Perjury

---

[ Back ] [ Next ]

 

 

7206- Fraud and False Statements: Perjury

 

 

[63-1 USTC ¶9451] United States of America , Plaintiff-Appellee v. Thomas Letchos, Defendant-Appellant

(CA-7), U. S. Court of Appeals, 7th Circuit, No. 13856, 316 F2d 481, 5/3/63, Affirming unreported District Court opinion

[1954 Code Sec. 7206]

Tax evasion: False statements: Witness: Perjury.--The defendant was found to have wilfully given false testimony, in proceedings against A. J. Accardo for tax evasion, to the effect that he had not told Revenue agents that he did not know Accardo and had not bought beer from him. The misstatements, which were the basis for indicting the defendant for perjury, were material and were wilfully made.

James P. O'Brien, United States Attorney, John Peter Lulinski, Raymond K. Berg, John Powers Crowley, Assistant United States Attorneys, Chicago, Ill., for plaintiff. George Cotsirilos, 1 N. LaSalle, Anna R. Lavin, 209 S. LaSalle, Chicago , Ill. , for defendant.

Before CASTLE, KILEY and SWYGERT, Circuit Judges.

SWYGERT, Circuit Judge:

The defendant, Thomas Letchos, was convicted after trial by jury of the crime of perjury, in violation of Title 18 U. S. C. §1621. From a judgment entered thereon, defendant appeals.

The alleged perjurious statements of defendant were made during the course of a trial of one Anthony Joseph Accardo wherein Accardo was charged with false statements in his income tax returns in claiming deductions for certain automobile expenses incurred by him as an agent for Premium Beer Sales, Inc. See United States v. Accardo [62-1 USTC ¶9170], 298 F. 2d 133 (7th Cir. 1962). Prior to the Accardo trial Internal Revenue Service agents interviewed many witnesses in an effort to ascertain the authenticity of Accardo's claim that he was a beer salesman for the years in which he claimed tax deductions. Defendant Letchos was one of those interviewed by agents Conroy and Tobias.

In summary, the evidence, taken most favorably for the government, shows that on January 6, 19 60, in an interview held at Tom's Steak House (an establishment owned by the defendant), defendant told the agents that he had been taking Lowenbrau beer since he started in business in June, 1955; that the first order was given to a Joseph Bronge of the West Town Distributors; that he had taken Fox Head beer about July 19, 19 56; that Bronge came to him at that time and told defendant he was now handling Fox Head beer, and out of friendship for Bronge, he took some at Bronge's request; that agent Tobias showed defendant some photograph and said, "Here are pictures of two fellows who are presumed to be beer salesmen. Do you know them?"; that defendant said, "I don't know him, but this is Jack Cerone"; that Tobias, pointing to the picture said, "This is the picture of Anthony Accardo, also known as Joe Batters. Now do you know him?" and defendant said, "I still don't know him"; that during the examination of the photographs, Tobias asked defendant if Anthony Accardo had ever been in to sell him beer, to which defendant replied "No"; that Tobias then asked if Anthony Accardo had ever been in the place so far as defendant knew for any purpose, and defendant answered that so far as he knew, he had never been in, that he didn't know him.

The Government introduced into evidence the report of Tobias and Conroy dealing with the interview with defendant, and also the original notes taken by Tobias during the course of the interview. Both agents used these documents prior to trial for the purpose of refreshing their recollections as to the events of January 6, 19 60. The Government also introduced a report made prior to this trial of an interview by the Federal Bureau of Investigation of agents Conroy and Tobias concerning the events of January 6, 19 60.

At the trial of Anthony Joseph Accardo, Accardo called defendant as a witness and defendant testified in substance that he knew Accardo; that Accardo was employed by Premium Beer in 1956, 1957, and 1958, selling beer; that Accardo made a business call on him in June or July, 1956, and at that time he purchased four cases of Fox Head beer from Accardo, after which the beer driver was instructed to see that he, defendant, had four cases on hand every time the driver made a call; that Accardo came to defendant's place of business several times a year during 1956, 1957, and 1958.

On cross-examination in the Accardo trial, defendant testified to having had an interview with two agents of the Internal Revenue Service on January 6, 19 60, and testified further:

I.

"Q. Did you not at that time and place, after having been shown a picture of Mr. Accardo and having had the picture identified as Mr. Accardo, tell these two Revenue Agents that you had never seen, never met, never heard of Mr. Accardo?"

"A. I did not."

* * *

"Q. Did you not at that time tell these Internal Revenue Agents that you had never seen Mr. Accardo?

"A. No."

II.

"Q. Did you not tell them that he had never been in your place of business?

"A. No, sir, he is a steady customer. How can I say he never had been in my place of business?

"The Court: Then your answer is no? Is that right? Is that your answer?

"The Witness: No."

III.

"Q. Did you not tell these Internal Revenue Agents that Accardo had never sold you beer?

"A. No, I never knew Mr. Accardo before he sold me the beer, I told them.

"The Court: Read the question to the witness. (Question read.)

"The Court: What is your answer?

"The Witness: No I never told them that."

IV.

"Q. Did you not at that time and place, Tom's Steak House, on January 6, 19 60, tell Internal Revenue Agents Tobias and Conroy that you had purchased Lowenbrau beer since 1955 from Mr. Joseph Bronge, the West Town Distributing Company, and that when Bronge began handling Fox Head beer, he came in to see you and asked you whether or not you would purchase Fox Head beer, at which time you did?

"A. I did not."

In an effort to impeach defendant's testimony in the Accardo trial agents Conroy and Tobias were called to testify in that case. Their testimony reaffirmed their version of the January 6, 19 60, interview summarized above.

On January 31, 19 61, defendant Letchos was indicted for perjury for falsely testifying in the Accardo trial that he had not made certain statements to two Internal Revenue Agents. The statements he denied having made were charged as:

"1. That he had never seen Mr. Accardo;

"2. That Mr. Accardo had never been in his place of business;

"3. That Mr. Accardo had never sold him beer;

"4. That he had purchased Lowenbrau beer since 1955 from Joseph Bronge of West Town Distributing Company, and when Bronge began handling Fox Head beer Bronge came in to see him and asked whether or not he would purchase Fox Head beer, at which time he did."

In charging the materiality element, the indictment recites:

"During the course of the (Accardo) trial it became material for the Court and jury to learn whether the said Anthony Joseph Accardo had performed any services for Premium Beer Sales, Inc. during the years 1956, 1957 and 1958. It further became material for the court and jury to learn whether or not certain witnesses who testified on behalf of the said Anthony Joseph Accardo had previously made statements to agents of the Federal Government which were inconsistent with their testimony in said case."

We begin by saying that we do not believe it can be seriously contested that the evidence supports the conclusion that defendant did make diametrically opposed statements in the investigation interview of January 6, 19 60, and during the course of the Accardo trial. The pertinent portions of the Accardo trial transcript were admitted into evidence as Government exhibits in this trial. Agents Tobias and Conroy testified as to what occurred and what was said during the interview, and Government's Exhibit 4, identified as a joint report of agents Conroy and Tobias of their interview with defendant, made two days after the interview, and Government's Exhibit 5, identified as the original notes taken by agent Tobias at the time of the inter-view, were admitted into evidence. ¹

[Materiality of Misstatements]

Defendant contends that the statements which are the basis for the perjury charge lack the element of materiality, which is necessary for conviction. The indictment in the Accardo case was admitted into evidence along with the transcript of the testimony of defendant and agents Conroy and Tobias. As a matter of law the trial judge found the necessary materiality. We believe that conclusion was not based on inferences but rather it is obvious from the evidence introduced in this trial. In United States v. Harris, 311 U. S. 292, 295 (1940), the Supreme Court of the United States said:

"Section 125 of the Criminal Code makes not distinction between the false assertions of the fact of prior statements and the false assertions of any other fact. Nor can we see any reason to make one. As the Government points out, the denial of the fact that certain statements have been made may be equally as clear, deliberate, and material a falsehood as the denial of any other fact. And since statements made to government agents are generally one of the bases upon which criminal proceedings are instituted and indictments returned, such a distinction might substantially impede effective administration of criminal law."

Impeachment of a witness goes to his credibility and questions on cross-examination for this purpose may be material in the sense required for a perjury conviction. Blackmon v. United States , 108 F. 2d 572 (5th Cir. 1940). The question here is not the truth or falsity of the prior inconsistent statement. It bears no citation of authorities to show that a mere prior inconsistent statement would not have given rise to a perjury conviction. The question here is whether defendant, while under oath, deliberately lied by denying the fact of his inconsistent statements, i.e., that he had ever made the inconsistent statements.

Conviction for such lies must follow only after strict adherence to the safeguards erected to protect witnesses from too-ready punishment for mere lapse of memory. "Conviction for perjury ought not to rest entirely upon 'an oath against an oath.'" See Weiler v. United States , 323 U. S. 606, 609 (1945). Among the safeguards is the two-witness rule discussed in our recent case of United States v. Nicoletti, 310 F. 2d 359 (7th Cir. 1962), also involving a perjury conviction growing out of the Accardo trial.

Agents Tobias and Conroy testified as to the statements made to them by defendant during the interview of January 6, 19 60. While they used their notes to refresh their memories, they also testified that they had independent recollection of the events in question. Further, the notes, introduced without objection, tended to corroborate their testimony. The two witness rule was fully complied with.

We also hold that sufficient evidence was introduced to permit the jury to find the necessary wilfulness. "In order to prove perjury, the prosecution must show that the testimony was wilfully given, and wilfulness is a question for they jury. Only by a full understanding of the issues on trial at the time the alleged perjury was committed can the jury determine the wilfulness of the defendant in giving his testimony." Harrell v. United States , 220 F. 2d 516, 520 (5th Cir. 1955).

It was not necessary to retry the Accardo case for the benefit of the injury in the instant case. It was only necessary to introduce sufficient of the evidence and testimony from that case to permit the jury to make a rational decision as to wilfulness. The jury's finding of wilfulness is fully supported by the record in this case.

The defendant contends that the closing arguments of the prosecution were grossly prejudicial to the defendant, being appeals to class prejudice on the ground of unusual wealth; to passion; to guilt by association; to prejudices fanned by notoriety. We have read the entire opening and closing final arguments of the prosecution and believe that defendant's contentions are unsound. While isolated remarks, taken out of context, in themselves might call for scrutiny of the record, such scrutiny convinces us that the total effect upon the jury was not such as to incite prejudice, and the statements were within permissive bounds.

Finally, defendants argue that the court below committed prejudicial error in failing to grant a new trial upon the discovery that several jurors impaneled in the instant case had made statements during voir dire examinations in another case and before another judge which were inconsistent with their voir dire response to questions in the present case. The question involved the prospective jurors' ability to weigh witnesses' testimony without giving undue weight to testimony of law enforcement officers merely because of their position. While being examined for the earlier case several jurors indicated that they would give added weight to testimony of law enforcement officers and were excused. This contention was adequately answered by Judge Will in denying defendant's motion for a new trial on this ground. ²

We find no error. The judgment is affirmed.

¹ Defendant now contends that the agents' reports (Government Exhibits 4 and 5) should not have been admitted into evidence. The record shows that defendant raised no objection to their admission at the trial and further, that defendant tacitly supported their admission by stressing the use defendant's anticipated strategy would make of the exhibits. In the absence of clear prejudice being demonstrated, we believe defendant has waived his right to attack the admissibility of the evidence at this stage.

² The Court: * * *

"With respect to the five jurors who allegedly answered my interrogatory with respect to whether or not they would give more credence or less credence to Internal Revenue or Government Agents than they would to non-official witnesses, if you like, I observed the jury in its response to my interrogatory. In fact, you will recall there was a long--it doesn't appear in the transcript--but there was a very long pause between the question which I asked, and that summary statement in which I said they would not give more or less credence.

"I waited for a considerable time to see if there was any indication on the part of any of the members of the panel that they had any feelings about this. I was not aware at the time that any of them had been interrogated on the same general subject in another case in another court. I don't know what they did in that court room.

"Mr. Cotsirilos [counsel for defendant]: I have it right here, Judge. I want to introduce it in evidence.

"The Court: I read the transcript, and I said I don't know how they appeared there. I do know how they appeared here. I watched them. I was satisfied they were giving me truthful answers, and I do not feel justified in saying that notwithstanding my observations of these people, that I must now conclude that they lied to me in the answers to the questions which they gave, because all of my observations are to the contrary. All of my observations were that they were taking the voir dire interrogation very seriously, and I think I must say I had the feeling that this was a very conscientious jury overall. I think you gentlemen felt the same as the case concluded.

* * *

"The Court: Well, I must say to you, Mr. Cotsirilos, that nothing that I observed in the court room with respect to these jurors would warrant me in concluding they were in any respect not completely qualified and that their deliberations in this case were not consistent with the answers which they gave to all of us, as we all asked them questions on the voir dire and accepted them only after those questions had been answered.

"As a matter of fact, as I recall it, nobody used all the peremptory challenges to which they were entitled. We were satisfied with this jury on the basis of their performance here with a minimum of peremptory challenges.

* * *

"The Court: Let me add one further alternative possibility, Mr. Cotsirilos, which you have alluded to and which I think may actually be the truth. That is, as a result of the rather vigorous reaction with respect to indications that they might give more credence to the testimony of a Government agent, that even over the short period of time, over a weekend, these jurors concluded that this was an erroneous position to take, and that they answered truthfully in Judge Perry's court room on Friday, and they answered truthfully here the following Monday.

"In fact, and I must say to you that you recall the voir dire, you will recall the carefulness with which all of us went into the various questions which were asked, and my feeling was that, and it is today, that this jury, as I observed them in the conduct of the voir dire and subsequently in their deliberations and in listening to the case, in their attitude in the course of the presentation of this, it was a very conscientious jury.

 

 

 

[87-2 USTC ¶9376] United States of America v. Daniel F. Marrinson

U.S. District Court, No. Dist. Ill. , East. Div., 85 CR 225, 8/7/85

[Code Sec. 7206 --Result unchanged by the Tax Reform Act of 1986 ]

Crimes: False return: Indictment: Validity: Vagueness: Perjury.--An indictment charging an individual with the crime of filing false returns in violation of Code Sec. 7206(1) was valid. The argument that such indictment was vague and violated other constitutional rights because the tax return indicated entries were made under penalties of perjury and Code Sec. 7206 permits the imposition of penalties different from those provided in the federal perjury statute was rejected. The language made under the penalties of perjury merely indicates what types of documents are covered by statute and provides a discernible limit to the application of Code Sec. 7206(1) . Such phrase could not reasonably confuse an individual regarding the consequences of filing a false tax return and the indictment sufficiently apprised him of the charges.
MEMORANDUM OPINION AND ORDER

ASPEN , District Judge:

On April 12, 1985 , an indictment was returned against defendant Daniel Marrinson ("Marrinson") charging him with four counts of filing a false income tax return in violation of 26 U.S.C. §7206(1) . Presently before the Court is Marrinson's motion to dismiss the indictment. For the reasons set forth below, the motion to dismiss is denied.

I.

As an initial matter, we must address the failure of Marrinson's counsel to comply with certain Local Rules of the United States District Court for the Northern District of Illinois. First, although Milwaukee attorneys James M. Shellow ("Shellow") and Susan W. Brenner ("Brenner") have submitted various pretrial motions on behalf of Marrinson, they have not yet filed an appearance form. This violates Criminal Rule 2.01, which provides in relevant part:

An attorney representing a defendant in any criminal proceeding in this Court or before a United States Magistrate shall file an appearance. This appearance must be filed prior to or simultaneously with the filing of any motion, brief or other document with the Court, or initial Court appearance, which ever occurs first. ¹

Under General Rule 3.14(e), "[a]n attorney who fails to file an appearance form where required to do so by this Rule will be found to be in contempt of this Court and may be fined an amount not to exceed fifty dollars ($50)." Accordingly, we order Shellow and Brenner to file an appearance form ² within five days; moreover, at the conclusion of Marrinson's trial we will decide whether to conduct a hearing to determine what, if any, sanctions should be imposed upon Shellow and Brenner for violating this Rule.

Marrinson's attorneys have also failed to designate as local counsel "a member of the bar of this Court having an office within this District upon whom service of papers may be made," as required by General Rule 3.13(a). ³ Penalties for failing to designate local counsel are set out in General Rule 3.13(b): the Clerk of the Court is to notify the attorney in writing that the designation must be made within thirty days, and if the attorney still fails to file the designation within that time, any documents filed by the attorney may be stricken by the court. In this case, it does not appear that the Clerk of the Court has notified Marrinson's lawyers to designate local counsel within thirty days. Therefore, we hereby order Shellow and Brenner to file their designation on or before September 6, 1985 . Assuming that they will comply with this order, we now proceed to consider the motion on its merits.

II.

Each reason Marrinson offers for dismissing the indictment is based on a single premise--that the income tax returns upon which Marrinson allegedly made false statements advised him that his entries were made "under penalties of perjury," but the statute under which he is charged, 26 U.S.C. §7206(1) , permits the imposition of penalties different from those provided by the general federal perjury statute, 18 U.S.C. §1621. Indeed, §7206(1) and §1621 not only provide for different penalties, but they also have different statutes of limitations and require different burdens or modes of proof. Because of these differences, Marrinson argues that the tax form actually misleads taxpayers as to the consequences of making false statements, and that his indictment must be dismissed for three reasons: (1) the indictment does not apprise Marrinson of the charges against him with the specificity required by the Sixth Amendment; (2) the provisions of §7206(1) are so vague as to deny due process; and (3) the indictment's construction of §7206(1) creates an unconstitutional ex post facto law.

To better understand Marrinson's argument, it is helpful to review the development of §7206(1) over the years. Under the earliest versions of the Internal Revenue Code ("the Code"), taxpayers were required to make their income tax returns under oath. Persons making false statements on their returns were punished under the general perjury statute, §125 of the Criminal Code. ⁴ See, e.g., United States v. Noveck [1USTC ¶215 ], 273 U.S. 202, 47 S.Ct. 341 (1927); Levin v. United States 5 F.2d 598, 599-600 (9th Cir. 1925).

In 1942, the requirement that individual returns be made under oath was eliminated. Instead, returns were required to "contain or be verified by a written declaration that [they were] made under the penalties of perjury." Revenue Act of 1942, §136(a) , Pub. L. No. 753, 56 Stat. 798, 836. Also in 1942, a new penalty provision was added to the Code, expressly adopting the penalties established for perjury in §125 . Section 145(c) stated:

Any individual who willfully makes and subscribes a return which he does not believe to be true and correct as to every material matter, shall be guilty of a felony and, upon conviction thereof, shall be subject to the penalties prescribed for perjury in section 125 of the Criminal Code.

This penalty section was replaced in 1949 by a new provision, codified as 26 U.S.C. §3809, which stated:

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 and, upon conviction thereof, shall be fined not more than $2,000 or imprisoned not more than five years, or both.

The penalties outlined in §3809 were identical to those imposed in the general perjury statute then in force (as well as to the penalties imposed in §1621 today). However, because §3809 specified the penalties for making false statements on tax returns rather than simply adopting the penalties provided under the general perjury statute, the two statutes arguably moved a step apart.

The next step occurred in 1954, when the penalties for making a false statement on a tax return first diverged from the penalties in §1621. Section 3809 was recodified as §7206(1) , and its penalty provisions were altered. The maximum permissible fine was increased from $2,000 to $5,000, and the maximum prison term was lowered from five years to three years. ⁵ Section 7206 's fine provision changed again in 1982, when the maximum fine rose from $5,000 to $100,000 for individuals. ⁶

Considered together, Marrinson argues, these statutory changes demonstrate that §7206 punishes something other than perjury. He claims that the reference to "the penalties of perjury" is not only anachronistic and useless but also impairs the validity and enforceability of §7206 because it is misleading.

We disagree with this proposition. As the Fifth Circuit explained in Escobar v. United States [68-1 USTC¶9125 ], 388 F.2d 661 (5th Cir. 1967), cert. denied, 390 U.S. 1024, 88 S.Ct. 1411 (1968):

Under the "plain meaning rule" of statutory construction it is clear that appellant was not charged with perjury. The statute does not say that one who willfully makes a false return "shall be guilty of perjury." In fact, it contains no language indicating that the crime of perjury is involved at all. The language "made under the penalties of perjury" is of purely historical significance. The phrase remains in the present statute as a "catch phrase" or "signpost" to indicate what types of documents are covered by the statute. Without this phrase any document would come within the purview of the statute and it would be identical (except for penalty) to 26 U.S.C.A. ¶7207 , which is a misdemeanor statute.

When viewed in this light it is understandable that Congress left the phrase in the statute and that the Internal Revenue Service left the statement in its return forms after the statute requiring the returns to be sworn to was repealed. The phrase, outdated though it was, remained to provide an easily discernible limit to the application of §7206(1) and its predecessors. It relieved Congress from having to substitute some new phrase. That it serves no other purpose is evidenced by the fact that perjury requires an oath, and no oath is required in an income tax return. Furthermore, in spite of the "penalties for perjury" language, Congress went on to provide another and much lighter penalty for the offense proscribed by §7206(1) , (3 years) than that provided for perjury under 18 U.S.C.A. §1621 (5 years).

Id., 388 F.2d at 664-65 (footnotes and citation omitted).

Marrinson's argument is largely a matter of semantics. The courts which have considered this matter are far from unanimous in their conclusions--some have labelled §7206 "a perjury statute," United States v. Levy [76-2 USTC¶9500 ], 533 F.2d 969, 973 (5th Cir. 1976); Kolaski v. United States [66-2 USTC ¶15,700 ], 362 F.2d 847, 848 (5th Cir. 1966); but others have declared that filing a false return is "similar in nature" to perjury, Hoover v. United States [66-1 USTC ¶9343 ], 358 F.2d 87, 89 (5th Cir. 1966), cert. denied, 385 U.S. 822, 87 S.Ct. 50 (1966), or is simply "not perjury," United States v. Tamura, 694 F.2d 591, 602 (9th Cir. 1982). One court has stated that "it is unnecessary to resolve this dispute in semantics,"Siravo v. United States [67-1 USTC ¶9446 ], 377 F.2d 469, 472 (1st Cir. 1967), an opinion we share. Like the Fifth Circuit in Escobar, we believe that the phrase "the penalties of perjury" could not reasonably confuse a taxpayer concerning the consequences of filing a false tax return. ⁷

Our belief is strengthened by the wording of a portion of the general perjury statute that Marrinson has ignored throughout his arguments. Section 1621 punishes acts of perjury "except as otherwise expressly provided by law." The Reviser's Note to the statute explains that this phrase was inserted "to avoid conflict with perjury provisions in other titles where the punishment and application vary." The Note goes on to state that "[m]ore than 25 additional provisions are in the code." This indicates that Congress has not adopted the narrow definition of perjury suggested by Marrinson, and it provides ample warning to taxpayers that §1621 is not the only statute which might be applied to the filing of false statements on income tax returns.

Thus, we find the premise upon which Marrinson bases each of his arguments to be flawed. Moreover, even when considered separately, none of the arguments appear meritorious. Contrary to Marrinson's assertions, the indictment does sufficiently apprise him of the charges against him.E.g., United States v. Grayson [69-2 USTC ¶9639 ], 416 F.2d 1073, 1076 (5th Cir. 1969), cert. denied, 396 U.S. 1059, 90 S.Ct. 754 (1970). Similarly, §7206(1) is not so vague that it fails to give fair notice of what conduct is prohibited; to the contrary, it quite clearly forbids a person from intentionally falsifying his tax return as to any material matter. See, e.g., United States v. DiVarco [72-1 USTC ¶9470 ], 343 F.Supp. 101 (N.D. Ill. 1972), aff'd [73-2USTC ¶9607], 484 F.2d 670 (7th Cir. 1973), cert. denied, 415 U.S. 916, 94 S.Ct. 1412 (1974). Finally, the interpretation of §7206(1) contained in the indictment does not create any ex post facto law; the penalties imposed by §7206(1) --and not §1621--have applied to Marrinson's alleged actions at all times.

Accordingly, Marrinson's motion to dismiss the indictment is denied. It is so ordered.

¹ General Rule 3.14(d) also establishes this filing requirement.

² General Rule 3.14(b) provides that where more than one attorney represents the same party, only one appearance form shall be filed.

³ No criminal rule deals specifically with the designation of local counsel for service. But Criminal Rule 1.02 provides that "[i]n all criminal proceedings, the General Rules of this Court shall be followed insofar as they are applicable."

⁴ Section 125 provided, in part:

Whoever, having taken an oath before a competent tribunal, officer, or person, in any case in which a law of the United States authorizes an oath to be administered, that he will testify, declare, depose or certify truly, or that any written testimony, declaration, deposition or certificate by him subscribed, is true, shall willfully and contrary to such oath state or subscribe any material matter which he does not believe to be true, is guilty of perjury.

This provision is virtually identical to the first part of the present general perjury statute, 18 U.S.C. §1621(1).

⁵ A person convicted under §7206 could also be charged with the costs of prosecution.

⁶ This most recent change does not apply to Marrinson because the 1982 amendment became effective after all the acts alleged in the indictment.

⁷ See also Hensley v. United States [69-1 USTC ¶9146 ], 406 F.2d 481, 485-86 (10th Cir. 1968) (denying the premise that §7206(1) "punishes for perjury without providing for the varying procedural and substantive burdens existent in a prosecution for the traditional crime of perjury").

 

 

 

[89-2 USTC ¶9438] United States of America, Plaintiff-Appellee v. Alayne B. Adams, Mayo L. Coiner, Defendants-Appellants

(CA-6), U.S. Court of Appeals, 6th Circuit, 87-5388/5424, 4/3/89 , 870 F2d 1140, Reversing and remanding an unreported District Court decision

[Code Sec. 7206 ]

Crimes: False and fraudulent statements: Omission of income: Amended returns: Perjury: Statements made to governmental agency.--Perjury convictions were reversed against a former employee of the Equal Employment Opportunity Commission who had been accused of falsifying her income from private practice when she applied for a position with the agency. Figures supplied by the taxpayer in a letter she mailed to the EEOC came from worksheets she prepared for her husband's use in filing the couple's income tax returns. Several years later, she filed a sex discrimination suit against the agency and testified at a deposition that the information she supplied was correctly reported. Later the couple discovered that self-employment income earned by the taxpayer had been omitted from the returns, and amended returns were then prepared and filed showing deficiencies which were paid in full. The taxpayer was then indicted for perjury for willfully making false income tax statements during her deposition regarding the EEOC lawsuit. The government did not sustain its burden of establishing the materiality of the false testimony. Prosecutions for perjury are usually not instituted with respect to testimony given in a civil proceeding, and the district court was ordered to entitle the taxpayer to discovery for the purpose of determining whether the EEOC improperly induced the criminal prosecution against her.

W. Hickman Ewing, Jr., United States Attorney, Devon L. Gosnell, Assistant United States Attorney, Memphis, Tenn. 38103, for plaintiff-appellee. Kathleen Laird Caldwell, 707 Adams Ave., Memphis, Tenn. 38105, for defendants-appellants.

Before NELSON and NORRIS, Circuit Judges, and SPIEGEL, District Judge. ^*

NELSON, Circuit Judge:

Alayne Adams and her husband, Mayo Coiner, were indicted on charges of making false federal income tax returns. They moved to dismiss the indictment on the ground that the prosecution had been initiated in retaliation for a sex discrimination suit that Ms. Adams had filed against the United States Equal Employment Opportunity Commission.

The motion to dismiss was supported by affidavits of a former employee of EEOC and a former Internal Revenue Service employee. The latter affiant suggested that criminal prosecutions are unusual where, as in this case, there was no outstanding deficiency and the returns had been corrected by amendments filed well before IRS started investigating. The retired EEOC official, who had once been the director of the district office where Ms. Adams was employed as an attorney, expressed a belief that "the EEOC instigated and pushed the investigation and prosecution of Alayne Adams as revenge against her because she filed the discrimination complaint and the subsequent lawsuit against the EEOC and because she declined to settle the lawsuit."

The district court denied the motion to dismiss without allowing the defendants to conduct discovery on their retaliaton claim and without holding an evidentiary hearing. The case went to trial, and verdicts of guilty were returned against both defendants on the tax charges. Ms. Adams was also convicted on three counts of perjury in connection with testimony she had given at a deposition in her sex discrimination suit and at a hearing held before a magistrate in that suit on a motion to dismiss for discovery defaults.

Upon review we conclude that this is one of those rare cases where the defendants are entitled to discovery on the issue of whether the government's decision to prosecute was tainted by improper motivation. The case will be remanded to permit such discovery. The perjury convictions will be reversed, because we do not believe that the government sustained its burden of establishing the materiality of the allegedly false testimony.

I

Alayne Adams was admitted to the bar of Tennessee in 1975, and she hung out her own shingle in Memphis soon thereafter. In 1977 she married Mayo Coiner, a law professor of mature years who had been one of her teachers at Memphis State Law School. He assisted her in her practice, and, as the evidence indicated, he assumed responsibility for preparing the couple's joint income tax returns. The latter task was complicated by a recent divorce from his first wife, and Mr. Coiner fell seriously behind in preparing the returns. He testified, however, that he increased the amount of tax money withheld from his salary at Memphis State, and he believed that because of the increased withholding and his alimony deductions no back taxes would be due.

Early in 1979 Ms. Adams applied for a job as a lawyer in the legal unit of the Memphis office of the EEOC. She spoke with the head attorney there, a Mr. Terry, and gave him a partially completed Form 171, the job application form commonly used in federal agencies. Ms. Adams had not filled in a portion of the Form 171 relating to her earnings history, and Mr. Terry told her that she would need to provide that information because the form called for it. Ms. Adams testified that Mr. Terry told her to include in the statement of her earnings any money that was owing to her or that she knew she was going to get from a settlement. He also told her to put down her gross earnings rather than net income.

On March 17, 1979 , Ms. Adams sent Mr. Terry a letter saying that she earned $15,723.40 in 1976, $21,919.45 in 1977, and $31,678.45 in 1978. The last figure, she testified, included a fee she anticipated receiving on the settlement of a lawsuit. Otherwise, she told the jury, the earnings figures she gave Mr. Terry came from worksheets that she prepared for use by her husband in filling out Schedule C forms for the couple's income tax returns. She said she prepared the Schedule C worksheets on the basis of numbers she took from her checkbooks.

Ms. Adams was hired by the EEOC in mid-1979. At about the same time, according to Mr. Coiner's testimony, Mr. Coiner went to the local IRS office and explained that he was delinquent in filing his tax returns but wanted to bring himself current. IRS had not previously been aware that he was late in filing. At least four conferences were held with IRS, he testified, and it was agreed that all of the late returns would be filed by the end of April of 1980.

In the second week of April, Mr. Coiner testified, his contact person at IRS called and said there had been a change and the returns would all have to be filed on April 16. Mr. Coiner testified that he spent almost the entire night of the 15th working on the returns, and he had Ms. Adams sign the forms in blank before she went to sleep that night. She did not see the completed returns before they were filed.

In July of 1981 Ms. Adams filed her discrimination action against the EEOC. Mr. Terry was named as a defendant, along with the agency itself. Through her attorney, Ms. Adams was served with a request for production of numerous documents, including her income tax returns. She testified at trial that her attorney had not told her, before the government took her deposition, that she had been asked to produce her tax returns.

Ms. Adams was deposed on December 2, 1981 . In the course of the deposition she was asked about the source of the numbers contained in her letter of March 17, 1979 , to Mr. Terry. Her answer was as follows: "I took them off of the Form C that I had prepared for income tax purposes." During her trial Ms. Adams testified that she had not in fact completed a Schedule C in final form, but "I had done the Schedule C form worksheet in preparation for doing the income taxes." She further testified at trial as follows:

"Q. Did you believe that that answer was correct?

A. Yes.

Q. Even though you never yourself filled out a Form C itself, the official government form?

A. If I had--if I had thought that there was any problem with it, I--there wouldn't have been any reason not to say, I mean worksheet. I was using words, I don't know, careless I guess, but I was referring to what I had in fact done for income tax purposes. And I did believe that I was answering the question honestly."

Ms. Adams and Mr. Coiner had changed their place of residence shortly before the deposition, and they testified that some of their records were misplaced in the course of the move. They could not find copies of their old tax returns, and they made several attempts to obtain copies from IRS. Their attempts were unsuccessful, they said.

In July of 1983--at a time when, according to Ms. Adams, she had made production of several file boxes containing all the financial records she had--a hearing was held before a magistrate on a motion to dismiss the discrimination case for failure to comply with the government's discovery requests. Ms. Adams testified at the hearing that records supporting the gross income figures she had given Mr. Terry were contained in the file boxes. Ms. Adams further testified that the figures were taken from her income tax returns, and that the business income she and her husband earned was reported on separate schedules, as she believed:

"Q. For the years you were married and also associated in practice, did you file separate schedules for your business income?

A. Yes, we did.

Q. Your income would be listed separately from his, is that correct?

A. Schedule C, I believe, yes.

Q. So, there would be a Schedule C for you and Schedule C for him, is that correct?

A. I believe it is."

Ms. Adams had never seen the returns themselves, according to her trial testimony, but she knew of no problem with them. She made it clear at the hearing before the magistrate that she had not personally prepared the returns, testifying as follows:

"I provided [Mr. Coiner] figures taken from my checkbook, broke it down into columns to be filled into the Schedule C."

Q. So you would have provided him income and expense figures to be used in determining Schedule C, is that correct?

A. That's correct.

Q. And the rest of them was left up to him to prepare?

A. That's right."

In January of 1984, according to the trial testimony, Ms. Adams and Mr. Coiner sought help from a certified public accountant in getting copies of their tax returns for the years in which the EEOC was interested. The accountant succeeded in getting copies of the returns from IRS, and it was then the defendants learned--for the first time, they maintained--that Ms. Adams' self-employment income had been omitted from the returns. Mr. Coiner testified at trial that he had "firmly believed that they contained every bit of reportable income that we had," and it was obvious that he had made "a pretty good mistake."

The accountant promptly prepared amended returns, which were filed in April of 1984. The amended returns showed an income tax deficiency of $3,344 for 1977 and $1,675 for 1978. The government does not deny that the deficiencies were paid in full, with all penalties and interest.

Early in 1985, as the trial record indicates, Mr. Eddie Daniel, a special agent of the Internal Revenue Service, was assigned to investigate possible criminal tax violations on the part of Ms. Adams and Mr. Coiner. It was Mr. Daniel who subsequently testified before the grand jury by which the defendants were indicted.

The indictment was handed up on February 27, 1986 . Counts one and two charged that on or about April 16, 1980 , Ms. Adams and Mr. Coiner willfully made and subscribed income tax returns for 1977 and 1978 that were false, the returns having failed to report income received by Ms. Adams in the private practice of law.

Count Three of the indictment charged Ms. Adams with having knowingly made a false material declaration at her deposition on December 2, 1981 . The gravamen of the charge was that Ms. Adams had lied when she testified that the income figures furnished to Mr. Terry in March of 1979 had been taken from "the Form C that I had prepared for income tax purposes."

Counts Four and Five of the indictment charged Ms. Adams with having knowingly made false material declarations in her testimony before the magistrate in July of 1983. The gravamen of these counts was that Ms. Adams had lied in saying that the figures provided to Mr. Terry were taken from her income tax returns and that she "believed" separate Schedule Cs had been filed for herself and her husband.

In July of 1986 the defendants moved to dismiss the indictment. In the brief accompanying their motion they asked the court "to allow the defendants discovery of the complete background of the investigation and instigation of the criminal charges against the defendants," and the brief suggested that "[u]ltimately, upon a hearing when discovery is completed, the court should dismiss this indictment" as having been brought in retaliation for Ms. Adams' discrimination suit.

The brief represented that "when Eddie Daniel interviewed Alan Chambers, civil counsel for [Ms. Adams], he told Mr. Chambers that his job was to find Ms. Adams guilty of something, no matter how small. He told Andy Gipson, a CPA assisting Mr. Coiner and Ms. Adams, essentially the same thing." These representations were not supported by affidavits. ¹

The defendants did submit an affidavit from Mr. Gipson stating, among other things, that he was a special agent in the Criminal Investigation Division of IRS from 1977 through 1982; that he had previously been employed by IRS as a tax auditor and Internal Revenue Agent; that he was familiar with the returns filed by Ms. Adams and Mr. Coiner for 1977 and 1978; that in his opinion "the omission of Alayne Adams' income from the joint returns filed by her and Mayo Coiner for the years 1977 and 1978 would not ordinarily constitute a criminal issue, due to the insignificant amount of her earnings and the resulting underpayment of income taxes;" that in his opinion "had Alayne Adams not brought suit against the Equal Employment Opportunity Commission, no criminal income tax investigation would have taken place with regard to her or Mayo Coiner and no indictment would have been approved by the Department of Justice Tax Division;" and that if the omission of Alayne Adams' earnings had been discovered by an Internal Revenue Agent or in the course of a tax audit, in Mr. Gipson's opinion "the matter would have been handled by the Civil Division of the Internal Revenue Service, with no criminal proceedings being required."

The motion to dismiss was also accompanied by an affidavit of Charles A. Dixon, who had been the director of EEOC's Memphis office prior to his retirement in May of 1986. Mr. Dixon said that he was aware of the existence of various confidential memoranda from Mr. Terry and others regarding the government's investigation of Alayne Adams and was also aware of contacts between the Department of Justice and Constance L. Dupre, Director of EEOC's Office of Legal Counsel. Mr. Dixon said that he was familiar with Ms. Adams' EEOC complaint, which had been "directed primarily at the actions of Ray Terry, the Regional Attorney." The affidavit went on to speak of Mr. Terry's "reputation for being unfair and vindictive towards people who 'cross' him, such as Alayne Adams." The final paragraph of Mr. Dixon's affidavit stated, in language quoted at the outset of this opinion, that Mr. Dixon believed the EEOC had "instigated and pushed the investigation and prosecution of Alayne Adams" in "revenge" for her having instituted discrimination proceedings. The affidavit concluded with a purported quotation from a confidential EEOC memorandum of April 26, 1985 , to the effect that the then newly initiated tax investigation was under way "probably as a result of the Justice Department being informed by Constance L. Dupre, Director, Office of [EEOC] Legal Counsel, about these matters."

The government filed a brief opposing the motion to dismiss, and the defendants filed a reply brief. In their reply brief the defendants asserted that during the five years preceding the indictment of Ms. Adams there had been only ten indictments for perjury in the Western District of Tennessee, none of which indictments had arisen out of testimony in a civil case. The ten indictments were listed in an appendix to the brief. The brief also asserted that in the preceding five years no one had been indicted in the Western District for tax evasion where taxes were not still due at the time of the indictment. A purported list of the tax evasion indictments was attached to the brief.

After hearing oral argument the district court entered a written order denying the motion to dismiss, declining to grant an evidentiary hearing, and, by inference, refusing to allow discovery on the issue of retaliation. The court dismissed the affidavit of former EEOC Director Dixon as "rank supposition," and said that EEOC's motivation was not relevant in any event "[b]ecause the EEOC is not the charging party in a criminal tax prosecution." The court said that the affidavit of Mr. Gipson, the former IRS employee, was "uncorroborated and conclusory," while the defendants' summaries of prior indictments for perjury and tax evasion were "in many regards distinguishable and of questionable authenticity and accuracy." The court did not suggest that there had ever before been a prosecution comparable to this one, but did observe that "[s]urely the attorney for defendants may not deprive [sic] the grand jury of this district from returning an indictment because it does not match . . . other cases."

The case went to trial in December of 1986, and judgments of conviction were entered on the jury's guilty verdict as to all counts in the indictment. Ms. Adams was given concurrent sentences of six months' imprisonment on each of the perjury convictions, and she was given a suspended sentence and placed on two years' probation as to the income tax counts. Mr. Coiner was fined $2000 and was likewise placed on probation for two years. (His conviction also resulted in entry of an order suspending him from practice before the district court.) This appeal followed.

II

 

We fully agree with the district court's thought that the mere filing of a lawsuit against an agency of the federal government does not give anyone a license to break the law and insist that any ensuing prosecution be quashed as retaliatory. The Constitution confers no such immunity from prosecution. Wayte v. United States, 470 U.S. 598, 614 (1985).

It seems reasonably clear, however, that a prosecution which would not have been initiated but for governmental "vindictiveness"--a prosecution, that is, which has an "actual retaliatory motivation"--is constitutionally impermissible. Blackledge v. Perry, U.S. 21, 27-28 (1974). The broad discretion accorded prosecutors in deciding whom to prosecute is not "unfettered," and a decision to prosecute may not be deliberately based upon the exercise of protected statutory rights. Wayte, 470 U.S. at 608, citing United States v. Batchelder, 442 U.S. 114, 125 (1979), and United States v. Goodwin, 457 U.S. 368, 372 (1982).

All power tends to corrupt, as Lord Acton reminded us, and occasional misuse of what we have termed "the awesome power of prosecutors (and judges)" is by no means inconceivable. United States v. Andrews, 633 F.2d 449, 453 (6th Cir. 1980) (en banc), cert. denied, 450 U.S. 927 (1981). It is not only the inexperienced and the overly ambitious who may be tempted to misuse the prosecutorial power, although they are certainly subject to that temptation. There are times when the judgment of even the most highly qualified and virtuous of prosecutors--perhaps especially they--will yield to an excess of zeal. One thinks of the Massachusetts men who, in an age not so very far removed from our own, prosecuted witches.

Whether the power to prosecute was misused in the case at bar we do not know. The mere fact that one of the defendants had sued the EEOC does not, in itself, suggest any misuse. But the datum that Ms. Adams was putting her governmental employer to the trouble (and potential embarrassment) of defending itself against a discrimination charge does not stand alone. The record suggests, for one thing, that taxpayers who underreport their income and then voluntarily amend their returns and pay the deficiency have not heretofore been subjected to prosecution in the Western District of Tennessee--at least not within the memory of the district judge, whose tenure goes back to 1966. The record suggests, similarly, that prosecutions for perjury have not heretofore been instituted in respect of testimony given in civil proceedings--a fact the significance of which increases, as we see it, in direct proportion to the thinness of the charges. (As we shall explain presently, the materiality of Ms. Adams' alleged prevarications is highly questionable.)

And there is more. The affidavit of Mr. Dixon, the former director of the EEOC office in Memphis, undoubtedly contains "supposition," but Mr. Dixon knows the dramatis personae as we do not, Mr. Dixon has seen confidential memoranda to which we are not privy, and Mr. Dixon states under oath that he believes the EEOC instigated the prosecution of Ms. Adams out of "revenge." Mr. Gipson, drawing on his lengthy experience as an employee of the IRS, states in his affidavit that he does not believe that criminal proceedings would "ordinarily" be instituted in tax cases of the sort presented here. Unless these men are perjuring themselves, their testimony raises a significant question as to why this particular prosecution was undertaken.

It is true, to be sure, that Ms. Adams' discrimination suit was brought against the EEOC and not against the IRS or the Department of Justice. But if the EEOC was able to prevail upon the Department of Justice to institute a prosecution that would not have been undertaken but for Ms. Adam's exercise of her statutory right to sue, it does not seem to us that EEOC's motivation is irrelevant.

Each situation of this sort will necessarily turn on its own facts, Andrews, 633 F.2d at 454, but where there has been a prima facie showing of a "realistic likelihood of vindictiveness," it is incumbent upon the district court to "conduct an evidentiary hearing where the government's explanations can be formally presented and tested." Id. at 457. And a criminal defendant "may . . . be entitled to discovery on the issue of selective prosecution if he introduces ' "some evidence tending to show the existence of the essential elements of the defense." ' " United States v. Schmucker, 815 F.2d 413, 418 (6th Cir. 1987), quoting United States v. Mitchell, 778 F.2d 1271, 1277 (7th Cir. 1985), and United States v. Berrios, 501 F.2d 1207, 1211 (2d Cir. 1974).

"Some evidence" of vindictive prosecution has been presented here. It is hard to see, indeed, how the defendants could have gone much farther than they did without the benefit of discovery on the process through which this prosecution was initiated.

It may well be that no fire will be discovered under all the smoke, but there is enough smoke here, in our view, to warrant the unusual step of letting the defendants find out how this unusual prosecution came about. It will be time enough for the district court to consider whether an evidentiary hearing should be held after discovery has been completed--and we are confident that the district court will not let the discovery get out of hand. Discovery should be confined to the narrow issue of whether the EEOC, acting on an improper motive, induced the Department of Justice to institute a prosecution that would not otherwise have been undertaken.

III

Even if the inquiry into possible vindictiveness should avail them nothing, defendants suggest that they are entitled to a new trial because of allegedly erroneous evidentiary rulings made by the district court. In most of the instances in question the defendants failed to make an appropriate offer of proof, however, and having read the trial transcript in its entirety, we are not persuaded that a new trial would be warrranted. On the whole, the defendants were given ample opportunity to get their story across to the jury.

IV

We return finally to Ms. Adams' perjury convictions. The statute under which she was charged, 18 U.S.C. §1623, makes it a felony for a person knowingly to give a false "material" declaration under oath in any United States court proceeding. We have accepted the view that materiality is an essential element of the crime, United States v. Quaisi, 779 F.2d 346, 347 (6th Cir. 1985), and whether the government has sustained its burden of establishing materiality is for the court to decide as a matter of law. United States v. Bednar, 728 F.2d 1043, 1047 (8th Cir.), cert. denied, 459 U.S. 827 (1984). Cf. United States v. Giacalone, 587 F.2d 5, 7 (6th Cir. 1978), cert. denied, 442 U.S. 940 (1979) ("It has long been settled that the question of materiality in a perjury or false statement case is one of law for the courts to decide").

The test of whether a false declaration satisfies the materiality requirement is whether a truthful statement might have assisted or influenced the tribunal in its inquiry. United States v. Swift, 809 F.2d 320, 324 (6th Cir. 1987). With respect to the deposition testimony on which Count Three of Ms. Adams' indictment was predicated, the government has not persuaded us that the inquiry into the alleged discrimination against Ms. Adams would have been assisted or influenced in any material way if Ms. Adams had testified that the earnings figures furnished to Mr. Terry came from a Form C worksheet prepared for income tax purposes, rather than from an actual Form C that Ms. Adams had prepared for income tax purposes.

The issue in Ms. Adams' lawsuit against the EEOC was whether the agency was guilty of sex discrimination, not whether Ms. Adams was guilty of failing to prepare proper income tax returns. It was the government's burden in the perjury case to establish a nexus between the discrimination proceeding and the defendant's false statement by presenting some evidence as to the scope of the discrimination case. See United States v. McComb, 744 F.2d 555, 564 (7th Cir. 1984). As we read the testimony of the EEOC trial lawyer who worked on Ms. Adams' discrimination case--and this is the only testimony which seems to have been designed to establish the necessary nexus--it does not adequately explain what difference it could have made in the discrimination suit whether Ms. Adams had actually prepared a Schedule C for income tax purposes or merely prepared a Schedule C worksheet.

As to the testimony on which Counts Four and Five of the indictment are based, that being Ms. Adams' testimony before the magistrate at the hearing held in 1983, the magistrate had called the hearing "to determine whether [Ms. Adams] had showed [EEOC] any records" covered by the document request. The tax returns had been requested to verify the amount of Ms. Adams' earnings prior to her employment by the EEOC. Ms. Adams' attorney contended that prior earnings were irrelevant--as the EEOC itself had evidently maintained, successfully, in Kouba v. Allstate Insurance Co., 523 F.Supp. 148 (E.D. Cal. 1981), a case decided two years earlier--but the magistrate's report and recommendation concluded that the EEOC was entitled to see the tax returns and that Ms. Adams had failed to produce what she was supposed to produce. The district court affirmed the magistrate's findings that the EEOC was entitled to discovery and that the agency was entitled to recover attorney fees in respect of its efforts to obtain Ms. Adams' records.

All this may be learned from the record of the criminal trial. What that record does not show, at least to our satisfaction, is how more precise answers by Ms. Adams to the questions asked her at the hearing before the magistrate could have had any significant influence on the magistrate's decision. If the magistrate had known that the income figures provided to Mr. Terry in 1979 came from worksheets rather than from final returns, would that have made it any more likely that Ms. Adams would be directed to produce the final returns in 1983? And if Ms. Adams did not in fact believe that her income had been listed on a separate Schedule C, would testimony to that effect have made it any more likely that she would be directed to produce the returns? We think not.

The government argues that the allegedly perjurious statements might be material to the issue of Ms. Adams' credibility. But this argument proves too much; the credibility of a witness is always at issue, but not every word of a witness's testimony is invariably material. The materiality of a particular snippet of testimony is not automatically established by the simple expedient of proving that the testimony was given.

Ms. Adams' perjury convictions are REVERSED. The case is REMANDED for further proceedings on the question whether the prosecution of Ms. Adams and Mr. Coiner for making false tax returns was based on improper motives.

^* The Honorable Arthur Spiegel, United States District Judge for the Southern District of Ohio, sitting by designation.

¹ Under Rule 47, Fed. R. Crim. P., it has been stated that "in the absence of a court order, or a local rule requiring affidavits, it is not required that affidavits be submitted." 3A Wright, Federal Practice and Procedure: Criminal 2d §802 , p. 192.

 

 

 

 

 

[91-1 USTC ¶50,267] United States of America, Plaintiff-Appellee v. David L. Reynolds, Defendant-Appellant

(CA-7), U.S. Court of Appeals, 7th Circuit, 90-1479, 11/28/90 , Affirming and reversing an unreported District Court decision

[Code Sec. 7206 ]

Criminal penalties: Fraud: Perjury.--A taxpayer's convictions for filing false income tax returns were reversed. The taxpayer was charged with falsely verifying that the amounts of taxable income shown on line 7 of Form 1040EZ were correct because the amounts did not include embezzlement income. Line 1, from which line 7 was arithmetically derived, required only that the taxpayer report the amount of wage, tip and salary income shown on his Form W-2. Thus, the amounts on line 7 were literally correct statements that constituted a defense to perjury. Although the proper charges against the taxpayer would have been tax evasion and failure to file information required by law, neither the indictment nor the charge to the jury set out the elements of these offenses.

Stephen J. Liccione, Joseph R. Wall, Assistant United States Attorneys, Milwaukee, Wis. 53202, for plaintiff-appellee. William E. Callahan, Jr., Davis & Kuelthau, 111 E. Kilbourn Ave., Milwaukee, Wis. 53202-6613, for defendant-appellant.

Before CUMMINGS, EASTERBROOK, and KANNE, Circuit Judges.

EASTERBROOK, Circuit Judge:

For more than a decade Milwaukee has participated in the community development block grant program administered by the Department of Housing and Urban Development. The City selects urban projects that meet federal criteria and pays a contractor to do the work; the federal government reimburses the City on certification that the work has been done according to the federal standards. A pot of money attracts many people, not all of them interested in fulfilling the statutory objectives. David Reynolds was one such person.

Reynolds formed the Phoenix Redevelopment Project, Inc., ostensibly to renovate housing in the 10th Aldermanic District of Milwaukee. That the extent of a federal redevelopment project should be limited by political boundaries in Milwaukee--boundaries having nothing to do with housing that could benefit from rehabilitation--seems to have drawn little attention at Milwaukee's Community Development Agency or at HUD. The link between Phoenix and the 10th District reflects the link between Reynolds and Michael McGee, the Alderman of the 10th District. Reynolds was one of McGee's confidants, able to induce action on applications for liquor licenses in his district (in exchange for baksheesh). Phoenix may have been another vehicle to send money in McGee's direction.

Reynolds arranged for two of Phoenix's suppliers to submit false invoices for supplies. Reynolds also forged some invoices on letterheads he obtained from these two suppliers. He submitted both the fraudulent and the forged invoices to the City for payment. Reynolds and his suppliers arranged to split the proceeds 50-50, but Reynolds reneged, paying them only 1/3 of the takings on the explanation that he needed a larger share to take care of someone from the City. The skimming led to four kinds of charges, in addition to the drearily inevitable yet pointless conspiracy charge: making false claims against the government, in violation of 18 U.S.C. §287; embezzling federal funds, in violation of 18 U.S.C. §641 ; theft from a governmental program, in violation of 18 U.S.C. §666 ; and filing false income tax returns, in violation of 26 U.S.C. §7206(1) (Reynolds, not content to rob a fund designed to assist the neediest in society, neglected to pay taxes on the booty). He was charged with and acquitted of three counts of extortion. The 42 counts on which he was convicted produced a term of four years' imprisonment, plus restitution of $52,219 and special assessments of $2,100.

The tax counts are the most problematic. Reynolds filed IRS form 1040EZ for each of tax years 1986 and 1987. Line 1 of this form says: "Total wages, salaries, and tips. This should be shown in Box 10 of your W-2 form(s). (Attach your W-2 form(s).)" Reynolds inserted in the space provided the amount shown on his W-2 forms, which he dutifully attached. The only other line on form 1040EZ calling for income is line 2, which reads: "Interest income of $400 or less. If the total is more than $400, you cannot use Form 1040EZ." Reynolds performed the additions and subtractions called for on the other lines, filling in the total on line 7, which reads: "Subtract line 6 from line 5. If line 6 is larger than line 5, enter 0 on line 7. This is your taxable income."

The indictment charged Reynolds with filing a return,

which said income tax return he did not believe to be true and correct as to every material matter in that on line 7 of the return, the defendant's taxable income was represented as being $12,743.00 [in 1986; $16,185 in 1987], whereas, as he then and there well knew and believed, he had taxable income in 1986 [or 1987] in excess of that heretofore stated.

Line 7 did not call for anything other than the difference between line 6 (the personal exemption, preprinted on the form) and line 5. Line 5 came from lines 1 and 2 (added to yield line 3), from which Reynolds subtracted charitable contributions (line 4). The veracity of Reynolds' verification (by signing the return) that line 7 is "true, correct, and complete" therefore depends on the accuracy of his entry on line 1. He contends that the entry on line 1 is literally correct: he wrote down everything he had received as "wages, salaries, and tips", exactly as it appeared on the forms W-2.

To this the prosecutor has two replies. One is that by filing form 1040EZ, Reynolds represented that he had no income not called for on lines 1 and 2. The other is that, according to expert testimony, Reynolds could have put his illegal income on line 1. Only one of these can be true. If income that is not reflected on a W-2 disqualifies someone from filing form 1040EZ, then illegal income may not be included on line 1 of that form. And the existence of such income indeed disqualifies a taxpayer from using form 1040EZ. It is designed for persons whose entire income appears on W-2s, plus interest income that financial institutions report on forms 1099. Anything more complex requires the taxpayer to use form 1040.

The prosecutor's argument that by filing form 1040EZ a taxpayer implicitly represents that he has no additional income has more substance, but this is not the theory in the indictment. It charged that line 7, specifically, was false, and line 7 is derived arithmetically from other lines. Section 7206(1) is a perjury statute, and literal truth is a defense to perjury, even if the answer is highly misleading. Bronston v. United States, 409 U.S. 352 (1973). Using the wrong form does not violate §7206(1) . Hartford-Connecticut Trust Co. v. Eaton [1 USTC ¶417 ], 34 F.2d 128, 130 (2d Cir. 1929). If the form has an open-ended line calling for §61 income, and the taxpayer leaves some income out, §7206(1) applies. United States v. Young [86-2 USTC ¶9806 ], 804 F.2d 116, 119 (8th Cir. 1986). Form 1040EZ is anything but open-ended, however. The right charges are tax evasion (26 U.S.C. §7201 ) and failure to supply information required by law (26 U.S.C. §7203 ). Reynolds did not reveal his complete income (§7203 ) and evaded taxation on that income (§7201 ). Neither the indictment nor the charge to the jury set out the elements of these offenses, so the problem is deeper than a citation to the wrong statute in the indictment. We vacate Reynolds' tax convictions, without foreclosing indictment and trial for the offenses that match the prosecution's theory of the case.

Leaving tax, we turn to embezzlement of federal funds, which violates 18 U.S.C. §641 . Reynolds defended against the embezzlement counts by observing that Milwaukee, and not HUD, paid Phoenix's invoices. Although the federal government reimbursed Milwaukee, the money in Phoenix's hands was Milwaukee's and therefore, Reynolds concludes, outside the scope of §641 . Section 641 , which punishes those who purloin "money, or any thing of value of the United States or of any department or agency thereof", is a problem child when applied to grantees or other independent contractors. What does it mean to say that Phoenix embezzled funds that the City and HUD handed over willingly? Isn't this just a back door way to cumulate the punishment assessed by §287, which penalizes false claims? Yet Reynolds does not contest the application of §641 to false claims, and he does not challenge this circuit's approach to defining "money . . . of the United States": if the United States supplies the funds and exercises supervision and control over their use in the hands of grantees, they remain "money . . . of the United States". E.g., United States v. Kristofic, 847 F.2d 1295 (7th Cir. 1988); United States v. Wheadon, 794 F.2d 1277, 1284-85 (7th Cir. 1986); United States v. Bailey, 734 F.2d 296 (7th Cir. 1984).

Community block grant funds come with the strings that usually tie up the use of federal money. 24 C.F.R. Part 570. Recipients must certify that they will put the dollars to particular uses. If they do not, the United States retains a right to recoup. Reynolds does not dispute these things--does not dispute that §641 would apply, if Phoenix had received the money from HUD. Because Milwaukee fronted City money, and obtained payment later, Reynolds believes that the link was broken. A jury could decide otherwise, however. The United States puts up all of the money Reynolds received, even paying the salaries of the employees of Milwaukee's Community Development Agency. More than a decade ago, when Milwaukee entered the block grant program, it may have had to inject some of its own money to pay the first month's invoices while awaiting reimbursement. Ever since then, however, no new City money has been invested. Funding rolls over; federal money Milwaukee gets in July (on account of invoices paid in June) is available to pay new invoices submitted in August. Everything Milwaukee's Community Development Agency receives, and everything it pays out, is covered by federal rules and subject to an obligation to repay the United States if anything goes wrong. As a practical matter, the dollars are as much "money . . . of the United States" as if Phoenix had billed HUD directly. Whatever doubts we may have about the use of §641 to increase the penalties provided by §287 are no reason to draw a line that depends on the existence of a local intermediary that serves as no more than a disbursing office for HUD.

A third line of attack goes to the conspiracy conviction. The indictment charged Reynolds with conspiring to defraud the United States, in violation of 18 U.S.C. §371 . Section 371 makes it a crime for "two or more persons [to] conspire either to commit any offense against the United States, or to defraud the United States". Reynolds contends that when the prosecutor challenges conduct that violates a specific statute (such as §287 or §641 ), the indictment must charge a conspiracy "to commit [that] offense against the United States", rather than a generic conspiracy to defraud. Reynolds invokes United States v. Minarik [90-1 USTC ¶50,085 ], 875 F.2d 1186 (6th Cir. 1989), in support of this conclusion.

Stated the way Reynolds frames it, the argument cannot be right. There are no common law federal crimes. Thus there will always be a specific substantive offense that the defendants conspired to commit. If the prosecutor must charge a conspiracy to commit the specific crime, there can never be a charge of conspiracy to defraud the United States. Some statutory language is redundant, but we hesitate to read out of §371 the language that has been the foundation for so many convictions. Moreover, reading §371 this way would do defendants no favors. If agreement to violate each specific statute is a distinct offense, then Reynolds should have been charged with three conspiracies rather than just one, for his acts transgressed §§287, 641 , and 666 . Why would defendants be better off facing three conspiracy charges rather than one generic charge of conspiring to defraud?

Although some language in Minarik suggests that the sixth circuit thought it better practice to charge a conspiracy to violate a particular statute, the holding of that case is only that the prosecution's theory changed so often that the defendant lacked notice of the charge against which he had to defend. Reynolds had plenty of notice. The conspiracy charge and the prosecution's theory were stable from indictment through conviction; the 39 specific charges laid under §§287, 641 , and 666 gave Reynolds ample notice of the facts that the prosecution would contend constituted the fraud. Reynolds had adequate notice, and an alteration in the phraseology of the conspiracy charge could not have assisted his defense.

When listing the charges against Reynolds we called the conspiracy charge inevitable yet pointless. It is inevitable because prosecutors seem to have conspiracy on their word processors as Count I; rare is the case omitting such a charge. It is pointless because, under the Sentencing Guidelines, the conspiracy is grouped with the substantive offense for the purpose of computing the offense level. U.S.S.G. §3D1.2(b) and Application Note 4. Although the existence of a conspiracy allows the prosecution to use co-conspirator statements that would otherwise be hearsay, it is not necessary to charge a conspiracy in order to take advantage of Fed. R. Evid. 801(d)(2)(E); it is enough to show that a criminal venture existed and that statements took place during and in furtherance of that scheme. Conspiracy, once a formidable weapon in the prosecutor's arsenal, has become a distraction, useful only to obtain an extra $50 special assessment and to generate complex issues for appeal. The $50 hardly compensates for the costs the allegation imposes on the parties and the judicial system. Our portfolio does not include making prosecutorial decisions, however, and we are satisfied that the conspiracy as charged comports with the United States Code.

None of Reynolds' other arguments requires extended comment. He contends, for example, that the court should have "struck the jury panel" because of pretrial publicity. His scam was front-page news in Milwaukee, apparently because of the potential role of Alderman McGee. Yet Reynolds does not contend that the jurors actually seated were unable to decide the case fairly on the record. There is no principle that high-visibility cases are un-triable or must be tried in another state. See Patton v. Yount, 467 U.S. 1025 (1984); Murphy v. Florida, 421 U.S. 794 (1975). Anyway, Reynolds did not request a change of venue. He had a fair trial.

The tax convictions are reversed. The remaining convictions are affirmed. The sentences are vacated, and the case is remanded for resentencing in accordance with our policy of giving the judge an opportunity to reformulate the sentencing package knowing which charges held up.

 

 

 

 

[93-2 USTC ¶50,428] United States of America, Plaintiff-Appellant v. Richard K. Borman and Betty L. White, Defendants-Appellees

(CA-7), U.S. Court of Appeals, 7th Circuit, 92-2517, 4/29/93 , 992 F2d 124. Affirming an unreported District Court decision

[Code Sec. 7206 ]

Perjury: Wrong form filed: Unreported income.--Married taxpayers who filed the wrong tax reporting form were not guilty of perjury because they failed to reveal income information not requested on that form. Simply filing a specific form did not create an implicit assumption that they received no income of a type or amount which would require a different form. Although they could possibly be indicted for tax evasion or failure to supply information required by law, they were not guilty of perjury since they answered the questions on the form filed fully and correctly.

Robert E. Lindsay, Karen Quesnel, Alan Hechtkopf, Department of Justice, Washington, D.C. 20530, Kevin Potter, Office of the United States Attorney, Madison, Wis., for plaintiff-appellant. Margaret Danielson, Madison, Wis., for Richard K. Borman. Stephen P. Hurley, John D. Hyland, Hurley, Burish & Milliken, 301 N. Broom St., Madison, Wis., for Betty L. White.

Before POSNER and RIPPLE, Circuit Judges, and FAIRCHILD, Senior Circuit Judge.

FAIRCHILD, Senior Circuit Judge:

The government appeals from an order granting Richard K. Borman's and Betty L. White's motion to dismiss the indictment. Pursuant to 18 U.S.C. §3731, the government is permitted in a criminal case to appeal from an order dismissing an indictment. The parties treat the district court's order granting the defendants' motions to dismiss as an order dismissing the indictment, and we have jurisdiction. The indictment charged Borman and White with willfully making and subscribing joint U.S. Individual Income Tax Returns, made under the penalties of perjury, which he/she did not believe to be correct as to every material matter, in violation of 26 U.S.C. §7206(1) . The returns referenced in the indictment were for the 1985, 1986 and 1987 tax years, one count for each defendant for each year. Each count alleged that Borman and White represented that, for each year, they received only wages, salaries, tips and interest in specified amounts, although they knew and believed that they also received gross receipts in specified amounts from the manufacture and sale of seasonal wreaths, which by law were required to be disclosed. Borman and White were husband and wife at the time of the alleged offenses.

Borman and White filed motions to dismiss the indictment. They asserted that the return involved in each count was IRS Form 1040A, which inquires about total wages, salaries, tips, interest income, and two other types of income not relevant in this case. The form does not inquire about income of other types nor about the amount of receipts from a business. Defendants did not insert any representation concerning other income. Thus, they argued that each return was true and correct, and therefore there was no violation of 26 U.S.C. §7206(1) , as held in United States v. Reynolds [91-1 USTC ¶50,267 ], 919 F.2d 435 (7th Cir. 1990), cert. denied, -- U.S. --, 111 S. Ct. 1402, 113 L.Ed.2d 457 (1991). The government conceded that defendants filed Forms 1040A and took the position that "[t]he defendants' motions raise only a question of law and the court should rule on them at this time. Such a ruling will be time-saving and serve the interests of judicial economy." Government's Opposition to Defendants' Motion to Dismiss at 2 (citing United States v. Korn, 557 F.2d 1089 (5th Cir. 1977)), R. 21.

The motions were referred to a magistrate judge, and on April 21, 1992 , he issued a Report recommending that the motions to dismiss be granted. The district court adopted the Report, relying principally on Reynolds [91-1 USTC ¶50,267 ], 919 F.2d 435, in which we held that §7206(1) is a perjury statute and literal truth is defense to perjury, even if the answer is highly misleading. Id. at 437. Although Borman and White allegedly had a duty to file a different form, which called for disclosure of their receipts from business, the government makes no claim that the answers on the Forms 1040A for the years at issue were untrue. The court ruled that the defendants' filing of the wrong form could not constitute a violation of §7206(1) . We affirm.

DISCUSSION

The indictment alleges that Borman and White did not believe their returns to be correct as to every material matter in that the said return represented that they received only wages, salaries, tips and interest. The government's theory must be that the filing of Form 1040A implicitly represented that they received no income of a type or amount which would require the use of a different form. The issue before us is whether an indictment, limited to that theory, charges an offense.

To establish a violation of §7206(1) , the government must prove that (1) the defendant made or subscribed a return which he verified as true; (2) the return contained a written declaration that it was made under penalty of perjury; (3) the defendant signed the return willfully, believing that it was not true and correct as to every material matter; and (4) the return was false as to a material matter. 26 U.S.C. §7206(1) ; United States v. Bishop [73-1 USTC ¶9459 ], 412 U.S. 346, 350, 93 S.Ct. 2008, 2012, 36 L.Ed.2d 941 (1973); United States v. Whyte [83-1 USTC ¶9185 ], 699 F.2d 375, 381 (7th Cir. 1983).

In Reynolds, we reversed a conviction under §7206(1) where the taxpayer filed a Form 1040EZ and the statements thereon were literally correct, but the taxpayer had received income of a type which he had a duty to report on a different form. The facts differ in that the Reynolds indictment did not allege a representation that the taxpayer received only income of particular types, and instead alleged that Reynolds represented his taxable income as the amount he had reported on line 7 of the form. These differences are insignificant for our present purpose, however, notwithstanding a remark in Reynolds that an "argument that by filing form 1040EZ a taxpayer implicitly represents that he has no additional income has more substance." Id. [91-1 USTC ¶50,267 ], 919 F.2d at 437.

Thus, under the Reynolds rationale, the untruth must be found in a statement of some material information called for by the form itself, and any implication drawn from the filing of a particular form--that the taxpayer had received no income requiring the use of a different form--is simply not enough. As the Reynolds opinion put it, "[u]sing the wrong form does not violate §7206(1) ." Id.

There is no question that if Borman and White had income of other types, they had a legal obligation to file Form 1040, not 1040A. However, the parties assume for present purposes that the statements made on the Forms 1040A for the years at issue are literally true. The Form 1040A does not call for a taxpayer to declare that he or she has no income of a type other than that required to be disclosed on the form. Although in Reynolds we noted that the IRS's implicit representation theory has "more substance" than a theory that line 7 of the Form 1040EZ called for a representation of total taxable income, we expressly held that §7206(1) is not violated by filing the wrong form. Id. at 437. A charge that the taxpayer makes an implicit representation when filing the wrong form adds nothing beyond a charge of filing the wrong form. Therefore, dismissal of the indictment was appropriate.

The government additionally argues that such a ruling would unduly diminish its ability to protect the integrity of the federal tax system. We are not persuaded. As we noted in Reynolds, the government may seek an indictment for tax evasion, 26 U.S.C. §7201 , or failure to supply information required by law, 26 U.S.C. §7203 . Moreover, the present problem is easily remedied without abandoning the use of simplified forms. The IRS need only add a single question to its Form 1040A--e.g., "did you receive income of any type not reported on this return?" If the taxpayer willfully fails to answer this question correctly, the government could prosecute under §7206(1) . See United States v. Mattox, 689 F.2d 531, 533 (5th Cir. 1982) (leaving a question unanswered constitutes making a false statement if in fact the question should have been answered).

For the foregoing reasons, we AFFIRM the district court's dismissal of the indictment.

 

 

 

 

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

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

[Code Sec. 7201 ]

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

[Code Sec. 7201 ]

Crimes: Foreign depositions: Sixth Amendment.--A deposition that took place in a foreign country was properly admitted because the procedures followed were those used in the United States and there was no language barrier between the parties. The taxpayer was not prejudiced by the late receipt of documents used at the deposition, and his lawyer was present and cross-examined the witness.
[Code Sec. 7206 ]

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

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

WEIS, Senior Circuit Judge:

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

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

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

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

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

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

I.

THE TAX COUNTS

A. Tax Evasion

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

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

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

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

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

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

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

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

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

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

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

B. Tax Perjury

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

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

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

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

II.

THE DEPOSITION OF A FOREIGN WITNESS

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

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

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

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

III.

PROSECUTORIAL MISCONDUCT

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

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

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

IV.

THE BANK FRAUD COUNT

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

V.

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

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

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

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

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

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

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

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

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

¹ 18 U.S.C. §1344 reads:

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

(1) to defraud a financial institution; or

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

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

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

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

 

 

 

 

[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).