Corporation
Officer
7203:
Willful Failure to File Return, Supply Information, or Pay Tax:
Sufficiency of Indictment or Information: Corporation Officer
[85-2
USTC ¶9844]
U.S.
of
America
, Plaintiff v. John DeFabritus, Defendant
U.S.
District Court, So. Dist. N.Y., 85 Cr 144(DNE), 605 FSupp 1538, 4/11/85
[Code Secs. 7201 and 7206]
Crimes: Tax evasion: Fraud and false statements: Indictment.--The
court denied the motion of a senior vice-president of a construction
company to dismiss an indictment charging him with evasion of individual
income taxes, falsely subscribing to his returns, and aiding and
assisting in the preparation of falsified corporate returns for the
construction company. Allegations that the construction of the
vice-president's home by the company constituted unreported income to
him were supported by probable cause, and admission of evidence
concerning the issue was proper and did not provide a basis for
dismissal of the indictment. Venue was proper because alleged violative
acts involving petty cash vouchers occurred within the court's district.
The vice-president's claim that the five-year delay before indictment
constituted a due process violation was rejected because no improper
motive was shown. His claim that a multiplicity of counts required
dismissal, and his motion for a bill of particulars were also rejected.
However, the vice president was successful in striking the language
"among other things" from the indictment because it added
nothing to the charges and would lead the jury to draw improper
inferences concerning crimes not charged in the indictment.
Rudolph
W. Guiliani, United States Attorney, Raymond A. Levites, Assistant
United States Attorney, New York, N.Y. 10007, for U.S. Charles A.
Stillman, Peter A. Chavkin, Stillman, Friedman & Shaw, 521 Fifth
Ave., New York, N.Y. 10175, for defendant.
Opinion
and Order
EDELSTEIN,
District Judge:
In
an Indictment filed
February 26, 1985
, defendant, John DeFabritus ("DeFabritus"), is charged with
conspiracy to defraud the
United States
and with numerous substantive violations of the federal income tax laws.
DeFabritus has moved to dismiss the indictment on a number of grounds
and to compel the government to provide him with a bill of particulars.
The
indictment contains ten counts. Count One charges DeFabritus with
conspiring to defraud the United States and to commit violations of the
Federal income tax laws, in violation of 18 U.S.C. §371. In substance,
this count alleges that DeFabritus, the senior vice-president of ARC
Electrical Construction Company ("ARC") and William Callahan,
formerly executive president and treasurer of ARC and now deceased,
together with other employees and third party vendors of ARC, conspired
to interfere with the proper operation of the Internal Revenue Service
("IRS") by depriving it of accurate information necessary to
compute and assess the individual tax liability of DeFabritus and other
key ARC executives for the years 1978 through 1980, and the corporate
tax liability of ARC for the same time period.
The
remaining nine counts charge DeFabritus with violations of the tax laws
flowing from his participation in the alleged conspiracy. Counts Two
through Four charge DeFabritus with evasion of his individual income
taxes, amounting to approximately $149,039.00 for the years 1978 through
1980, in violation of 26 U.S.C. §7201. Counts Five through Seven charge
DeFabritus with falsely subscribing to his individual income tax returns
for the same years, in violation of 26 U.S.C. §7206(1). Counts Eight
through Ten charge DeFabritus with aiding, abetting and assisting in the
preparation and filing of falsified and intentionally misleading
corporate tax returns for ARC for the calendar years 1978 through 1980,
in violation of 26 U.S.C. §7206(2).
I.
Motion to Strike "Legally Unsupportable Allegations".
DeFabritus moves to strike allegations in the indictment that relate to
his failure to declare as income the value of a house he now owns that
was allegedly built for him by his employer, ARC. 1
DeFabritus contends that he purchased the home at its appraised value
and that the money and services provided by ARC to build the house were
interest free loans. In support of this contention, DeFabritus cites a
loan agreement with ARC, which was executed on
August 17, 1981
, three years after construction of the house had begun and eight months
after the issuance by the Town of
East Hampton
of the house's certificate of occupancy. Under the loan agreement
DeFabritus acknowledged a debt to ARC in the amount of $265,000.00, the
appraised value of the house, for construction of the house. The
agreement also provided that in consideration of DeFabritus's continued
service for ARC, ARC would allow DeFabritus additional time to repay the
"loan." DeFabritus also cites a written agreement entered into
October 15, 1981
, in which DeFabritus acknowledged an indebtedness of $165,000.00 to
ARC's Pension Trust. DeFabritus states that the "facts are
essentially undisputed between the parties" and that as a matter of
law the acts as alleged in the indictment are not unlawful.
The
government, however, presents a somewhat different factual background
than that of the defendant. The government contends that the house,
furniture and garden constitute concealed compensation to DeFabritus for
which there was no intention to "repay" prior to the
commencement of the investigation by the IRS into the financial affairs
of ARC and its senior employees in the summer of 1980. The government
contends that the 1981 "loan" agreements between ARC and
DeFabritus were drafted after and in response to the commencement of the
criminal investigation, and that prior to the execution of these
agreements there is no evidence of any intention by DeFabritus to repay
ARC for the construction of the house. Moreover, the government contends
that the house did not take three years to complete, but was
substantially completed and in periodic use by the defendant during the
summer of 1979. 2
There
is sufficient probable cause of criminal liability under the
government's version of what the defendant characterizes as a loan.
Therefore, the court cannot strike these allegations from the
indictment; it is jury's role, not the court's, to determine if the
facts, as they find them, support the charges in the indictment.
II.
Dismissal of the Indictment based on erroneous admission of evidence to
the Grand Jury. DeFabritus moves to dismiss the indictment based on the
admission of erroneous evidence to the Grand Jury, specifically, the
evidence regarding the home discussed above. Aside from the more than
$270,000.00 of income attributable to the house, the indictment further
charges that DeFabritus failed to declare approximately $25,000.00 of
taxable income which he obtained over a three year period. DeFabritus
contends that because, as a matter of law, he had no tax liability with
respect to the home, the "erroneous" introduction before the
Grand Jury of this $270,000.00 worth of undeclared taxable income
irremediably prejudiced the Grand Jury. This motion is denied.
A
facially valid indictment cannot be attacked based on the sufficiency of
the evidence presented to the Grand Jury in the absence of gross abuse
or purposeful deception by the prosecutor. Costello v. United States
[56-1 USTC ¶9321], 350 U.S. 359, 363-64 (1956); see United States v.
Hogan, 712 F.2d 757 (2d Cir. 1983) (dismissal of indictment because
of prosecutorial misconduct). There has been no such showing in this
case. In United States v. Bari, 750 F.2d 1169 (2d Cir. 1984), the
court stated that "[t]he admission of evidence within the realm of
colorable relevance is not misconduct calling for the extreme remedy of
dismissal of the indictment even if the prejudicial effect of such
evidence outweighs its probative value."
Id.
at 1177. 3
The
evidence regarding the home was clearly relevant and does not provide a
basis to dismiss the indictment. Further, it is not clear that the
admission of the evidence was "erroneous." The
characterization of the admission on this evidence as
"erroneous" is based on the motion to strike the allegations
pertaining to the home transaction as "legally unsupportable."
This motion is denied for the reasons stated above. There is sufficient
"probable cause" to support the government's contentions
regarding the house to uphold the indictment.
Finally,
the defendant assumes that the indictment must be dismissed if the court
agrees with his version of the home transaction. The court, however,
cannot assume that if the Grand Jury had not heard the evidence
regarding the house, it still would not have indicted DeFabritus for not
declaring approximately $25,000.00 of taxable income over a three year
period, which saved DeFabritus $9,800.00 in taxes that would have been
due and owing.
III.
Motion to dismiss based on improper venue. DeFabritus moves to dismiss
various counts of the indictment based on improper venue. The government
does not oppose the motion with regard to Counts Five and Six.
Therefore, Counts Five and Six of the indictment are dismissed without
prejudice to seeking an indictment in the proper venue.
Defendant
asserts that the Southern District of New York is the improper venue for
all but two of the remaining counts of the indictment. 4
Counts Two, Three and Four allege income tax evasion in violation of 26
U.S.C. §7201. DeFabritus contends that on a charge of attempted
evasion, venue lies where the tax return was prepared, signed or filed.
Because the returns charged in Counts Two and Three were neither signed,
prepared or filed in the Southern District, DeFabritus contends that
venue in this district is improper. The act of attempted evasion,
however, consists not only of the preparation and filing of the return,
but the preparation of the underlying documents supporting the return.
Venue is proper "wherever the attempt to evade taxes was begun,
continued, or completed." United States v. Slutsky [73-2
USTC ¶9733], 487 F.2d 832, 839 (2d Cir. 1973), cert. denied, 416
U.S. 937 (1974). The alleged acts regarding the false petty cash
vouchers which are part of the attempted evasion alleged are therefore
part of the attempt charged. Where the evasion charge is based on the
making of false records, proper venue for an evasion charge includes the
district in which the corporation maintaining those records has its
principle place of business. Beaty v. United States [54-2 USTC ¶9466],
213 F.2d 712 (4th Cir. 1954), vacated mem. [55-1 USTC ¶9139],
348 U.S. 905 (1955) (vacated for re-examination in light of "net
worth decisions" in Holland v. United States [54-2 USTC ¶9714],
348 U.S. 121 (1954), Friedberg v. United States [54-2 USTC ¶9713],
348 U.S. 142 (1954), Smith v. United States [54-2 USTC ¶9715],
348 U.S. 147 (1954), and United States v. Calderon [54-2 USTC ¶9712],
348 U.S. 160 (1954)). These acts concerning the petty cash vouchers,
which are alleged to have occurred in this district, establish a
sufficient basis for venue in this court for the charges of attempted
evasion of income tax.
Defendant
contends that under the provisions of 18 U.S.C. §3237(b), he may elect
to be tried in the district where he resides, in this case, the Eastern
District of New York. Section 3237(b), however, applies only to offenses
involving "use of the mails." The allegations in Counts Two,
Three and Four, the evasion counts, do not involve "use of the
mails" within the meaning of Section 3237(b). In In re United
States (Clemente), 608 F.2d 76 (2d Cir. 1979), cert. denied,
446 U.S. 908 (1980), the court held that section 3237(b) applies
"at most, to tax prosecutions that involve the use of the mails in
the sense that a mailing, whether or not alleged in the indictment, is
the basis on which the prosecution seeks to establish venue in a
district other than the taxpayer's district of residence."
Id.
at 81. In this case, as in Clemente, "the Government does
not rely on the mailing of any item to establish venue in a district
other than the taxpayer's district of residence," id. at 81
n. 7. Accordingly, because the government will attempt to show at trial
that DeFabritus attempted to evade taxes in the Southern District of New
York, venue is proper. 5
Defendant
"recognize[s] that the law in this circuit is not consonant with
[his] position," however he asks the court to depart from the
holding in Clemente because it was "based on an erroneous
reading of the plain terms of §3237 and its legislative history and
because it has been roundly criticized by commentators and rejected by
every other court." Memorandum in Support of Motion at 17 n. *.
This court, however, is bound by the law in this circuit. United
States v. Posner, 549 F. Supp. 475, 476-77 n.1 (S.D.N.Y. 1982)
(following Clemente rule). Moreover, the defendant's assertions
regarding the criticism of Clemente are not accurate. Although it
is a minority view, the holding in Clemente has been adopted by
the Fourth Circuit, see In re United States (Nardone), 706 F.2d
494, 496 (4th Cir.), cert. denied, 104 S. Ct. 496 (1983); United
States v. Dorison, 573 F. Supp. 809, 811 (S.D.W. Va. 1983), cert.
denied, 104 S. Ct. 2346 (1984), and supported by at least one
commentator, Note, Transfer of Venue in Income Tax Prosecutions: 18
U.S.C. §3237(b)'s Use of the Mails, 53 Fordham L. Rev. -- (1985). 6
The court agrees with the reasoning in Clemente, in that it
"is faithful to the result intended by Congress, but avoids the
judicial inefficiency and duplicative proceedings that would be the
inevitable result of a broader interpretation" of Section 3237(b), Nardone,
supra, 706 F.2d at 496.
Counts
Eight, Nine and Ten allege that DeFabritus aided and assisted in the
filing of false corporate tax returns, in violation of 26 U.S.C. §7206(2).
Venue for the charge of aiding and assisting in the preparation and
presentation of fraudulent income tax returns is the same as for the
predicate charge of preparation and presentation of the return. United
States v. Kelley [39-2 USTC ¶9621], 105 F.2d 912 (2d Cir. 1939).
The alleged acts of aiding and assisting which consist of the payment of
petty cash from ARC took place in the corporate offices of ARC in
Manhattan
. These acts are sufficient to place venue in this district. 7
IV.
Multiplicity. DeFabritus contends that Counts Five through Seven,
charging filing of a false return for a particular year and Counts Two
through Four, charging attempted evasion of income tax for that same
year are multiplicitous and therefore must be dismissed. 8
A defendant may be charged with two crimes even though both arise from
the same facts. See United States v. Lodwick [69-2 USTC ¶9586],
410 F.2d 1202 (8th Cir.), cert. denied, 396 U.S. 841 (1969). Even
though both offenses may arise from the same occurrence, the elements
necessary to prove the two crimes differ. The lesser included offense,
however, will be dismissed "[i]f there is no factual dispute
concerning an element which distinguishes the offenses."
United States
v. Harary, 457 F.2d 471, 478 (2d Cir. 1972). The court,
therefore, will consider dismissing the lesser included offense only if
the defendant enters into a stipulation with the government regarding
the elements that distinguish the two offenses. This is the only way the
court can be assured that there is no factual dispute as required by Harary.
In the absence of a stipulation, the court cannot make a determination
regarding the facts of this case until evidence has been presented at
trial. Only at that time can a decision be made regarding the dismissal
of any of the counts based on multiplicity. See United States v.
Klein, 474 F. Supp. 1243, 1246 n.6 (S.D.N.Y.), aff'd mem.,
614 F.2d 1292 (2d Cir. 1979), cert. denied, 447 U.S. 905 (1980).
V.
Preindictment Delay. DeFabritus moves to dismiss the indictment based on
a violation of his constitutional right to due process caused by the
delay in seeking an indictment. The indictment concerns violations of
the tax laws for returns for the years 1978, 1979 and 1980. The
indictment was filed on
February 26, 1985
. 9
Defendant
admits that he has a "large burden" in moving to dismiss the
indictment based on preindictment delay. Memorandum in Support of Motion
at 21. In attempting to satisfy this burden, the defendant contends that
he will suffer extreme prejudice in the preparation of his case because
of the length of the delay in seeking an indictment. While "proof
of prejudice is generally necessary" to a due process claim, a due
process inquiry must also consider the reasons for delay.
United States
v. Lovasco, 431
U.S.
783, 790 (1977). The question is "whether the action complained of
. . . violates those 'fundamental conceptions of justice which lie at
the base of our civil and political institutions,' and which define 'the
community's sense of fair play and decency."
Id.
(quoting Mooney v. Holohan, 294
U.S.
103, 112 (1935) and Rochin v. California, 342
U.S.
165, 173 (1952)).
The
government contends that in order to gain a dismissal of the indictment,
the defendant must demonstrate that the delay was intended "to gain
tactical advantage over the accused," United States v. Marion,
404
U.S.
307, 324 (1971). The defendant, on the other hand, contends that a delay
brought about by negligence on the part of the prosecutor is sufficient
to warrant dismissal.
It
is unclear whether prosecutorial negligence is sufficient to require
dismissal of an indictment. In United States v. Birney, 686 F.2d
102 (2d Cir. 1982), the court specifically declined to express an
opinion on this issue.
Id.
at 105 n.1. Other than this reference, this court has not found a single
case which bases a decision to dismiss an indictment on mere
prosecutorial negligence. While at least one court has considered
prosecutorial negligence in its decision to dismiss an indictment, United
States v. Townley, 665 F.2d 579, 586 (5th Cir.) (prosecutorial
overload and insufficient personnel, if coupled with substantial
prejudice, may be entitled to slight weight in finding a deprivation of
due process), cert. denied, 456 U.S. 1010 (1982), this is
certainly a minority view. 10
This court will not join this minority and would require a showing of
improper motive to dismiss the indictment. The defendant has not offered
any evidence of such motive. Under these circumstances, the court does
not find that the fundamental conceptions of justice which define the
community's sense of fair play and decency have been violated. The
motion to dismiss the indictment based on due process considerations is
denied.
VI.
Striking Certain Language from the Indictment. Defendant moves to strike
a number of terms from the indictment. In order to grant a motion to
strike surplusage from an indictment, it must be clear that the
allegations are not relevant to the charge and are inflammatory and
prejudicial. United States v. Kemper, 503 F.2d 327, 329 (6th Cir.
1974), cert. denied, 419
U.S.
1124 (1975); United States v. Pilnick, 267 F. Supp. 791, 802
(S.D.N.Y. 1967). The standard is exacting.
United States
v. DePalma, 461 F. Supp. 778, 797 (S.D.N.Y. 1978). Each
statement that the defendant claims is surplusage will be addressed
individually with regard to this standard.
The
indictment contains the phrase "slush fund." Specifically, the
indictment states: "It was a further object of this conspiracy for
Arc to maintain false books and records to create a "slush
fund" for the benefit of William Callahan (now deceased), and to be
otherwise made use of as certain executives saw fit." Indictment ¶17.
The indictment may properly include any allegation that is
"relevant to the case and will constitute part of the government's
proof at trial."
United States
v. Espisito, 423 F. Supp. 908, 911 (S.D.N.Y. 1976). The evidence
regarding the secretive accumulation of cash would be probative of a
scheme to avoid the payment of taxes and is thus properly included in
the indictment. While there are words less prejudicial than "slush
fund" that may be used to characterize the alleged accumulation of
cash, the court does not have broad powers to amend an indictment by
changing the wording of the indictment, Ex parte Bain, 121 U.S. 1
(1887). The words "slush fund," therefore, will not be
stricken from the indictment.
The
defendant objects to the use of the words "among other things"
and "at least" in the indictment. 11
The words "among others" have been stricken from an indictment
where they serve no useful purpose and allow the jury to draw the
inference that the defendant is accused of crimes not charged in the
indictment. United States v. Brighton Building & Maintenance Co.,
435 F. Supp. 222, 230 (N.D. Ill. 1977), aff'd, 598 F.2d 1101 (7th
Cir. 1979); see also United States v. Freeman, 619 F.2d 1112,
1118 (5th Cir. 1980) (reference to indictment to particular events that
"included, but were not limited to, the following" should have
been treated as surplusage), cert. denied, 450 U.S. 910 (1981).
These
cases are persuasive with regard to the words "among other
things" in paragraphs 18(a) and 18(e) of the indictment. This
language does not add anything to the charges in the indictment and
would lead the jury to draw improper inferences regarding other crimes
not charged in the indictment. The words "among other things"
are therefore to be stricken from paragraphs 18(a) and 18(e) of the
indictment. By striking this language, the court in no way forecloses
the government from presenting any proof relevant to the charges at
trial. See
United States
v. Pope, 189 F. Supp. 12, 26 (S.D.N.Y. 1960).
Defendant
also moves the court to strike the term "Executive" in Count
One, paragraph one, because DeFabritus is only a vice-president of the
corporation. The court finds nothing inherently prejudicial,
inflammatory or misleading in the term "Executive," as applied
to the charges in the indictment and will therefore not strike this term
from the indictment.
Defendant
also objects to the government's repeated use of the term "now
deceased" in referring to William Callahan. Mr. Callahan was
murdered in 1981 and his death remains unsolved. Defendant contends that
the repeated use of the term "now deceased" "is bound to
suggest to the jury that there is something in his death which is
relevant to the defendant's guilt in this case." Memorandum in
Support of Motion at 28. The court does not agree. Defendant does not
dispute the government's right to refer once to the fact that Callahan
is dead.
Id.
For clarity's sake it is appropriate that his death be referred to
whenever his name is mentioned in the indictment. Moreover, the
government has stated its belief that defendant was in no way
responsible for Callahan's death and that it would not object to the
court so instructing the jury. Government's Memorandum at 24, n.
VII.
Bill of Particulars. The government has responded to all but three of
the defendants Bill of Particulars. It is within the discretion of the
trial judge to determine whether a bill of particulars must be filed and
its scope. United States v. Cohen, 518 F.2d 727 (2d Cir.), cert.
denied, 423 U.S. 926 (1975). That discretion must be informed,
however, by certain well established considerations: whether the
requested particularization is necessary to a defendant's preparation
for trial and the avoidance of unfair surprise at trial. United
States v. Kendall, 665 F.2d 126 (7th Cir.), cert. denied, 455
U.S.
1021 (1981). It is not enough that the information would be useful to
the defendant; if the defendant has been given adequate notice of the
charges against him, the government need not be required to disclose
additional details about its case. The court must be cognizant of the
fact that a bill of particulars confines the government's evidence at
trial to the particulars furnished.
United States
v. Boffa, 513 F. Supp. 444, 484-85 (D.
Del.
1980). This, the court is required to balance restricting the
Government's proof against protecting defendants from suprise
Id.
at 485. Based on these considerations, the outstanding requests for
particulars are denied.
The
defendant seeks a list of the petty cash vouchers which the government
will claim DeFabritus did not report as income. The government has
asserted that the defendant has been provided with access to all
vouchers that will be offered at trial pursuant to Rule 16 of the
Federal Rules of Criminal Procedure. This disclosure is sufficient to
permit the defendant to prepare for trial and the request is therefore
denied.
The
defendant also seeks a list of all overt acts not listed in the
indictment. A defendant does not ordinarily "need" detailed
evidence of the conspiracy to prepare for trial.
United States
v.
Wilson
, 565 F. Supp. 1416 (S.D.N.Y. 1983). The indictment lists twenty-six
overt acts; this information will surely permit the defendant to prepare
adequately for trial. This request clearly constitutes an attempt to
discover the government's case at trial and will not be permitted. See
United States
v. Hilliard, 436 F. Supp. 66, 76 (S.D.N.Y. 1977).
Finally,
the defendant seeks disclosure of "any statement by any
coconspirator which the government intends to offer at trial as a
coconspiratorial admission by the defendant under Fed. R. Evid.
801(d)." Memorandum in Support of Motion at 30. This request is
denied. Certain statements of co-conspirators made during the course of
the conspiracy are discoverable under Rule 16(a)(1)(A) of the Federal
Rules of Criminal Procedure. United States v. Turkish, 458 F.
Supp. 874 (S.D.N.Y. 1978), aff'd, 623 F.2d 769 (2d Cir. 1980). 12
The court will not impose disclosure beyond that required by Rule 16.
The indictment and the discovery made to the defendant thus far
adequately apprise the defendant of the charges against him so that he
can prepare his defense.
CONCLUSION
The
defendant's motion to dismiss the indictment based on legally
unsupportable allegations, Grand Jury prejudice, preindictment delay and
multiplicity are denied. The motion for a bill of particulars is denied
in all respects. The defendant's motions to strike surplusage from the
indictment and to dismiss counts based on improper venue are granted in
part and denied in part. Counts Five and Six are hereby dismissed
without prejudice.
1
This motion affects the substantive counts, Two through Seven, and
portions of Count One, the conspiracy count.
2
DeFabritus contends that the house did not constitute income to him
until January of 1981 when the Town of
East Hampton
issued the certificate of occupancy. The issue of when DeFabritus had
dominion over the property alleged in the indictment, sufficient for the
property to constitute income within the meaning of the income tax laws,
is properly a jury question. United States v. Dixon [83-1 USTC ¶9213],
698 F.2d 445, 446 (11th Cir. 1983).
3
In examining the evidence presented to a grand jury, the court is not
bound by the same rules that apply to the introduction of evidence at
trial. For example, the court in
Bari
, held that Rule 403 of the Federal Rules of Evidence which
permits a court to exclude evidence if the probative value is
substantially outweighed by the danger of unfair prejudice does not
apply to grand jury proceedings. 750 F.2d at 1177.
4
Defendant concedes that venue is proper for the counts relating to the
1980 tax return. Memorandum of Law in Support of Motion at 15. Conuts
Four and Seven involve the 1980 return.
5
Venue is proper with respect to Count Seven because the return was
prepared in the Southern District of New York.
6
The commentator advocates adoption of the Clemente view, provided
the defendant has some "minimum contact" with the government's
chosen forum. Although this is not the law of this circuit, even under
this approach the government has alleged sufficient contracts with the
Southern District of New York to meet the "minimum contacts"
test. The government alleges that "[a]mony other things,
DeFabritus' false petty cash vouchers in each of the three years were
made and submitted at Arc's offices in New York." Government's
Memorandum at 14-15. Defendant's contacts with the Southern District of
New York are certainly "more than negligible."
7
The defendant has moved to dismiss Count One, the conspiracy count,
based on improper venue. The defendant fails, however, to address Count
One in his memorandum. Based on the above analysis, the Southern
District of New York is the proper venue for the conspiracy charge.
8
As noted above, Counts Five and Six are dismissed. Therefore,
defendant's motion with respect to the multiplicity of these counts is
moot. Count Seven is arguably duplicitous only with Count Four.
9
The statute of limitations for tax violations is six years from the
filing of the return. The indictment was filed within this period.
10
Were the court to adopt the negligence standard, the outcome would not
be altered. The defendant has not demonstrated actual prejudice
resulting from the delay in seeking the indictment. DeFabritus contends
that the only person other than he who was involved in any discussion
relating to the purchase of the house was William Callahan, Sr., who
died in 1981. Any prejudice resulting from the loss of this witness,
however, is not due to the government's delay. Even if the government
had indicted defendant three years ago, Callahan would not have been
alive to testify in this matter. Moreover, defendant's contention that
he will have difficulty remembering the events reflected in cash
vouchers signed in 1973 and 1974 is equally unavailing. He would have
had the same difficulty in remembering such facts even if the indictment
had been filed in 1982, a time when even defendant would have to concede
that there was no wrongful pre-indictment delay. See United States v.
Carruth [83-1 USTC ¶9247], 699 F.2d 1017, 1019-20 (9th Cir.), cert.
denied sub nom., Reed v.
United States
, 104 S. Ct. 698 (1983).
11
The indictment states:
Rather,
the corporate monies were used, among other things, for the construction
and improvement of personal residences and for the benefit of themselves
and others.
Indictment ¶18(a).
[T]he defendant and his co-conspirators thus concealed, among other
things, the true nature of the payments and their own tax liability for
the monies they received by aiding and assisting in the preparation of
false corporate tax returns.
Indictment ¶18(e).
The bogus petty cash vouchers prepared and submitted by the defendant .
. . total at least $25,000.
Indictment ¶18(d).
12
Rule 16 requires discovery only if the statements are written or
recorded or if the statements are made in response to interrogation by a
person known by the declarant to be a government agent and the
government intends to offer the statement in evidence at trial.
[54-1
USTC ¶9286]
United States of America
v. Harold C. Trownsell and Otto C. Kuehn
United States of America
v. Harold C. Trownsell and Sidney C. Trownsell
In
the United States District Court for the Northern District of Illinois,
53 CR 156, 53 CR 157, 117 FSupp 24, November 18, 1953
Criminal prosecution: Sufficiency of indictment: Motion to dismiss.--Motions
to dismiss the indictments on the ground of their insufficiency were
denied, where the indictments charged the defendants with willful tax
evasion by knowingly filing a false return reporting a certain income
and tax due whereas the net income and tax due were of a specified
greater amount.
Criminal prosecution: Motion for bill of particulars.--The
alternative motions for a bill of particulars were denied on the ground
that the defendants were in possession of the means of ascertaining the
facts (the corporate books) and a bill of particulars is not intended as
a means to elicit evidence of the Government's case.
Otto
Kerner,
Jr.
,
United States
Attorney,
219 South Clark Street
,
Chicago
4,
Ill.
, for plaintiff. Floyd Lanham,
105 West Adams Street
,
Chicago
3,
Ill.
, for defendant Trownsell. Earle C. Hurley,
231 South La Salle Street
,
Chicago
4,
Ill.
, for defendant Kuehn.
Memorandum
HOFFMAN,
District Judge:
The
defendants have moved to dismiss the indictments in the above entitled
causes and in the alternative to direct the Government to furnish the
defendants with a bill of particulars.
The
indictment in case No. 53 CR 156 charges a violation of Section 145(b),
26 U. S. C., by Harold C. Trownsell and Otto C. Kuehn, President and
Secretary-Treasurer of Chicago Avenue Chevrolet, Inc., by wilfully and
knowingly attempting to defeat and evade income taxes owing by the
corporation for the year 1946 by knowingly filing a false and fraudulent
tax return wherein it was stated the income of the corporation for 1946
was the sum of $25,119.26 and that the total amount of tax due thereon
was the sum of $5,779.82, whereas the net income of the corporation for
the year in question was the sum of $84,355.34, upon which net income
the corporation owed to the United States of America a total tax of
$31,782.19.
The
indictment in case No. 53 CR 157 makes a similar charge against Harold
C. Trownsell and Sidney C. Trownsell, President and Vice-President,
respectively, of Trownsell Chevrolet Sales, Inc., for the year 1946 in
that they fraudulently filed an income tax return for the corporation
wherein the income was said to be $46,153.65 with a resulting tax of
$16,961.43, whereas the actual net income of the corporation was
$87,256.65, with a tax due of $33,157.53.
The
motion to dismiss in each case is predicated on the following grounds:
(1) The indictments fail to charge a commission of a crime; (2) The
indictments are too vague and fail to state a crime; (3) They are so
vague it is impossible for the defendants to plead to them; (4) The
indictments are fatally defective because they state mere conclusions
unsupported by allegations of fact.
Indictments
framed in substantially similar form have been held sufficient by the
Court of Appeals for the Seventh Circuit. In the case of Capone v.
United States, 56 Fed. (2d) 927 [3 USTC ¶885], at 931, the court
said:
"But
it is contended by appellant that the indictment should have specified
the means by which he attempted to evade and defeat the payment of the
tax. Neither the Cruikshank case nor any other case which we have been
able to find supports this contention."
To
the same effect see United States v. Miro, 60 Fed. (2d) 58 [1932
CCH ¶9396], United States v. Guzik, 54 Fed. (2d) 618 [1931 CCH
¶9681], and Himmelfarb v. United States, 175 Fed. (2d) 924 [49-1
USTC ¶9313].
The
motions of the defendants to dismiss the indictments in the above
entitled causes will be denied.
[Motions
for Bill of Particulars]
With
respect to the alternative motions of the defendants in both cases for a
bill of particulars, it may be said that the information sought is to be
found in the books of the corporations which the defendants headed, and
which books are subject to their inspection. In the case of United
States v. Skidmore, 123 Fed. (2d) 604 [41-2 USTC ¶9716], at page
607, the court said:
"To
each of these indictments appellant moved for a bill of particulars,
which the court denies. In all material instances he called for
calculations based upon appellant's books of account which were in his
own possession. From these it would seem clear that he could easily
calculate his receipts and expenditures and thus ascertain the true
amount, if any, for which he was liable for taxation. If, on the other
hand, the Government was in error as to its calculations, it would have
been a simple matter for appellant to show those errors by the
inspection of his own books. The general rule is that particulars such
as these will not be furnished when the one seeking them is in
possession of the means of ascertaining them. Moreover, in case of such
motions the court is clothed with considerable discretion in making its
orders. We think that discretion was not abused in this case."
And
in the case of Remmer v. United States, 205 Fed. (2d) 277 [53-1
USTC ¶9421], it was said at page 281:
"Particular
stress is placed upon the fact that the indictment did not inform him as
to the source or sources of his alleged net income, the item or items
making up his alleged net income, and the method or methods by which the
Government computed his alleged net income. An application for a bill of
particulars is one addressed to the sound discretion of the court. Our
inquiry: Was that discretion abused? * * * A bill of particulars should
be granted where it is thought necessary (1) to protect the defendant
against a second prosecution for the same offense, or (2) to enable the
defendant to adequately prepare his defense and avoid surprise at the
trial. In the instant case the indictment charged that appellant filed
tax returns disclosing a certain net income and tax due, whereas, in
fact the net income and tax due were of a specified greater amount. It
is apparent that the offense charged is sufficiently defined to protect
appellant from double jeopardy. * * * Appellant was in a position to
know whether the facts alleged were true. * * * The District Court in
the exercise of its discretion determined that granting the requested
bill of particulars would merely apprise appellant of information in the
hands of the prosecution to which he was not entitled. * * *"
A
bill of particulars is not intended as a means to elicit evidence of the
Government's case. United States v. Mangiaracina, 10 F. R. D. 415
[50-2 USTC ¶9467]; Nye & Nissen v. United States, 168 Fed.
(2d) 846; Fredrick v.
United States
, 163 Fed. (2d) 536; Voght v.
United States
, 156 Fed. (2d) 308;
United States
v. Clark, 10 F. R. D. 622,
United States
v. Kushner, 135 Fed. (2d) 668. Barron, in Federal Practice and
Procedure, Sec. 1917, states that:
"Defendants
are not entitled to a bill of particulars * * * as to evidentiary matter
especially when the defendant is in possession of the means of
ascertaining the facts."
In
United States v. Rainey, 10 F. R. D. 431, the court said at page
433:
"In
this case the defendant asks whether the income charged by the
government represents a single item of undeclared net income and then
the defendant asks for the date, the place, the nature of the
transaction, and the source or persons from whom the defendant received
the income. This would, of course, be setting forth evidence of the
government, and, as stated, it is the rule that 'it is not the function
of the bill to furnish accused with the evidence of the
prosecution.'"
The
alternative motion of the defendants in the above entitled causes for an
order directing the Government to file a bill of particulars is denied.
The United States Attorney is directed to bring in the defendants in
both cases for arraignment and plea on or before
November 25, 1953
.
[35-1
USTC ¶9002]The
United States of America
. Appellant, v. Jacob Troy
Supreme
Court of the
United States
, No. 25. October Term, 1934, 293 US 58, 55 SCt 23, Decided November 5,
1934
On appeal from the District Court of the United States for the Middle
District of Pennsylvania.Indictment of a corporation's president, for
wilfully and knowingly attempting to defeat and evade tax upon the
corporation's income, is not defective because it fails to allege that
the defendant was under a duty, as president, to perform the act in
respect of which the violations occurred, and the indictment is
sustained; for when charged with wilful effort to defeat the tax by
presenting a false return no allegation of duty to make the return was
necessary. Reversing District Court for the Middle District of
Pennsylvania
, 6 Fed. Supp. 315
Mr.
Justice McREYNOLDS delivered the opinion of the Court.
This
cause is here under the Criminal Appeals Act,
March 2, 1907
, c. 2564, 34 Stat. 1246 (U. S. C. A. Title 18, Sec. 682) and Sec. 238
Jud. Code (U. S. C. A. Title 28, Sec. 345). It necessitates
consideration of certain provisions of the Revenue Act of 1928, c. 852,
45 Stat. 791.
Section
52 of that Act commands corporations to make tax returns sworn to by
designated officers. Section 146(a) declares that any person required to
make return who wilfully fails so to do shall be guilty of a
misdemeanor; 146(b) that any person who wilfully fails to collect or
truthfully account for and pay over any tax, and any person who wilfully
attempts to evade or defeat any tax shall be guilty of felony; and
146(c) that "the term 'person' as used in this section includes an
officer or employee of a corporation or a member or employee of a
partnership, who as such officer, employee, or member is under a duty to
perform the act in respect of which the violation occurs".
Sec.
701 provides: "When used in this Act the term 'person' means an
individual, a trust or estate, a partnership, or a corporation";
also "the terms 'includes' and 'including' when used in a
definition contained in this Act shall not be deemed to exclude other
things otherwise within the meaning of the term defined".
Applicable
portions of the Act are copied in the margin. *
An
indictment, in the Middle District of Pennsylvania, charged appellee
Troy with violating Sec. 146(b) in that while president of the Troy Oil
Company, Incorporated, he unlawfully, wilfully and knowingly attempted
to defeat and evade a large part of the tax due from that corporation
for 1929, by making a return for it which falsely stated the gross
income. The indictment was challenged because "it fails to set
forth that the defendant was under a duty to perform the act in respect
of which the violation occurred and in the absence of this averment the
indictment fails to set forth facts showing prima facie, a commission of
the crime charged in the indictment". The trial judge sustained the
objection and quashed the indictment. In his view it was necessary that
there should be allegation and proof that appellee, as president of the
corporation, was under a duty to make the return.
This
was error; the questioned judgment must be reversed.
Section
146(a) penalizes any person required to make a return, who wilfully
fails so to do; paragraph (b) any person under duty to collect, account
for, and pay over any tax, who wilfully fails, also any person (without
regard to duty) who wilfully attempts to defeat the tax; and paragraph
(c) declares that the term person as used in the section shall include
an officer under duty to perform etc.
Considering
these paragraphs along with the definitions of Sec. 701, it seems
sufficiently clear that Congress did not intend that paragraph (c)
should exclude from paragraph (b) one who actually attempted to defeat.
If the charge against appellee had been failure to make return, or pay
over the tax for the corporation it might have been necessary to allege
and show some duty in respect thereto; but when charged with wilful
effort to defeat the tax by presenting a false return no allegation of
duty to make the return was necessary. The alleged act sufficiently
indicated appellee's criminal intent. Certainly we can find no
legislative purpose to exempt from punishment one who actively endeavors
to defeat a tax. And because some officers are said to be included in
the term "person", all other individuals are not necessarily
excluded.
Thus
construed, all parts of the statute may have effect, and the manifest
purpose of Congress will not be obstructed.
Reversed.
*
Rev. Act of 1928, c. 852, 45 Stat. 791, 808, 835, 878.
Sec.
52. Corporation Returns.
(a)
Requirement.--Every corporation subject to taxation under this title
shall make a return, stating specifically the items of its gross income
and the deductions and credits allowed by this title. The return shall
be sworn to by the president, vice president, or other principal officer
and by the treasurer or assistant treasurer. . . .
Sec.
146. Penalties.
(a)
Any person required under this title to pay any tax, or required by law
or regulations made under authority thereof to make a return, keep any
records, or supply any information, for the purposes of the computation,
assessment, or collection of any tax imposed by this title, who
willfully fails to pay such tax, make such return, keep such records, or
supply such information, at the time or times required by law or
regulations, shall, in addition to other penalties provided by law, be
guilty of a misdemeanor and, upon conviction thereof, be fined not more
than $10,000, or imprisoned for not more than one year, or both,
together with the costs of prosecution.
(b)
Any person required under this title to collect, account for, and pay
over any tax imposed by this title, who willfully fails to collect or
truthfully account for and pay over such tax, and any person who
willfully attempts in any manner to evade or defeat any tax imposed by
this title or the payment thereof, shall, in addition to other penalties
provided by law, be guilty of a felony and, upon conviction thereof, be
fined not more than $10,000, or imprisoned for not more than five years,
or both, together with the costs of prosecution.
(c)
The term "person" as used in this section includes an officer
or employee of a corporation or a member or employee of a partnership,
who as such officer, employee, or member is under a duty to perform the
act in respect of which the violation occurs.
Sec.
701. Definitions.
(a)
When used in this Act--
(1)
The term "person" means an individual, a trust or estate, a
partnership, or a corporation.
.
. . . . .
(b)
The terms "includes" and "including" when used in a
definition contained in this Act shall not be deemed to exclude other
things otherwise within the meaning of the term defined.