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7203: Willful Failure to File Return, Supply Information, or Pay Tax: Evidence: Depositions

 

[96-2 USTC ¶50,402] United States of America , Plaintiff-Appellee v. William Lee Workinger, Defendant-Appellant

(CA-9), U.S. Court of Appeals, 9th Circuit, 95-30200, 7/23/96, 90 F3d 1409, 90 F3d 1409. Affirming an unreported District Court decision

[Code Sec. 6531 ]

Tax convictions: Internal Revenue laws: Corruptly obstructing and impeding the due administration of: Statute of limitations: Exceptions.--The prosecution of a dentist for corruptly obstructing and impeding the due administration of the Internal Revenue laws by submitting inaccurate financial forms to IRS collection officers was not barred by the statute of limitations. The six-year limitations period applied under Code Sec. 6531(6) because the taxpayer's actions constituted offenses as described under Code Sec. 7212 , which involves attempts to interfere with the administration of the Internal Revenue laws. The parenthetical language of Code Sec. 6531(6) did not limit the scope of the six-year limitations period to those Code Sec. 7212 offenses involving intimidation of government officers and employees. Congress expressly included the Code Sec. 7212 offenses within the six-year limitations period, and the structure of Code Sec. 6531 made it apparent that the parenthetical language in Code Sec. 6531(6) was descriptive, not limiting.

[Code Secs. 7203 and 7206 ]

Tax convictions: Evidence: Admission: Transcript: Hearsay: Testimony.--The lower court did not abuse its discretion when it admitted into evidence a transcript of an interview with an individual taxpayer, who was convicted of willfully failing to pay taxes and filing a false income tax return, by his wife's attorney. The taxpayer's statements were admissions by a party-opponent and were not hearsay. Further, the minimum requirements of authentication were met. The government did not offer false evidence when it elicited testimony from a revenue agent that characterized two monetary amounts as income. The taxpayer's disagreement with the agent concerning the characterization of income did not convert her testimony into falsehood. The taxpayer did not make a prima facie case of government misconduct.

William Fitzgerald, Christopher L. Cardani, Assistant United States Attorneys, Eugene, Ore., Robert E. Lindsay, Alan Hechtkopf, Scott A. Schumacher, Department of Justice, Washington, D.C. 20530, for plaintiff-appellee. Joseph Wetzel, Wetzel, DeFrang & Sandor, 838 S.W. First Ave. , Portland , Ore. 97204 , for defendant-appellant.

Before: REINHARDT, KOZINSKI and FERNANDEZ, Circuit Judges

OPINION

FERNANDEZ, Circuit Judge:

William Lee Workinger appeals his conviction for willfully failing to pay taxes in violation of 26 U.S.C. §7203 , willfully filing a false income tax return in violation of 26 U.S.C. §7206(1) , and corruptly obstructing and impeding the due administration of the Internal Revenue laws in violation of 26 U.S.C. §7212(a) . We affirm.

BACKGROUND

On March 23, 1994, Workinger, a dentist licensed to practice in Oregon , was indicted for his participation in an elaborate scheme to conceal his income and assets from the Internal Revenue Service. The heart of his scheme consisted of creating and using various entities to hide income, purposely misstating his income, filing forms which substantially underreported the value and quantity of his financial resources and holdings, and diverting his practice income to his spouse. Among other things, the government accused Workinger of maintaining numerous unreported bank accounts holding substantial unreported funds, depositing business receipts into bank accounts that he had not listed on IRS forms, and failing to disclose real estate which he controlled. The government also alleged that he had misled federal investigators by showing a rental agreement form to prove that he rented a home which he actually owned and by filing false statements of financial condition.

Workinger was indicted in five counts for attempting to evade payment of federal income tax for 1980, 1981, 1983, 1984 and 1985 (Counts 1, 2, 3, 4, and 5 respectively). He was also indicted for making and subscribing his 1987 federal income tax return on which he understated his total income (Count 6). Finally, he was indicted for corruptly obstructing and impeding the due administration of the internal revenue laws by submitting inaccurate financial forms to IRS collection officers on three separate occasions--once on February 17, 1988, and twice on March 29, 1989 (Count 7). Workinger claims that prosecution on the latter count was barred by the statute of limitations.

In 1991, before the indictment issued, Workinger had been interviewed by Donald Johnson, a lawyer representing Workinger's former wife. Although no court reporter was present, Workinger affirmed that he would tell the truth and the conversation was tape-recorded. Mr. Johnson's secretary, who was not present at the interview, then typed a transcription of the conversation. The transcriptions included handwritten notations, numerous interruptions and sections omitted as "inaudible." At trial, the transcript of that interview was received by the court and read verbatim to the jury. By that time, the tapes had been erased. Workinger asserts that the transcript should not have been admitted because it was not the best evidence, was not properly authenticated, and was hearsay.

In the course of the trial, the prosecution called Revenue Agent June Brock to testify as an expert witness. Ms. Brock testified in support of the government's charge that Workinger signed a false 1040 form for 1987 which he did not believe to be correct. Brock testified that $7,855.55 was omitted income "because it was a discount." She further testified that $8,625 was omitted income because the government found that an asset sold by Workinger had no basis in his hands. Workinger claims that this testimony was false.

On January 25, 1995, Workinger was convicted as charged on Counts 6 and 7. On Counts 1 through 5, he was convicted of the lesser included offense of willful failure to pay income taxes. He appealed.

JURISDICTION AND STANDARD OF REVIEW

The district court had jurisdiction pursuant to 18 U.S.C. §3221 . We have jurisdiction pursuant to 18 U.S.C. §1291 .

The district court's conclusion regarding the applicability of a statute of limitations is a matter of law reviewed de novo. United States v. Manning, 56 F.3d 1188, 1195 (9th Cir. 1995). In construing a statute, our court's objective "is to ascertain the congressional intent and give effect to the legislative will." Philbrook v. Glodgett, 421 U.S. 707, 713, 95 S. Ct. 1893, 1898, 44 L. Ed. 2d 525 (1975). This court must first determine whether the plain language makes its meaning reasonably clear. Negonsott v. Samuels, 507 U.S. 99, 104-05, 113 S. Ct. 1119, 1122-23, 122 L. Ed. 2d 457 (1993). If it is clear, that is the end of the inquiry. See Sullivan v. Stroop, 496 U.S. 478, 482, 110 S. Ct. 2499, 2502, 110 L. Ed. 2d 438 (1990). "In ascertaining the plain meaning of the statute, [we] must look to the particular statutory language at issue, as well as the language and design of the statute as a whole." K-Mart Corp. v. Cartier, Inc., 486 U.S. 281, 291, 108 S. Ct. 1811, 1818, 100 L. Ed. 2d 313 (1988).

A district court's evidentiary rulings are reviewed for an abuse of discretion. Manning, 56 F.3d at 1196. "Evidentiary rulings will be reversed for abuse of discretion only if such nonconstitutional error more likely than not affected the verdict." United States v. Corona , 34 F.3d 876, 882 (9th Cir. 1994).

DISCUSSION

I. Statute of Limitations

When the indictment was filed on March 23, 1994, Count 7 charged that Workinger "did corruptly obstruct and impede, and endeavor to obstruct and impede the due administration of the internal revenue Laws of the United States .... in violation of Title 26, United States Code, Section 7212(a) ." More specifically, it charged that Workinger had submitted a false document on February 17, 1988, and two false documents on March 29, 1989, for those very purposes. Workinger contended that because the filing of the indictment took place more than three years after the incidents in question, the indictment was barred by the three-year statute of limitations. 26 U.S.C. §6531 . ¹ The district court disagreed and applied, instead, the six-year statute of limitations. §6531(1) and (6) .

The statute of limitations does provide that, in general, criminal tax proceedings must be initiated within three years of the offense. It then provides eight exceptions for which the statute of limitations is six years. One of those exceptions establishes a six-year limitations period "for offenses involving the defrauding or attempting to defraud the United States ... in any manner." §6531(1) . Another exception establishes a six-year limitations period "for the offense described in Section 7212(a) (relating to intimidation of officers and employees of the United States )." §6531(6) . Section 7212(a) provides criminal penalties for the following:

Corrupt or forcible interference.--Whoever corruptly or by force or threats of force ... endeavors to intimidate or impede any officer or employee of the United States acting in an official capacity under this tile, or in any other way corruptly or by force or threats of force ... obstructs or impedes, or endeavors to obstruct or impede, the due administration of this title. ...

Thus, §7212(a) provides punishment for those who endeavor to obstruct or impede the administration of Title 26. It also provides punishment for those who endeavor to intimidate or impede an employee who is acting in his official capacity under that title.

Because he was charged with corruptly obstructing or impeding the due administration of the Internal Revenue laws, Workinger urges that the six-year provision does not apply to him. Workinger first argues that the district court erred by applying §6531(1) . He contends that §6531(1) only applies to defendants expressly charged with defrauding the United States . Workinger avers that §6531(1) cannot apply to one who has only impeded or obstructed the internal revenue laws because to impede or obstruct does not necessarily require the defendant to defraud the United States. He then asserts that §6531(6) does not apply to him because the parenthetical language of §6531(6) limits the scope of the six-year limitations exception to those §7212(a) offenses involving the intimidation of officers and employees of the United States . He argues that, because he was indicted only for impeding the internal revenue laws, his §7212(a) offense falls outside of the scope of the §6531(6) exception.

The district court rejected both of Workinger's contentions. The court first interpreted the parenthetical language in §6531(6) to be descriptive rather than limiting, and, therefore, applied a six-year statute of limitations to Workinger's claims. In the alternative, the court found that "the alleged violation of 26 U.S.C. §7212(a) ... involves an attempt to defraud" and therefore applied the six-year limitations period set forth in §6531(1) . While, as we will explain, we disagree with the district court regarding the direct application of §6531(1) to this case, we do agree that it must inform our determination that §6531(6) does apply.

Section 6531(1) , by its own terms, does not require that a defendant be expressly indicted for tax fraud. Indeed, a reading which so limited it would be inconsistent with the overall structure of the statute. The §6531 exceptions start out with two very broad formulations. The first broad exception, as already mentioned, is any offense which "involves" defrauding the United States in any manner. See §6531(1) . The second covers the offense of "willfully attempting in any manner to evade or defeat any tax or the payment thereof. ..." §6531(2) . These two exceptions appear to cover most acts that a person could perform in an attempt to avoid paying taxes. As one commentator put it: "Although [§6531 ] states the general rule as being a 3-year period, there are numerous exceptions which render the 3-year period almost irrelevant." Patricia T. Morgan, Tax Procedure and Tax Fraud in a Nutshell, §13.1.7 (1990). That observation surely applies to §§6531(1) and (2) .

Nevertheless, §6531 does go on and list other more specific exceptions. Among those is "offenses described in sections 7206(1) and 7207 (relating to false statements and fraudulent documents)." §6531(5) . Both §7206(1) and §7207 deal with particular kinds of fraud, and §6531(5) might therefore be thought of as somewhat redundant to §6531(1) . Still, Congress undoubtedly wanted to avoid any argument that the particular offense mentioned in §7206(1) --false declaration under penalty of perjury--is not fraud in itself. Similarly, Congress undoubtedly wanted to forestall an argument that some aspects of §7207 were not truly fraudulent because the section refers to documents known to be "fraudulent" or "false as to any material matter. ..." In short, Congress wanted to be sure that mere technical distinctions would not make a difference in the statute of limitations. That underscores rather than undercuts the breadth of §6531(1) .

Thus, in §6531(1) Congress applied the six-year limitations period to offenses other than those mentioned in sections which were labeled "fraud," if those offenses did reflect fraudulent activity. In United States v. Grainger, 346 U.S. 235, 73 S. Ct. 1069, 97 L. Ed. 1575 (1953), the Supreme Court construed language of the Suspension Act, which was rather similar to the language of §6531(1) . That Act suspended "the running of any statute of limitations applicable to any offense ... involving fraud or attempted fraud against the United States or any agency thereof in any manner. ..." Id. at 242, 73 S. Ct. at 1073.

The Court said:

We believe that Congress sought by its phrase "involving fraud ... in any manner" to make the Suspension Act applicable to all offenses which are fairly identifiable as those in which fraud is an essential ingredient, by whatever words they be defined, and that Congress did not seek to limit its applicability to such of those identifiable offenses as also are labeled with a particular symbol.

Id. at 244, 73 S. Ct. at 1074. Here, as there, Congress has expressed a similar breadth of purpose.

Workinger asserts, however, that the offenses under §7212(a) do not necessarily include fraud as an "essential ingredient." With that we must agree. Still, it would be an unusual case where a person would corruptly obstruct or impede the administration of the tax laws, without having that activity include some element of fraud. The difficulty, of course, is that corruption and fraud are not the same, nor is the latter necessarily included in every instance of the former. As we have said, "An act is 'corrupt' within the meaning of §7212(a) if it is performed with the intention to secure an unlawful benefit for oneself or for another." United States v. Hanson [94-1 USTC ¶50,075 ], 2 F.3d 942, 946 (9th Cir. 1993); see also United States v. Dykstra [93-1 USTC ¶50,243 ], 991 F.2d 450, 453 (8th Cir.) cert. denied, -- U.S. --, 114 S. Ct. 222, 126 L. Ed. 2d 177 (1993); United States v. Reeves [85-1 USTC ¶9190 ], 752 F.2d 995, 998-99 (5th Cir.), cert. denied, 474 U.S. 834, 106 S. Ct. 107, 88 L. Ed. 2d 87 (1985). That may not involve fraud.

Nevertheless, there is often a clear relationship between fraud and corruption because both "are paradigm examples of activities done with an intent to gain an improper benefit or advantage." United States v. Mitchell [93-1 USTC ¶50,171 ], 985 F.2d 1275, 1278 (4th Cir. 1993). In the case at hand, for example, Workinger obstructed and impeded by filing false documents. That was activity which was fraudulent by its very nature. Thus, although the district court was technically wrong, the breadth of §6531(1) illuminates what Congress was about when it added the §6531(6) exception to the three-year statute.

In the context of the overall coverage of the §6531 exceptions, it would be most peculiar if the parenthetical language in §6531(6) were meant to restrict that section to the intimidation portion of §7212(a) . As we have already explained, §6531(1) covers all offenses where fraud is an essential ingredient. Similarly, §6531(2) covers all willful attempts to evade or defeat taxes. Perusal of the other portions of §6531 reveals that §6531(3) covers willfully aiding in the preparation of false or fraudulent returns, §6531(4) covers the willful failure to pay tax or to file a return, §6531(5) covers presentation of false statements and fraudulent documents, and §6531(8) covers all conspiracies "to evade or defeat any tax or the payment thereof." Section 6531(7) then covers activities by corrupt government agents. All of these exceptions deal with the obtaining of improper benefits or advantages through the use of fraud or corruption.

If §6531(6) only covered actual intimidation, Congress would have jumped beyond those concepts and solely focused upon crimes of violence and force. In doing so it would have left behind crimes of corruption. That is a very unlikely legislative leap. More likely is Congress's recognition that the argument now being made to us would be made. That is, that despite a defendant's submission of false documents in an attempt to impede the collection of taxes, he would assert that his acts were not really fraudulent but that they were merely corrupt. To forestall a defendant's evasion of prosecution by use of the shorter three-year statute, Congress expressly included §7212(a) offenses within the list of the six-year exceptions. In short, the structure of §6531 makes it apparent that the parenthetical language in §6531(6) is descriptive, not limiting. Corruption was within the section's purview. The result is that the six-year statute of limitations applied to Count 7.

II. The Admission of the Transcript

Workinger next contends that the district court abused its discretion when it admitted the transcript of his recorded deposition into evidence. Workinger asserts that the transcript violated the best evidence rule, Fed. R. Evid. 1002; that the transcript was hearsay, Fed. R. Evid. 801 and 802; and that the transcript was not sufficiently authenticated as required by Fed. R. Evid. 901(b)(1).

A. The Best Evidence Rule

Workinger's claim that the admission of a transcript violated the best evidence rule is otiose. See Fed. R. Evid. 1002. The rule provides that: "To prove the content of a writing, recording, or photograph, the original writing, recording, or photograph is required, except as otherwise provided in these rules or by Act of Congress." Here the government sought to prove the content of the tape made during Workinger's deposition. The tape, therefore, was the best evidence of its own content. See United States v. Gonzales-Benitez, 537 F.2d 1051, 1053 (9th Cir.), cert. denied, 429 U.S. 923, 97 S. Ct. 323, 50 L. Ed. 2d 291 (1976). However, the tape was not available because it had been erased by its owner, Mr. Johnson, prior to the trial. That had been done in the ordinary course of his business and not at the behest of the government. Therefore, use of the tape itself was not required. See Fed. R. Evid. 1004(1); see also United States v. Ross, 33 F.3d 1507, 1513-14 (11th Cir. 1994), cert. denied, -- U.S. --, 115 S. Ct. 2558, 132 L. Ed. 2d 812 (1995). The best evidence rule was not violated.

We, of course, are well aware of the fact that a tape recording cannot be said to be the best evidence of a conversation when a party seeks to call a participant in or observer of the conversation to testify to it. In that instance, the best evidence rule has no application at all. See Gonzales-Benitez, 537 F.2d at 1053-54. That is not this case.

It is true that, ultimately, the transcript of the tape was intended to reflect the content of the conversation that took place. But, more proximately, it was intended to reflect the content of the tape itself. When Johnson's secretary was given the tape and told to transcribe it, what she did was prepare a document which purported to indicate what she heard on the tape. But if somebody wanted to know the content of that tape, it itself was the best evidence of that. A different rule would lead to transcripts being submitted with the admonition "Trust me, the transcript does reflect what was taped." Indeed, it would be like having the secretary come to court to testify, "I have listened to the tape, and here is what it says." That cannot be right; it is precisely what the best evidence rule was designed to avoid.

Thus, again, the tape was the best evidence of what was recorded upon it, but the best evidence rule was not violated in this case.

B. Hearsay

Workinger next contends that the transcripts were inadmissible hearsay. Fed. R. Evid. 801(c). That rule defines "hearsay" as "a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted." However, an admission by a party-opponent is not hearsay. Fed. R. Evid. 801(d)(1)(A). Workinger's statements in the transcript were admissions of a party-opponent; they were not hearsay.

C. Authentication

Workinger additionally contends that because the transcripts were not adequately authenticated, the district court abused its discretion when it admitted them into evidence. See Fed. R. Evid. 901(a). That Rule states that for authentication there must be "evidence sufficient to support a finding that the matter in question is what its proponent claims." A document can be authenticated by the testimony of a witness with knowledge. United States v. Childs, 5 F.3d 1328, 1336 (9th Cir. 1993), cert. denied, -- U.S. --, 114 S. Ct. 1385, 128 L. Ed. 2d 60 (1994). The government need only make a prima facie showing of authenticity "so that a reasonable juror could find in favor of authenticity or identification." United States v. Chu Kong Yin, 935 F.2d 990, 996 (9th Cir. 1991) (citation omitted). Once the prima facie case for authenticity is met, the probative value of the evidence is a matter for the jury. Id. ; United States v. Blackwood [90-1 USTC ¶50,081 ], 878 F.2d 1200, 1202 (9th Cir. 1989) (per curiam).

To authenticate the tapes, the government elicited testimony from the person who transcribed the tape. She testified that she listened to them "over and over" to make sure that her transcription was accurate. The government also elicited testimony from Mr. Johnson, the attorney who conducted the taped interview. Mr. Johnson testified that he had examined the transcript shortly after it was made and had compared it to the actual tape recordings and then filed an affidavit with the state court attesting to its accuracy. He testified that, to the best of his recollection, the transcript accurately represented the testimony during the deposition. Although he testified at trial that he could not specifically recollect listening to the tapes, he also testified that he would not have signed the affidavit had he not done so.

The district court did not abuse its discretion when it admitted the transcript because the testimony certainly met the minimum requirements for authentication. Workinger's objections, therefore, were simply a matter for the jury to consider when it determined the weight it would afford to the transcript.

III. Testimony of Agent Brock

Workinger next contends that the prosecution offered false evidence when it elicited testimony from Agent Brock that characterized two monetary amounts as income. First, she testified that $7,855.55 payed to the defendant from Ira Lawrence was income--not merely a loan as Workinger claims. Second, she testified that the entire $8,625 in proceeds Workinger received from the sale of equipment to Lawrence was income--not an amount reduced by his basis in the property. Workinger disagrees with her analysis, but his differing opinion of the results of his various manipulations does not convert the agent's contrary characterization into perjury. Brock's testimony did have a basis in the facts and in the law and Workinger's disagreement with Brock's analysis did not transform her testimony into a falsehood. See Campbell v. Gregory, 867 F.2d 1146, 1148 (8th Cir. 1989) (testimony of expert is not perjury merely because it differed from opinions of other experts). In short, Workinger has not made a prima facie case of government misconduct. See United States v. Paris, 827 F.2d 395, 401 n.3 (9th Cir. 1987) (burden is on defendant to make prima facie case showing prosecutorial misconduct).

CONCLUSION

There can be little doubt that Workinger set out to deprive the government of taxes that he properly owed. Despite his almost daedalian schemes to avoid paying his share of the cost of maintaining our society, he was found out. He now seeks to escape from part of his criminal liability by asserting that because he was accused of corruption rather than fraud, as such, one of the counts against him was barred by the statute of limitations. He is wrong because when it enacted §6531(6) Congress assured that the corrupt as well as the fraudulent would be subject to a six-year statute of limitations.

AFFIRMED.

¹ Hereafter all references to statutory sections are to 26 U.S.C. unless otherwise stated.

[Concurring Opinion]

KOZINSKI, Circuit Judge

in part and concurring in the judgment:

I agree with the majority's result, but cannot join all of its opinion. Specifically, I don't agree with its reasons why a six-year and not a three-year statute of limitations applies to Count 7. Nor can I join its rationale for concluding that the best evidence rule didn't preclude the government from introducing a transcript instead of a tape of defendant's deposition.

I

Count 7 charged Workinger with violating 26 U.S.C. §7212(a) . That statute makes it a felony to:

corruptly or by force or threats of force ... endeavor[ ] to intimidate or impede any officer or employee of the United States acting in an official capacity under this title, or in any other way corruptly or by force or threats of force ... obstruct[ ] or impede[ ], or endeavor[ ] to obstruct or impede, the due administration of this title.

Workinger violated section 7212(a) , according to the indictment (and the jury's verdict), by submitting false documents to the IRS. Count 7 therefore did not charge that he had intimidated United States officials, but only that he "did corruptly obstruct and impede, and endeavor to obstruct and impede" the administration of the tax laws. Indictment, ER at 4.

The indictment was filed much more than three years after he submitted the last of the false documents. Workinger thus points to 26 U.S.C. §6531 , which provides a three-year statute of limitations for criminal tax offenses, except those listed in its eight subsections. Subsection six provides a six-year statute of limitations "for the offense described in section 7212(a) (relating to intimidation of officers and employees of the United States)." ¹ In Workinger's view, the subsection's parenthetical reference to intimidation of United States officials restricts the subsection's coverage, and thus applies only to section 7212(a) offenses involving intimidation, not those involving otherwise obstructing or impeding. Because he was charged only with obstructing and impeding, not intimidating, Workinger argues, the indictment was barred by the statute of limitations.

The majority rejects this argument on the ground that the other subsections of section 6531 don't suggest Congress sought to distinguish, for statute of limitations purposes, between tax offenses involving force or violence and other tax offenses; there's therefore no reason to think Congress tried to draw such a distinction in section 6531(6) . See maj. op. at 8854. True enough, but this doesn't tell us much about whether section 6531(6) refers to section 7212(a) in its entirety, or only to that portion criminalizing "intimidation" of United States officials. The reason is that none of the other subsections of section 6531 refer to substantive offenses like section 7212(a) , which, by its terms, criminalizes the use or threat of force, in addition to other conduct. Because section 6531(6) specifically mentions "intimidation" but omits "obstructing" or "impeding," Workinger's argument is not defeated by the majority's analysis.

I would begin by examining the language of section 6531(6) , see N.Y. Conference of Blue Cross v. Travelers Ins., 115 S. Ct. 1671, 1677 (1995), something the majority never does. Consistent with ordinary usage, section 6531(6) 's parenthetical is more naturally understood as descriptive rather than restrictive. See Norman J. Singer, 2A Sutherland Statutory Construction §45.13, at 78 (5th ed. 1992) ("[L]egislators can be presumed to rely on conventional language usage."). Thus, section 6531(6) reads most easily if "the offense described in section 7212(a) " is taken to refer to section 7212(a) in its entirety, and the parenthetical language is understood as further identifying, by way of a general description of its content, the section intended. This does not violate the canon of statutory construction that says courts should strive not to render language in a statute superfluous. Parenthetical language is commonly used for descriptive purposes and, to the extent Congress so used it in section 6531(6) , it remains fully functional under a descriptive interpretation. If Congress intended to establish a six-year statute of limitations for "intimidating" and a three-year statute for otherwise obstructing or impeding, it chose a particularly awkward way to achieve this. It would have been much more straightforward to outlaw intimidating United States officials in one subsection, to outlaw any other form of obstructing or impeding them in another, and to refer only to the first in section 6531(6) .

Other courts have interpreted identical parenthetical language as descriptive. In United States v. Herring, 602 F.2d 1220 (5th Cir. 1979), for example, defendant was charged with "racketeering activity" as defined by 18 U.S.C. §1961. Section 1961's definition incorporated by reference other federal offenses, identifying them by their United States Code section and a brief parenthetical description. See Herring, 602 F.2d at 1223 n.3. One of the statutes so incorporated was 18 U.S.C. §2314, which made it a crime to transport securities in interstate commerce, knowing them to have been "stolen, converted or taken by fraud." Herring, 602 F.2d at 1222 n.2. Section 1961, however, described section 2314 as only "(relating to interstate transportation of stolen property)." Id. at 1223 & n.3 (quoting 18 U.S.C. §1961) (emphasis added). Defendant moved to dismiss the section 1961 charge, claiming that, while the securities in Herring might have been "converted" or "taken by fraud," it was clear they had not been "stolen"; he therefore hadn't violated the part of section 2314 that had been incorporated into section 1961. See id. at 1223. The Fifth Circuit rejected this argument, explaining that "the parenthetical [language] ... was intended merely to aid the identification of section 2314 rather than to limit the proscriptions of that section." Id.; accord United States v. Garner, 837 F.2d 1404, 1418-19 (7th Cir. 1987) (section 1961's reference to "title 18, United States Code: Section 201 (relating to bribery)" reached any conduct amounting to a section 201 violation, not only conduct within "the common definition of bribery"); Fidelity & Deposit v. Stromberg S. Metal, 532 A.2d 676, 678-79 (D.C. App. 1987) (statutory reference to "title 40 ... sections 270a-270e (known as the Miller Act, relating to performance bonds)" meant the entire Miller Act, not "only that portion dealing with performance bonds").

Workinger doesn't point to any cases that have interpreted similar parenthetical language as restrictive. He cites 26 U.S.C. §1(a)(1) , which refers to "every married individual (as defined in section 7703 )," and 26 U.S.C. §9722 , which states: "If a principal purpose of any transaction is to evade or avoid liability under this chapter, this chapter shall be applied (and such liability shall be imposed) without regard to such transaction." These sections don't help Workinger. Unlike the language of section 7212(a) , the language of the section 1(a)(1) is more naturally understood as restrictive because it uses the restrictive phrase "as defined." And it's not clear what comfort Workinger gets from section 9722 's parenthetical language, which is clearly not restrictive but descriptive.

Nor is Workinger's explanation of why Congress would have provided a six-year statute of limitations for "intimidating" but a three-year statute for otherwise "obstructing or impeding" persuasive. He claims that intimidation offenses are somehow less "dangerous" than other section 7212(a) violations, Appellant's Reply Br. at 4, but this doesn't take into account the language of section 7212(a) . The statute makes it illegal not only to "intimidate or impede" United States officials, but to "in any other way corruptly or by force or threats of force ... obstruct[ ] or impede[ ], or endeavor[ ] to obstruct or impede, the due administration of this title." 18 U.S.C. §7212(a) . In other words, section 7212(a) , by its terms, anticipates "obstructing" or "impeding" offenses that involve the use of force or threats, and can therefore be quite "dangerous." Suppose, for example, that Workinger had broken into the home of the IRS agent who was investigating him and slit the agent's throat while he slept. Workinger wouldn't have intimidated the agent, but he would surely have endeavored to obstruct or impede the administration of the tax laws in a particularly "dangerous" manner.

The legislative history, though not conclusive, favors the view that section 6531(6) refers to section 7212(a) in its entirety. ² According to the House Report, section 7212(a) was intended to reach any type of "interference" with the administration of the tax laws, and Congress viewed all such interference as equally serious:

A [current] provision of the ... Code makes it an offense punishable by a $5,000 fine or 3 years' imprisonment or both to forcibly assault, resist, oppose, etc., any officer or employee acting under the internal revenue laws. A similar, but amplified, provision of this bill covers all cases where the officer is intimidated or injured; that is, where corruptly, by force or threat of force, directly or by communication, an attempt is made to impede the administration of the internal-revenue laws. The penalty in the case of all such attempts to interfere with the administration of the internal-revenue laws is to be a fine of not more than $10,000 or imprisonment for not more than 5 years or both.

H.R. Rep. No. 1337, 83d Cong., 2d Sess. 107 (1954), reprinted in 1954 U.S.C.C.A.N. 4025, 4135-36. The House Report further describes section 6531 as providing a six-year limitations period "for intimidating United States officers." Id. at 4134. Given the Report's evident view that section 7212(a) sets forth a single offense, its reference to "intimidating United States officers" is, in context, a reference to the entire prohibition established by section 7212(a) , denoted by the first act (or, more precisely, result) it proscribes.

Workinger also points to Waters v. United States [64-1 USTC ¶15,561 ], 328 F.2d 739 (10th Cir. 1964), where the Tenth Circuit reasoned that "[s]ince the six-year limitation [under section 6531 ] is an exception to the [three-year] general rule, it must be strictly construed to apply to those offenses specifically enumerated." Id. at 743. Workinger takes this language out of context. The Tenth Circuit was there referring to offenses listed in sections of the tax code that were not enumerated in section 6531 . Section 7212(a) , by contrast, is listed by number and therefore is "specifically enumerated" as the Tenth Circuit used those words. Workinger also points to Waters' statement that section 6531 "is to be liberally interpreted in favor of the accused." Id. at 742. The Supreme Court has since explained, however, that the so-called "rule of lenity" applies only where the language of a criminal statute is "grievously ambiguous." Staples v. United States , 114 S. Ct. 1793, 1804 n.17 (1994) (brackets omitted); Chapman v. United States, 500 U.S. 453, 463 (1991). That test isn't met here. Although Workinger's interpretation can't be rejected out of hand, it's not as persuasive as the alternative.

I see no reason to apply the rule of lenity in any event. The Supreme Court has articulated two rationales for the rule, neither of which is implicated here. The first is that defendants are entitled to notice of what's illegal so they can conform their conduct. See United States v. Bass, 404 U.S. 336, 348 (1971). But it is unlikely in the extreme that a defendant would elect to commit a crime because he believed the statute of limitations for the offense was only three years instead of six; there is no plausible reliance interest at stake here. The second rationale is that only legislatures, not courts, should make conduct criminal; the rule of lenity prevents a court from resolving an ambiguity in a criminal statute so as to expand the scope of a criminal statute beyond what the legislature clearly intended. See id. But there's no concern here that a court will render criminal what the legislature meant to remain legal. Workinger's conduct clearly was criminal under section 7212(a) ; the only doubt is whether the government waited too long to prosecute. There's no reason to apply the rule of lenity on that point.

II

Workinger's best evidence rule argument commands considerably less force than his interpretation of section 6531(6) . He claims the government should not have been allowed to introduce a transcript of his deposition because the deposition had also been recorded on tape. The majority properly rejects this argument, but for the wrong reason. According to the majority, the transcripts were admissible because the deposition tapes were destroyed by their owner before trial "in the ordinary course of his business and not at the behest of the government." Maj. op. at 8855.

I cannot join this analysis because it presupposes that the best evidence rule applies here. It does not. The best evidence rule calls for the introduction of "the original writing, recording, or photograph" only where the proponent seeks "[t]o prove the content of a writing, recording, or photograph." Fed. R. Evid. 1002. Here, the government did not seek, by introducing the transcript, to prove the content of the tapes but to prove what was said at the deposition itself; Workinger admits as much. See Br. for Appellant at 17 ("The prosecution in this case sought to introduce the transcript as evidence of admissions by Dr. Workinger.") (emphasis added) (citing ER 137 (the government offered testimony "to authenticate the transcript as substantive evidence of what occurred")). ³ It is true that the reporter prepared the transcript by listening to the tapes. The transcript, nevertheless, purports to reflect what was said at the deposition, not what was on the tapes. ⁴ The best evidence rule has no application.

The majority attributes some independent significance to the tape transcript by arguing that "[a] different rule would lead to transcripts being submitted with the admonition 'Trust me, the transcript does reflect what was taped.' ... [This] is precisely what the best evidence rule was designed to avoid." Maj. op. at 8855. But this hopelessly confuses the policies of the best evidence rule with those of the hearsay rule. The transcript here was admissible not because it accurately reflected the tape, but because Donald Johnson, the attorney for the defendant's ex-wife, testified that it accurately reflected the deposition. ER at 90-92. Without this testimony from someone who was present, I'm not at all sure the transcript would have been admissible since, as the majority notes, the transcriber was not present when the testimony was given and thus could not authenticate the transcript as an accurate reflection of what was said at the deposition. See maj. op. at--.

And here is what I find curious about the majority opinion. In the name of ensuring the integrity of transcripts, my colleagues permit the introduction of a transcript where the intervening tape has been destroyed. Since we have no evidence of what the tape said other than the transcript itself, we really do have a situation where the secretary who transcribed the tape can tell us only "I have listened to the tape, and here is what it says." Maj. op. at 8855. ⁵ At the same time, the majority seems to say that, were the tape available, the best evidence rule would require its introduction in lieu of the transcript. One can only imagine the upheaval this will cause in the trial courts of the Ninth Circuit. Since virtually all transcripts are prepared from an intervening medium (an audio tape, stenograph paper, a computer tape) the clear implication of today's opinion is that the best evidence rule precludes introduction of the transcript if the intervening medium is available. All told, I think this is a strange result and entirely unnecessary.

I join the remaining portions of the majority opinion.

¹ The district court found Count 7 timely based not only on section 6531(6) , but also on section 6531(1) . The latter provides a six-year statute of limitations "for offenses involving the defrauding or attempting to defraud the United States or any agency thereof." 26 U.S.C. §6531(1) . The government doesn't defend this reasoning on appeal and, in fact, with commendable candor, acknowledges the authority that shows it to be error. Br. of the Appellee at 15 n.5 (citing United States v. Grainger, 346 U.S. 235, 244 (1953)). The majority's discussion of the issue, maj. op. at 8852-8853, is therefore superfluous.

² Because I do not believe the section is clear, it is appropriate to consult legislative history for a general understanding of what the drafters had in mind.

³ The majority's statement to the contrary, maj. op. at 8854, isn't accurate.

⁴ In this case the distinction doesn't matter much, but it well could. In a case, for example, where the defendant was charged with fraudulently altering a tape, the best evidence rule might well bar the admission of the transcript to prove what was on the tape.

⁵ Fortunately, as noted, what the tape says really doesn't matter. See note 4, supra.

 

 

[96-1 USTC ¶50,190] United States of America , Plaintiff-Appellee, Cross-Appellant v. Reinhard P. Mueller, Defendant-Appellant, Cross-Appellee

(CA-11), U.S. Court of Appeals, 11th Circuit, 94-3617, 2/14/96, 74 F3d 1152, Affirming, reversing and remanding an unreported District Court decision

[Code Sec. 7201 ]

Crimes: Jury trial: Tax evasion: Failure to report income: Liquidating dividend: Control over dividend.--A jury was entitled to find that the majority shareholder and president of a liquidating corporation was guilty of tax evasion because he did not report as income a liquidating dividend over which he exercised sufficient control. Although the taxpayer argued that the money went into a contingency fund to protect officers and directors of the corporation from potential claims arising out of the liquidation, the money was not used for this purpose and was actually for the taxpayer's benefit.

[Code Sec. 7201 ]

Crimes: Foreign depositions: Sixth Amendment.--A deposition that took place in a foreign country was properly admitted because the procedures followed were those used in the United States and there was no language barrier between the parties. The taxpayer was not prejudiced by the late receipt of documents used at the deposition, and his lawyer was present and cross-examined the witness.

[Code Sec. 7206 ]

Crimes: Jury trial: Perjury: False statement on return: Signature authority over foreign account.--There was adequate evidence to sustain the jury's conviction of an individual on a perjury charge. The taxpayer failed to report income, reported a capital loss instead of a gain, underreported adjusted gross income and falsely claimed on his tax return that he did not have signature or other authority over a foreign bank account. The taxpayer presented evidence that he filed a form disclosing his connection to the foreign bank with an IRS office other than the one with which he filed his return. However, when the taxpayer filed an amended return with the original IRS office, he did not correct the false statement.

Before: BIRCH, Circuit Judge, CLARK and WEIS ^*, Senior Circuit Judges.

WEIS, Senior Circuit Judge:

Defendant was convicted on one count of tax evasion and two counts of tax perjury based on his failure to report and pay tax on funds he acquired by failing to distribute a liquidating dividend of a corporation he controlled. We determine that there was adequate evidence to sustain those judgments.

Defendant was also convicted on one count of bank fraud arising from the liquidation. However, we conclude that the defendant's conduct in obstructing discovery and filing misleading pleadings in a civil suit brought by a financial institution to recover dividends due it did not constitute criminal conduct under the bank fraud statute. We accordingly direct acquittal on that count.

The district court sentenced defendant to incarceration for fifty-one months, a fine of $50,000, and a term of three years supervised release. In addition, defendant was ordered to pay restitution in the amount of $654,735.51 on the condition, however, that if he paid the fine and made restitution, the prison term and supervisory release would terminate.

The prosecution against defendant arose out of his actions as majority shareholder, president, and director of Omni Equities, Inc., formerly known as A.T. Bliss & Company. In April 1986, at his request, Omni's three-member Board of Directors voted to liquidate the company. Defendant became trustee for the shareholders of Omni with the authority to distribute liquidating dividends to them.

The Depository Trust Company, a federally chartered institution, was a substantial shareholder in Omni, and failing to receive a liquidating dividend, filed a civil suit in October 1986 against Omni and defendant in Florida state court. Ultimately, Depository Trust was granted summary judgment, but recovered only $10,259 of the $665,000 awarded in its favor.

Defendant has appealed his convictions, asserting that the evidence was insufficient, the trial court erred in admitting the deposition of a witness taken in a foreign country, and the prosecutor made improper comments to the jury in his summation. The government has cross-appealed the sentence imposed by the trial court.

I.

THE TAX COUNTS

A. Tax Evasion

Count one of the indictment charged defendant with evasion of tax due for the year 1986. On April 8, 1986, two days before the Omni board approved action to liquidate the company, defendant sold his shares in Omni for $1,117,104 to R. Mueller & Sons, Ltd., of London , England . According to the government, R. Mueller & Sons was the new name given to an English "shelf corporation," an entity that can be acquired and used by anyone under whatever name one chooses. After activating R. Mueller & Sons through acquisition of the shelf corporation, defendant controlled it and handled its financial affairs.

Omni's primary asset consisted of shares in MagnaCard. On April 26, 1986, Omni sold its holdings in MagnaCard to Jacob Growth Capital, Ltd., an English company, for $3.6 million. The sale was made through Walter L. Jacob & Co., a London securities dealer. The relationship between Jacob Growth Capital and Walter L. Jacob & Co. is not clear from the record. Three days later, defendant directed that $2.3 million of proceeds due Omni from the sale of MagnaCard be sent to R. Mueller & Sons as a liquidating dividend, and that $940,000 be delivered to Omni's lawyers in Florida . The latter amount was eventually deposited in an account at Meritor Bank, Lakeland , Florida , in the defendant's name as trustee for Omni's stockholders.

On May 4, 1986, defendant began to draw dividend checks from the Meritor account and mailed them to stockholders with a letter explaining Omni's liquidation. Later, defendant withdrew $650,000 from the Meritor account in order to reduce Omni's exposure to pre-judgment attachments. However, by August 1986, that sum was redeposited to honor checks issued as liquidating dividends.

On August 19, 1986, defendant directed Meritor Bank to wire $485,177.37 (apparently the balance of the account) to Walter L. Jacob & Co., Barclays Bank, London . Defendant asserted that this account was a contingency fund set up to meet potential claims against Omni's officers arising out of the liquidation of the company. Subsequently, all of Omni's funds at Walter L. Jacob & Co. were transferred to an account in Hong Kong maintained by Walter L. Jacob.

Depository Trust never received the $496,437.50 in liquidating dividends from Omni to which it was entitled, although defendant maintained that he had mailed checks to Depository Trust in May 1986.

In his 1986 income tax return, defendant and his wife reported adjusted gross income of $159,525, and a loss of $156,025 from the defendant's sale of Omni stock to R. Mueller & Sons. The government contended that defendant failed to report as income the $486,178 due Depository Trust (the amount of the liquidating dividend less the $10,259 recovered from an attachment against Omni's account). In addition, the government asserted that as a result of his sale of Omni stock to R. Mueller & Sons, defendant realized a capital gain of $911,975, rather than the loss he reported.

Defendant argued that he never received the $485,000 wired from the Meritor Bank account to Barclays Bank, insisting instead that it went to Walter L. Jacob & Co. He also contended that Walter L. Jacob & Co. did not lay out cash for the MagnaCard stock. Instead, as partial payment, Jacob offset approximately $1 million it had loaned to defendant. Jacob provided the remainder of the sale price by issuing debentures, which were never paid.

We need not decide whether there was sufficient evidence for the jury to convict defendant of tax evasion on the sale of stock to R. Mueller & Sons because the verdict could properly have been based on the defendant's exercise of control over the money due Depository Trust.

26 U.S.C. §7201 provides that "[a]ny person who willfully attempts in any manner to evade or defeat any tax ... shall ... be guilty of a felony...." Gain, lawful or unlawful, constitutes taxable income "when its recipient has such control over it that, as a practical matter, he derives readily realizable economic value from it." Rutkin v. United States [52-1 USTC ¶9260 ], 343 U.S. 130, 137, 72 S.Ct. 571, 575, 96 L.Ed. 833 (1952). See also Commissioner v. Glenshaw Glass Co. [55-1 USTC ¶9308 ], 348 U.S. 426, 431, 75 S.Ct. 473, 477, 99 L.Ed. 483 (1955) (receipt of punitive damages taxable); United States v. Schmidt [93-1 USTC ¶50,074 ], 935 F.2d 1440, 1448 (4th Cir.1991) (dominion and control of property makes it taxable); In re Bentley [90-2 USTC ¶50,527 ], 916 F.2d 431, 432 (8th Cir.1990) (increase in wealth over which taxpayer has dominion is taxable).

Viewing the evidence in the light most favorable to the government, United States v. Morris [94-1 USTC ¶50,234 ], 20 F.3d 1111, 1114 (11th Cir.1994), as we must in an appeal from a conviction, we conclude that the jury was entitled to find that defendant exercised sufficient control over the $485,177 due Depository Trust to make it taxable to him. The money went to an account at Barclays Bank, ostensibly for an Omni contingency fund, but was actually for the defendant's benefit.

Although supposedly designed to protect former officers and directors of Omni, the contingency fund was not so used. In one instance, when the former secretary and director of Omni was sued for participation in the liquidation, she received no assistance from the Barclays account. Pursuant to the defendant's instructions, no withdrawal from the account was permitted without his prior written authorization. None of the directors were aware of the existence of the account, and at the time the deposit was made, the jury could find that Omni, in fact, was but the defendant's alter ego. Although defendant contends that he was acting only as an agent or conduit for Omni, the jury was free to reject that position under the evidence presented by the government.

B. Tax Perjury

The bulk of the evidence presented on counts three and four, the tax perjury charges, involved the same facts as those underlying the tax evasion charge. Specifically, the indictment alleged that in his 1986 income tax return and 1988 amended return, defendant failed to report as income the money owed Depository Trust; failed to report as income the liquidating dividend received by R. Mueller & Sons; reported a capital loss instead of a gain from his sale of Omni stock to R. Mueller & Sons; and underreported his adjusted gross income. To the extent that these charges mirror the tax evasion count, defendant does not raise any additional arguments.

However, defendant was also charged with falsely checking the "no" box on his 1986 return that asked whether he had signature or other authority over a foreign bank account. It is not disputed that, in fact, he did have such power. Defendant contended that the matter was simply a mistake, and he produced evidence that on July 31, 1987, he filed a form with the IRS in Detroit reporting his connection with the London bank accounts. However, he had filed his tax return at the IRS office in Atlanta .

The government points out that, when defendant filed an amended return on October 3, 1988, again in Atlanta , he did not correct the false statement about the foreign bank accounts. The determination of whether the misrepresentation about the bank accounts was willful, or merely a mistake, is a typical issue for a jury to resolve, and here it decided against defendant.

We conclude, therefore, that there was adequate evidence to sustain the convictions on counts one, three, and four.

II.

THE DEPOSITION OF A FOREIGN WITNESS

Defendant maintains that the trial court erred in admitting the deposition of David Brailsford, an English citizen who lived in the London area and was unavailable to testify at trial. Brailsford was the Chief Examiner of the United Kingdom's Department of Trade and Industry, Company Investigations Division, and had investigated the activity of Walter L. Jacob & Co. Defendant contends that the reading of this deposition at trial violated the confrontation clause of the Sixth Amendment.

Depositions, particularly those taken in foreign countries, are generally disfavored in criminal cases. For an extensive discussion, see United States v. Drogoul, 1 F.3d 1546, 1551 (11th Cir.1993). Nevertheless, depositions are authorized "when doing so is necessary to achieve justice and may be done consistent with the defendant's constitutional rights." Id. See Fed.R.Crim.P. 15.

In this case, the deposition took place in London . Defense counsel was present and cross-examined the witness. Defendant listened to the testimony on the telephone and was able to consult with his lawyer as the deposition proceeded. Unlike depositions taken in some foreign countries, see, e.g., Drogoul, 1 F.3d at 1554-55, the procedures here followed those used in the United States . There were no language barriers and defendant was able to participate and advise his counsel. Foreign depositions have been approved in similar instances, United States v. Gifford, 892 F.2d 263, 265 (3d Cir.1989), see United States v. Kelly, 892 F.2d 255, 262-63 (3d Cir.1989), and even in cases where the proceeding was in a foreign language and conducted by a judicial officer rather than counsel. See United States v. Salim, 855 F.2d 944, 954-55 (2d Cir.1988).

Defendant complains that he was not provided with copies of all the documents used at the deposition until several hours before it was scheduled. However, the documents were faxed to defendant and were available to him and his counsel as the deposition proceeded. In his brief to this Court, defendant has not cited any specific instance of prejudice caused by late receipt of the documents. We are satisfied that the district court properly permitted the introduction of deposition evidence in this case.

III.

PROSECUTORIAL MISCONDUCT

During his summation to the jury, the Assistant U.S. Attorney said that Mueller "lied on his affidavit submitted, he lied on his tax returns, he lied to Social Security Administration, he lied when he filled out and signed the tax return and I submit to you that not only goes to show his willfulness, but it also goes to show the credibility of the statements that have been given here."

Defendant did not object to these comments at trial, and consequently, we review only for plain error. United States v. Wiggins, 788 F.2d 1476, 1478 (11th Cir.1986). To meet that standard, a prosecutor's remarks during closing argument must be both improper and prejudicial to a substantial right of the defendant. United States v. Thomas, 8 F.3d 1552, 1561 (11th Cir.1993). A reversal is warranted when prosecutorial misconduct was so pronounced and persistent that it permeated the entire atmosphere of the trial. United States v. McLain, 823 F.2d 1457, 1462 (11th Cir.1987).

We do not approve of the remarks of the Assistant U.S. Attorney and, had an objection been raised at the time they were made, a sharp curative instruction would have been in order. It is improper for a prosecutor to directly convey his personal beliefs about a defendant's credibility in closing argument. However, in the circumstance of this case, we cannot say that the comments reached the level of plain error. As the Supreme Court stated in United States v. Young, 470 U.S. 1, 16, 105 S.Ct. 1038, 1047, 84 L.Ed.2d 1 (1985), "[v]iewed in context, the prosecutor's statements, although inappropriate and amounting to error, were not such as to undermine the fundamental fairness of the trial and contribute to a miscarriage of justice." We conclude, therefore, that the prosecutor's final summation did not constitute reversible error.

IV.

THE BANK FRAUD COUNT

Much of the evidence previously discussed was not admissible on the bank fraud charge, although all counts were tried together despite the defendant's request for a severance.

In 1986, defendant entered into a plea agreement with the United States with respect to an indictment in the Southern District of Florida alleging criminal tax violations. As part of the arrangement, the government was barred from bringing future charges against defendant pertaining to his involvement with Omni's predecessor, A.T. Bliss & Company.

After the indictment in the present case was filed in the Middle District of Florida, defendant sought enforcement of the plea bargain from Judge Ryskamp, who had approved it in the Southern District of Florida. Judge Ryskamp granted the requested relief and issued an order reading: "The United States is enjoined from presenting any evidence of Defendant Mueller's conduct, prior to November 7, 1986, with regard to [the bank fraud count] of the indictment pending against him in the Middle District of Florida."

The record in this case contains few details of the defendant's conduct after November 7, 1986 having any relevance to bank fraud. What evidence there is consists of references to the suit that Depository Trust filed against Omni and defendant in the Florida state court on October 15, 1986, asserting a claim for the liquidating dividend. Apparently, defendant was not represented by counsel in that case, but prepared and filed an answer on November 19, 1986 for himself as well as for Omni.

In the trial of the case now before us, an official of Depository Trust testified that on December 11, 1986, defendant failed to appear for a state court deposition scheduled to be held in Lakeland , Florida . Defendant, who lived in Fort Lauderdale , had objected to traveling to Lakeland , some distance from his home. The Depository Trust official further testified that on October 12, 1987, defendant filed an affidavit in the state court in which he gave his version of what had happened to the dividend checks in early 1986.

This witness also testified, without specificity, that defendant had failed to appear for depositions on other occasions. In addition, the witness discussed other events that occurred before November 7, 1986, which were admissible only as to the tax violation counts. The official also identified a number of documents that defendant had produced during the course of the civil suit. Finally, the witness described the garnishment proceeding on the defendant's bank account at the Meritor Bank, which yielded approximately $10,000.

In its brief, the government recognizes that to establish bank fraud in violation of 18 U.S.C. §1344, ¹ the prosecution "must establish that the defendant engaged in or attempted to engage in a scheme or artifice to defraud a financial institution, and that the defendant acted knowingly." It is not disputed that Depository Trust is a financial institution within the ambit of 18 U.S.C. §1344.

The government contends that there is sufficient evidence from which the jury could conclude defendant committed bank fraud. The bases of the government's position are that Depository Trust had a claim against defendant for $486,000; that the answer and affidavit defendant filed in the civil suit contained falsehoods; and that defendant delayed final resolution of the suit by obstructing discovery. In addition, we may also assume that after November 6, 1986, defendant had control of the funds at Barclays Bank and thus could have paid the debt owed Depository Trust, but did not.

At the conclusion of the government's evidence, defendant moved for acquittal on the bank fraud count. The trial judge denied the request stating: "Well [Depository Trust's lawsuit] in itself, would not be enough, but a jury question is formed as to whether or not the dealings in November of '87 with regard to transferring funds to [Euro International] and Venture Funding and so forth, the jury can decide whether or not any of those funds were [Depository Trust] funds."

The trial judge was referring to a consolidation of a number of corporations through the exchange of stock and notes. The companies included Venture Funding, Ltd. into which R. Mueller & Sons had merged. All of the corporations received stock in a new entity, Euro International. Apparently, no cash was involved in these transactions, and significantly, on appeal the government does not argue that any of the $486,000 due Depository Trust was traced to these mergers.

As to the bank fraud count, therefore, the record establishes only that during the pendency of a civil suit in state court for the recovery of money due and owing, defendant delayed the ultimate entry of judgment by filing a false and misleading answer and affidavit, and slowed discovery.

As this Court explained in United States v. Falcone, 934 F.2d 1528, 1539 (11th Cir.1991), section 1344 covers two distinct types of bank fraud: subsection (a)(1) outlaws schemes to defraud federally insured financial institutions and subsection (a)(2) prohibits schemes to obtain funds from such institutions by means of false or fraudulent pretenses, representations, or promises. Because defendant did not obtain funds from Depository Trust, only subsection (a)(1), banning schemes to defraud, is pertinent to this case.

The courts have traditionally been wary of defining fraud for fear of creating opportunities for, or encouraging the creation of, dishonest schemes that lie outside the definition. Consequently, case law on fraud is highly fact-bound and broad statements must be read in context.

The government has cited two cases in support of its position, but we do not find them persuasive. For example, in United States v. Goldblatt, 813 F.2d 619, 624 (3d Cir.1987), the court of appeals explained that fraud is measured by determining whether the scheme "demonstrated a departure from fundamental honesty, moral uprightness, or fair play and candid dealings in the general life of the community." In that case, the defendant, claiming money from a bank, was convicted of covering up the relevant fact that the withdrawal of his funds had been made by his son.

In United States v. Solomonson, 908 F.2d 358, 363 (8th Cir.1990), the Court observed: "[A]ctions that have the effect of delaying a complaint, making apprehension less likely, or giving a false sense of security to the victim can be considered part of a scheme to defraud." That case is of little help here because Depository Trust, the victim, was aware that it had been denied funds due it and had filed suit to recover them.

The parties have not provided us with authorities analogous to the facts presented here. However, several district court cases have held that the mail fraud statute does not extend to false statements by attorneys in the context of pending litigation. McMurtry v. Brasfield, 654 F.Supp. 1222, 1225 (E.D.Va.1987) (letters and affidavit mailed in custody dispute not mail fraud); See also Paul S. Mullin & Assocs., Inc. v. Bassett, 632 F.Supp. 532, 540 (D.Del.1986) (suggestion that attorney's actions could be mail fraud was "absurd"); Spiegel v. Continental Ill. Nat. Bank, 609 F.Supp. 1083, 1089 (N.D.Ill.1985), aff'd 790 F.2d 638 (7th Cir.1986) (correspondence concerning issue in pending litigation not mail fraud). These courts indicated that the appropriate remedy was notification of disciplinary authorities, or application for sanctions in the civil litigation. Because the bank fraud statute is modeled on the wire and mail fraud statutes, see H.R.Rep. No. 1030, 98th Cong., 2d Sess. 377, reprinted in 1984 U.S.C.C.A.N. 3182, 3519, a similar standard should apply here.

It is highly unlikely that Congress intended the bank fraud statute to cover the situation before us. First, Depository Trust had no greater rights to the liquidating dividends than any other shareholder. It would be incongruous to extend the weapon of criminal penalties to Depository Trust when others in the same situation were not granted such rights.

If the government believed that the defendant's conduct in the civil suit merited criminal prosecution, the perjury statute would have been available. Unlike the crime of perjury, which extends to all litigants, applying the bank fraud statute here, as the government would have us do, would benefit only a limited class of litigants. We find nothing in the language of the bank fraud statute to create such sweeping protection for banks in the context of civil suits.

Nor do we find any indication that Congress intended to create such a basic interference with established norms in civil litigation as is urged here. Permitting the government to prevail on its theory would mean that a bank suing on a note could threaten the obligor with criminal sanctions if he delayed payment, although a similar suit by a non-financial institution would have no such ramifications. The state court has ample means to enforce discovery procedures and invoke appropriate sanctions against offending parties--even when, as here, the litigant proceeded pro se. Damages for undue delay and obstruction of litigation, after all, may be imposed in civil proceedings.

We are persuaded that there was insufficient evidence on which a jury could find a violation of the bank fraud statute in this case, and accordingly, we direct the entry of judgment of acquittal on count two. See Burks v. United States, 437 U.S. 1, 16-18, 98 S.Ct. 2141, 2149-51, 57 L.Ed.2d 1 (1978) (double jeopardy bars retrial after appellate court determines evidence at trial was insufficient); United States v. Baptista-Rodriguez, 17 F.3d 1354, 1369 (11th Cir.1994); United States v. Khoury, 901 F.2d 948, 961 (11th Cir.1990).

V.

Because the conviction on count two is vacated, the case will be remanded to the district court for resentencing on the remaining counts. See United States v. Young, 953 F.2d 1288, 1290 (11th Cir.1992). However, there are a few matters that we must address first. The district court ordered defendant to make restitution based on the loss incurred by Depository Trust. Because the defendant's conviction for bank fraud is vacated, the order for restitution can no longer stand. Thus, the government's cross-appeal as to the restitution portion of the sentence is moot.

Defendant also asserts that the district court erred in sentencing him under the 1988 sentencing guidelines, the guidelines in effect the year his offense was completed, rather than the 1994 Sentencing Guidelines, the ones applicable for the year he was sentenced. Defendant argues that because of changes in the computation of the tax loss used to determine his base offense level, he received a higher sentence under the 1988 guidelines than he would have received under the 1994 guidelines.

18 U.S.C. §3553(a)(4)(A) provides that sentencing should ordinarily be made pursuant to the guidelines "that are in effect on the date the defendant is sentenced." However, because calculation under 1994 guidelines would have resulted in a longer sentence, the government contends that it was necessary to use the 1988 version. See United States v. Lance, 23 F.3d 343, 344 (11th Cir.1994) (noting ex post facto implications).

The defendant's sentence was based on "tax loss." Under the 1988 guidelines, tax loss included interest to the date of the filing of the indictment. The defendant's total tax loss was $1,134,215.03, which under the 1988 guidelines, corresponded to a base offense level of 16. The 1994 guidelines' definition of "tax loss" excludes interest, but part of the pertinent calculation involves the use of "unreported gross income." ² The defendant interprets this term to mean "adjusted gross income." We reject that construction of the guideline and read it literally to apply to unreported gross income. In any event, the government insists that a more accurate determination was made.

The record on this point is less than specific, but because the case must be remanded for resentencing, the parties may recalculate the sums at stake and if any disagreement remains, submit the matter to the sentencing judge for resolution.

The district court also ordered that if defendant served his full prison sentence, his fine would be waived. We fail to find, nor did the district court provide, any support for this unusual contingency.

The sentencing guidelines call for the imposition of fines in all cases, with limited exceptions for defendants who are unable, and not likely to become able, to pay all or part of a fine, or for those whose dependents would be unduly burdened. U.S.S.G. §5E 4.2 (1988); U.S.S.G. §5E 1.2 (1994). 18 U.S.C. §3572 specifies the factors to be considered in imposing a fine. There is no provision in the statute or the guidelines for the expiration of a fine based on a defendant's service of his full term of incarceration. That portion of the sentence must therefore be deleted.

Accordingly, the judgments of convictions on counts one, three and four are AFFIRMED. The conviction on count two is REVERSED, and judgment of acquittal on that count must be entered in favor of the defendant. The case is REMANDED for resentencing.

^* Honorable Joseph F. Weis, Jr., Senior U.S. Circuit Judge for the Third Circuit, sitting by designation.

¹ 18 U.S.C. §1344 reads:

Whoever knowingly executes, or attempts to execute, a scheme or artifice--

(1) to defraud a financial institution; or

(2) to obtain any of the moneys, funds, credits, assets, securities, or other property owned by, or under the custody or control of, a financial institution, by means of false or fraudulent pretenses, representations, or promises;

shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.

² U.S.S.G. 2T1.1(c)(1)(A) (1994) reads:

If the offense involved filing a tax return in which gross income was underreported, the tax loss shall be treated as equal to 28% of the unreported gross income ... unless a more accurate determination of the tax loss can be made.

 

 

 

 

 

 

[69-1 USTC ¶9432]United States of America v. Sidney Rosenstein, Irving Braverman, Foremost Brands, Inc. and Mc Inerny Sales, Inc., Defendants

U. S. District Court, So. Dist. N. Y., 68 Cr. 972, 303 FSupp 210, 5/27/69

[Code Sec. 7203]

Crimes: Fraud: Trial procedure: Venue: Bill of particulars: Depositions: Discovery.--The court denied the taxpayer's motion to transfer his tax evasion trial from the district in which he presently resided to the district in which he resided at the time of the alleged offense. His motion for the taking of a deposition of a foreign resident was granted where it was shown that the prospective witness had probable material information and was unable to attend the trial due to ill health. But his motion for depositions of two other foreign residents was denied where one was a fugitive from justice and there was insufficient evidence to show that the other could not be present. As to a motion for a bill of particulars, the Government consented to furnish information sufficient to apprise the taxpayer of the nature of the crime charged and to enable the adequate preparation of a defense, but the court ordered further particulars as to specific items. The court denied the taxpayer's motion for discovery and inspection of items beyond those the Government had already consented to furnish.

Robert M. Morgenthau, United States Attorney, New York, N. Y., for plaintiff. James M. La Rossa, 115 Broadway, New York, N. Y., for defendants.

Memorandum

[Motions]

TENNEY, District Judge:

Defendants herein make the following respective motions before this Court: (1) defendant Irving Braverman seeks, pursuant to Title 18, United States Code, Section 3237(b), to transfer his trial to the Eastern District of New York on the ground that, during all the times wherein it is alleged that defendant Braverman conspired to evade income taxes, he resided in Brooklyn, New York, which location is within that district; (2) defendants move for an order pursuant to Rule 15(a) of the Federal Rules of Criminal Procedure directing the examination by way of deposition of Herbert Batliner and Alfred Buehler, both of Vaduz, Lichtenstein, and of James Ward of Lancashire, England, all as prospective witnesses on defendants' behalf; and (3) defendants move, pursuant to Fed. R. Crim. P. 7(f), for an order directing the United States Attorney to furnish them with a bill of particulars and for discovery and inspection pursuant to Fed. R. Crim. P. 16.

Motion for a Change of Venue

Title 18, United States Code, Section 3237(b), sets forth that notwithstanding subsection (a), which provides for the general rule that an offense may be prosecuted ". . . in any district in which such offense was begun, continued or completed. . . .",

". . . where an offense is described in section 7203 of the Internal Revenue Code of 1954, or where an offense involves use of the mails and is an offense described in section 7201 or 7206(1), (2) or (5) of such Code . . . and prosecution is begun in a judicial district other than the judicial district in which the defendant resides, he may upon motion filed in the district in which the prosecution is begun, elect to be tried in the district in which he was residing at the time the alleged offense was committed. . . ." (Emphasis supplied.)

It is abundantly clear that Congress, by its enactment of section 3237(b), intended to give a defendant prosecuted in a district other than the one in which he presently resides and charged with a violation of Title 26, United States Code, Section 7201, or a related conspiracy count, the right to be transferred for trial to the judicial district of his residence at the time the alleged offense was committed. United States v. Dalitz, 248 F. Supp. 238, 240 (S. D. Cal. 1965); United States v. Rosenberg, 226 F. Supp. 199, 201 (S. D. Fla. 1964). Inasmuch as defendant Braverman presently resides in Manhattan, the district in which the prosecution was, in fact, commenced, the transfer provision would not be applicable.

Motion for Depositions

Defendants move, pursuant to Rule 15(a) of the Federal Rules of Criminal Procedure for an order directing that depositions be taken of the following prospective witnesses for the defense: (1) Herbert Batliner of Vaduz, Lichtenstein; (2) Alfred Buehler, also of Vaduz, Lichtenstein; and (3) James Ward of Lancashire England.

Fed. R. Crim. P. 15(a) provides in pertinent part:

"If it appears that a prospective witness may be unable to attend or prevented from attending a trial or hearing, that his testimony is material and that it is necessary to take his deposition in order to prevent a failure of justice, the court at any time after the filing of an indictment or information may upon motion of a defendant and notice to the parties order that his testimony he taken by deposition. . . ."

Additionally, it should be noted that it was the intention of the Advisory Committee that, in criminal cases, depositions are to be used "only in exceptional circumstances". United States v. Birrell, 276 F. Supp. 798, 822 (S. D. N. Y. 1967). In view of the limited application of this rule, this Court is constrained to grant defendant's motion only with respect to James Ward.

To allow the deposition of Mr. Buehler, who is presently a fugitive from justice subject to arrest pursuant to the outstanding order of contempt issued by the Honorable Inzer B. Wyatt of this court on February 9, 1968, would itself be an "injustice", rather than "prevent a failure of justice". United States v. Van Allen, 28 F. R. D. 329, 346 (S. D. N. Y. 1961).

With regard to Mr. Batliner, the bare recital in an affidavit submitted by defense counsel that ". . . your deponent has reason to believe that [Mr. Batliner] will not attend any trial conducted in the United States. . . .", absent any factual elaboration showing that the witness, in fact, cannot be present, is insufficient to set the provisions of Rule 15(a) in motion. United States v. Birrell, supra at 823.

James Ward, believed to be an employee of Continental Trade Establishment, in all probability has knowledge as to who had ownership and control of said corporation, which testimony would be relevant to a determination of the issues at trial. In light of Mr. Ward's letter of February 11, 1969, addressed to defense counsel, in which he enclosed a medical certificate confirming an arteriosclerosis and chronic bronchitis condition, preventing any travel to the United States, and in which he expressed regrets over his inability to be of more assistance, together with defense counsel's representation in an affidavit that Mr. Ward had informed him that he would be willing to submit to a deposition in England, it is the opinion of this Court that the above-stated representations constitute a sufficient showing to satisfy the requirements of Rule 15(a).

Motion for a Bill of Particulars

The Government has consented to furnish information, with regard to the several counts of the indictment, sufficient to apprise the defendants of the nature of the crimes charged and to enable the adequate preparation of a defense. However, in addition, this Court in its discretion hereby requires the Government, to the best of its ability, to:

(1) Identify each co-conspirator alleged in the indictment as "divers other persons to the Grand Jury unknown", by name and address, as such conspirators become known to the prosecution;

(2) State whether Continental Trade Establishment is a corporate entity, specifying, if any

a. the date of incorporation,

b. where incorporated,

c. the incorporators of such entity;

(3) State whether it will be claimed that an account or accounts were maintained by any of the defendants or co-conspirators, corporate or individual, at the Bank Leu, Zurich, Switzerland, specifying:

a. the owner of record of said account or accounts;

b. when such account or accounts were opened;

c. whether such account or accounts are still active;

(4) State the substance of the conversations alleged as overt acts four and five;

(5) State whether conversation is relied upon, as to overt act seven and, if so, the substance thereof.

Motion for Discovery and Inspection

It is the opinion of this Court that defendants' motion for discovery and inspection of items beyond which the Government has already consented to furnish be denied.

After due consideration and for the above-stated reasons, the within motions are granted to the extent indicated herein.

So ordered.