7203 - Incrimination 2 Page 1

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Fraud Statutes 

Additional Information:

 

7203 - Accountant-Client Privilege
7203 - Accrual Basis
7203 - Admissibility 1 p1
7203 - Admissibility 1 p2
7203 - Admissibility 1 p3
7203 - Admissibility 1 p4
7203 - Admissibility 1 p5
7203 - Admissibility 1 p6
7203 - Admissibility 2 p1
7203 - Admissibility 2 p2
7203 - Admissibility 2 p3
7203 - Admissibility 2 p4
7203 - Admissibility 2 p5
7203 - Admissibility 3 p1
7203 - Admissibility 3 p2
7203 - Admissibility 3 p3
7203 - Admissibility 3 p4
7203 - Admissibility 3 p5
7203 - Admissibility 4 p1
7203 - Admissibility 4 p2
7203 - Admissions p1
7203 - Admissions p2
7203 - Advice of Counsel p1
7203 - Advice of Counsel p2
7203 - Amendment
7203 - Appeal Right to
7203 - Appeal Timeliness
7203 - Appeal Waiver
7203 - Appeal without merit
7203 - Arrest
7203 - Fraudulent Return
7203 - Defeat & Evade Income Taxes p1
7203 - Defeat & Evade Income Taxes p2
7203 - Defeat & Evade Income Taxes p3
7203 - Defeat &  Evade Income Taxes p4
7203 - Attorney Disqualified
7203 - Attorney's Testimony p1
7203 - Attorney's Testimony p2
7203 - Attorney's Testimony p3
7203 - Attorney's Testimony p4
7203 - Bail
7203 - Bank Records &  Net Worth Increases 1 p1
7203 - Bank Records &  Net Worth Increases 1 p2
7203 - Bank Records &  Net Worth Increases 1 p3
7203 - Bank Records &  Net Worth Increases 1 p4
7203 - Bank Records &  Net Worth Increases 1 p5
7203 - Bank Records &  Net Worth Increases 1 p6
7203 - Bank Records &  Net Worth Increases 2 p1
7203 - Bank Records &  Net Worth Increases 2 p2
7203 - Bank Records &  Net Worth Increases 2 p3
7203 - Bank Records &  Net Worth Increases 2 p4
7203 - Bank Records &  Net Worth Increases 2 p5
7203 - Bank Records &  Net Worth Increases 3 p1
7203 - Bank Records &  Net Worth Increases 3 p2
7203 - Bank Records &  Net Worth Increases 3 p3
7203 - Bank Records &  Net Worth Increases 3 p4
7203 - Bank Records &  Net Worth Increases 3 p5
7203 - Bank Records &  Net Worth Increases 4 p1
7203 - Bank Records &  Net Worth Increases 4 p2
7203 - Bank Records &  Net Worth Increases 4 p3
7203 - Bank Records &  Net Worth Increases 4 p4
7203 - Bank Records &  Net Worth Increases 4 p5
7203 - Bank Records &  Net Worth Increases 5 p1
7203 - Bank Records & Net Worth Increases 5 p2
7203 - Bank Records & Net Worth Increases 5 p3
7203 - Bank Records & Net Worth Increases 5 p4
7203 - Bank Records & Net Worth Increases 5 p5
7203 - Base Sentence p1
7203 - Base Sentence p2
7203 - Base Sentence p3
7203 - Base Sentence p4
I7203 - Bill of Particluar Conspiracy
7203 - Bill of Particulars
7203 - Books and Records
7203 - Burden of going forward with evidence
7203 - Burden of Proof
7203 - Carryback Offset
7203 - Changing Plea
7203 - Character witness p1
7203 - Character witness p2
7203 - Circumstanial Evidence p1
7203 - Circumstanial Evidence p2
7203 - Circumstanial Evidence p3
7203 - Circumstanial Evidence p4
7203 - Collateral Estoppel
7203 - Collection
7203 - Commitment by U.S. Commissioner
7203 - Communication to Jury
7203 - Compromise
7203 - Consolidation
7203 - Conspiracy p1
7203 - Conspiracy p2
7203 - Conspiracy 1 p1
7203 - Conspiracy 1 p2
7203 - Conspiracy 1 p3
7203 - Conspiracy 1 p4
7203 - Conspiracy 1 p5
7203 - Conspiracy 1 p6
7203 - Conspiracy 1 p7
7203 - Conspiracy 1 p8
7203 - Conspiracy 2 p1
7203 - Conspiracy 2 p2
7203 - Conspiracy 2 p3
7203 - Constitutional Grounds 1 p1
7203 - Constitutional Grounds 1 p2
7203 - Constitutional Grounds 1 p3
7203 - Constitutional Grounds 1 p4
7203 - Constitutional Grounds 1 p5
7203 - Constitutional Grounds 2 p1
7203 - Constitutional Grounds 2 p2
7203 - Constitutional Grounds 2 p3
7203 - Constitutional Grounds 2 p4
7203 - Constitutional Grounds 2 p5
7203 - Constitutional Grounds 3 p1
7203 - Constitutional Grounds 3 p2
7203 - Constitutional Grounds 3 p3
7203 - Constitutional Grounds 3 p4
7203 - Constitutional Grounds 3 p5
7203 - Constitutional Grounds 4 p1
7203 - Constitutional Grounds 4 p2
7203 - Constitutional Grounds 4 p3
7203 - Constitutional Grounds 4 p4
7203 - Constitutional Grounds 5 p1
7203 - Constitutional Grounds 5 p2
7203 - Constitutional Grounds 5 p3
7203 - Constitutional Grounds 5 p4
7203 - Constitutional Grounds 5 p5
7203 - Constitutional Grounds 6
7203 - Contempt Finding Ag. Defendant's Counsel
7203 - Continuance p1
7203 - Continuance p2
7203 - Continuance p3
7203 - Conviction Required
7203 - Copies of Records p1
7203 - Copies of Records p2
7203 - Corporation Officer
7203 - Costs
7203 - Credit for Time Served
7203 - Criminal Contempt
7203 - Cross-Examination PART 1 p1
7203 - Cross-Examination PART 1 p2
7203 - Cross-Examination PART 1 p3
7203 - Cross-Examination PART 1 p4
7203 - Cross-Examination PART 1 p5
7203 - Cross-Examination PART 2
7203 - DefendantHaving Facts Available p1
7203 - DefendantHaving Facts Available p2
7203 - DefendantHaving Facts Available p3
7203 - Degree of Proof p1
7203 - Degree of Proof p2
7203 - Depositions
7203 - Different Statute Cited
7203 - Discovery, Scope Of
7203 - Documentary Evidence in Jury Room
7203 - Double Jeopardy 1 p1
7203 - Double Jeopardy 1 p2
7203 - Double Jeopardy 1 p3
7203 - Double Jeopardy 1 p4
7203 - Double Jeopardy 1 p5
7203 - Double Jeopardy 2 p1
7203 - Double Jeopardy 2 p2
7203 - Double Jeopardy 2 p3
7203 - Double Jeopardy 2 p4
7203 - Enhanced Sentence Sophisticated Means p1
7203 - Enhanced Sentence Sophisticated Means p2
7203 - Enhanced Sentence p1
7203 - Enhanced Sentence p2
7203 - Entrapment
7203 - Erroneous calculation of tax
7203 - Exclusion of Oral Testimony
7203 - Exercise Privilege-Exclusion from Courtroom
7203 - Expert Witness p1
7203 - Expert Witness p2
7203 - Expert Witness p3
7203 - Expert Witness p4
7203 - Extenuating Circumstances
7203 - Fact Finding p1
7203 - Fact Finding p2
7203 - Fact Finding p3
7203 - Fact Finding p4
7203 - Fact Finding p5
7203 - Failure of IRS to File Return
7203 - Failure to Assess Tax
7203 - Failure to Prosecute p1
7203 - Failure to Prosecute p2
7203 - Failure to Prosecute p3
7203 - Failure to Prosecute p4
7203 - Failure to Prosecute p5
7203 - Failure to Report Income 1 p1
7203 - Failure to Report Income 1 p2
7203 - Failure to Report Income 1 p3
7203 - Failure to Report Income 1 p4
7203 - Failure to Report Income 1 p5
7203 - Failure to Report Income 1 p6
7203 - Failure to Report Income 2 p1
7203 - Failure to Report Income 2 p2
7203 - Failure to Supply Information
7203 - False Return
7203 - Fictitious names
7203 - Fraud Case Procedures p1
7203 - Fraud Case Procedures p2
7203 - Fraud Case Procedures p3
7203 - Fraud Case Procedures p4
7203 - General Exception
7203 - Good Faith p1
7203 - Good Faith p2
7203 - Good Faith p3
7203 - Good Faith p4
7203 - Government Agent Prosecuting Claim
7203 - Grand Jury 1 p1
7203 - Grand Jury 1 p2
7203 - Grand Jury 1 p3
7203 - Grand Jury 1 p4
7203 - Grand Jury 1 p5
7203 - Grand Jury 2 p1
7203 - Grand Jury 2 p2
7203 - Hearsay Evidence p1
7203 - Hearsay Evidence p2
7203 - Hearsay Evidence p3
7203 - Hearsay Evidence p4
7203 - Hearsay Evidence p5
7203 - Hostility of the Court p1
7203 - Hostility of the Court p2
7203 - Hostility of the Court p3
7203 - Hypnosis
7203 - Identification
7203 - Ignorance of Law
7203 - Immunity p1
7203 - Immunity p2
7203 - Immunity p3
7203 - Impeachment p1
7203 - Impeachment p2
7203 - Improper Comment PART 1 p1
7203 - Improper Comment PART 1 p2
7203 - Improper Comment PART 1 p3
7203 - Improper Comment PART 1 p4
7203 - Improper Comment PART 1 p5
7203 - Improper Comment PART 2 p1
7203 - Improper Comment PART 2 p2
7203 - Improper Comment PART 2 p3
7203 - Improper Comment PART 2 p4
7203 - Improper Comment PART 2 p5
7203 - Improper Comment PART 3
7203 - Improper Question
7203 - Incrimination 1 p1
7203 - Incrimination 1 p2
7203 - Incrimination 1 p3
7203 - Incrimination 1 p4
7203 - Incrimination 1 p5
7203 - Incrimination 2 p1
7203 - Incrimination 2 p2
7203 - Incrimination 2 p3
7203 - Incrimination 2 p4
7203 - Incrimination 2 p5
7203 - Incriminaton Before Grand Jury p1
7203 - Incriminaton Before Grand Jury p2
7203 - Instructions to Jury 1 p1
7203 - Instructions to Jury 1 p2
7203 - Instructions to Jury 1 p3
7203 - Instructions to Jury 1 p4
7203 - Instructions to Jury 1 p5
7203 - Instructions to Jury 2 p1
7203 - Instructions to Jury 2 p2
7203 - Instructions to Jury 2 p3
7203 - Instructions to Jury 2 p4
7203 - Instructions to Jury 2 p5
7203 - Instructions to Jury 3 p1
7203 - Instructions to Jury 3 p2
7203 - Instructions to Jury 3 p3
7203 - Instructions to Jury 3 p4
7203 - Instructions to Jury 3 p5
7203 - Instructions to Jury 4 p1
7203 - Instructions to Jury 4 p2
7203 - Instructions to Jury 4 p3
7203 - Instructions to Jury 4 p4
7203 - Instructions to Jury 4 p5
7203 - Instructions to Jury 5 p1
7203 - Instructions to Jury 5 p2
7203 - Instructions to Jury 5 p3
7203 - Instructions to Jury 5 p4
7203 - Instructions to Jury 5 p5
7203 - Instructions to Jury 6 p1
7203 - Instructions to Jury 6 p2
7203 - Instructions to Jury 6 p3
7203 - Instructions to Jury 6 p4
7203 - Instructions to Jury 6 p5
7203 - Instructions to Jury 7 p1
7203 - Instructions to Jury 7 p2
7203 - Instructions to Jury 7 p3
7203 - Instructions to Jury 7 p4
7203 - Instructions to Jury 7 p5
7205 Convictions p1
7205 Convictions p2
7205 Convictions p3
7205 Convictions p4
7205 Convictions p5
7205 Double Jeopardy
7205 Exemption Certificates
7205 Hostility of the Court
7205 Indictment
7205 Information
7205 Intent to Deceive Lacking
7205 Right to Counsel
7205 Trial, Timeliness
7205 Variance
7205 Venue
7205 Willfulness
7206 False Returns 1 p1
7206 False Returns 1 p2
7206 False Returns 1 p3
7206 False Returns 1 p4
7206 False Returns 1 p5
7206 False Returns 2 p1
7206 False Returns 2 p2
7206 False Returns 2 p3
7206 False Returns 2 p4
7206 False Returns 2 p5
7206 False Returns 3 p1
7206 False Returns 3 p2
7206 False Returns 3 p3
7206 False Returns 3 p4
7206 Basis for Allegation of Fraud
7206 Concealment of Assets p1
7206 Concealment of Assets p2
7206 Conspiracy 1 p1
7206 Conspiracy 1 p2
7206 Conspiracy 1 p3
7206 Conspiracy 1 p4
7206 Conspiracy 2 p1
7206 Conspiracy 2 p2
7206 Constitutionality p1
7206 Constitutionality p2
7206 Constitutionality p3
7206 Costs
7206 Disclosure of Returns
7206 Estoppel p1
7206 Estoppel p2
7206 Estoppel p3
7206 Evidence 1 p1
7206 Evidence 1 p2
7206 Evidence 1 p3
7206 Evidence 1 p4
7206 Evidence 1 p5
7206 Evidence 2 p1
7206 Evidence 2 p2
7206 Evidence 2 p3
7206 Evidence 2 p4
7206 Evidence 2 p5
7206 Evidence 3 p1
7206 Evidence 3 p2
7206 Evidence 3 p3
7206 Evidence 3 p4
7206 Evidence 3 p5
7206 Evidence 4 p1
7206 Evidence 4 p2
7206 Evidence 4 p3
7206 False Claims Against U.S.
7206 False Documents p1
7206 False Documents p2
7206 False Statements in Return 1 p1
7206 False Statements in Return 1 p2
7206 False Statements in Return 1 p3
7206 False Statements in Return 1 p4
7206 False Statements in Return 1 p5
7206 False Statements in Return 2 p1
7206 False Statements in Return 2 p2
7206 False Statements in Return 2 p3
7206 False Statements in Return 2 p4
7206 False Statements in Return 3 p1
7206 False Statements in Return 3 p2
7206 False Statements in Return 3 p3
7206 False Statements in Return 3 p4
7206 False Statements in Return 3 p5
7206 False Statements in Return 4 p1
7206 False Statements in Return 4 p2
7206 False Statements in Return 4 p3
7206 False Statements in Return 4 p4
7206 False Statements in Return 4 p5
7206 False Statements in Return 5 p1
7206 False Statements in Return 5 p2
7206 False Statements in Return 5 p3
7206 False Statements in Return 5 p4
7206 False Statements to IRS Agents p1
7206 False Statements to IRS Agents p2
7206 False Statements to IRS Agents p3
7206 Forgery
7206 Grand Jury
7206 Guilty Plea p1
7206 Guilty Plea p2
7206 Immunity
7206 Indictment 1 p1
7206 Indictment 1 p2
7206 Indictment 1 p3
7206 Indictment 1 p4
7206 Indictment 1 p5
7206 Indictment 2 p1
7206 Indictment 2 p2
7206 Instructions to Jury 1 p1
7206 Instructions to Jury 1 p2
7206 Instructions to Jury 1 p3
7206 Instructions to Jury 1 p4
7206 Instructions to Jury 1 p5
7206 Instructions to Jury 2 p1
7206 Instructions to Jury 2 p2
7206 Instructions to Jury 2 p3
7206 Instructions to Jury 2 p4
7206 Instructions to Jury 2 p5
7206 Instructions to Jury 3 p1
7206 Instructions to Jury 3 p2
7206 Instructions to Jury 3 p3
7206 Instructions to Jury 3 p4
7206 Instructions to Jury 3 p5
7206 Jury Verdict Disregarded
7206 Jury p1
7206 Jury p2
7206 Jury p3
7206 Lesser Included Offense p1
7206 Lesser Included Offense p2
7206 Motion For Continuance
7206 Motion to Sever
7206 Motion to Transfer
7206 Motion to Vacate Sentence
7206 Net Worth Statement
7206 Offer in Compromise
7206 Perjury
7206 False or Fraudulent Returns p1
7206 False or Fraudulent Returns p2
7206 False or Fraudulent Returns p3
7206 False or Fraudulent Returns p4
7206 False or Fraudulent Returns p5
7206 Prior Convictions
7206 Prior Law
7206 Probation
7206 Prosecutor's Comment p1
7206 Prosecutor's Comment p2
7206 Restitution
7206 Right to Counsel p1
7206 Right to Counsel p2
7206 Sentence p1
7206 Sentence p2
7206 Sentence p3
7206 Sentence p4
7206 Sentencing Guidelines 1 p1
7206 Sentencing Guidelines 1 p2
7206 Sentencing Guidelines 1 p3
7206 Sentencing Guidelines 1 p4
7206 Sentencing Guidelines 1 p5
7206 Sentencing Guidelines 2 p1
7206 Sentencing Guidelines 2 p2
7206 Sentencing Guidelines 2 p3
7206 Statute of Limitations p1
7206 Statute of Limitations p2
7206 Venue
7206 Willfulness Defined p1
7206 Willfulness Defined p2
7206 Willfulness Defined p3
7206 Willfulness Defined p4
7207 Conviction
7207 Defenses
7207 Motion to Dismiss
7207 Sentencing
7207 Willfully Defined
7210 Willful Failure to Obey Summons
7212 Assault
7212 Bribery
7212 Constiutionality
7212 Indictment
7212 Interference p1
7212 Interference p2
7212 Interference p3
7212 Interference p4
7212 Jury Instructions
7212 Rescue of Seized, Levied Property p1
7212 Rescue of Seized, Levied Property p2
7212 Sentence p1
7212 Sentence p2
7212 Statute of Limitations
7212 Suppresion of Evidence
7215 Constitutionality
7215 Conviction
7215 Corporation
7215 Defenses
7215 Evidence
7215 Intent
7215 Speedy Trial
7216 Consent
7216 Preparer Defined
7216 Scope of Statute
7217 IRS Employees

 

Incrimination 2 Page1

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7203: Willful Failure to File Return, Supply Information, or Pay Tax: Defenses: Incrimination

Part 2

 

[66-2 USTC 9680] United States of America v. Fred P. Fiore

U. S. District Court, West. Dist. Pa., Criminal No. 66-28, 258 FSupp 435, 9/14/66

[1954 Code Sec. 7206(1)]

False statements: Criminal tax investigation: Constitutional rights: Motion to suppress evidence: Failure to warn of right to counsel.--The taxpayer's motion to suppress evidence obtained voluntarily from him and his accountant at two separate interviews by Internal Revenue Service Agents was denied since Internal Revenue Service Agents conducting a criminal tax investigation are under no duty to apprise a taxpayer of his constitutional right to counsel. Furthermore, the taxpayer's right against self-incrimination was not violated since he asserted no right at the interview and his declarations to the agents were voluntary.

Thomas A. Daley, Assistant United States Attorney, Pittsburgh , Pa. , for gov't. Hubert Teitelbaum, 1122 Frick Bldg., Pittsburgh, Pa., Edward P. Zemprelli, 535 Miller Ave., Calirton, Pa., for defendant.

Opinion and Order

MARSH, District Judge:

The defendant, Fred P. Fiore, was indicted February 10, 19 66, on four counts, each charging him with willfully and knowingly making and subscribing to false statements in his income tax returns for the years 1959, 1960, 1961, and 1962 in violation of 7206(1) of Title 26 U. S. C. A. While the defendant is charged with knowingly and willfully understating his income from three separate sources, the indictment stems primarily from investigations which resulted in allegations by the United States that the defendant during these years owned certain Gulf Oil stock from which he received substantial dividends not declared on his returns.

[Motion to Suppress Evidence]

Before the court is defendant's motion to suppress certain evidence obtain by Internal Revenue agents by interrogation of the defendant on two occasions and by the taking of notes by one agent on one of these occasions from certain records placed at the agent's disposal by the defendant and his accountant. At a hearing, testimony concerning the circumstances of these disclosures was given by the defendant and by the two Internal Revenue agents assigned to the case. 1 Initially, it should be stated that the defendant did not have counsel present at either of the meetings which will hereafter be described, nor did he seek the advice of counsel concerning these investigations until after the meetings had taken place.

[Supreme Court Decisions]

The defendant rests his motion solely on contentions that the evidence was obtained in violation of his rights under the Fifth and Sixth Amendments. The defendant does not expressly assert that the evidence was obtained by coercion, fraud, misrepresentation or deceit, or other than "voluntarily". Rather, the defendant urges that deception was implicit in the failure of Internal Revenue agents to apprise the defendant when their investigations became in fact an inquiry into possible criminal conduct, and likewise in their failure to warn the defendant of his constitutional rights at such time.

More specifically, the defendant contends that the test of "voluntariness" as defined and applied in cases such as United States v. Burdick [54-2 USTC 9475], 214 F. 2d 768 (3d Cir. 1954), and United States v. Wheeler [59-2 USTC 9552], 172 F. Supp. 278 (W. D. Pa. 1959), aff'd [60-1 USTC 9306] 275 F. 2d 94 (3d Cir. 1960), can no longer be deemed dispositive of questions of suppression of evidence in light of recent Supreme Court decisions. In both Burdick and Wheeler, the defendants argued that admissions made to Internal Revenue agents in the course of investigations of their income tax returns should have been suppressed because they were obtained in violation of the Fifth Amendment. In each case, however, it was held that the test of admissibility was whether the statement was entirely voluntary and understandingly given, and that failure to warn a person that he did not have to testify against himself and that any information given might be used against him in a criminal proceeding did not make the admission involuntary. The cases relied upon were Powers v. United States, 223 U. S. 303 (1912) and Wilson v. United States, 162 U. S. 613 (1896).

No violation of the Sixth Amendment was asserted in either Burdick or Wheeler; the dates of the cases would suggest why. The defendant in the present case, however, cites Massiah v. United States, 377 U. S. 201 (1964); Escobedo v. Illinois, 378 U. S. 478 (1964); and United States ex rel. Russo v. State of New Jersey, 351 F. 2d 429 (3d Cir. 1965), in support of his position that statements and information obtained when he was without benefit of counsel were in violation of his rights under the Sixth Amendment. Subsequent to the hearing and argument on the motion, the Supreme Court decided Miranda v. Arizona, 384 U. S. 436 (1966).

Miranda rests the Sixth Amendment right to counsel squarely upon the Fifth Amendment right against self-incrimination and additionally establishes express conditions of warnings concerning constitutional rights and demonstration of intelligent waiver of such rights while the individual is in custody at the police station or otherwise deprived of his freedom of action. In absence of the observance of such conditions, all statements, whether intended or tending to be inculpatory or exculpatory, are inadmissible. Miranda v. Arizona, supra, pp. 476-477. The impact of the Miranda decision upon Supreme Court cases relied upon in the decisions in Burdick and Wheeler was noted by Justice Harlan in his dissenting opinion (p. 509):

"* * * [I]n practice and from time to time in principle, the Court has given ample recognition to society's interest in suspect questioning as an instrument of law enforcement. * * * Of course the limitations imposed today were rejected by necessary implication in case after case, the right to warnings having been explicitly rebuffed in this Court many years ago. Powers v. United States , 223 U. S. 303; Wilson v. United States , 162 U. S. 613."

While Miranda does not expressly overrule Powers or Wilson, it is evident that to the extent that Miranda (and Escobedo and Russo before it) adopts a doctrine which implicitly modifies the criteria of these earlier opinions, the present status of the "voluntariness" test adopted by both Burdick and Wheeler is arguably in question. In short, we are called upon to determine whether recent Supreme Court cases imposing specific conditions of limitation upon police interrogations must be deemed equally applicable to Internal Revenue investigations. If so, a more exact meaning attaches to the term "voluntary" than heretofore. We conclude, however, for reasons we shall set forth, that such cases have no application to income tax investigations in respect to either Sixth or Fifth Amendment rights. First, we will state the facts from the testimony at the hearing.

[IRS Investigation]

In the period covered by the indictment, the defendant was primarily in the business of stripping and selling coal and excavating for commercial buildings. (T., p. 10.) For the years 1958, 1959, and 1960, he filed returns which were audited. Certain adjustments to his tax liability were made in each instance, and he was required to pay additional taxes for each of these years. (T., p. 13.) These audits bear on this motion only insofar as they tend to establish the defendant's frame of reference with respect to Internal Revenue audit and investigative procedures when he was confronted by agents making the investigation which led to this indictment.

The defendant's 1961 return was assigned for audit in the latter part of 1962 to revenue agent George Skoufis, a field auditor (T., p. 40). Skoufis commenced his audit in early March, 1963. As a revenue agent, he was primarily concerned with the civil aspects of a tax case, and was "specifically instructed at the first indication of criminal aspects to discontinue the examination and notify our Intelligence Division * * * through channels * * *." (T., p. 41.)

Skoufis met twice (March 1st and March 15th) with the defendant's accountant, William McArdle, at the latter's office without the defendant being present (T., p. 62). On these two occasions, Skoufis examined and made notes of certain records, mostly cancelled checks and bank statements (T., p. 42). Skoufis then requested and arranged for a meeting with the defendant, which took place at the defendant's apartment (T., p. 62) on March 28th, with Mr. McArdle also present (T., p. 59). He did not at any time warn or suggest to the defendant or his accountant that the defendant could have, or should have, counsel present at this meeting. (T., pp. 47-52.)

The defendant vigorously urges that a most significant fact is that prior to this meeting, Skoufis was in possession of certain information obtained "from a Federal Agency * * * concerning the possibility of the possession of Gulf Oil stock" by the defendant in 1961, since he then knew from examination of the 1961 return that the defendant had reported no dividends on such stock in that year (T., p. 50). This was the moment, according to defendant, when a routine audit to determine civil liability for tax became a criminal investigation.

At this meeting Skoufis asked the defendant whether he had any "stocks not shown in his returns" (T., p. 49), making reference both to stock in general and to Gulf stock in particular (T., p. 50). Skoufis testified that he "had no definite information that would have indicated to me any Criminal elements as of this date which was March 28, I believe, of 1963." (T., p. 52.) But after the meeting he made an oral report to his superior in which he "specifically said" that he "had reason to believe" that the defendant "as of that date owned certain Gulf Oil stock." (T., p. 54.) Subsequently, Skoufis made further inquiry and discovered that the defendant had received substantial dividends in 1961 that were not reported on his 1961 return. He immediately referred the case to the Intelligence Division (T., p. 55).

[Special Agent's Investigation]

Skoufis made an appointment for a second meeting with the defendant (T., p. 56), which took place on August 2, 19 63 at accountant McArdle's office (T., p. 66). Present were Skoufis, McArdle, the defendant, and William McMahon, a special agent with the Intelligence Division (T., pp. 64, 66). Prior to this meeting, Skoufis did not tell McArdle that a special agent responsible for criminal investigations had been assigned to the case, nor that the purpose of the meeting was for McMahon to interview the defendant concerning possible criminal aspects of the case (T., pp. 56, 66).

At the August 2nd meeting, special agent McMahon first placed the defendant under oath. He then advised the defendant of his constitutional rights in that he was not required to answer any questions, make any statements, or supply any records that he thought would incriminate him under federal law. The defendant said that he understood. (T., pp. 20, 67.) There was no mention of the defendant's right to counsel. The defendant testified that he did not invoke the Fifth Amendment at any time. He acknowledged that he knew that he did not have to say anything that might incriminate him, and when asked to confirm his denial that he invoked the Fifth Amendment, he said: "I absolutely did not, because if I was going to take the Fifth Amendment, I would have taken it on the whole question and answer." (T., p. 30.) McMahon testified that the defendant did invoke the privilege. McMahon described the critical stages of the interview in these words:

"On two occasions he declined to answer. In the first instance, I asked Mr. Fiore after having him identify his 1958, 1959, 1960 and 1961 Tax Returns, I asked him if these returns contained all the income that he had during these years, and at that point, he declined to answer on the basis that it would tend to incriminate him. Later in the interview I asked Mr. Fiore if he had any stock accounts or brokerage accounts. He again declined to answer on the basis that it would tend to incriminate him." (T., pp. 67-68.)

Again, McMahon's testimony concerning the conclusion of the interview is significant:

"And Mr. Fiore later in the interview did answer these questions only at the conclusion of the interview when I asked Mr. Fiore if he had any statements that he wished to make in his own behalf. At that point, Mr. McArdle asked, 'What were the Gulf dividends?' The interview was drawing to a close, and I asked Mr. Fiore if he wished to make any statements in his own behalf, and he said that he did not. At that point is when Mr. McArdle said, 'What were the Gulf dividends that Mr. Fiore was supposed to have?' I stated that we did not discuss any Gulf dividends during this interview. It was only then that the area was opened up, and at that time Mr. Fiore did admit to having the Gulf dividends." (T., p. 69.)

Though the defendant ultimately gave the information regarding the Gulf dividends, he never answered the question of whether all his income was reported on his 1958 through 1961 returns. (T., pp. 69-71.)

[Change in Investigation]

The defendant first contends that when in the course of this investigation, the investigating agents began to suspect fraud and began to act on the presumption that criminal conduct was involved, he became entitled to representation by counsel because at that point the investigation had "begun to focus on a particular suspect". Escobedo v. Illinois, supra, p. 490. He contends that the accusatorial stage was reached either at the moment, or some time after the moment, that revenue agent Skoufis: (1) knew for a fact that no dividends on Gulf stock had been declared on the defendant's 1961 return; and (2) was possessed of information, received from another Federal Agency, that the defendant owned, and had received substantial dividends on, Gulf stock in 1961.

The sole question, insofar as right to counsel under the Sixth Amendment is concerned, is whether or not there exists a right to counsel in a criminal investigation into possible tax fraud, and, if so, when that right attaches. The defendant's position is that the right exists and does attach because the nature of the investigation brings it within the scope of Escobedo.

We need not pursue this question through all stages of the investigation, however. We discuss the Sixth Amendment aspect only in respect to the interrogation by special agent McMahon on August 2nd, for it is plain that if the accusatorial stage was not reached when this inquiry became unquestionably an investigation solely directed to possible criminal conduct, then, a fortiori, it did not become accusatorial at any preceding stage.

[Kohatsu case]

Post-Escobedo cases dealing with suppression of evidence obtained by Internal Revenue agents the Kohatsu v. United States [65-2 USTC 9715], 351 F. 2d 898 (9th Cir. 1965), and Rickey v. United States [66-1 USTC 9395], 360 F. 2d 32 (9th Cir. 1966). In pattern, if not in factual detail, the Kohatsu case is substantially analogous to the case at bar. A revenue agent commenced an audit of the defendant's return and met with the defendant on two occasions and obtained a statement. Based on information the revenue agent obtained, the investigation was referred to special agents of the Intelligence Division who held further meetings with the defendant. The same argument was advanced by the defendant in Kohatsu v. United States , supra, p. 900, namely:

"[T]hat * * * [a] 'routine civil tax investigation' undergoes a fundamental change when (1) a revenue agent discovers facts indicating substantial unreported income, and (2) the facts are such that the revenue agent suspects fraud. It is appellant's position that when these events occur, the investigation 'has begun to focus on a particular suspect' and that from that point 'government agents have a duty to inform the taxpayer of his right to counsel, and that they must not elicit further incriminating evidence from the taxpayer until he has been informed of his constitutional rights in specific, understandable terms'."

The Ninth Circuit rejected this argument noting, at p. 901:

"In the instant case the essential question to be determined by the investigations of the revenue agents was whether in fact any crime had been committed. The accused had not been indicted or arrested."

The Court concluded that the agents were conducting an investigation, that the accusatorial stage had not been reached, and that there was "nothing in the Escobedo opinion or its 'philosophy'" (id., p. 902) which would impose a duty upon Internal Revenue agents to inform the taxpayer of the criminal nature of the investigation or his absolute constitutional right to remain silent under the Fifth Amendment.

[Escobedo Not Controlling]

The defendant argues eloquently that Escobedo should apply to income tax investigations. There may indeed be aspects to a criminal tax investigation by special agents of the Intelligence Division that might be deemed to make it indistinguishable from any other criminal investigation. But in one respect, it is different. The usual criminal investigation commences with the independent establishment of the commission of a crime which projects a ring of evidence large enough to bring the suspect within its circle. The process of further "general inquiry into an unsolved crime" 2 gradually pulls the suspect toward the center of all evidence until investigation ultimately begins to focus upon him. In a tax investigation, however, the defendant stands in the center of the inquiry from the beginning, as the only possible suspect, while, as investigation proceeds, the ring of evidence expands and builds around him. For this reason, the distinction between "investigative" and "accusatorial" stages may not be entirely apposite to criminal tax investigations. The defendant urges with vehemence that an individual under investigation for income tax fraud or willful falsification is subjected to compelling psychological pressures which can be employed to extract incriminating statements from him, and that he is therefore quite as much in need of counsel to preserve his constitutional rights as a suspect in custody who is under interrogation concerning a crime established by independent evidence.

However true this might be, we are concerned only with whether Escobedo applies to such investigations, and we conclude that it does not. Any question left open by Escobedo was closed, we believe, by the statement of the Court in Miranda v. United States , supra, p. 444:

"By custodial interrogation we mean questioning initiated by law enforcement officers after a person has been taken into custody or otherwise deprived of his freedom of action in any significant way. 4" " 4This is what we meant in Escobedo when we spoke of an investigation which had focused on an accused."

Nor do we think that the defendant can gain support for his position from Massiah v. United States , supra. Massiah had retained a lawyer and though free on bail was under indictment when federal agents obtained, via radio transmitter, the statements which the Court held could not constitutionally be used as evidence against him in his trial. Massiah differs markedly on its facts, and the Court leaves no doubt that it was influenced in its decision by the trickery employed by the government agents. Massiah v. United States, supra, pp. 206-207. For these reasons, we do not believe Massiah merits further discussion. 3

[Miranda Not Controlling]

Lastly, there is the clear intendment of the Court in Miranda that the requirements of a warning of constitutional rights and a demonstration of voluntary, knowing and intelligent waiver of those rights are to be confined to situations of "custodial interrogation". The reiteration of this term throughout the opinion and the prefacing of the decision with a lengthy recital of police abuses leaves no doubt as to what situations the Court had in mind in reaching its decision.

We find nothing in Miranda to suggest that these same safeguards are to be construed as mandatory in the type of investigative questioning to which the defendant here was subjected. Though hardly to be characterized as pleasant, neither of these meetings resembled a "custodial interrogation". 4 Agent Skoufis questioned the defendant in defendant's own apartment. Special agent McMahon questioned him at the office of his accountant. McMahon warned the defendant of his right to remain silent, and while Skoufis did not, the absence of a warning, we believe, is no ground for suppression of any portion of the evidence. As noted earlier in this opinion, it was well settled under Powers v. United States, supra, p. 313, and Wilson v. United States, supra, p. 623, that it was no essential to the admissibility of the defendant's testimony that he should first have been warned that what he said might be used against him. Miranda, in our view, supersedes this rule only in the context of a custodial interrogation.

Specifically, we hold that in the circumstances of the investigation under consideration, Miranda has no application in defining rights under either the Sixth or Fifth Amendment.

[No Fifth Amendment Violation]

The remaining question is whether the defendant, at any stage of this investigation, asserted his right to remain silent under the Fifth Amendment and, if so, whether any evidence was obtained in derogation of that right. We find from defendant's own testimony that he did not assert any such right and his declarations to the agents were voluntary.

[Holding]

In conclusion, we find no grounds under either the Fifth or Sixth Amendment to warrant suppression of any evidence obtained by these agents. We deem the holdings of Escobedo, Russo and Miranda inapplicable to investigations of this kind and find that "voluntariness" remains the test of admissibility of evidence procured in these circumstances as held in the cases of United States v. Burdick, supra, and United States v. Wheeler, supra. The record fully supports a finding that, under Burdick and Wheeler, the defendant gave all information voluntarily.

An appropriate order will be entered.

1 The defendant's general counsel also testified concerning events subsequent to the two interviews, but since he did not attend these meetings, his testimony added no facts concerning the manner in which the agents obtained the evidence at issue.

2 Escobedo v. Illinois, supra, p. 490.

3 McLeod v. Ohio, 381 U. S. 356 (1965), cited by defendant, is also inapposite. The defendant in that case was both under indictment and in custody when he made an oral confession. See: State v. McLeod, 203 N. E. 2d 349 (Ohio 1964).

4 As characterized by Judge Goodrich in United States v. Frank [57-1 USTC 9675], 245 F. 2d 284, 286 (3d Cir. 1957), "* * * we do not think any taxpayer considers an audit by a revenue agent to be a call for purely social purposes."

 

 

 

[73-1 USTC 9304]United States of America, Plaintiff-Appellee v. Kenneth Vanderburgh, Defendant-Appellant

(CA-9), U. S. Court of Appeals, 9th Circuit, No. 72-2549, 473 F2d 1313, 2/9/73

[Code Sec. 7201]

Criminal penalties: Tax evasion: Agent's warning of rights: Instructions to jury: Use of net worth method: Miscellaneous errors asserted.--Conviction for willful evasion of taxes was affirmed. IRS agents gave the defendant adequate warning of his rights when first contacted. The instructions to the jury, taken as a whole, covered the requested defense instructions refused by the trial court. The government was allowed to prove its case by use of the net worth method even though the defendant's books were claimed to be complete and adequate. Miscellaneous errors asserted by the defense were not cause for reversal.

Dean C. Smith, United States Attorney, Carroll D. Gray, Assistant United States Attorney, Spokane, Wash., for plaintiff-appellee. Howard A. Anderson, Gerald A. Rein, Morrison, Huppin, Ewing & Anderson, 521 Parkade Plaza, Spokane, Wash., for defendant-appellant.

Before KOELSCH and WRIGHT, Circuit Judges, and EAST, * District Judge.

PER CURIAM:

The Judgment of Conviction on two counts of income tax evasion for the reporting years of 1965 and 1966, under Title 26 U. S. C. Section 7201, is affirmed.

The Defendant-Appellant asserts eleven errors of law. We conclude all eleven asserted errors are without merit and comment on only these:

Issue 1

The investigating Internal Revenue Special Agents failed to give the Defendant an adequate warning of his rights when he was initially contacted.

The record reveals a more than adequate warning under U. S. v. Chikata [70-1 USTC 9448], 427 F. 2d 385 (9 Cir. 1970) and the books of account were voluntarily turned over. Simon v. U. S. [70-1 USTC 9212], 421 F. 2d 667 (9 Cir. 1970), cert. denied 90 S. Ct. 1691.

Issues 5, 6, 7, 8 and 9

These requested instructions were partisan pinpoints of phases of the Defendant's defense. The record reveals that the substance of the requested instructions refused by the trial court were adequately covered by the instructions given, when considered as a whole.

Issue 10

It was error to permit the Government to prove its case through the net worth method because the Defendant maintained a complete and adequate set of books of account.

The record reveals the set looked good at first blush, but, also, substantiates the truism of these sage words:

"DeLucia also contends that where he himself kept a set of books and records the District Court erred in permitting use of the net worth method of proof. This would mean that simply because taxpayer has kept a set of books, the veracity of which is in question, the Government is estopped from going beyond those books to prove their falsity or inaccuracy. This is absurd." U. S. v. DeLucia [59-1 USTC 9161], 262 F. 2d 610, 614 (7 Cir. 1958). Defendant's enlargement on bail is revoked, effective now.

Affirmed.

* Honorable William G. East, Senior United States District Judge for the District of Oregon, sitting by designation.

 

 

 

[71-2 USTC 9725]United States of America v. Joseph A. Nemetz, Appellant

(CA-3), U. S. Court of Appeals, 3rd Circuit, No. 18,850, 450 F2d 924, 11/4/71 , Affirming District Court, 70-2 USTC 9566

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

Crimes: Tax evasion: Fraudulent understatement of income: Assignments of error: Right to counsel: Miranda warning.--Evidence voluntarily obtained as a result of interrogating the taxpayer was admissible. The Government was not required to give a Miranda warning so long as the taxpayer had knowledge and understanding of his rights and that any information given by him was voluntary.

[Code Sec. 7602--Result unchanged by '69 Tax Reform Act]

Enforcement of summons: Intervention by taxpayer: Summons proceedings involving interview of witnesses.--The taxpayer had no right to intervene in summons proceedings as to interviews of persons served with summons.

Thomas A. Daley, Assistant United States Attorney, Pittsburgh, Pa., for appellee. Allen N. Brunwasser, 903 B Grant Bldg., Pittsburgh, Pa., for appellant.

Before MCLAUGHLIN, GANEY and ADAMS, Circuit Judges.

Opinion of the Court

PER CURIAM:

Joseph Nemetz was convicted of violating 26 U. S. C. 7201 by wilfully evading the payment of taxes for the years 1962, 1963, 1964, 1966 and 1967. Following the denial of his motion for a new trial, 1 Nemetz appealed setting forth a number of grounds for reversal of his conviction and the award of a new trial.

The evidence of Nemetz's guilt adduced at his jury trial was, according to the district court, [70-2 USTC 9566] overwhelming. Nemetz was a building contractor engaged primarily in home roof repairs. The government, by direct evidence, showed that the taxable income Nemetz should have reported in the years specified in the indictment far exceeded that which he did report. 2

The two substantial contentions advanced by Nemetz concern his right to counsel during the Internal Revenue Service [IRS] investigation of his records, and his alleged right to intervene during IRS interviews of persons served with process pursuant to 26 U. S. C. 7602.

In March, 1968, the IRS, acting on information received from an informant, assigned a special agent, Vernon Carpenter, to examine Nemetz's financial records. On May 2, 19 68, the special agent telephoned Nemetz and told him that he was to investigate Nemetz's 1964, 1965 and 1966 tax returns. The special agent further stated that he wished to see Nemetz's cancelled checks, books and records, and arranged a meeting on May 6, 19 68 for that purpose.

Concerning the May 6th meeting, Carpenter's uncontradicted testimony at the Jackson v. Denno hearing and at trial was:

A. "Well, I told Mr. Nemetz that as a special agent it was my duty to investigate possible criminal income tax violations. I also informed him that I had been assigned to investigate his income tax liability for the years '64, '65 and '66, and I told him that under the Constitution of the United States he had the right to refuse to answer any questions, furnish any information or submit any documents which he felt might tend to incriminate him. I also told him that any information which he did furnish or any documents which he did submit could be used against him in any criminal action that might be undertaken.

As I was finishing my statement to Mr. Nemetz, he told me he understood he also had the right to have an attorney present during the interview and I told him that was correct, he did have the right to have an attorney present during the interview. I then asked him if he wished to proceed with the interview without an attorney. He said he did, and so I asked him questions relative to his financial and income tax liability.

Q. Did you ask him if he understood his rights?

A. Yes, I did. He said that he did."

Based on this and other testimony presented at the Jackson hearing, the trial judge found that all the actions taken by Nemetz at the May 6th meeting were voluntary and that all the evidence obtained therefrom was admissible.

Nemetz contends that the right-to-counsel warning given him by Carpenter was inadequate under the test of Miranda v. Arizona, 384 U. S. 436 (1966). This Court has held, however, that the stringent Miranda doctrine does not apply to tax fraud investigations. Rather the traditional voluntariness test is to be utilized: United States v. Jaskiewicz [70-2 USTC 9616], 433 F. 2d 415 (3rd Cir. 1970). The testimony quoted above illustrates Nemetz's knowledge and understanding of his rights and that any action he took was voluntary. Under these circumstances, since Nemetz was completely aware of his right to counsel, no error was committed in admitting into evidence his books, records and cancelled checks.

Nemetz next claims that because he was not permitted to intervene during interviews conducted by IRS agents with persons whose appearances had been compelled by service of Section 7602 summonses, all evidence obtained as a result of these meetings should have been suppressed. That the taxpayer has no absolute right to intervene in such proceedings is beyond question. Donaldson v. United States [71-1 USTC 9173], 400 U. S. 517 (1971). Further, in a more compelling case than that presented by Nemetz, the Fifth Circuit held that an order of the district court granting intervention--although based on its sound discretion--was nevertheless improper. United States v. Newman [71-1 USTC 9329], 441 F. 2d 165 (5th Cir. 1971). We are unable to distinguish Nemetz's case from either Donaldson or Newman and we hold, therefore, under the facts established at trial, that Nemetz had no right to intervene.

The other points raised by Nemetz have been carefully considered, and we find them lacking in merit. Accordingly, the judgment of conviction will be affirmed.

1 Chief Judge Marsh's able opinion denying the motion is reported at [70-2 USTC 9556] 309 F. Supp. 1336 (W. D. Pa. 1970).

2 The following table illustrates the large variances between Nemetz's reported income and the taxable income the government proved should have been reported.

                  Taxable Income         Proven Taxable
                      Per Return                 Income
1962 ....              $3,252.67             $26,860.40
1963 ....               2,906.91              33,377.43
1964 ....                 337.35               7,873.47
1966 ....               5,037.94              63,332.91
1967 ....               4,083.98              12,061.03

 

 

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

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

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

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

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

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

MCENTEE, Circuit Judge:

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

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

[Special Agent]

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

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

[Flier]

As stated above, the court admitted into evidence, over defendant's objection of irrelevance, a political flier which demonstrated to defendant's constituents that his 1962 federal income tax had been paid in full. It also showed that his state tax returns for 1962 and 1963 were on file by August 9, 19 64. We think that this evidence was relevant to prove defendant's state of mind when he failed to file his tax returns. United States v. Taylor [62-2 USTC 9590], 305 F. 2d 183 (4th Cir.), cert. denied, 371 U. S. 894 (1962), supports this holding. Taylor involved a jury conviction for filing a false income tax return. The defendant admitted at trial that he had been audited by state tax agents. He then admitted that he had paid additional state income taxes after the audit. The latter admission was objected to. Defendant also objected to questions asked about filing returns reporting the social security and withholding taxes of his secretary. In holding the questions to be proper, the court said:

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

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

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

[Accountant-Attorney]

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

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

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

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

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

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

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

Affirmed.

1 On July 29, 19 64, the 1963 return was filed and on August 13, 19 64, the 1962 return was filed. These late filings, of course, do not prevent the prosecution for wilful failure to file.

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

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

 

 

[70-1 USTC 9448]United States of America, Appellee v. Jack I. Chikata, Appellant.

(CA-9), U. S. Court of Appeals, 9th Circuit, No. 24,298, 427 F2d 385, 5/26/70 , Affirming an unreported District Court decision

[Code Secs. 7201, 7203 and 7602]

Crimes: Tax evasion: Conviction: Miscellaneous assignment of errors.--Taxpayer's conviction for income tax evasion was upheld. Charges that the lower Court erred (1) in admitting into evidence facts obtained by the IRS from meeting with the taxpayer wherein he was not given a Miranda type warning, (2) in refusing to give the taxpayer a fair trial, (3) in refusing to strike all exhibits and testimony offered in violation of the court's order, (4) in instructing the jury to consider only the net worth of the taxpayer, (5) in overruling the taxpayer's motion to dismiss on the grounds that Code Sec. 7201 under which he was indicted was unconstitutionally indefinite, (6) in failing to exclude exhibits acquired by the special agent by use of an admin istrative summons, and (7) in ordering the taxpayer to stipulate as to the authenticity of certain government exhibits, were without merit.

Stan Pitkin, United States Attorney, J. S. Obernour, Assistant United States Attorney, Tacoma, Wash., for appellee. Martin J. Durkan, Durkan & Durkan, Olympic Nat'l Bldg., Seattle, Wash., for appellant.

Before JERTBERG, WRIGHT and KILKENNY, Circuit Judges.

KILKENNY, Circuit Judge:

Appellant, a Seattle druggist, was convicted by a jury of income tax evasion, 1 for the years 1961, 62 and 63. He was sentenced to a year and a day on each court, the sentences to run concurrently, and to pay a fine of $7,500.00 on each of the three counts, to be noncumulative. He appeals. We affirm.

In January, 1966, a group supervisor of the Internal Revenue Service, when work was low, selected at random from the Seattle telephone directory, ten names of pharmacists. From the income tax returns of this group, he designated three for audit and assigned Rob ert Anderson, a revenue agent in the supervisory group, to make the audit. One so designated was appellant's 1964 return, which showed a large amount of interest income compared to the reported business income. At this time, there was no thought of possible fraud, although the supervisor's group was commonly known as the fraud group because approximately one-third of its work consisted of cooperating with special agents in criminal investigations.

Anderson, after receiving thereturns, called appellant and told him of the assignment and that he wanted to see his books and records on the '67 return. Appellant invited Anderson to his place of business. Upon arrival, Anderson found that appellant had only his 1965-66 records on hand. After an examination of these records, Anderson proceeded with an interview for background and history and made arrangements to return the next day for further information.

The following day, an examination was made of the 1964 bank records. The agent found that in 1964, appellant had deposited $36,000.00 into his checking account, an amount far in excess of his reported gross receipts of $23,000.00. In a hurried analysis of appellant's reported income from retained copies of prior returns to 1959, the agent arrived at a net worth statement amounting to $130,000.00 in assets at the end of 1964, including $17,000.00 in cash that appellant said he had deposited in his checking account in 1965.

During the court of the investigation, the agent found that appellant's cash register could record sales no larger than $9.99 and that appellant recorded sales over $10.00 by ringing the extra amount and writing down the $10.00 on a piece of paper. Sometimes, he told the agent, he forgot to write down the $10.00 sales and that this might occur two or three times daily. Armed with this information, the agent computed an unexplained increase in assets of $46,000.00 for 1959 through 1964, this being an amount that would equal three unreported $10.00 sales for each working day during the period. Based on this information, Anderson offered a referral report, suggesting that there was an indication of fraud. This report was reviewed and assigned to special agent Catlow of the Intelligence Division for preliminary examination. Anderson was assigned as a cooperating agent.

Appellant, in the meantime, had hired attorney Bernard Greene and so advised Anderson. Greene called Anderson and told him that he represented appellant. Although Catlow was informed of these facts, he did not contact Greene because Greene had not filed a power of attorney as required by the Internal Revenue regulations. Instead, accompanied by Anderson, he went to appellant's place of business. He there identified himself and advised appellant that he could have his attorney present, that he need not answer any question, nor furnish any information. Appellant was told that the initial examination indicated a shortage of reported income. Appellant then called his attorney, who arranged for an appointment the next day at his office. At this meeting, Greene expressed a willingness to cooperate with the agents. Catlow then questioned appellant, covering much of the same areas that Anderson had covered during the initial interviews. Some time later, John Durkan, another attorney, took over the case for the appellant.

Contentions

Appellant charges that the lower court erred in the following particulars: (1) in admitting in evidence any facts directly elicited from the appellant by the government agents or indirectly by leads furnished by appellant; (2) in refusing to give appellant a fair trial; (3) in refusing to strike all exhibits and testimony offered in violation of the court's order; (4) in instructing the jury to consider only the net worth of appellant; (5) in overruling appellant's motion to dismiss on the ground that the statute under which he was indicted was unconstitutionally indefinite; (6) in failing to exclude exhibits acquired by the special agent by use of an admin istrative summons; and (7) in ordering the appellant to stipulate as to the authenticity of certain government exhibits.

Contention One

Appellant argues that all evidence acquired by Anderson and Catlow during the course of their interviews with appellant and any evidence acquired as a result of leads obtained from appellant, during those meetings, was inadmissible because at no time was appellant given the necessary Miranda type warning. We note that appellant was in his own place ob business on the occasion of the conversations with the government agents. He was not in custody, nor at the time was he, in any way, deprived of his freedom. In these circumstances, we are controlled by a number of our own authorities, which have refused to enlarge the Miranda rule beyond its stated limits. Spahr v. United States [69-1 USTC 9315], 409 F. 2d 1303, 1304-1305 (9th Cir. 1969), cert. denied 396 U. S. 840; Simon v. United States, 421 F. 2d 667 (9th Cir. 1970). In Simon, we declined to follow United States v. Dickerson [69-2 USTC 9556], 413 F. 2d 1111 (7th Cir. 1969), the principal case on which appellant relies. In Mathis v. United States [68-1 USTC 9357], 391 U. S. 1 (1968), on which appellant also leans, the taxpayer was in custody in a state prison on another charge at the time he was questioned by Internal Revenue Agents. The Court, in Mathis, again limited Miranda to a person in custody or otherwise deprived of his freedom in some significant way. We resolve this issue against appellant. Additionally, we hold there was no coercive conduct on the part of the Internal Revenue Agents.

Contention Two

Appellant here charges that he was deprived of a fair trial because he was harassed by the Internal Revenue Agents and by the trial court. With a few exceptions, the complaints are those of the attorney, rather than appellant, and are concerned with what occurred during pre-trial hearings, rather than during the trial. Of course, what occurred in the pretrial hearings can have no bearing on the fairness of the trial unless some relationship is shown. Our examination of the record reveals no such connection and appellant points to none. Additionally, our examination of the record leads us to the conclusion that the trial court's actions in the pretrial hearings were fully justified. The alleged harassment by the Internal Revenue Service, during the pretrial period, is completely irrelevant.

During the trial, the court asked appellent's counsel not to "be so aggressive", told appellant's counsel that a certain question was propounded in "an improper way" and on one occasion, in commenting on counsel's repetitious interrogation, commented, "It is just ridiculous." Read in context with the relevant questions, we find nothing objectionable in the court's comments. In his closing argument to the jury, counsel for appellant referred to his client, who was born in Japan, as a sick old man who was imprisoned by the United States in a World War II concentration camp. He had emphasized this internment throughout the trial. Responding to this argument, the United States Attorney called attention to the fact that the concentration camps were established as a result of the sinking of American battleships in Pearl Harbor. Neither argument had anything to do with the merits of the case. While we do not condone this type of argument by a prosecuting attorney, we have no doubt that the prosecutor's response was prompted by the argument of appellant's own counsel. In these circumstances, we do not feel that the prosecutor's conduct should be treated as reversible error.

Contentions Three and Seven

These contentions are related and should be considered together.

Acting under the authority of Rule 17.1, FRCrimP, the trial court, after a lengthy pre-trial conference, ordered appellant's counsel to examine government proposed exhibits 1 through 41 and appear some seven days later and then given reasons why he and his client should not stipulated to the authenticity of such exhibits, reserving all objections to relevancy and materiality. During the course of the conference, appellant's attorney took the position that the exhibits were inadmissible on various grounds, but did not challenge their identity or authenticity. Repeatedly, the court explained to appellant's counsel that the stipulation as to identity and authenticity of the documents would in no way prejudice future objections to admissibility on any other ground. Appellant's counsel finally said that he did not care to stipulate, under any circumstances, being of the belief that he should not, in any way, help the government meet is burden of proof. After this statement by counsel, the court explained that Rule 17.1 required a certain amount of cooperation by a defendant in a criminal case and the court had power to require counsel to study the documents in order to determine whether he had a valid reason for doubting their authenticity. The transcript of the hearing makes it patently clear that appellant's counsel was given every opportunity to study the documents, as well as the list of the proposed witnesses who would authenticate the exhibits, if called for that purpose. The hearing was held on February 3, 19 69. Appellant and his counsel were ordered to return on February 10th and state their reasons for not agreeing to the authenticity of the proposed exhibits. Instead of returning on February 10th and stating reasons for not agreeing to the exhibits, the appellant and his attorney signed the stipulation, which had been prepared by the government. This instrument was filed with the Clerk on February 7th.

Appellant and his attorney now contend they were intimidated into signing the stipulation. We do not agree. Although the court was forceful, and, to an extent, even demanding in his efforts to "promote a fair and expeditious trial" under the provisions of Rule 17.1, we hold that the record does not support a finding that he exercised his persuasion beyond permissible limits. The record makes it perfectly clear that appellant and his attorney were given the opportunity and, for that matter, were instructed to return on February 10th and then state any and all objections they might have to signing the stipulation. Then, and only then, the record makes clear, would the judge decide what future action, if any, might be appropriate.

During the trial, the court received in evidence exhibits in addition to those mentioned in the stipulation. Appellant, in urging error, calls attention to the court order requiring the government, in advance of trial, to disclose all of its exhibits and the names of its witnesses.

The record of the pre-trial conference makes it quite apparent that the main purpose of stipulating to the authenticity of exhibits 1 through 41 was to avoid calling over 20 witnesses to identify the documents. Nothing said in the conference indicates that these would be the only exhibits offered by the government. The judge who was responsible for the disclosure order, in ruling on this contention, found it completely without merit. 2 So do we, Far in advance of the trial, the appellant and his attorney were made aware of the fact that the government was going to use the "net worth method of proof" and that the material supplied to appellant prior to trial would be illustrated and amplified during the course of the trial. The additional exhibits and testimony to which appellant objects are in connection with those subjects.

Contention Number Four

Next, appellant argues that the court erred in instructing the jury to consider only the net worth of the appellant and not of his wife. In this connection, the court carefully instructed the jury that in the state of Washington a wife had a vested property right in the community property and in the income of the community equal to that of her husband. Beyond doubt, the prosecution was premised on the net worth of the appellant, rather than that of his wife. There is no claim that the separate property of the wife in any way contributed to the net worth of appellant as shown by the record. This contention is patently groundless.

Contention Number Five

Appellant challenges the constitutionality of 26 U. S. C. 7201, the statute under which he was convicted. He says the statute is too vague. It does not, he argues, set up standards which are ascertainable and understandable by men of ordinary intelligence. Appellant cites no specific authority for his position. Insofar as we can determine, the only cases considering the subject have held the statute constitutional. United States v. Schipani [66-2 USTC 9512], 362 F. 2d 825 (2d Cir. 1966), cert. denied 385 U. S. 934; United States v. Conti [66-1 USTC 15,694], 361 F. 2d 153 (2d Cir. 1966), vacated on other grounds 390 U. S. 204; and United States v. Keig [64-2 USTC 9563], 334 F. 2d 823 (7th Cir. 1964). We have carefully examined those cases and believe they are judicially sound.

Contention Number Six

Relying on United States v. Powell [64-2 USTC 9858], 379 U. S. 48 (1964) and Wild v. United States [66-2 USTC 9500], 362 F. 2d 206 (9th Cir. 1966), appellant suggests that the lower court committed error in failing to exclude all exhibits acquired by the special agent, by use of an admin istrative summons under the provisions of 26 U. S. C. 7602 (1964).

Wild, as well as Powell, pointedly recognizes that where the objective of the investigation is to obtain information which may be utilized in determining whether there is civil liability for a tax or a tax penalty, the obtaining of documents under the summons is legitimate, notwithstanding the fact that the information might, in the future, be also used in a criminal prosecution. Beyond all legitimate argument, the investigation in this case was conducted for a legitimate purpose. Recent cases sustaining this view are Howfield, Inc. v. United States [69-1 USTC 9298], 409 F. 2d 694, 697 (9th Cir. 1969); United States v. Ahmanson [69-2 USTC 9572], 415 F. 2d 785, 787 (9th Cir. 1969); United States, et al. v. M. P. Ruggeiro [70-1 USTC 9381], -- F. 2d --, Nos. 24519-24524 (9th Cir., April 28, 1970).

AFFIRMED.

1 26 U. S. C. 7201.

2 "Moreover, in this particular case far beyond anything in my experience in dealing with literally hundreds of tax evasion cases, there has been an extraordinary disclosure made to the defendant and his counsel of the evidence to be offered by the government. Never before have I ever required so sweeping disclosure as has been voluntarily offered by the government in this case." (T. R. Vol. IV, p. 355).

 

 

[70-1 USTC 9212]William Simon, Appellant v. United States of America, Appellee

(CA-9), U. S. Court of Appeals, 9th Circuit, No. 24,758, 421 F2d 667, 1/26/70 , Affirming unreported District Court

[Code Secs. 7201 and 7206]

Crimes: Fraud: Right to counsel: Self-Incrimination.--It was not error to admit in evidence incriminating statements made by the taxpayer to a special agent where the agent informed the taxpayer of his identity, the taxpayer was not held in custody and the agent informed the taxpayer that he had the right to remain silent. Similarly, the court refused to support the taxpayer's claim of unreasonable search and seizure.

Luther J. Avery, Rob ert L. Dunn, Bancroft, Avery & McAllister, 10th Floor, TWA Bldg., 240 Stockton St., San Francisco, Calif., George W. Mead, Pub. Service Bldg., Portland, Ore., Bernard Shevach, Executive Bldg., Portland, Ore., for appellant. Sidney I. Lezak, United States Attorney, Portland, Ore., Jack C. Wong., Charles H. Turner, Assistant United States Attorneys, Portland, Ore., for appellee.

Before KOELSCH, BROWNING, and DUNIWAY, Circuit Judges.

PER CURIAM:

William Simon was convicted of income tax frauds. (26 U. S. C. 7201 and 7206(1)). On this appeal he urges that this Fourth, Fifth and Sixth Amendment rights were violated because he was not given the Miranda warnings by the government's investigating agent. Specifically he assigns as error the admission of evidence consisting of incriminating statements made by him to Walter J. Sanders, Jr., a Special Agent of the Intelligence Division of the Internal Revenue Service, and of information gained by the Agent from an inspection of Simon's business records.

We conclude that Miranda is inapplicable to this case and that Simon freely consented to the asserted search.

This court has repeatedly rejected vigorous appeals to extend the Miranda rule "beyond its stated limits." Spahr v. United States [69-1 USTC 9315], 409 F. 2d 1303, 1305 (9th Cir. 1969). Absent custody in the conventional sense, we have declined to fault a government agent and reverse a conviction for failure to give a Miranda type warning unless the facts clearly demonstrated that the appellant was "deprived of his freedom by the authorities in any significant way."

The circumstances in this case hardly disclose an "in custody investigation." The initial meeting between Sanders and Simon was held in the latter's private office at one of his stores. Simon was at liberty to come and go as he pleased or to ask Sanders to leave. Nor did Simon's conduct at the meeting, or thereafter, suggest that he was, or believed that he was, under any compulsion to divulge information. Quite the contrary. Upon being told at the outset that Sanders was a criminal investigator for the Internal Revenue Service and, being affirmatively advised of his right to remain silent, Simon declared that he had "nothing to hide" and expressed a willingness to answer any questions concerning his business and tax returns.

Simon places considerable reliance upon United States v. Dickerson [69-2 USTC 9556], 413 F. 2d 1111 (7th Cir. 1969), a recent decision of the Seventh Circuit rendered by a divided panel. He says that the facts in that case are indistinguishable from those in the case at bar. However, there the Special Agent, unlike his counterpart in the case before us, did not explain his function to the appellant nor give him any warnings whatever. The failure was held to constitute conclusive proof of coercion. We decline to give the failure such weight, even if it were evident in this case. As well said by the Second Circuit in commenting upon and declining to follow Dickerson:

"The fact that IRS agents sometimes give a partial warning at one or even several interviews during a protracted investigation does not mean that warnings of some kind are or should be required. Rather, proof that some warnings were given, or that none were given, merely serves as evidence bearing on the question of whether the questioning was non-coercive."

United States v. Caiello [70-1 USTC 9153], 420 F. 2d 471 (#33175), (2d Cir. Dec. 31, 19 69).

The claim of unreasonable search and seizure is similarly unsupported. Sanders could hardly be said to have gained access to Simon's records by trickery or deceit (Spahr v. United States, supra). Not only did he state why he wanted to see them, but he additionally accompanied his request with the statement that Simon need not comply.

The judgment is affirmed.

 

 

[70-1 USTC 9153]United States of America, Appellee v. Richard V. Caiello, Appellant

(CA-2), U. S. Court of Appeals, 2nd Circuit, Docket No. 33175, 420 F2d 471, 12/31/69, Aff'g unreported District Court decision

[Code Sec. 7201]

Crimes: Tax evasion: Criminal investigation: Noncustody case: Constitutional rights: Motion to suppress evidence.--The taxpayer was not entitled to suppress evidence (statements and records) given by him to several IRS agents on the ground that his constitutional rights had been violated due to the agents failure to give him Miranda type warnings. None of the interviews with the taxpayer took place in a custodial setting or were inherently coercive. If a taxpayer is aware that he is the subject of a tax investigation, and if he is interviewed in noncustodial situations, Miranda warnings are not required. A condition imposed on the taxpayer's probation by the District Court that he pay all income taxes, penalties, and interest due did not foreclose any of his rights to a full determination of his civil tax liability.

James M. Sullivan, United States Attorney, James P. Shanahan, Assistant United States Attorney, for appellee. Phillip Pinsky Pinsky, Canter & Pinsky, 345 S. Warren, Syracuse, N. Y., for appellant.

Before LUMBARD, Chief Judge, MEDINA and FEINBERG, Circuit Judges.

LUMBARD, Chief Judge:

Richard V. Caiello appeals from his conviction on three counts of willfully attempting to evade joint income tax liability in the years 1960, 1961, and 1962 in violation of 26 U. S. C. section 7201. The appeal raises the now familiar question of whether statements and records of a taxpayer under investigation by revenue agents and special agents of the Internal Revenue Service (IRS) may be received in evidence when the taxpayer has not been given the so-called Miranda warnings. All but one of the circuits which have considered this question have repeatedly held that such warnings are not required. 1 A divided panel of the Seventh Circuit recently held that such warnings "must be given to the taxpayer by either the revenue agent or the special agent at the inception of the first contact with the taxpayer after the case has been transferred to the Intelligence Division [of the IRS]." United States v. Dickerson [69-2 USTC 9556], 413 F. 2d 1111, 1116-7 (7th Cir. 1969) (footnotes omitted). 2 We reject the reasoning of the majority opinion in Dickerson and affirm the conviction on the authority of our long line of cases refusing to require such warnings, the latest of which is United States v. White [69-2 USTC 9675], 417 F. 2d 89, slip op. 89 (2d Cir. Oct. 10, 1969).

[Miranda Warnings]

When considering whether warnings about Fifth and Sixth Amendment rights should be given during tax investigations which may lead to criminal prosecution, most courts of appeal have examined the facts surrounding the IRS interviews on a case-by-case basis to determine whether they presented the inherently compulsive aspects which the Supreme Court found to exist in the process of custodial interrogation in Miranda v. Arizona, 384 U. S. 436 (1966), and later in Mathis v. United States [68-1 USTC 9357], 391 U. S. 1 (1968). See e.g., United States v. Squeri [68-2 USTC 9493], 398 F. 2d 785, 789-90 (2d Cir. 1968); United States v. Mackiewicz [68-2 USTC 9461], 401 F. 2d 219, 222-3 (2d Cir. 1968). As we stated in Squeri, supra, at 790:

The Fifth Amendment privilege prohibits the government from compelling a person to incriminate himself. It was the compulsive aspect of custodial interrogation, and not the strength or content of the government's suspicions at the time the questioning was conducted, which led the Court to impose the Miranda requirements with regard to custodial questioning. We believe that the presence or absence of compelling pressures, rather than the stage to which the government's investigation has developed, determines whether the Miranda requirements apply to any particular instance of questioning.

[No Warnings Given]

The testimony shows that at no time prior to the "formal interview" with the taxpayer did either of the IRS agents conducting the investigation specifically warn Caiello that he could refuse to answer their questions or produce records, that anything he said could be used against him in a criminal prosecution, or that he had a right to counsel, retained or appointed. Although many of the cases decided in this and other circuits have mentioned the fact that taxpayers undergoing audit were informed of some or all of their rights at some point during a long investigation, see e.g. Squeri, supra at 788, this factor has not been regarded as crucial. 3 Appellant contends that the complete absence of warnings in the present case distinguishes our previous decisions. We disagree. The fact that IRS agents sometimes give a partial warning at one or even several interviews during a protracted investigation does not mean that warnings of some kind are or should be required. Rather, proof that some warnings were given, or that none were given, merely serves as evidence bearing on the question of whether the questioning was noncoercive.

The substance of our prior decisions is that if the taxpayer is aware that he is the subject of a tax investigation and if he is interviewed in noncustodial situations, Miranda warnings are not required. The rationale is that once the taxpayer is aware that agents of the IRS are conducting a serious inquiry into his income tax liability and the agents do not conduct their investigation in a manner which is inherently coercive it is not improper to expect that "[t]o some extent persons must be prepared to look after themselves." Morgan v. United States [67-1 USTC 9449], 377 F. 2d 507, 508 (1st Cir. 1967). In the present case, there can be no question that the IRS investigation satisfied both the conditions described above.

[Motion to Suppress Evidence]

Caiello made a timely motion to suppress statements and records given by him to several IRS agents. Judge Port held a pretrial hearing and denied the motion; the objections were renewed at trial, and testimony about Caiello's statements and copies of many of his records were introduced in evidence over those objections. Thus, Judge Port found that Caiello had not discharged his burden of showing that the circumstances surrounding his contacts with the IRS were so coercive as to require the giving of warnings. Upon review of the record, we agree that this burden was not met.

[No Coercion Present]

The transcript of the suppression hearing shows that Caiello was contacted more than twenty times by revenue agent George Kowitt and special agent Michael Wilton, either together or separately. 4 There can be no doubt that the statements and records furnished by Caiello were important, for the government used the net worth and expenditure method of establishing unreported income. 5 As noted above, none of the Miranda warnings was specifically given.

Caiello was fully aware of what was occurring. The initial face-to-face meeting between Caiello and Kowitt, the first IRS man to contact him, took place on June 3, 19 64, in the office of Caiello's bookkeeper Hurley. Caiello himself remained for only fifteen minutes, after delivering some records he had agreed to bring when Kowitt arranged the appointment over the telephone. Kowitt continued his audit at Hurley's office with the records made available to him there. Thus, from the inception of the IRS investigation, both Caiello and his bookkeeper Hurley were fully aware that a tax investigation was underway. 6

The investigation was referred to the Intelligence Division by Kowitt on August 4, 19 64, and special agent Wilton first met with Caiello on August 17, eleven days later. Up to this point, Kowitt had visited Caiello twice after the brief meeting at Hurley's office. Wilton testified that he was introduced to Caiello by Kowitt as a special agent of the Intelligence Division and that he showed Caiello his badge and credentials. On cross-examination at trial, Wilton stated that he told Caiello: "I have been assigned to conduct an investigation of your tax liability." Thus, it was perfectly clear to Caiello that he was the subject of a tax investigation, and an investigation which had more serious aspects by reason of the appearance and formal introduction of a second IRS representative. 7

The record is also replete with testimony that none of the interviews took place in a custodial setting or were inherently coercive. At the suppression hearing, Caiello was asked several questions relating to the entire course of his contact with representatives of the IRS prior to the formal interview, which he attended with counsel on January 21, 19 66. One set of exchanges is particularly significant:

"Q. Now at any time during the course of your contact with members of the Federal Internal Revenue Service did any of the representatives ever advise you that you were under arrest? A. No.

"Q. Did they ever advise you were in custody? A. No.

"Q. Did they ever advise you that you were not free to leave either your premises or their offices [where the interviews took place] at any time? A. No.

"Q. Was it your feeling during the course of these interviews that you were free to leave at any time? A. Yes."

Moreover, Caiello testified that he often moved away from the IRS representatives who interviewed him in his grocery store to wait on customers or do other work. The agents' testimony, not contradicted by Caiello, was that several times throughout the long period of investigation they asked Caiello if he minded answering questions or producing records; his replies were always to the effect that he did not mind. The most important example of this occurred during the meeting of August 17, 19 64, when Kowitt introduced Wilton to Caiello. Wilton asked Caiello if he was willing to submit any of his records to him. Caiello replied that he was and made an appointment with Wilton for August 19, 19 64. Wilton returned on that date, with Kowitt, and picked up the records--including cash register tapes and other financial records which the government photocopied and later introduced at trial to show how they had checked Caiello's annual expenditures against reported income and calculated net worth. 8

[Warnings Not Required]

We can see no good reason for requiring government agents to give Miranda warnings whenever they deal with a citizen regarding possible tax liabilities under circumstances where the citizen is not under restraint and is at liberty to cooperate or not as he may choose. Every citizen must know and will be deemed to know that he is under an obligation honestly and fully to furnish correct information regarding his income and to pay the taxes which accordingly would be owing to the government. Every citizen also knows that false returns and fraudulent evasion of taxes are criminal offenses in violation of federal laws. So far as the citizen is concerned his duties and obligations and his liabilities for taxes for violation of law are the same regardless of the duties of the particular agents who may be assigned to investigate his returns, tax liabilities, and possible violations of the criminal law. And, of course, where there is no restraint and the contacts of the taxpayer and the agents extend over some period of time, there is ample opportunity for the taxpayer to seek such advice and assistance from third persons as he may desire. 9

[District Court Upheld]

Our examination of the record leaves no doubt that Mr. Caiello was not under any restraint at any time up to the formal interview. His answers and decisions to produce various records were voluntary. Accordingly, Judge Port was correct in denying the motion to suppress the statements and records and in admitting them in evidence over renewed objections at trial.

[Probation]

There is a final matter which merits our attention. On December 16, 19 68, Caiello was sentenced to six months in prison and fined $5000.00 on each of counts 2 and 3 of the indictment, the prison sentences to run concurrently. As to count 4, sentence was suspended and Caiello was placed on probation for three years. The judgment of conviction states:

"Probation to begin upon release from confinement. As a special condition of probation, the defendant is ordered to pay all taxes, penalties and interest on his income taxes for the years, 1961, 1962 and 1963 within ninety days after the amounts are finally fixed."

We construe the second sentence quoted above broadly to mean that probation will begin upon release from confinement and that the condition imposed therein is a condition upon the continuation of probation while Caiello is proceeding with an adjudication of his civil tax liability, the duration of such condition of course not to exceed three years. Moreover, as we read the sentence, the time period in the second quoted sentence for the payment of taxes, penalties, and interest does not begin to run until Caiello has exhausted all judicial as well as admin istrative procedures in connection with determining the amount of tax due. Cf. White, supra, at --, slip op. at 97-8. Undoubtedly the district court did not mean to foreclose any of the defendant's rights to a determination of his civil tax liability. See United States v. Taylor [62-2 USTC 9590], 305 F. 2d 183, 187 (4th Cir.), cert. denied 371 U. S. 894 (1962), rehearing denied, 371 U. S. 943 (1962); United States v. Stoehr [52-1 USTC 9299], 196 F. 2d 276 (3rd Cir.), cert. denied 344 U. S. 826 (1952).

The conviction is affirmed.

1 See cases cited in United States v. White [69-2 USTC 9675], 417 F. 2d 89, --, slip op. 89, at 92 (2d Cir. Oct. 10, 19 69), and in Cohen v. United States [69-1 USTC 9132], 405 F. 2d 34, 37-8 n. 7 (8th Cir. 1968).

2 As the Seventh Circuit stated in Dickerson, the "jurisdiction of the Intelligence Division is limited to criminal investigations." 413 F. 2d at 1112-3. However, the Dickerson holding would permit a revenue agent to testify about statements made or records produced by the taxpayer during the process of audit prior to referral to the Intelligence Division, even though no warnings were given. Thus, the thrust of the decision could be avoided by simply expanding the scope of the pre-referral audit, since both revenue agents and the special agents of the Intelligence Division peruse essentially the same records and make essentially the same calculations.

3 In our latest pertinent decision, we noted that the "Special Agent admonished [the taxpayer] that he was not required to answer any questions or turn over any personal records but did not state specifically that anything he said might be used against him in a criminal prosecution." White, supra, at --, slip op. at 91. In addition, the court pointed out that no warnings about the right to counsel were given.

4 A number of these contacts were short telephone calls Some of these calls were merely to arrange appointments for personal interviews. Other calls involved a few substantive questions about Caiello's business or personal financial affairs. Several phone calls and meetings were devoted primarily to obtaining from Caiello extensions of the statutory time to levy additional assessments of income tax.

5 This is a technique by which IRS agents calculated annual increments in asset value and compare them to reported income. In Caiello's case, for the three years for which he was convicted, the indictment charged that he had understated the income from his grocery store--a sole proprietorship--by a total in excess of $29,000.00

6 The IRS representatives referred Caiello to Hurley for advice at least once during the investigation. The record shows that on February 9, 19 65, agents Kowitt and Wilton met Caiello at his store for the purpose of securing an extension of the period of limitation for the assessment of additional tax. In explaining this procedure to Caiello, Wilton told him that if he did not understand the forms he should take it up with Hurley. The forms were eventually signed on September 21, 19 65, and returned to Wilton.

7 Also relevant in this regard is the fact that Caiello admitted on cross examination at the suppression hearing that before the IRS contacted him he had already been audited by tax officials of New York State with regard to payment of state income taxes, and that this investigation had resulted in an additional assessment of between $1400.00 and $1500.00 which he had to pay to the state. That this experience was in Caiello's mind during the IRS investigation is perfectly clear, for Kowitt testified that at one of his early meetings with Caiello, Caiello asked him how the IRS audit was going compared with the state investigation.

8 Another example occurred when Kowitt took a verbatim transcript of his questions and Caiello's answers with regard to cash on hand during the years under investigation at an interview in the store on July 22, 19 64. After reading the answers back to Caiello, Kowitt testified that he asked Caiello "if he would object to signing this statement and he said that it was the truth and he had no objection and signed it.

9 See footnote 6, supra, and accompanying text.

Concurring Opinion

FEINBERG, Circuit Judge (concurring):

I concur on the authority of United States v. White, slip op. 89 (2d Cir. Oct. 10, 19 69), petition for cert. filed, 38 U. S. L. W. 3212 (U. S. Dec. 1, 19 69); United States v. Mackiewicz [68-2 USTC 9461], 401 F. 2d 219 (2d Cir.), cert. denied, 393 U. S. 923 (1968), and my concurrence there, 401 F. 2d 226; and United States v. Squeri [68-2 USTC 9493], 398 F. 2d 785 (2d Cir. 1968).

 

 

[69-2 USTC 9675]United States of America, Plaintiff-Appellee v. Francis D. White and Gertrude W. White, Defendants-Appellants

(CA-2), U. S. Court of Appeals, 2nd Circuit, Docket Nos. 33446-7, 417 F2d 89, 10/10/69

[Code Sec. 7201]

Crimes: Tax evasion: Criminal investigation: Voluntary cooperation with agents: Noncustody case: Constitutional rights: Admissibility of evidence.--Taxpayer was not entitled to suppress evidence against him based on the violation of his constitutional rights under the Miranda rule where he voluntarily cooperated with IRS agents and was interviewed at his office, with his accountant present, and at the accountant's office. Other evidence from which it could be inferred that he had unreported income was properly admitted.

[Code Secs. 7201 and 7206]

Crimes: Tax evasion: False and fraudulent returns: Pyramiding of penalties.--Taxpayer's conviction for tax evasion and for signing false returns was upheld. However, since the false returns were steps in the consummation of the greater offense--attempt to defeat or evade tax--additional fines under Sec. 7206 were vacated.

Richard B. Buhrman, Johnnie M. Walters, Assistant Attorney General, Joseph M. Howard, Department of Justice, Washington, D. C. 20530, for plaintiff-appellee. J. F. Henry DeLange, Charles K. Rice, Albert R. Mugel, 720 Liberty Bank Bldg., Buffalo, N. Y., for defendants-appellants.

Before MOORE, HAYS and ANDERSON, Circuit Judges.

MOORE, Circuit Judge:

I. The primary point urged by appellants upon this appeal relates to the voluntariness with which they produced, during the investigation of their affairs by a Special Agent of the Internal Revenue Service Intelligence Division, the great bulk of the evidence used against them at trial. During the investigative sessions at which the incriminating evidence came out, appellants were not told that a possibility then existed of criminal prosecution for tax evasion. The Special Agent admonished Francis White (referred to as "Francis") 1 that he was not required to answer any questions or turn over any personal records, but did not state specifically that anything he said might be used against him in a criminal prosecution. He was not advised of his right to counsel, nor was he advised that counsel would be furnished in the event he qualified as an indigent. Thus appellant argues that he was not given the full Miranda warnings at the point when investigation of his affairs became essentially accusatory, see Escobedo v. State of Illinois, 378 U. S. 478 (1964), and that his Fourth and Fifth Amendment rights were therefore abridged by the admission of evidence garnered through the investigative interviews.

The case presented by appellants does not differ in any essential from the situation confronting this Court in United States v. Mackiewicz [68-2 USTC 9461], 401 F. 2d 219 (2d Cir. 1968) and in United States v. Squeri [68-2 USTC 9493], 398 F. 2d 785 (2d Cir. 1968). In Mackiewicz we held that questioning by a Special Agent under circumstances almost identical to these here presented did not create an atmosphere sufficiently coercive to generate the necessity for the full range of warnings contemplated by the Miranda decision for essentially "custodial" interrogations. Francis was interviewed by the Special Agent at his own place of business in the presence of his accountant, and was interviewed once more in the office of his accountant, who was again present throughout the interview. Under these circumstances, Francis's confrontations with the Service's Intelligence Division was not inherently coercive, and he and his wife were not entitled to suppress evidence against them garnered from that confrontation on the basis of Miranda. In accord with this view are decisions in seven other Circuits: Morgan v. United States [67-1 USTC 9449], 377 F. 2d 507 (1st Cir. 1967); United States v. Mancuso [67-2 USTC 9487], 378 F. 2d 612 (4th Cir. 1967); Agoranos v. United States [69-1 USTC 9316], 409 F. 2d 833 (5th Cir. 1969); United States v. Maius [67-2 USTC 9521], 378 F. 2d 716 (6th Cir. 1967); Cohen v. United States [69-1 USTC 9132], 405 F. 2d 34 (8th Cir. 1969); Feichtmeir v. United States [68-1 USTC 9217], 389 F. 2d 498 (9th Cir. 1968); and Hensley v. United States [69-1 USTC 9146], 406 F. 2d 481 (10th Cir. 1969). Contra, United States v. Dickerson [69-2 USTC 9556], 413 F. 2d 1111, 38 U. S. L. W. 2133 (7th Cir., July 28, 19 69).

Aside from the Miranda-based decisions, appellant asserts the novel proposition that the government's right to introduce evidence obtained from Francis is even more narrowly circumscribed by the requirements for voluntariness of "confessions" under 18 U. S. C. 3501. That section lists five factors which a Judge should consider in his determination of voluntariness before submission of the evidence to the jury. From this appellant argues that disclosures and evidence sufficiently voluntary to be admissible under Miranda nevertheless may be involuntary as a matter of law under the Omnibus Crime Control and Safe Streets Act of 1968.

That contention does not require extended discussion. It is sufficient to note that neither the language of 3501 nor its legislative history indicate that Congress intended to expand the protection of potential criminal defendants beyond the scope of protection established by the Miranda line of cases.

II. Special Agent Martin, whose investigation in 1962 formed the basis of the prosecution against the Whites in this case, testified at trial concerning his investigation. Martin also had testified for the Government before the grand jury in 1965 but no record of his grand jury testimony was kept. However, minutes were kept and a record made of the testimony of all defense witnesses at the grand jury hearing.

Appellant argues, on authority of our decision in United States v. Youngblood, 379 F. 2d 365 (2d Cir. 1967), that a defendant in a criminal case is entitled to a transcript of all testimony against him given before the grand jury. We noted in Youngblood that transcripts of testimony at grand jury hearings in this Circuit are now regularly kept and filed away, but that this "may not always have been the practice, and where it has not been we do not imply that a defendant is entitled as of right to minutes that do not exist." 379 F. 2d at 370, fn. 4.

Had this failure occurred subsequent to our decision in Youngblood, supra, very possibly a different question would have been presented. However, Youngblood was given prospective application only, and the indictment against the Whites was returned two years prior to that decision. Minutes of Agent Martin's testimony were not made at the grand jury hearing in 1965. Since they did not exist at the date of decision in Youngblood, his trial testimony cannot now be held improperly admitted on that basis.

III. The Government adduced evidence at trial showing that Francis maintained a separate personal bank account in a neighboring town in which he deposited large amounts of currency from unidentified sources. The evidence was offered to show the wilfulness of his conduct in seeking to conceal his financial activities or mislead others who had an interest in his financial affairs. Spies v. United States [43-1 USTC 9243], 317 U. S. 492, 499 (1943). White's accountant, who prepared his tax returns, was unaware of the separate account and the large cash deposits. Appellant contends that this evidence was prejudicial and improperly admitted, suggesting that the jury may have erroneously inferred that these cash deposits represented still other unreported income, unrelated to the specific items upon which the evasion indictments were based.

In cases involving income tax evasion, evidence purporting to show the wilfulness of misconduct through extensive dealings in cash is properly admissible. E.g., Gariepy v. United States [51-1 USTC 9318], 189 F. 2d 459, 463 (6th Cir. 1951); Schuermann v. United States [49-1 USTC 9281], 174 F. 2d 397, 398 (8th Cir. 1949). The Government's proof showed that a large number of checks were cashed by the Whites throughout the period covered by the indictment instead of being deposited to the proper business accounts. Cash deposits in the separate bank account thus had a substantial tendency to prove their intent in converting unreported income received in check form into cash. The value of this evidence as proof of a material element in the case overcame whatever prejudice might have operated against appellants through improper inferences made by the jury on the evidence, and the evidence was therefore properly admitted.

IV. Several items charged in the indictment as unreported income were in the form of checks from a corporation controlled by Francis. The Government introduced evidence that those payments were entered on the paying corporation's books as expense items. This evidence was offered for the purpose of showing that the payments were not repayments of loans or other items which would not represent reportable income to the Whites. Appellants argue that this evidence was improperly admitted because it may have raised the inference of misdealing by the corporations, which was not charged in the indictment. However, as was the case with the cash deposits, any prejudicial inference was overbalanced by the positive value of the evidence in showing a material element of the case, i.e., the income nature of the Whites' receipts, and its admission was not reversible error.

V. The indictment brought by the Government against the Whites charged each defendant with (a) four counts (for the years 1958, 1959, 1960, 1961) of wilful attempts to evade or defeat income taxation under 26 U. S. C. 7201, and (b) four separate counts (for the same years) under 26 U. S. C. 7206(1) for making and subscribing documents which contain "a written declaration that it is made under the penalties of perjury, and which he [the taxpayer] does not believe to be true and correct as to every material matter." The documents were signed joint tax returns for the four years of the indictment period. The prosecutions under 7201 were based on understatements of income and overstatements of expenses in the four-year series of filed returns, together with proof of overt acts by both defendants tending to show the wilfulness of their affirmative efforts to evade the tax.

The jury returned a verdict of guilty on all eight counts against each defendant. Each was subsequently sentenced to the maximum fine of $10,000 for each violation of 7201, totaling $40,000. Each was additionally sentenced to the maximum fine of $5,000 for each violation of 7206(1), which provides a felony penalty for perjured returns whether or not a wilful attempt to evade or defeat payment of taxes is shown. Total fines under this section were $20,000 for each defendant. We affirm the convictions on all counts, but the additional fines for violation of 7206(1) must be vacated. United States v. Lodwick [69-2 USTC 9586], 410 F. 2d 1202, 23 AFTR 2d 69-1760 (8th Cir., May 22, 19 69); Gaunt v. United States [50-2 USTC 9412], 184 F. 2d 284, 290 (1st Cir. 1950), cert. denied 340 U. S. 917, rehearing denied 340 U. S. 939 (1951). Under the circumstances of this case, the perjured returns were "incidental step[s] in the consummation of the completed offense of attempted defeat or evasion of tax," Gaunt, supra at 290, and as such each offense constituted a "crime within a crime" under the lesser included offense doctrine. Id. Both offenses charged were properly submitted simultaneously to the jury, but the cumulative fines, insofar as they exceeded the maximum possible fine under the greater offense charged in 7201, constituted an unauthorized pyramiding of penalties.

Section 7206(1), although it charges an offense separate and distinct in itself, is only one part in a comprehensive statutory scheme to prohibit and punish fraud occurring in the assessment and collection of taxes by the government. Section 7201 is the inclusive section, prohibiting all attempts to evade or defeat any tax in any manner, and such an attempt is punishable as a felony. There follows a series of sections prohibiting specific methods of fraud in the collection and payment of taxes, all of which are separately punishable standing alone. Among these are 7203, 7206 and 7207, all directed against the taxpayer. Other sections are directed at persons involved in the process of tax collection. Section 7203 prohibits the failure to file a return, supply information or pay a tax. Section 7207 prohibits the filing of fraudulent returns, statements or other documents required by the Service. Both these sections have been held by the Supreme Court to constitute, under appropriate circumstances, lesser offenses included within the prohibition of 7201. Sansone v. United States [65-1 USTC 9307], 380 U. S. 343 (1965). Section 7206(1) provides penalties for signing, under oath, false returns or statements made in the process of tax collection. The offense charged is perjury, the operative element is the signature under oath, and the felony penalties reflect the seriousness of this method of committing fraud. Thus the perjury offenses charged under 7206 may separately form the basis for an indictment; but where proof of wilfully attempted evasion under 7201 also proves, as an incident to the wilful evasion, the preparing and subscribing of a fraudulent return, the specific form of fraudulent conduct merges into the inclusive fraud charged under 7201. To cumulate penalties beyond the maximum authorized by 7201 is, therefore, improper under these circumstances, and the $20,000 in additional fines assessed against each appellant on the 7206(1) counts must be vacated.

VI. The sentencing court suspended the additional sanction of imprisonment against the Whites, placing them both on probation for five years. Continuation of probation was expressly conditioned, however, upon their payment, within 30 days, of all existing tax liabilities together with full interest and all penalties, including the fraud penalties.

In imposing these conditions, the trial court referred to information it had received from the Internal Revenue Service assessing appellants' civil liability for the four years covered by the indictment. However, that figure represented only a computation by the Service, and the Government concedes that the appellants here are entitled to litigate that civil liability before payment. It is further conceded that the conditions imposed on appellants' probation would hamper the determination by legal process of the civil liability. For these reasons, the conditions attached to probation must be removed. United States v. Taylor [62-2 USTC 9590], 305 F. 2d 183 (4th Cir.) cert. denied 371 U. S. 894, rehearing denied 371 U. S. 943 (1962); United States v. Stoehr [52-1 USTC 9299], 196 F. 2d 276 (3d Cir.) cert. denied 344 U. S. 826 (1952).

The judgment of the District Court is modified by striking therefrom the $40,000 in fines applicable to the convictions under 26 U. S. C. 7206(1), and is remanded for removal of the conditions to probation; in all other respects, the judgment is affirmed.

1 Both Francis and Gertrude White were convicted on the evidence produced in Agent Martin's investigation. The books, records and statements which appellants sought to suppress, however, were turned over to the investigator as a result of, and during, interviews with Francis alone. Mrs. White does not claim any failure of consent or any right to suppress evidence against her based on failure of consent, since their joint returns, for which they are both liable, formed the basis of the prosecution.

 

 

[70-1 USTC 9374]United States of America, Appellee v. Elton M. Brevik, Appellant

(CA-8), U. S. Court of Appeals, 8th Circuit, No. 19,726, 422 F2d 449, 3/11/70 , Aff'g unreported District Court opinion

[Code Sec. 7201]

Evasion of taxes: Miranda warnings in non-custodial hearing: Witnesses' testimony of other crimes: Prejudice: Evidence.--The taxpayer was convicted of evading income taxes for 1961 and 1962. On appeal, he pleaded the Government's failure to give him the Miranda warnings at a pre-trial meeting, and witnesses' remarks implying he was guilty of other crimes, as grounds for reversal. Held, the Miranda warnings were unnecessary as the evidence obtained at the meeting was insignificant and the warnings are not required at non-custodial hearings, such as the one here. Cohen v. U. S., 69-1 USTC 9132, 405 F. 2d 34, followed. Held, none of the remarks made by the Government's witnesses were sufficiently prejudicial, in light of all the evidence, to require reversal. The trial court was affirmed.

Rob ert G. Renner, United States Attorney, Ralph E. Koenig, Assistant United States Attorney, Minneapolis, Minn., for appellee. Richard A. Rohleder, E-903 First National Bank Bldg., St. Paul, Minn., for appellant.

Before MATTHES, GIBSON and LAY, Circuit Judges.

GIBSON, Circuit Judge:

Elton M. Brevik was tried in November, 1968 on two counts of income tax evasion, one each for 1961 and 1962, before Judge Phillip Neville in the United States District Court for Minnesota. The jury returned verdicts of guilty on both counts and Brevik was sentenced to three years imprisonment. Motions for judgment n.o.v. and in the alternative for new trial were denied and the defendant appealed. Since Brevik does not challenge the sufficiency of the evidence upon which he was convicted and since proof of his guilt was in fact substantial we need only discuss those facts germane to the two questions of law upon which this appeal is based.

Brevik contends first that his statements to a special agent of the Internal Revenue Service were obtained in violation of the guidelines laid down by the United States Supreme Court in Miranda v. Arizona, 384 U. S. 436 (1966), and should not have been received in evidence, and second that testimony of several other government witnesses and exhibits related thereto were irrelevant and prejudicial and improperly admitted into evidence.

The first contention arises out of testimony given at trial by government witness and IRS agent Samuel P. Doonan. Agent Doonan testified to statements made by the defendant at an interview which occurred on August 9, 19 65 in the Minneapolis office of the IRS. Present at the interview were Special Agent Doonan, Revenue Agent Earl Williams, and the defendant. Agent Doonan had previously requested a meeting with Brevik and requested that Brevik bring his personal business records. It is undisputed that Brevik's compliance with these requests was voluntary. At the meeting itself Brevik's freedom of movement, including the right to leave, was not restricted. Agent Doonan testified that he informed Brevik before proceeding with the interview that Brevik had a right under the Fifth Amendment not to furnish any information to him or to talk to him. However, Agent Doonan did not advise Brevik of his right to counsel. Before Agent Doonan testified to the substantive events at the August 9th interview Brevik's counsel objected to further testimony regarding the interview on the ground that under the Miranda decision Brevik was entitled to be informed of his right to counsel and any statements made without such advice being given are not admissible in evidence. This objection was overruled.

Agent Doonan testified to only two statements made by Brevik at the interview. The first was that Brevik told him that in compliance with the request to bring in his records, he (Brevik) had placed them in the glove compartment of his automobile from which they were stolen while his car was parked at the airport where he had left it while temporarily out of town. Agent Doonan testified also that Brevik attempted to explain the payment of a check in the amount of $2500.00 to his brother-in-law, James P. Korstad, drawn on the corporate account of Selective Investment Corporation, as being in exchange for financial advice regarding the corporate structure of the company. Korstad had previously testified that the payment was reimbursement of a long standing personal debt.

In light of the totality of the evidence proving defendant's purposeful tax evasion, these statements testified to by Agent Doonan taken together amount to only an insignificant part of the evidence upon which the defendant was convicted and were used largely to question Brevik's credibility rather than as substantive proof of his guilt. Furthermore, the Court's ruling admitting this evidence was correct. We held in Cohen v. United States [69-1 USTC 9132], 405 F. 2d 34 (1968), cert. denied, 394 U. S. 943 (1969), that where an interview is of a non-custodial nature, as was concededly the case here, statements elicited or volunteered at such an interview are not tainted or inadmissible due to failure to give all of the Miranda warnings, even where such interview has reached the accusatory stage. Cohen, supra, like the case before us, was a case involving a non-custodial interview by IRS agents. Virtually all the circuits have ruled on the issue of the application of the Miranda warnings to non-custodial tax investigations and only the 7th Circuit in U. S. v. Dickerson [69-2 USTC 9556], 413 F. 2d 1111 (1969) opposes the rule that Miranda does not apply to such situations. The case of Mathis v. U. S. [68-1 USTC 9357], 391 U. S. 1, (1968), cited by defendant, is not applicable since it involved a clearly custodial situation. In light of Cohen, supra, and the many cases in the other circuits supporting the proposition in Cohen, we hold that it was not error to admit the testimony of Agent Doonan.

Defendant next objects to the admission of certain testimony given by four government witnesses, Frank Kosanda, Raymond F. Kelly, Joe Thompson and Vernie Lysenzer. The crux of the claim is that certain segments of the testimony of these witnesses and connected exhibits prejudicially accused the defendant of prior criminal misconduct in violation of the general rule observed in Hartman v. U. S. [54-2 USTC 9522], 215 F. 2d 386 (8th Cir. 1954) and Kempe v. U. S., 151 F. 2d 680 (8th Cir. 1945), cert. denied, 331 U. S. 843 (1947), 1 and as a result such evidence was improperly admitted.

Frank Kosanda testified that as an attorney in Grand Forks, North Dakota he had incorporated the Garden State Investment Company. This testimony is connected with the rest of the case only in the fact that Garden State Investment Company was one of the companies from which money was apparently taken by Brevik without reporting it as income. This testimony may be irrelevant but it is not prejudicial, does not violate the rule against admission of evidence tending to show that a defendant has committed other crimes, and in light of all the evidence, its admission, if error, was surely harmless.

Witnesses Kelly and Thompson testified over objection that they were North Dakota farmers who were solicited by Brevik and who bought stock in Garden State Investment Company. Lysenzer only testified that Brevik visited him, at which point, after objection from defense counsel, the trial court prohibited further evidence of this sort, saying that it was cumulative and that if it were continued it might become prejudicial in that it implied that Brevik was involved in dishonest stock transactions, a crime which was not part of the indictment in the present case. The trial court observed that the evidence admitted to that point was not prejudicial.

On the whole we agree with the trial court that very little of this testimony was important and none was significantly prejudicial considered in light of the totality of the evidence. There might be some question regarding the government's purpose in introducing this testimony and some difficulty in determining its relevance. However, the government does suggest one plausible explanation. The government contends that it was necessary to show that monies taken from corporate accounts were in fact corporate funds and not personal finances. Thus, the evidence is probably relevant, and even if irrelevant and erroneously admitted, is harmless error in light of the overwhelming evidence of defendant's guilt. As to the allegation that the testimony, even if relevant, violates the general rule against admission of evidence which tends to implicate a defendant in other criminal activity, it is difficult to see how this testimony does so. At most it appears to raise a bare implication of possible dishonest stock transactions, and in fact no testimony was received other than the statements that stock was sold for significant sums of money. Only in one instance was possible dishonest activity more clearly raised. Joe Thompson testified that the original check used to purchase stock from Brevik was in the courthouse in Grafton, North Dakota as part of the evidence in a lawsuit there. Defense counsel objected to this testimony and the objection was sustained, the testimony stricken from the record, and the jury instructed to disregard it. Much more damaging evidence implicating Brevik in violations of the Minnesota Securities Act was elicited by Brevik's own counsel in cross examining a government witness who testified under cross examination that Brevik had pleaded guilty to such violations.

We find that most of the evidence complained of had relevance sufficient for admission and none was significantly prejudicial. Thus, it is our view that no error was committed, but even assuming, arguendo, that some error was committed, it was harmless.

Judgment affirmed.

1 In Hartman v. U. S., supra, at 393, the Court held that "In order for wrongful acts not included in a charge to be admissible to prove intent they must be of such a character that as a matter of logic they tend to demonstrate a criminal intent in the acts within the charge." Kempe v. U. S., supra, at 687 states the rule as: "The general rule is that in a criminal prosecution proof which shows or tends to show that the accused is guilty of the commission of other crimes and offenses at other times, even though they are of the same nature as the one charged in the indictment, is incompetent and inadmissible for the purpose of showing the commission of the particular crime charged. The accused is to be convicted, if at all, on evidence showing his guilt of the particular offense charged in the information. It is not competent to prove that the accused committed other crimes of a like nature for the purpose of showing that he would be likely to commit the crime charged in the information."

 

 

[69-1 USTC 9149]United States of America, Plaintiff-Appellee v. Ethel M. Beal, Defendant-Appellant

(CA-6), U. S. Court of Appeals, 6th Circuit, No. 18474, 404 F2d 58, 11/26/68, Aff'g unreported District Court decision

[Code Secs. 7201 and 7602(1)]

Tax evasion: Examination of books and witnesses: Accountant: Voluntary cooperation with IRS agents: Motion to suppress evidence: Defenses: Constitutionality.--In upholding the taxpayer's conviction for filing false and fraudulent returns for the taxable years 1959 through 1962, the Court of Appeals held that the District Court did not err in failing to suppress prior to trial, and by admitting at the trial, certain evidence obtained from the taxpayer and her accountant. The taxpayer conceded that the information derived from her accountant was voluntarily made available to IRS agents; there was no showing that the taxpayer's books and records, rather than the accountant's, were surrendered; the taxpayer's returns for the taxable years had not been subjected to prior audit; the examination of the taxpayer's records was authorized (Code Sec. 7602(1)); the taxpayer turned over her records without coercion or promise; and there was no indication that the taxpayer was ever subjected to in-custody questioning. District Court affirmed.

[Code Sec. 7201]

Tax evasion: Jury trial: Defenses: Prior contact with juror.--There was no evidence to support the taxpayer's contention that she was deprived of a fair trial by undisclosed prior contact of one juror with her and her hotel.

George I. Cline, United States Attorney, G. Wix Unthank, Assistant United States Attorney, Lexington, Ky., for plaintiff-appellee. William H. Beck, 404 Citizens Union Nat'l Bank Bldg., Lexington, Ky., for defendant-appellant.

Before EDWARDS and COFFIN, * Circuit Judges, and CECIL, Senior Circuit Judge.

PER CURIAM:

Appellant Beal was indicted for filing false and fraudulent income tax returns in each of four years--1959, 1960, 1961 and 1962--in violation of 26 U. S. C. 7201 (1964). The government served notice that it intended to proceed by net worth proofs to show understatement of income by over $51,000 and understatement of tax by over $21,000 in the four disputed years. The case was tried to a jury before the United States District Court for the Eastern District of Kentucky and appellant was found guilty on all counts and was thereafter sentenced to probation and a $2,500 fine on each count.

[Issues on Appeal]

On appeal appellant's counsel listed ten separate claims of reversible error, but at oral argument largely abandoned all except numbers IV, VII and VIII.

[Prior Contact with Juror]

As to appellant's question IV, wherein she asserts that she was deprived of a fair trial by undisclosed prior contact of one juror with her and her hotel, we have examined the appellate record and find it devoid of facts upon which appellant seeks to rely. Clearly, the claim was not advanced at trial and apparently no record was made pertaining to this issue on motion for new trial. If this evidence is newly discovered evidence, it cannot be asserted first at appellate hearing. See FED. R. CRIM. P. 33.

As to questions VII and VIII, appellant asserts that the District Judge erred in failing to suppress prior to trial, and by admitting at trial, certain evidence derived from appellant's accountant and from appellant herself. Appellant relies generally on the Fourth and Fifth Amendments in this regard. We have examined the entire record in this regard and find no constitutional violations or reversible error.

[Information Obtained from Accountant]

Appellant appears to concede that information derived from appellant's accountant was voluntarily made available to the Internal Revenue Service agents. The record does not show surrender of appellant's own books and records, as opposed to the accountant's own books and records. Appellant's tax returns for these disputed years had not been subjected to prior audit. Cf. Hinchcliff v. Clarke [67-1 USTC 9187], 371 F. 2d 697 (6th Cir. 1967).

[IRS Investigation]

Nor is any issue presented (or found in the record) which would show such violations pertaining to information derived from appellant herself. The examination of appellant's records was authorized by statute. 26 U. S. C. 7602(1) (1964). The District Judge found (on ample evidence) that appellant turned over her records without coercion or promise. See Eggleton v. United States [56-1 USTC 9108], 227 F. 2d 493 (6th Cir. 1955), cert. denied, 352 U. S. 826 (1956); Zap v. United States, 328 U. S. 624 (1946), rehearing denied, 329 U. S. 824, vacated and remanded on other grounds, 330 U. S. 800 (1947). There is no indication in this record that appellant was ever subjected to in-custody questioning. Cf. Miranda v. Arizona, 384 U. S. 436 (1966).

We have also examined the other six issues advanced on this appeal and find no reversible error.

Affirmed.

* Hon. Frank M. Coffin, United States Court of Appeals for the First Circuit, sitting by designation.

 

 

[69-1 USTC 9133] Rob ert M. Muse, Appellant v. United States of America, Appellee

(CA-8), U. S. Court of Appeals, 8th Circuit, No. 19,259, 405 F2d 40, 12/18/68, Aff'g unreported District Court opinion

[Code Sec. 7201]

Tax evasion: Tax investigation: Pre-custodial investigation: Constitutional rights.--The District Court did not err in admitting oral and written statements made by the taxpayer to a Special Agent who had warned the taxpayer that he had a right to remain silent, but had failed to warn him of his right to retain counsel. The taxpayer was not in custody, the statements were not obtained by misrepresentation, fraud or coercion, and were voluntarily given. Cohen v. U. S., (CA-8) 69-1 USTC 9132.

John L. Boeger, Morris A. Shenker, James F. Nangle, Jr., 408 Olive St., St. Louis, Mo., for appellant. John M. Brant, Mitchell Rogovin, Assistant Attorney General, Lee A. Jackson, Joseph M. Howard, Department of Justice, Washington, D. C. 20530, Veryl L. Riddle, United States Attorney, Irvin L. Ruzicka, Assistant United States Attorney, St. Louis, Mo., for appellee.

Before VAN OOSTERHOUT, Chief Judge; MEHAFFY and HEANEY, Circuit Judges.

HEANEY, Circuit Judge:

The defendant was indicted in three counts for willfully attempting to evade income taxes by filing false and fraudulent individual income tax returns for the years 1960, 1961 and 1962 in violation of 7201 of the Internal Revenue Code of 1954. He was found guilty on all counts and sentenced.

[Issue]

The question raised here is whether the District Court erred in refusing to exclude evidence obtained from the defendant by Internal Revenue Service Agents. We hold it did not.

[Pre-custodial Investigation]

A Revenue Agent of the Internal Revenue Service began an investigation of the defendant's returns in early 1964. He had been investigating the returns of the defendant's brother. He met twice with the defendant before referring the case to the Intelligence Division on February 24, 19 64. He told the defendant that the purpose of the investigation was to determine the defendant's correct tax liability.

On March 2, 19 64, the Revenue Agent and the Special Agent met with the defendant in the Special Agent's office. The Special Agent introduced himself as Special Agent and read the following warning:

"Under the Constitution of the United States you have the right to refuse to answer questions or make any statement which may tend to incriminate you under the laws of the United States. Anything you say, any evidence you produce may be used against you in any proceeding which may hereafter be undertaken by the United States."

The defendant replied that he understood. Several additional visits were made between the March meeting and October 14, 19 65. Incriminating statements and records were obtained at some of them. At the latter meeting, the Special Agent asked the defendant to sign a written statement. The defendant asked "what direction the investigation was going" and whether he needed a lawyer. The Special Agent replied that "it looked as if criminal prosecution would be recommended; that it was for the defendant to decide about retaining a lawyer and that the Internal Revenue Service Agents would not advise him one way or the other on the subject."

On October 28, 19 65, the defendant signed a statement containing oral admissions made by him during the course of the several meetings. In substance, the defendant admitted that he knew that each return understated his income by "several thousand dollars" and that he had filed the incorrect returns to protect his brother against an examination.

No statements as to the purpose of the investigation, nor warnings other than those stated, were given to the defendant at any time during the investigation.

[No Right to Warning]

We are convinced here, as we were in Cohen v. United States, No. 19181, 8th Cir. Dec. 18, 19 68, [69-1 USTC 9132] decided today, that the District Court did not err in receiving the defendant's oral and written statements in evidence. The defendant was not in custody and the statements were not obtained by misrepresentation, fraud or coercion, and were voluntarily given. The defendant's constitutional rights under the Fifth and Sixth Amendments were not violated.

Affirmed.

 

 

[69-1 USTC 9295]Taglianetti v. United States

Supreme Court of the United States, No. 446, 394 US 316, 89 SCt 1099, 3/24/69, Aff'g CA-1, 68-2 USTC 9479, 398 F. 2d 558

On Petition for Writ of Certiorari to the United States Court of Appeals for the First Circuit.

[Code Sec. 7201]

Criminal prosecutions: Tax evasion: Electronic surveillance: Government records: Constitutional safeguards.--The taxpayer's conviction for tax evasion was upheld. The taxpayer was not entitled to examine additional surveillance records obtained by the government by electronic means where the District Court had examined all the records in camera in order to determine if the government had correctly identified the taxpayer and had turned over to him each conversation in which he had participated. The in camera examination was an adequate safeguard of the taxpayer's Fourth Amendment rights.

Black, J., concurs in the result.

Raymond La Fazia, 111 Westminster St., 533 Industrial Bank Bldg., Providence, R. I., for petitioner. Erwin N. Griswold, Solicitor General, Mitchell Rogovin, Assistant Attorney General, Richard B. Buhrman, Department of Justice, Washington, D. C. 20530, for U. S.

PER CURIAM:

The petition for certiorari is granted and the judgment of the Court of Appeals is affirmed. 1 Following a jury trial in the District Court, petitioner was convicted on three counts of wilfully attempting to evade his income tax for the years 1956, 1957, and 1958. Following a remand to the District Court, the Court of Appeals affirmed the convictions. In the District Court on remand, the Government purported to turn over to petitioner all of his own conversations which had been overheard by means of unlawful electronic surveillance. 2 Petitioner argues that he was entitled to examine additional surveillance records because neither the Government nor the District Court was able to determine with certainty which conversations petitioner had been a party to. In fact, the District Court examined all the records in camera to ascertain if the Government had correctly identified petitioner's voice and had turned over to petitioner each conversation in which he had participated.

Nothing in Alderman v. United States, Ivanov v. United States, or Butenko v. United States, -- U. S. --, requires an adversary proceeding and full disclosure for resolution of every issue raised by an electronic surveillance. On the contrary, an adversary proceeding and disclosure were required in those cases not for lack of confidence in the integrity of government counsel or the trial judge, but only because the in camera procedures at issue there would have been an inadequate means to safeguard a defendant's Fourth Amendment rights. Here the defendant was entitled to see a transcript of his own conversations and nothing else. He had no right to rummage in government files. The trial court was asked only to identify those instances of surveillance which petitioner had standing to challenge under the Fourth Amendment exclusionary rule and to double-check the accuracy of the Government's voice identifications. Under the circumstances presented here, we cannot hold that "the task is too complex, and the margin for error too great, to rely wholly on the in camera judgment of the trial court."

MR. JUSTICE BLACK concurs in the result.

MR. JUSTICE MARSHALL took no part in the consideration or disposition of this case.

1 Although this petition for certiorari was not filed within the 30 days allowed by the Court's Rule 22(2), the time limitation is not jurisdictional, Heflin v. United States, 358 U. S. 415, 418, n. 7 (1959), and does not bar our exercise of discretion to consider this case.

2 Petitioner sought disclosure only of his own conversations and apparently lacks standing as to any others. "We do not understand appellant to argue that he has a right to inspect logs or memos of conversations in which he was not a participant. Indeed, that point he wisely conceded before the district court." 398 F. 2d, 558, 571.

 

 

[69-1 USTC 9132]Jerry M. Cohen, Appellant v. United States of America, Appellee

(CA-8), U. S. Court of Appeals, 8th Circuit, No. 19,181, 405 F2d 34, 12/18/68, Aff'g unreported District Court opinion

[Code Sec. 7201]

Tax evasion: Tax investigation: Pre-custodial interview: Constitutional rights.--Internal Revenue Agents, Revenue or Special, conducting tax investigations are not required to warn taxpayers who are not in custody of their constitutional right to remain silent or right to retain counsel. However, disclosures to Internal Revenue Service Agents, both Revenue or Special, must be entirely voluntary and must not be induced by coercion, fraud or misrepresentations.

John M. Bray, 1100 Federal Bar Bldg., 1815 H. St., N. W., Washington, D. C., Rob ert J. Koster, Cook, Murphy, Lance & Mayer, 611 Olive St., Suite 2106, St. Louis, Mo., for appellant. John M. Brant, Richard C. Pugh, Acting Assistant Attorney General, Lee A. Jackson, Joseph M. Howard, Department of Justice, Washington, D. C. 20530, Veryl L. Riddle, United States Attorney, Irvin L. Ruzicka, Assistant United States Attorney, St. Louis, Mo., for appellee.

Before MATTHES, MEHAFFY and HEANEY, Circuit Judges.

HEANEY, Circuit Judge:

The defendant was indicted in three counts for willful failure to file individual income tax returns for 1960, 1961 and 1962 in violation of 7203 of the Internal Revenue Code of 1954, and in eight counts for knowingly filing false employer's quarterly tax returns for 1961 and 1962 in violation of 7201. He was found guilty on all counts and was sentenced.

[Issue]

The question raised here is whether the District Court erred in refusing to exclude evidence obtained from the defendant by Internal Revenue Service Agents--evidence which the defendant contends was secured by misrepresentation and in violation of his constitutional rights under the Fifth (Miranda) 1 and Sixth (Escobedo) 2 Amendments. We affirm.

[Pre-Custody Investigation]

A Special Agent, 3 assigned to investigate the defendant's failure to file tax returns, telephoned the defendant on August 19, 19 63, and told him he was a Special Agent who investigated irregularities in taxes. He asked the defendant a few questions and requested an appointment.

On September 9, 19 63, the Special Agent went to the defendant's office and told him that the St. Louis Office of the Internal Revenue Service had no record of income tax returns filed by the defendant and asked where they had been filed. The defendant replied that he had filed returns in Detroit in 1959, but had not filed returns after that. This was the first time that the Special Agent knew that no returns had been filed. The Special Agent then told the defendant that a Revenue Agent had been assigned to "examine his income tax liability, if any" and that the Revenue Agent would make the tax examination, and that he, the Special Agent, would conduct an audit. The Special Agent also learned, at this meeting, that the defendant was the sole proprietor of the United Heating Service.

The agents visited the defendant's office singly or together on September 26, 19 63, June 3, 19 64, September 9, 19 64, March 16, 19 65, August 10, 19 65 and September 16, 19 65. On most occasions, they obtained records used against the defendant.

It was at the second visit, on June 3, 19 64, that the defendant was first advised that he need not answer any questions which tended to incriminate him. He responded to this warning by saying that he understood but saw no reason not to answer. The warning was repeated at an August 10, 19 65, meeting at the defendant's office. The defendant again answered the questions put to him by the agents.

On April 6, 19 66, the taxpayer went to the Internal Revenue Service office for a formal interview. He did so in response to a letter which told him he could bring an attorney. He was advised for the first time at this meeting that the Special Agent was a criminal investigator. He was also advised for the first time that he had a right to counsel, but was not told that counsel would be provided for him.

On the basis of this record, we are convinced that the defendant's records and statements were not obtained by misrepresentation, fraud or coercion, as those terms were understood pre-Escobedo and Miranda, and were voluntarily given in the same sense.

While there is District Court authority for the view that Internal Revenue Service Agents have an affirmative duty to inform a taxpayer that he is the subject of a criminal investigation in circumstances comparable to those here, 4 the United States Courts of Appeals have uniformly held to the contrary. 5 We follow the latter cases but reiterate our warning in White v. United States, 395 F. 2d 170 (8th Cir. 1968), that agents must not affirmatively mislead a taxpayer into believing that the investigation is exclusively civil in character and will not lead to criminal charges.

[Miranda Warning]

We turn to the question of whether the failure to give a Miranda warning, or a modified version thereof, made the evidence obtained inadmissible.

We indicated by way of dictum in Frohmann v. United States [67-2 USTC 9588], 380 F. 2d 832 (8th Cir. 1967), and held in White, that a special investigator for the Alcohol and Tobacco Tax Division of the Internal Revenue Service conducting a pre-custody investigation need not warn a taxpayer of his constitutional rights as enunciated in Escobedo and Miranda. We did not distinguish in either case between investigations conducted by the Audit Division, usually civil, and those conducted by Special or Intelligence Agents, usually criminal. Nor did we attempt to draw a line between the investigatory or accusatory stage of such investigations.

We are now faced with the question of whether we will apply the dictum in Frohmann and the holding in White to pre-custodial inquiries by Special Agents of the Internal Revenue Service, including situations in which the inquiries may have reached the accusatory stage.

District Courts in the Tenth, Fifth, Third and Seventh Circuits have held that warnings are required at the point the investigation reaches the accusatory stage or becomes criminally oriented. They have indicated that this stage is often reached when a Special Agent is assigned to the case 6 United States v. Turzynski [67-2 USTC 9489], 268 F. Supp. 847 (N. D. Ill. 1967), is recognized as the leading case for this point of view.

In Turzynski, as a result of a civil investigation, the taxpayer's case was turned over to the criminal division of the Internal Revenue Service. The taxpayer was not informed of this shift of focus and continued to furnish the Special Agent with records and interviews. The taxpayer was given no warning of possible criminal prosecution until the investigation was completed and he was sent a letter inviting him to a formal conference. The letter informed him that he could bring counsel. The taxpayer reported without counsel. The agents, however, refused to continue until the taxpayer retained counsel. The court said:

"* * * Once a taxpayer becomes the subject of a criminal tax investigation, as evidenced by the referral of the investigation to the Intelligence Division or otherwise, our adversary process of criminal justice has become directed against him as a potential criminal defendant. Any evidence obtained from him is admissible only if the taxpayer furnished it after knowingly and voluntarily waiving his constitutional rights and privileges. * * *

* * *

"To hold otherwise would lead to the anomolous conclusion that a person suspected of bank robbery, sale of narcotics, murder, rape or other serious crime is entitled to greater protection of his constitutional rights than a person suspected of violating the internal revenue laws. For when the silent transition from civil to criminal investigation takes place in a tax case, the taxpayer being interrogated and asked to furnish his books and records is just as surely a prime suspect and candidate for criminal prosecution as the individual under interrogation as a suspect for other crimes."

Id. at 850-51.

[Courts of Appeals' Decisions]

The Courts of Appeals, that have considered the matter since Escobedo, have held, in a variety of fact situations, that warnings need not be given in pre-custodial interview. 7 The reasoning of Judge Lumbard in United States v. Squeri [68-2 USTC 9493], 398 F. 2d (2d Cir. 1968), appears to reflect the views (often unexpressed) of the Circuits that have considered the question:

"* * * [W]e reject the view, adopted by a few district courts in other circuits, that IRS agents must give the Miranda warnings, even though there is no custodial interrogation, if the investigation has reached the accusatory stage. * * * The Fifth Amendment privilege prohibits the government from compelling a person to incriminate himself. It was the compulsive aspect of custodial interrogation, and not the strength or extent of the government's suspicions at the time the questioning was conducted, which led the court to impose the Miranda requirements with regard to custodial questioning. We believe that the presence or absence of compelling pressures, rather than the stage to which the government's investigation has developed, determines whether the Miranda requirements apply to any particular instance of questioning."

Id. at 790.

[Present IRS Procedure]

On November 26, 19 68, the Internal Revenue Service announced a revised procedure for advising a taxpayer of his rights during an investigation conducted by a Special Agent of the Internal Revenue Service, Intelligence Division.

"* * * At the initial meeting with a taxpayer, a Special Agent is now required to identify himself, describe his function, and advise the taxpayer that anything he says may be used against him. The Special Agent will also tell the taxpayer that he cannot be compelled to incriminate himself by answering any questions or producing any documents, and that he has the right to seek the assistance of an attorney before responding.

"Previously, the Special Agent identified himself and described his function at the first meeting with the taxpayer but was not required to give further advice unless the taxpayer was in custody or the investigation proceeded beyond the pre-liminary stage.

"IRS has made no change in its existing instructions that if it becomes necessary to interview a person who is in custody, an Agent must give a comprehensive statement of rights before any interrogation. This statement warns the person in custody that he may remain silent and that anything he says may be used against him.

"A person in custody also must be told that he has the right to consult or have present his own counsel before making a statement or answering any questions, and that if he cannot afford counsel he can have one appointed by the U. S. Commissioner."

IRS News Release IR-949, November 26, 19 68.

The procedures outlined in the instructions are a step forward in tax admin istration and will be among the factors considered by this Court in determining whether the nature of an investigation has been misrepresented. They fall short, however, of extending to the taxpayer the protections set forth in Escobedo and Miranda.

The admin istration of the new Internal Revenue Service procedure will raise practical problems. In some instances, the Revenue Agents will have obtained the evidence necessary to obtain a conviction before referral; in others, Revenue Agents might be encouraged to expand their inquiries. Furthermore, a determination as to when the right to warnings attach should not depend on the title and function of the official investigator. United States v. Mathis [68-1 USTC 9357], 391 U. S. 1 (1968); United States v. Mackiewicz [68-2 USTC 9461], (2d Cir. July 10, 19 68), cert. denied, 37 U. S. L. Week 3158 (U. S. Oct. 28, 19 68); Note, 33 U. Chi. L. Rev. 134, 147-48 (1965).

To meet these problems, Law Review commentary recommends that warnings be optional with the Internal Revenue Service depending on whether there is a desire to preserve the right to use any evidence obtained in a criminal prosecution. If it had this desire, full warnings would be required. 8

If a taxpayer is entitled to be warned of his Fifth and Sixth Amendment rights in a non-custodial tax investigation, the Law Review recommendations would be meritorious. While the suggested procedure would impose additional admin istrative tasks, 9 it would be fair to the taxpayer and susceptible of review. We do not require it, however, because we do not believe that the taxpayer is so entitled.

[No Right to Warning]

To summarize, we hold that the Internal Revenue Service Agents, Revenue or Special, are not required to warn taxpayers who are not in custody of their Fifth or Sixth Amendment rights.

We also reemphasize the views that we expressed in White that disclosures to Internal Revenue Service Agents, Revenue or Special, must be entirely voluntary and must not be induced by coercion, fraud or misrepresentations.

Affirmed.

1 Miranda v. Arizona, 384 U. S. 436 (1966).

2 Escobedo v. Illinois, 378 F. 2d 767 (1964).

3 Revenue Agents undertake routine civil audits in an attempt to ascertain if, in fact, there has been a deficiency. The Revenue Agent, in the normal course, is not searching for evidence of fraud. If, however, the Revenue Agent discovers the possible existence of fraud, the matter is turned over to his superiors who refer the case to the Intelligence Division. The Intelligence Division then determines whether a fraud investigation is warranted. If a decision is made to commence a fraud investigation, a Special Agent is placed in charge. The Special Agent is a trained criminal investigator. His duty is to determine whether the taxpayer has, in fact, committed fraud. Both the Special Agent and Revenue Agent have virtually unreviewable discretion to dismiss the criminal aspects of a case while they are in charge. Duke, Prosecutions for Attempts To Evade Income Tax: A Discordant View of a Procedural Hybrid, 76 Yale L. J. 1, 34-35 (1966); Hewitt, The Constitutional Rights of the Taxpayer in a Fraud Investigation, 44 Taxes 660, 661-62 (1966).

4 United States v. Wheeler [57-2 USTC 9752], 149 F. Supp. 445, 450 (W. D. Pa. 1957), rev'd on other grounds, [58-2 USTC 9626] 256 F. 2d 745 (3d Cir.), cert. denied, 358 U. S. 873 (1953):

"* * * [T]he law distinguishes between failure on the part of a government investigator to disclose the purpose of his investigation at its inception when suspicion of criminal wrongdoing exists and the discovery of criminal wrongdoing in the course of a routine investigation. * * *"

The former constitutes misrepresentation. United States v. Walrich, 129 F. Supp. 528 (S. D. N. Y. 1954). Although fraud was suspected from the outset the agents told the defendant that it was a routine examination. The court held that this was a misrepresentation. United States v. Guerrina [53-1 USTC 9369], 112 F. Supp. 126 (E. D. Pa. 1953), modified, [55-1 USTC 9143] 126 F. Supp. 609 (E. D. Pa. 1955).

5 United States v. Mackiewicz 68-2 USTC 9461, (2d Cir. July 10, 19 68), cert. denied, 37 U. S. L. Week 3158 (U. S. Oct. 28, 19 68); United States v. Sclafani [59-1 USTC 9357], 265 F. 2d 408, 414 (2d Cir. 1959), cert. denied, 360 U. S. 918 (1960); United States v. Frank [57-1 USTC 9675], 245 F. 2d 284, 286 (3d Cir. 1957), cert. denied, 355 U. S. 819 (1957). See, Hanson v. United States [51-1 USTC 9118], 186 F. 2d 61, 65-66 (8th Cir. 1950).

6 United States v. Wainwright [68-1 USTC 9311], 284 F. Supp. 129 (D. Colo. 1968); United States v. Kingry [67-1 USTC 9262], (N. D. Fla. January 6, 19 67); United States v. Gower [65-2 USTC 9752], (M. D. Pa. August 27, 19 65). See, Andrews, The Right To Counsel In Criminal Tax Investigations Under Escobedo And Miranda: The "Critical Stage," 53 Iowa L. Rev. 1074, 1111-1116 (1968); Comment, 53 Iowa L. Rev. 957, 962 (1968).

7

FIRST CIRCUIT:

Taglianetti v. United States [68-2 USTC 9479], (1st Cir., July 18, 19 68), petitioner for cert. filed, 37 U. S. L. Week 3081 (U. S. Aug. 28, 19 68) (No. 446); Spinney v. United States [67-2 USTC 9738], 385 F. 2d 908 (1st Cir. 1967), cert. denied, 390 U. S. 921, 19 L. Ed. 2d 981 (1968); Schlinsky v. United States [67-2 USTC 9493], 379 F. 2d 735 (1st Cir.), cert. denied, 389 U. S. 920 (1967); Morgan v. United States [67-1 USTC 9449], 377 F. 2d 507 (1st Cir. 1967).

In each of these cases, the defendant was warned of his right to remain silent and was told that anything he stated could be used against him. In none of them was he advised of his right to counsel or to have counsel appointed for him. The language of the Court in Spinney indicates, however, that it would not necessarily require that any of the Miranda warnings be given to a taxpayer being interviewed in home or an Internal Revenue Service office.

"* * * [W]here one is legally free, albeit at the risk of unpleasant consequences, to reject the government's invitation to appear and participate in an I. R. S. interview, the requirements enumerated in Miranda do not apply. * * *

`. . . the background of Miranda demonstrates that it was the product of the Court's concern with the difficulty of protecting persons in the custody of the police from coercive interrogation tactics carried on in secret. * * * Defendant makes no assertion, nor could he, that he was not free to walk out of the Internal Revenue office at any time. * * *'" Spinney v. United States, 385 F. 2d at 910.

SECOND CIRCUIT:

United States v. Marcus [68-2 USTC 9599], (2d Cir. September 20, 19 68); United States v. Dawson [68-2 USTC 9527], 400 F. 2d 194 (2d Cir. 1968); United States v. Squeri [68-2 USTC 9493], 398 F. 2d 785 (2d Cir. 1968); United States v. Mackiewicz [68-2 USTC 9461], (2d Cir. July 10, 19 68), cert. denied, 37 U. S. L. Week 3158 (U. S. Oct. 28, 19 68).

In Mackiewicz and Squeri, the defendant was warned of his right to remain silent but was not advised of his right to counsel. In Dawson, the defendant was warned of his right to remain silent and to have counsel at the first two interviews. At subsequent interviews, no earnings were given and defendant made damaging admissions. In Marcus, it is not clear whether or not the defendant was warned of his right to remain silent, but the defendant was not warned of his right to counsel. The Court, in all four cases, went beyond the facts of the particular case and stated that where the defendant was aware he was the subject of a tax investigation and where the interviews were conducted in noncustodial situations. Miranda warnings are not required.

FOURTH CIRCUIT:

United States v. Mancuso [67-2 USTC 9487], 378 F. 2d 612 (4th Cir.), modified [68-1 USTC 9166], 387 F. 2d 376 (4th Cir. 1967), cert. denied, 390 U. S. 955 (1968).

The defendant was accompanied by his attorney and accountant at two Internal Revenue Service interviews where he made incriminating statements. The defendant was warned he could refuse to answer the question which could incriminate him, but was not warned of his right to counsel. The Court, rather than base its decision on the narrow ground that counsel was, in fact, present, chose to hold that neither Miranda nor Escobedo are applicable to a tax investigation where the purpose is to determine whether or not additional taxes due or a crime has in fact been committed.

FIFTH CIRCUIT:

Mathis v. United States [67-1 USTC 9408], 376 F. 2d 595 (5th Cir. 1967), rev'd [68-1 USTC 9357], 391 U. S. 1 (1968).

The defendant was interviewed in connection with a routine audit while he was confined in the Florida State Penitentiary on an unrelated conviction. No warnings were given and the Circuit Court affirmed on the basis that no warnings were required where the agent was conducting a routine audit even though there was a possibility that fraud would be uncovered. The Supreme Court reversed and held the interview must be suppressed as it was the product of an in custody interrogation.

SIXTH CIRCUIT:

United States v. Maius [67-2 USTC 9521], 378 F. 2d 716 (6th Cir.), cert. denied, 389 U. S. 905 (1967).

The defendant was warned that he had the right to remain silent but not that he had grave right to counsel. The Court expressed grave reservations as to its holding:

"* * * A citizen summoned before such federal agents has the option to refuse to answer their questions; but there are few who have the toughness of fibre and the technical knowledge of their rights, who would decline to answer questions put to them in these circumstances. Until we are told by superiod authority that a citizen's constitutional rights are imperiled by such procedure, we are constrained to hold that the evidence thereby obtained is admissible in the ensuing criminal trial."

Id. at 719.

SEVENTH CIRCUIT:

United States v. Mansfield [67-2 USTC 9586], 381 F. 2d 961 (7th Cir.), cert. denied, 389 U. S. 1015 (1967).

The defendant was warned at the initial interview that there was a possibility of criminal prosecution and that he could remain silent and refuse to produce his records. He was not warned of his right to counsel. No further warnings were given at subsequent interviews. The Court held that the tactical decision not to give further warnings did not render inadmissible records obtained at subsequent interviews.

NINTH CIRCUIT:

Selinger v. Bigler [67-1 USTC 9420], 377 F. 2d 542 (9th Cir.) (Per Curiam), cert. denied, 389 U. S. 904 (1967); Rickey v. United States [66-1 USTC 9395], 360 F. 2d 32 (9th Cir.), cert. denied, 385 U. S. 835 (1966); Kohatsu v. United States [65-2 USTC 9715], 351 F. 2d 898 (9th Cir. 1965), cert. denied, 384 U. S. 1011 (1966).

All three of these cases arose post-Escobedo but pre-Miranda. In Kohatsu, the defendant was not warned of his right to retain or have counsel appointed, but was warned of his right to remain silent and not to produce any records. The warning, however, was given by a Special Agent after the defendant has already made incriminating statements and turned over incriminating records to a Revenue Agent. The Court held that Escobedo was not applicable as this was an investigation to determine whether a crime had been committed in fact. Revenue Agents are not required to inform the taxpayer of the shift to a criminal investigation where a routine investigation develops evidence of fraud because it is inherent in the investigation that the agents will pursue such evidence. The other two cases relied on this reasoning.

8 Duke, supra note 3, at 39, Hewitt, supra note 3, at 697; Lipton, Constitutional Rights in Criminal Tax Investigation, 53 A. B. A. J. 517, 521 (1967); Note, 33 U. Chi. L. Rev. 134, 1947-48 (1965).

9 "To inject the full Miranda warning at this stage of the proceedings would merely clutter an already difficult admin istrative task." United States v. Mackiewicz, supra. See Kohatsu v. United States, supra; United States v. Sclafani, supra.

 

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