirmative evasive acts that laid the groundwork for later tax evasion.

2.

Nevertheless, the three additional affirmative acts proved by the government at trial, when taken together, are sufficient to sustain the jury's verdict. The Supreme Court has said of the affirmative act element that "[i]f the tax evasion motive plays any part in such conduct[,] the offense may be made out even though the conduct may also serve other purposes such as concealment of other crime." Spies v. United States [43-1 USTC ¶9243 ], 317 U.S. 492, 499, 63 S. Ct. 364, 368 (1943). Elaborating on the "affirmative act" requirement, we stated in McGill that an "affirmative act is anything done to mislead the government or conceal funds to avoid payment of an admitted and accurate deficiency." McGill [92-1 USTC ¶50,052 ], 964 F.2d at 230. We also noted that "[o]ne act will suffice." Id. at 229 (citing United States v. Conley [87-2 USTC ¶9469 ], 826 F.2d 551, 556-57 (7th Cir. 1987)). Whereas simple nonpayment of taxes owed cannot sustain a conviction under the statute, acts intended to conceal or mislead are sufficient.

Voigt argues that the government's proofs as to the second, third and fourth affirmative acts were legally insufficient because they were equally consistent with innocent activity and, more specifically, because there was no evidence linking them to a "motive" or "intent" to evade. According to Voigt, therefore, there must be direct evidence of intent before a rational trier of fact can conclude beyond a reasonable doubt that an affirmative act was undertaken, in part, to evade the payment of income tax. Voigt's legal proposition is without precedential support.

In the majority of criminal cases, the element of intent is inferred from circumstantial evidence. See generally United States v. Iafelice, 978 F.2d 92, 98 (3d Cir. 1992) ("It is not unusual that the government will not have direct evidence. [Mens rea] is often proven by circumstances."). The rule is no different in tax evasion prosecutions. The Supreme Court in Spies stated that "any conduct, the likely effect of which would be to mislead or conceal," is sufficient to satisfy the "affirmative act" element. Spies [43-1 USTC ¶9243 ], 317 U.S. at 499, 63 S. Ct. at 368 (emphasis added). Accord United States v. Mal [91-2 USTC ¶50,518 ], 942 F.2d 682, 687 (9th Cir. 1991) (evasion of payment "involves conduct designed to place assets beyond the government's reach after a tax liability has been assessed") (emphasis added); Conley [87-2 USTC ¶9469 ], 826 F.2d at 556 (rational jury can infer intent to evade upon learning of manner in which defendant conducted his financial affairs); United States v. Shorter [87-1 USTC ¶9127 ], 809 F.2d 54, 57-58 (D.C. Cir.) (jury could infer intent to evade where defendant carried on "cash lifestyle"), cert. denied, 484 U.S. 817, 108 S. Ct. 71 (1987); United States v. Voorhies [81-2 USTC ¶9710 ], 658 F.2d 710, 714-15 (9th Cir. 1981) ("Voorhies' conduct in 1974 [of liquidating assets and transporting proceeds to Switzerland ] had the 'likely effect' of misleading or concealing."). These cases simply require that there be some evidence from which a jury could infer an intent to mislead or conceal beyond mere failure to pay assessed taxes; it is for the jury to determine, as a matter of fact, whether the affirmative act was undertaken, in part, to conceal funds from or mislead the government.

We have no difficulty concluding, therefore, that Voigt's refusal to pay for a piece of jewelry in cash; his use of bizarre confidentiality agreements; and his maintenance of overseas bank accounts, taken together, provided the jury with sufficient evidence from which it could infer that they were "designed" to evade the payment of admitted tax deficiencies, even if such actions otherwise might constitute wholly innocent conduct. See United States v. Jungles [90-1 USTC ¶50,289 ], 903 F.2d 468, 473-74 (7th Cir. 1990) (activity that is lawful itself can constitute affirmative act to evade); see also United States v. Pollen, 978 F.2d 78, 86 (3d Cir. 1992) (transporting funds to foreign countries, thereby making it more difficult to trace, provides inference of intent to evade), cert. denied, 508 U.S. 906, 113 S. Ct. 2332 (1993).

The evidence at trial indicating a possible motive unrelated to tax obligations for some or all of the affirmative acts, upon which Voigt heavily relies on appeal, was before the jury. It chose to reject Voigt's proffered interpretation and accept the government's. Given our deferential standard of review, United States v. Casper, 956 F.2d 416, 421 (3d Cir. 1992), along with the settled rule that we draw all reasonable inferences in favor of the jury's verdict, Jackson v. Virginia, 443 U.S. 307, 319, 99 S. Ct 2781, 2789 (1979), we may not substitute our (or Voigt's) judgment for that of the jury; Voigt's legal sufficiency challenge is essentially a futile attempt to rehash his closing argument.

Finally, even were we to agree that, standing alone, the three remaining affirmative acts were insufficient to establish Voigt's intent to evade payment, our decision in McGill instructs that the jury was entitled to consider Voigt's submission of a materially misleading Form 433-A in 1990 as relevant evidence on the question whether his later actions were intended to be evasive. See supra n.25. This provided the jury with ample basis on which to convict, since in 1990 Voigt had materially misled the IRS in order to hamper its attempts to collect back taxes. The jury readily could have concluded that Voigt's later actions were not innocent as Voigt claimed but, rather, were part of a conscious and continued attempt to thwart the IRS's collection efforts. Accordingly, we reject Voigt's legal sufficiency challenge to his tax evasion convictions.

VIII.

THE RESTITUTION ORDER

At sentencing, the district court ordered Voigt to make $7,040,000 in restitution. Finding that Voigt had secreted substantial sums of money derived from the Trust's advance-fee scheme, the district court noted in its amended judgment that

as was demonstrated at trial and at various motion hearings, [] defendant has himself deposited or forwarded to others for deposit in various accounts in various European banks, millions of dollars in cash and other property. To cite but two examples, the Government has already obtained a release and assignment of funds and property currently frozen at United Overseas Bank in Switzerland in the account of defendant's former girlfriend; and the Government has received a similar release and assignment from defendant pertaining to funds frozen in his accounts at the same bank.

pp. at 1394. Voigt now challenges the district court's restitution order and, more specifically, the lack of "specific findings" as to his ability to pay. Claiming that "there is no evidence of any funds elsewhere," Voigt's Br. at 48, Voigt asks us to vacate the restitution order and remand for recalculation. We review the restitution award for abuse of discretion. United States v. Graham, 72 F.3d 352, 355 (3d Cir. 1995), cert. denied, 116 S. Ct. 1286 (1996).

A.

In United States v. Logar, 975 F.2d 958 (3d Cir. 1992), we held that when a district court imposes an order of restitution under the Victim and Witness Protection Act ("VWPA"), codified at 18 U.S.C. §§3663-64, it is required " 'to make specific findings as to the factual issues that are relevant to the application of the restitution provisions....' " Id. at 961 (quoting United States v. Palma , 760 F.2d 475, 480 (3d Cir. 1985)). One of the relevant provisions to which the requirement of specific factual findings applies is "the defendant's ability to pay and the financial need of defendant and the defendant's dependents." United States v. Copple, 24 F.3d 535, 549 (3d Cir.) ("Copple I") (citing Logar, 975 F.2d at 961), cert. denied, 115 S. Ct. 488 (1994)). The restitution amount must reflect the defendant's ability to pay within five years after the date of sentencing. 18 U.S.C. §3663(e)(2)(C).

In Copple I, the district court ordered restitution of approximately four million dollars after simply adopting as its factual findings the amount of loss to the victims calculated in the presentence report, but without specific findings on either the amount of loss or Copple's ability to pay. After the case had been remanded to the district court and a resentencing hearing had been held, the court reinstated its restitution order of four million dollars. Although it had made specific findings concerning the amount of the loss, which Copple did not challenge, the district court found that despite the defendant's current financial hardship, he had the potential to earn money in the future given his past success as a businessman.

On appeal a different panel of this court again vacated the restitution award and remanded for resentencing. United States v. Copple, 74 F.3d 479 (3d Cir. 1996) ("Copple II"). We found that a defendant's past success as a businessman, alone, could not justify the four-million-dollar restitution award, since it was unrealistic that the defendant would be able to earn that amount of money over five years. The court made no "findings about Copple's financial needs, and observed only that 'the family is in dire financial straights at this time,' an assertion hardly supportive of the exceptionally large restitution amount it ultimately ordered." Id. at 483.

As to the government's contention that the restitution award should be sustained because it implicitly reflected amounts attributable to assets Copple acquired with misappropriated funds, we agreed that

[t]he proceeds from a defendant's illegal conduct that the defendant still retains or can recoup are certainly encompassed within the "financial resources of the defendant" that the district court should consider in fashioning a restitution order. Of course, the continued existence of such proceeds is a factual issue that should be accompanied by "specific findings."

Id. at 484 (citation omitted). We went on to note that, in determining a restitution award based on "the court's reasonable belief that there are secreted assets," id., the district court may calculate the total proceeds of defendant's crime minus amounts already accounted for, and then place the burden of accounting for the remainder on the defendant. The defendant may point to specific disbursements indicating that he is no longer in possession of funds obtained as a result of his crimes or assets purchased therewith. "Unless [the defendant] can disprove possession of any remaining amount in this manner, the court may consider the resulting figure as constituting 'financial resources of the defendant.' " Id.

B.

In light of our decision in Copple II, which was filed after briefing and argument in this case had been completed, we see no basis for setting aside the district court's restitution award as an abuse of discretion. In fact, the district court's analysis was prescient in that it essentially employed the framework contemplated by Copple II for ordering restitution where there is reason to believe that a defendant has secreted proceeds from illegal activity. Relying on Copple II, we divide our analysis into two parts. We first determine whether the district court's finding that Voigt had secreted the proceeds of his crime, thereby shifting to him the burden to explain their whereabouts, was an abuse of discretion. We then determine whether the district court's ultimate restitution order constituted an abuse of discretion given that the burden of persuasion as to the location of the proceeds, as well as on financial resources and ability to pay, had shifted to defendant. Copple II, 74 F.3d at 484; 18 U.S.C. §3664(d).

1.

That the district court was entitled to proceed with the sort of analysis contemplated in Copple II cannot seriously be disputed. The district court's restitution order, along with the evidence at trial, provided ample basis for the court's conclusion that Voigt had attempted to secrete the proceeds of his criminal activity in foreign bank accounts and in his former girlfriend's name. Since there is evidence in the record to support the district court's "reasonable apprehension that [Voigt] has secreted certain assets," Copple II, 74 F.3d at 484, the derivation of a "starting point" and the concomitant shifting of the burden to the defendant cannot constitute an abuse of discretion.

To the extent that Voigt complains that the district court's starting point ($7,040,000) did not represent the amount of his actual holdings at sentencing, he misses the point. Copple II makes clear that once the district court has reasonably concluded that the defendant is concealing the proceeds of his crime, the district court may use as a starting point the entire amount of the loss caused minus any amount already accounted for (in this case, the amount sought by the government in forfeiture). Again, we see no abuse of discretion in the district court's decision to require Voigt to account for the entire $7,040,000.

2.

The essence of Voigt's complaint is that the district court's ultimate restitution award was the same amount as the starting point it had derived. Voigt assails the district court's failure to make specific findings on his ability to pay or on his financial resources. But under Copple II and 18 U.S.C. §3664(d), it was Voigt who bore the burden of persuasion (and, logically, the burden of production) on whether he possessed the $7,040,000 in crime proceeds and on the issue of his financial resources and needs. Voigt failed to adduce sufficient evidence on either subject. For instance, Voigt never submitted to the Probation Department a completed Personal Financial Statement form. Instead, he claimed that he was "living off savings and other assets," yet never accounted for the source of those funds. This was simply insufficient to demonstrate by a preponderance of the evidence his financial resources and needs. United States v. Cannistraro, 871 F.2d 1210, 1214 (3d Cir. 1989) (no abuse of discretion where restitution amount not reduced to reflect ability to pay when defendant fails to adduce evidence on that subject).

Given Voigt's complete failure to meet his statutory burden of demonstrating his financial resources and needs, it is not surprising that the district court was unable to announce "specific findings" on that subject. Quite simply, because Voigt had failed to account for the $7,040,000 in crime proceeds, and because he failed to adduce sufficient evidence on his ability to pay and financial needs, the district court had no choice but to impose what had been its "starting point" as the final amount of restitution. Such a result is entirely "consistent with . . . our policy-based conviction that defendants ought not be permitted to profit, quite literally, from uncertainty for which their illegal conduct is ultimately responsible." Copple II, 74 F.2d at 484. Put another way,

if the government bore the burden of proving that such defendants still possess illegally obtained assets, the government would be unable to locate hidden assets, those assets would not be taken into account in framing restitution orders, and the defendants would continue to profit at the expense of the innocent victims. This would be unconscionable.

The solution is to place the burden of proof on the defendant to show what has happened to all of the illegally obtained assets. All assets for which the defendant cannot account may be included in the amount of restitution ordered. To the extent that records are unavailable, the risk of inaccuracy should be borne by the defendant rather than the victims.

Id. at 486 (Alito, J., concurring) (citation omitted).

Finally, we do not view the district court's decision to accept Voigt's representations of indigency for purposes of appointing appellate counsel as mandating a contrary result. The district court explained that it did so simply to expedite Voigt's appeal. In United States v. Hallman, 23 F.3d 821, 827 (3d Cir.), cert. denied, 115 S. Ct. 216 (1994), we held that a finding of indigence at the time of sentencing is not a bar to imposing restitution as long as the award is based "on realistic prospects that the defendant will be able to pay it, and not on fantastic or overly speculative possibilities." Copple II, 74 F.3d at 485. Given the district court's record-supported findings that Voigt concealed substantial sums of crime proceeds, and given Voigt's failure to rebut those findings with competent evidence, the district court's restitution order was based on "realistic prospects that the defendant will be able to pay it ..." Id.

IX.

THE MOTIONS FOR SEVERANCE

Finally, Voigt argues that the district court erred in denying his motions to sever his trial from those of his codefendants on the ground of mutually antagonistic defenses, and that his convictions must therefore be reversed. The district court's denial of Voigt's motion is reviewable only for abuse of discretion. United States v. Thornton , 1 F.3d 149, 152 (3d Cir.), cert. denied, 114 S. Ct. 483 (1993).

A.

In appealing his conviction on this ground, Voigt faces an uphill battle. As the Supreme Court has recently noted, "[t]here is a preference in the federal system for joint trials of defendants who are indicted together." Zafiro v. United States , 506 U.S. 534, 113 S. Ct. 933, 937 (1993). See FED. R. CRIM. P. 8(b) ("Two or more defendants may be charged in the same indictment or information if they are alleged to have participated in the same act or transaction or in the same series of acts or transactions constituting an offense or offenses."). Such joint trials promote efficiency in the courts and serve the interests of justice by preventing "the scandal and inequity of inconsistent verdicts." Zafiro, 506 U.S. at 537, 113 S. Ct. at 937 (quoting Richardson v. Marsh, 481 U.S. 200, 209, 107 S. Ct. 1701, 1708 (1987)). In addition, joint trials of defendants charged under a single conspiracy aid the finder of fact in determining the "full extent of the conspiracy," United States v. Provenzano, 688 F.2d 194, 199 (3d Cir.), cert. denied, 459 U.S. 1071, 103 S. Ct. 492 (1982), and prevent "the tactical disadvantage to the government from disclosure of its case." United States v. Jackson , 649 F.2d 967, 973 (3d Cir.), cert. denied, 454 U.S. 1034, 102 S. Ct. 574 (1981).

As a result, when defendants have been properly joined pursuant to Rule 8(b) of the Federal Rules of Criminal Procedure, "a district court should grant a severance under Rule 14 only if there is a serious risk that a joint trial would compromise a specific trial right of one of the defendants, or prevent the jury from making a reliable judgment about guilt or innocence." Zafiro, 506 U.S. at 539, 113 S. Ct. at 938. See Fed. R. Crim. P. 14 ("If it appears that a defendant or the government is prejudiced by a joinder of ... defendants ... for trial together, the court may order an election or separate trials of counts, grant a severance of defendants or provide whatever other relief justice requires.").

Many courts have recognized that such a risk arises when codefendants assert "mutually antagonistic" defenses. See Zafiro, 506 U.S. at 538, 113 S. Ct. at 937 (collecting cases). Even where a defendant establishes that his defense and those of his codefendants are mutually antagonistic, however, severance is not mandatory. Id. , 113 S. Ct. at 938. Mutually antagonistic defenses are not prejudicial per se; and even if they were, Rule 14 "leaves the tailoring of the relief to be granted, if any, to the district court's sound discretion." Id. at 539, 113 S. Ct. at 938. Therefore, to obtain a reversal of conviction for failure to sever where codefendants assert mutually antagonistic defenses, a defendant "must demonstrate clear and substantial prejudice resulting in a manifestly unfair trial." United States v. Reicherter, 647 F.2d 397, 400 (3d Cir. 1981).

Although precise articulations may differ, courts agree that "[m]utually exclusive defenses ... exist when acquittal of one codefendant would necessarily call for the conviction of the other." United States v. Tootick, 952 F.2d 1078, 1081 (9th Cir. 1991). This type of situation arises "when one person's claim of innocence is predicated solely on the guilt of a co-defendant." United States v. Harris, 9 F.3d 493, 501 (6th Cir. 1993). In determining whether mutually antagonistic defenses exist such that severance may be required, the court must ascertain whether "the jury could reasonably construct a sequence of events that accommodates the essence of all appellants' defenses." United States v. Perez-Garcia, 904 F.2d 1534, 1548 (11th Cir. 1990).

While mutually antagonistic defenses have been much discussed in theory, only rarely have courts found that they exist in practice. See Zafiro, 506 U.S. at 538, 113 S. Ct. at 937; see also Tootick, 952 F.2d at 1078 (finding mutually antagonistic defenses warranting reversal where two defendants charged with assault both defended themselves by arguing that the other committed the assault alone). Far more frequently, courts have concluded that the asserted defenses, while in conflict with one another, are not so irreconcilable that "[t]he jury could not have been able to assess the guilt or innocence of the defendants on an individual and independent basis." Tootick, 952 F.2d at 1083. See, e.g., United States v. Flanagan, 34 F.3d 949, 952 (10th Cir. 1994) (affirming denial of motion to sever because a jury "could logically" accept one defendant's defense without concluding that the codefendant was guilty, and vice versa); Harris, 9 F.3d at 501 (affirming denial of motion to sever trials of coconspirators, one of whom claimed innocence and the other of whom claimed entrapment, on the ground that these defenses are not inconsistent because the jury could logically have accepted both); Perez-Garcia, 904 F.2d at 1548 (affirming denial of motion to sever because "the jury could reasonably construct a sequence of events that accommodates the essence of all appellants' defenses").

Moreover, courts have consistently held that finger-pointing and blame-shifting among coconspirators do not support a finding of mutually antagonistic defenses. See Provenzano, 688 F.2d at 198 (affirming denial of motion to sever where all defendants blamed one coconspirator on the ground that these defenses were not antagonistic, because if jury had believed that only one defendant was to blame there would have been a failure of proof on the conspiracy charges); see also United States v. Smith, 44 F.3d 1259, 1266-67 (4th Cir.) (affirming denial of motion to sever where defendant's codefendants claimed that he ran the whole scheme and they were just victims of his criminal influence), cert. denied, 115 S. Ct. 1970 (1995); United States v. Linn, 31 F.3d 987, 992 (10th Cir. 1994) (affirming denial of motion to sever where each coconspirator defended himself by blaming the others on the ground that the jury could have believed all defendants' theories and acquitted them all); United States v. Rivera, 6 F.3d 431, 438 (7th Cir. 1993) (affirming denial of motion to sever where codefendants in a drug conspiracy all claimed ignorance and blamed each other on ground that "plain and simple blame-shifting" does not necessarily prevent jury from making reliable judgment about guilt or innocence), cert. denied, 114 S. Ct. 1098 (1994); United States v. Barber, 442 F.2d 517, 530 (3d Cir.) (holding that "the mere presence of hostility among defendants or the desire of one to exculpate himself by inculpating another" are insufficient grounds to require severance), cert. denied, 404 U.S. 958, 92 S. Ct. 327 1971). These cases illustrate the well-settled principle that "defendants are not entitled to severance merely because they may have a better chance of acquittal in separate trials." Zafiro, 504 U.S. at 540, 113 S. Ct. at 938.

B.

Voigt's argument is essentially indistinguishable from those that were rejected in the conspiracy cases cited above. The basis of his claim is that his codefendants "directed blame at [him] as the architect of the scheme ... ." Smith, 44 F.3d at 1267. Travis argued throughout the trial that Voigt had deceived her, and that "[s]he was one of the victims of John Voigt." App. at 985 (Travis' counsel's closing argument). Similarly, Anderskow and Anchors argued that they were pawns in a scheme created and perpetrated by John Voigt.

Voigt contends that "the defenses presented [by his codefendants] would, in order to have succeeded, have required defendant Voigt's conviction, and certainly enhanced that possibility." Voigt's Br. at 30. In light of the case law and on logical grounds, we disagree. The basic theory behind the defenses of Travis, Anderskow, and Anchors was that they lacked criminal intent. Although it is fairly clear that these defenses, by pointing the finger of blame at Voigt, increased the likelihood that Voigt would be convicted, the Supreme Court has stated that this type of injury alone does not mandate severance. Zafiro, 506 U.S. at 540, 113 S. Ct. at 938. As the government correctly argued in its brief, "it was not logically impossible for the jury to have either (i) disbelieved all of the defenses, given the government's affirmative proof or (ii) believed all of them, on the basis that the government had not adduced sufficient evidence of intent." Government's Br. at 39. Under these circumstances, we cannot conclude that the defenses in this case were mutually antagonistic.

The limiting instructions that the district court gave to the jury reinforce our conclusion. See Smith, 44 F.3d at 1267; Rivera, 6 F.3d at 438. The court instructed the jury (1) to "consider each count of the indictment and each defendant's involvement in that count separately," (2) that "the burden is always on the prosecution to prove guilt beyond a reasonable doubt," (3) that its "verdict as to any defendant on any count should not control [its] verdict as to any other defendant or any other count," and (4) that opening statements and closing arguments are not evidence. Anderskow's App. at 4251, 4257 & 4278. We are convinced that these instructions "were sufficient to cure any potential prejudice from antagonistic defenses." Rivera, 6 F.3d at 438 (relying on similar instructions). We therefore conclude that the district court did not abuse its discretion in denying Voigt's motions for a severance.

X.

CONCLUSION

We will affirm Voigt's conspiracy, money laundering and tax evasion convictions, as well as the district court's order of restitution. ²⁶ We will vacate the forfeiture order, which is incorporated into the judgment of conviction and sentence, and remand for further proceedings consistent with this opinion.

^* Honorable Louis H. Pollak, Senior United States District Judge for the Eastern District of Pennsylvania, sitting by designation.

¹ In this section we provide a general overview of the Trust and its modus operandi as alleged in the indictment and as described in trial testimony. Because the issues are so numerous, and because few are fact-specific, we will provide a more extensive description of the facts only when our analysis of the defendant's various assignments of error so requires.

² The district court granted Voigt's posttrial motion for judgments of acquittal on two other counts of wire fraud; those counts arose out of the conduct of acquitted codefendant Mercedes Travis and could be sustained only under the coconspirator liability theory of Pinkerton v. United States, 328 U.S. 640, 66 S. Ct. 1180 (1946).

³ Alevy pleaded guilty prior to trial and testified for the government. Travis, Anderskow and Anchors were tried with Voigt. Travis was acquitted; Anderskow and Anchors were convicted of various charges including conspiracy to commit wire fraud, wire fraud and money laundering. We affirm their convictions in a separate opinion filed this day. United States v. Anderskow, -- F.3d --, Nos. 95-5093 & 95-5094 (3d Cir. 1996).

⁴ At oral argument, Voigt intimated that the district court's rather summary disposition of his renewed posttrial motion failed to comply with Rule 12(e) of the Federal Rules of Criminal Procedure. FED. R. CRIM. P. 12(e) ("Where factual issues are involved in determining a motion, the court shall state its essential findings on the record.") (emphasis added). Voigt failed to raise the Rule 12(e) claim below, and the courts of appeals are divided as to whether an alleged Rule 12(e) error need be preserved and whether a harmless error analysis is appropriate. Compare United States v. Caballero, 936 F.2d 1292, 1296 (D.C. Cir. 1991) (requiring preservation and affirming where trial court omits a finding that is apparent on the face of the record), cert. denied, 502 U.S. 1061, 112 S. Ct. 943 (1992) with United States v. Prieto-Villa, 910 F.2d 601, 610 (9th Cir. 1990) (preservation unnecessary and remand required for insufficient compliance with rule) and United States v. Moore, 936 F.2d 287, 288-89 (6th Cir. 1991) (per curiam) (issue preserved for review and remand required due to insufficient compliance with rule).

We need not address this issue, however, because Voigt's "failure to raise the issue ... on appeal constitutes a waiver." Internal Revenue Serv. v. Gaster [94-2 USTC ¶50,622 ], 42 F.3d 787, 792 n.5 (3d Cir. 1994). The "failure to raise a theory as an issue on appeal constitutes a waiver because consideration of that theory would vitiate the requirement of the Federal Rules of Appellate Procedure and our own local rules that, absent extraordinary circumstances, briefs must contain statements of all issues presented for appeal, together with supporting arguments and citations." Id. (emphasis added) (quoting International Raw Materials, Ltd. v. Stauffer Chem. Co., 978 F.2d 1318, 1327 n.11 (3d Cir. 1992) (internal quotation marks omitted), cert. denied, 507 U.S. 988, 113 S. Ct. 1588 (1993)).

In light of the cases in this circuit that have taken a rather permissive approach to Rule 12(e)'s requirement that "essential findings" be placed in the record, see generally United States v. Acosta, 965 F.2d 1248, 1255 (3d Cir. 1992); United States v. Thame, 846 F.2d 200, 201 (3d Cir.), cert. denied, 488 U.S. 928, 109 S. Ct. 314 (1988), we do not view this case as involving an extraordinary circumstance that would require us to reach an unpreserved issue not properly raised by the defendant on appeal. Accordingly, we leave for another day the questions whether Rule 12(e) errors need be preserved and whether such errors are amenable to harmless error analysis.

⁵ The plurality in Hampton would have announced a per se rule in overinvolvement cases that where predisposition to commit a crime is shown, thereby negating a statutory entrapment defense, there can be no due process violation based on "outrageous government conduct" as a matter of law. But two concurring Justices, as well as three in dissent, expressly disavowed the plurality's per se rule. Accordingly, as of 1976 there were five Justices who continued to recognize the viability of a due process claim premised upon outrageous government conduct--at least in the overinvolvement setting.

⁶ Consistent with our case law, the defendant bears the burden of demonstrating the existence of an attorney-client relationship, since the defendant is the moving party and the one claiming that otherwise relevant evidence is privileged. In re Grand Jury Empaneled Feb. 14, 1978, 603 F.2d 469, 474 (3d Cir. 1979).

⁷ The district court's decision to substitute the trial for a pretrial evidentiary hearing also failed to recognize that the government loses its right to appeal adverse suppression rulings once jeopardy has attached. See 18 U.S.C. §3731. More importantly, Rule 12(e) expressly prohibits the district court from deferring decision on a pretrial motion if "a party's right to appeal is adversely affected." FED. R. CRIM. P. 12(e). Accordingly, using the trial to resolve factual disputes that could result in an unappealable, midtrial order of suppression would appear to violate the strictures of Rule 12(e). See generally United States v. Nunez, 19 F.3d 719, 723 (1st Cir. 1994) (citing United States v. Barletta , 644 F.2d 50, 54-55 (1st Cir. 1981)).

⁸ On the contrary, in a letter submitted to the district court in response to Travis' motion to disqualify him from representing Voigt as counsel, attorney James Binns stated that he met with Travis in June of 1992 to respond to a government subpoena directed at the Trust and that Travis "gave me certain documents and withheld many asserting an attorney-client privilege on behalf of Mr. Voigt, [coconspirator] Mr. Anderskow ... and the Trust." App. at 85. See also infra IV.A.1.

⁹ In any event, to the extent that Levy can be read as holding that certain government conduct is per se prejudicial, we note that the Supreme Court has since held to contrary. United States v. Morrison, 449 U.S. 361, 365-66, 101 S. Ct. 665, 668 (1981) (even where government conduct is deliberate, defendant must demonstrate prejudice to obtain a remedy).

¹⁰ We also reject Voigt's claim that the government's preindictment use of Travis as a confidential informant, even assuming she was his attorney, implicates Sixth Amendment concerns. Brewer v. Williams, 430 U.S. 387, 398, 97 S. Ct. 1232, 1239 (1977). See also Moran v. Burbine, 475 U.S. 412, 106 S. Ct. 1135 (1986); Maine v. Moulton, 474 U.S. 159, 106 S. Ct. 477 (1985); United States v. Gouveia, 467 U.S. 180, 104 S. Ct. 2292 (1984). Also without merit is Voigt's contention that Travis' actions in surreptitiously copying Trust documents and providing them to the government implicate the Fourth Amendment, since Voigt's conclusory allegations failed to allege a prima facie showing of a Fourth Amendment violation. See Acosta, 965 F.2d 1248, 1256 n.9. Finally, we agree that there was no basis for the district court to invoke its supervisory authority to dismiss the indictment inasmuch as Voigt has failed to demonstrate any significant government misconduct. United States v. Hasting, 461 U.S. 499, 505-06, 103 S. Ct. 1974, 1978-79 (1983).

¹¹ Due to an error of some sort, the court apparently did not receive Travis' motion until the day of the hearing. Upon learning that a motion was missing from the record before it, the court stopped the hearing temporarily and read the motion on the spot before allowing the hearing to proceed.

¹² Voigt also argues that the Rules of Professional Conduct ("RPCs") adopted by the New Jersey Supreme Court require the district court to make specific findings of fact in considering a motion to disqualify chosen counsel. While this argument may have some merit when a motion to disqualify is expressly based upon a claimed violation of a specific RPC, see United States v. Miller [80-2 USTC ¶9559 ], 624 F.2d 1198, 1201 (3d Cir. 1980) (holding that a court should disqualify counsel for violation of a disciplinary rule "only when it determines, on the facts of the particular case, that disqualification is an appropriate means of enforcing the applicable disciplinary rule"); Dewey v. R.J. Reynolds Tobacco Co., 536 A.2d 243, 245 (N.J. 1988) (holding that courts considering alleged RPC violations must undertake a "painstaking analysis of the facts") (citation omitted), the disqualification of a defendant's chosen counsel need not be, and in this case was not, predicated on a finding of a specific RPC violation. The "fair and proper admin istration of justice" side of the equation merely "includ[es] the interests underlying the ethical standards governing the practice of law," Davis v. Stamler, 650 F.2d 477, 479-80 (3d Cir. 1981); it is neither defined nor circumscribed by those standards. On the contrary, a district court has independent interests in protecting its judgments against later collateral attack, preserving the integrity of its proceedings, and protecting the truth-seeking function of the proceedings. United States v. Moscony, 927 F.2d 742, 749 (3d Cir.), cert. denied, 501 U.S. 1211, 111 S. Ct. 2812 (1991); United States v. Dolan, 570 F.2d 1177, 1184 (3d Cir. 1978). We therefore reject Voigt's contention that the district court's decision was governed by the standards and procedures governing the adjudication of alleged RPC violations under New Jersey law.

¹³ The government invites us to analyze the issue with due regard for the fact that Binns was a third attorney Voigt sought to add to his defense team. Specifically, it argues that the constitutional interest in adding a third attorney necessarily must be lower than when a defendant retains a first (or second) attorney. Voigt counters that such an approach would be tantamount to performing a harmless error inquiry. We disagree. Employing a harmless error inquiry would require us to conclude, first, that the disqualification was an abuse of discretion and, second, that Voigt's effective representation by two other attorneys rendered the error harmless. The government simply asks us to acknowledge that, in balancing Voigt's right to counsel of choice, which Wheat stresses is a highly discretionary act, the district court properly considered Voigt's representation by two other privately retained attorneys of his choice. Since, however, we conclude that the disqualification would have been proper even if Binns had been Voigt's only attorney, we need not decide whether the Sixth Amendment interest in adding a third attorney is as strong as in retaining a first (or second).

¹⁴ Once again, the government would have us consider the fact that Binns might have been called as a witness at trial as justifying the district court's disqualification of Binns. The district court, however, did not rely on that possibility in disqualifying Binns. In attempting to determine whether the district court's disqualification decision was consistent with a sound exercise of discretion, we question whether considering evidence in the record not relied on by the district court would not be tantamount to performing a harmless error analysis. Since we have found no abuse of discretion, however, we have no occasion to decide the question left open in Fuller, i.e., whether a harmless error analysis applies to nonarbitrary-yet-erroneous denials of the right to counsel. Therefore, we need not rely on Binns' status as a potential witness to affirm the district court's disqualification decision.

¹⁵ §1956. Laundering of monetary instruments

(a)(1) Whoever, knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity, conducts or attempts to conduct such a financial transaction which in fact involves the proceeds of specified unlawful activity--

(A)(i) with the intent to promote the carrying on of specified unlawful activity ....

...

shall be sentenced to a fine of not more than $500,000 or twice the value of the property involved in the transaction, whichever is greater, or imprisonment for not more than twenty years, or both.

U.S.C.18 §1956(a)(1)(A)(i).

¹⁶ The court, in imposing sentence on a person convicted of an offense in violation of section ... 1956 ... of this title, shall order that the person forfeit to the United States any property, real or personal, involved in such offense, or any property traceable to such property....

U.S.C. 18 §982(a)(1) .

¹⁷ Forfeiture of Substitute Property

(p) If any of the property described in subsection (a) of this section, as a result of any act or omission of the defendant--

....

(5) has been commingled with other property which cannot be divided without difficulty;

the court shall order the forfeiture of any other property of the defendant up to the value of any property described in paragraph[] ... (5).

U.S.C. 21 §853(p)(5).

¹⁸ (b)(1) Property subject to forfeiture under this section, any seizure and disposition thereof, and any admin istrative or judicial proceeding in relation thereto, shall be governed--

(A) in the case of a forfeiture under subsection (a)(1) of this section, by subsections (c) and (e) through (p) of the Comprehensive Drug Abuse Prevention and Control Act of 1970 (21 U.S.C. §853 )[.]

U.S.C. 18 §982(b)(1) .

¹⁹ Indeed, Voigt does not allege on appeal that the district court erroneously determined that the government is entitled to $1.6 million in criminal forfeiture. He argues only that the jewelry in question is not directly forfeitable under §982(a)(1) .

²⁰ To put it bluntly, even if the in personam nature of criminal forfeiture were sufficient, in and of itself, to obviate the need for tracing as a policy matter, that still does not explain why federal courts should be free to ignore the fact that prior to the enactment of the substitute asset provisions, Congress, by using the terms "involved in" and "traceable to," clearly required that there be a connection between the criminal activity and the property sought in criminal forfeiture.

²¹ We also reject the government's suggestion that references to the in personam nature of criminal forfeiture in the legislative history surrounding the enactment of §982(b)(1) somehow authorize a federal court to interpret the words "traceable to" out of the statute. If anything, Congress' reference to the in personam nature of criminal forfeiture was offered as a justification for including in §982 a substitute asset provision that allows the government to seize property having no connection to money laundering activity:

Because criminal forfeitures are in personam ... the substitute assets provision also gives the government the ability to receive, in essence, a general judgment against the defendant. When a certain sum is alleged in the indictment as the amount of criminal proceeds and those proceeds can not be found after the jury enters a special verdict against that sum, the government can then execute against any other property belonging to the defendant.

Arthur W. Leach & John G. Malcolm, Criminal Forfeiture: An Appropriate Solution to the Civil Forfeiture Debate, 10 Ga. St. U. L. Rev. 241, 295 n.164 (1994) (so concluding in the RICO forfeiture context).

²² Interpreting the word "traceable to" to mean exactly what it says is no doubt salutary. We avoid the problems plaguing other courts that have attempted to devise a workable tracing analysis for tainted property that has been commingled in a bank account with untainted property. See United States v. Banco Cafetero Panama , 797 F.2d 1154 (2d Cir. 1986) (exploring various tracing options); see also $448,342.85, 969 F.2d at 477 ("It is easy to imagine difficult problems in associating proceeds with crime").

²³ The Seventh Circuit's opinion in United States v. $448,342.85 dealt with the money laundering civil forfeiture statute, 18 U.S.C. §981 , which also contains the terms "involved in" and "traceable to." The decision was handed down prior to Congress' enactment of 18 U.S.C. §984, a substitute asset provision applicable to civil forfeiture under §981 . It is significant that in the absence of such a provision, the court refused to countenance the government's argument that the terms "involved in" and "traceable to" need not be given their ordinary meaning. $448,342.85, 969 at 477 ("Only property used in or traceable to the 'specified unlawful activity' is forfeit.").

²⁴ We do not understand the phrase "cannot be divided without difficulty" in §853(p)(5) as meaning simply that the amount of crime proceeds cannot be separated out (e.g., where tainted and untainted funds are pooled together to purchase a piece of real property). We think the substitute asset provision applies equally to commingling of cash, which makes it impossible to distinguish between tainted and untainted dollars, although one readily could separate out the amount subject to forfeiture.

²⁵ As we noted in McGill, however, "[p]rior acts are certainly relevant in determining whether a current act is evasive. Further, prior acts are always relevant in the assessment of willfulness." [92-1 USTC ¶50,052 ], 964 F.2d at 231 n.20 (citation omitted).

²⁶ Voigt has raised one other assignment of error, which he has framed in the following terms: "The District Court Erred in Increasing Defendant Voigt's Offense Level Two Points for Obstruction of Justice." Voigt's Br. at ii. We find this issue sufficiently meritless as not to warrant independent analysis.

 

 

[73-1 USTC ¶9213] United States of America , Plaintiff-Appellee v. Sidney Rosenstein, Irving Braverman, Foremost Brands, Inc. and McInerney Sales Inc., Defendants-Appellants

(CA-2), U. S. Court of Appeals, 2nd Circuit, Docket Nos. 72-1092, 72-1190, 474 F2d 705, 1/26/73, Aff'g District Court, 69-1 USTC ¶9432, 303 F. Supp. 210

[Code Sec. 7201 and 18 U. S. C. §§ 2 and 371]

Crimes: Tax evasion: Conspiracy: Evidence: Documents: Admissibility: Other defenses.--The court affirmed the convictions of the taxpayers and their wholly owned corporations for tax evasion and conspiracy to defraud the government of income tax. Although the trial court erred in admitting certain documents under the business records exception to the hearsay rule, they could have been properly admitted as declarations of co-conspirators or as admissions of the taxpayers against their own interests. Moreover, use of the documents did not violate the attorney-client privilege because they were written as part of the business dealings of the taxpayers and their attorneys. The documents were not seized in violation of the taxpayers' Constitutional rights, and there was no undue delay in bringing the case to trial.

Whitney North Seymour, Jr., United States Attorney, Gary P. Naftalis, Gerald A. Feffer, John W. Nields, Jr., Assistant United States Attorneys, New York, N. Y., for plaintiff-appellee. Ronald P. Fischetti, James M. LaRossa, Gerald L. Shargel, 522 5th Ave., New York, N. Y., for S. Rosenatein and McInerney Sales, Inc., Norman S. Ostrow, James M. Ringer, James B. Weidner, Royall, Koegel & Wells, Pan Am Bldg., 200 Park Ave., New York, N. Y., for I. Braverman and Foremost Brands, Inc., for defendants-appellants.

Before SMITH, KAUFMAN and MULLIGAN, Circuit Judges.

MULLIGAN, Circuit Judge:

These are appeals by Sidney Rosenstein, Irving Braverman, Foremost Brands, Inc. and McInerney Sales, Inc. from judgments of conviction entered in the United States District Court for the Southern District of New York on January 11, 1972 after trial before Hon. Thomas F. Croake, United States District Judge, and a jury. Judgments affirmed.

The Indictment filed on December 4, 1968 contained 13 counts. Count 1 charged all defendants with conspiracy to defraud the United States of federal income taxes and to commit offenses against the United States in willfully evading income taxes in violation of Title 26, United States Code, Section 7201 and in violation of Title 18, United States Code, Section 2, by aiding and abetting such violations. The balance of the counts were for substantive violations of these sections by the individual and corporate defendants. All were found guilty of the conspiracy counts and the applicable substantive counts. On January 11, 1972, Judge Croake imposed the following sentences:

Sidney Rosenstein, 18 months in prison concurrently on each count, a total fine of $100,000 plus one-half the cost of prosecution;

Irving Braverman, 18 months in prison concurrently on each count, a total fine of $100,000 plus one-half the cost of prosecution;

McInerney Sales, Inc. and Foremost Brands, Inc. were each fined a total of $40,000;

Rosenstein and Braverman are presently enlarged on bail and payment of fines and costs has been stayed pending appeal.

I. The Facts

The investigation of this complicated case was commenced by Internal Revenue Service in 1964 and did not terminate until late in 1967. It involved interveiwing a great number of witnesses in the United States as well as foreign nationals in Switzerland and Liechtenstein . In a trial which lasted six weeks, the Government presented some 75 witnesses and over 1000 documents as exhibits. The defendants did not testify.

The Government's proof established without any doubt that from May, 1960 until 1967 Braverman and Rosenstein and their wholly owned corporations, Foremost and McInerney, brazenly and fraudulently evaded United States income taxes by creating a dummy Liechtenstein corporation, called Continental Trade Establishment (CTE), to which they diverted payments of $1.6 million in commissions from October 1, 1961 to January 31, 1965 and which, in turn, were deposited in a secret account at the Bank Leu, Zurich, Switzerland.

Braverman and Rosenstein and their corporate alter egos, Foremost and McInerney, acted as sales representatives for American manufacturers in the sale of their products to United States Military Post Exchanges throughout the world. In return for their services, they received commissions of about 6% on gross sales. In May, 1960, Braverman and Rosenstein created CTE in Liechtenstein and opened an account at the Bank Leu in Zurich . Their American clients were then asked to make all commission checks on sales to overseas PX's payable to CTE and to forward them to Dr. Herbert Batliner, Haupstrasse 22, Vaduz , Liechtenstein , instead of to Foremost or McInerney, the previous payees. Sometime in 1966 the instructions were changed and the checks were forwarded to Dr. Alfred Buehler at the same Liechtenstein address. Batliner and Buehler were both Liechtenstein attorneys and Haupstrasse 22 was a two-story building which housed Batliner's law office and a shoe store. Representatives of 42 American manufacturers testified at trial as to the payment arrangements and the Government produced checks, payable to CTE and deposited in the Swiss Bank, totalling $1,604,409.59 for foreign PX commissions from October 1, 1961 through January 31, 1965. It is not disputed that no United States income taxes have ever been paid by the appellants on these commissions.

The evidence of the Government that CTE was utilized as a shell and a device for the appellants and was not in fact a viable operating entity, was overwhelming. A dozen American manufacturers were advised by Rosenstein, Braverman or their employees that CTE was actually their company. All the activities performed by Rosenstein and Braverman prior to May, 1960, continued. The same cast of characters continued to travel to European PX's, displaying samples and catalogues and arranging appointments between buyers and sellers. PX representatives testified at trial and produced log books from Wiesbaden and Nuremberg , Germany , the buying centers for the military establishment where sales representatives were required to check in. This testimony and these documents establish that while Rosenstein and Braverman continued to appear for their American clients, no one ever heard of or met either Batliner or Buehler who apparently never appeared to represent their company. Only one of the 15 PX buyers who testified had even heard of CTE. Even more telling is the testimony of Peter Roussos and Rob ert Naar, exclusive resident representatives for Foremost in parts of Europe from 1960 to 1964. They testified that only Braverman and Rosenstein or themselves represented the 42 American manufacturers whose commission checks to CTE constitute the basis for this indictment. Neither was ever employed by CTE and in fact neither had ever heard of CTE. There is no indication that CTE ever performed any services. In fact there is evidence to establish that Braverman and Rosenstein had CTE stationery and cards printed. The correspondence and contracts, prepared on these letterheads, were signed by their employees, falsely identifying the employees as CTE officers. Rosenstein also directed that Batliner's signature be forged on these letters. When he learned of this, Batliner resigned as a CTE director to be replaced by Buehler. The evidence of the PX representatives, the American manufacturers and the employees of Foremost and McInerney, plus the obvious efforts of Rosenstein and Braverman to create an appearance of activity amply demonstrate the charade. The reading of a voluminous record compels the conclusions that CTE had only one function: it was the receptacle of the income earned by the appellants from their representation of American producers of goods sold to foreign post exchanges. It was created by the defendants in an elaborate but futile effort to avoid American income taxes.

The principal argument raised on appeal is that the admission into evidence of the records of CTE, Government Exhibits 1020-23 and 1025-29, constituted reversible error.

II. The Liechtenstein Documents

(a) The Business Records Exception

The exhibits in question were produced toward the close of its case, by a Government witness, Dr. Peter Monauni, one of three Liechtenstein attorneys, resident at Hauptstrasse 22, Vaduz , Liechtenstein . Dr. Batliner had refused to come to the United States at the time of the trial to testify. Instead he sent Dr. Monauni who had been associated with him for ten years. Dr. Monauni's direct testimony bolstered the other evidence in the case as to CTE's true character. He knew it simply as a client of his firm; to his knowledge it conducted no business of any description at the law office headquarters except for the forwarding of mail and checks.

Monauni produced a CTE file containing Exhibits 1020-23 and 1025-29. The Government offered the documents under the business records exception to the hearsay rule, 28 U. S. C. §1732. ¹ Essentially the statute provides that any writing or record, made as a memorandum of any act, transaction, occurrence or event, if made in the ordinary course of one's business and if it was the regular course of such business to make such record at the time or reasonably thereafter, is admissible as evidence of the act, transaction, occurrence or event. We agree with the appellants that the documents were not properly admissible under the statutory business record exception. The fact that Dr. Monauni did not personally keep the books and records would not render them inadmissible ( United States v. New York Foreign Trade Zone Operators, Inc., 304 F. 2d 792, 796 (2d Cir. 1962)), but someone who is sufficiently familiar with the business practice must testify that these records were made as part of that practice. United States v. Delgado, 459 F. 2d 471, 472 n. 5 (2d Cir. 1972); Cullen v. United States , 408 F. 2d 1178 (8th Cir. 1969); United States v. Dawson [68-2 USTC ¶9527], 400 F. 2d 194, 198-99 (2d Cir. 1968), cert. denied, 393 U. S. 1023 (1969). Dr. Monauni's testimony did not rise to this level of requisite knowledge. He not only did not keep the records, he did not even know from his own personal knowledge that they were kept in Batliner's office. He did not testify to the business practice of CTE or that it was the practice to keep the documents which were introduced.

Some of the Liechtenstein documents were letters from third parties who clearly were not working for CTE. They "were not made in the regular course of the business of the company in whose files they were found. . . ." Phillips v. United States , 356 F. 2d 297, 307 (9th Cir. 1965), cert. denied, 384 U. S. 952 (1966). The requirements of the Business Records Rule are not fulfilled by a showing that the addressee routinely kept a file of such correspondence. It must appear that the letter was written in the regular course of its author's business. See Johnson v. Lutz, 253 N. Y. 124 (1930).

While the records were not admissible as business records, we cannot agree with the appellants' contention that we cannot sustain their admission on the basis of some other exception to the hearsay rule. The rule stated by Wigmore is "[a]n offer of a fact for an inadmissible purpose A is properly excluded, though the same fact would have been admissible for purpose B." 1 J. Wigmore, Evidence §17, at 320 (3d ed. 1940) (emphasis in original, footnote omitted). (See People v. Zacknowitz, 254 N. Y. 192, 200 (1930)).

The Government now urges that these documents are admissible either as admissions by the defendants or as declarations by conspirators, which like the Business Records Rule are further recognized exceptions to the hearsay rule. Here there is no difference in the purpose for which the evidence is sought to be admitted on the alternative grounds. The purpose of admission under any such exception is to establish the truth of that which is contained in the declaration which otherwise would be hearsay. This distinguishes Shepard v. United States , 290 U. S. 96 (1933) and United States v. DeMasi, 445 F. 2d 251 (2d Cir.), cert. denied, 404 U. S. 882 (1971), relied upon by appellants.

Shepard was a case in which an army officer had been accused of murdering his wife by adding bichloride of mercury to her liquor. There was testimony that the sick wife made the statement "Dr. Shepard has poisoned me." She also inquired if there was enough of the liquor left to have tests made. These statements were offered as dying declarations, an exception of the hearsay rule. Since there was a lack of evidence that the declarant spoke without hope of recovery, the statements were held by the Supreme Court to be not admissible for their truth as dying declarations. The Government argued alternatively that the statements were admissible for a different purpose, to wit, they were admissible to rebut evidence of defendant's witnesses that the victim had suicidal tendencies since the statements indicated a will to live. The alternative purpose was clearly untenable since no limiting instructions had been given to alert the jury to the different purpose for which the evidence was offered. Had the conviction been sustained the prejudice to the defendant from the admission of the accusation now urged as simply indicative of a will to live and no more, is obvious. As Mr. Justice Cardozo observed in characteristic language "The reverberating clang of those accusatory words would drown all weaker sounds." Shepard v. United States , supra, 290 U. S. at 104.

DeMasi is like unto Shepard. There the Government offered certain statements made by a decedent to two witnesses. The statements were offered for their truth as exceptions to the hearsay rule. On appeal this court found that the declarant was not a conspirator and his statements were inadmissible hearsay. The Government's alternate argument that the statements were admissible for another purpose, was rejected: "The Government's alternate theory to justify the admissibility of the declaration, that the statement was relevant to prove the victim's state of mind, was not suggested at the trial, and the court did not instruct the jury with reference to it; therefore we will not consider it." United States v. DeMasi, supra, 445 F. 2d at 256 (emphasis added and footnote omitted).

The situation we encounter here is clearly distinguishable. The alternative theories proposed are equally exceptions to the hearsay rule. ² The Government is asserting that the documents are admissible for the same purpose, to establish the truth of what they say. No different or other limiting instruction to a jury was necessary no matter what the theory of admission. The prejudice of the lack of such instruction, so clear in Shepard and DeMasi, is not at all present here.

(b) Declarations of Co-Conspirators

If the documents were admissible as declarations of a conspirator, appellants argue that the trial court would have had to find that the defendant's participation in the conspiracy had been established by a fair preponderance of the evidence aliunde. United States v. Geaney, 417 F. 2d 1116, 1120 (2d Cir. 1969), cert. denied, 397 U. S. 1028 (1970); Levie, Hearsay and Conspiracy: A Reexamination of the Co-conspirators' Exception to the Hearsay Rule, 82 Mich. L. Rev. 1159, 1176-78 (1954); Developments in the Law--Criminal Conspiracy, 72 Harv. L. Rev. 922, 987 (1959).

Since the documents were not offered as declarations of conspirators there was no occasion for Judge Croake to find on the record that each of the defendants was a member of the conspiracy. We believe that the evidence submitted by the Government prior to the admission of the disputed documents fully supported such a finding. The testimony of the representatives of the 42 American manufacturers clearly established by a fair preponderance of the evidence, the test here applicable, that Braverman and Rosenstein had jointly contacted all of their American clients requesting that commission checks theretofore payable to either Foremost or McInerney be made payable to CTE. Moreover, representatives of Ideal Toy, North Shore Sportswear, Genesco, Leeds Travelwear, Burlington Industries, Tobin-Hamilton, National Togs, Blue Bell, Inc., Prince Gardner Wallets, Adler Company, and My Toy Company testified that Rosenstein, Braverman or their employees advised them that CTE was Braverman's and Rosenstein's company. ³ The testimony of PX employees that despite the 1960 change to CTE, the same personnel continued to represent Foremost and McInerney and that Batliner, Buehler and CTE were unknown to them, was further proof that CTE was a shell devised by the defendants to siphon off commissions. In addition to all of this, some of the documents which will be discussed later in this opinion were admissible in any event as admissions. The fact that some of these exhibits might have been admitted after the co-conspirator documents is not material since it is well established that the determination as to whether the prosecution has laid the foundation for the admission of the co-conspirator's statements can be made at the close of the Government's case. United States v. Geaney, supra, 417 F. 2d at 1120; United States v. Sansone, 231 F. 2d 887 (2d Cir.), cert. denied, 351 U. S. 987 (1956).

In our view Judge Croake could have properly made the determination that the Government had laid a proper foundation for the admission of these documents as statements of co-conspirators made in furtherance of this continuing scheme to defraud the United States of taxes. The fact is that he made no such ruling and none was requested. We nonetheless hold that this court can make the post hoc determination on appeal.

We should emphasize that the function of determining whether or not the proper foundation for the admission of these documents has been made is judicial and that the jury may not properly reassess the propriety of the court's determination. ⁴ United States v. Regland, 375 F. 2d 471, 478-79 (2d Cir. 1967), cert. denied, 390 U. S. 925 (1963); Carbo v. United States , 314 F. 2d 718, 735-38 (9th Cir. 1968).

It is difficult to see what value the declarations could have as proof of the conspiracy, if before using them the jury had to be satisfied that the declarant and the accused were engaged in the conspiracy charged; for upon that hypothesis the declarations would merely serve to confirm what the jury had already decided. United States v. Dennis, 183 F. 2d 201, 230-31 (2d Cir. 1950) (L. Hand, J.), aff'd on other grounds, 341 U. S. 494 (1951).

In sum, the determination by an appellate court that the documents could appropriately have been found admissible by the trial judge, as statements of co-conspirators, does not in any way impinge upon any jury function. No instructions of the trial judge were necessary either to caution the jury as to any limited purpose for which the documents were received or that they might review his assessment that a proper foundation was laid. It is difficult therefore to see any impropriety in now accepting alternate bases for admission of the questioned documents, any objections sought to be levelled on the alternative grounds can and have been made here. ⁵

There is authority for our position. Orser v. United States , 362 F. 2d 580 (5th Cir. 1966), is directly in point. The trial court, over objection that statements made in the presence of the defendant were hearsay, admitted them on the theory that it was an accusation made against the defendant and since he had not denied them, they were admissible as implied admissions. On appeal, the court found them not to be admissible on this basis, but nevertheless admissible as declarations by co-partners in crime. Even though the trial court had made no finding that a conspiracy existed, the appellate court found that there was ample evidence of the conspiracy upon which the trial court could have predicated such finding, hence no prejudice could be found. 362 F. 2d at 585-86. ⁶

(c) Admissions

We further find that many of the documents which were admitted were admissible in any event as admissions. For example, many are letters containing directions to Batliner and Buehler to execute contracts, and establish that Rosenstein and Braverman were the operating executives of CTE. ⁷ Most incriminating is Exhibit 1025, a letter signed by both Rosenstein and Braverman addressed to Batliner in which they describe themselves as "equal partners and holders of the founder rights" of CTE.

After an examination of these exhibits we are convinced that the vast majority of the documents admitted were admissible either as admissions or statements in furtherance of the conspiracy. Those which were not do not in our view constitute prejudicial error in light of the overwhelming proof of the Government. ⁸ There is no real problem of authenticity here since the letters and documents which were admissible were signed by either Rosenstein or Braverman or both. That the signatures were those of the defendants was virtually conceded at trial. The argument now made that making an issue of their validity on trial would have increased the importance of these documents in the minds of the jury is not at all persuasive. In view of the admittedly inculpatory character of the documents, it is inconceivable that tactical considerations would have prevented defendants from controverting their authenticity. It is further relevant that the Government had handwriting experts available to establish that the signatures were genuine in the event that their validity was questioned.

III. Other Arguments

(a) Attorney-Client Privilege

The appellants have raised several other arguments on appeal which are of less substance. The claim is made that the use of the CTE documents and the testimony of Dr. Monauni constituted a violation of the attorney-client relationship. Although Batliner and Buehler were attorneys, the posture of the defendants has been decidedly ambivalent as to their true roles. The theory of their defense initially at least, was that Batliner and later Buehler were businessmen operating a bona fide successor firm to Foremost and McInerney, engaged in the business of representation of American firms selling goods to European PX's. The letters for the most part reveal that they were in fact puppets who were being directed by Braverman and Rosentein to sign contracts, forward checks to Bank Leu, order business cards and to arrange for letters of credit. Batliner's letters are routine responses and requests for authority to pay Liechtenstein taxes. "Where an attorney and his client are engaged in business dealings as was the case here the attorneyclient rule does not apply." Lowy v. Commissioner, 262 F. 2d 809, 812 (2d Cir. 1959).

Appellant Braverman argues that Ex. 1025 is privileged. This is the letter signed by both individual defendants in which they describe themselves as equal partners in CTE and advise Batliner of Buehler's appointment to the admin istrative board of CTE as well as naming another anstalt as the representative of CTE. Batliner is directed in the letter to make the necessary "decisions" concerning the change of residence and in the board and to have these "decisions" registered with the Trade Registry in Vaduz . Despite the use of the word "decisions" it seems evident that Batliner was in fact confronted with a decision previously made by the defendants and simply ordered to perform the ministerial task of amending corporate records.

Even if we make the assumption that the letter represents what would be a privileged communication and not a routine business arrangement, the privilege does not protect communications during the commission and in furtherance of the felony. United States v. Bob, 406 F. 2d 37, 40 (2d Cir.), cert. denied, 308 U. S. 589 (1939). The suggestion that since there was no crime committed in Liechtenstein , the attorney-client privilege remained intact, is not at all persuasive. The privilege is that of the client who in this case are American citizens whose scheme to evade United States income taxes is unquestionably criminal. The situs of their attorneys or of the documents produced here is irrelevant. The evidence of the criminal conspiracy here dehors this document is in any event substantial, as we have previously indicated.

(b) Constitutional Right of Privacy

Appellants argue that the Liechtenstein documents were improperly seized in violation of their Fourth and Fifth Amendment rights. We find that there was no "seizure" of corporate records here by governmental agents. Monauni appeared with the records Batliner had turned over to him and Government Agent Brozen, who accompanied him to the United States , testified that he was unaware of the fact that Monauni had even brought the file until he arrived. There is no showing here of "official misconduct" which would trigger Fourth Amendment rights and attendant exclusionary rules. Coolidge v. New Hampshire , 403 U. S. 443, 487-88 (1971). The request for an evidentiary hearing on this question was properly denied. Agent Brozen was thoroughly examined on this point in the trial. The defense motion to depose Batliner before trial under Fed. R. Crim. P. 15 was properly denied by Judge Tenney (United States v. Rosenstein [69-1 USTC ¶9432], 303 F. Supp. 210, 212 (S. D. N. Y. 1969)) since the only allegation made to support the motion was that counsel had "reason to believe" that Batliner would not attend any trial in the United States. This was deemed insufficient to establish factually that the witness could not be present. This determination was properly within the discretion of the judge. United States v. Birrell, 276 F. Supp. 798, 822 (S. D. N. Y. 1967). During the course of the trial when counsel for the defendant during his cross-examination of Monauni, indicated his interest in examining Batliner, the Government indicated that Batliner had stated that he would not testify at that time However, the Government twice offered, in the presence and out of the presence of the jury, to accompany defense counsel to Liechtenstein to take his deposition. The offer was not accepted. The argument that appellants were deprived of their right to confront Batliner is not supported by the record.

It is not disputed that a corporation has no Fifth Amendment privilege (Wilson v. United States, 227 U. S. 365, 384-85 (1911)); and in any event neither Rosenstein nor Braverman, even though they were the alter egos and sole owners of CTE, can assert Fifth Amendment privileges when corporate records are used against them. United States v. Fago [63-2 USTC ¶9576], 319 F. 2d 791 (2d Cir. 1963). Even viewed as personal papers rather than as corporate records, we find no Constitutional violation. The papers were in the possession of Batliner who surrendered them through Monauni without Government compulsion. The documents were not privileged and we find no legitimate expectation of privacy or confidentiality under the Fourth or Fifth Amendments. Couch v. United States , 41 U. S. L. W. 4107 (U. S. Jan 9, 1973).

(c) Pre-Trial Delay

The claim of Braverman and Foremost that there was such inordinate delay in the prosecution of this case so as to deny them due process of law is not tenable. Preindictment delay is premised on the fact that the conspiracy commenced in 1960 and terminated in 1967 with substantive violations committed from December 1962 through April 15, 1965. The indictment was returned on December 4, 1968. We find no merit in the argument that this delay was unreasonable. There is no suggestion of Government design to create delay and no showing of prejudice. In fact the investigation required here to produce the witnesses and documents in the United States and Europe , placed a tremendous burden on the Government which was dealing with a massive, albeit crude, scheme to defraud. The post-indictment delay from December 4, 1968 to October 26, 1971 was not excessive in our view within the criteria established in Barker v. Wingo, 407 U. S. 514 (1972). There was no demand by the defendants for a trial and no specific instances of prejudice resulting from delay. Again the complicated character of the case is an element to be considered (407 U. S. at 531). It is also noteworthy that although the Government had placed the case on the calendar in May, 1970, to secure a trial date, defense counsel requested adjournments until the Spring of 1971 because of his own trial schedule. At that time substituted counsel requested a delay until the Fall of 1971.

Finally, Judge Croake properly denied defendants' motions for discovery under Rules 16(a) and 16(b), Fed. R. Crim. P., as overbroad. United States v. Jordan , 399 F. 2d 610, 615 (2d Cir.), 343 U. S. 1005 (1968). Again we find no showing of prejudice in the denial of the discovery orders here where the Government voluntarily made available prior to trial most of its documentary evidence, i.e., the checks made payable to CTE by the manufacturers in payment of the sales commissions.

After reviewing all of the appellants' arguments on appeal, we affirm.

¹ 28 U. S. C. §1732 provides in pertinent part:

(a) In any court of the United States and in any court established by Act of Congress, any writing or record, whether in the form of an entry in a book or otherwise, made as a memorandum or record of any act, transaction, occurrence, or event, shall be admissible as evidence of such act, transaction, occurrence, or event, if made in regular course of any business, and if it was the regular course of such business to make such memorandum or record at the time of such act, transaction, occurrence, or event or within a reasonable time thereafter.

All other circumstances of the making of such writing or record, including lack of personal knowledge by the entrant or maker, may be shown to affect its weight, but such circumstances shall not affect its admissibility.

The term "business," as used in this section, includes business, profession, occupation, and calling of every kind.

² We note that the new Federal Rules of Evidence do not classify admissions or co-conspirators' declarations as exceptions to the hearsay rule, but rather as statements which are not hearsay. Fed. R. Evid. 801(d)(2). See United States v. Puco, slip. op. 1437, 1441 n. 3 (2d Cir., Jan. 11, 1973). In any event they are admissible to establish the truth of what is said. C. McCormick, Evidence §239, at 503-04 (1954).

³ For example, Abe Kent and Miriam Gittleson, employees of the Ideal Toy Corporation, testified that defendant Rosenstein had called and requested that Rosenstein's commission checks be sent to CTE, the "subsidiary" corporation.

Rubin Bass, president of North Shore Sportswear, testified in part:

Q. . . . Just what did Azzaro (an employee of McInerney) say to you and what did you say to Mr. Azzaro?

A. To mail the checks overseas.

Q. What did he say?

A. This would cover his commissions to McInerney Sales.

. . . .

Q. Do you recall whether or not Mr. Azzaro indicated anything about the nature of who owned the companies or who the companies were? . . .. (Objections of defense counsel)

A. All he said is that all these companies are one and not to worry what name we make it out, it will cover the commissions.

(Tr. 467)

Mr. Bass further testified that despite the payments to CTE, he continued to deal with the same people, Rosenstein and Azzaro, at McInerney. No one from Europe performed any services for him.

Francis Parker, an employee of Genesco, testified that his company's sales representative was Foremost Brands. At the request of defendant Braverman, Genesco employed CTE and began paying commissions to the latter. Braverman indicated to Parker that Foremost and CTE were the "same" organization.

⁴ This is in contrast to the rule with regard to confessions followed in some jurisdictions. Under the so-called "Massachusetts Rule" the trial judge initially determines whether the defendant's confession is voluntary. If the court admits the confession, the jury is instructed that they may ignore it if they disagree with the court and believe the confession to have been coerced. See Jackson v. Denno, 378 U. S. 368, 378 n. 9 (1964).

⁵ Standard Oil Co. v. Moore , 251 F. 2d 188, 217-18 (9th Cir. 1957), cert. denied, 356 U. S. 975 (1958), relied upon by appellants is distinguishable. In that case the documents held inadmissible under the Business Records Rule, were urged on appeal, as in this case, to be admissible as either admissions or declarations of co-conspirators. The appellate court had to remand for a new trial since for the most part the "admissions" consisted of inter-office memos of employees and agents of the corporation to their principals and not to third parties. They were intramural statements and there had to be some showing that they represented the position of the corporation. No such problem exists here. For the most part the letters here were signed by Braverman and Rosenstein who were of course, in fact, the alter egos of the corporation. Therefore no independent or collateral finding of authority was here required.

⁶ The charge of Judge Croake here was entirely proper with respect to the admissibility of one conspirator's statements or declarations made in furtherance of the conspiracy against other persons found to be members. Therefore no further instruction was necessary with respect to the theory of admissibility of the Liechtenstein documents. See United States v. Baker, 419 F. 2d 83, 88-89 (2d Cir. 1969), cert. denied, 397 U. S. 971, 976 (1970).

See also United States v. Ross, 321 F. 2d 61, 68-69 (2d Cir.), cert. denied, 375 U. S. 894 (1963), where Chief Judge Friendly observed: "[W]e should hardly be warranted in reversing for the admission of evidence simply because the judge did not place his ruling on the ground that would most readily have supported it."

⁷ For example, a letter dated June 20, 1963 from defendant Braverman to Dr. Batliner reads as follows:

I am herewith returning both contracts from Dan River International.

Please sign both copies for Continental Trade and return same to my attention.

. . . .

Comparable instructions appear in letters from Braverman, dated March 14, 1963, April 4, 1963, September 3, 1963 and May 28, 1964.

⁸ Appellants vigorously attack the admission of Government's Exhibit 1029 which was a list of expenses of CTE including the names of Braverman and Rosenstein. The expenses totalled $54 and the Government argued to the jury that such minimal expenses for CTE which purportedly was engaged in substantial business, was indicative of its mere "mail drop" function. Since the memo was unsigned, it was not admissible on the alternate grounds we have accepted. However, that this was the true function of CTE is so clearly established by the other evidence, witnesses' testimony as well as the admissible documents, that we do not consider its admission here prejudicial. It was merely cumulative to that properly admitted evidence.

[70-2 USTC ¶9649] United States of America , Appellee v. David J. O'Connor, Defendant, Appellant

(CA-1), U. S. Court of Appeals, 1st Circuit, No. 7629, 433 F2d 752, 10/16/70, Affirming unreported district court

[Code Sec. 7203--Result unchanged by '69 Tax Reform Act]

Crimes: Failure to file return: Evidence: Attorney's testimony: Circumstantial evidence: Copies of records.--The taxpayer's conviction for wilful failure to file income tax returns for the years 1962 and 1963 was supported by substantial proof and was sustained. Where the taxpayer's primary contention at trial was his lack of wilfulness and that the returns had been filed, it was proper for the trial court to admit the following evidence: (1) an interview between the taxpayer and a special agent in which the taxpayer claimed that he had filed returns for the years; (2) a political flier issued by taxpayer to his constituents indicating that he had paid his 1962 income tax; (3) a letter from the taxpayer's accountant stating that he had not authorized the use of his name in the taxpayer's flier; (4) the testimony of an attorney, who represented the taxpayer under a power of attorney, outside the presence of the taxpayer that contradicted the taxpayer's statements in an IRS meeting; and (5) a statement made by the taxpayer to IRS officials that his father had been convicted of tax evasion and, because of what his father had gone through, he certainly would have filed. As to (4) above, the court indicated that it would have suppressed the evidence if the taxpayer had told the attorney not to make the statements or to confine himself to the position adopted by the taxpayer. The trial court's instructions to the jury were proper. Finally, the court held that the taxpayer was not entitled to a warning of his constitutional rights by special agents.

Herbert F. Travers, Jr., United States Attorney, Wayne B. Hollingsworth, Assistant United States Attorney, Boston , Mass. , for appellee. Thomas C. Cameron, Francis J. DiMento, DiMento & Sullivan, 100 State St., Boston, Mass., for defendant, appellant.

Before ALDRICH, Chief Judge, MCENTEE and COFFIN, Circuit Judges.

MCENTEE, Circuit Judge:

Defendant was convicted of wilful failure to file income tax returns for the years 1962 and 1963, in violation of 26 U. S. C. §7203 (1964).

His primary contention at trial was that his alleged violations were not wilful. But the government's evidence against him on this point was plentiful. Defendant did not take the stand in his own defense, nor did he present any witnesses on his own behalf. He insisted to special agents of the Internal Revenue Service on several occasions that he had filed his returns. He gave the special agents a carbon copy of a letter allegedly sent to the Internal Revenue Service indicating that he had mailed his 1962 return on time. He also gave them a carbon of the allegedly mailed return. At conferences with Internal Revenue in Boston , New York , and Washington , defendant clung steadfastly to his story that he had filed the returns. ¹ The government showed further that defendant, a state representative, had sent a political flier to his constituents indicating that he had paid his 1962 income tax. The government showed that he had also claimed by inference to have filed on time. These showings, along with proof that he had not filed, made a strong case against him.

[Special Agent]

Defendant was asked by a special agent, "Did you file your Federal Individual Income Tax Return for 1962?" He replied in the affirmative. Defendant objected to the admission of this question and his response. He would have us analogize this colloquy to the one in Flaherty v. United States , 355 F. 2d 924 (1st Cir. 1966), vacated on other grounds, Piccioli v. United States [68-1 USTC ¶15,820], 390 U. S. 202 (1968). The question asked the defendant in that case was: "If you were in the wagering business, would you have registered and purchased a federal stamp?" Only a lawyer could have realized what that question meant, for it was so phrased that "the incriminatory answer was precisely the one that would appear to be exculpatory." 355 F. 2d at 926. Flaherty could not have realized that it was in his best interest to remain silent. In the instant case, the question was entirely straightforward; it was not a trick. Defendant could readily understand that to answer in the negative would be an admission of guilt and to answer in the affirmative would be a lie. He could very well have said nothing, as he was under no compulsion to speak. Instead, he lied, and the jury had a right to consider the lie along with other evidence as to his state of mind.

Defendant also objected to admission of copies of documents he gave to the special agents. He claims a violation of the best evidence rule because the documents admitted were not the ones he gave, but only copies thereof. Under Fed. R. Crim. P. 26 we must apply the common law best evidence rule. Defendant argues that, where an original document is allegedly lost, production of the original may be excused only if the trial court finds that it has become unavailable without the fault of the proponent. Old Colony Trust Co. v. Shaw, 348 Mass. 212, 219, 202 N. E. 2d 785, 791 (1964), upon which he relies, does not support that proposition. It holds that if the trial judge finds the originals are unavailable without the serious fault of the proponent and that reasonable search was made, copies are admissible. Cf. McDonald v. United States , 89 F. 2d 128, 136 (8th Cir.), cert. denied, 301 U. S. 697 (1937); see generally McCormick, Law of Evidence §201 (1954). That being the rule, Sylvania Electric Products, Inc. v. Flanagan, 352 F. 2d 1005, 1008 (1st Cir. 1965), the copies were admissible.

[Flier]

As stated above, the court admitted into evidence, over defendant's objection of irrelevance, a political flier which demonstrated to defendant's constituents that his 1962 federal income tax had been paid in full. It also showed that his state tax returns for 1962 and 1963 were on file by August 9, 1964. We think that this evidence was relevant to prove defendant's state of mind when he failed to file his tax returns. United States v. Taylor [62-2 USTC ¶9590], 305 F. 2d 183 (4th Cir.), cert. denied, 371 U. S. 894 (1962), supports this holding. Taylor involved a jury conviction for filing a false income tax return. The defendant admitted at trial that he had been audited by state tax agents. He then admitted that he had paid additional state income taxes after the audit. The latter admission was objected to. Defendant also objected to questions asked about filing returns reporting the social security and withholding taxes of his secretary. In holding the questions to be proper, the court said:

"It is well established that evidence of collateral facts, circumstances and other acts of a defendant of a character kindred to that for which he is on trial, whether occurring prior or subsequent to the alleged offense, may be admitted with proper explanation to the jury as to the limits within which it may be included and for what purposes. (Citations omitted). The information elicited from the defendant over objection might well bear upon his attitude toward the reporting and payment of taxes generally and thus may have been helpful to the jury in ascertaining his intent in preparing and filing his 1955 tax return."

305 F. 2d at 185-86. Accord, United States v. Magnus [66-2 USTC ¶9660], 365 F. 2d 1007, 1011 (2d Cir. 1966), cert. denied, 386 U. S. 909 (1967); Morrison v. United States [59-2 USTC ¶9657], 270 F. 2d 1 (4th Cir.), cert. denied, 361 U. S. 894 (1959); Emmich v. United States [1924 CCH ¶3481], 298 F. 5 (6th Cir.), cert. denied, 266 U. S. 608 (1924).

The case of United States v. Long [58-2 USTC ¶9621], 257 F. 2d 340 (3d Cir. 1958), held that the failure to file could not be used to help prove intentional misrepresentation on a later return. The Long court relied on Spies v. United States [43-1 USTC ¶9243], 317 U. S. 492 (1943). But Spies only rejected the "contention that a willful failure to file a return, together with a willful failure to pay the tax may, without more, constitute an attempt to defeat or evade a tax. . . ." 317 U. S. at 494-495. (Emphasis added). It did not say that a jury could not consider that failure. In fact, the Supreme Court said that the jury could consider the failures to file and to pay the tax along with other acts to find criminal tax evasion. 317 U. S. at 500. To the extent that Long is contra to our holding here, we prefer to follow Taylor and Magnus, supra. We think the same reasoning applies to the evidence of defendant's past history of delinquent payments. ²

[Accountant-Attorney]

Defendant also objected to testimony by his accountant, Katz, relating to a conversation with the defendant about the flier. He also objected to receipt into evidence of a letter written by Katz about the flier in which the accountant's name prominently appeared. The evidence in question stated that Katz had not authorized the use of his name in the flier and that defendant knew of Katz's objections. We think that both the testimony and the letter were relevant once the flier was in evidence. The government was entitled to show that the accountant did not stand behind the flier, or else the jury could have inferred that defendant's statements in the flier followed good accounting procedures and that the accountant stood behind defendant in the presentation of the return to his constituents.

Also, defendant objected to an admission made by his attorney which was allowed into evidence. The attorney was acting under a power of attorney from defendant, which had been sent to the Internal Revenue Service. At a meeting with Internal Revenue, held in Washington , the defendant repeated his assertion that he had filed the tax returns in question. Shortly thereafter, he left the meeting but his attorney remained in the conference. The attorney then told the Internal Revenue officials that defendant had lied to them when he told them that his accountant, Katz, had mailed the returns to him for signing and filing. According to the attorney, defendant said this to protect Katz because "Katz was a C. P. A. and had a license." The attorney's story obviously contradicted defendant's statements. Defendant's attorney had "in all matters pertaining to any Federal Taxes for the calendar years ended 1962 and 1963 . . . full power and authority to do and perform all and every act or thing whatsoever required and necessary." The power of attorney was in evidence. We think this point is controlled by United States v. Dolleris [69-1 USTC ¶9289], 408 F. 2d 918 (6th Cir.), cert. denied, 395 U. S. 943 (1969). In Dolleris, a prosecution for tax evasion, the attorney representing the defendant under a similar power of attorney made certain admissions when his client was not present. The court held that these admissions were properly received in evidence against the defendant. Cf. Hayes v. United States [69-1 USTC ¶9204], 407 F. 2d 189 (5th Cir.), cert. denied, 395 U. S. 972 (1969); Harris v. United States [66-1 USTC ¶9251], 356 F. 2d 582 (5th Cir. 1966); see also American Fur Co. v. United States , 27 U. S. 358 (1829); United States v. Gooding, 25 U. S. 460 (1827). We might rule otherwise had defendant told his attorney not to make the statements or to confine himself to the position adopted by defendant. That would have been a case where the attorney exceeded the scope of his actual authority. But in the instant case no such defense was raised. The attorney may well have thought that an explanation for the motive for his client's misconduct would constitute, over all, a net gain in the eyes of the Service, which already appeared to believe that the misconduct had occurred. It was clearly within the power and duty of the attorney to do what he could, in his own best judgment, to dispel the suspicions of the Internal Revenue Service and avoid indictment. ³

Over objection, a government witness was permitted to relate one of defendant's statements made at the New York conference with Internal Revenue officials that his father had been convicted of tax evasion and, because he had seen what his father had gone through, he certainly would have filed. Defendant argues that there was inherent prejudice in the admission of this testimony since its only effect was to lead the jury to a "like-father, like-son" conclusion. The statement may have had some such tendency; however, the admission was entirely relevant to the questions of knowledge and intent. Defendant, having offered his explanation himself, cannot object to its use.

Defendant contends that the trial court, in instructing the jury, withdrew from its consideration the issue of his duty to file. After carefully reading the charge in its entirety, we are convinced that this allegation is without merit. The court stated several times that the three elements of the crime had to be proved. Twice, in mentioning the requirement that the prosecution must prove that defendant had to make a return, the judge said, "I think there is no dispute about that at all." (Emphasis added). However, on each occasion, the court quite clearly said, "Those three elements must be proved beyond a reasonable doubt before you would be warranted in returning a verdict of guilty." Defendant relies on DeCecco v. United States [65-1 USTC ¶15,640], 338 F. 2d 797 (1st Cir. 1964). There, the trial court disregarded a requested instruction that the mere fact that the government's evidence on one element was uncontradicted did not require the jury to accept it. Instead, the court removed that element from jury consideration. It said that only the second element need be proved because there was no dispute over the first. In the instant case, the district court never intimated that only two elements need be proved. Nor was it clear in DeCecco, as it is here, that the instructions reiterated the fact that there were three elements for decision by the jury.

Defendant objected to the trial court's instruction on "reasonable doubt." We have examined the charge in its entirety and find no merit in this objection.

Defendant also complains that the district court erred in allowing special agents to testify about statements he made to them before he was advised of his constitutional rights. We have considered this question several times, most recently in United States v. Mitchell [70-2 USTC ¶9637], No. 7614 (1st Cir., Oct. 7, 1970). Suffice it to say that the warnings referred to were not required here.

In all respects, we believe that the defendant had a fair trial and was fairly convicted.

Affirmed.

¹ On July 29, 1964, the 1963 return was filed and on August 13, 1964, the 1962 return was filed. These late filings, of course, do not prevent the prosecution for wilful failure to file.

² Defendant does not urge that the court failed to instruct the jury as to the effect of the evidence and did not request any such instructions, Fed. R. Crim. P. 30, relying instead on his arguments of irrelevancy.

³ Pickert v. Hair, 146 Mass. 1, 15 N. E. 79 (1888), cited by defendant, does say that an attorney's conversation relating to a fact in controversy, but not to an agreement relating to the management and trial of a suit, or an admission intended to influence procedure, was inadmissible. But even the Massachusetts court later recognized, Loomis v. New York, N. H. & H. R. Co., 159 Mass. 39, 34 N. E. 82 (1893), that an attorney retained to present and collect a claim may make admissions while acting within that authority. See generally Wigmore, Evidence, §1063 (1940).

 

 

 

[69-1 USTC ¶9289] United States of America , Plaintiff-Appellee v. Kenneth H. Dolleris, Defendant-Appellant

(CA-6), U. S. Court of Appeals, 6th Circuit, No. 18431, 408 F2d 918, 3/20/69, Affirming an unreported District Court decision

[Code Secs. 7201 and 7206]

Criminal proceedings: Wilful evasion of taxes: Miscellaneous defenses.--Taxpayer's conviction for wilful evasion of income taxes by filing of false tax returns and wilful signing of false returns was upheld. The Court found without merit miscellaneous assertions that the lower court erred in: (1) receiving testimony that the taxpayer had asserted his right to remain silent; (2) receiving testimony of the taxpayer's attorney made during conferences at which the taxpayer was not present; and (3) admitting into evidence invoices and checks which the taxpayer had made payable to nonexistent and fictitious parties. Further, there was sufficient evidence in the record to support the jury's verdict of guilty.

L. S. Jones, 920 Kentucky Home Life Bldg., Louisville , Ky. , for appellant. Mitchell Rogovin, Assistant Attorney General, Joseph M. Howard, John P. Burke, Department of Justice, Washington, D. C. 20530, Ernest W. Rivers, United States Attorney, John L. Smith, Assistant United States Attorney, Federal Bldg., Louisville, Ky., for appellee.

Before: O'SULLIVAN, EDWARDS, and MCCREE, Circuit Judges.

MCCREE, Circuit Judge:

Appellant was convicted by a jury on all counts of a nineteen count indictment charging wilful evasion of income taxes by the filing of false tax returns and wilful signing of false returns, in violation of Sections 7201 and 7206 of the Internal Revenue Code of 1954.

[Facts]

He is the principal officer and majority stockholder of D. & W. Sales and Service, Inc., hereinafter referred to as "D. & W.", a corporation located in Louisville , Kentucky and engaged in rebuilding and selling used automobile parts. The indictment charged him with making certain sales of scrap materials to Brodey & Brodey, Inc., hereinafter referred to as "Brodey", a corporation located in Indianapolis , Indiana , and to Louisville Scrap Material Co., Inc., hereinafter, "Louisville Scrap Co.", a corporation also located in Louisville , and with deliberately failing to report a part or all of the proceeds of these sales. The amounts alleged to have been unreported total approximately $43,000. Counts 1-5 and 11-14 of the indictment concern the tax returns of D. & W. for the fiscal years ending on January 31, from 1961 to 1965. Counts 6-10 and 15-19 concern taxpayer's personal returns for the same years.

[Right To Remain Silent]

The first question presented on appeal is whether the District Court erred in receiving certain testimony which appellant contends conveyed to the jury the fact that appellant had asserted his right to remain silent during the investigation of his alleged tax evasion. ¹ Although appellant cites several portions of testimony in support of this contention, he relies primarily on that of Internal Revenue Agent Bernard Morgan concerning a meeting attended by agents of the Internal Revenue Service, taxpayer and his attorney. ²

It is true that "[t]he prosecution may not . . . use at trial the fact that . . . [the defendant] stood mute or claimed his privilege in the face of accusation." Miranda v. Arizona , 384 U. S. 436, 468 (1966) (n. 37). Accord , United States v. McKinney , 379 F. 2d 259 (6th Cir. 1967); United States v. Pearson, 344 F. 2d 430 (6th Cir. 1965). It is also clear that testimony which is elicited to establish that a defendant claimed the privilege against self-incrimination before a grand jury or at a former trial is inadmissible. Grunewald v. United States [57-1 USTC ¶9693], 353 U. S. 391 (1957); Stewart v. United States , 366 U. S. 1 (1961). We do not think, however, that Morgan's testimony falls within the scope of these prohibitions. It was not deliberately elicited and conveyed only the fact that appellant's attorney had advised him of his constitutional right to remain silent. Moreover, other testimony which the jury heard, and which is discussed infra, reveals that appellant cooperated with the agents after he had received this advice, and that he authorized his attorney to participate in conferences with them in order to explain the apparent inaccuracy of his returns. The other testimony relied upon by taxpayer only remotely lends itself to the contention he advances and does not merit further discussion.

In any event, this issue is not properly before us on appeal. During his trial, appellant made specific objections to some of this testimony, but made no objection at any time based on the constitutional grounds he now asserts. As this court stated in United States v. Miller, 316 F. 2d 81 (6th Cir. 1963), cert. denied, 375 U. S. 935 (1963), reh. denied, 375 U. S. 989 (1964):

The Supreme Court has held that an objection to evidence predicated upon a specific constitutional claim is not properly presented for review if the only objection made in the trial court was based on other grounds. On Lee v. United States, 343 U. S. 747, 749-750, n. 3, 72 S. Ct. 967, 96 L. Ed. 1270. Under such circumstances, the Court of Appeals may decline to consider the constitutional claim in the exercise of its discretion under Rule 52(b), F. R. Cr. P. 316 F. 2d at 84.

Furthermore, even if receipt of this testimony were constitutional error and if, despite appellant's failure to make an appropriate objection to its receipt, we were disposed to consider this issue on appeal, we would hold that the error was harmless beyond a reasonable doubt. Chapman v. California , 386 U. S. 18 (1967), reh. denied, 386 U. S. 987 (1967).

[Testimony of Taxpayer's Attorney]

The next question presented is whether statements made by Dolleris' attorney, Mr. Jones, during conferences held for the purpose of investigating the accuracy of appellant's returns were properly received by the District Court as admissions, even though Dolleris was not present at the conferences. Whether such statements constituted admissions by Dolleris depends on the scope of Jones' authority at the time they were made. Laird v. Air Carrier Engine Service, Inc., 263 F. 2d 948 (5th Cir. 1959). As appellant observes, an attorney, merely because of his employment in connection with litigation, does not have the authority to make out-of-court admissions for his client, except those which are directly related to the management of that litigation. 7 Am. Jur. 2d, Attorneys at Law §122 (1963). However, on October 25, 1965, Dolleris executed a power of attorney ³ which provided in part:

KNOW ALL MEN BY THESE PRESENTS:

That I, Kenneth H. Dolleris, hereby make, constitute and appoint Lee S. Jones, my true and lawful attorney, hereby revoking any and all powers of attorney heretofore executed in the premises, for me and in my name, place and stead before the Internal Revenue Service, United States Treasury Department, to defend me against proposed income tax deficiency or income tax evasion or failure to file returns for all taxable years 1959, 1960, 1961, 1962, 1963, 1964, and 1965, to do and perform any and all other lawful acts as shall be deemed necessary or proper to protect my interest; to request of and receive from the Treasury Department such documents or copies thereof as I may be entitled under the law and the regulations; to demand and receive, giving and granting unto said attorney full power and authority to do and perform all and every act or thing whatsoever requisite or necessary in and about the premises as fully to all intents and purposes as I might or could do if personally present at the doing thereof; thereby ratifying and confirming all action my said attorney may have taken in this matter.

We hold that this instrument authorized Jones to participate in conferences with treasury agents and to attempt to explain to them the apparent inaccuracy of appellant's returns. Since the statements in question were made by Jones for this purpose, they were within the scope of his authority and testimony concerning them was properly admitted by the District Court. ⁴

Any doubt about the intended legal effect of the power of attorney is dispelled by consideration of the circumstances under which it was executed and the subsequent acts of the parties. 3 Am. Jur. 2d, Agency §33 (1962). Appellant was aware of the purpose for which the conferences were held and obviously knew that his refusal or failure to provide a satisfactory explanation of his returns would be likely to result in criminal prosecution. On March 17, 1965, he and Jones attended the first conference and he allowed Jones to answer many of the questions posed by the agents and to receive a list of allegedly unreported items. At a second conference held on October 18, 1965, he allowed Jones to respond to all questions asked by the agents. One week later he executed the power of attorney. Thereafter, Jones, unaccompanied by Dolloris, participated in four more conferences held during 1965 and 1966. One of these conferences was held in the D. & W. offices, and appellant was invited to attend at least one of these meetings but declined to do so.

In Epstein v. United States [57-2 USTC ¶9797], 246 F. 2d 563 (6th Cir. 1957), cert. denied, 355 U. S. 868 (1957), this court determined that two letters written by the appellant's accountant during an investigation of income tax evasion were admissible into evidence, stating:

The contention that the court committed reversible error in permitting the admission of two letters signed by Eugene Bernstein in explanation of one of the charts [used by the government during the trial] has no merit. Bernstein was an accountant employed to represent defendant. During the course of the investigation he wrote one letter (dated February 3, 1955), on the letterhead of his accountant's firm, with reference to the holdings of defendant and his wife. He wrote a similar letter on the letterhead of defendant's attorneys in which his name is listed as tax counsel, giving similar information with reference to the transactions between defendant and The Jameson Construction Company. These statements from attorney and tax counsel are plainly competent. 246 F. 2d at 570-71.

[Admission of Checks & Invoices]

The third question presented on appeal is whether certain invoices and checks which Brodey made payable to nonexistent and fictitious parties were erroneously admitted into evidence by the District Court. Appellant required Brodey to pay cash for some of the scrap metal which it bought. In complying with this requirement, Brodey made out checks and invoices in the names of fictitious payees, cashed the checks, and delivered the proceeds to Dolleris. Brodey's secretary-treasurer, Harry Brodey, testified that it could have made out the checks (and presumably the invoices) to "cash" and have achieved the same result. ⁵

In Bodnar v. United States [57-2 USTC ¶9971], 248 F. 2d 481 (6th Cir. 1957), checks made out to cash were offered to establish a taxpayer's receipt of certain unreported cash payments. We held them properly admissible as records made in the regular course of business under 28 U. S. C. §1732 (1951). We find no reason to distinguish between checks payable to cash and checks payable to fictitious persons in the context of this case. The uncontradicted testimony of two of Brodey's officers shows that although the payees were fictitious, the transactions took place and Dolleris received the proceeds of the checks. ⁶

Appellant's contention that the admission of these documents was error because of their tendency to associate him with a fraudulent scheme is also without merit. It is clear that this evidence was relevant because it was introduced to corroborate testimony that taxpayer, on many occasions, had asked for and received part of the sale price of scrap in cash. A trial judge has discretion to admit or refuse relevant evidence even though it may have a prejudicial effect on the jury. United States v. Craft, No. 18332 (6th Cir. Feb. 20, 1969). We do not think that there was an abuse of discretion in this case.

[Evidence Supported Jury's Verdict]

The fourth question presented is whether there is sufficient evidence in the record to support the jury verdict of guilty. Appellant points out that he moved for acquittal at the conclusion of the Government's case and that this motion was denied. After introducing evidence in his own behalf, appellant failed to renew this motion at the conclusion of the entire case or thereafter. As this court stated in United States v. Gosser, 339 F. 2d 102 (6th Cir. 1964), cert. denied, 382 U. S. 819 (1965), reh. denied, 382 U. S. 922 (1965):

It is the settled rule that if a defendant at the close of the Government's case moves for judgment of acquittal on the ground that the evidence is insufficient to support a verdict of guilty, and after the motion is overruled, introduces evidence in his own behalf, he waives his objections to the denial of his motion for judgment of acquittal on that ground. 339 F. 2d at 110.