Improper
Question
7203: Willful Failure to File Return,
Supply Information, or Pay Tax: Trial: Improper Question
[88-1 USTC ¶9238]
United States of America
, Appellee v. Larry A. Jerde, Appellant
(CA-8),
U.S. Court of Appeals, 8th Circuit, 87-5193, 3/3/88, 841 F2d 818,
Affirming an unreported District Court decision
[Code Sec. 7203 --Result
unchanged by the Tax Reform Act of 1986 ]
Criminal penalties: Failure to file returns: Trial: Instructions to
jury: Improper questioning.--The court affirmed the taxpayer's
conviction on five counts of willfully failing to file employer's
quarterly tax returns and willfully failing to file personal income tax
returns. The district court properly instructed the jury concerning
willfulness and good faith. The jury instructions adequately and
correctly covered the taxpayer's defense theory. Also, the district
court did not improperly interject itself into the trial by
interrogating the taxpayer on two occasions. The questions were
necessary to clarify testimony, and at no time did the district court
become an advocate for the prosecution.
John J.
Ulrich, Assistant United States Attorney,
Sioux Falls
,
S.D.
57101
, for appellee. Kevin J. Short, William J. Mauzy, P.A.,
701 Fourth Ave. South
,
Minneapolis
,
Minn.
55415
, for appellant.
Before GIBSON,
BOWMAN, and WOLLMAN, Circuit Judges.
WOLLMAN,
Circuit Judge:
Larry A. Jerde
(Jerde) appeals from his five-count conviction by a jury of willfully
failing to file employer's quarterly tax returns for the third and
fourth quarters of 1984, and willfully failing to file personal income
tax returns for the 1982, 1983, and 1984 calendar years, in violation of
26 U.S.C. §7203 . 1
Jerde argues that the district court 2
erroneously instructed the jury concerning willfulness and good faith,
and that the district court improperly interjected itself into the trial
by interrogating Jerde on two occasions. We affirm.
I.
At the time of
trial, Jerde had practiced as a certified public accountant for
approximately eleven years. In December 1980, Jerde started his own
accounting practice in
Watertown
,
South Dakota
. In December 1982, Jerde sold fifty percent of this practice to Dennis
Jeske (Jeske), a former Internal Revenue Service agent. The practice was
incorporated as Jerde & Jeske, Ltd., with each owning fifty percent
of the stock. The firm suffered a loss during the 1983 tax season. The
business relationship between Jerde and Jeske deteriorated, and Jeske
left the firm in June 1983.
After
settlement negotiations failed, Jeske filed a lawsuit in February 1984
to recover the $11,000 he had invested in the business. One of the
issues in the lawsuit was whether Jerde & Jeske, Ltd. was a
corporation or a joint venture. Jerde argued that the corporation was
never operational because Jeske had only paid $11,000 of the $15,000
purchase price. This litigation continued through
November 24, 1986
.
During the
pendency of the state court litigation, Jerde did not file employer's
quarterly tax returns for the third and fourth quarters of 1984. Jerde
applied for six-month extensions of time in which to file his 1982,
1983, and 1984 personal income tax returns but did not file the returns
before the expiration of the respective extension periods. Jerde claims
to have filed the returns in question in December 1986. 3
In March 1987,
Jerde was convicted of five counts of willfully failing to file these
returns. At trial, Jerde contended that his failure to file the tax
returns was not willful. Under penalty of perjury, each tax return
requires the signer to declare, to the best of his knowledge and belief,
that the return is true, correct, and complete. Jerde's theory of
defense was that his failure to file the returns was not willful because
he acted under the good-faith befief that he could not accurately
complete the returns until the ongoing state court litigation determined
whether Jerde & Jeske, Ltd. was a corporation or a joint venture.
II.
Jerde argues
that the district court erroneously instructed the jury concerning
willfulness and good faith. Four general principles govern our
evaluation of the adequacy of jury instructions. First, the instructions
must inform the jurors of the essential issues before them and of the
permissible ways of resolving those issues.
United States
v.
Montgomery
, 819 F.2d 847, 851 (8th Cir. 1987). Second, a party is entitled to
an instruction on his theory of the case, provided the instruction is
timely requested, supported by the evidence, and correctly states the
law.
Id.
at 851-52. Third, the district court is afforded considerable discretion
in choosing the form and language of jury instructions.
Id.
at 852. Fourth, the adequacy of jury instructions is determined by
reviewing them as a whole, United States v. Kouba [87-2
USTC ¶9396 ], 822 F.2d 768, 770 (8th Cir. 1987), and in the context
of the trial. United States v. Park, 421
U.S.
658, 674 (1975); United States v. McMillan, 820 F.2d 251, 256
(8th Cir.), cert. denied, 108 S.Ct. 234 (1987).
Jerde contends
that the district court erroneously instructed the jury that the
government was not required to prove bad purpose or evil motive to
establish willfulness. The instruction in question stated in relevant
part:
Willfulness
is an essential element of the crime of failure to file an income tax
return. The word "willfully["] used in connection with this
offense means a voluntary, intentional violation of a known legal duty,
or otherwise stated, with the wrongful purpose of deliberately intending
not to file a return which defendant knew he should have filed in order
to prevent the government from knowing the extent of and knowing the
facts material to the determination of his tax liability. You are
instructed that the government is not required to prove bad purpose or
evil motive. (Emphasis added.)
We have stated
that the words "bad purpose or evil motive" are " 'merely
another way to convey the concept of willfulness.' " United
States v. Ojala [76-2
USTC ¶9760 ], 544 F.2d 940, 947 (8th Cir. 1976) (quoting United
States v. Pohlman [75-2
USTC ¶9677 ], 522 F.2d 974, 977 (8th Cir. 1975) (en banc), cert.
denied, 423
U.S.
1049 (1976)). Based on this statement, Jerde argues that it was
misleading to instruct the jury that the government was not required to
prove bad purpose or evil motive, because the terms "bad purpose or
evil motive" and "willfulness" are essentially synonymous
for this purpose. In addition, Jerde argues that Pohlman held
that a trial court is not required to instruct the jury that bad purpose
or evil motive is required to establish willfulness, not that the
government is not required to prove bad purpose or evil motive.
"Willfulness
in this context simply means a voluntary, intentional violation of a
known legal duty." United States v. Pomponio [76-2
USTC ¶9695 ], 429 U.S. 10, 12 (1976). It does not require proof of
any other motive.
Id.
Our references in Ojala and Pohlman to "bad purpose
or evil motive" meant no more than the intent to violate a legal
duty. See Pomponio, 429
U.S.
at 11. We conclude that the challenged jury instruction was not
misleading, particularly when the charge as a whole made repeated
reference to the appropriate legal standard. See Ojala, 544 F.2d
at 947 (jury instruction that minimized good motive was proper because
government was not required to prove anything but a voluntary,
intentional violation of a known legal duty).
As indicated
above, Jerde's theory of defense was that his failure to file the
returns in question was not willful because he acted under the
good-faith belief that he could not accurately complete the returns
until the ongoing court litigation determined whether Jerde & Jeske,
Ltd. was a corporation or a joint venture. He argues that his theory of
defense was effectively removed from the jury's consideration by the
jury instruction that stated in relevant part:
You
are instructed that the existence of wilfulness required to be proven by
the government is not negated by the excuse of pressing business
problems including any existing State court litigation. These matters
however may be considered by you in determining whether or not the
defendant voluntarily and intentionally violated a known duty. If you
should find that the government has failed to prove beyond a reasonable
doubt that the defendant's failure to file was willful, then your
verdict should be for the defendant.
The propriety
of this instruction is apparent in the context of the whole trial.
Jerde's counsel sought to introduce a copy of the state court's
memorandum decision into evidence. At that point, the district court
gave the following limiting instruction:
You
have heard evidence of the existing State Court litigation. The court
does advise you that the existence of State Court litigation is not an
excuse for failure to timely file United States Internal Revenue Service
income tax returns.
The
court will be submitting to you an issue of willfullness [sic].
I
am going to permit Exhibit 30, which is the memorandum decision of the
State Court decision, to be introduced for the limited purpose of you to
determine what effect that may have had upon the issue of willfullness
[sic], which is an element of the offense of failing to timely file an
income tax return.
So
for that limited purpose, Exhibit 30 will be received, in other words,
not as an excuse for failure to file, but simply for you to determine
and assess that evidence in light of your requirement to find that the
defendant willfully failed to file timely his 1982, '83 and '84 income
tax returns and the 941 Form[s], which are the subject of Counts I and
II.
We conclude
that the challenged jury instruction did not remove Jerde's theory of
defense from the jury. This instruction, particularly when read in
conjunction with the limiting instruction, properly instructed the jury
that the mere existence of state court litigation does not negate
willfulness. See United States v. Sempos [85-2
USTC ¶9683 ], 772 F.2d 1, 2 (1st Cir. 1985) (financial or domestic
problems do not negate willfulness as used in 26 U.S.C. §7203
). The instruction also focused the jury's attention on the
appropriate standard, "whether * * * the defendant voluntarily and
intentionally violated a known duty," and informed the jury that it
could consider Jerde's pressing business problems, including the
existence of state court litigation, in making that determination. 4
Jerde's next
two arguments concern the jury instructions given by the district court
on the issue of good faith. First, Jerde argues that because the concept
of good faith simply requires a person to act with an honest belief or
with honest intentions, the following jury instruction improperly raised
the level of that standard: "In the traditional sense 'good faith'
connotes a moral quality; it is equated with honesty of purpose, freedom
from fraudulent intent and faithfulness to a duty or obligation."
"Good
faith is * * * [a] quality with no technical meaning or statutory
definition, and it encompasses, among other things, an honest belief,
the absence of malice and the absence of design to defraud or to seek an
unconscionable advantage[.]" Black's Law Dictionary 623 (5th ed.
1979); see Kouba, 822 F.2d at 771. Viewed in the context of the
whole charge, we conclude that the district court did not err in giving
the challenged instruction.
Second, Jerde
contends that the district court's use of the phrase "good-faith
reason" rather than "good-faith belief" in the following
instruction could have led the jury to judge Jerde's good-faith defense
under an objective standard:
You
are instructed that since the statute under which the defendant is
charged requires the government to prove wilfulness, the law recognizes
a good-faith reason for not filing as required by law. If you believe
that the defendant had a good-faith reason for not filing, then this
finding of good faith would constitute a lack of wilfulness on his part
and accordingly he would be entitled to a verdict of not guilty as to
each of those counts to which your finding applies. To say the defendant
acted in "good faith" is but another way of stating that his
acts were not "willful."
We agree that
a subjective rather than an objective standard is to be applied in
evaluating a good-faith defense to the charge of willfully failing to
file tax returns under 26 U.S.C. §7203
. United States v. Wells [86-1
USTC ¶9407 ], 790 F.2d 73, 75 (10th Cir. 1986); United States v.
Aitken [85-1
USTC ¶9209 ], 755 F.2d 188, 192 (1st Cir. 1985). In the context of
the trial and of the jury charge as a whole, however, we conclude that
the use of the words "good-faith reason" did not transmute
from a subjective to an objective test the standard to be applied by the
jury to Jerde's claimed good-faith belief that he could not timely file
the returns in question. 5
Finally, Jerde
argues that the district court's failure to give his proffered jury
instructions 6
deprived him of an instruction on his theory of defense. We disagree.
Although a
defendant is entitled to an instruction on his theory of defense, if it
is timely requested, supported by the evidence, and correctly states the
law, Montgomery, 819 F.2d at 851-52, "[a] defendant is not
entitled to a particularly worded instruction where the instructions
given adequately and correctly cover the substance of the requested
instruction[s]." Kouba, 822 F.2d at 771. We conclude that
the jury instructions given adequately and correctly covered Jerde's
defense theory.
III.
Jerde argues
that his convictions should be reversed because the district court
improperly interjected itself into the trial by interrogating him on two
occasions. At the end of direct examination, the court asked Jerde
whether one would be subject to fraud if he filed an informational
return within the six-month extension period notifying the Internal
Revenue Service that the return was incomplete due to the unavailability
of information. Then, at the end of recross-examination, the court again
questioned Jerde concerning the options available to him at the end of
the six-month extension period. Specifically, the court asked whether it
was Jerde's position "that [his] only option[s] [were] to not file
a return, or else file it under penalty of perjury," and whether
one would be subject to fraud if he overstated his income and overpaid
his tax. Jerde argues that by suggesting alternatives to his chosen
course of action, the court conveyed the impression to the jury that
Jerde's position was unreasonable and should not be believed.
The trial
court has a duty to make the interrogation of witnesses and the
presentation of evidence effective for the ascertainment of truth. Fed.
R. Evid. 611(a)(1). In doing so, the trial court is permitted to
interrogate witnesses, Fed. R. Evid. 614(b), particularly when it deems
the questioning necessary to clarify testimony and to elicit necessary
facts. United States v. Gleason [85-2
USTC ¶9519 ], 766 F.2d 1239, 1243 (8th Cir. 1985), cert. denied,
474
U.S.
1058 (1986).
The trial
court's intervention should not be so extensive as to destroy the
overall fairness of the trial, however. Unfairness to the defendant can
result where the trial court "loses its color of neutrality and
tends to accentuate and emphasize the prospection's case." United
States v. Bland, 697 F.2d 262, 265 (8th Cir. 1983) (footnote
omitted). Although the trial court may interject isolated questions to
clarify ambiguities, it "cannot assume the mantle of an advocate
and take over the cross-examination for the government to merely
emphasize the government's proof or to question the credibility of the
defendant[.]"
Id.
After a review
of the record, we conclude that the district court did not become an
advocate for the prosecution in this case. Its questions were not asked
to merely emphasize the government's proof or to question Jerde's
credibility. Near the end of direct examination, Jerde's counsel asked
Jerde whether, at the end of the six-month extension period, he had any
options other than to file a false return and perjure himself or to not
file a return until he knew the information was correct. Jerde somewhat
ambiguously responded: "Not really, not after the six-month
period." The district court's questions merely sought to clarify
whether Jerde believed those were the only two options available.
Further, the
district court acted to minimize any prejudicial effect that might have
resulted from its efforts to clarify the record. It did not express an
opinion as to the facts or comment directly on Jerde's testimony, see Ray
v. United States, 367 F.2d 258, 263 (8th Cir. 1966), cert.
denied, 386 U.S. 913 (1967); it provided both sides with an
opportunity to further question Jerde in light of the court's questions,
see Van Leirsburg v. Sioux Valley Hosp., 831 F.2d 169, 173 (8th
Cir. 1987); and it instructed the jury that any questions the court had
asked during the course of the trial did not reflect the court's opinion
on those matters, but were merely intended to bring out facts that had
not been fully covered by testimony.
The judgment
is affirmed.
1
26 U.S.C. §7203 provided
in relevant part for the tax years in question:
Any person * *
* required * * * to make a return, * * * who willfully fails to * * *
make such return * * * at the time or times required by law or
regulations, shall * * * be guilty of a misdemeanor[.]
2
The Honorable Richard H. Battey, United States District Judge for the
District of South Dakota.
3
The Internal Revenue Service has no record of receiving some of these
returns. For the purpose of this appeal, it is unnecessary for us to
determine whether the returns were filed in December 1986.
4
The present case is distinguishable from United States v. Burton
[84-2 USTC
¶9689 ], 737 F.2d 439 (5th Cir. 1984), which held that a jury
instruction stating that "[a] good faith belief that wages are not
income is not a defense to [charges under 26 U.S.C. §§7203
and 7205 ]"
improperly removed Burton's theory of defense from the jury's
consideration.
Id.
at 440-41. Jerde's theory of defense was submitted for the jury's
consideration. The district court merely clarified that the existence of
state court litigation was not a defense; it was only relevant in
determining whether Jerde voluntarily and intentionally violated a known
legal duty.
5
We note that while discussing Jerde's design, motive, and intent for not
filing the returns, Jerde's counsel, in opening and closing arguments,
stated that Jerde had a "good-faith reason" for not filing the
returns.
6
The instructions proffered by Jerde were:
Good faith
defenses to the criminal charge of failing to timely file tax returns
are a bonified [sic] misunderstanding of, to-wit:
1.
Defendant's liability for a tax;
2. Defendant's duty to make a return; or
3. The adequacy of the records Defendant maintains.
The law
requires every tax payer [sic] to certify the correctness and validity
of his return by executing the following acknowledgement:
"Under
penalty of perjury, I declare that I have examined this return,
including accompanying schedules and statements, and to the best of my
knowledge and belief, it is true, correct and complete."
Mere failure
to pay a tax is not a crime, since otherwise a taxpayer might be
imprisoned for debt.
[86-2 USTC ¶9543]
United States of America
, Plaintiff-Appellee v. James L. Harrold, Sr., Defendant-Appellant
(CA-10),
U.S. Court of Appeals, 10th Circuit, 84-2612, 7/14/86, 796 F2d 1275,
Affirming and remanding unreported District Court decision
[Code Sec. 7201 ]
Criminal penalties: Evasion or avoidance of tax: Sufficiency of
indictment: Jury instructions: Improper question.--The taxpayer's
conviction for income tax evasion, resulting from his use of trusts to
conceal his income, was affirmed and remanded to the district court to
determine if the jury panel had been selected properly. There was no
prejudice to him from any lack of specificity in the indictment. The
government did not violate his due process rights when a witness was
questioned about the taxpayer's invocation of the Fifth Amendment. This
error was harmless in light of the overwhelming evidence of guilt and
the fact that it was an isolated remark. The taxpayer was not entitled
to a jury instruction that his good-faith disagreement with the tax laws
constituted a defense.
Layn R.
Phillips, United States Attorney, John S. Morgan, Assistant United
States Attorney, Tulsa, Okla., for plaintiff-appellee. John E. Dowdell,
Norman
, Wohlgemuth & Thompson, 909 Kennedy Bldg.,
Tulsa
,
Okla.
74103
, for defendant-appellant.
Before LOGAN,
MOORE, and BALDOCK, Circuit Judges.
LOGAN, Circuit
Judge:
Defendant,
James L. Harrold, Sr., appeals his conviction for income tax evasion, in
violation of 26 U.S.C. §7201
.
On appeal
defendant claims that: (1) his indictment was insufficient; (2) the
government and its witnesses improperly referred at trial to his
assertion during pretrial investigations of his Fifth Amendment right to
silence; (3) the court inadequately instructed the jury on his
good-faith defense; (4) the court wrongly excluded evidence relevant to
his good-faith defense; and (5) he was denied his right under 28 U.S.C.
§1867(f) to inspect the jury records. We reject all these claims except
the last. On that issue we remand on a limited basis.
Defendant was
indicted for income tax evasion for the years 1979 through 1981. During
this time, defendant worked as an engineer for Consultants and
Designers, Inc. His earnings from this company were as follows:
1979--$31,762.37; 1980--$35,208.42; 1981--$36,687.91. After filing his
1975 return, defendant decided to stop paying income taxes because, he
contends, he had determined from his own research that wages did not
constitute taxable income. Defendant consequently filed W-4 withholding
forms declaring himself exempt from income taxes and paid no income
taxes during any of the years at issue.
Defendant
created the Zident Educational Trust (Zident) on
February 6, 1980
. The alleged purpose of this trust was to create an "educational
facility that could pass on Christian beliefs and patriotic
themes." R. X, 679. The evidence suggested, however, that defendant
placed most of his personal property in the trust and used it as a
vehicle for his personal investments. Although defendant was not a
trustee of Zident, he was its executive secretary, exercised substantial
control over its investments, and had signatory power for the trust.
Extensive
evidence was presented concerning the Zibiz Research Trust (Zibiz),
which was created by the Zident trustees and whose beneficiary was
Zident. Defendant was manager of Zibiz and in that capacity offered
advice on investments. He also had signatory power for Zibiz. There was
evidence that Zibiz purchased items such as a waterbed and a motorboat
and occasionally "traded" them to Zident. Defendant lived in a
trailer that Zibiz owned.
Both of these
trusts had assets worth several thousand dollars and were active in the
stock market. They paid a negligible amount of income taxes in 1980 and
1981. Zibiz, for example, paid $1449.08 in taxes in 1981. Zident paid no
taxes in 1980 and 1981. An expert government witness testified that all
of the income of these trusts should be attributed to defendant because
of the control he exercised over them. That expert concluded the trusts
had been used to conceal defendant's income.
I
Defendant
asserts that his indictment was insufficient. He argues that "there
are no factual allegations as to the amount of taxable income received
or tax liability due" and that it is not "clear what the
alleged evasion may be." Brief of Appellant at 15.
In United
States v. Radetsky, 535 F.2d 556 (10th Cir.), cert. denied,
429 U.S. 820 (1976), we set out the requirements of an indictment:
"First,
the indictment must contain the elements of the offense and sufficiently
apprise the defendant of what he must be prepared to meet; second, it
must be such as to show to what extent he may plead a former acquittal
or conviction as a bar to further prosecution for the same cause."
Id.
at 562; see also
United States
v. Salazar, 720 F.2d 1482, 1486 (10th Cir. 1983), cert. denied,
105 S.Ct. 789 (1985); Rose v. United States [42-2
USTC ¶9500 ], 128 F.2d 622, 624 (10th Cir. 1942).
The indictment
here meets those requirements. 1
The focus of the government's case was on defendant's filing of
fraudulent W-4 withholding forms and his creation of fraudulent trusts
to hide his income and assets. The indictment specifically referred to
the W-4 forms and to attempts to "conceal" ownership of
assets. Although it would have been better for the indictment to have
referred to the challenged trusts with greater specificity, if the
government had detailed knowledge then of the precise methods defendant
used to conceal his income, the reference to the concealment of asset
ownership gave defendant notice that the trusts were likely to be
questioned at trial. See Salazar, 720 F.2d at 1487
("sufficiency of an indictment, however, 'is not a question of
whether it could have been more definite and certain' ") (quoting United
States v. Debrow, 346
U.S.
374, 378 (1953)).
In addition,
inadequacy of an indictment requires reversal only if it prejudiced the
defendant. See
United States
v. Fitzgibbon, 576 F.2d 279, 283 (10th Cir.), cert. denied,
439 U.S. 910 (1978). Here defendant presented detailed evidence
concerning the challenged trusts and seemed prepared to meet the
government's case. Accordingly, there was no prejudice to him from any
lack of specificity in the indictment.
Defendant's
claim that the indictment should have included the amount of taxes owed
is meritless. In a §7201 prosecution
the government is not obligated to prove the precise amount owed. See
Graves v. United States [51-2
USTC ¶9431 ], 191 F.2d 579, 582 (10th Cir. 1951); United States
v. Newman [72-2
USTC ¶9719 ], 468 F.2d 791, 795 (5th Cir. 1972); United States
v. Stein [71-1
USTC ¶9209 ], 437 F.2d 775, 779 (7th Cir. 1971). Thus there is no
requirement that an indictment under §7201
specify the exact amount owed.
Defendant
claims that the indictment is too vague to protect him from subsequent
prosecutions for the same offenses. But in Radetsky we noted that
"the record evidence of exhibits and testimony" is available
to protect against a defendant being placed twice in jeopardy. Radetsky,
535 F.2d at 563; see also
United States
v. Smith, 692 F.2d 693, 696-97 (10th Cir. 1982). The trial record
clearly indicates that this prosecution involved violations concerning
the Zident and Zibiz trusts from 1979 through 1981. There is little
danger that defendant will be prosecuted again for the same trust
violations.
II
Defendant next
claims that the government violated his due process rights by
intentionally eliciting testimony from two IRS officers that defendant
refused to answer certain questions during pre-indictment investigations
in reliance on his Fifth Amendment privilege against self-incrimination.
First, IRS
Officer
Rob
ert Randolph testified that defendant invoked his right to remain silent
at a meeting with IRS officers on
November 13, 1979
. The second incident arose during the testimony of IRS officer Larry
Garner. Garner, who was conducting a criminal investigation of
defendant, testified that defendant refused to reply to certain
questions after receiving a Miranda warning. 2
The government
states in its brief that it regrets this questioning of both IRS
officers with respect to defendant's silence but asserts that "such
error was harmless." Brief of Appellee at 14. We are surprised that
the government in effect concedes that reference to defendant's silence
by Officer Randolph was error. Officer Randolph was conducting a civil
investigation and there is no indication in the record that he gave
defendant a Miranda warning. In United States v. Massey,
687 F.2d 1348 (10th Cir. 1982), we stated that a comment on a
defendant's silence is error only when the defendant remained silent in
reliance on government action, i.e., a Miranda warning.
Id.
at 1353; see also Wainwright v.
Greenfield
, 54 U.S.L.W. 4077, 4078 (U.S. Jan. 14, 1986); Fletcher v. Weir,
455
U.S.
603, 605-07 (1982); Jenkins v. Anderson, 447
U.S.
231, 240 (1980); Doyle v. Ohio, 426
U.S.
610, 618 (1976); United States v. Davis, 780 F.2d 838, 844-45
(10th Cir. 1985). Because defendant's refusal to respond to certain of
Randolph
's questions was not based on a Miranda warning or any other
government action, the testimony concerning defendant's pre-Miranda
reliance on the Fifth Amendment was proper and will not be considered in
determining if defendant was prejudiced. 3
We agree that
the government's questioning of Officer Garner about defendant's
invocation of the Fifth Amendment was error. Nevertheless, if we find
beyond a reasonable doubt that defendant was not prejudiced by the
error, his conviction will stand. 4
See United States v. Schmitt, No. 85-2525, slip op. at 2-3 (10th
Cir. June 18, 1986); Massey, 687 F.2d at 1353. In Massey
we considered the following factors relevant in determining whether an
error was harmless:
"1.
The use to which the prosecution puts the post-arrest silence.
2.
Who elected to pursue the line of questioning.
3.The
quantum of other evidence indicative of guilt.
4.
The intensity and frequency of the reference.
5.
The availability to the trial judge of an opportunity to grant a motion
for mistrial or to give curative instructions."
Id.
(quoting Williams v. Zadradnick, 632
F.2d 353, 361-62 (4th Cir. 1980)); see also Schmitt, slip op. at
8; United States v. Remigio, 767 F.2d 730, 735 (10th Cir.), cert.
denied, 106 S. Ct. 535 (1985).
In determining
whether defendant was prejudiced, the key factors often will be the
purpose for which the government used defendant's silence and the
quantum of other evidence of defendant's guilt. The government admits
here that the purpose of its questioning was "to establish
defendant's knowledge of his obligation to file a tax return."
Brief of Appellee at 12. This was a clear violation of Anderson v.
Charles, 447 U.S. 404 (1980), which forbade the government from
drawing meaning from a defendant's silence.
Id.
at 409. The error is particularly serious here because defendant's
knowledge of his tax liability was the central issue in this case; his
defense was that he did not know he owed taxes. In addition, the
government used defendant's silence to impeach his testimony that he was
unaware that he had violated the tax laws. 5
Although the
error in this case was egregious, it still can be deemed harmless if the
defendant's theory was "transparently frivolous" and the
evidence of guilt was overwhelming. See
United States
v. Meneses-Davila, 580 F.2d 888, 894 (5th Cir. 1978); Chapman v.
United States, 547 F.2d 1240, 1248 (5th Cir.), cert. denied,
431 U.S. 908 (1977). In light of the quantum and nature of other
evidence at trial indicative of defendant's knowledge of his tax
obligations, we are convinced that the jury would have found defendant's
good-faith defense frivolous even without the government's impermissible
questions.
The government
demonstrated that defendant was involved in the tax protester movement.
An undercover special agent for the IRS testified that in 1979, at the
National Tax Freedom forum in Oklahoma City (a tax protester
convention), defendant stated to him that he did not file tax returns in
1976 or 1977 as a way of protesting the income tax. The agent also
testified that defendant stated he would play "dumb" if the
IRS contacted him, that he would send out certified letters to the IRS
concerning his tax questions, and that he believed that these letters
could then be used as evidence of his "good faith." The IRS
agent further testified that defendant stated he would use these letters
to establish his ignorance of the tax laws. At trial, defendant
acknowledged that such methods were discussed expressly at the National
Tax Freedom forum. The evidence at trial showed that this plan was
precisely the course defendant later adopted and now submits to us. From
this evidence a reasonable jury could only have concluded that defendant
was well aware of his tax obligations, and that he chose to mask such
knowledge through a careful scheme.
Moreover,
defendant testified he filed income tax returns from 1948 to 1975. By
1976, however, he stated he had come "to the conclusion that the
wages [he] was receiving were not taxable income as defined by the
Supreme Court, . . . ." R. X, 641. Defendant then ceased paying
income tax. From this testimony we believe the jury had before it
overwhelming evidence that defendant had full knowledge of his tax
liability, but determined, for reasons known only to him, to drop out of
the system. It would have been absurd for the jury to find that,
although defendant had paid income tax on his wages for twenty-seven
years, he suddenly no longer "knew" that this was his
obligation. Cf. United States v. Weninger [80-2
USTC ¶9560 ], 624 F.2d 163, 167-68 (10th Cir.), cert. denied,
449
U.S.
1012 (1980). The evidence demonstrated only that defendant disagreed
with the law, not that he was unaware of it. See infra at
15-17 (discussing state of mind necessary for criminal tax evasion).
Thus, in light of the evidence at trial, defendant's good-faith defense
was indeed transparent.
Further, the
prosecution did not highlight the evidence of defendant's taking the
Fifth Amendment. It did not ask him, when he took the stand, why he
refused to answer particular questions. And it did not refer to this
issue in closing argument. Although we recognize that curative
instructions do not always cure, we note also that the trial court did
instruct the jury at the close of evidence that defendant had the right
to decline to answer questions and no adverse inference could be drawn
from his exercise of his constitutional right. Finally, these were only
isolated remarks during a two-week trial, which mitigates the danger of
prejudice. See Remigio, 767 F.2d at 735 (curative instruction,
isolated reference, and overwhelming evidence of guilt result in
harmless error despite intentional reference to defendant's silence); Velarde
v. Shulsen, 757 F.2d 1093, 1096 (10th Cir. 1985) (chance of
prejudice greater when comment on silence occurs in one-day trial, with
no curative instruction); United States v. De La Luz Gallegos,
738 F.2d 378, 383 (10th Cir. 1984) (comment on silence harmless when
made only in opening argument, evidence substantial, and comment not
fresh in jurors' minds); United States v. Bridwell, 583 F.2d
1135, 1139 (10th Cir. 1978) (isolated remark, immediate curative
instruction, and overwhelming evidence render comment harmless).
Accordingly,
we find the government's reference to defendant's post-Miranda
silence harmless. 6
III
Defendant
alleges that the district court erred in failing to instruct the jury
specifically that, if he had a good-faith belief that he owed no income
tax, he could not be found guilty of tax evasion. 7
In United
States v. Phillips, 775 F.2d 262 (10th Cir. 1985), we held that a
defendant in a tax evasion case was entitled to an instruction that a
subjective good-faith misunderstanding of tax liability is a defense. 8
Id. at 264; accord United States v. Wells, No. 84-2573,
slip op. at 4-5 (10th Cir. May 9, 1986). For example, if a defendant
proved that he honestly believed that lottery winnings did not
constitute taxable income, he would not be guilty of criminal tax
evasion if he failed to declare his winnings. A defendant, however, is
not entitled to an instruction that his good-faith disagreement
with the tax laws constitutes a defense. Id.; see also United States
v. Weninger, 624 F.2d at 167. Thus, if the winner of a lottery knew
that his winnings consistently were held taxable by the IRS, but he did
not declare them as income because he believed such winnings
should not be taxable, he could be found guilty of criminal tax evasion.
This distinction is crucial and has been recognized by several courts. See,
e.g., United States v. Mueller, 778 F.2d 539, 541 (9th Cir. 1985); United
States v. Aitken [85-1
USTC ¶9209 ], 755 F.2d 188, 191 (1st Cir. 1985); United States
v. Burton [84-2
USTC ¶9689 ], 737 F.2d 439, 441-42 (5th Cir. 1984); United
States v. Kraeger [83-2
USTC ¶9453 ], 711 F.2d 6, 7 (2d Cir. 1983).
In United
States v. Hopkins, 744 F.2d 716 (10th Cir. 1984) (en banc), we held
that a good-faith instruction must be given in mail fraud cases as
"a separate subject" if there is sufficient evidence to
support the theory.
Id.
at 718. Instructions simply defining willfulness are in this
circumstance insufficient. Id.; accord United States v. Casperson,
773 F.2d 216, 223 (8th Cir. 1985). Instead "[t]here must be a full
and clear submission of the good faith defense to the jury."
Hopkins
, 744 F.2d at 718 (citations omitted). 9
We do not see
any significant difference between the good-faith defense tendered in
Hopkins
and that raised here. In each case the key question is whether defendant
had a good-faith belief in the propriety of his conduct. See id.
Thus defendant here was entitled to a good-faith instruction if there
was evidence from which the jury could have found that defendant in good
faith misunderstood the income tax laws. 10
Cf. Mueller, 778 F.2d at 541 (approving instruction despite
absence of explicit good-faith wording).
On the amount
of evidence necessary, in United States v. Swallow [75-1
USTC ¶9267 ], 511 F.2d 514 (10th Cir.), cert. denied, 423
U.S. 845 (1975), we stated that "[e]ven though the evidence may be
weak, insufficient, inconsistent or of doubtful credibility, its
presence requires an instruction on a theory of defense."
Id.
at 523; accord
United States
v. Curry, 681 F.2d 406, 413 (5th Cir. 1982); United States v.
Garner, 529 F.2d 962, 970 (6th Cir.), cert. denied, 426 U.S.
922 (1976). In
Hopkins
, however, we suggested that a defendant is entitled to a
good-faith instruction only if there is a quantum of evidence from which
the jury "reasonably" could find that the defendant
acted in good faith.
Hopkins
, 744 F.2d at 718 (emphasis added); accord
United States
v.
Jackson
, 726 F.2d 1466, 1468 (9th Cir. 1984). We need not resolve whether
our en banc holding in Hopkins was intended to state a stricter
rule than that recited in Swallow, because the giving of an
erroneous instruction does not warrant reversal when, in light of all
the evidence, it is clear that the error was harmless. See, e.g.,
United States
v. Herbert, 698 F.2d 981, 986 (9th Cir.) ("erroneous
instruction requires reversal only if there is "reasonable
probability" that error materially affected verdict") (quoting
United States v. Valle-Valdez, 554 F.2d 911, 916 (9th Cir.
1977)), cert. denied, 464 U.S. 821 (1983); see also
United States
v. Carouthers, 669 F.2d 635, 640 (10th Cir. 1982).
The only
evidence at trial of defendant's good-faith misunderstanding of the law
consisted of his own statements. On the other hand, there was
unchallenged evidence that defendant paid income taxes on his wages for
twenty-seven years, that he was a sophisticated investor, and that he
attended tax protester conventions at which he expressly discussed how
to fabricate, for the purposes of a trial, evidence that he
misunderstood the tax laws. Therefore this is not a case in which a
defendant has simply presented minimal evidence supporting his theory as
in Swallow. Here the evidence at trial demonstrated that
defendant acted in bad faith. Thus, even if a good-faith instruction had
been given, we are confident the result of the trial would have been the
same.
IV
Defendant
claims that, in addition to instructing the jury inadequately on his
good-faith defense, the district court prevented him from presenting
this defense by excluding letters he had written regarding his
interpretation of the tax laws and Supreme Court opinions on which he
had relied to reach his conclusion that wages are not income.
The court
allowed defendant to introduce some letters he sent and all letters he
received from IRS officials in response to his inquiries, and to testify
on the basis for his beliefs. The district court excluded as irrelevant,
however, several letters defendant wrote to senators and congressmen
regarding the definition of income and the responses he received to
these letters. Defendant contends that these letters were highly
probative of his state of mind.
We believe
that these letters may have been relevant as evidence that defendant
misunderstood his tax liability. See Fed. R. Evid. 401 (relevant
evidence is that which has "any tendency to make . . . [a]
fact . . . more probable or less probable") (emphasis added). Their
exclusion, however, does not warrant reversal of defendant's conviction.
Defendant was permitted to testify at length concerning his beliefs
about the tax system and the basis for his beliefs. He detailed how he
had been studying tax issues for more than ten years and has studied
Supreme Court opinions construing the tax laws. He was allowed to read
letters he had written to the IRS and to Senator David Boren. We have no
reason to believe that the excluded letters would have differed from or
added significantly to the evidence previously introduced. Accordingly,
we hold that, despite the exclusion of those letters, defendant was able
to submit the substance of his good-faith theory to the jury, and any
error was harmless. See United States v. Thiel [80-1
USTC ¶9373 ], 619 F.2d 778, 781 (8th Cir. 1980) (wrongful exclusion
of letters written to IRS not reversable error because defendant had
opportunity to articulate his good-faith defense); United States v.
Rothbart, 723 F.2d 752, 755 (10th Cir. 1983); United States v.
Hayes, 477 F.2d 868, 873-74 (10th Cir. 1973).
Defendant's
assertion that the trial court wrongly excluded various Supreme Court
opinions on which he relied also is unavailing. A trial court's decision
to exclude evidence will be overturned only if it was clearly erroneous
or an abuse of discretion. See, e.g.,
United States
v. Rothbart, 723 F.2d at 755; United States v. Neal, 718 F.2d
1505, 1509-10 (10th Cir. 1983), cert. denied, 105 S. Ct. 87
(1984). Several courts have held that Supreme Court opinions or other
evidence on which a defendant relied to reach an erroneous conclusion on
tax obligations properly are excluded. See Mueller, 778 F.2d at
540 (exclusion of Supreme Court opinions); United States v. Burton,
737 F.2d 439, 443 (5th Cir. 1984) (exclusion of expert testimony
concerning plausibility of theory that wages are not income); United
States v. Kraeger, 711 F.2d at 7-8 (exclusion of federal court
opinions); Cooley v. United States [74-2
USTC ¶9718 ], 501 F.2d 1249, 1253 (9th Cir. 1974) (exclusion of
letter appearing in Congressional Record, IRS Training Manual, and
Supreme Court opinions), cert. denied, 419 U.S. 1123 (1975).
These courts have found, and we agree, that admission of such evidence
would confuse the jury with respect to the requirements of the law. It
is the role of the court to control such submissions and to instruct the
jury on the law itself. See Fed. R. Evid. 403.
As noted, we
have adopted a subjective standard in tax evasion cases, and thus the
basis on which defendant reached his opinions is of little relevance.
The proper inquiry is whether defendant actually misunderstood his tax
obligations, not whether he had a reasonable basis for his beliefs.
Accordingly,
we find the district court's exclusion of Supreme Court opinions
appropriate.
V
Defendant's
final contention is that the district court erred in denying his motion
to inspect and copy jury records pursuant to 28 U.S.C. §1867(f). The
district court refused to allow defendant to inspect the jury records
because he apparently had failed to apply for an order to do so. The
court, however, did permit defendant to inspect the records following
his conviction. On the basis of this subsequent inspection, defendant
filed a motion for a mistrial and submitted briefs to the district
court. The district court ordered that the motion be held in abeyance
pending disposition of this appeal. The government concedes that a
limited remand to the district court to determine if the jury panel was
selected properly is appropriate. Brief of Appellee at 4. We agree.
Therefore the district court is directed to consider defendant's
contentions on remand and to set aside his conviction if he establishes
that the jury panel was chosen improperly. See United States v.
Lawson [82-1
USTC ¶9197 ], 670 F.2d 923, 926 (10th Cir. 1982). 11
AFFIRMED and
REMANDED.
1
The indictment stated as follows:
"During
the calendar year 1979, defendant JAMES L. HARROLD, SR., a resident of
Tulsa County within the Northern District of Oklahoma, had and received
taxable income upon which there was a substantial tax liability due and
owing; that said defendant was required by law following the close of
the taxable year 1979 and on or before April 15, 1980, to file with the
Internal Revenue Service a federal income tax return reporting such
income; that said defendant willfully and knowingly attempted to evade
and defeat the income tax due and owing to the United States of America
by failing to make and file an income tax return as required, by failing
to pay the Internal Revenue Service the income tax due and owing for the
calendar year 1979, and by concealing and attempting to conceal from all
proper officers of the United States of America his true and correct
taxable income by conducting his affairs so as to avoid the maintenance
of normal business records, by attempting to conceal his ownership of
assets, by conducting financial transactions through the use of cash,
cashier's checks or money orders, the likely effect of which would be to
mislead or conceal, and by providing his employer with fraudulent W-4
tax withholding form, in violation of Title 26, United States Code, Section
7201 ."
R.
I, 24. This language was repeated for the charges relating to 1980 and
1981.
2
The following testimony of Garner is challenged:
"Q.
[Government] All right. What, if anything, did you talk to Mr. Harrold
about?
A. [Garner] Whether or not he had filed an income tax return for the
years 1979, 1980 and 1981.
Q. All right. Did you advise him of anything?
A. Prior to actually getting into discussions, I did advise him of his
Fifth Amendment rights as required by our procedures.
Q. And would you tell us exactly what it was you advised him of?
A. His Constitutional rights, Fifth Amendment Constitutional rights.
Q. What were those? Can you read them to us, please?
. . .
Q. What did Mr. Harrold respond, if anything?
A. That he did understand the rights.
Q. What happened next? Did you talk about anything? Did you visit with
him?
A. Yes, we did, I did, pardon me.
Q. Go ahead.
A. I asked him questions pertaining to the fact that he had actually
filed a 1979 or 1980 or 1981 income tax return, and he responded that
you had to have approximately thirty-three hundred dollars with which to
file the tax return, and that if he made that amount of money that he
would have more than likely filed a tax return.
Q. All right. Did he say anything else?
A. Okay, he indicated that if he had filed the tax returns for those
years, it would have been with the
Austin
Service
Center
in
Austin
,
Texas
.
. . .
Q. All right. Can you tell us everything that Mr. Harrold told you on
this particular occasion?
. . .
A. Okay. Essentially, when we got into the discussion about whether he
had filed a return or not, and also when I had asked him if he had any
income, he indicated that he would have filed a return, like I said
before, if he had had at least thirty-three hundred dollars in income. I
asked him if he had any income, and his response was that he had some
dividends and he had earned some moneys [sic] primarily from odd types
of jobs that he had actually worked. He--okay, he indicated that his
stocks that he actually had--he did own some stocks. He had bought stock
by the name of President Steyn. He had bought it through Merrill Lynch
brokerage firm, and he had earned, as I mentioned, some dividends from
that. Other than principally the fact that he had dividends, there was
no income per se. We got into the discussion about how was he existing
at this particular point in time, and during that time he indicated that
he was doing primarily odd jobs and did repair work as needed, and, of
course, as requested by various individuals. I asked him if this
location was his, and he indicated that he was more or less a caretaker
for the area where I found him, which was the Route 2, Box 134-A area,
and also encompassing the mobile home. He was being allowed to stay
there by friends, and he was caretaking the property for those friends.
Let's see, okay, we got into repeating for the most part some questions,
and primarily what I'm speaking of is the employment aspect of it, who
was he actually employed by, to which, as I mentioned earlier, he never
actually really gave me the answers to those questions. He just avoided
it. And to some degree he would plead the Fifth Amendment as though he
would not respond to the question.
. . .
Q. Did he, at any time, ever assert the Fifth Amendment in response to
any questions you asked him?
A. He did assert the Fifth Amendment to various questions I asked him
after I had read him his rights.
Q. Do you recall how many times?
MR. DOWDELL: I
object, Your Honor.
THE COURT:
Sustained.
MR. MORGAN: I
believe that is all."
R.
IV, 77-81, 88.
3
Defendant, in his later conversation with Officer Garner, answered some
questions and refused to answer others. We believe that this partial
silence does not preclude him from arguing that a violation of Doyle
v. Ohio, 426 U.S. 610 (1976), occurred. To the extent that a
defendant clearly relies on a Miranda warning to refuse to answer
specific questions, he has been induced by the government to do so and
his silence may not be used against him. See Hockenbury v. Sowders,
718 F.2d 155, 159 (6th Cir. 1983), cert. denied, 466 U.S. 975
(1984); Note, Protecting Doyle Rights After Anderson v.
Charles: The Problem of Partial Silence, 69
Va.
L. Rev. 155, 166-67 (1983).
Phelps v.
Duckworth, 772 F.2d 1410 (7th Cir.) (en banc), cert. denied,
106 S. Ct. 541 (1985), can be read to indicate that Doyle only
applies if a defendant remains almost completely silent following a Miranda
warning.
Id.
at 1413. In Phelps, however, the defendant never asserted his Miranda
rights at all; instead, he offered an exculpatory story at the time of
arrest.
Id.
at 1412. In contrast, defendant here specifically invoked his Miranda
rights as to particular questions. Therefore, he relied on governmental
action and is entitled to the protections of Doyle. See id. at
1422 (Posner, J., concurring) (basis of Doyle is that defendants
should not be "bushwacked" if they rely on right to silence).
Furthermore, the Seventh Circuit relied on Hockenbury for its
conclusion that Doyle only applies in cases of near complete
silence.
Id.
at 1413. In Hockenbury, however, the Sixth Circuit specifically
stated that Doyle protects a defendant"who has refused to
answer specific questions after Miranda warnings have been given,
. . . ." Hockenbury, 718 F.2d at 159. Therefore, we do not
read Phelps as inconsistent with the rule we are applying here.
4
Defendant did not object to references to his silence until the
government asked how many times defendant invoked the Fifth Amendment.
Although defendant erred in not objecting at the prosecution's initial
reference to his silence, reference to a defendant's silence following a
Miranda warning is "plain error" implicating
substantial rights and thus is still subject to review. See Fed.
R. Crim. P. 52(b); United States v. Barton, 731 F.2d 669, 675
(10th Cir. 1984) (citing cases).
5
This case is distinguishable from Charles, where the Supreme
Court permitted the prosecution to use defendant's post-Miranda
statements to impeach the defendant's statements at trial. Charles,
447
U.S.
at 408. Here, by its own admission, the government used defendant's silence
to impeach him, not his statements made following the Miranda
warning. Thus we are not engaging in the "formalistic"
understanding of silence that the Court condemned in Charles. See id.
at 409.
6
Because the government erred in commenting on defendant's silence, it
has the burden of proving that the error was harmless. See Chapman v.
California
, 386
U.S.
18, 24 (1967); see also Brooks v. Kemp, 762 F.2d 1383, 1436-37
(11th Cir. 1985) (Clark, J., concurring in part, dissenting in part) (en
banc). Yet the government in its brief does little more than recite that
the evidence was "overwhelming" and note that a curative
instruction was given. We deplore such practice on the part of the
government. The doctrine of harmless error has not yet reached the point
where the government can avoid the impact of its own miscues merely be
intoning that "the evidence was overwhelming." Were this a
closer case, the government's limited effort would result in reversal.
7
The district court instructed the jury as follows on the disobedience of
known tax laws:
"Also,
you're instructed that if you should find the defendant acted
voluntarily, purposely, deliberately and intentionally in the handling
or nonhandling of his income tax affairs for the year or years in
question, as distinguished from accidental, [sic] inadvertently or
negligently, then you're instructed it's no defense for the defendant
that he claims a good purpose for doing so.
If it is shown
that the defendant intentionally violated his known legal duty to file a
return, his reasons for doing so are irrelevant. It's the duty of all
citizens to obey the law, whether they agree with it or not."
R.
Supp. III, 14. The court also instructed the jury that:
"to attempt to evade or defeat a tax involves two things. One, an
intent to evade or defeat the tax, and secondly, some act by the
defendant in the furtherance of such an attempt. The word attempt
contemplates that the defendant had knowledge and understanding that
during the particular tax years involved that he income in such years
which was taxable and which he was required by law to report, but that
he nevertheless attempted to evade or defeat the taxes thereon, . . .,
by willfully failing to report income which he knew he had during that
year and which he knew should have been reported."
Id.
at 10-11. Finally, in explaining to the jury the inferences that it was
permitted to draw from defendant's previous acts, the court stated that
the jury must find that "the accused acted willfully and with
specific intent and not because of mistake, or accident or any other
innocent reason."
Id.
at 13-14. It also instructed: "To establish specific intent, the
government must prove that the defendant knowingly did an act which the
law forbids or knowingly failed to do an act which the law requires,
purposely intending to violate the law."
Id.
at 15.
8
Defendant's proposed instruction in the instant case was as follows:
"If
a person, in good faith, believes that he has paid all the taxes he
owes, he cannot be guilty of criminal intent to evade the tax. The reasonableness
of his belief is for the jury to decide and this belief is based on
whether he acted in good faith or whether he willfully intended to evade
taxes. This issue of intent is one which the jury must determine from a
consideration of all the evidence in the case bearing on the defendant's
state of mind.
Such a good
faith belief goes to the essential elements of willfullness, and a
failure to understand the law or a misrepresentation of the law if
honestly held would entitle the defendant to an acquittal of the charges
made against him."
Brief
of Appellant at 30 n.14 (emphasis added).
Defendant's proposed instruction improperly stated the standard as
objective. Under the proposed instruction, the jury would have had to
decide whether defendant's belief was "reasonable." The proper
standard is subjective. See Phillips, 775 F.2d at 264.
Ordinarily, when a proposed instruction is a misstatement of the law, it
need not be given. See
United States
v. Stoddart, 574 F.2d 1050, 1053 (10th Cir. 1978). If, however, the
instruction concerns a particularly important matter, the court should
instruct the jury properly. See
United States
v. Leach, 427 F.2d 1107, 1112-13 (1st Cir.), cert. denied,
400 U.S. 829 (1970). Because this instruction concerned defendant's sole
defense, we will consider whether it was error not to give the
instruction in its proper form.
9
The apparent reason courts have trouble giving an appropriate separate
instruction on the good-faith defense is that the concept is so closely
interwoven with "willfulness," on which the courts almost
always will instruct. Because instructions should be tailored to the
facts of the case, we are reluctant to suggest the form of any
instruction. Nevertheless, because of the difficulties in these
failure-to-file cases, we set forth here instructions similar to ones we
have recently approved. These instructions are only models and should be
modified to fit the facts of a specific case.
"Willfulness
is an essential element of the crime of failing to file a return and the
crime of supplying false or fraudulent information. You are instructed
that an act is done 'willfully' if it is done voluntarily and
intentionally with specific intent to do that which the law forbids or
to not do that which it requires.
The word
'willfully' used in connection with the offense charged in this case
means a voluntary, intentional violation of a known legal duty--that is,
the defendant voluntarily and intentionally did not file an income tax
return, which he was required by law to file and which he knew he was
required to file.
The government
need not prove that the defendant intended to defraud it or to evade the
payment of any taxes to make the defendant's failure to file qualify as
willful under this provision of the law.
Defendant's
conduct is not 'willful' if he acted through negligence, inadvertence,
mistake, or good-faith misunderstanding of the requirements of the law.
Good faith.
Defendant asserts a defense of good-faith misunderstanding. You are
instructed that if defendant had a good-faith misunderstanding of the
law's requirements to report the income at issue here he is not guilty
of the offense. It should be pointed out, however, that neither
defendant's disagreement with the law nor his own belief that the law is
unconstitutional--no matter how earnestly held--constitutes a defense of
good-faith misunderstanding or mistake. It is the duty of all citizens
to obey the law regardless of whether they agree with it.
As an example,
if the evidence shows that a defendant honestly believed that lottery
winnings did not constitute taxable income, he would not be guilty of
criminal tax evasion if he failed to declare his winnings. But if that
individual knew his winnings consistently were held taxable, but he did
not declare them as income because he believed they should not be
taxable, he would be guilty."
10
In United States v. Rothbart [84-1
USTC ¶9104 ], 723 F.2d 752 (10th Cir. 1983), this court addressed a
trial court's refusal to give specific instructions on a good-faith
defense in a tax evasion case. In Rothbart the defendant was
convicted of failure to file timely tax returns.
Id.
at 753. The defendant requested the trial court to instruct the jury
that a good-faith "misunderstanding of the law" is a defense.
Id.
at 755. Instead the trial court, like that here, instructed the jury
that a failure to file was not willful if "due to accident,
inadvertence, negligence, or mistake."
Id.
In affirming we found that this instruction on intent sufficiently
presented the defendant's theory to the jury.
Id.
Hopkins
did not explicitly overrule the decision in Rothbart. It did,
however, overrule one of the decisions on which the Rothbart
court relied for its conclusion that a specific good-faith instruction
need not be given. See
Hopkins
, 744 F.2d at 718 (overruling United States v. Westbo, 576
F.2d 285 (10th Cir. 1978)). Thus the precedential value of Rothbart
is tenuous, and we believe the
Hopkins
rationale applies to the instant case.
11
Because the government agrees that remand is proper, we do not reach the
question of whether defendant's failure to request an order from the
court or otherwise pursue his request diligently constitutes a waiver of
his right to inspect jury records. A district court should, as a matter
of course, avoid confusion by issuing an order granting a proper §1867(f)
request. See Government of the
Canal Zone
v.
Davis
, 592 F.2d 887, 889 (5th Cir. 1979).
[54-2 USTC ¶9574]C. G. Benham,
Appellant v.
United States of America
, Appellee
(CA-5),
In the United States Court of Appeals for the Fifth Circuit, No. 14657,
215 F2d 472, September 3, 1954
Appeal from the United States District Court for the Western District of
Texas.
Criminal penalties: Filing fraudulent return on behalf of another:
Sufficiency of evidence.--Taxpayer was convicted of filing a
fraudulent return and of filing and causing to be filed a fraudulent
return on behalf of his wife. The Circuit Court found that, even though
the taxpayer's erroneous records may have accounted for the errors in
his wife's return, the evidence was insufficient to sustain taxpayer's
conviction on the count of filing his wife's return. The evidence as to
taxpayer, which showed increases in taxpayer's net worth not explained
by taxpayer's return, was held to be sufficient, although the entire
case was reversed and remanded on other grounds.
Criminal penalties: Prejudicial argument of counsel before jury.--Taxpayer
was convicted on two counts of tax evasion. Taxpayer did not object to
the prosecutor's comments to the jury, and did not move for a mistrial,
but nevertheless, taxpayer appealed on the ground that the prosecutor's
improper arguments were so grossly prejudicial that the harm could not
be removed by objections or instructions. The Circuit Court agreed with
taxpayer that the comments regarding taxpayer's refusal to testify and
taxpayer's activities as a usurer deprived the taxpayer of a fair trial.
Muckleroy
McDonnold, Leonard Brown, San Antonio, Tex., George O. B. John, Houston,
Tex., for appellant. Charles F. Herring, United States Attorney, Austin,
Tex., Thomas E. James, Assistant United States Attorney, Austin, Tex.,
for appellee.
Before
HUTCHESON, Chief Judge, and RIVES, Circuit Judge, and WRIGHT, District
Judge.
[Prior
History of This Case]
RIVES, Circuit
Judge:
The appellant
was tried upon an indictment containing four counts, each charging that
he did wilfully and knowingly attempt to defeat and evade income taxes
in violation of Section 145(b), Title 26, United States Code. The
indictment included two counts for each of the years 1946 and 1947,
covering the separate returns filed by the defendant and by his wife.
The jury found the defendant not guilty under the two counts covering
the year 1946, but guilty under the third and fourth counts covering the
year 1947. The court sentenced the defendant under the third count to
imprisonment for a period of three years and to pay a fine of $5,000.00,
and under the fourth count to one year imprisonment and a fine of
$5,000.00, the sentence to begin at the expiration of the sentence under
the third count. A motion for new trial having been overruled, this
appeal followed. Of the numerous specifications of error, we find it
necessary to discuss but two.
[Sufficiency
of Evidence]
The first
specification questions the sufficiency of the evidence to support the
verdict as to each count. The defendant moved for a judgment of
acquittal at the close of the Government's evidence, but failed to move
for a judgment of acquittal at the close of all the evidence. Upon such
a record the appellate court will not consider the objection that the
verdict is not supported by the evidence except to prevent a miscarriage
of justice. Ansley v.
United States
, 5th Cir., 135 Fed. (2d) 207, 208;
Battle
v.
United States
, D. C. Cir., 206 Fed. (2d) 440, 441; Demetree v.
United States
, 5th Cir., 207 Fed. (2d) 892, 894 [53-2 USTC ¶9646].
The Government
sought to convict the defendant by proving increases in his net worth
corroborated by evidence showing specific items of income not reported.
Without detailing the evidence, we think it sufficient to say that,
insofar as the third count is concerned, in our opinion the evidence of
the Government if believed by the jury sustains the verdict of guilty.
On the other hand, there was no evidence to support a conviction under
the fourth count charging that the defendant "did wilfully and
knowingly attempt to defeat and evade a large part of the income tax due
and owing by the said Ethel H. Benham to the United States of America
for the calendar year 1947, by filing and causing to be filed with the
Collector of Internal Revenue * * * a false and fraudulent income tax
return for and on behalf of the said Ethel H. Benham * * *." While
the returns show on their face that the joint community income of the
husband and wife was determined and divided in half for tax purposes,
that fact alone does not suffice to establish that the husband either
filed or caused to be filed the wife's separate return. That return was
not signed by the husband, but was signed by the wife and by the
accountant who prepared it, and the evidence is entirely consistent with
the theory that they were the only ones responsible for its filing. The
husband's erroneous records may have accounted for the errors in the
wife's return, but the crime was not complete until the return was
filed, and to be guilty under the fourth count the husband must either
have filed his wife's return or have caused it to be filed. There is no
evidence that he did either. The sentence, however, under each count was
separate, and the defendant would still be subject to the specific
sentence under count three if the record were otherwise free from error.
Blitz v. United States, 153 U. S. 308, 318.
[Prosecutor's
Prejudicial Comment]
The argument
of counsel for the Government is set out in full in the record. The
defendant interposed no objections and made no motions to instruct the
jury to disregard any part of the argument, but appeals for reversal on
the ground that improper argument was so grossly prejudicial that the
harm could not be removed by objections or instructions, and that under
such circumstances there was no duty on the part of a defendant in a
criminal case to move for a mistrial. After careful consideration, we
are constrained to agree with the appellant's position. A few
illustrative excerpts from the argument are set forth in the footnote. 1
Each case
stands upon its own peculiar facts and circumstances as to whether a
defendant has been afforded a fair trial. It sometimes becomes the duty
of the trial judge to stop counsel's discourse without waiting for an
objection. Viereck v. United States, 318 U. S. 236, 248; De
Bonis v. United States, 6th Cir., 54 Fed. (2d) 3, 5. Whenever this
Court is of the opinion that a defendant has been denied a fair trial,
it must set aside the judgment of conviction.
`The
United States Attorney is the representative not of an ordinary party to
a controversy, but of a sovereignty whose obligation to govern
impartially is as compelling as its obligation to govern at all; and
whose interest, therefore, in a criminal prosecution is not that it
shall win a case, but that justice shall be done. As such, he is in a
peculiar and very definite sense the servant of the law, the two-fold
aim of which is that guilt shall not escape or innocence suffer. He may
prosecute with earnestness and vigor--indeed, he should do so. But,
while he may strike hard blows, he is not at liberty to strike foul
ones. It is as much his duty to refrain from improper methods calculated
to produce a wrongful conviction as it is to use every legitimate means
to bring about a just one.' Berger v. United States, 295 U. S.
78, 88. Compare New York Central R. Co. v. Johnson, 279 U. S.
310, 316-18" Viereck v. United States, supra at p. 248.
The
prosecuting attorney's argument could be ever so vigorous so long as it
was confined to the issue of the defendant's guilt or innocence of the
crime charged against him; but the indirect reference to the defendant's
failure to testify, the appeals to prejudice against the defendant as a
usurer, and to the jurors' selfish interests effectively deprived the
defendant of a fair trial and make necessary a reversal of the judgment
of conviction and a remand of the case for a new trial.
REVERSED AND
REMANDED.
1
"Let's see if we can tell a little more about Mr. Benham here.
Let's look at these postcards that he had, that we introduced into
evidence. He was advertising--he was even advertising himself as being
an attorney at law. I don't think that man can have much scruples, and I
think the evidence before you reflects that."
*
* *
"Let's
look a little further. He required from people who borrowed money from
him to sign an agreement--the agreements are in evidence--releasing him
from usury charges--usury, gentlemen, prohibited by the Constitution.
Now, why would he have those signed if he weren't in the usury
business?"
*
* *
"He is
the kind of a man who, in the course of his operations, buys notes at
fifty per cent, sells them to an unsuspecting investor in second lien
notes at a hundred per cent. He is not satisfied with a hundred per cent
profit on his investment. No, he reserves a portion of the piddling
interest that those notes drew and takes that away from his investors.
And, in addition to that, he charges those investors the accrued
interest up to the day the notes transferred. Now, what does he do about
recording those transfers to his investors? He makes those investors
sign an agreement that they won't let the borrower know that they own
the note, and that they will not record it so that the public may
scrutinize it. That's the kind of man he is, gentlemen."
*
* *
"You can
call him by another name, but he is still a loan shark by my book, and
every man in
Travis
County
will agree to that. That's the kind of man you are dealing with. I think
that is significant in determining whether or not he has an intent to
evade."
*
* *
"The
defendant is seeking, as is not unusual, to lay off his guilt here on
women folks--these three women that took the stand--or dead people. He
doesn't have the courage to come up before you and say, 'Yes, I did
it.'"
*
* *
"I have
talked some here about Benham, a loan shark, a man of no principle, in
my judgment, a man that charged three hundred per cent interest on notes
to poor devils buying second-hand cars; such a man, to my mind, was not
a good man."
*
* *
"But,
gentlemen, you can see his tracks. You -- follow his modus operandi, if
you will, mode of operations, over the years, see the kind of man he is,
see that he's the sort of man, in my judgment, who will do a thing like
this. This is a man who would evade his taxes, beat anything he thought
he could get by with. He has had time to figure it out in the shadow of
Pike's Peak
in
Colorado
. He is a shrewd and cunning man with no principle, in my
judgment."
*
* *
"In my
judgment, if you turn this man loose, what you are going to be doing by
your verdict is encouraging people who hear about what you have done, to
do the same thing. There is too much of it, gentlemen. It's got to be
stopped. You and other honest taxpayers have to make up the difference
that the tax evaders fail to pay. If this man had evaded $250,000 worth
of taxes over the years, the government is going to have the money, and
you are going to have to pay it. Somebody is."
[54-2 USTC ¶9553]Almon H.
Rickenbaker, Appellant v.
United States of America
, Appellee
(CA-4),
In the United States Court of Appeals for the Fourth Circuit, No. 6782,
June 9, 1954, (214 F. (2d) 3. Cert denied, 348
U. S.
832, 75 S. Ct. 54)
Appeal from the United States District Court for the Eastern District of
South Carolina, at
Columbia
.
Criminal penalties: Trial: Improper questions: Continuance.--Taxpayer
appealed his conviction of tax evasion on the grounds of the trial
judge's error in refusing to continue the trial and in permitting the
prosecutor to cross-examine taxpayer as to taxpayer's prior convictions.
The Circuit Court held that continuance was in the discretion of the
trial judge, and that the improper questions to taxpayer could not have
affected the result reached by the jury.
J. A. Hutto
(John B. Baltzegar, on brief) for appellant. Fred G. Folsom, Special
Assistant to the Attorney General (H. Brian Holland, Assistant Attorney
General, Ellis N. Slack, David L. Luce, Joseph M. Howard and David R.
Urdan, Special Assistants to the Attorney General; N. Welch Morrisette,
Jr., United States Attorney, and Irvine F. Belser, Jr., Assistant United
States Attorney, on brief), for appellee.
Before PARKER,
Chief Judge, SOPER and DOBIE, Circuit Judges.
PER CURIAM:
This is an
appeal from a conviction and sentence under an indictment charging
income tax evasion for the years 1949 and 1950 in violation of 26 U. S.
C. 145(b). The contentions presented on appeal are that there was error
in refusing to continue the trial of the case and in permitting the
appellant to be asked on cross examination whether he thought a man who
had been convicted of major crimes was worthy of belief, whether he had
been convicted of receiving stolen property, violation of the liquor
laws and assault and whether he had incurred legal expense in recent
years.
The question
of continuance was a matter resting in the sound discretion of the trial
judge. That matter is not argued in the brief of appellant and nothing
is called to our attention indicating that the discretion was abused.
While we do not approve parts of the cross examination of which
complaint is made, we do not find anything therein which would justify
the setting aside of the verdict and the granting of a new trial. It
was, of course, competent to show by the cross examination of appellant
that he had been convicted of receiving stolen property, as this was a
matter going clearly to the question of his credibility. No objection
was made to the question as to appellant's conviction of assault. A more
serious question arises as to the competence of the question relating to
his conviction for violation of the liquor law for which he received a
minor sentence; but we need not go into this, as we think that it could
not have affected the result in view of appellant's admission that he
had been convicted of receiving stolen property and of the testimony
offered as to his bad character. The other matters complained of, such
as asking his opinion as to whether a man who had been convicted of
crimes was worthy of belief and asking him as to whether he had recently
incurred legal expenses are too insignificant for consideration. While a
prosecuting officer should not engage in this sort of cross examination,
an appellate court would not be justified in awarding a new trial on
account thereof.
Affirmed.
[77-2 USTC ¶9604]
United States of America
, Plaintiff-Appellee v. Donald E. Meeker, Defendant-Appellant
(CA-7),
U. S. Court of Appeals, 7th Circuit, No. 76-1878, 558 F2d 387, 7/26/77,
Reversing and remanding unreported District Court decision
[Code Sec. 7203--result unchanged by '76 Tax Reform Act]
Crimes: Failure to report income: Fair trial: Witnesses: Use of
improper and prejudicial questions.--Taxpayer's conviction for
failure to report income was reversed since certain questions the
prosecutor asked witnesses at the trial were prejudicial and deprived
the taxpayer of a fair trial. First, the questions invited the jury to
convict the taxpayer on facts outside the record, some of which were
patently untrue, and others of which were not admissible at trial.
Second, having originated with the representative of the
United States
, of whom the average jury expects fairness and impartiality, such
prejudicial questions carried much weight against the accused when they
should properly carry none. Finally, the misconduct of the prosecutor
was pronounced and persistent, with a probable cumulative effect upon
the jury which could not be disregarded as inconsequential.
John D. Bird,
Jr.,
780 N. Water St.
,
Milwaukee
,
Wis.
, for plaintiff-appellee. Ralph A. Fine, 850 Marine Plaza,
111 E. Wisconsin Ave.
,
Milwaukee
,
Wis.
, for defendant-appellant.
Before TONE,
BAUER, Circuit Judges, and JAMESON, Senior District Judge. *
BAUER, Circuit
Judge:
Meeker asks us
to overturn his conviction for failing to report income on his 1970
individual and corporate income tax returns. He argues that the
prosecutor's repeated use of improper and prejudicial questions in
examining witnesses before the jury denied him a fair trial. We reverse.
Meeker was
charged with failing to report gross receipts of his sole proprietorship
and wholly-owned corporation for the 1970 tax year. The Government
presented evidence at trial of $167,741.92 in receipts defendant
received on behalf of his proprietorship that he failed to report on his
1970 individual income tax return, and $94,972.04 in receipts he
received on behalf of his corporation that he failed to report on his
1970 corporate income tax return.
Meeker bases
his appeal on four questions the prosecutor asked of witnesses at trial.
Objections to each of the questions were sustained and the jury was
instructed to disregard each. 1
The defendant argues that the cumulative effect of the questions was so
prejudicial that he was denied a fair trial.
The first
challenged question was asked on redirect examination of Bernadine
Rennels, a former bookkeeper of the defendant. The prosecutor asked Mrs.
Rennels,
"Do
you recall
Mr. M
eeker commenting to you that he always is going to owe additional tax
because he takes questionable deductions and things like this?"
This question
is improper both as to form, being a leading question on redirect
examination, and as to substance. The manifest implication of the
question--that Meeker told his bookkeeper that he underpaid his taxes by
taking questionable deductions and "things like this"--was not
supported by evidence the prosecutor was prepared to present and such
evidence was, at best, of questionable admissibility. It is axiomatic
that an attorney, and a prosecutor in particular, should not allude to
matters that he has no reasonable basis to believe are relevant to the
case or that will not be supported by admissible evidence. ABA Code of
Professional Responsibility DR7-106(c); Am. C. of Trial Lawyers Code of
Trial Conduct ¶4(c). This rule is, of course, directed in particular
toward matters that are prejudicial to an opponent's case, as was the
statement here.
The prosecutor
admitted at oral argument before this Court that he had no prior
knowledge that Meeker had made such a statement to his bookkeeper. His
only basis for the question was a statement Meeker had made to an IRS
agent; a statement which, if admissible, would not support the
implication in the prosecutor's question.
In the second
challenged question, the prosecutor asked David Dillon, an accountant
who had prepared the defendant's returns for 1970 and 1971,
"In
layman's terms regarding
January 1, 1966
, can you tell the jury how much unreported gross receipts the IRS audit
discovered at that time?"
This
question left the jury with the impression that Meeker had previously
failed to report gross receipts. Such an implication is, of course,
highly prejudicial to the defendant because the jury might infer from
the implication of past illegal behavior that the defendant is more
likely to have committed the crime for which he is presently standing
trial. Given the possibility of the jury drawing this inference,
evidence of such prior misconduct is only admissible if offered to prove
such matters as motive, opportunity, intent, preparation, plan,
knowledge, identity or absence of mistake or accident. Federal Rules of
Evidence No. 404(b); see
United States
v. Fearns, 501 F. 2d 486, 490-91 (7th Cir. 1974). In this
instance, the question was not asked for a purpose sanctioned by Rule
404(b). The government explains that the question was asked merely to
help explain the background for a figure on Meeker's 1970 individual
income tax return. The highly prejudicial prior misconduct implication
was unnecessary for such a purpose.
Moreover, the
implication was false. The IRS did not determine that Meeker
failed to report gross receipts in 1966. Rather, Meeker became liable to
the IRS in 1966 for the tax on a substantial amount of his gross
receipts as a result of the IRS's imposition of a change in Meeker's tax
accounting procedure from the cash to the accrual method. 2
To characterize the advancement of the payment of previously deferred
tax liability as unreported gross receipts is an inexcusable distortion
of the facts.
The Government
asked the third question during the redirect examination of
Rob
ert E. Jenkins, an IRS agent who examined Meeker's accounting records.
The prosecutor asked the agent,
"His
real method of accounting was not to report income, wasn't it?"
As the
Government conceded in its brief, this question was also improper. It
constituted a leading question of a prosecution witness that contained
an implication that the defendant was guilty of engaging in the conduct
for which he was on trial. Such an inflammatory statement on the part of
a prosecutor is never permissible.
Finally, the
Government asked Meeker on cross-examination, referring to an accountant
who had prepared returns for Meeker
"Did
he tell you that he would refuse to file a final return for you in
1969?"
The
prejudicial implication in this question called for inadmissible opinion
evidence that was not relevant to any aspect of the case, which only
involved Meeker's 1970 tax returns.
In propounding
these questions, the prosecutor "overstepped the bounds of that
propriety and fairness which should characterize the conduct of such an
officer in the prosecution of a criminal offense." Berger v.
United States
, 295
U. S.
78, 84 (1935). Like the prosecutor censured in Berger, the
prosecutor here was guilty of
"mistaking
the facts in his cross-examination of witnesses; of putting into the
mouths of such witnesses things which they had not said, . . . [and] of
assuming prejudicial facts not in evidence."
Id.
There
is no excuse for such conduct on the part of an officer of the
United States
, and we hereby reprimand the prosecutor involved in this case for
engaging in such behavior. He should heed well the Supreme Court's
declaration in Berger of the extra burden a prosecuting attorney
bears in presenting his case:
"The
United States Attorney is the representative not of an ordinary party to
a controversy, but of a sovereignty whose obligation to govern
impartially is as compelling as its obligation to govern at all; and
whose interest, therefore, in a criminal prosecution is not that it
shall win a case, but that justice shall be done. As such, he is in a
peculiar and very definite sense the servant of the law, the twofold aim
of which is that guilt shall not escape or innocence suffer. He may
prosecute with earnestness and vigor--indeed, he should do so. But,
while he may strike hard blows, he is not at liberty to strike foul
ones. It is as much his duty to refrain from improper methods calculated
to produce a wrongful conviction as it is to use every legitimate means
to bring about a just one." Id. at 88.
Having found
the questions improper, we must decide whether they constituted grounds
for reversal. Despite the sustaining of the defense's objections and the
judge's admonitions to the jury to disregard each question, we find the
questions propounded to have been so prejudicial to the defendant that
we cannot deem them harmless.
We note three
particular reasons for our finding. First, the questions invited the
jury to convict Meeker on facts outside the record, some of which were
patently untrue, and others of which were not admissible at trial.
"The
prejudice to a defendant of inviting conviction of facts--if they be
such--dehors the record is counter to the basic concept of
fairness." United States v. Grossman, 400 F. 2d 951, 956
(4th Cir.), cert. denied, 393
U. S.
982 (1968).
Second, coming
from the mouth of the representative of the
United States
, of whom the average jury expects the fairness and impartiality
mentioned in Berger, such prejudicial questions "carry much
weight against the accused when they should properly carry none." Berger,
supra at 88.
Finally, as in
Berger,
"we have
not here a case where the misconduct of the prosecuting attorney was
slight or confined to a single instance, but one where such misconduct
was pronounced and persistent, with a probable cumulative effect upon
the jury which cannot be disregarded as inconsequential." Berger,
supra at 89.
A new trial
shall be granted.
REVERSED
AND REMANDED.
*
The Hon. William J. Jameson, United States District Court for the
District of Montana, is sitting by designation.
1
Defense counsel also moved for a mistrial after each question. All four
mistrial motions were denied.
2
The IRS permitted Meeker to spread out over a ten year period the gross
receipts that became taxable at the time Meeker started reporting income
on an accrual basis. Ten percent of those gross receipts were reported
on his 1970 individual tax return, and the question in dispute arose
during consideration of that figure on Meeker's 1970 return.
[58-2 USTC ¶9705]
United States of America
, Plaintiff-Appellee v. Sanders Scott and Edward Copeland,
Defendants-Appellants
(CA-7),
U. S. Court of Appeals, 7th Circuit, No. 12251, 257 F2d 374, 7/17/58,
Rev'g an unreported District Court decision
[1939 Code Sec. 145(b)--similar to 1954 Code Sec. 7201; 1939 Code Sec.
3793(b)--similar to 1954 Code Sec. 7207]
Crimes: False and fraudulent returns: Income tax evasion: Jury
trials: Prejudicial matter introduced: Impartiality of trial judge.--Defendants
were on trial for filing false and fraudulent income tax returns and for
income tax evasion. During the trial, the
United States
attorney asked one of his witnesses a question knowing in advance that
the answer would have indicated that defendants were paying police
protection. Since the defendants were being tried on income tax issues,
the issue of police corruption thus created would have been outside the
crimes for which defendants were being tried. This fact was recognized
as prejudicial to the defendants' case. However, the court, instead of
declaring a mistrial, advised the jury to disregard the improper
question, substituted an alternate juror for one who indicated that she
was influenced by the improper question, and then proceeded to laud the
character of the
United States
attorney. The defendants moved for acquittal at the close of the
Government's case and, on appeal from the denial of a motion for
acquittal, the appellate court reversed and remanded the case for a new
trial on the ground that the trial court had committed reversible error.
Rob
ert Tieken, United States Attorney, Chicago, Ill., John Peter Lulinski,
William A. Barnett, for plaintiff-appellee. Earl E. Strayhorn, 64 West
Randolph,
Chicago
,
Ill.
, for defendants-appellants.
Before MAJOR,
HASTINGS and PARKINSON, Circuit Judges.
PARKINSON,
Circuit Judge:
Sanders Scott,
Edward Copeland and Julian A. Black were tried to a jury on a thirteen
count indictment.
[False
Returns and Income Tax Evasion]
Counts I, II
and III charged all three defendants with the preparation and
presentation of a false and fraudulent partnership return for 1949, 1950
and 1951 in violation of Title 26 U. S. C. A. §3793(b)(1). The
remaining counts charged each defendant with evading his individual
income taxes for the same period and Scott for the additional year 1948
in violation of Title 26 U. S. C. A. §145(b).
The defendants
moved for an acquittal at the close of the Government's case. The
District Court granted the motion as to defendant Black and denied as to
defendants Scott and Copeland.
The jury found
defendant Scott not guilty as to the 1948 charge but found both
defendants Scott and Copeland guilty on all other counts in which they
were charged. The District Court entered judgment on the verdict and
pronounced sentence. Motions of defendants for a new trial were denied.
This appeal followed.
Discussion of
all the errors relied upon for reversal, as incorporated in the
statement of the contested issues upon which the parties are in
agreement, would serve no purpose other than to unnecessarily extend
this opinion. However, two of the seven contested issues are:
"1.
(b) Whether the court erred in denying defendants' motions for a new
trial.
2.
Whether the court erred: (c) In denying the motion for a Mistrial."
[Corruption
of Police Placed in Issue]
The fourth of
over twenty witnesses called by the Government was Raymond W. Garrigan,
an Internal Revenue Agent with the United States Treasury Department. He
was an important witness for the Government and his direct testimony was
very extensive. However, after he had detailed a conversation of May
13th with the defendant Black covering the matter in issue the United
States Attorney, with full knowledge of what he would say, asked him:
"Mr.
Garrigan, I believe that we have concluded the discussion on May 13th
concerning those particular books. What else if anything was said on
that occasion?"
Garrigan
then gave the following answer, as the Prosecutor admittedly knew he
would:
"Well,
I asked Mr. Black if he paid any protection for the wheel, paid for any
protection."
The
defendants objected and the trial court excused the jury from the
courtroom permitting them to take to their jury room a written document
identified as Government Exhibit 351. Counsel for the defendants
suggested to the trial court the impropriety of such procedure and the
judge instructed the marshal to go into the jury room and "[a]sk
them to let me have the exhibit, so there will be no discussion."
There was some
colloquy between court and counsel on the admissibility of the evidence
as to whether the defendants paid police protection. The judge said:
"As
far as the eyes of the jury, I think it will be prejudicial, and cannot
have any but a prejudicial effect."
He
then asked Government counsel what he proposed to show. The United
States Attorney replied that the evidence would show that Garrigan asked
Black "if he paid police protection money, and Mr. Black said,
first, said he paid very little, then he asked him how much, and he said
he didn't know how much, and he said: Well, you must have some idea.
Then he said it was negligible, that when a man was arrested he had to
pay five or ten dollars, and over the years the amount was
negligible." This evidence was highly prejudicial to the
defendants.
[Prejudicial Question]
The judge then
had the jury returned to the courtroom and he spoke to them as follows:
"Ladies
and gentlemen, with all the effort that the Court has made to keep
prejudice out of this matter, you have heard a highly prejudicial
question. I regret it very much. We have tried to try this case on the
issue of income tax and not on the issue of corruption of police forces.
"I
have ruled that the question may not be asked and may not be answered.
It is very unfortunate. I am surprised--this is a very high grade United
States District Attorney here, and I am surprised that he has brought
this element of prejudice into this case. I regret it very much.
"I
am going to change my ruling because of the offer of proof, and the
chips can fall where they may. I will not take the responsibility for
prejudice if a higher court shall reverse this case because of the
element of prejudice that has been brought in.
"I
think the fact that the question has been asked, if it goes unanswered
it will be far more serious so far as the defendants are concerned in
this case than to have it answered.
"The
record has been made by the District Attorney and I regret it very
much."
The
defendants then moved that a juror be withdrawn and for a mistrial. The
court took the motion under advisement and ordered the Government to
pursue the entire incompetent matter.
Apparently
court reporters were changed at this juncture and an argument ensued
about what question had actually been asked. The judge permitted the
situation to get out of control to such an extent that one of the jurors
spoke out as follows:
"It
was the answer that was given that brought that in, not the question, as
I remember it."
The
judge then succeeded in getting the right court reporter into the
courtroom. The correct question and answer were read. Counsel for the
Government then asked a question. The judge interrupted by saying:
"No,
I want you to pursue the conversation exactly as it was pursuant to the
objections. I want to go right on with the conversation."
Counsel
for the Government then interrogated the witness Garrigan fully on this
matter which, as we have already pointed out, was highly prejudicial.
Thereupon the judge announced that he would "excuse the witness for
the day, and you will return tomorrow morning."
[Effect on Jury]
The judge then
made a stump speech to the jury informing them that he didn't like the
element of prejudice that had been interjected and said:
"I
am going to ask each member of the jury to raise your hand, if you think
you can go ahead and try this case. That is the reason I had the rest of
the questions asked. If it hadn't been pursued, there might have been a
question in your mind that there was an element of protection that you
had not been able to hear. All of this has nothing to do with the case
because in the end they say that the expense is negligible, they are not
claiming any credit for expense that was paid out.
"I
am going to ask you to raise your hands, each of you, if you feel you
can go ahead and try this case and eliminate that with the instruction
that I have given and the remarks I have made and the criticism that I
have made of the District Attorney's office and of the witness himself
for bringing this out.
"You
know these witnesses all know what they are doing. This was
intentionally brought out by the Government, and it has hurt their case.
It should not have been brought out and they know it shouldn't have been
brought out. I don't like it.
"We
have spent a lot of time already, and if the withdrawal of a juror is
granted, we have got to go through and try this case all over.
Everything we have done has to be done all over, another jury chosen,
and all that, unnecessary expense.
"But
I am going to ask you--it is your judgment now. I am going to rely a lot
on what you tell me. If you think you can try this and put this element
out of your mind and not be prejudiced in any way, raise your hands. If
you don't think you can do it, don't raise your hands.
"Now
let's see if there is anyone who can raise their hands and handle this
matter without prejudice."
The
Court then noted one juror, Mrs. Portner, was not raising her hand. The
judge then said: "I can only sympathize with you. As far as I am
concerned, I can understand that a person might well feel that way"
and sua sponte discharged her from the jury and replaced her with
an alternate juror. He then adjourned court for the day.
The next
morning, out of the presence of the jury, the judge guessed that if
there was no argument on the motion of the defendants to withdraw a
juror and for a mistrial he would overrule it. He did so and after
considerable argument of counsel the jury was seated.
[Court's
Attitude Towards Government's Attorney]
The judge then
made a second impromptu speech to the jury wherein he said, inter
alia:
"[T]he
United States District Attorney here who, I may say to you, has tried a
number of cases before me and I am going to tell you personally that I
am very fond of him. It is the first time in his long career that I
have had any criticism of him. I think he has been on excellent man.
I think he is a man of the highest integrity and I think highly of him,
* * *. It is the duty of every lawyer to talk to his witnesses
beforehand and ask questions of them. I knew he knew what the answer was
going to be and I asked him if he did know and he told me that the
witness would say. I asked the witness out of the presence of the jury
and he said then what he later said in front of you, so the witness knew
and counsel knew what the answers were to be elicited and I still say it
was prejudicial, but you have given me your assurance that you can
overlook it. * * * I am going to ask you to not hold that against this
District Attorney. * * * I am going to ask you to not hold it against
the United States Government and not to be prejudiced by what has
happened, one way or the other."
[Court's
Influence on Jury]
The influence
of the trial judge on the jury is necessarily and properly of great
weight, Starr v. United States, 1894, 153
U. S.
614, 626, and he should not say anything which might have the effect of
prejudicing the cause of either party before those whose duty it is to
decide on the facts.
U. S.
v. Levi, 7 Cir., 1949, 177 Fed. (2d) 833. It is the duty of the
trial judge to endeavor to maintain throughout the trial an atmosphere
of impartiality.
U. S.
v. Wheeler, 7 Cir., 1955, 219 Fed. (2d) 773. In diametric
opposition to all these rules the trial judge here permitted evidence to
go to the jury which was highly prejudicial to the defendants. He then
compounded the error with his extremely laudatory praises of counsel for
the Government. While perhaps counsel for the Government is a man of the
highest integrity and one of whom the judge might well be very fond, for
him to have said so to the jury at this juncture coupled with the
prejudicial evidence admitted, in our opinion, did irreparable harm to
the defendants.
When a judge
extols counsel for any jury trial litigant as an exemplar immediately
after counsel has purposely and successfully placed in evidence before
the jury highly prejudicial testimony such partiality would exert such a
strong controlling influence on the jury against the adverse party as to
preclude any possibility of a fair trial. Thus the trial court here
committed reversible error.
Judgment
reversed and cause remanded for new trial.
[50-2 USTC ¶9412]Alfred C. Gaunt,
Defendant Appellant v.
United States of America
, Appellee
(CA-1),
In the
United States
Court of Appeals for the First Circuit, No. 4479. October Term, 1949,
184 F2d 284,
July 28, 1950
Appeal from the
United States
District Court for the District of Massachusetts.
Penalties: Sufficiency of indictment: Wilful filing of false and
fraudulent returns.--The language of Code Sec. 145(b) is broad
enough to include the filing of a false and fraudulent return as a
punishable manner of attempted tax evasion. Code Sec. 145(c) merely
imposed the penalties for perjury upon those who wilfully falsify their
returns regardless of the tax consequences of the falsehood. The
indictment under Code Sec. 145(b) was sufficient.
Penalties: Sufficiency of indictment: Conviction sustained on basis
of statute other than that cited in indictment.--A count in the
indictment against taxpayer under Sec. 35(A) of the old Criminal Code
adequately charged an offense under Code Sec. 145(c) and did not mislead
the taxpayer to his prejudice in the preparation or presentation of his
defense.
Penalties: Sentence imposed on more inclusive count.--Although a
count may charge a crime which is within a crime charged in another
count, submission of both counts to the jury is not prevented. Sentence
is imposed on the more inclusive count only, or a single sentence is
imposed on the counts as a whole, provided that the penalty is within
the maximum limits specified for the more inclusive offense, or
sentences within the applicable limits are imposed on both counts to run
concurrently. Judgment appealed from was amended by striking the fine
imposed on the less inclusive count.
Penalties: Sufficiency of indictment: Proof of wilfulness.--Direct
proof of wilfulness is not essential and from the evidence the jury
could have reasonably inferred that beyond a reasonable doubt the
taxpayer's understatements of income were made wilfully in an attempt to
evade or defeat taxes.
Penalties: Trial: Motion for new trial denied.--The trial court
did not abuse its discretion in denying a motion for a new trial raised
on a political issue as well as upon an improper question which was cut
short and excluded.
Rob
ert F. Bradford, with whom John A. Perkins was on brief, for appellant.
Fred G. Folsom, Special Assistant to the Attorney General, with whom
Theron Lamar Caudle, Assistant Attorney General, Ellis N. Slack, Special
Assistant to the Attorney General, George F. Garrity, United States
Attorney, and Philip T. Jones, Assistant U. S. Attorney, were on brief,
for appellee.
Before
MAGRUDER, Chief Judge, and CLARK and WOODBURY, Circuit Judges.
Opinion
of the Court
WOODBURY,
Circuit Judge:
The
defendant-appellant was indicted in six counts for alleged offenses with
respect to his federal income taxes for the calendar years 1944, 1945,
and 1946, during which period he was on the cash-calendar year basis and
filed joint returns with his wife. In counts 1, 2, and 3 it was charged
that he "did wilfully and knowingly attempt to defeat and evade a
large part of the income tax due and owing by him and his wife to the
United States of America" for each of the above calendar years,
respectively, "by filing and causing to be filed with the Collector
of Internal Revenue for the Internal Revenue Collection District of
Massachusetts, at Boston, Massachusetts, a false and fraudulent joint
income tax return on behalf of himself and his said wife," wherein,
it may fairly be said without quoting the figures alleged, he had
grossly understated their net income for each of the above years,
respectively, "in violation of Section 145(b), Internal Revenue
Code; 26 U. S. C. Sec. 145(b)." In counts 4 and 6 Gaunt was charged
with criminal offenses with respect to amended income tax returns which
he filed for himself and his wife jointly for the calendar year 1946,
but these counts were dismissed by the trial court on the Government's
motion and hence are not before us for consideration. And in count 5 it
was charged that Gaunt "did knowingly and wilfully make and cause
to be made false and fraudulent statements and representations in a
matter within the jurisdiction of a department and agency of the United
States, namely, the Collector of Internal Revenue for the Internal
Revenue Collection District of Massachusetts," in that he "did
file and cause to be filed" with that Collector "a false and
fraudulent joint income tax return for the calendar year 1946 on behalf
of himself and his said wife," wherein, again we can fairly say
without quoting the figures alleged, his total business receipts as a
sales agent, and his total compensation as an industrial executive were
both grossly understated, "in violation of Section 35(A) of the
Criminal Code, as amended; 18 U. S. C. Sec. 80."
A trial by
jury on pleas of not guilty as to each of the four counts above
described resulted in a verdict of not guilty on the first count, but
verdicts of guilty on counts 2, 3, and 5. The court below thereupon
sentenced the defendant to concurrent terms of imprisonment for 18
months on each of those three counts, and also sentenced him to separate
fines of $2,000 on each, and this appeal is from the judgment and
commitment embodying those sentences.
[Sufficiency
of Indictment Attacked]
The defendant
first attacks the sufficiency of the indictment as to counts 2 and 3 on
the ground that "The mere making and subscribing of a false return,
even though done wilfully and with an intent to evade or defeat the tax,
is not an 'attempt' to evade or defeat the tax under Internal Revenue
Code, Section 145(b)," which, so far as material, provides that
"any person who wilfully attempts in any manner to evade or defeat
any tax imposed by this chapter 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." Arguing by analogy from the case of Spies v.
United States, 317 U. S. 492 [43-1 USTC ¶9243], the defendant
contends that the offense of wilfully attempting to evade or defeat the
payment of income taxes by the expedient of filing a false and
fraudulent return grossly understating taxable income, which is the
offense with which he was charged in counts 2 and 3, is not comprehended
within the meaning of the above quoted subsection for the reason that
that offense is specifically described in the succeeding subsection
(145(c)) which, as in force at the times involved, read: "Any
individual who wilfully makes and subscribes a return which he does not
believe to be true and correct as to every material matter, shall be
guilty of a felony, and, upon conviction thereof, shall be subject to
the penalties prescribed for perjury in section 125 of the Criminal
Code," to wit, a fine of not more than $2,000 and imprisonment for
not more than five years.
In the Spies
case it was held that mere proof of a wilful failure to file any return
at all, coupled with failure to pay any tax, will not support a
conviction for the felony described in §145(b) supra, for the
reason that such proof establishes nothing more than the misdemeanor
described in §145(a), quoted so far as material in the margin, 1
and it ought not to be assumed "That Congress by the felony defined
in §145(b) meant no more than the same derelictions it had just defined
in §145(a) as a misdemeanor." id. 497.
[Scope
of Code Secs. 145(b) and 145(c)]
The
defendant's argument is that in the case at bar the Government has
proved at most that he wilfully made and subscribed a tax return which
he did not believe to be true and correct as to every material matter,
and hence proved only the offense described in §145(c). Therefore he
says that it follows by parity of reasoning from the Spies case
that he could not be validly convicted of a wilful attempt in any manner
to evade or defeat taxes under §145(b), for to sustain a conviction
under that subsection more must be shown than a false return wilfully
made, as, for instance, "keeping a double set of books, making
false entries or alterations, or false invoices or documents,
destruction of books or records, concealment of assets or covering up
sources of income, handling of one's affairs to avoid making the records
usual in transactions of the kind, and any conduct, the likely effect of
which would be to mislead or to conceal" (Spies v. United
States, supra, at page 499), which, he says, the Government failed
to do.
The
defendant's argument rests upon the fallacious premise that an
indictment under §145(b) charging the filing of a false and fraudulent
return as the manner of attempting to evade or defeat payment of income
taxes defines a crime the elements of which are identical with the crime
defined and made punishable by §145(c). It seems to us clear that the
latter subsection makes it a felony merely to make and subscribe a tax
return without believing it to be true and correct as to every material
matter, whether or not the purpose in so doing was to evade or defeat
the payment of taxes. That is to say, it seems to us that the
subsection's purpose is to impose the penalties for perjury upon those
who wilfully falsify their returns regardless of the tax consequences of
the falsehood. Whereas subsection 145(b) condemns as felonious wilful
attempts to evade or defeat taxes "in any manner," and one
manner, certainly, is by the wilful filing of a return known to be false
in some material respect. Thus while the proof of an offense under
subsection 145(b) may incidentally also prove an offense under §145(c),
it must in addition indicate an intent in some manner to evade or defeat
a tax which is due. In brief, it seems to us evident that the scope of
the two subsections is different with respect to an attempt to evade or
defeat taxes, and certainly the language of §145(b) is broad enough to
include the filing of a false and fraudulent return as a punishable
manner of attempted tax evasion. And we are not precluded from regarding
a wilfully false tax return as a punishable manner of at tempted tax
evasion by the enumeration of other possible methods by the Supreme
Court in the above quotation from its opinion in the Spies case,
for the court was careful to say that its list of possible methods was
given "By way of illustration, and not by way of limitation"
upon the scope of the statutory language. In accord in principle with
our view see Cave v. United States, 159 Fed. (2d) 464 [47-1 USTC
¶9171], cert. den. 331
U. S.
847, reh. den. 332
U. S.
786; Myres v.
United States
, 174 Fed. (2d) 329 [49-1 USTC ¶9275], cert. den. 338
U. S.
849;
United States
v. Crossant, 178 Fed. (2d) 96 [49-2 USTC ¶9483], cert. den. 339
U. S.
927; and in direct accord see Taylor v. United States, 179 Fed.
(2d) 640 [50-1 USTC ¶9151]. Jones v.
United States
, 164 Fed. (2d) 398 [47-2 USTC ¶9402], heavily relied upon by the
defendant, is not in point for in that case the court ordered a new
trial for error in the charge, not dismissal for failure properly to
allege a crime. 2
[Application
of Criminal Code]
The next
matters for consideration are the defendant's allied contentions first
that count 5 of the indictment states no offense under §35(A) of the
Criminal Code under which it was drawn, and hence should have been
dismissed or the defendant ordered acquitted thereunder, and second
that, if by any theory both counts 3 and 5 of the indictment are held to
be valid, then they are for one and the same offense, and for that
reason the defendant's motion to require the Government to elect between
those counts, which the court below denied, should have been granted.
Section 35(A)
of the old Criminal Code, 18 U. S. C. §80, (1946 ed.) under which count
5 was drawn, as in effect at the time of the offenses alleged, provided
so far as material that ". . . whoever shall knowingly and wilfully
falsify or conceal or cover up by any trick, scheme, or device a
material fact, or make or cause to be made any false or fraudulent
statements or representations . . . knowing the same to contain any
fraudulent or fictitious statement or entry in any matter within the
jurisdiction of any department or agency of the United States . . .
shall be fined not more than $10,000 or imprisoned not more than ten
years, or both." It is the defendant's first contention that
Congress by the subsequent enactment in 1942 of §145(c) of the Internal
Revenue Code repealed the above quoted section of the Criminal Code in
so far as offenses defined in the later enactment are concerned, for in
that later enactment as already appears, Congress specifically provided
that "any individual who wilfully makes and subscribes a return
which he does not believe to be true and correct as to every material
matter, shall be guilty of a felony, and upon conviction thereof, shall
be subject to the penalties prescribed for perjury in section 125 of the
Criminal Code." He does not contend that subsequently enacted §145(c)
of the Internal Revenue Code repealed §35(A) of the Criminal Code for
all purposes, or even for all internal revenue purposes. He concedes
that as to some internal revenue matters there is a distinction between
the scope of the is a distinction between the scope of the two statutes.
What he contends is that where the attempt is to make out a violation of
§35(A) by the filing of a false income tax return, as in the case at
bar, there is no distinction between the offense defined in that section
and the offense defined in §145(c) of the Internal Revenue Code, and
hence that the specific provisions of the later statute must be
construed as superseding the general provisions of the earlier one.
We concede the
force of the contention, as did the court below. We incline to the view,
however, that the court below was correct in its conclusion that the
contention is ruled against the defendant in United States v.
Gilliland, 312
U. S.
86. See also Bartlett v. United States, 166 Fed. (2d) 920, 927;
United States
v. Heine, 149 Fed. (2d) 485, 487, cert. den. 325
U. S.
885, and Ex Parte Barkoff, 65 Fed. Supp. 976. But however, this
may be, the point is now moot for it is authoritatively established that
a conviction may be sustained on the basis of a statute other than that
cited in the indictment, if the error in citation did not mislead the
defendant to his prejudice (Williams v. United States, 168 U. S.
382, 389; United States v. Hutcheson, 312 U. S. 219, 229; Rule
7(c) of the Federal Rules of Criminal Procedure) it being enough if an
indictment or count clearly charges an offense under any law of the
United States. And it seems to us that count 5 adequately charges an
offense under §145(c) of the Internal Revenue Code, and that the
citation therein of §35(A) in its stead did not mislead the defendant
to his prejudice in the preparation or presentation of his defense. In
short, we think the count fully apprised the defendant of the charge
which he was called upon to defend and did defend. Therefore there was
no error in permitting the jury to consider the question of the
defendant's guilt under count 5, and since the sentence imposed on count
5, both as to fine and imprisonment, is within the permissible maximum
limits of §145(c), it follows that so far as the contention under
consideration is concerned there was no error in the sentence imposed on
that account.
[Sentence
Imposed on More Inclusive Count]
But the
defendant contends that counts 3 and 5 allege one and the same offense,
and for that reason his motion to require the Government to elect
between them should have been granted. What we have already said with
respect to the difference in the scope of §145(b) and the scope of §145(c)
disposes of this contention. To be sure the offense charged in count 5
is an incidental step in the consummation of the completed offense of
attempted defeat or evasion of tax by means of a false and fraudulent
return charged in count 3. In short, count 5 charges a crime within the
crime charged in count 3. But, as this court recently held in Ekberg
v. United States, 167 Fed. (2d) 380, 384 et seq. this does
not prevent submission of both counts to the jury. It does, however,
require that sentence be imposed on the more inclusive count only, or
that a single sentence be imposed on the counts as a whole, provided, of
course, that the penalty is within the maximum limits specified for the
more inclusive offense, or that sentences within the applicable limits
be imposed on both counts to run concurrently. id. 385, 386. Thus
as we see it the judgment appealed from must be amended by striking
therefrom the separate $2,000 fine imposed on count 5.
[Proof
of Wilfulness]
We turn now to
the defendant's contention that "The evidence did not prove beyond
a reasonable doubt that the defendant acted 'wilfully', and the Court
erred in refusing to give requested instructions as to the meaning of
the term."
The defendant
rests the first part of this contention on the broad proposition that
"wilfulness within the meaning of any of the statutes in question
cannot be inferred merely from proof of understatement of income on the
defendant's tax returns," and that "such proof was the only
proof offered by the Government in the course of its case." At the
outset it must be pointed out that the defendant by offering evidence on
his own behalf elected to abandon his motion for acquittal made at the
close of the Government's case and to rely upon a subsequent motion to
the same effect made at the close of all the evidence (United States
v. Goldstein, 168 Fed. (2d) 666, 669, 670; Mosca v.
United States
, 174 Fed. (2d) 448, 450, 451 and cases cited 3)
which he made, so that this later motion is the only one for
consideration on this appeal. Hence the sufficiency of the evidence as a
whole to establish the defendant's wilfulness must be considered, not
merely the sufficiency of the evidence offered by the Government alone
on that issue. And an examination of all the evidence convinces us of
its sufficiency with respect to the defendant's wilfulness.
Wilfulness is,
of course, a question of fact. But direct proof thereof is not
essential. It may be inferred from acts and circumstances, and the
inference may be drawn from a combination of acts and circumstances,
although each separate act and circumstance, standing alone is
unimportant. Battjes v.
United States
, 172 Fed. (2d) 1, 5 [49-1 USTC ¶9149]. Moreover, in cases of this
sort "affirmative wilful attempt may be inferred from . . . any
conduct, the likely effect of which would be to mislead or to
conceal." Spies v.
United States
, supra, 499. Thus mere understatements of income by the defendant
are not by any means the sole criterion for determining the wilfulness
of his alleged attempts to evade or defeat his taxes. His
understatements of income must be viewed in their setting, and so viewed
we are convinced that the jury could well find that the understatements
were wilful, for if the jury accepted the Government's evidence, as it
was entitled to do, it could well have found that the defendant was an
intelligent, astute and successful business executive with many years of
experience who had full records of his income available, and that the
understatements in his returns for the years involved, which he made out
himself, were gross. Under these circumstances it seems to us clear that
the jury could very reasonably have inferred that beyond a reasonable
doubt the defendant's understatements of income were made wilfully in an
attempt to evade or defeat taxes, and wholly discounted his defense that
those understatements for the most part were made stupidly or
carelessly. Thus we do not have here a case in which on the objective
facts an inference of innocence is as strong as an inference of guilt,
and the defendant's argument on that score does not call for
consideration.
And the trial
court's instructions on the issue of wilfulness were clear and adequate.
Without going into a detailed analysis of each of the defendant's
requested instructions on this issue which the court below denied, it
will suffice to say that an examination of the evidence and the charge
discloses that such of those requests as were not given in substance
were either erroneous or misleading, or if given would have unduly
burdened the charge with unnecessary and confusing detail. The charge as
given seems to us accurate and adequate, and eminently fair to the
defendant on the issue of wilfulness as the excerpt therefrom in the
margin indicates. 4
The defendant
also complains of the charge in that the trial court refused his
requests to instruct the jury as to the law with respect to the
taxability of income received by the defendant as the result of several
business transactions entered into by the defendant during the years
involved, which income the Government contends he grossly understand in
his returns--his theory being that "In order for the jury to
conclude with respect to any transaction that the defendant did what he
did with a fraudulent purpose to defeat and evade his tax, it would be
essential for the jury first to find that in his treatment of the
transaction he did defeat and evade the tax."
A careful
examination of the record discloses no basis for the conclusion that the
defendant reported any one of the business transactions in question in
compliance with the applicable tax law or Treasury Regulations. Indeed
his defense at the trial was not to deny that he had illegally
understated his taxable net income from those transactions, but that his
understatements with respect thereto were not wilful, but were the
result of carelessness, stubbornness, or negligence, and that certain
other misstatements in his returns as to minor matters, although
technically erroneous, did not in fact result in an understatement of
his taxable net income. The Government's evidence, on the other hand,
tended clearly to disprove all this. The issue at the trial, and as we
read the record the only issue there, was whether the understatements
were made wilfully or innocently, not whether the returns complied with
the applicable law and regulations, and from this it follows the there
was no occasion to burden the charge, and undoubtedly confuse the jury,
with a discussion, which could only be complicated, of several intricate
aspects of income tax law.
Of the two
objections to the admission and exclusion of evidence argued by the
defendant but one calls for any notice at all, and that only by the
citation of United States v. Johnson, 319 U. S. 503, 519 [43-1
USTC ¶9470].
[Denial
of Motion for New Trial]
This brings us
to the defendant's last contention which is that the court below abused
its discretion in denying his motion for a new trial. We deem it
necessary to discuss only two of the grounds advanced in support of this
motion.
Counsel for
the defendant in the course of his argument to the jury called attention
to the fact that the defendant had been elected to the Governor's
Council in November 1946, that his term of office began in January 1947,
that investigation of his income tax returns for the years involved
began in February 1947, that at no time had he been sent a thirty day
letter, a ninety day letter, or been given by the Government "an
opportunity to pay what he owed" and then asked rhetorically:
"Is it possible, Mr. Foreman and Gentlemen, that the Government,
the Internal Revenue Bureau, the agents, jumped in with alacrity upon
him as a Governor's Councillor?" Subsequently, no doubt moved by
these remarks, the court below said in its charge: "I am very sorry
that there was an issue of politics raised in this case. No man in this
courtroom, I am sure, is interested in considering political questions
with respect to this case. You are not here as Republicans or Democrats
or Socialists, and I have no reason to believe that anyone else is here
in a partisan capacity. A man is here to be judged on the basis of his
tax record, not his political record. And I have no reason to suppose
that the Grand Jury differed one bit from you gentlemen in acting
according to their consciences and their views of justice. A man who is
or has been a member of the Governor's Council is entitled to just as
good a break as a man who has not been, and he is not entitled to one
bit better break."
Counsel for
the defendant contends that the above portion of his argument
constituted a "legitimate comment upon evidence in the case"
and that although the trial court "was entitled to comment on the
evidence," it was not entitled to take from the jury "the
right to consider any inference based on evidence, however slight, of an
attempt to use the criminal law against a citizen for political
purposes." Indeed, he says that the action of the court in so doing
was so highly prejudicial as to warrant a new trial, not as a matter of
discretion, but as a matter of law. We cannot agree. In fact we think
the court below correctly refused to permit a charge so serious as that
government officials were actuated by political motives in matters of
this sort to rest upon so slight a foundation. Furthermore, the proper
issue before the jury was the guilt or innocence of the defendant on the
evidence presented; and pure speculation as to motivation of the
prosecuting officials introduced an extraneous issue of the red herring
variety. Certainly we cannot say that the court below abused its
discretion in doing what it did. Nor do we need to pause for long over
the defendant's further contention that the sentence in the above quoted
portion of the charge with respect to the Grand Jury constituted highly
prejudicial error in that it permitted the jury to give "weight to
the action of the Grand Jury which it was not entitled to have." It
will suffice to say that the court's passing comment with respect to
lack of reason to suppose any impropriety on the part of the Grand Jury
was warranted under the circumstances, and that misinterpretation of
that remark by the jury can hardly be supposed in view of the court's
instruction at the outset of its charge that the indictment "is not
evidence in the case," but "a mere charge or presentment which
was made by the Grand Jury after hearing only one side of the case.
Moreover, the Grand Jury may or may not have heard some of the same
evidence which you heard."
Finally the
defendant contends that a grave enough error to warrant a new trial as a
matter of law occurred when the prosecutor toward the end of the trial
asked a defense character witness: "Did you also hear that the
defendant was convicted for violation of the labor laws in--."
Concededly the question was cut short as indicated by objection of
counsel for the defendant, and the court at once told the jury:
"The objection is sustained and it is an improper reference, and
the jury will totally disregard it." A conference at the bench
followed at which the court said to counsel that it was "not the
sort of thing that should be done," but that "It is not
sufficiently prejudicial to warrant a new trial."
We agree with
the court below that the question was properly cut short and excluded.
The controlling cases (Michelson v. United States, 335
U. S.
469, and Malatkofski v. United States, 179 Fed. (2d) 950) do not
go further than somewhat unenthusiastically to permit in discretion
questions of the kind under consideration with respect to offenses
involving moral turpitude or dereliction of some sort, such as
conspiracy to steal, or receiving stolen goods, respectively, whereas
the broad general question in the present case with respect to some
unspecified violation of the labor laws has no more direct tendency to
show moral turpitude or dereliction than a broad general question with
respect, for instance, to some unspecified violation of the motor
vehicle laws. And it is more prejudicial. In short, discretion exists as
to questions with respect to offenses from which defective moral
character may be inferred, but does not exist as to questions with
respect to offenses from which no such inference is permissible.
Questions of the latter sort probe not only irrelevant but also
prejudicial matter which must be excluded as a matter of law. But we are
not by any means prepared to say that the question asked was so highly
prejudicial as to warrant us in ordering another trial as a matter of
law. The court below was in a far better position than we to judge the
prejudicial effect of the question upon the jury, and the adequacy of
the corrective measure taken. We cannot say that the corrective measure
was so hopelessly inadequate as to warrant the conclusion that the trial
court abused its discretion in refusing to grant a new trial on that
score.
The
judgment of the District Court is modified by striking therefrom that
part imposing a fine of $2,000 on count 5, and by changing the total of
fines from $6,000 to $4,000, and as modified said judgment is offirmed.
1
Any person required under this chapter to pay any . . . tax, or required
by law . . . to make a return . . . who wilfully fails to pay such . . .
tax, make such return . . . 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."
2
This conclusion renders it unnecessary for us to discuss the defendant's
argument that the court below erred in certain of its rulings, and also
in certain of its instructions to the jury, with respect to the
requirements for an "attempt" within the meaning of §145(b)
for those arguments are predicated upon the hypothesis that the mere
filing of a false return, even though done wilfully with an intent to
evade or defeat taxes, is not an "attempt" under that
subsection. Since the hypothesis is in error, there is no need to
discuss these argument.
3
We are unable to discern any contrary indication in the per curiam
decisions of the Supreme Court in Sherwin v. United States, 312
U. S. 654, and Hemphill v. United States, 312 U. S. 657 upon
which the defendant relies.
4
`Wilfully' means knowingly, and with a bad heart, and a bad intent; it
means having the purpose to cheat or defraud or do a wrong in connection
with a tax matter. It is not enough if all that is shown is that the
defendant was stubborn or stupid, careless, negligent, or grossly
negligent. A defendant is not wilfully evading a tax if he is careless
about keeping his books. He is not wilfully evading a tax if all that is
shown is that he made errors of law. He is not wilfully evading a tax if
all that is shown is that he in good faith acted contrary to the
regulations laid down by the Bureau of Internal Revenue and the United
States Department of the Treasury. He certainly is not wilful if he acts
without the advice of a lawyer or accountant, for there is no
requirement that a taxpayer, no matter how large his income, should
engage a lawyer or an accountant."
[Concurring
Opinion]
MAGRUDER,
Chief Judge (concurring):
I concur in
the judgment and in general in the opinion of the Court.
With reference
to the question which the prosecutor asked of a defense character
witness, "Did you also hear that the defendant was convicted for
violation of the labor laws in--": This type of question may be
permissible in the discretion of the trial judge, provided the proper
factual basis for it exists. Malatkofski v.
United States
, 179 Fed. (2d) 905, 913-14 (C. A. 1st, 1950); Michelson v.
United States
, 335
U. S.
469 (1948). Here the judge excluded the question at the outset and
directed the jury to disregard it. Counsel for the defendant did not ask
for a mistrial at that point. After the jury brought in its verdict, the
defendant moved for a new trial for the reason, among others, that he
had been substantially prejudiced and deprived of a fair trial as a
result of the action of the prosecutor in asking the character witness
the foregoing question. The reasons given by the judge for denying a new
trial on that score seem to me to be adequate. Defendant was not
entitled to a new trial as a matter of law, and it seems to me obvious
that the trial court cannot be said to have committed an abuse of
discretion in denying the motion. See Sears v.
United States
, 264 Fed. 257, 264 (C. A. 1st, 1920).
The effect of
what we do is that the defendant will have to serve concurrent sentences
of 18 months and pay aggregate fines of $4,000. I think the conviction
on count 5 is clearly invulnerable, for the reasons indicated in the
Court's opinion. Therefore, though I agree that the convictions on
counts 2 and 3 should also be affirmed, it may be worth while to point
out that even if we had concluded that the defendant had been improperly
convicted on those two counts, all we would have done would have been to
set aside the judgment of conviction and the sentences as applied to
counts 2 and 3, leaving standing the judgment of conviction on count 5
with the sentence thereon of 18 months' imprisonment and a fine of
$2,000. See Jarvis v.
United States
, 90 Fed. (2d) 243, 246-47 (C. A. 1st, 1937). Giugni v.
United States
, 127 Fed. (2d) 786, 792 (C. A. 1st, 1942).