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While the magistrate judge had Knapp's initial request for information under advisement, Knapp sent a letter (the fourth relevant filing) to the clerk of the district court. This letter, dated July 25, 1992 , requested the names and addresses of the prospective jurors who may be selected for his trial. Knapp quoted the dictates of section 6103(h)(5) and informed the clerk of the date Judge Evans had established for his trial, September 15, 1992 . Knapp sent a carbon copy of his July 25 letter to the government.

On appeal, the government claims there is a handwritten notation on the upper right hand corner of the filed copy of Knapp's July 25 letter which suggests that Knapp was sent a potential juror list. We do not find such a notation. The question of whether Knapp was sent a potential jury list based upon his letter of July 25, 1992 , however, is inconsequential. Knapp did not file his request by motion addressed to the court, pursuant to either Rule 12 or Rule 47 of the Federal Rules of Criminal Procedure. Knapp sent a letter to the district court clerk. Further, Knapp did not inform the district court of the fact that he lacked this information when the trial started.

Knapp now claims his right to potential juror audit information pursuant to section 6103(h)(5) has been violated. He bases this contention and this appeal regarding this issue on the communications described supra. We conclude that Knapp was aware of his right to receive this information and that he made at least one independent request for juror audit information, albeit to the clerk of the court. The record is unclear regarding whether or not he received the information. However, on this record we decline to charge the district judge with the affirmative duty to ascertain whether or not Knapp had requested or received potential juror audit information. This issue should have been brought, by Knapp, to the attention of the district judge by a timely motion prior to proceeding with the trial. See United States v. Droge [92-1 USTC ¶50,207 ], 961 F.2d 1030, 1036 (2d Cir. 1992). This would have allowed the district judge to decide upon the proper course of action. Further, if the district judge determined that a thorough voir dire would satisfy the dictates of section 6103(h)(5) and Knapp did not agree, Knapp could have objected to proceeding with trial without giving him time to acquire the information he sought.

Accordingly, Knapp waived his right to appeal this issue because: (1) he failed to make a proper request, pursuant to either Rule 12 or Rule 47 of the Federal Rules of Criminal Procedure, for release of potential juror information from the district judge; (2) he did not inform the district judge that he lacked this information prior to or during the trial; and (3) he did not object to proceeding to trial without acquiring the information. Failure to bring matters to the attention of the district judge precludes consideration of those matters on appeal. See, e.g., United States v. Monzon, 869 F.2d 338, 342 (7th Cir. 1989) (failure to make district court aware of circumstances surrounding evidence defendant wants suppressed waives right to rely on those circumstances on appeal); United States v. Carmel, 801 F.2d 997, 1000 (7th Cir. 1986) (failure to bring factual dispute to attention of district court waives review of dispute on appeal). Knapp may not now complain of any error by the district judge.

IV. Jencks Act Information

Knapp filed a broad pretrial discovery motion which, among other things, made a general request for the production of relevant written or recorded statements of potential government witnesses. In response, the government stated it would comply through its local "open-file" discovery policy, except for the prior testimony of grand jury witnesses which would be produced under the terms of the Jencks Act, 18 U.S.C. sec. 3500. ³ Based upon the government's response to Knapp's motion, Magistrate Judge Goodstein found his request moot.

Subsequent to filing his general discovery request, Knapp discovered that the government's "open file" did not contain the names of witnesses, their proposed testimony or other specific information he sought to acquire. Also, Knapp wanted to see Volume I of Special Agent Thomas Larson's report. When informed that Volume I of the report, as well as other specific information, was not part of the "open file" and would not be provided, Knapp filed an objection to the magistrate judge's Order. Knapp, therefore, was aware that access to Volume I of Larson's report was specifically denied to him by the government prior to trial. Knapp, however, did not request this report at trial following Larson's testimony. Now, on appeal, Knapp claims the failure to turn over the Larson report violates the Jencks Act.

Knapp contends the magistrate judge found his original discovery motion moot because he reasonably construed the government's response and its "open-file" discovery policy as an agreement that all discoverable materials are part of the "open file" and had been or would be provided to Knapp prior to trial. Knapp's contention appears to be based upon his subjective understanding of the scope of information available to him and his interpretation of the government's "open file" discovery policy. However, there is nothing in the record to support the inference that other specific Jencks Act material, not in the "open file" of the government, would be produced prior to trial under this policy, and, in fact, Knapp was so informed as it relates to Larson's report.

Knapp further argues that even though he failed to request the Larson report following Larson's testimony at trial, this issue falls directly within the holding of the Fifth Circuit in United States v. Newman, 849 F.2d 156 (5th Cir. 1988), in that "[w]here the government agrees to produce Jencks material before trial, the defendant does not have to move for the material at the close of each witness's testimony." Id. at 159. The government maintains, however, that there was no agreement to disclose Special Agent Larson's report as part of its "open-file" policy. The government contends Knapp knew its "open file" did not include Volume I of Special Agent Larson's report, knew of the government's pretrial refusal to produce it, but yet failed to specifically request that it be produced following Larson's direct testimony as required by the Jencks Act.

We agree with the government that the principle set forth by the Fifth Circuit in Newman is inapplicable here, because there is no showing that the government agreed that all Jencks Act material would be disclosed prior to trial, rather than only what was contained in the government's open file and the testimony of grand jury witnesses to be produced one day prior to trial. The general rule is that a defendant is required to request disclosure following the witness's direct testimony. See United States v. Mack, 892 F.2d 134, 137 (1st Cir. 1989), cert. denied, 498 U.S. 859 (1990); United States v. Petito, 671 F.2d 68, 73-74 (2d Cir.), cert. denied, 459 U.S. 824 (1982); United States v. Lyman, 592 F.2d 496, 498-99 (9th Cir.), cert. denied, 442 U.S. 931 (1979); see also United States v. Spatuzza, 331 F.2d 214, 218 (7th Cir.) (defendant must request production of materials under Jencks Act), cert. denied, 379 U.S. 829 (1964). Consequently, Knapp's failure to request Larson's report following Larson's direct testimony in these circumstances waived any issue of error relating to the government's failure to produce the report.

CONCLUSION

For the reasons stated above, the judgment of the district court is affirmed.

AFFIRMED

^* The Honorable Philip G. Reinhard of the United States District Court for the Northern District of Illinois, sitting by designation.

¹ We note that at oral argument in this appeal, Knapp's attorney questioned, for the first time, the propriety of the district judge instructing the jury regarding Knapp's status as a tax protestor. The jury was instructed that if they found Knapp to be a tax protestor during the years in question, they could consider his status, statements and actions concerning the payment of income taxes as circumstantial evidence in determining willfulness for failing to file returns for those years.

This issue was not raised in the district court, see Dempsey v. Atchison, Topeka and Santa Fe Ry. Co., 16 F.3d 832, 835 n.3 (7th Cir. 1994), nor directly raised as a specific contention of instructional error in Knapp's brief on appeal, see Fed.R.App.P. 28(a)(5); Travelers Ins. Co. v. Penda Corp., 974 F.2d 823, 833 (7th Cir. 1992) (citing Beard v. Whitley County REMC, 880 F.2d 405, 408-09 (7th Cir. 1988)), and, therefore, we decline to consider it. Even were we to construe broadly Knapp's First Amendment argument, discussed infra, as raising this instructional error, the giving of such instruction was not plain error because the charge was limited to conduct not protected by the First Amendment and the proof of Knapp's guilt was overwhelming.

² Most of the disputes regarding this statute have been premised upon the time necessary for receipt of the information requested from the Secretary of the Treasury. In these cases the defendant has made a timely request of the district court for release of potential juror information, received the information, and then requested the audit information regarding the potential jurors from the Secretary of the Treasury. Some circuits have ruled upon this issue because the defendant has received the potential juror names from the district court, but has not received some or all of the information requested from the Secretary of the Treasury prior to the date of trial and the trial court proceeded with the trial. See United States v. Droge [92-1 USTC ¶50,207 ], 961 F.2d 1030, 1037 (2d Cir. 1992); United States v. Spine [91-2 USTC ¶50,464 ], 945 F.2d 143 (6th Cir. 1991); United States v. Masat [90-1 USTC ¶50,156 ], 896 F.2d 88, 94-95 (5th Cir. 1990). Other circuits have ruled upon this issue because the trial court has refused to provide information on the potential jury pool. See United States v. Holden [92-2 USTC ¶50,321 ], 963 F.2d 1114, 1115-16 (8th Cir. 1991); United States v. Schandl [91-2 USTC ¶50,580 ], 947 F.2d 462, 467-69 (11th Cir. 1991).

Several approaches have evolved from the seven circuit courts that have interpreted the rights conferred by sec. 6103(h)(5) . The majority adopts the rule that "errors in compliance may be rendered harmless by appropriate voir dire." United States v. Droge [92-1 USTC ¶50,207 ], 961 F.2d 1030, 1034 (2nd Cir. 1992). This standard has been adopted by the Second, Fifth, Sixth, Eighth and Eleventh Circuits.

Two other views have been promulgated by the Ninth and the First Circuits. The Ninth Circuit has held that a defendant's timely pretrial request for the jury list required the district court to respond in sufficient time before trial to enable the defendant to obtain the audit information from the Secretary of the Treasury. It characterized the defendant's right as absolute but declined to establish a per se reversal standard for noncompliance. United States v. Hashimoto [89-2 USTC ¶9432 ], 878 F.2d 1126, 1129-35 (9th Cir. 1989). However, the Ninth Circuit has subsequently modified its view regarding non-compliance. See United States v. Hicks [91-2 USTC ¶50,404 ], 947 F.2d 1356, 1360-61 (9th Cir. 1991) (court's erroneous limitation on request to Treasury for only past six years' data harmless in light of voir dire questions as to whether jurors had ever been audited).

Finally, the First Circuit has given the statute another construction. The First Circuit has read the statute to suggest the pretrial audit information is to be used as a veracity-checking device. Therefore, if the information is not available prior to the start of the trial, a jury may be selected. However, the information must be available prior to the jury being sworn. See United States v. Huguenin [91-2 USTC ¶50,571 ], 950 F.2d 23, 28-30 (1st Cir. 1991); United States v. Lussier [91-1 USTC ¶50,164 ], 929 F.2d 25, 29-30 (1st Cir. 1991) (per curiam).

We observe that in the instant case, the district judge first provided Knapp the opportunity to request that the court ask particular voir dire questions of the venire, and he then, at the government's request, conducted a thorough voir dire examination. During this extensive voir dire, the district judge elicited more information regarding the potential jurors attitudes and histories regarding the IRS than would have been available from the Treasury Secretary.

³ The government in fact agreed to produce the prior testimony of grand jury witnesses one day prior to trial rather than after the witnesses testified at trial.

 

 

 

[2001-1 USTC ¶50,283] United States of America , Plaintiff-Appellee v. Dr. Glenn Ahee, Defendant-Appellant

(CA-6), U.S. Court of Appeals, 6th Circuit, 99-1991, 2/15/2001, 2001 U.S. App. LEXIS 2706. Affirming an unreported District Court decision

[Code Sec. 7206 ]

Crimes: Filing of false returns: Conviction, upheld: Jury instructions.--Sufficient evidence existed to support a chiropractor's conviction on two counts of filing false returns in connection with "zero" returns that he filed for two tax years. The taxpayer's arguments regarding jury selection and his contention that one of the jurors was motivated to find him guilty due to fear of the IRS were meritless. Fear of the IRS is not a type of specific knowledge or undue influence sufficient to taint jury deliberations or warrant a hearing concerning improper extraneous prejudice. Moreover, the trial court did not commit plain error in failing to provide an explicit definition of "gross income" in its jury instructions. Finally, suggestions made by the prosecutor to the jury in closing arguments were well within the bounds of acceptable arguments and in no way improperly appealed to the jurors' pecuniary interests.
[Code Sec. 7206 ]

Crimes: Filing of false returns: Knowing and willful acts: Conviction, upheld: Individuals subject to tax: Miscellaneous constitutional arguments: Indictment.--A chiropractor was properly convicted of two counts of filing false returns in connection with "zero" returns that he filed for two tax years. The trial court's refusal to suppress his two "zero" tax returns did not violate his Fifth Amendment privilege against self-incrimination. Moreover, the taxpayer's argument that the trial court lacked jurisdiction over his case because the indictment was defective and was constitutionally insufficient to inform him of what constituted criminally prohibited conduct lacked merit. Although the taxpayer contended that the Internal Revenue Code does not define income and, thus, he did not know that monies received for his chiropractic services represented taxable compensation, the evidence established that he paid taxes for several years and considered those sums to be "income" when seeking loans or engaging in other financial activities.

[Code Sec. 7206 ]

Crimes: Filing of false returns: Conviction, upheld: Individuals subject to tax: Miscellaneous constitutional arguments: Administrative summonses.--Sufficient evidence existed to support a chiropractor's conviction on two counts of filing false returns in connection with "zero" returns that he filed for two tax years. Nothing in the record of the underlying litigation warranted a finding that the trial court erred in refusing to conduct a hearing regarding the suppression of information gathered through administrative summonses. Moreover, the taxpayer presented no credible evidence to demonstrate that administrative summonses were issued under the auspices of a criminal investigation or that the IRS violated his First Amendment Rights by engaging in impermissible selective prosecution. He failed to prove that he was selected for prosecution based upon his membership in a tax-protest organization.

Margaret E. Davis, Office of the U.S. Attorney, Detroit , Mich. , for plaintiff-appellee. Robert R. Elsey, Grosse Pointe Park , Mich. for defendant-appellant.

Before: DAUGHTREY and CLAY, Circuit Judges, RUSSELL, District Judge. ^*

è Caution: This court has designated this opinion as NOT FOR PUBLICATION. Consult the Rules of the Court before citing this case.ç

RUSSELL, District Judge:

Defendant, Dr. Glenn Ahee, appeals his conviction by the district court of two counts of filing a false tax return, in violation of 26 U.S.C. §7206. On appeal, Dr. Ahee alleges that the trial court committed numerous evidentiary errors, that it empaneled an improper jury, that it permitted the use of a constitutionally insufficient indictment, that it allowed the Internal Revenue Service to improperly utilize administrative summonses, that the trial judge gave improper jury instructions, and that the prosecution engaged in improper conduct during its closing argument. For the reasons set forth below, we AFFIRM the district court on all grounds.

Dr. Glenn Ahee is a chiropractor who has been in private practice since June of 1986. He shared an office with another chiropractor, and operated the business under the name Shorepointe Chiropractic. Dr. Ahee charged a fee for his services, and reported these fees as income on his federal individual income tax returns until 1990. Dr. Ahee employed Robert Jeanguenat, a CPA and childhood friend, to complete his tax forms.

In 1990, Dr. Ahee stopped filing individual tax returns after watching a video tape given to him by his mother. The individual on the video instructed viewers that the Internal Revenue Code ("IRC") did not specifically require people to file returns or pay income tax based on the returns. Ahee contacted the man on the video, and began purchasing books, acquiring information, and reading court cases suggested by the individual. He also purchased a copy of the IRC. After doing case research, including United States v. Mitchell [71-1 USTC ¶9451], 403 U.S. 190, 91 S.Ct. 1763, 29 L.Ed.2d 406 (1971) and United States v. Ballard [76-1 USTC ¶9378], 535 F.2d 400 (8th Cir. 1976), Dr. Ahee sent letters to the IRS stating he was not subject to its jurisdiction and demanding a refund of $6,440. He also demanded that the IRS explain why he was required to pay taxes or file a return. Ahee claimed that the IRC did not specifically impose a tax upon his "activity." As a result, he was allegedly not required to pay taxes on monies generated by his "activity" of chiropractic services. Finally, he claimed he did not report any "income" because income is not defined by the IRC.

In June of 1990, Dr. Ahee applied for a mortgage to purchase a residential house. On his mortgage application, he listed "gross monthly income" of $2,300 and $4,000 per month in "other income." One year later, he created a trust called the Shorepointe Chiropractic Trust, and transferred all of his assets, including his interest in Shorepointe Chiropractic and the home he bought in June 1990, into the trust. His CPA informed him that whatever money came into the trust had to be reported to the IRS on the trust return. Dr. Ahee admitted that $43,324 reported in the 1991 trust return as "outside services" went into his personal accounts. He also admits that he did not report these monies on his 1991 personal federal tax return.

Dr. Ahee's CPA became concerned about these questionable financial activities. The CPA prepared a letter dated March 5, 1992 , in which he detailed his relationship with Dr. Ahee in 1991. The letter verifies that the CPA only prepared a trust return, and did not prepare an individual return for 1991. The CPA also told Dr. Ahee that the trust relationship would not save Dr. Ahee on his taxes. The CPA hand delivered the letter to Dr. Ahee, and had Dr. Ahee sign indicating its receipt.

In March of 1993, Special Agent Sanderson of the IRS Criminal Investigation Division conducted an interview of Dr. Ahee. Dr. Ahee admitted that he had not filed returns for 1990 or 1991. Special Agent Sanderson also met with CPA Jeanguenat, who informed Sanderson that he had prepared a 1990 personal return for Dr. Ahee and forwarded it to Dr. Ahee for his signature. The CPA indicated that Dr. Ahee had an income of $83,478 for 1990, and that he assumed Dr. Ahee had signed and filed the tax return. CPA Jeanguenat also provided Special Agent Sanderson with a copy of the "tax organizer" prepared by Dr. Ahee to assist Jeanguenat in preparing the 1990 return.

From this tax organizer, Special Agent Sanderson was able to identify bank accounts and other assets. He obtained records for these accounts, which revealed that Dr. Ahee had deposited numerous checks, cash and insurance proceeds given to Dr. Ahee as payment for chiropractic services. The IRS prepared summaries of the activities in these accounts, with which Dr. Ahee agreed. Utilizing these summaries, along with canceled checks and other records provided by Dr. Charles Schiemke, Dr. Ahee's partner in Shorepointe Chiropractic, the IRS prepared estimated taxes for Dr. Ahee. After subtracting expenses, exemptions and other permitted deductions, the Service calculated that Dr. Ahee's "total income" was $38,944.96 for 1990 and $50,555.83 for 1991.

In April of 1995, Dr. Ahee filed two form 1040 federal individual income tax returns for the years 1990 and 1991. Each of these returns were filed with all entries completed "0," except the 1990 return demanded the $6,440 refund (presumably for taxes paid in 1989). Attached to these returns was a two paged typed addendum in which Dr. Ahee stated that he was not required to pay taxes. Dr. Ahee claimed that he decided to file these "zero" returns after attending a tax seminar in early April 1995.

In 1996, a federal grand jury returned a two count indictment for making a false return under 26 U.S.C. §7206(1), based on the two "zero" returns. On January 22, 1999 , Dr. Ahee was convicted in a jury trial for violating the statute, and now appeals his conviction. Dr. Ahee mounts seven challenges to his conviction, with differing standards of review. We address each challenge separately below.

DISCUSSION

I. JUROR EXCLUSION AND INFLUENCE

Dr. Ahee claims that the court below improperly excluded all jurors who had previous negative experiences with the IRS and who believed or had knowledge that the IRS had engaged in improper activities. He also alleges that the judge erred in not conducting a post-trial hearing concerning alleged influence on one of the jurors. These arguments are in error.

A proper challenge to juror exclusion requires a showing that (1) the excluded group is a distinctive group in the community; (2) the identified group is under-represented in the jury venire from which jurors are selected, and that (3) this under-representation is due to systematic exclusion of the group in the jury selection process. See Duren v. Missouri , 439 U.S. 357, 364, 99 S.Ct. 664, 668, 58 L.Ed.2d 579 (1979). Review of whether or not jurors were properly excluded, or whether or not the trial judge conducted "proceedings necessary to discover misconduct is reviewed only for an abuse of discretion." United States v. Shackelford, 777 F.2d 1141, 1145 (6th Cir. 1985). See also Marks v. Shell Oil Co., 895 F.2d 1128, 1129 (6th Cir. 1990). Appellant points to no evidence in the record to support his claim. Nor can he demonstrate any record of objecting to the exclusion during the course of voir dire. Rather, it is just a bald, sweeping generalization indicating dissatisfaction with the jury panel. Such "issues averted to in a perfunctory manner, unaccompanied by some effort at developed argumentation, are deemed waived." McPherson v. Kelsey, 125 F.3d 989, 995 (6th Cir. 1997).

Appellant secured an affidavit from one of the jurors, and two "witnesses," that he and other jurors were motivated to find Ahee guilty out of fear of the IRS. Dr. Ahee also alleges the affidavit shows the jury preferred a finding of guilt on the lesser-included misdemeanor charge, but "through fear entered verdicts of guilty as to felonies."

Since Fed. R. Evid. 606(b) "only permits jurors to testify 'whether extraneous prejudicial information was improperly brought to the jury's attention or whether any outside influence was improperly brought to bear upon any juror,' " a party seeking to have the trial court conduct a so-called Reemer hearing must demonstrate that external influences impacted the jury process. United States v. Shackelford, 777 F.2d 1141, 1145 (6th Cir. 1985). See also United States v. Herndon, 156 F.3d 629, 635 (6th Cir. 1998) (only "where a colorable claim of extraneous influence has been raised" should a court conduct a Reemer hearing). "Extraneous influence on a juror is one derived from specific knowledge about or a relationship with either the parties or their witnesses. This knowledge or relationship is such that it taints the deliberations with information not subject to a trial's procedural safeguards." Herndon, 156 F.3d at 636.

Fear of the IRS is not the type of external influence contemplated by Fed. R. Evid. 606. A juror's possible subjective belief concerning the IRS is not "specific knowledge" sufficient to "taint the deliberations." This Court's cases that have found extraneous influence, and thus the necessity of a hearing, involved prior business relationships among private parties that ended with animosity (Herndon), or improper direct communication with the jury. See United States v. Walker, 1 F.3d 423 (6th Cir. 1993) (highlighted transcripts inadvertently sent to the jury room); United States v. Cooper, 868 F.2d 1505 (6th Cir. 1989) (prosecutor's notes ended up in the jury room). These cases highlight the policy behind Fed. R. Evid. 606 that only objective external forces, not the juror's own "mental processes" may be evaluated by the trial judge in a Reemer hearing.

Moreover, Appellant states everyone that had a negative experience with the IRS was already excluded. Thus, all potential jurors who have objective reasons for "fearing" the IRS were not on the actual jury. Dr. Ahee cannot both argue undue influence on the jury, and at the same time argue that all potential jurors who had a prior "knowledge or relationship" with IRS were systematically excluded from the jury panel. Herndon, 156 F.3d at 636.

II. SUPPRESSION OF TAX RETURN

Appellant contends that his two "zero" tax returns should have been suppressed as violative of his 5th Amendment privilege against self incrimination. "When reviewing the denial of a motion to suppress, we review the district court's findings of fact for clear error and its conclusions of law de novo." United States v. Hurst, 228 F.3d 751, 756 (6th Cir. 2000) (citing United States v. Navarro-Camacho, 186 F.3d 701, 705 (6th Cir. 1999); United States v. Walker, 181 F.3d 774, 776 (6th Cir. 1999), cert. denied, 528 U.S. 980, 120 S.Ct. 435, 145 L.Ed.2d 340 (1999). ² Nonetheless, the evidence must be evaluated " 'in the light most likely to support the district court's decision.' " Id. (quoting Navarro-Camacho, 186 F.3d at 705). There is nothing to suggest that the district court committed reversible error in its evaluation of Dr. Ahee's motion to suppress.

"The central standard for the application of the Fifth Amendment privilege against self incrimination is whether the claimant is confronted by substantial and 'real,' and not merely trifling or imaginary, hazards of incrimination." United States v. Argomaniz [91-1 USTC ¶50,135], 925 F.2d 1349, 1353 (11th Cir. 1991) (quoting Marchetti v. United States [68-1 USTC ¶15,800], 390 U.S. 39, 53, 88 S.Ct. 697, 705, 19 L.Ed.2d 889 (1968)). A taxpayer may not, in the words of Justice Holmes, "draw a conjurer's circle around the whole matter by his own declaration that to write any word upon the government's blank would bring him into danger of the law." United States v. Saussy [86-2 USTC ¶9718], 802 F.2d 849, 855 (6th Cir. 1986) (quoting United States v. Sullivan [1 USTC ¶236], 274 U.S. 259, 264, 47 S.Ct. 607, 71 L.Ed. 1037 (1927)).

"The privilege must be claimed specifically in response to particular questions, not merely in a blanket refusal to furnish any information; (2) the claim is to be reviewed by a judicial officer who determines whether the information sought would tend to incriminate; (3) the witness or defendant himself is not the final arbitor of whether or not the information sought would tent to incriminate." Saussy [86-2 USTC ¶9718], 802 F.2d at 855 (quoting United States v. Johnson [78-2 USTC ¶9642], 577 F.2d 1304, 1311 (5th Cir. 1978)).

The cases that have upheld the exercise of the Fifth Amendment privilege typically involve criminal activity, or suspected criminal activity. They do not involve blanket refusals to provide any information whatsoever on an IRS 1040. Indeed, as noted above, this Court requires the privilege to be claimed "specifically in response to particular questions." There is nothing to indicate that occurred in this case.

III. INDICTMENT DEFECTS

The indictment in this case read as follows:

That on or about April 17, 1995 , in the Eastern District of Michigan, Southern Division, defendant Glenn M. Ahee did willfully make and subscribe a false return, statement and document, purporting to be an individual income tax return for 1990 [and 1991], which contained a written declaration that it was made under the penalty of perjury and was filed with the Internal Revenue Service, which return, statement and document he did not believe to be true and correct as to every material matter, in that he prepared and filed a form 1040 return which reported zero total income, whereas, as he knew, he earned substantial total income in 1990 [and 1991], all in violation of 26 U.S.C. §7206(1).

Appellant claims this indictment was constitutionally insufficient to inform him of what constituted the criminally prohibited conduct. He also claims that the district court was without jurisdiction to hear the case due to defects in the indictment These contentions are without merit.

An "indictment is sufficient if it, first, contains the elements of the offense charged and fairly informs a defendant of the charge against him which he must defend, and second, enables him to plead an acquittal or conviction in bar of future prosecutions of the same offense." Hamling v. United States , 418 U.S. 87, 117, 94 S.Ct. 2887, 2907, 41 L.Ed.2d 590 (1974). "It is generally sufficient that an indictment set forth the offense in the words of the statute itself, as long as 'those words of themselves fully, directly, and expressly, without any uncertainty or ambiguity, set forth all the elements necessary to constitute the offense intended to be punished.' " Id. (citation omitted). As to the question of jurisdiction, this Court applies de novo review. See Hedgepeth v. Tennessee , 215 F.3d 608, 611 (6th Cir. 2000).

Section 7206(1) provides that "any person who willfully makes and subscribes any return, statement, or other document, which contains or is verified by a written declaration that it is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter shall be guilty of a felony. . ." 26 U.S.C. §7206 (1). "Section 7206 prohibits making or assisting the making of any materially false return, statement, claim or other document under the internal revenue laws. . . . Under a reasonable construction of the statute, a person of ordinary intelligence could understand that it criminalizes lying on any form or document filed with the IRS." United States v. Cochrane, 985 F.2d 1027, 1031 (9th Cir. 1993). Under the statue the government need not prove either intent to evade payment of taxes nor even the existence of any taxable income. merely that the person who signed the form lied about the matters it contained. See United States v. Taylor [78-1 USTC ¶9474], 574 F.2d 232 (5th Cir. 1978).

Any return that "omits material items necessary to the computation of income is not 'true and correct' within the meaning of section 7206. If an affirmative false statement be required, it is supplied by the taxpayer's declaration that the return is true and correct, when he knows it is not." Siravo v. United States [67-1 USTC ¶9446], 377 F.2d 469, 472 (1st Cir. 1967). Finally, "under §7206(1), the Government [does] not need to establish an actual tax deficiency in a §7206(1) prosecution. The burden rests on the taxpayer to disclose his receipts and claim his proper deductions." United States v. Ballard [76-1 USTC ¶9378], 535 F.2d 400, 404 (8th Cir. 1976).

Appellant avers that since the Code does not define income, he did not know that monies he received were income, so he violated the Code, if at all, in good faith. While it is true that the "general term income is not defined in the Internal Revenue Code," all of the monies received by Dr. Ahee clearly meet the definitions found in IRC §61. Ballard [76-1 USTC ¶9378], 535 F.2d at 404. The money he received as compensation for patient services falls squarely within IRC §61(a)(1): "Compensation for services, including fees, commissions, fringe benefits, and similar items." The monies could similarly be seen as "gross income derived from business" or "dividends" or "distributive share of partnership gross income" or finally "income form an interest in an estate or trust" under the trust scheme he established in 1991. See 26 U.S.C. §61(a)(2), (a)(7), (a)(13) and (a)(15).

Moreover, there is no indication that Dr. Ahee did not know that the monies he received as a result of providing patient services constituted "income." He had paid income taxes for several years, and his accountant had always established Dr. Ahee's level of taxable income from sums Dr.Ahee received as compensation for chiropractic services. His argument that he did not know that the sums he received constituted "income" is belied by his prior payment of income taxes based on those sums, and his aforementioned continued reliance on those sums as "income" when seeking loans or engaging in other financial activities.

IV. ADMINISTRATIVE SUMMONS

Dr. Ahee challenges the use of administrative summonses by the IRS to gather information which led to his indictment. He argues that the trial court should have conducted a so-called Genser hearing regarding the suppression of information obtained pursuant to the administrative summonses. See United States v. Genser [78-2 USTC ¶9682], 582 F.2d 292 (3d Cir. 1978), cert. denied, 444 U.S. 928, 100 S.Ct. 269, 62 L.Ed.2d 185 (1979). He also argues that the use of administrative summonses was improper since the summonses were issued under the auspices of a criminal investigation in violation of United States v. Lasalle National Bank [78-2 USTC ¶9501], 437 U.S. 298, 98 S.Ct. 2357, 57 L.Ed.2d 221 (1978). Finally, Dr. Ahee alleges that the summons were issued due to impermissible selective prosecution in response to legitimate First Amendment-protected activity.

The decision of whether to hold a Genser hearing lies within the sound discretion of the trial court. This court will "defer to the district court's discretion to decide if an evidentiary hearing on the question of enforcement of a summons is warranted." United States v. Gertner [95-2 USTC ¶50,499], 65 F.3d 963, 969 (1st Cir. 1995) (quoting Fortney v. United States [95-2 USTC ¶50,371], 59 F.3d 117, 121 (9th Cir. 1995)). See also Hintze v. IRS [89-2 USTC ¶9451], 879 F.2d 121, 126 (4th Cir. 1989). Dr. Ahee has presented nothing during the course of this appeal to suggest the trial court abused its discretion in not holding a Genser hearing regarding the IRS summonses used during the investigation.

At the trial court, Dr. Ahee argued that the Service failed to demonstrate the proper grounds for the use of the administrative summonses. The IRS may justify the use of the administrative summons upon a demonstration of good faith; that is:

that the investigation will be conducted pursuant to a legitimate purpose, that the inquiry may be relevant to the purpose, that the information sought is not already within the Commissioner's possession, and that the administrative steps required by the [Internal Revenue] Code have been followed--in particular, that the "Secretary or his delegate," after investigation, has determined the further examination to be necessary and has notified the taxpayer in writing to that effect.

United States v. Stuart [89-1 USTC ¶9185], 489 U.S. 353, 109 S.Ct. 1183, 1188, 103 L.Ed.2d 388 (1989) (quoting United States v. Powell [64-2 USTC ¶9858], 379 U.S. 48, 57-58, 85 S.Ct. 248, 254-55, 13 L.Ed.2d 112 (1964)). Also, under LaSalle, the Service cannot obtain information pursuant to the administrative summons process "after the IRS recommends prosecution to the Department of Justice, or after the IRS has abandoned, in an institutional sense, the pursuit of civil tax determination or collection." Genser [78-2 USTC ¶9682], 582 F.2d at 309. Dr. Ahee argues that the IRS has not met the standard of good faith set out above since it violated the admonition of LaSalle concerning criminal prosecutions.

Dr. Ahee notes that the IRS first became aware of him through a 1992 criminal investigation of the Pilot Connection Society, a tax protest organization operating in the western United States . While this is true, at the time there was no ongoing criminal investigation of Dr. Ahee himself. In fact, no criminal charges were brought against Dr. Ahee until after he made the false statements on his 1990 and 1991 1040s that he filed in April of 1995. Special Agent Sanderson stated in a sworn affidavit that all administrative summonses were issued in 1993 and 1994, well before Special Agent Sanderson completed his report recommending criminal sanctions, and at least 2 years before the matter was tendered to the Department of Justice for prosecution. Moreover, the crime at issue in the current case did not occur until April of 1995, at least a year after the summonses were issued. Given this fact, and the fact the summonses were utilized to gather evidence, not justify a previous determination to prosecute, the trial court did not err in concluding the IRS had a legitimate purpose for the use of administrative summonses under 26 U.S.C. §7206.

Dr. Ahee also alleges that the IRS did not properly follow the procedure for giving a taxpayer the opportunity to quash a subpoena under 26 U.S.C. 7609(a)(1). This statute gives a taxpayer up to 20 days to move to quash a subpoena investigating his or her affairs. Dr. Ahee only identifies one summons potentially violative of this provision. On April 8, 1993 , the Northeast Catholic Credit Union was served with a summons demanding it produce records relating to Dr. Ahee on April 26, 1993 , only 18 days later.

Nonetheless, the record reveals that Dr. Ahee received notice of the summons on April 9, 1993 , but did not make any motion to quash until July 8, 1998 , more than five years later. Despite the violation of the statutory provision, the district court properly denied any hearing on the motion to suppress/quash the information obtained with the summons. Not only did Dr. Ahee not present any justification for waiting over five (5) years to attempt to quash the summons, he presented no basis in fact that would justify an order to quash, nor did he demonstrate any information which the Service obtained with the summons that would be offered at trial.

Likewise, Dr. Ahee is entitled to no relief on the basis of selective prosecution. He argues that while he was subjected to criminal prosecution for filing "zero returns," other tax payers only received civil penalty assessments, or, in some cases, actual tax refunds. He argues the difference in treatment arose from his association with a tax protester group, and his exercise of First Amendment rights to criticize the government.

"The government has broad discretion in determining who will be charged and with what crime." Wayte v. United States , 470 U.S. 598, 607, 105 S.Ct. 1524, 1530, 84 L.Ed.2d 547 (1985). Thus, in order to succeed upon a selective prosecution claim, a criminal defendant must establish both that the government harbored a discriminatory intent and that the challenged prosecutorial policy had a discriminatory effect. See United States v. Jones, 159 F.3d 969, 976 (6th Cir. 1998). A demonstration of discriminatory intent requires the defendant to "show that 'the government's discriminatory selection of him has been invidious or in bad faith, i.e., based on such impermissible considerations such as race, religion, or the desire to prevent the exercise of his constitutional rights.' " United States v. Mullins, 22 F.3d 1365, 1373 (6th Cir. 1994) (quoting United States v. Hazel [83-1 USTC ¶9132], 696 F.2d 473, 474 (6th Cir. 1983)). As to discriminatory effect, "a defendant must show that similarly situated individuals . . . were not similarly prosecuted." Jones, 159 F.3d at 977.

Dr. Ahee has failed to adduce any evidence that either his membership in the Pilot Connection Society was a factor in the government's decision to prosecute, or that he was treated differently from "similarly situated" individuals. While he presents hearsay testimony that other people who filed "zero returns" were not prosecuted, he never outlines any evidence suggesting these individuals had similar incomes, expenses, deductions or exemptions that would have produced knowing, material misstatements of income on a level with those made by Dr. Ahee. He has simply produced no evidence to sustain a finding of "selective" prosecution.

V. POST-TRIAL MOTIONS FOR DISMISSAL

In his motions for post-trial relief, Dr. Ahee alleged a litany of evidentiary and other discretionary ruling abuses by the trial court. The district court denied Dr. Ahee's motions in all regards. "Although we review the district court's denial of the motion[s] de novo, we must affirm its decision if the evidence, viewed in the light most favorable to the government, would allow a rational trier of fact to find the defendant guilty beyond a reasonable doubt." United States v. Canan, 48 F.3d 954, 962 (6th Cir. 1995) (citing United States v. Montgomery, 980 F.2d 388, 393 (6th Cir. 1992)).

First, he alleges that the district court improperly admitted evidence of other bad acts in violation of Fed. R. Evid. 404(b). Specifically, he challenges the prosecution's successful introduction of his 1988 and 1989 federal tax returns as improper under this rule as he was only charged with making false statements on his 1990 and 1991 returns. As an initial matter, the admission of the two returns was not Rule 404(b) evidence because they were not offered to show prior wrongful acts. Rather, the Service introduced the two returns to show prior "good" acts; that is, that Dr. Ahee knew how to file proper tax returns yet consciously chose not to do so in the subsequent years of 1990 and 1991. Moreover, the prosecution informed Dr. Ahee prior to trial of its intent to introduce the returns, and Dr. Ahee made no timely, pretrial motion to exclude the evidence. At trial, defense counsel objected to the returns, but only on relevancy grounds, not under Rule 404(b). Thus, not only do Dr. Ahee's contentions lack merit, they were not properly preserved for presentation to this Court.

Dr. Ahee also asserts that the district court erred in allowing prosecution witnesses to offer hearsay testimony. However, he makes only a passing reference to this contention in his appellate brief, with no citation to the record nor any further argument or even citation to relevant authority. Such a skeletal treatment of an appellate issue is insufficient to preserve the allegation of error for review. See United States v. Layne, 192 F.3d 556, 566-67 (6th Cir. 1999), cert. denied, 529 U.S. 1029, 120 S.Ct. 1443, 146 L.Ed.2d 330 (2000).

Dr. Ahee next asserts the trial court erroneously allowed two prosecution witnesses to testify as "experts" under Fed. R. Evid. 703 when the two individuals did not meet the requirements Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993) and Kumho Tire Company, LTD v. Carmichael, 526 U.S. 137, 119 S.Ct. 1167, 143 L.Ed.2d 238 (1999). However, he cannot point to anything in the record that indicates the trial judge ever granted the two witnesses in question, CPA Jeanguenat and Ann McEnanly, expert status. The trial judge actually brushed aside an attempt by the prosecutor to qualify CPA Jeanguenat as an expert during the course of the trial. As to Ms. McEnanly, an employee of the IRS who compiled exhibits used during the trial, the district court found that she did not offer expert testimony. The district court also found that she had laid a proper foundation for any opinion testimony which she may have given. Since there are no rulings by the trial court that the two witnesses were experts. Dr. Ahee's challenge to non-existent rulings is without merit.

Dr. Ahee further asserts that the Service constructively and improperly amended the indictment returned by the grand jury when the prosecution questioned government witnesses about Dr. Ahee's "gross income" when the charging instrument specifically claimed that he had misstated his "total income" on his 1990 and 1991 tax returns. However, as noted by the prosecution, the testimony at trial was not offered in an attempt to charge Dr. Ahee with a different offense. Rather, in order to arrive at a "total income" figure on a tax return, the tax payer (and the IRS) must first calculate "gross income." Introduction of evidence regarding Dr. Ahee's gross income and the components of such a figure thus do not amount to a constructive amendment of the indictment.

Next, Dr. Ahee contends that the prosecution failed to adduce sufficient evidence to support his convictions because no witness was able to testify as to his intent at the time he filed the 1990 and 1991 "zero returns" or to testify that the applicable laws imposed any duty upon Dr. Ahee to pay federal income taxes. When reviewing a sufficiency challenge, this Court must determine whether, viewing the trial testimony, exhibits and other evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt. See Jackson v. Virginia, 443 U.S. 307, 319, 99 S.Ct. 2781, 2789, 61 L.Ed.2d 560 (1979). Additionally, when performing this review, the Court may not reweigh the evidence, reevaluate the credibility of the witnesses, or substitute its judgment for that of the jury. See United States v. Hilliard, 11 F.3d 618, 620 (6th Cir. 1993).

There was no direct evidence presented at trial of Dr. Ahee's intent at the time of filing the "zero returns" for 1990 and 1991 in April of 1995. It would be a rare case that such testimony or other evidence would be available to the prosecution. Nevertheless, the Service presented sufficient circumstantial evidence to justify a finding that Dr. Ahee misstated his total income on the returns, that he knew that the stated income amounts were incorrect, and that the misstatements were intentional. This included testimony and documentation showing that Dr. Ahee had filed proper returns in prior years and was thus aware of his obligations as a taxpayer, the testimony of Dr. Ahee's personal accountant that Dr. Ahee had been informed that either the Shorepointe Chiropractic Trust or Dr. Ahee was responsible for paying taxes, and the testimony that Dr. Ahee had admitted to significant income in order to secure a mortgage loan at the same time he denied having any income for federal tax purposes.

The crux of Dr. Ahee's argument on this issue is that the Service has not established his responsibility to pay taxes and that testimony regarding gross receipts does not necessarily prove that he understated his income. This once again demonstrates Dr. Ahee's misunderstanding of 26 U.S.C. §7602. The crimes for which he was convicted do not involve allegations of nonpayment of taxes or underpayment of taxes, but rather the making of false statements on a federal tax form. Although gross receipts do not equal total income under the Internal Revenue Code, circumstantial evidence concerning prior years' returns and diversion of substantial amounts of income into a trust justify a rational trier of fact in finding beyond a reasonable doubt that Dr. Ahee's income for the relevant tax years was greater than zero. The same pattern of conduct also justifies the conclusion that Dr. Ahee knowingly misstated that income in violation of §7602.

VI. JURY INSTRUCTIONS

Dr. Ahee also briefly argues that the district court erred in failing to instruct the jury on the definition of gross income. As noted by the Service, however, defense counsel chose not to object to the instructions as given. Since no objection was made, this Court may only reverse if the trial judge committed plain error. United States v. Alt [93-2 USTC ¶50,385], 996 F.2d 827, 829 (6th Cir. 1993). See also Reynolds v. Green [93-2 USTC ¶50,385], 184 F.3d 589, 594 (6th Cir. 1999). Here, the jury had before it, through Dr. Ahee's testimony on cross-examination, the statutory definition of gross income, and was specifically instructed to use its common sense in considering and weighing the evidence in the case. Under such circumstances, and because the defendant was charged and convicted with making false statements regarding his "total income," not his "gross income," the district court did not commit plain error in failing to give an explicit definition of a term not included in the indictment.

VII. CLOSING ARGUMENT

In his final challenge, Dr. Ahee contends that the prosecution engaged in improper conduct during its closing argument by appealing to the pecuniary interests of the jury. Prosecutorial misconduct typically will not result in reversible error where the misconduct was not flagrant or where the proof of guilt is overwhelming. United States v. Bess, 593 F.2d 749, 757 (6th Cir. 1979). "First, we determine whether the conduct was improper under United States v. Bess, 593 F.2d 749 (6th Cir. 1979). Improper conduct is then examined for flagrancy under United States v. Leon, 534 F.2d 667 (6th Cir. 1976). If the conduct is found not to be flagrant, we will reverse only when (1) the proof against the defendant was not overwhelming, (2) opposing counsel objected to the conduct. and (3) the district court failed to give a curative instruction. United States v. Carroll, 26 F.3d 1380, 1384-90 (6th Cir. 1994) (reconciling Bess and Leon). In the absence of an objection, only flagrant conduct will warrant a "plain error" reversal. Id. , at 1385 n. 6." United States v. Brown, 66 F.3d 124, 127 (6th Cir. 1995). Here, Dr. Ahee cannot point to either flagrant misconduct or timely objection by his counsel in the record. The argument of the prosecutor did ask the jurors to use their common sense in evaluating the case and did submit that Dr. Ahee did not want to pay income taxes for his own selfish purposes. Those suggestions, however, were well within the bounds of acceptable argument and in no way improperly appealed to the jurors' pecuniary interests. Dr. Ahee's arguments to the contrary are without merit.

CONCLUSION

Dr. Ahee raises numerous issues in his attempt to extricate himself from these charges. For the reasons stated above, none of the arguments have merit. The district judge committed no reversible errors. The verdict of the jury is AFFIRMED.

^* Honorable Thomas B. Russell, United States District Judge for the Western District of Kentucky, sitting by designation.

² This is a different standard than the typical "abuse of discretion standard" prescribed by the Supreme Court for evidentiary decisions. General Electric Co. v. Joiner, 522 U.S. 136, 141, 118 S.Ct. 512, 139 L.Ed.2d 508 (1997). This is due to the strong constitutional considerations involved in evaluating a suppression claim under the Fourth and Fifth Amendments. See Hurst , 228 F.3d at 756 n. 1.

 

 

 

[2002-2 USTC ¶50,776] United States of America , Plaintiff-Appellee v. Nelson Lee Jennings, Defendant-Appellant

(CA-4), U.S. Court of Appeals, 4th Circuit, 00-4331, 11/14/2002, Affirming an unreported District Court decision

[Code Sec. 7206 ]

Crimes: Fraud and false statements: Preparation of false or fraudulent returns.--The district court properly refused to set aside the verdict and grant a new trial to a tax preparer who had been convicted of willfully aiding or assisting in the preparation and presentation of false and fraudulent tax returns. The preparer unsuccessfully contended that the government's knowing use of perjured testimony at trial violated his right to due process. The weight of the evidence pointed strongly to the preparer's guilt, even aside from the testimony of witnesses for whom he had prepared returns. The jury could have readily found that the returns were fraudulent or false on their face due to the frequency and similarity of the overstated deductions. Moreover, it could have inferred willfulness from the preparer's repeated pattern of failing to obtain sufficient documentation to justify the deductions claimed on the returns.
[Code Sec. 7206 ]

Crimes: Fraud and false statements: Preparation of false or fraudulent returns: Perjury.--The district court properly refused to set aside the verdict and grant a new trial to a tax preparer who had been convicted of willfully aiding or assisting in the preparation and presentation of false and fraudulent tax returns. Even if the government had knowingly submitted perjured testimony, as the tax preparer contended, he conceded at oral argument that he failed to demonstrate that the taxpayer witnesses lied about any material fact. Even if the witnesses' testimony denying knowledge of the claimed deductions was perjured, such testimony was not material because it was relevant to their credibility, not the preparer's liability under Code Sec. 7206(2) .
[Code Sec. 7206 ]

Crimes: Fraud and false statements: Preparation of false or fraudulent returns: Due process: New trial denied.--The district court properly refused to set aside the verdict and grant a new trial to a tax preparer who had been convicted of willfully aiding or assisting in the preparation and presentation of false and fraudulent tax returns. To the extent the preparer claimed that his due process rights were violated by not being afforded an opportunity to impeach the credibility of witnesses, it was undisputed that the government turned over to the preparer both the tax returns and the witnesses' affidavits almost two months prior to trial. The preparer's counsel pointed out inconsistencies in the witnesses' testimony at trial.

Helen F. Fahey, United States Attorney, Stephen Westley Haynie, Assistant United States Attorney, Norfolk, Va., for plaintiff-appellee. William P. Robinson, Jr., Robinson, Neeley & Anderson, Norfolk , Va. , for defendant-appellant.

Before: LUTTIG, MOTZ and GREGORY, Circuit Judges.

è Caution: This court has designated this opinion as NOT FOR PUBLICATION. Consult the Rules of the Court before citing this case.ç

OPINION

Per Curiam"

EC: Nelson Jennings, a tax preparer, was convicted of 12 counts of willfully aiding or assisting in the preparation and presentation of false and fraudulent returns in violation of 26 U.S.C. §7206(2). For the reasons that follow, we affirm.

I.

A computer program developed by the Internal Revenue Service ("IRS") uncovered an unusual pattern in a number of the tax returns prepared by Jennings . J.A. 34-35. The IRS reviewed approximately 90 returns, discovering that the itemized deductions on the returns were disproportionately high in relation to the adjusted gross income of the taxpayers. J.A. 36-37.

The IRS thereafter designated 23 returns for full investigation, including interviews with the taxpayers whose returns were selected. During the interviews, the taxpayers signed affidavits stating that they were not eligible for many of the deductions listed on the returns, that they did not review the returns carefully or provide Jennings with documentation to support the claimed deductions, and that they relied on Jennings ' expertise in preparing the returns. Thus, contrary to the signed statement in their tax returns, ¹ the taxpayers essentially denied any knowledge of the fraudulent deductions, explaining that they were interested only in the amount of the refund.

The government subsequently indicted Jennings on 23 counts of willfully aiding and assisting in the preparation and presentation of false and fraudulent returns in violation of 26 U.S.C. §7206(2). ² At trial, the government called the taxpayer witnesses, who, "[f]or the most part[ ]," testified consistently with their signed affidavits. S.J.A. 175. In addition to the taxpayer testimony, the district court also admitted the fraudulent returns into evidence. J.A. 29-30.

The jury returned a guilty verdict on 12 of the 23 counts of the indictment. J.A. 1034-35. The district court subsequently denied Jennings ' motion to set aside the jury verdict and for a new trial, S.J.A. 173-78, and sentenced him to 27 months imprisonment, J.A. 1158-59. This appeal followed.

II.

Jennings argues that the district court erred in refusing to grant him a new trial because the government's knowing use of perjured taxpayer testimony violated his right to due process, thereby depriving him of a fair trial. We disagree.

In denying Jennings' motion for a new trial, the district court held that "the taxpayer witnesses committed perjury either (1) when they signed their returns stating that they had examined the figures on the returns and that those figures were correct; or (2) when they signed the affidavits and testified in Court that they did not examine the deductions contained in the return." S.J.A. 176. Nevertheless, the district court concluded that even "the presentation of [such] inherently incredible . . . testimony" did not prejudice Jennings "by depriving him of a fair trial." S.J.A. 177. We express no view regarding whether the government knowingly used perjured testimony against Jennings at the trial because, even if we assume that it did, there is no "reasonable likelihood that the false testimony could have affected the judgment of the jury." United States v. White, 238 F.3d 537, 540-41 (4th Cir. 2001) (quoting Kyles v. Whitley, 514 U.S. 419, 433 n.7 (1995)).

First, the weight of the evidence in this case, even aside from the taxpayers' testimony, pointed heavily toward Jennings ' guilt. As the district court observed in reaching this conclusion, "a simple comparison of the amounts the taxpayers claimed to have paid in medical expenses and charitable contributions with the amount of income earned by the taxpayers reveals the grossly disproportionate amount of itemized deductions claimed on the returns." S.J.A. 177. Indeed, the jury could have readily found that the returns were "fraudulent" or "false" on their face since the total itemized deductions as a percentage of adjusted gross income on the 23 returns ranged from a low of 45% to a high of 99%, with 22 of the 23 returns containing total itemized deductions that were greater than 60% of adjusted gross income. S.J.A. 172. See United States v. Conlin [77-1 USTC ¶9291 ], 551 F.2d 534, 536 (2d Cir. 1977) (holding that the jury's finding that a tax preparer acted willfully was supported "by both the frequency and similarity of" the overstated deductions in the returns that he prepared). Furthermore, as the district court noted, the jury could have inferred guilt, especially as to willfulness, from Jennings ' repeated pattern of failing to obtain "sufficient documentation despite the obvious disproportion between the deductions and available income" on the returns. S.J.A. 177.

Second, even assuming arguendo that the government knowingly submitted perjured testimony, Jennings conceded at oral argument that he "ha[d] failed to demonstrate that [the taxpayers] lied about any material fact." Knox v. Johnson, 224 F.3d 470, 478 (5th Cir. 2000). Section 7206(2) expressly provides that a person may be convicted "whether or not such falsity or fraud is with the knowledge or consent of the person authorized or required to present such return, affidavit, claim or document." Thus, even if the taxpayers' testimony at trial denying any knowledge of the claimed deductions was perjurious, such testimony was not material since "the innocence or guilty knowledge of a taxpayer is irrelevant to [a section 7206 prosecution]." United States v. Jackson [71-2 USTC ¶9739 ], 452 F.2d 144, 147 (7th Cir. 1971) (emphasis added); see also United States v. Rowlee [90-1 USTC ¶50,189 ], 899 F.2d 1275, 1279 (2d Cir. 1990) ("In fact, the guilt or innocence of the taxpayer for whom the return was filed is irrelevant to the question of the adviser's guilt."). As a result, any perjured testimony in this case was relevant only to the credibility of the taxpayer witnesses, not to establishing a section 7206(2) violation by Jennings .

Finally, to the extent Jennings contends that his due process rights were violated by not being afforded an opportunity to impeach the credibility of the taxpayer witnesses, we disagree, for it is undisputed that the government turned over to Jennings both the tax returns and the affidavits almost two months prior to trial. Indeed, having been made aware of the discrepancies in the various taxpayer statements, defense counsel actually highlighted some of the inconsistencies during his examination of the taxpayer witnesses at trial.

Accordingly, we hold that the district court did not abuse its discretion in denying Jennings' motion to set aside the verdict and for a new trial because even if the government knowingly presented perjured testimony, there is no "reasonable likelihood that the false testimony could have affected the judgment of the jury." ³

CONCLUSION

For the reasons stated herein, the judgment of the district court is affirmed.

AFFIRMED.

¹ In the tax returns, the taxpayers signed the following statement: "Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct, and complete." S.J.A. 148.

² Section 7206(2) provides as follows:

Any person who . . . willfully aids or assists in, or procures, counsels, or advises the preparation or presentation under, or in connection with any matter arising under, the internal revenue laws, of a return, affidavit, claim, or other document, which is fraudulent or is false as to any material matter, whether or not such falsity or fraud is with the knowledge or consent of the person authorized or required to present such return, affidavit, claim, or document . . . shall be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 3 years, or both, together with the costs of prosecution.

³ In a related claim, Jennings also argues that the district court erred when it failed to instruct the jury that it was entitled to completely disregard the taxpayer testimony because the taxpayer witnesses committed perjury either in their returns or in their affidavits. J.A. 1009. Even assuming arguendo that the taxpayer testimony was, in fact, perjurious, the district court did not abuse its discretion in refusing Jennings ' proffered instruction because the court appropriately administered a "broad range of instructions on credibility." United States v. Gray, 137 F.3d 765, 773-74 (4th Cir. 1998).

 

 

 

[98-2 USTC ¶50,627] Douglas J. Carpa, Plaintiff v. Donald R. Smith, et al., Defendants

U.S. District Court, Dist. Ariz., CIV 96-1435 PHX EHC, 7/16/98

[Code Secs. 7402 and 7602 ]

Jurisdiction: District court: Sufficiency of complaint: Tax protestors: Search and seizure: Criminal tax investigation: Suits by taxpayers: Statutory rights: Constitutional rights: Treaty rights: Sufficiency of complaint: Bivens-type claim: Evidence: Damages: Exhaustion of administrative remedies: Proper defendant: RICO claims: Criminal statutes: Religious freedom: Right to privacy: Treaty: Intentional infliction of emotional distress: Standing.--A tax protestor's complaint alleging that an IRS search and seizure violated his rights failed to state a justiciable claim. His Bivens-type claim was unsupported by evidence of intentional wrongdoing. He had not exhausted his administrative remedies before bringing his Code Sec. 7433 claim, and individual agents were not proper parties to that claim. His RICO complaint lacked the required specificity, and he could not pursue claims under criminal statutes that did not provide a private cause of action for civil liability. Also, he did not identify the nature of religious beliefs that he alleged were violated. Finally, individual agents were not proper defendants for his claim under the Privacy Protection Act, 42 USC Sec. 2000aa, and that act did not apply to him because there was probable cause to believe he was involved in a criminal tax evasion and fraud.
[Code Secs. 7201 , 7206 and 7805 ]

Penalties, criminal: Tax protestors: Search and seizure: Criminal tax investigation: Suits by taxpayers: Sufficiency of complaint: Implementing regulations: Return of property: Statute of limitations.--The argument of a tax protestor who was under criminal tax investigation that Code Secs. 7201 and 7206 had no force because they lacked implementing regulations was rejected. Those sections defined the conduct they prohibited and had the force of law without resorting to implementing regulations.
[Code Sec. 6531 ]

Statue of limitations: Criminal prosecutions: Six-year period: Fraud.--A taxpayer's request that the IRS return property that he alleged it unlawfully seized was not ripe because the limitations period to prosecute him had not expired. The six-year period applied since he was suspected of aiding or assisting in the preparation of fraudulent returns and of willfully attempting to evade or defeat a tax.

[Code Sec. 7433 ]

Damages: Unauthorized collection actions: Tax protestors: Search and seizure: Criminal tax investigation: Suits by taxpayers: Exhaustion of administrative remedies.--A tax protes tor's claim for damages arising from an IRS search and seizure that allegedly violated his rights failed to state a justiciable claim. He had not exhausted his administrative remedies before bringing the claim, and individual agents were not proper defendants.

Constitutional rights: Tax protestors: Search and seizure: Criminal tax investigation: Suits by taxpayers: Sufficiency of complaint: Religious freedom: Right to privacy.--A tax protestor's complaint alleging that an IRS search and seizure violated his constitutional religious and privacy rights failed to state a justiciable claim. He did not identify the nature of his religious beliefs or the manner in which they were violated. Individual agents were not proper defendants for his claim under the Privacy Protection Act, 42 USC Sec. 2000aa, and that act did not apply because there was probable cause to believe the taxpayer was involved in a criminal tax evasion and fraud. Moreover, his Bivens-type claim was unsupported by evidence of wrongdoing.

Douglas J. Carpa, pro se.

ORDER

CARROLL, District Judge:

Plaintiff Douglas Carpa ("Plaintiff"), proceeding pro se, filed an amended complaint against numerous employees of the federal government. Plaintiff alleges violations of his constitutional and statutory rights in connection with the search and seizure of his property by the Internal Revenue Service ("IRS").

Before the Court is a motion to dismiss for failure to state a claim and lack of subject matter jurisdiction. Also before the Court is Plaintiff's motion to suspend the Local Rules of Practice.

The Court addresses each of these motions below.

I. Background

Plaintiff, an Arizona resident, was the focus of an investigation by the Internal Revenue Service. Reply to Plaintiff's Response to Motion to Dismiss, Attachment 2 ("Application and Affidavit of Donald Smith"). The IRS suspected Plaintiff and his associates of organizing off-shore trusts designed to avoid tax liability by others in violation of federal law. Id. The IRS linked Plaintiff to a number of tax protestor organizations suspected of engaging in unlawful activities. Id. In addition, IRS agents working undercover had met with Plaintiff and his associates on several occasions and discussed their offshore operations. Id. It was from these discussions that IRS agents learned that Plaintiff kept client records at his home. Id.

On February 24, 1993 , IRS Special Agent Donald Smith ("Smith") secured a warrant to search Plaintiff's residence for evidence. Id. , Attachment 1 ("Search Warrant"). As grounds for the warrant, Smith testified that Plaintiff and his associates were suspected of violating 18 U.S.C. §§286, 287 and 371, and 26 U.S.C. §§7201 and 7206. Id. , Attachment 2 ("Application and Affidavit of Donald Smith"). On February 25, 1993 , IRS agents and Tempe police executed the warrant and seized property belonging to Plaintiff. Motion to Dismiss, at 5, 9.

Plaintiff filed his original complaint on June 14, 1996 against the following defendants: Internal Revenue Service employees Donald R. Smith, Michael Isenberg, Greg Heck, Bill Owens, Sandra Lee Schwartz, Kishore Koritala, Timothy Lee, Edward Chavez, Michael Bigelow, Margaret Milner Richardson and John Does I-VII (collectively referred to as "IRS Defendants"); the City of Tempe and John Does VIII-XX of the Tempe Police Department (collectively referred to as "Tempe Defendants"); Sheriff Joe Arpaio ("Sheriff Arpaio"); U.S. Magistrate Judge Stephen Verkamp ("Judge Verkamp"); and U.S. Treasury Secretary Robert Rubin ("Secretary Rubin").

The Court dismissed the unnamed defendants on January 9, 1997 . (Dkt. 12). On February 24, 1997 , the Court granted the Tempe Defendants' motion to dismiss for failure to state a claim. (Dkt. 19). Also on February 24, the Court instructed Plaintiff to file an amended complaint alleging sufficient facts to state a claim against the remaining defendants. (Dkt. 19).

Plaintiff filed his amended complaint on March 27, 1997 . He alleges that the IRS violated his constitutional and statutory rights as part of a "planned pogrom of legal violence," which culminated in the illegal search and seizure of his property. ¹

Plaintiff contends that IRS Special Agent Smith committed perjury to obtain the search warrant. Amended Complaint, at 9. Plaintiff alleges that Smith did not have probable cause to believe that Plaintiff had violated the laws that Smith cited in his affidavit. Id. at 9-10. Plaintiff accuses Smith of seeking to mislead the judge in order to procure the warrant. Id. at 10.

Plaintiff further argues that 26 U.S.C. §§7201 and 7206(2) have no implementing regulations and are therefore unenforceable, that off-shore trusts are lawful, and that Smith also omitted these vital facts in order to obtain the warrant. Id. at 12-13.

Finally, Plaintiff alleges that the defendants searched his home brandishing weapons, "physically traumatizing" his wife and inflicting severe emotional distress. Id. at 15. He contends that he has been a target of the IRS since he made a citizen's arrest of an IRS agent for "attempted theft by extortion" in December 1993. Motion for the Suspension of Local Rules, at 1. Plaintiff also believes he may be on an IRS "enemies list." Amended Complaint, at 15.

Plaintiff seeks damages under 42 U.S.C. §1983, 26 U.S.C. §7433 and the RICO statutes. ² He also seeks relief under the First Amendment Privacy Protection Act, 42 U.S.C. §2000aa, the Religious Freedom Restoration Act, 42 U.S.C. §2000bb, the United Nations Universal Declaration of Human Rights, and numerous criminal statutes under Title 18. Plaintiff additionally asks for the return of his seized property.

In his amended complaint, Plaintiff abandons his claims against Judge Verkamp and Sheriff Arpaio. The Court subsequently dismissed defendants Bigelow, Richardson and Rubin after Plaintiff failed to state any factual allegations against them. (Dkt. 25). The remaining defendants now move the Court to dismiss Plaintiff's amended complaint. For the reasons discussed below, the Court will grant their motion.

II. Motion for Suspension of Local Rules

Plaintiff has filed a "Motion and Application for the Suspension of Local Rules" under Rule 1.21, Rules of Practice for the District of Arizona. Plaintiff essentially asks the Court to revisit its order of May 22, 1997 , granting the defendants' motion to strike a memorandum of points and authorities and thirteen exhibits that Plaintiff filed with his amended complaint. (Dkt. 32). He argues that these attachments provide "a clear historical background" of the IRS plan against him.

For the same reasons the Court granted the defendants' motion to strike these documents, the Court will deny Plaintiff's motion to suspend the Local Rules of Practice. See Fed. R. Civ. P. 7(a) and 8(a).

III. Motion to Dismiss

1. Standard of Review

For purposes of a motion to dismiss for failure to state a claim, any well-pleaded factual allegations in the complaint are accepted as true and construed in the light most favorable to the plaintiff. Allen v. City of Beverly Hills , 911 F.2d 367, 369 (9th Cir. 1990). However, legal conclusions cast in the form of factual allegations are given no presumption of truthfulness unless those conclusions can reasonably be drawn from the facts alleged. Clegg v. Cult Awareness Network, 18 F.3d 752, 754-55 (9th Cir. 1994); In re Verifone Sec. Litig., 11 F.3d 865, 868 (9th Cir. 1993) ("conclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss for failure to state a claim").

A dismissal under Fed. R. Civ. P. 12(b)(6) is a ruling on a question of law. North Star Int'l v. Arizona Corp. Comm'n., 720 F.2d 578, 580 (9th Cir. 1983). Dismissal is not appropriate unless it appears certain that the plaintiff would not be entitled to relief under any set of facts that could be proven. Terracom v. Valley National Bank, 49 F.3d 555, 558 (9th Cir. 1995) (citations omitted). The allegations of a pro se complaint are held to less stringent standards than formal pleadings drafted by lawyers. Haines v. Kerner, 404 U.S. 519, 520 (1972).

There is a presumption against the exercise of jurisdiction by federal district courts because they are courts of limited jurisdiction. Kokkonen v. Guardian Life Ins. Co. of America , 511 U.S. 385, 387 (1994); National Treasury Employees Union v. Federal Labor Relations Authority, 112 F.3d 402, 404 (9th Cir. 1997). The plaintiff bears the burden of demonstrating that a federal district court has subject matter jurisdiction. Ashoff v. City of Ukiah , 130 F.3d 409, 411 (9th Cir. 1997); Thompson v. McCombe, 99 F.3d 352, 353 (9th Cir. 1996). Furthermore, it must appear from the face of the complaint that subject matter jurisdiction exists.

In ruling on a challenge to subject matter jurisdiction, a district court is free to hear evidence and resolve factual disputes. Thornhill Publishing Co. v. General Telephone Corp., 594 F.2d 730, 733 (9th Cir. 1979). No presumption of truthfulness attaches to a plaintiff's allegations. Id. However, where facts relevant to determining subject matter jurisdiction are intertwined with the merits of plaintiff's claim, the court shall employ the standard applicable to a motion for summary judgment. Augustine v. United States , 704 F.2d 1074, 1077 (9th Cir. 1983).

2. Discussion

The defendants have filed a motion to dismiss Plaintiff's amended complaint for the following reasons: Plaintiff's Bivens claim does not meet the required pleading standard and fails as a matter of law; Plaintiff's RICO claim is barred by the doctrine of sovereign immunity and fails to meet the required pleading standard; Plaintiff fails to state a viable claim under Title 26; Plaintiff has no private right of action under Title 18; Plaintiff's claims under 42 U.S.C. §§2000aa and 2000bb have no merit and are barred by the statute of limitations; and Plaintiff is not entitled to recover his seized property.

A. Bivens Claims

The Ninth Circuit employs a heightened pleading standard for Bivens claims. Branch v. Tunnell, 14 F.3d 449, 452 (9th Cir. 1994). A plaintiff asserting a Bivens claim must set forth in his complaint nonconclusory allegations that demonstrate evidence of unlawful intent. Id.

In his amended complaint, Plaintiff alleges that Smith perjured himself in his affidavit to secure the search warrant. However, Plaintiff fails to substantiate these allegations with any evidence. Smith's affidavit contains more than ten pages of information establishing probable cause to believe that Plaintiff was engaged in unlawful activities. Other than mere conclusory allegations of perjury, Plaintiff offers no facts to show that Smith knew or should have known that any of the statements in the affidavit were false. Plaintiff's amended complaint thus fails to meet the required pleading standard. Id. at 455.

Plaintiff also contends that Smith committed perjury because 26 U.S.C. §§7201 and 7206(2) "have no implementing regulations." Without implementing regulations, Plaintiff argues, these laws have no force of law and Smith therefore had no cause for believing that Plaintiff was violating 18 U.S.C. §§286, 287 and 371. This argument is without merit.

Section 7805(a) of the Internal Revenue Code provides that the Secretary "shall prescribe all needful rules and regulations for the enforcement of [tax laws]. . . ." This does not mean that implementing regulations are required to enforce every provision in the tax code. Russell v. United States [95-1 USTC ¶50,029], 75 A.F.T.R.2d. 95-495 (W.D. Mich. 1994). See also Watts v. Internal Revenue Service, 925 F. Supp. 271, 277 (D.N.J. 1996) ("By 'needful rules and regulations,' Congress did not intend to require the promulgation of unnecessary regulations"). Sections 7201 and 7206 define the conduct they prohibit, and have the force of law without resorting to implementing regulations. United States v. Washington [97-1 USTC ¶50,129], 947 F. Supp. 87, 91 (S.D.N.Y. 1996). See also United States v. Bowers [90-2 USTC ¶50,588], 920 F.2d 220, 222 (4th Cir. 1990) ("duty to pay those taxes is manifest on the face of the statutes, without any resort to IRS rules, forms or regulations"); United States v. Hicks [91-2 USTC ¶50,549], 947 F.2d 1356, 1360 (9th Cir. 1991) ("It is the tax code itself, without reference to regulations, that imposes the duty to file a tax return."). For the reasons set forth above, the Court will dismiss Plaintiff's Bivens claim for failure to state a claim.

B. RICO Claims

The particularity requirements of Rule 9(b), Fed. R. Civ. P., apply to RICO claims. Moore v. Kayport Package Express, Inc., 885 F.2d 531, 541 (9th Cir. 1989). Rule 9(b) requires the pleader to "state the time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentation." Id. (citing Schreiber Distributing Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986)).

Plaintiff fails to meet this standard in his amended complaint. Plaintiff alleges that defendants engaged in "racketeering as that term is defined" in the RICO statutes. He does not specify what the unlawful conduct is, or when and where it occurred. Nor does he attribute the conduct to any specific individual.

To the extent that Plaintiff's RICO claim is directed at Smith, Plaintiff fails to state a cause of action. An essential element of a RICO claim is "a pattern of racketeering activity," which comprises "at least two acts" of racketeering conduct. 18 U.S.C. §§1961(5) and 1962(c). Plaintiff's amended complaint accuses Smith of perjuring a single affidavit on one occasion. This is insufficient to establish a pattern. Furthermore, Plaintiff fails to offer any evidence to support his claim that Smith knowingly falsified information.

Plaintiff further argues that he can better meet the heightened pleading standard after additional discovery. Response to Motion to Dismiss, at 6. However, Rule 9(b) is intended to prevent the filing of a complaint as a pretext for discovery, and "protects potential defendants . . . from the harm that comes from being charged with the commission of fraudulent acts." Semegen v. Weidner, 780 F.2d 727, 731 (9th Cir. 1985). To allow Plaintiff to conduct discovery as requested would subvert the purpose of the pleading requirements.

On the face of his amended complaint, Plaintiff fails to state a RICO claim. Accordingly, the claim is dismissed.

C. Relief Under 26 U.S.C. §7433

A taxpayer can bring a civil action for damages against the United States if an officer or an employee of the Internal Revenue Service acts recklessly or intentionally disregards any provision of Title 26. 26 U.S.C. §7433(a). Often referred to as the Taxpayer Bill of Rights, this section makes a suit against the United States "the exclusive remedy for recovering damages resulting from such actions." Id.

Plaintiff does not sue the United States , but instead has filed suit against employees of the IRS. These are not proper defendants under section 7433. Consequently, plaintiff fails to state a valid claim.

Even if Plaintiff had named the proper defendants, he would not be entitled to relief. The Internal Revenue Code requires a plaintiff to exhaust administrative remedies with the IRS before bringing a claim. 26 U.S.C. §7433(d)(1). Plaintiff does not allege or provide evidence that he has exhausted such remedies with the IRS. Consequently, the Court does not have subject matter jurisdiction over this claim. Conforte v. United States [93-1 USTC ¶50,274], 979 F.2d 1375, 1377 (9th Cir. 1992).

D. Religious Freedom Restoration Act (RFRA)

Plaintiff next alleges that the defendants violated his "First Amendment practice of religious teachings" under the Religious Freedom Restoration Act (RFRA), 42 U.S.C. §2000bb. Plaintiff does not identify the nature of his religious teachings or the manner in which defendants abridged his right to exercise his beliefs. Even so, Plaintiff's claim is precluded by the Supreme Court's holding that RFRA was unconstitutional. City of Boerne v. Flores, 117 S.Ct. 2157 (1997).

E. Privacy Protection Act (PPA)

Plaintiff next alleges that the seizure of a "trust primer" and a "treaty passport" by the IRS violated the First Amendment Privacy Protection Act (PPA). Amended Complaint, at 7.

The Privacy Protection Act creates a civil cause of action against the United States for damages resulting from a search or seizure in violation of the Act. 42 U.S.C. §2000aa-6(a)(1). Individual employees of the federal government, however, are not subject to suit under the Act. Id.

Moreover, the PPA allows the government to search for and seize materials if "there is probable cause to believe that the person possessing such materials has committed or is committing the criminal offense to which the materials relate." 42 U.S.C. §§2000aa(a)(1) and (b)(1). Smith's warrant affidavit established probable cause to believe that Plaintiff was engaged in unlawful activities. Furthermore, the property seized at Plaintiff's residence related to the crimes Plaintiff allegedly committed. Accordingly, the defendants' seizure of Plaintiff's property did not violate the PPA. See DePugh v. Sutton, 917 F. Supp. 690, 697 (W.D. Mo. 1996).

E. Title 18 Violations

Plaintiff additionally seeks relief under a number of criminal statutes, including 18 U.S.C. §§2, 3, 4, 16, 241, 242, 872, 878, 912, 913, 1001, 1341, 1661 and 2111. However, these criminal statutes do not provide a private cause of action for civil liability. Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980) (18 U.S.C. §§241 and 242 provide no private right of action and cannot form the basis of a civil suit). See also Steinman v. Internal Revenue Service [97-1 USTC ¶50,396], 78 A.F.T.R.2d 96-5380 (D. Ariz. 1996) (18 U.S.C. §§3, 4, 16, 241, 242, 872, 912, 913, 1001, 1341, 1661 and 2111 do not provide a private right of action).

Accordingly, the Court will dismiss these claims.

F. United Nations Universal Declaration of Human Rights

Plaintiff alleges that defendants violated his rights under the United Nations Universal Declaration of Human Rights. However, Plaintiff does not have standing to make this claim. Dickens v. Lewis, 750 F.2d 1251, 1254 (5th Cir. 1984). Moreover, the Declaration is not a statement of law and does not support a cause of action. Haitian Refugee Center, Inc. v. Gracey, 600 F. Supp. 1396, 1406 (D.D.C. 1985), aff'd, 809 F.2d 794 (D.C. Cir. 1987). Accordingly, the Court will dismiss this claim.

G. Return of Seized Property

Plaintiff alleges that his property was unlawfully seized by the IRS and seeks to have it returned. He reasons that because the IRS does not appear as though it will prosecute him, return of his property is appropriate. Response to Motion to Dismiss, at 8. The defendants counter that the limitations period for prosecuting Plaintiff has not yet expired, and they are entitled to retain the property until they have decided whether to prosecute. Reply to Plaintiff's Response to Motion to Dismiss, at 3.

Generally, the statute of limitations for prosecutions under the internal revenue laws is three years after the commission of the offense. 26 U.S.C. §6531. However, certain offenses carry a six-year limitations period. Id. In his warrant affidavit, Smith suspects Plaintiff of aiding or assisting in the preparation of fraudulent matter, and of willfully attempting to evade or defeat a tax. These are among the offenses that can carry a six-year limitation period. Id. Because six years have not passed since the execu tion of the search warrant, Plaintiff's request is likely not yet ripe.

H. Infliction of Emotional Distress

Plaintiff alleges that defendants physically traumatized his wife and inflicted severe emotional distress during the search of his home. To the extent Plaintiff seeks to recover for emotional distress suffered by his wife, he does not have standing to do so. See Portman v. County of Santa Clara , 995 F.2d 898, 902 (9th Cir. 1993). Neither can Plaintiff recover on his own behalf. Plaintiff acknowledges being in California when his home was searched. Amended Complaint, at 15. This places him well beyond the zone of danger to support a claim as a bystander. See Keck v. Jackson, 122 Ariz. 114, 116 (1979) ("The plaintiff/bystander must himself have been in the zone of danger so that the negligent defendant created an unreasonable risk of bodily harm to him.").

In consideration of the above,

IT IS ORDERED granting Defendants' motion to dismiss Plaintiff's amended complaint. (Dkt. 36).

IT IS FURTHER ORDERED denying Plaintiff's motion to suspend the Local Rules of Practice. (Dkt. 42).

¹ Plaintiff is suing the defendants in their individual and "corporate" capacity. The Court will construe "corporate" to mean the defendants' official capacity. To the extent plaintiff sues the defendants in their official capacity, his claims are barred by the doctrine of sovereign immunity.

² Because the defendants are federal actors, the Court will treat plaintiff's §1983 claim as a Bivens claim. See Bivens v. Six Unknown Agents of the Federal Bureau of Narcotics, 403 U.S. 388 (1971).

 

 

[66-2 USTC ¶9513] United States of America , Plaintiff v. Eugene V. Hensley, Defendant

U. S. District Court, Dist. N. Mex., No. 22,522 Criminal, 257 FSupp 987, 6/23/66

[1954 Code Secs. 6513 and 6531]

Statute of limitations: Criminal prosecutions: Extension of time for filing returns.--An indictment charging the filing of a false and fraudulent return and the making of a false verification, returned more than six years after the due date of the return but within six years from the date the return was actually filed because of extensions granted by the Commissioner, was timely and a motion to dismiss the indictment was denied. Hull , 66-1 USTC ¶9259, not followed.

[1954 Code Sec. 7206(1)]

Criminal penalties: Fraudulent and false statements: Constitutionality of statute.--A motion to dismiss certain counts in an indictment on the ground that Sec. 7206(1) was unconstitutional was denied.

John Quinn, United States Attorney, Scott McCarty, Assistant United States Attorney, P. O. Box 607, Albuquerque, N. Mex., Vincent P. Russo, Tax Division, Department of Justice, Washington, D. C. 20530, for plaintiff. Modrall, Seymour, Sperling, Roehl & Harris, Simms Bldg., Albuquerque, N. Mex., J. Howard Edmondson, Fellers, Snider, Baggett & McLane, 2700 First Nat'l Bldg., Oklahoma City, Okla., for defendants.

Memorandum Opinion

BRATTON, District Judge:

This matter came on for hearing upon the Motions of the defendant to dismiss Counts III and VII of the Indictment as being barred by the Statute of Limitations, and to dismiss Counts V, VI, VII and VIII of the Indictment upon the grounds that Title 26, United States Code, Section 7206(1) is unconstitutional, and the Court having considered the briefs and argument of counsel finds that neither Motion is well taken.

The challenge to the constitutionality of Title 26, U. S. C. Sec. 7206(1) is without any support in authority, and it is the opinion of this Court that the argument advanced by defendant as to unconstitutionality is not well founded and does not require further discussion.

The facts upon which the argument as to the Statute of Limitations is laid are as follows:

Court III is brought under Title 26, U. S. C., Sec. 7201, charging that on June 17, 19 60, the defendant attempted to evade and defeat a part of the taxes for the calendar year 1959 by filing a false and fraudulent tax return for a corporation. Count VII charges that on June 17, 19 60, the defendant did willfully make and subscribe a verified income tax return which he did not believe to be correct, in violation of Title 26, U. S. C. Sec. 7206(1).

The Internal Revenue Service had granted extensions of time beyond June 17, 19 60, in which to file the return, and it was filed within the extension.

The Indictment was returned March 22, 19 66, which is more than six (6) years from the due date of March 15, 19 60, prescribed by statute for the corporate return, but less than six (6) years from June 17, 19 60, which is the date the return was actually filed.

The pertinent provisions of the Internal Revenue Code of 1954 applicable to this case are follows:

"SEC. 6072. TIME FOR FILING INCOME TAX RETURNS.

(a) General Rule.--In the case of returns under section 6012, 6013, 6017, or 6031 (relating to income tax under subtitle A), returns made on the basis of the calendar year shall be filed on or before the 15th day of April following the close of the calendar year and returns made on the basis of a fiscal year shall be filed on or before the 15th day of the fourth month following the close of the fiscal year, except as otherwise provided section. in the following subsections of this section.

(b) Returns of Corporations,--Returns of corporations under section 6012 made on the basis of the calendar year shall be filed on or before the 15th day of March following the close of the calendar year, and such returns made on the basis of a fiscal year shall be filed on or before the 15th day of the third month following the close of the fiscal year."

The pertinent provisions of the statute of limitations, Section 6531 of the Internal Revenue Code of 1954, are as follows:

"SEC. 6531. PERIODS OF LIMITATION ON CRIMINAL PROSECUTIONS.

"No person shall be prosecuted, tried, or punished for any of the various offenses arising under the internal revenue laws unless the indictment is found or the information instituted within 3 years next after the commission of the offense, except that the period of limitation shall be 6 years--

* * *

"(2) for the offense of willfully attempting in any manner to evade or defeat any tax or the payment thereof;

* * *

"(5) for offenses described in sections 7206(1) and 7207 (relating to false statements and fraudulent documents);

* * *

"* * * For the purpose of determining the periods of limitation on criminal prosecutions, the rules of section 6513 shall be applicable. Aug. 16, 19 54, 9:45 a.m., E. D. T., c. 736, 68A Stat. 815."

Section 6513, the section referred to in Section 6531, insofar as is pertinent here, provides:

"SEC. 6513. TIME RETURN DEEMED FILED AND TAX CONSIDERED PAID.

"(a) Early Return or Advance Payment of Tax.--For purposes of section 6511, any return filed before the last day prescribed for the filing thereof shall be considered as filed on such last day. For purposes of section 6511(b)(2) and (c) and section 6512, payment of any portion of the tax made before the last day prescribed for the payment of the tax shall be considered made on such last day. For purposes of this subsection, the last day prescribed for filing the return or paying the tax shall be determined without regard to any extension of time granted the taxpayer and without regard to any election to pay the tax in installments."

The defendant relies upon three cases to support his position, U. S. v. Doelker [63-1 USTC ¶9239], 211 Fed. Supp. 663, U. S. v. Black [63-2 USTC ¶9564], 216 Fed. Supp. 645, and U. S. v. Hull [66-1 USTC ¶9259], U. S. Court of Appeals, 5th Circuit, No. 22,217 as reported in 66-1 USTC [page] 85,508, Commerce Clearing House, Inc.

The Doelker case involved a charge of willful failure to file a return, and the Indictment was returned more than three years after the normal due date of April 15 and within three years of a period of extension granted by the director. The Court correctly determined that the starting date of the statute of limitations was April 15. This is clearly provided in the third sentence of Section 6513(a).

The Black case involved a charge of violation of Section 7201, alleging an attempt to evade and defeat the tax by filing a false return. The return was filed early and the Indictment was returned more than six years from the date the return was actually filed, but less than six years from the last day prescribed for the payment of the tax.

The Court correctly held that the Indictment was timely returned under the provisions of the first sentence of Section 6513(a).

The Hull case involved an indictment charging the aiding and abetting of the filing of false and fraudulent tax returns in violation of Title 26, Sec. 7206(2).

The Indictment was returned more than six years after the due date of the tax return, but less than six years after the tax return was actually filed because of extensions granted by the Director of Internal Revenue.

As reported in 66-1 USTC [page] 85,508, Commerce Clearing House, Inc., the Court cited the statutes and set out its brief decision as follows:

"26 U. S. C. §6531 provides:

'. . . for purposes of determining the periods of limitation on criminal prosecutions, the rules of §6513 shall be applicable.' §6513

'. . . for purposes of this subsection the last day prescribed for filing the return or paying the tax shall be determined without regard to any extension of time granted the taxpayer and without regard to any election to pay the tax in installments.'

"The statute seems to be clear to the effect that returns are deemed to have been filed and wilful acts of (sic) omissions committed on the last date prescribed for the filing of returns irrespective of extensions of time granted; thus, undisputably the statute of limitations bars prosecution on Count One. United States v. Doelker [63-1 USTC P. 9239], 211 F. Supp. 663, (N. D. Ohio, 1962), affd. per curiam [64-1 USTC P. 9236] 327 F. 2d 343 (6th Cir. 1964); U. S. v. Black [63-2 USTC P. 9564], 216 F. Supp. 645 (W. D. Mo., 1963); Mertens, Law of Federal Income Taxation §55A. 15."

The quotation is almost literally taken from Mertens, and in the judgment of this Court the language in Mertens as applied to the instant case is incorrect and the decision in the Hull case based thereon is incorrect. The instant case is, for practical purposes, the same as the Hull case, but this Court arrives at a contrary conclusion.

Both counts of the Indictment in the instant case involve the filing of an allegedly false return after the statutory due date and during a period of extension granted by the Director. The date on which it is charged that was done was June 17, 19 60. The date on which the return may have been due is immaterial insofar as determining whether the offenses charged were committed.

The first two sentences of Section 6513 change, for purposes of the statute of limitations, the dates upon which it shall be deemed an act was done regardless of when it was actually done. But these two sentences apply only to early filings or payments. Neither is applicable to the situation here involved where the filing is after a statutory due date and during a period of extension.

The third sentence of Section 6513 only relates to determination of the last date prescribed for filing a return or paying a tax and fixes that date for purposes of the statute of limitations. Insofar as the offenses charged in Counts II and VII of the Indictment are concerned, the last date prescribed for filing and [sic] return or paying the tax has no bearing and is not an issue. The offense, if proved, would have been committed when the return was actually filed, regardless of the due date.

Section 6531 provides a limitation of six years after the commission of the offense. It is alleged the offenses were committed on June 17, 19 60, by the filing of a false return on that date and by the making of a false verification on that date. No provision of Section 6513 is applicable to change that date to any other date.

The Motions are not well taken and will be denied.

 

 

[2005-2 USTC ¶50,513] United States of America v. Robert B. Creamer, Defendant.

U.S. District Court, No. Dist. Ill. , East. Div.; 04 CR 281, April 8, 2005 .

[ Code Secs. 6531, 7202 and 7206]

Criminal procedure: Statute of limitations: Tax evasion: Timeliness of indictment: Willfulness: False statements: Failure to pay withholding tax. --

A taxpayer's motion to dismiss an indictment for bank fraud and tax violations because of pre-indictment delay was denied. The taxpayer failed to establish that the government's eight-year delay between the completion of its investigation and the indictment caused actual and substantial prejudice to his fair trial rights. Further, in a case of first impression, the court held that the limitations period began to run when the payment became past due, and not on April 15 of the succeeding calendar year, as the government claimed. For Code Sec. 7202 offenses, the focus is not on the filing of tax returns, but on the collection and payment of withholding taxes. Accordingly, April 15 could not be the offense date because the employer had no obligation regarding the withholding taxes on that date. Moreover, the court also concluded that the plain meaning of the statutory language and the vast body of case law set the limitations period at six years for Code Sec. 7202 offenses. The court also upheld the taxpayer's motion to sever the bank fraud counts from the tax violations, since joinder would prejudice the taxpayer's defense.

MEMORANDUM OPINION AND ORDER

MORAN, Senior Judge: The government accuses defendant Robert B. Creamer of committing bank fraud under 18 U.S.C. §1344, and tax violations under 26 U.S.C. §§7202 and 7206. The section 1344 charges stem from a check kiting scheme that defendant allegedly orchestrated while he served as director of several non-profit organizations. The section 7202 charges arise from defendant's alleged failure to pay withholding taxes to the Internal Revenue Service (IRS). The section 7206 charges relate to false statements that defendant allegedly made on his personal tax returns. Defendant has now filed seven pretrial motions in which he seeks the following grounds of relief: dismissing the section 7202 charges as untimely; dismissing all counts due to pre-indictment delay; severing the bank fraud and tax counts; dismissing the §7206 charges for failing to state an offense; and three discovery-related motions which request that the government disclose certain categories of evidence. For the following reasons, defendant's motions are granted in part and denied in part.

BACKGROUND

Defendant is the former director of several non-profit organizations that addressed primarily consumer advocacy issues. Those organizations were the Illinois Public Action Fund (IPAF), the Citizen Action Center for Consumer Rights (CACCR), and the National Consumers Foundation (NCF). The government alleges that defendant executed three separate check-kiting schemes in 1993, 1996 and 1997, during his tenure at those organizations. A check-kiting scheme "involves the knowing drafting and depositing of a series of overdraft checks between two or more federally insured banks with the purpose of artificially inflating bank balances so that checks can be drawn on accounts that actually have negative funds." United States v. LeDonne, 21 F.3d 1418, 1425, n.2 (7th Cir. 1994). According to the government, the defendant drew insufficiently-funded checks on the organizations' bank accounts and then deposited those checks in other bank accounts held by the same organizations in order to create the appearance of positive account balances. He then drew money from those accounts in order to pay the organizations' operational expenses. Responding to those allegations, defendant claims that the organizations had access to a large reservoir of funds to sustain their operations and that this reservoir of funds was sufficient to cover the organizations' bank debts.

The schemes were allegedly executed in similar fashion, and the illustration of one scheme provides an adequate background for all. In Count 1 the government alleges that in 1997 defendant drew insufficiently-funded checks on an account held by CACCR at US Bank of Oregon (US Bank), and then deposited them into accounts at South Shore Bank that were held by CACCR and IPAF. Defendant then drew insufficiently-funded checks on the CACCR account at South Shore Bank and deposited them into the IPAF account at South Shore Bank. Next, defendant drew insufficiently-funded checks on the IPAF account at South Shore Bank and deposited them into an IPAF account at Cole Taylor Bank. Defendant then issued insufficiently-funded wire transfers against the IPAF account at Cole Taylor and deposited them into the CACCR account at US Bank and the South Shore account of IPAF. Thus, according to the government, defendant allegedly used the organizations' accounts at the different banks to create a circuit through which he passed insufficiently-funded checks and wire transfers in order to maintain the appearance of positive balances, from which he withdrew funds to support the organizations.

The sums at stake were substantial. According to the government, the combined balance of the organizations' accounts during the 1997 kite ranged from negative $1 million to more than negative $2.6 million. Counts 2 through 7 each relate to the issuance of one in a series of six checks, which ranged from $93,000 to $98,000 in value. The combined daily balance during the 1996 check-kiting scheme ranged from negative $70,000 to more than negative $900,000. Counts 9 through 12 relate to a series of kited checks that were drawn in amounts from $64,000 to $99,000. The combined balance of the organizations' accounts during the 1993 scheme ranged from negative $600,000 to approximately negative $900,000. Finally, Counts 14 through 16 address three kited checks, which ranged from $13,721 to $14,200 in value.

In Counts 17 through 30 the government accuses defendant of violating §7202 by failing to pay to the IRS withholding taxes during specific fiscal quarters between 1996 and 2000. Counts 17 through 20 charge defendant with failing to pay taxes withheld from IPAF employees. Defendant left IPAF in 1997 and formed Issue Dynamics, Inc. (IDI), a political consulting firm where defendant was president and also the sole employee. Counts 21 through 30 charge that defendant failed to make ten payments reflecting taxes that he withheld at IDI. In his defense, defendant asserts that neither he nor any of the organizations that he directed ever misrepresented the amount of taxes owed.

Counts 31 through 34 charge defendant with making false statements on personal tax returns he filed between the years 1996 through 1999. Specifically, the government claims that defendant included withholding taxes on the 1040 forms when he knew that no withholding taxes were actually paid over to IRS. Defendant moves to dismiss these counts, and argues that the relevant line on Form 1040 asks only for taxes that were withheld, and not taxes that were paid to the IRS. He further contends that a taxpayer may include amounts withheld, even if the taxpayer's employer never paid those sums to the IRS.

The grand jury returned a 34-count indictment against defendant on May 10, 2004. Before the indictment's issuance, defendant and the government entered into an agreement whereby defendant agreed to toll the statute of limitations period for all counts on May 31, 2003. If not for that agreement, the government could not pursue Counts 13 through 16, which relate to the 1993 bank fraud, as the relevant statute of limitations period for §1344 offenses is ten years.

As is evident from the description above, the charges against defendant divide into two categories: bank fraud and tax violations. And, within those two categories, the charges relate to defendant's professional business life and his personal life. The charges do overlap, but defendant says the similarities are insufficient to justify the joinder of the bank fraud and tax violations. Further, over a decade passed between the first check-kiting activity and the indictment. Defendant claims that the government's delay in bringing its case against him is sufficiently prejudicial to warrant dismissal of the entire indictment. That contention, along with defendant's remaining arguments, are discussed below in detail.

DISCUSSION

Defendant's Motion to Dismiss All Counts for Pre-Indictment Delay

Defendant seeks to dismiss all counts in the indictment due to the pre-indictment delay. This is defendant's second argument, but the court addresses it first because defendant's success on this claim could conceivably moot his remaining arguments. However, defendant does not prevail here since he cannot demonstrate with requisite specificity that the government's lengthy pre-indictment delay caused him actual and substantial prejudice.

Defendant focuses primarily on the bank fraud counts, and specifically those stemming from the alleged 1993 check-kiting scheme. As for the tax counts, defendant contends that the government joined them in order to portray the bank fraud counts as timely. Over ten years passed between the alleged 1993 bank fraud and defendant's indictment on March 10, 2004. As noted above, if not for defendant's agreement to toll the statute of limitations period on March 31, 2003, the government would not be able to pursue the 1993 offenses. Defendant claims that the pre-indictment delay has caused him to lose three sources of valuable information. He identifies financial records relating to IPAF, NCF and CACCR that were destroyed; a business associate and personal friend, Mirron Alexandroff, who died in 2001; and other witnesses' memories, which have faded, as sources of evidence that he may no longer use to assist his defense. Defendant contends that if he had access to that evidence he would have used it to demonstrate that he never intended to expose the banks to actual or potential losses, and that the organizations, particularly IPAF, had sufficient funds to cover any overdrafts. Without those sources of information, defendant believes that his defense suffers severe prejudice. In response, the government argues that all of the charges have been brought within the time periods set by the relevant statutes of limitations. The government also labels plaintiff's lost evidence as insufficient to establish prejudice. Lastly, the government asserts that the delay was not due to any impermissible purpose.

The primary safeguard to a timely indictment is a statute of limitations. See United States v. Sowa, 34 F.3d 447, 450 (7 ^th Cir. 1994); United States v. Henderson, 337 F.3d 914, 919 (7 ^th Cir. 2003); United States v. Pardue, 134 F.3d 1316, 1319 (7 ^th Cir. 1998) ("A defendant's primary protection against overly stale criminal charges is the applicable statute of limitations, which is the legislative limit on prosecutorial delay."). Still, charges filed within the statute of limitations may violate the Due Process Clause of the Fifth Amendment, which "plays a limited role in protecting a defendant from undue prosecutorial delay." United States v. Smith, 80 F.3d 1188, 1191 (7 ^th Cir. 1996). To show that a pre-indictment delay violates due process, a defendant "must prove that the delay caused actual and substantial prejudice to his fair trial rights, and there must be a showing that the government delayed indictment to gain a tactical advantage or some other impermissible reason." Sowa, 34 F.3d at 450. Defendant's showing of actual and substantial prejudice must be "'specific, concrete, and supported by evidence.'" Id. quoting Pharm v. Hatcher, 984 F.2d 783, 787 (7 ^th Cir. 1993). That showing has also been described as "exacting" ( United States v. McMutuary, 217 F.3d 477, 482 (7 ^th Cir. 2000)), and "quite stringent." United States v. Hunter, 197 F.3d 862, 865 (7 ^th Cir. 1999). "Vague, speculative, or conclusory allegations" of harm are insufficient to establish prejudice. United States v. Canoy, 38 F.3d 893, 902 (7 ^th Cir. 1994); United States v. Spears, 159 F.3d 1081, 1084 (7 ^th Cir. 1998). After the defendant shows that the delay caused him actual and substantial prejudice, the government "must come forward and provide its reasons for the delay." Sowa, 34 F.3d at 451. Finally, after the government explains the delay, its reasons "are balanced against the defendant's prejudice to determine whether the defendant has been denied due process." Id. Due process is not violated if the delay "is legitimately investigative in nature." Id. Due process "is only implicated if the government purposely delayed the indictment to take advantage, tactically, of the prejudice or otherwise acted in bad faith." Id. at 450. In Sowa, the court recognized that it "has never characterized a pre-indictment delay as a constitutional violation." Id. Over ten years have passed since Sowa was decided, and the court's observation remains unchanged.

Defendant describes Alexandroff as a longtime friend who could "provide distinctive insight into [defendant's] operation of IPAF and [defendant's] utter lack of fraudulent intent in the financing of the organization." Alexandroff served on IPAF's Board of Directors and was also a personal friend of defendant. Defendant asserts that Alexandroff thus had a unique dual perspective --an overview of IPAF due to his role on the board, and a window into defendant's state-of-mind due to his friendship. According to defendant, he and Alexandroff discussed financial matters during 1996 and 1997. Defendant argues that Alexandroff would have testified to defendant's lack of intent to defraud any bank, and also that there is no other source for this testimony. In response, the government advances three arguments: despite his role on the Board of Directors, Alexandroff lacked knowledge of IPAF's day-to-day banking affairs; if Alexandroff actually knew about IPAF's financial affairs, then he would have been a co-schemer; and further, Alexandroff's testimony would have been inadmissible hearsay.

The Court of Appeals has been clear that the death or unavailability of a witness during a pre-indictment delay is not sufficient to establish actual and substantial prejudice. See Henderson , 337 F.3d at 920; United States v. Perry, 815 F.2d 1100, 1103 (7 ^th Cir. 1987). When a witness dies, the defendant claiming prejudice must prove "that the missing witness would have testified on the defendant's behalf, would have withstood cross-examination, and would have been a credible witness before the jury." Canoy, 38 F.3d at 902. Defendant does make a generalized showing as to the factors, but he must detail specifics and not generalities and vagaries. See United States v. Koller, 956 F.2d 1408, 1416 (7 ^th Cir. 1992) ("The defendant must also allege more than that a particular witness is no longer available and that his testimony would have been favorable to the defense."). Defendant's showing falls far short of the prejudice demonstrated in the rare instance of dismissal for pre-indictment delay, United States v. Sabath, 990 F. Supp. 1007 (N.D. Ill. 1998). In that case three key witnesses died during the delay, and in support of his motion to dismiss the defendant submitted evidence to support the deceased witnesses' testimony. Defendant presents no similar evidence that corroborates what he posits Alexandroff would have said. It is more than probable that other IPAF employees were familiar with the organization's finances and also knew defendant on a personal level. And it is implausible that Alexandroff was the only person with whom defendant discussed IPAF's finances. Defendant's unsupported portrayal of Alexandroff as the ultimate insider is bereft of the concrete and specific evidence necessary to establish prejudice.

Next, defendant claims prejudice due to the fact that financial records from IPAF, NCF and CACCR were discarded in or around 1999. The mere loss of records during a pre-indictment delay is not enough to establish prejudice. Spears, 159 F.3d at 1085. Defendant must show what the records would have shown and how they would have helped his defense. Canoy, 38 F.3d at 902-03. Defendant asserts that had the government indicted the case in a timely manner he would have used the records to establish that the organizations had sufficient funds to reimburse the banks, and that he thus lacked any intent to defraud. Defendant further argues that the loss of the records prevents him from arguing that no bank suffered actual monetary losses, which, in his view, evidences that he did not intend to defraud any bank. These arguments fail to establish actual and substantial prejudice.

Section 1344 does not require that the victim bank actually suffer any loss. See 18 U.S.C. §1344; Neder v. United States [ 99-1 USTC ¶50,586], 527 U.S. 1, 24-25 (1999) ("The common-law requirements of 'justifiable reliance' and 'damages' ... plainly have no place in the federal fraud statutes."); United States v. Barrett, 178 F.3d 643, 648 (2d Cir. 2000) ("[A]ctual or potential loss to the bank is not an element of the crime of bank fraud but merely a description of the required criminal intent."); United States v. Mason, 902 F.2d 1434, 1441 (9 ^th Cir. 1990) ("[A] federally supported financial institution need not incur a 'loss' in order to be a victim of 'false or fraudulent pretenses, representations, or promises.'"). Even if actual loss was relevant, the banks' own records could adequately show what losses, if any, they actually suffered due to defendant's alleged check-kiting scheme. Thus, even if defendant had the records, and assuming that they showed his organizations had sufficient funds to cover the checks, and that no bank actually suffered any loss, he could still be convicted under section 1344. There is yet another reason why the absence of the organizations' financial records does not sufficiently prejudice defendant. The loss of those records does not preclude defendant from showing that he did not intend to commit bank fraud because any specifically identifiable funds received by the organizations would be noted in at least two locations: the organizations' records and the records held by the sources of those funds. Thus, those sources, whether they be banks, contributors, or other lenders, may establish the financial situations at the organizations. Using the records from those sources, defendant may show that the organizations had or expected to receive sufficient funds to reimburse the banks, and thus support his claim that he never intended to defraud the banks. However, defendant has not made a specific showing that these records are unavailable.

Defendant also argues that he suffers prejudice due to the "enormous task" of finding witnesses and reconstructing their memories that have eroded over time. Defendant asserts that task has been complicated by the many organizational and institutional changes that several of the banks have experienced. This is clearly the weakest of defendant's arguments, for he does not point to any specific and concrete evidence, and the general category of lost evidence --faded memories --is vague and insufficient. See Koller, 956 F.2d at 1416 ("Allegations that witnesses' memories have faded is not enough."). A defendant's burden of proving prejudice in pre-indictment delay cases has been described as a "monumental hurdle" ( Sowa, 34 F.3d at 451), which is an appropriate image because the defendant must construct with detail and specificity that which is lost and unavailable. Here, defendant does not provide any potential witnesses --what they would say and how their testimony would help his defense. See Aleman v. Honorable Judges, 138 F.3d 302, 310 (7 ^th Cir. 1998) ("It is not enough simply to speculate ... that witnesses' memories might have faded because of the passage of time.").

As is the case with his arguments relating to Alexandroff and the lost records, defendant fails to point to any evidence to corroborate that those sources of information would actually support his defense. See United States v. Sample, 565 F. Supp. 1166, 1178-79 (N.D. Ill. 1983). Defendant has also failed to show that no other sources of evidence exist. Instead, he cites prejudice from the "enormous task" of locating that evidence. In sum, defendant falls far short of clearing the monumental hurdle that is before him.

Having held that defendant has failed to establish actual and substantial prejudice, it is unnecessary to reach into the next stage of the pre-indictment delay analysis --the government's reasons for the delay. Still, we note that the government's explanation is conclusory, vague and speculative. According to the government, it was under the impression that most of the financial records were destroyed, but in late 2001 it learned that those records actually existed. This explanation, which is not supported by an affidavit, only shows that the government lacked some evidence, not that it was ignorant of all suspected wrongdoing. The government does not contend that the evidence was so sparse that it could not prosecute the case prior to discovering the records, but, instead, that the case against defendant was bolstered by the newly-discovered records. The government describes what the discovered records reveal regarding the organizations' expenditures, but it fails to show specifically how the absence of the records precluded prosecution. It is unclear how these records correspond to the charges because the government does not link those records to specific charges. Further, the government fails to argue that the charges could not be supported by evidence from other sources. Still, despite the government's delay, and its inability to explain that delay, due process has not been violated here and this is not the rare case that must be dismissed for pre-indictment delay.

Defendant's Motion to Dismiss Counts 17 Through 29 as Untimely

Counts 17 through 30 charge defendant with willfully failing to pay over withholding taxes to the IRS, in violation of section 7202. Section 7202 requires a person to withhold certain taxes ¹ from an employee's paycheck and to pay over those sums to the IRS, and a failure to meet either of those obligations violates the statute. United States v. Gilbert [ 2001-2 USTC ¶50,655], 266 F.3d 1180, 1185 (9 ^th Cir. 2001). See also Internal Revenue Manual §9.1.3.3.3.1 (stating that the elements of a section 7202 offense are "either a duty to collect any tax or a duty to account for and pay over any tax, or both; either failure to collect any tax or failure to truthfully account for and pay over any tax, or both; and willfulness.").

Defendant argues that the controlling limitations period for section 7202 offenses is three years, but the government contends that the period is six years. Defendant also claims that the limitations period begins to run when payment becomes past due, but the government states that the clock starts on April 15 of the succeeding calendar year. Under 26 U.S.C. §6531 the limitations periods for "offenses arising under the internal revenue laws" is three years "after the commission of the offense," but, if one of eight statutory exceptions apply, the limitations period is six years. At issue here is if one of those exceptions --section 6531(4) --applies to section 7202. Defendant has agreed to toll the limitations period on March 31, 2003, which means that the limitations periods must have begun after either March 30, 1997, or March 30, 2000. If section 6531(4) does not apply, then only Count 30, which relates to a tax payment due on April 30, 2001, would be within three years of the indictment. ² But if section 6531(4) does apply, and assuming that limitations period begins to run on the payment's due date, then only Counts 17 and 18 are untimely. ³ We conclude that when a taxpayer fails to pay over withholding taxes the government must bring a section 7202 prosecution within six years from the date the payment was due.

Section 6531(4) extends the limitations period to six years "for the offense of willfully failing to pay any tax, or make any return ... at the time or times required by law or regulations." This subsection does not explicitly reference another tax code provision, unlike four other subsections. See section 6531(5) (referencing sections 7206(1) and 7207); section 6531(6) (referencing section 7212(a)); section 6531(7) (referencing section 7214(a)); section 6531(8) (referencing 18 U.S.C. §371). But the absence of specific reference to section 7202 by name does not indicate that it is beyond the coverage of section 6531(4), as an analysis of the language of section 6531(4) demonstrates.

Defendant claims that the language of section 6531(4) shows that Congress did not intend that it cover section 7202 offenses. Defendant argues that section 6531(4) closely tracks the language of section 7203, not section 7202, which indicates that section 6531(4) covers only section 7203. Compare section 6531(4) ("offense of willfully failing to pay any tax, or make any return ... at the time or times required by law or regulations"), with section 7203 ("[a]ny person ... who willfully fails to pay such estimated tax or tax, make such return"). But if Congress intended for section 6531(4) to reference section 7203 exclusively, it would have mentioned section 7203 by name. It instead chose to track a phrase from section 7203, which is insufficient to establish an exclusive relationship between the sections. Relying on United States v. Block [ 82-1 USTC ¶9256], 497 F.Supp. 629, 632 (N.D. Ga. 1980), defendant emphasizes that section 6531(4) applies only to the "offense of willfully failing to pay any tax," and therefore cannot refer to two offenses --those in sections 7202 and 7203. That argument fails because its predicate --that section 6531(4) is solely wedded to section 7203 --is wrong. Further, "offense" clearly modifies "any tax, or ... any return," and the government's attempts to depict "offense" as plural through linguistic maneuvers such as arguing that "any tax" is actually plural, are wholly unnecessary. Failing to pay any tax on different occasions will lead to multiple offenses, and multiple violations.

Defendant also argues that section 6531(4) does not cover section 7202 because it punishes the failure to "pay any tax," not the failure to "pay over any tax" from section 7202. Defendant also cites United States v. Brennick [ 97-1 USTC ¶50,390], 908 F.Supp. 1004, 1018-19 (D. Mass. 1995), which held that the absence of the phrase "pay over" from section 6531(4) shows that it did not cover section 7202. "Pay over" is key language to section 7202 because it describes how an employer pays over to the IRS federal income taxes withheld from an employee's salary. Yet these "third party taxes" ( Block [ 82-1 USTC ¶9256], 497 F.Supp. at 632) are still taxes, and section 6531(4) clearly applies to "any tax." We would have to ignore the plain meaning of "pay any tax" in order to exempt from its coverage withholding taxes, which, despite their method of payment, are still taxes that must be paid.

Further, case law heavily favors the longer limitations period. Block and Brennick are the only two cases to hold that the three-year limitations period applies. In contrast, five federal circuits hold that the six-year limitations period applies to section 7202. See United States v. Adam [ 2002-2 USTC ¶50,502], 296 F.3d 327 (5 ^th Cir. 2002); United States v. Gilbert [ 2001-2 USTC ¶50,655], 266 F.3d 1180 (9 ^th Cir. 2001); United States v. Gollapudi [ 97-2 USTC ¶50,978], 130 F.3d 66 (3d Cir. 1997); United States v. Evangelista [ 97-2 USTC ¶50,608], 122 F.3d 112 (2d Cir. 1997); United States v. Porth [ 70-1 USTC ¶9329], 426 F.2d 519 (10 ^th Cir. 1970). Those decisions discuss many of the persuasive arguments in favor of the longer limitations period that are detailed above and other arguments as well, such as the inconsistency of Congress applying section 6531(4) to section 7203, a misdemeanor statute, but not section 7202, a felony statute. See Gollapudi [ 97-2 USTC ¶50,978], 130 F.3d at 71. Thus, the plain meaning of the statutory language and the vast body of case law set the limitations period at six years for section 7202 offenses.

In order to be timely charged, any criminal activity must have occurred after March 30, 1997. Counts 17 and 18 present the unique question of when the limitations period begins for offenses under section 7202 --on the payment due date or on the date when the party from whom the taxes were withheld must file her taxes. The payment due date for Count 17 was October 30, 1997, and for Count 18 payment was due on January 31, 1997. Defendant argues that the clock starts on the payment due date, which means that neither count was timely filed. The government contends that the critical date is April 15 of the year succeeding the payment due dates, which would mean that the limitations period for Counts 17 and 18 began on April 15, 1997. Neither party offers case law that directly addresses this issue, and it appears to be one of first impression.

It is important to recognize the nature of the taxes that are at issue. An employer will typically withhold federal income taxes from an employee's paycheck, and then pay over those taxes to the government. Those payments are due after each quarter. See 26 C.F.R. 31.6011(a)-4 ("every person required to make a return of income tax withheld from wages pursuant to section 3402 shall make a return for the first calendar quarter in which the person is required to deduct and withhold such tax and for each subsequent calendar quarter."). The withheld sums never belong to the employer, who basically holds the taxes in trust for the government. The government accuses the defendant of not paying over the withheld taxes and instead using them to meet the operational costs of the organizations that he operated. Thus, the government does not charge defendant with failing to pay his own taxes, but rather the taxes that others owed.

The analysis begins with section 6531, as it sets the limitation periods for criminal prosecutions. The final sentence of section 6531 states: "For the purpose of determining the periods of limitation on criminal prosecutions, the rules of 6513 shall be applicable." Section 6513(b) provides that "any tax actually deducted and withheld at the source during any calendar year under chapter 24 shall, in respect of the recipient of the income, be deemed to have been paid by him on the 15 ^th day of the fourth month following the close of his taxable year with respect to which such tax is allowable credit under section 31." This subsection thus sets the "payment date" with respect to the employee, who is the recipient of the income, but not the employer. Further, a tax is deemed paid on April 15 by the taxpayer who includes the withholding tax deduction on his tax return form, not paid in the sense of the employer paying a tax over to the I RS. Sections 6513(c) and 6513(e) are also irrelevant. Section 6513(c)(1) provides that, with respect to FICA tax, if a return is filed before April 15 of the succeeding year, it is considered filed on April 15 of that year. Section 6513(c)(2) establishes that any remuneration or amount paid prior to April 15 is considered to be paid on April 15. Section 6513(e) provides that any payment of FUTA taxes made for a calendar year or period within that year is considered to be made on the last day for filing. These provisions do not apply when the employer withholds money from an employee but fails to pay that money over to the government. No return was filed here, so section 6513(c)(1) does not apply, and no payments were made, which makes sections 6513(c)(2) and 6513(e) irrelevant. The reasons behind section 6513's irrelevance highlight the major flaw in the government's argument for April 15 as the beginning of the limitations period. April 15 relates to the tax obligations of the employee, and not the employer. Finding no guidance in section 6513, we return to section 6531.

Section 6531 provides that an indictment must be found within three or six years "next after the commission of the offense." The limitations period thus begins when the offense was committed. See Pendergast v. United States, 317 U.S. 412, 418 (1943) ("statutes of limitations normally begin to run when the crime is complete"). We believe that a section 7202 offense is committed and completed when the employer fails to pay over withholding taxes, and not when the employee files his taxes. The government knows, at the time a quarterly payment is due but not paid, not only that it is owed money, but also who must pay those sums. The government's date, April 15, cannot be the offense date because the employer has no obligations regarding the withholding taxes on that date. April 15 relates to the date that the employees from whom taxes were withheld must file their tax returns. As discussed below in connection with Counts 31 through 34, a taxpayer may include withholding payments on her tax form even if those payments were never paid over to the government. The indictment provides additional support for the conclusion that the payment due date is the date of the offense. The government has charged defendant with fourteen separate violations of section 7202. Each violation corresponds to quarterly payment due dates. If April 15 was truly the payment due date, then the government would have brought only five counts against defendant. Instead, the charges relate to the payment due dates, which shows that the offenses occurred on those dates. By insisting that the offense occurs on April 15, the government ignores the special circumstances that section 7202 is designed to address.

While courts have not addressed when the limitations period begins for section 7202 offenses, they have resolved the same issue with respect to section 7201, which criminalizes tax evasion. Under section 6513(a), the payment of any tax prior to the filing's due date is considered to be filed on the due date, which is April 15. The section 7201 offense does not become complete until the tax return is due, as it is not until then that a tax deficiency exists. United States v. King [ 97-2 USTC ¶50,746], 126 F.3d 987 (7 ^th Cir. 1997). If the taxpayer files after April 15, the limitations period begins when the return is actually filed. United States v. Habig [ 68-1 USTC ¶9243], 390 U.S. 222 (1968). Thus, the taxpayer can never cause the limitations period to run prior to April 15, and if he files after that date he cannot cause the period to run before he actually filed. Further, the limitations period may begin on the date of the taxpayer's last evasive act, even if that date is after the actual date of filing. See United States v. Anderson [ 2003-1 USTC ¶50,237], 319 F.3d 1218, 1219 (10 ^th Cir. 2003); Sanchez & Tejeda, 41 AM. CRIM. L. REV. at 1154 ("The statute of limitations begins to run on the date the taxpayer files the fraudulent document or on the date of the last affirmative act of evasion."). In each scenario the limitations period begins when the offense is complete. The offense is usually complete when taxpayer files falsified tax forms and creates a tax deficiency, ( United States v. Carlson [ 2001-1 USTC ¶50,152], 235 F.3d 466, 470 (9 ^th Cir. 2000)), which explains why the limitations period for section 7201 offenses typically begins on April 15. However, that date is not the default starting date for section 7202 offenses, which focus not on the filing of tax returns, but on the collection and payment of withholding taxes.

Also demonstrating that April 15 is irrelevant to section 7202 offenses is "the last act of evasion" principle from section 7201 cases. Tax evasion cases often involve acts of concealment and subterfuge occurring over the course of many years, and each act of evasion is part of a larger scheme. United States v. Hunerlach [ 99-2 USTC ¶51,009], 197 F.3d 1059, 1065 (11 ^th Cir. 1999). In contrast, section 7202 offenses are discrete crimes, even when the defendant fails to pay over taxes over a number of quarters, as the government accuses defendant of doing here. Under the government's argument, defendant's last evasive act occurred on April 15. But that argument fails because it focuses on the employee's filing due date and not on defendant's conduct. United States v. Butler [ 2002-2 USTC ¶50,579], 297 F.3d 505 (6 ^th Cir. 2002), also illustrates why the quarterly payment due date rather than the filing date begins the limitations period. In Butler the government accused the defendant of violating section 7201 by failing to pay taxes for the quarter ending December 31, 1991. The defendant argued that the indictment was untimely because it was filed on January 29, 1998. The court rejected that position and concluded that December 31 only marked the end of the quarter, and not the beginning of the limitations period. That period began to run on the date of the last affirmative act of evasion, which was January 31, 1992, the quarterly payment due date, which made the indictment timely by three days. Id. at 511-12. Thus, the last act necessary is the failure to pay over taxes on the payment due date.

Policy also favors starting the clock when the payments are due. From the government's perspective, an employer's payment of withholding taxes is timely if it is received prior to April 15 of the year succeeding the payment due dates. This is true even when the employer is obligated to make quarterly payments to the government. The government's position vitiates any requirement to make quarterly payments and clouds the clarity provided by set deadlines. That position also creates incentives for employers to keep the withholding taxes (and reap the benefits of possession) until April 15. The government's argument also undermines the principle that an employer holds withholding taxes in trust for the government. See Davis v. United States [ 92-1 USTC ¶50,292], 961 F.2d 867, 869 (9 ^th Cir. 1992) ("Although an employer collects [withholding taxes] each salary period, payment to the federal government takes place on a quarterly basis. In the interim, the employer holds the collected taxes in trust for the government."); see also 26 U.S.C. §7501(a) ("Whenever any person is required to collect or withhold any internal revenue tax from any other person and to pay over such tax to the United States, the amount of tax so collected or withheld shall be held to be a special fund in trust for the United States."). In contrast, viewing a section 7202 offense to be complete on the payment due date supports the policy of employer as trustee of withholding taxes, and also sets clear standards for employers obligated to pay those taxes over to the government.

The limitations period for section 7202 offenses begins to run when the tax payments were due, which renders Counts 17 and 18 untimely, as those tax payments were due more than six years prior to the indictment. Counts 19 through 30 are timely filed.

Defendant's Motion to Sever Bank Fraud Counts from Tax Violations

The government's case against defendant spans many years and covers a wide range of conduct. We have already held that the government's pre-indictment delay was not sufficiently prejudicial to warrant dismissal of the entire indictment. Defendant challenges the second facet of the government's case when he moves to dismiss the bank fraud counts (Counts 1 through 16) from the tax counts (Counts 17 through 34). Defendant argues that the bank fraud and tax counts are improperly joined because they are not sufficiently related, and he also contends that joinder will prejudice his right to a fair trial.

The government may charge a defendant with multiple offenses provided that they "are of the same or similar character, or are based on the same act or transaction, or are connected with or constitute parts of a common scheme or plan." FED. R. CRIM. P. 8(a). Even if offenses are properly joined, a court has discretion to sever them if their joinder sufficiently prejudices the defendant. FED. R. CRIM. P. 14(a); United States v. Shue, 766 F.2d 1122, 1134 (7 ^th Cir. 1985). If the Rule 8 requirements are met, then Rule 14 controls severance issues. United States v. Lane, 474 U.S. 438, 447 (1986).

Joinder of offenses increases judicial economy by avoiding duplicative trials. See United States v. Coleman, 22 F.3d 126, 132 (7 ^th Cir. 1993) ("Judicial economy and convenience are the chief virtues of joint trials --i.e. joinder often avoids expensive and duplicative trials."). The Seventh Circuit has emphasized that Rule 8 should be broadly construed to promote judicial efficiency. See United States v. Stokes, 211 F.3d 1039, 1042 (7 ^th Cir. 2000); United States v. Freland, 141 F.3d 1223, 1226 (7 ^th Cir. 1998); United States v. Alexander, 135 F.3d 470, 476 (7 ^th Cir. 1998); United States v. Moore , 115 F.3d 1348, 1362 (7 ^th Cir. 1992). Despite the policy favoring joinder, benefits of joint trials "must be balanced against the defendant's right to a trial free of prejudice." United States v. L'Allier, 838 F.2d 234, 240 (7 ^th Cir. 1988); see also Coleman, 22 F.3d at 132. ("defendant embarrassment or confoundment in presenting separate defenses simultaneously, jury cumulation of evidence, and jury inference of criminal disposition are [joinder's] main vices."). When determining whether or not joinder is proper, the court focuses on the indictment. Alexander , 135 F.3d at 475; United States v. Hubbard, 61 F.3d 1261, 1270 (7 ^th Cir. 1995); United States v. Bruun, 809 F.2d 397, 406 (7 ^th Cir. 1987).

Defendant argues that joinder is improper because the indictment fails to show that the bank fraud offenses are sufficiently linked to the tax violations. Defendant contends that the indictment actually shows that the two groups of offenses are dissimilar. He states that the bank fraud offenses occurred between 1993 and 1997, but the tax violations transpired between 1996 and 2001. Defendant further emphasizes that the final bank fraud scheme terminated prior to the incorporation of IDI. Defendant also highlights that the offenses derive from distinct titles in the U.S. Code, that the victims are different, and that the offenses require proof of entirely different elements.

According to the government, joinder is proper because the bank fraud and tax counts are part of the same transaction and common scheme or plan. Specifically, the government believes that defendant used the bank fraud and tax violations to maximize the organizations' operating income and his own influence. The government also states that the charges do share evidence, specifically defendant's bank accounts, which the government believes will show that defendant orchestrated the check-kiting schemes and also had sufficient money to meet the organizations' tax obligations. The government further contends that it will use the IPAF tax returns to establish defendant's IDI-related tax violations.

Absent from the face of the indictment is any clear connection between the bank fraud offenses and tax violations. Counts 17 through 20 incorporate only paragraph one of Count 1, which conveys the following information: defendant was the executive director at IPAF; he was in charge of the day-to-day operations; he was responsible for maintaining the books and records, including corporate receipts, bank accounts, and tax forms. Counts 31 through 34, which relate to the section 7206 violations, do not incorporate paragraph one from Count 1. Indeed, Counts 31 through 34 are silent as to the bank fraud violations and, likewise, Counts 1 through 16 do not mention the section 7206 offenses. Finding that the face of the indictment fails to link the two groups of offenses, we turn to the bases for joinder set forth in Rule 8(a).

As mentioned above, Rule 8(a) provides three possible grounds for joinder. The government contends that the bank fraud offenses and tax violations are based on the same transaction and common scheme, and it does not argue that the charges are of the "same or similar character," ⁴ which is "the broadest of the possible bases for joinder under Rule 8(a)." Alexander, 135 F.3d at 476. The "transaction" basis has been interpreted broadly, and it applies when charges share a "logical relationship." United States v. Berardi, 675 F.2d 894, 899 (7 ^th Cir. 1982). A logical relationship exists when one charge serves as a "logical precursor" for the other. United States v. Woody, 55 F.3d 1257, 1267 (7 ^th Cir. 1995). In Woody, the defendant was charged with possessing stolen mail and assault. The court held that the stolen mail charge was a logical precursor for the assault because the assault occurred while officers attempted to arrest the defendant on the mail charges. Similarly, multiple charges comprise a "common scheme or plan," when one charge is directly related to and even provides the impetus for the other charge. See United States v. Randazzo, 80 F.3d 623, 627 (1st Cir. 1996) (observing that the "common scheme or plan" basis "is often used to join false statement claims with tax fraud charges where the tax fraud involves failure to report specific income obtained by the false statements."). The indictment does not expressly state that the charges comprise either a transaction or common scheme, but the government may still establish joinder through other means, such as the existence of an evidentiary overlap between the charges.

There is some dispute as to the role that evidence should play in the joinder analysis. Some courts have ruled that evidence has no bearing in determining whether joinder is proper. See United States v. Kaquatosh, 227 F. Supp. 2d 1045, 1050 n.10 (E.D. Wis. 2002 ) ("potential evidentiary overlap ... is irrelevant under the controlling legal standard"); United States v. Lanas, 324 F.3d 894, 899 (7 ^th Cir. 2003) ("whether there was misjoinder under Rule 8 is determined by looking solely at the allegations in the indictment; it is thus irrelevant what was shown by the proof at trial."). Other courts have held that evidence does indeed serve a role when considering joinder problems. See L'Allier, 838 F.2d at 240 (quoting United States v. Shue, 766 F.2d 1122, 1134 (7th Cir. 1985)) (stating that joinder is proper "if the 'counts refer to the same type of offenses occurring over a relatively short period of time, and the evidence as to each count overlaps.'"); United States v. Donaldson, 978 F.2d 381, 391 (7 ^th Cir. 1992) ("Offenses may be joined if ... the evidence of several counts overlaps."). See also United States v. Best, 235 F. Supp. 2d 923, 928 (N.D. Ind. 2002) (recognizing that "[t]he Seventh Circuit has formulated two slightly different tests for analyzing whether the joinder of charges is proper under Rule 8."). This dispute may derive from the Seventh Circuit observation that Rule 8(a) contains "a rather clear directive to compare the offenses charged for categorical, not evidentiary, similarities." Coleman, 22 F.3d at 133. That "directive" related to the "same or similar character" language from Rule 8(a), which is not at issue in this case. The court in Coleman also contrasted the "same or similar character" language with the other two grounds for joinder, which are prefaced by the words "are based on," which implies that considering evidence is proper and relevant to the transaction and common scheme grounds. Further, establishing if crimes are connected to form a common scheme necessarily involves looking at the evidence that supports each charge. See United States v. Windom, 19 F.3d 1190, 1196 (7 ^th Cir. 1994) (quoting United States v. Montes-Cardenas, 746 F.2d 771, 776 (11 ^th Cir. 1984)) ("Two crimes are 'connected together' if the proof of one crime constitutes a substantial portion of the proof of another."). Because the government seeks joinder on the "transaction" and "common scheme" grounds, the court will consider the argument that the evidentiary overlap justifies the joinder of the bank fraud and tax charges.

The government claims that the bank records are common to all charges and are sufficient to justify joinder. But that evidence is only common to the offenses occurring in 1996 and 1997. Bank records relating to the 1993 bank fraud have no bearing on any alleged tax violations. And because Counts 17 and 18 are untimely, the bank records are only relevant to Counts 19 and 20. The evidentiary overlap is much too minimal to support joinder. Not only does the government's evidence fail to join all counts, it also fails to explain how the bank fraud charges and tax violations are a transaction, or are connected together as a common scheme or plan. The government alleges that defendant used the check-kiting scheme to pay the organizations' operational costs, which presumably included salaries paid to IPAF employees. See Indictment, Count 1, ¶ 12(c) (defendant kited checks "to fraudulently cover the payment of bills and other financial obligations defendant CREAMER had authorized."). It was from those salaries that defendant withheld federal income taxes, which he then allegedly failed to pay over to the government. However, the government does not allege that there is such a direct link between the proceeds from the check-kiting scheme and tax violations. According to defendant, any such link would be impossible because the bank fraud created no proceeds. Regardless of the existence of proceeds, neither allegations nor evidence binds the two alleged schemes together and the two groups of charges are not logically related to each other.

The dearth of shared evidence suggests that severance will not lead to wasted judicial resources. A joint trial would require the jury to consider two different bodies of law. The bank fraud and tax offenses share no common elements. In contrast, in Coleman the court held that joinder was appropriate because the four counts against the defendant each derived from the same criminal statute, which meant that each offense shared the same elements. See Coleman, 126 F.3d at 135 ("Also, the central contested issue for each count was virtually the same --i.e. constructive possession --and, as a result, the jury did not have to grapple with the application of widely variant governing principles.").

Joinder may also be improper when the offenses are not temporally related. See Donaldson, 978 F.2d at 391 ("Offenses may be joined if they occur within a relatively short period of time."). As many as eight years separate the earliest bank fraud offense from the final alleged tax violation. In Coleman the court described the temporal relation between offenses that were separated by twenty-one months to "range from moderate to quite slim." Coleman, 22 F.3d at 131. In United States v. Turner, 93 F.3d 276, 283 (7 ^th Cir. 1996), the court observed that a fourteen-month time span between offenses indicated that those offenses were not temporally related. And, in Hubbard, the court described seventeen months as a "significant expanse of time" that failed to establish a temporal connection between two charges. Hubbard, 61 F.3d at 1270. Under those standards, an eight-year expanse certainly shows that the offenses are not temporally related, and weighs in favor of severance.

Joinder is improper because the bank fraud charges and the tax violations are independent of each other. In cases where joinder is appropriate, one charge often provides the impetus or motive for the other charge. For example, in United States v. Dominguez, 226 F.3d 1235 (11 ^th Cir. 2000), the court held that drug offenses and mortgage fraud charges were properly joined because "concealing income from the drug activity was the motive for the mortgage fraud." Id. at 1242. In that case, when the defendant applied for a mortgage he submitted false tax returns in order to hide the fact that his income derived from illegal drug activity. The court observed that "the fact that one illegal activity provides the impetus for the other illegal activity is sufficient to constitute a common scheme for joinder purposes." Id. at 1239. In United States v. Buchanan, 930 F. Supp. 657, 667 (D. Mass. 1996) the court held that joinder was improper because there were no allegations that charges relating to one scheme served as the "predicate" for charges involving another scheme. In United States v. Koen, 982 F.2d 1101, 1112 (7 ^th Cir. 1992), the defendant argued that the government improperly joined an embezzlement charge with arson and mail fraud charges. The court disagreed and held that "the fact that [the defendant] may have committed embezzlement would be especially relevant to establishing a motive to commit later acts of mail fraud." In Berardi, the defendant was charged with extortion, mail fraud, and obstruction of justice and claimed misjoinder. The court found the charges were properly joined because evidence supporting one offense helped prove another offense. Berardi, 675 F.2d at 900. In each of the cases one charge essentially derived from another, as seen when the defendant commits illegal acts in an attempt to cover up prior illegal conduct. The government cannot point to similar links between the offenses brought against defendant.

The government does not allege that defendant failed to pay over the withholding taxes because of the bank fraud charges. Nor does it argue that the bank fraud charges were either predicate or impetus for the tax violations. Further, as mentioned above, the government does not contend that the tax violations were based on income produced by the bank fraud. See United States v. Anderson, 809 F.2d 1281, 1288 (7 ^th Cir. 1987) ("Joinder of tax evasion counts is appropriate when it is based upon unreported income flowing directly from the activities which are the subject of the other counts."). Even if the bank fraud counts played a very small role in the tax violations, separate trials would be required to protect defendant's right to a fair trial. United States v. Emond, 935 F.2d 1511, 1516 (7 ^th Cir. 1991).

The government also contends that a common scheme exists due to defendant's alleged instrumental role in both the bank fraud and tax violations during his tenure as IPAF's director. In Koen, the court noted that the offenses were of a "similar character because they all relate to [defendant's] mishandling of the funds." Koen, 982 F.2d at 1111. And in Alexander, the court concluded that joinder was proper because the defendant committed the offenses "in order to enhance the resources of his bankruptcy petition filing business." Alexander, 135 F.3d at 476. These cases are distinguishable on several grounds. First, these cases focused on the "same or similar character" basis, which the government does not seek to apply here. Second, sufficient evidentiary and temporal support bolstered the government's case for joinder in those cases, whereas here there is a lack of evidentiary support and the bank fraud and tax violations are separated by as many as eight years. Under the government's approach, any criminal conduct that defendant allegedly committed that contributed to the organizations' bottom line would be part of the common scheme and subject to joinder. Thus, a bank robbery or narcotics transaction that yielded proceeds later used to pay IPAF's heating bill would be subject to joinder, even if those criminal acts occurred eight years after the bank fraud. We are to apply Rule 8 broadly, but the government's construction stretches that rule beyond its proper bounds.

Defendant also alleges that joinder would prejudice his right to a fair trial. Much of the evidence related to the alleged check-kiting schemes would be inadmissible at trial on the tax violations. The government does not contend that all evidence would be cross-admissible. The introduction of inadmissible evidence could allow the jury to convict defendant based on a perceived propensity to violate the law. See Coleman, 22 F.3d at 132 (if "evidence of the joined offenses would be inadmissible at separate trials, joinder seems to implicate the set of concerns underlying the so-called propensity rule of evidence."). Defendant has shown that joinder would prejudice his defense. Having found that Counts 1 through 16 are improperly joined with Counts 17 through 34, we need not reach defendant's argument that severance is required under Rule 14.

Defendant's Motion to Dismiss Counts 31 Through 34 For Failure to State an Offense

In Counts 31 through 34 the government accuses defendant of submitting tax returns he knew were not correct in every material matter, in violation of 26 U.S.C. §7206(1). ⁵ Specifically, the government alleges that defendant misstated the total taxes that were owed or overpaid for the years 1996 through 1999 when he included withholding taxes, thus inflating the total tax payments.

Defendant argues that Counts 31 through 34 fail to state a claim because Form 1040 only requires the taxpayer to include the taxes withheld, not the sums actually paid over to the IRS, and that the government does not accuse him of misstating the amounts withheld. Thus, according to defendant, because the actual payment of the withholding taxes is irrelevant to the veracity of his tax forms, and since he accurately stated the amounts withheld, his tax forms are literally true and do not violate section 7206(1).

In the normal course, an employer withholds income taxes from its employees; submits quarterly a form 941 disclosing the amount withheld; and deposits that amount, together with other taxes due, with the federal government. The employer annually prepares W-2 and 1099 forms, which disclose the amount withheld during that taxable year and furnishes them to each of its employees. The employee thereafter files his or her tax return, in which the employee takes credit as a payment the federal income tax withheld as set forth in the forms W-2 and 1099.

As we understand it, the government is not contending that the employer did not file the form 941 quarterly reports or that defendant received any of the funds purportedly withheld. It charges, rather, that the employer did not make the required deposits, that defendant was responsible for making those deposits and that he claimed the amounts withheld (reflected in at least some instances in W-2 or 1099 forms, or both) as payment credits on his personal income tax returns, even though he knew the government had never received the money.

Defendant relies upon United States v. Borman [ 93-2 USTC ¶50,428], 992 F.2d 124 (7 ^th Cir. 1993), and United States v. Reynolds [ 91-1 USTC ¶50,267], 919 F.2d 435 (7 ^th Cir. 1990). In both cases the taxpayer or taxpayers used a form that required them to disclose only some of their income, and the disclosures as required by that form were accurate. While their failure to use the correct forms exposed them to criminal sanctions for failure to disclose their entire income or for tax evasion, they could not be prosecuted for filing a false return. The government argues, in response, that the returns here were inaccurate because defendant claimed credit for payments he knew had not been made, and which he had responsibility to make.

Again, in the normal course, a taxpayer is entitled to a credit for withholding taxes, even if those taxes were never paid to the I RS. 26 C.F.R. 1.31-1 ("If the tax has actually been withheld at the source, credit or refund shall be made to the recipient of the income even though such tax has not been paid over to the Government by the employer."); Sanchez & Tejeda, 41 AM. CRIM. L. REV. at 1167 ("Once an employer withholds taxes from an employee's wages, the IRS credits the withholdings to the employee regardless of whether the employer pays them over to the government."; Purdy Co. of Illinois v. United States [ 87-1 USTC ¶9227], 814 F.2d 1183, 1186 (7 ^th Cir. 1987) ("If the employer withholds these "trust fund" taxes but fails to pay them over to the United States, the employee is nevertheless credited with having paid the taxes and is not liable for any additional payment."); Weisman v. C.I.R. [ 2000-2 USTC ¶50,557], 103 F.Supp.2d 621 (E.D. N.Y. 2000). The policy is convincing and it benefits employees who are entitled to presume that their employers pay over the taxes withheld from their paychecks. It would be patently unfair to saddle an employee with the responsibility of verifying if her employer made quarterly tax payments.

In this case defendant was not only an employee, he allegedly held the dual status of employee and employer, and was, more importantly, the person responsible for paying over the withheld taxes to the government. Thus, according to the government, when he allegedly failed to make those payments he was no longer entitled to presume that they were paid. While that contention finds some support from United States v. Gollapudi [ 97-2 USTC ¶50,978], 130 F.3d 66 (3d Cir. 1997) (although there the defendant did not even file any form 941s), we think that it confuses the different capacities in which defendant allegedly acted. 26 C.F.R. 1.31-1 does not make the distinction. The failure to pay over is by the employer. The employee, without any reference to his knowledge, is entitled to the credit if the tax has been withheld.

That does not mean, however, that one with a dual status necessarily escapes sanctions. 26 U.S.C. §7202 imposes criminal penalties on a person required to pay over the withheld taxes, who wilfully fails to do so. That charge is the subject of Counts 21 through 30 of the indictment. Count 31 relates to the 1996 tax return, for a period when defendant was allegedly the chief executive officer of IPAF, and count 32 relates partially to a period when he held that position. Counts 21 through 30 relate to the period 1997-1999, when defendant was allegedly chief executive officer of IDI, which is partially the period for Count 32 and which are mirror images of the claimed credits on the personal tax returns in Counts 33 and 34. We conclude that Counts 21 through 30 are the proper charges and that Counts 31 through 34 are not.

Counts 31 through 34 are dismissed.

Discovery Related Motions

Defendant presents three motions related to pretrial discovery. He requests that the court order the government to present notice of its intention to use Rule 404(b) "other crimes, wrongs, or acts" evidence no later than forty-five days before trial. Defendant moves to compel the government to present no later than forty-five days prior to trial a proffer pursuant to United States v. Santiago, 582 F.2d 1128 (7 ^th Cir. 1978) ("Santiago proffer") in order to establish the existence of a conspiracy. He also moves for the disclosure of exculpatory evidence under Brady v. Maryland, 373 U.S. 83 (1963) and Giglio v. United States, 405 U.S. 150 (1972). These motions are denied as moot because the government has indicated that it understands its obligations and has pledged to meet them.

The government states that it will provide notice of its intent to use any evidence under Rule 404(b) and also present a Santiago proffer no later than four weeks prior to trial. That is a reasonable amount of time and will prevent unfair surprise and allow defendant to prepare any motions he deems necessary. As to the nature of the Rule 404(b) disclosure, the Advisory Committee Notes to the 1991 Amendments specify that the "Committee opted for a generalized notice provision which requires the prosecution to apprise the defense of the general nature of the evidence of extrinsic acts." Thus, the government need only disclose the "general nature" of the evidence; however, vague disclosures that prevent defendant from filing motions in limine are improper and undermine the purpose of disclosure. Defendant has requested disclosure of nineteen categories of exculpatory evidence, but the government argues that several of those categories are neither exculpatory nor impeaching. ⁶ It is not necessary at this juncture to label any category of evidence beyond the reach of Brady and Giglio. ⁷ The government acknowledges that it is under a continuing duty to disclose any exculpatory evidence.

CONCLUSION

For the foregoing reasons, defendant's motion to dismiss the indictment for pre-indictment delay is denied; the motion to dismiss Counts 19 through 29 is denied, but Counts 17 and 18 are dismissed as untimely; defendant's motion to sever Counts 1 through 16 from Counts 17 through 34 is granted; defendant's motion to dismiss Counts 31 through 34 is granted; and defendant's discovery-related motions pertaining to Rule 404(b) evidence, a Santiago proffer, and exculpatory evidence, are denied as moot.

¹ An employer's payroll tax liability includes the following: "(i) Federal Insurance Contribution Act ( "FICA") payments, which include the employee's contribution to Social Security and Medicaid; (ii) Federal Unemployment Tax Act ( "FUTA") payments; and (iii) required withholdings in connection with employee income taxes." Melissa Sanchez & Adam Tejeda, Tax Violations, 41 AM. CRIM. L. REV. 1147, 1167 (2004). The court uses "employer" as shorthand for "person required under this title to collect, account for, and pay over" from section 7202. Defendant does not dispute that he was a person charged with those responsibilities.

² This assumes that the limitations period begins to run on the payment due date. If April 15 of the year after the payment due date marks the start of the limitations period, then Counts 25 through 29 would also be timely. Counts 25 through 28 relate to quarterly payments due during 1999, which means the clock starts on April 15, 2000. And Count 29 corresponds to a January 30, 2000, due date, which sets the critical date at April 15, 2001.

³ Payment for Count 17 was due on October 30, 1996. Count 18 corresponds to the quarter ending December 31, 1996, and lists payment due on January 30, 1998. Defendant calls our attention to this typographical error in Count 18, and states that the due date was actually January 30, 1997. The government does not object, so we assume that the payment due date, and not the ending date for the quarter, is incorrectly transcribed in the indictment. There appear to be other clerical errors in the indictment. Count 19 states the quarter ended on March 31, 1997, but lists the tax payment due on April 30, 1998. Similarly, Count 20 states the quarter ended on June 30, 1997, but lists the tax payment due date as July 30, 1998. Also, Count 30 has the quarter ending on March 31, 2000, but states that the payment was due on April 30, 2001.

⁴ The government states in its brief: "The bank and tax offenses are properly joined because they stem from 'transactions,' within the meaning of Rule 8, which are 'connected together' and 'constitute parts of a common scheme or plan'" (quoting Rule 8(a)) and "All of the charges in this case arise from Creamer's common scheme to maximize the operating income and influence of himself and the entities he personally controlled through fraud."

⁵ A person violates section 7206(1) if he "Willfully makes and subscribes any return, statement, or other document, which contains or is verified by a written declaration that it is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter."

⁶ The government argues the following requests implicate evidence that is not Brady or Giglio material: (1) Any and all information about pre-indictment delay and (2) Request for names, addresses, and statements as to who was present when the events occurred but failed to implicate defendant is not even subject to discovery according to the government.

⁷ Evidence that does not on its face appear to be exculpatory or impeaching, such as any documents relating to and explaining the delay, could very well be discoverable. For instance, if the pre-indictment delay was caused by a witness who made statements exculpating defendant, but then changed his story, the witness's statements could be discoverable.