Statute of Limitations

---

[ Back ] [ Next ]

 

7212- Interference with Administration of Internal Revenue Laws: Statute of Limitations

   

[97-1 USTC ¶50,390] United States of America , Plaintiff v. John A. Brennick, Defendant

U.S. District Court, Dist. Mass., 95-10197-NG, 11/13/95, 908 FSupp 1004, 908 FSupp 1004

[Code Sec. 7202 ]

Criminal prosecution: Civil penalties: Double jeopardy: Sufficiency of indictment: Multiplicitous counts: Failure to collect and pay over tax: Interference with administration: Obstruction.--Civil penalties assessed in connection with an individual's failure to collect and pay over taxes were reasonably related to the damages the government incurred in prosecuting the case and, therefore, did not give rise to a claim of double jeopardy. The penalties were not extreme, and they had neither a deterrent nor retributive quality to them. Further, the indictment did not contain multiplicitous counts that gave rise to double jeopardy since a violation of Code Sec. 7212 charged in the indictment entailed an intent to obtain an unlawful benefit by endeavoring to obstruct operation of the tax laws. Therefore, it involved conduct which Code Sec. 7202 did not address.

[Code Sec. 7212 ]

Criminal prosecution: Interference with administration: Unconstitutionally vague term: Notice, actions prohibited: Obstruction: Corrupt: State of mind.--An individual, who was indicted for obstruction, failing to pay over taxes, and various structuring activities, was properly charged with violations of Code Sec. 7212(a) . The term "corruptly" in the statute was not unconstitutionally vague as it applied to him because he was put on notice that the actions charged in the indictment were prohibited. The term does not limit the category of acts that obstruct or impede the IRS but, rather, it identifies the state of mind necessary for those acts to rise to the level of a felony.

[Code Sec. 7202 ]

Criminal prosecution: Sufficiency of indictment: Failure to collect and pay over tax: Willful.--An individual, who was indicted for obstruction, failing to pay over taxes, and various structuring activities, was properly charged with violations of Code Sec. 7202 . The plain language of the statute did not require both a willful failure to account and a willful failure to pay over, but rather penalizes the failure to complete the duty imposed by law: truthfully accounting for and paying over the withholding tax collected by an employer. An interpretation that required a violation of both elements would be inconsistent with any reasonable understanding of the purposes of the statute.

[Code Sec. 6531 ]

Criminal prosecution: Sufficiency of indictment: Failure to collect and pay over tax: Willful: Limitations period.--The three-year statute of limitations barred a charge under Code Sec. 7202 against an individual, who was indicted for obstruction, failing to pay over taxes, and various structuring activities. The six-year limitations period contained in Code Sec. 6531(4) was inapplicable because it was limited to the single offense of "willfully failing to pay any tax, or make any return," an offense described in Code Sec. 7203 .
[Code Sec. 6531 ]

Criminal prosecution: Interference with administration: Obstruction: Parenthetical language: Limitations period.--The six-year limitations period applied with regard to a charge under Code Sec. 7212(a) against an individual, who was indicted for obstruction, failing to pay over taxes, and various structuring activities. The six-year period applied to all actions brought under Code Sec. 7212 and not just those relating to the intimidation of officers and employees of the United States . The parenthetical language in the statute served as a cross-reference for the reader and did not limit its scope.

Stephen G. Huggard, United States Attorney, Boston , Mass. 02109 , for plaintiff. Terry Philip Segal, Scott P. Lopez, Segal & Feinberg Law Office, 210 Commercial St., Boston, Mass. 02109, Robert Wolkon, Ferriter, Scobbo, Sikora, Caruso & Rodophele, One Beacon St., Boston, Mass. 02108, for defendant.

MEMORANDUM AND ORDER

I. INTRODUCTION

GERTNER, District Judge:

The defendant, John A. Brennick, is charged with nine counts of structuring financial transactions to avoid currency reporting requirements (Counts 1-9), one count of bankruptcy fraud (Count 10), twenty-two counts of failing to truthfully account for and pay over payroll taxes (Counts 11-32), and one count of corruptly endeavoring to obstruct and impede the due administration of the internal revenue laws (Count 33).

In essence, the superseding indictment charges that Brennick, who was the president of a number of health care companies, withheld payroll taxes from his employees but failed to pay them over to the Internal Revenue Service, during the period from 1986 to 1993. Instead, the indictment charges, the defendant withdrew millions of dollars from these companies through structured cash transactions designed to avoid bank reporting requirements.

The indictment also charges that defendant subsequently filed for bankruptcy on behalf of himself and one of his companies, and that he made false statements under oath during the Section 341 meeting with creditors. Finally, the indictment charges that the defendant failed to timely remit withholding taxes, made misrepresentations to the IRS concerning the reasons for his failure to pay taxes, took his pay mainly in cash, structured cash transactions to avoid bank reporting requirements, obtained separate Employer Identification Numbers for each of his separate companies, retained checks made payable to the Internal Revenue Service by his staff rather than depositing them, and diverted business assets to his personal use, all as a way of corruptly endeavoring to obstruct and impede the due administration of the internal revenue laws.

Defendant has filed motions to dismiss various of the counts. I will address each of defendants' arguments in turn.

II. DOUBLE JEOPARDY

Counts 11 through 32 charge the defendant with violating 26 U.S.C. §7202, by failing to "truthfully account for and pay over, either in whole or in part, to the Internal Revenue Service . . . federal income taxes . . . due and owing to the United States of America." Defendant contends that because he has already been assessed civil penalties in connection with these charges, the instant prosecution is barred by the Double Jeopardy Clause of the Fifth Amendment. In particular, he argues that the earlier IRS assessment of civil penalties against him constituted a "punishment" and, because the constitution prohibits multiple punishments for the same offense, the government is precluded from any further punitive action (be it civil or criminal) against him. See Halper v. United States , 490 U.S. 435, 440 (1989).

The superseding indictment charges the defendant with failing to pay approximately $1.4 million in withholding taxes, and paying late an additional $700,000 of such taxes. The IRS imposed penalties pursuant to four distinct sections of the Tax Code: (1) late deposit penalties (26 U.S.C. §6656); (2) late payment penalties (26 U.S.C. §6653): (3) late filing penalties (26 U.S.C. §6651); and (4) bad check penalties (26 U.S.C. §6657). ¹ The total amount of these penalties exceeds $600,000.

In contending that these earlier penalties constituted an imposition of punishment which bars the government from engaging in further criminal prosecution, defendant asks this court to reject the reasoning of Helvering v. Mitchell [38-1 USTC ¶9152], 303 U.S. 391 (1938), which upheld the imposition of civil tax penalties against a double jeopardy challenge. In Helvering, the government prosecuted the defendant for willfully failing to pay income tax. After the defendant was acquitted, the government imposed a civil penalty equal to fifty percent (50%) of the unpaid tax. In upholding the imposition of the penalty against a double jeopardy challenge, the court held that the civil penalty was remedial, rather than punitive, and that the Double Jeopardy Clause therefore did not apply. The court found that the penalty was imposed "primarily as a safeguard for the protection of the revenue and to reimburse the Government for the heavy expense of investigation and the loss resulting from the taxpayer's fraud." Helvering [38-1 USTC ¶9152], 303 U.S. at 401.

Helvering is directly on point. Defendant suggests, however, that two recent Supreme Court cases have called Helvering's reasoning into question. See Halper, supra; Montana DOR v. Kurth Ranch, -- U.S. --, 114 S. Ct. 1937 (1994). In Halper, the Supreme Court held for the first time that the imposition of a civil penalty could, under certain circumstances, raise double jeopardy concerns. Halper involved the imposition of civil penalties under the False Claims Act (FCA), which prohibits the making of false claims for payment from the federal government. Under the FCA, persons making false claims are subject to criminal prosecution but are also liable to the government for "a civil penalty of $2,000, an amount equal to 2 times the amount of damages the Government sustains . . . and costs of the civil action." Halper, 490 U.S. at 438.

Halper had been charged and convicted of making false Medicare claims on 65 occasions, in a total amount of $585. He was sentenced to two years in prison and fined $5,000. The government then attempted to collect a civil penalty for each of the sixty-five instances of false billing, for a total penalty in excess of $130,000. Halper contended that the penalty constituted a prohibited second punishment for the same offense of which he had been convicted. The government argued that because the penalty was a civil one, the Double Jeopardy Clause did not apply.

The Court concluded that the relevant criterion for triggering double jeopardy protection was not whether the penalty in question was characterized as "civil" or "criminal," but rather whether it was "punishment." Halper, 490 U.S. at 447-448. A civil sanction is not punishment, the Court stated, if its purpose is merely to reimburse the government for the approximate expenses it incurred because of the defendant's unlawful activity. Id. at 448. If, however, the penalty has a deterrent or retributive quality to it, then it must be considered a form of punishment, and the double jeopardy clause applies. Id.

In Halper, the district court had concluded that the government's expenses associated with Halper unlawful acts were no greater than $16,000. The Supreme Court concluded that, on those facts, the government's proposed $130,000 penalty could not be reasonably interpreted as having a solely remedial purpose; therefore, it could not be imposed consistent with the Double Jeopardy Clause. Id. at 452. The Court was careful to note, however, the anomalous facts of the case and the "small gauge" nature of the defendant's activities. Id. at 449. It reiterated that "in the ordinary case, fixed-penalty-plus-double-damages provisions can be said to do no more than make the Government whole." Id.

In Kurth Ranch, the Court once again considered the circumstances under which a civilly imposed government exaction could constitute punishment for double jeopardy purposes. At issue in Kurth Ranch was a property tax which the State of Montana imposed on possessors of marijuana. The tax was only imposed in conjunction with criminal prosecutions, and far exceeded the market value of the taxed property. The Court determined that taxes could be considered punitive under some circumstances.

The Court conceded that taxes, unlike penalties, fines and forfeitures, ² could not be classified as "punishment" merely because they had some deterrent effect, since virtually all taxes modify people's behavior to some extent. Kurth Ranch, 114 S. Ct. at 1946-1947. Taxes are assumed, however, to have primarily a revenue raising purpose. It is only when the tax is clearly intended as a punishment, and loses its character as a "normal revenue law," that the Double Jeopardy Clause applies. Id. at 1948.

In Kurth Ranch, the Court concluded that the tax in question was so unlike an ordinary tax that it could only be characterized as a form of punishment. Among the anomalous characteristics of the tax were the fact that it only applied to illegal activity, that it exceeded the actual market value of the taxed property, that it applied solely to property which had already been seized from its owner and destroyed by the government, and that it was only imposed upon the actual arrest of the taxpayer for criminal activity. Id. at 1946-1948.

Does Helvering have continuing vitality in light of Halper and Kurth Ranch? A number of factors suggest that it does. First, both the Halper and Kurth Ranch courts cited Helvering with approval, strongly indicating that the Court did not intend to overrule Helvering sub silentio. In Halper, the Court cited Helvering for the proposition that, upon a determination that a statute was intended to be remedial rather than punitive, double jeopardy principles did not apply. Halper, 490 U.S. at 442-443. Although Halper went on to use a different method from Helvering to determine whether the statute in question was punishment, it never questioned that Helvering was correctly decided. In Kurth Ranch, Helvering was cited for its assumption that a tax could, under some circumstances, violate the Double Jeopardy Clause, regardless of the nomenclature (penalty, addition to tax, assessment) used to describe it. Kurth Ranch, 114 S.Ct. at 1946, n.16. Thus in neither case is there a suggestion that Helvering was incorrectly decided, or that it would be decided differently today.

In addition, both Halper and Kurth Ranch take pains to stress the anomalous character of the penalty and the tax involved, respectively, and clearly distinguish them from "normal" cases. In Halper, the Court describes the case before it as the "rare" one, "where a fixed-penalty provision subjects a prolific but small-gauge offender to a sanction overwhelmingly disproportionate to the damages he has caused" and where the civil penalty "bears no rational relationship to the goal of compensating the Government for its loss." Halper, 490 U.S. at 449. In Kurth Ranch, the facts were equally extreme, involving a tax which had virtually none of the ordinary characteristics of a tax, but which was clearly targeted at punishing those who had already been arrested for a specific criminal offense. Kurth Ranch, 114 S. Ct. at 1948 (describing the tax as "a concoction of anomalies, too far-removed in crucial respects from a standard tax assessment to escape characterization as punishment.")

In contrast to the sanctions imposed in Halper and Kurth Ranch, the penalties at issue here are neither extreme, nor unrelated to the damage which the defendant caused to the United States . The civil penalties, all combined, amount to only twenty-three percent (23%) of the total amount of tax which defendant failed to pay, or failed to pay on time. This is less than the fifty-percent (50%) penalty at issue in Helvering. Moreover, the amount at issue here is entirely consistent with other liquidated damages provisions which the Supreme Court has found to be purely remedial. See Rex Trailer Co. v. United States, 350 U.S. 148 (1956) (upholding liquidated penalty equal to $2,000 per violation of law prohibiting purchase of government surplus property by non-qualified individuals); United States ex rel. Marcus v. Hess, 317 U.S. 537 (1943) (upholding liquidated damages penalty of double the amount of false claims plus $2,000 under same false claims provision at issue in Halper where total penalty was approximately $315,000 for false claims totaling $101,500).

In sum, Halper teaches that an administrative penalty is punishment only where it cannot be reasonably related to the damages the government incurred in prosecuting the case. Kurth Ranch teaches that a taxation scheme is punishment if it moves so far from ordinary taxation so as to lose its character as a tax. Neither of those conditions obtain here. The penalty in this case is neither disproportional to the government's damages, nor is it a clearly punitive tax. Accordingly, it is not a punishment within the meaning of the Double Jeopardy Clause. See Thomas v. C.I.R. [95-2 USTC ¶50,439], 62 F.3d 97, 99-101 (4th Cir. 1995).

III. WHETHER USE OF TERM "CORRUPTLY" IS UNCONSTITUTIONALLY VAGUE

Count 33 charges the defendant with a violation of 26 U.S.C. §7212(a), which provides:

Whoever corruptly or by force or threats of force (including any threatening letter of communication) endeavors to intimidate or impede any officer or employee of the United States acting in an official capacity under this title, or in any other way corruptly or by force or threats of force (including any threatening letter of communication) obstructs or impedes, or endeavors to obstruct or impede, the due administration of this title, shall, upon conviction thereof, be fined not ore than $5,000, or imprisoned not more than 3 years, or both, except that if the offense is committed only by threats of force, the person convicted thereof shall be fined not more than $3,000, or imprisoned for not more than 1 year, or both. The term "threats of force", as used in this subsection, means threats of bodily harm to the officer or employee of the United States or to a member of his family. (emphasis added)

The government charges that the defendant used a series of deceptive techniques, including taking his pay in cash, setting up corporations with multiple employer identification numbers, structuring cash transactions to avoid detection, and misrepresenting the state of his finances to the IRS, in a corrupt endeavor to obstruct and impede the IRS from administering the internal revenue laws applicable to defendant's corporations. Defendant contends that the statute is unconstitutionally vague as applied to him, because the use of the word "corruptly" did not place him on notice that the acts of which he is accused were prohibited.

Constitutional vagueness challenges (other than those implicating First Amendment rights) must be considered in light of the specific facts of the case. Maynard v. Cartwright, 486 U.S. 356, 361 (1988); United States v. Powell, 423 U.S. 87, 92 (1976). A challenge for vagueness will fail if a reasonable person would have known from the language of the statute that their conduct was at risk. Maynard, 486 U.S. at 356. If the language of the challenged statute "can be made constitutionally definite by a reasonable construction . . ., this Court is under a duty to give the statute that construction." United States v. Harriss, 347 U.S. 612, 618 (1954). "[I]f the general class of offenses to which the statute is directed is plainly within its terms, the statute will not be struck down as vague even though marginal cases could be put where doubts might arise." Id.

All five of the circuit courts which have considered the issue have found a consistent and constitutional meaning for the term "corruptly" as it is used in Section 7212(a). Starting with United States v. Reeves [85-1 USTC ¶9190], 752 F.2d 995 (5th Cir. 1985), cert. denied, 474 U.S. 834 (1985), each court has determined that "corruptly" means "with the intent to secure an unlawful benefit or advantage either for oneself or for another." [85-1 USTC ¶9190], 752 F.2d at 1001; see also United States v. Bostian [95-2 USTC ¶50,596], 59 F.3d 474, 478 (4th Cir. 1994); United States v. Hanson [94-1 USTC ¶50,075], 2 F.3d 942, 946 (9th Cir. 1993); United States v. Mitchell [93-1 USTC ¶50,171], 985 F.2d 1275, 1278 (4th Cir. 1993); United States v. Yagow [92-1 USTC ¶50,167], 953 F.2d 423, 427 (8th Cir. 1992); United States v. Popkin [91-2 USTC ¶50,496], 943 F.2d 1535, 1540 (11th Cir. 1991), cert. denied, 503 U.S. 1004 (1992).

Reeves was the first case to consider the proper definition of "corruptly" in Section 7212(a). It involved the prosecution of a tax protester who had placed improper liens on an IRS investigator's house as a means of harassment. The defendant had been convicted after a non-jury trial in which the trial judge had applied a definition of "corruptly" as meaning "with improper motive or bad or evil purpose." The Fifth Circuit rejected this definition. Although it noted that a similar definition of "corruptly" had been used in cases interpreting 18 U.S.C. §1503, the jury tampering statute, it held that the use of a similarly broad definition in the tax context would render the statute unconstitutionally vague. Reeves [85-1 USTC ¶9190], 752 F.2d at 999. The court noted that jury tampering refers to an act which is almost invariably improper and which occurs in the very narrow context of a judicial proceeding. By contrast, the court reasoned, "the Internal Revenue Service is permitted great power to intrude on, and investigate virtually every aspect of economic life to effect its purpose of administering the tax laws; thus, the narrow circumstances in which section 1503 applies have no parallel in cases involving section 7212(a)." Id. at 999.

Noting its obligation to construe statutes to avoid constitutional questions where possible, id. at 999 (citing Arnett v. Kennedy, 416 U.S. 134 (1974)), the court turned to Section 7212(a)'s legislative history. That history, which was admittedly sparse, suggested to the court that the statute was intended to prohibit those acts by which the defendant acts to gain an improper advantage or benefit. ³ Since Reeves, every other court considering the issue has reach a similar conclusion. See Bostian [95-2 USTC ¶50,596], 59 F.3d at 478; Hanson [94-1 USTC ¶50,075], 2 F.3d at 946; Mitchell [93-1 USTC ¶50,171], 985 F.2d at 1278; Yagow [92-1 USTC ¶50,167], 953 F.2d at 427; Popkin [91-2 USTC ¶50,496], 943 F.2d at 1540.

Notwithstanding the uniform appellate authority as to the meaning of corruptly in Section 7212(a), defendant contends that it is vague as applied to the particular conduct alleged in this case. In support of this proposition, he relies principally on the case of United States v. Poindexter, 951 F.2d 369 (D.C. Cir. 1991), cert. denied, 113 S.Ct. 656 (1992). In Poindexter, the court held that the word "corruptly" as used in a federal obstruction of justice statute, 18 U.S.C. §1505, was unconstitutionally vague as applied to the defendant's actions. Poindexter had been President Reagan's National Security Advisor. He had been accused of lying during the course of a congressional investigation of the Iran-Contra affair and charged under 18 U.S.C. §1001 (making false statements to a government department) as well as 18 U.S.C. §1505. Section 1505 provides, in relevant part, for the criminal prosecution of anyone who "corruptly . . . influences, obstructs, or impedes or endeavors to influence, obstruct or impede . . . the due an proper exercise of the power of inquiry under which any inquiry or investigation is being had by either House [of Congress], or any committee of either House."

In a somewhat surprising decision, the court concluded that Poindexter could not be prosecuted under Section 1505 because it did not put a reasonable person on notice that lying to a congressional investigation was within the scope of the conduct it prohibited. Poindexter, 951 F.2d at 379-380. First, the court examined the plain language of the statutes and concluded that the term "corruptly influencing" a congressional investigation did not clearly encompass lying to it. Id. at 377-378. The court then turned to the statute's legislative history and found it to be ambiguous, at best. Id. at 378-384. Finally, the court considered whether the statute had been sufficiently clarified by prior judicial interpretations to give the requisite notice of what was prohibited. Although it found that some courts had held that Section 1505 applied to similar dishonest statements in other contexts, none had announced a "coherent principle for inclusion or exclusion," and therefore prior decisions had done nothing to clarify the meaning of the statute as applied to Poindexter's conduct. Id. at 384-386.

I have carefully considered the Poindexter court's analysis and conclude that its reasoning does not apply here. While I agree that the term "corruptly" is capable of multiple meanings, its meaning in Section 7212(a) has been sufficiently clarified by judicial interpretation to have placed the defendant on adequate notice of the criminality of the charged behavior.

The statute at issue in Poindexter, 18 U.S.C. §1505, is similar to Section 7212(a) in that both statutes make it unlawful to "corruptly" obstruct or impede certain types of government processes. Section 1505 goes beyond Section 7212(a), however, because it also prohibits one from corruptly "influencing" a congressional investigation. This distinction is significant. Unlike the term "obstruct" or "impede", the word "influence" does not have any inherent connotation of improperly interfering with legitimate government activity. Some actions which influence a congressional investigation are perfectly appropriate and even to be encouraged. The word "corruptly" must therefore serve to put potential defendants on notice as to exactly what types of influence are prohibited by the law. The Poindexter court concluded that in the context of the Iran-Contra hearings, lying was not clearly a type of "corrupt influence" within the meaning of the statute.

By contrast, Section 7212(a) simply prohibits "obstructing" or "impeding" the due administration of the Internal Revenue Code. These words have an inherent connotation of impropriety and thus do not need the modifier "corruptly" to put potential wrongdoers on notice as to what category of activities is covered by the statute. The use of "corruptly" in Section 7212(a) does not limit the category of acts which obstruct or impede the IRS, but rather identifies the state of mind necessary for such acts to rise to the level of a felony: intending to secure an unlawful benefit for oneself or others.

Another important distinction between Poindexter and the instant case is the history of judicial interpretation of the statute in question. The Poindexter court held that Section 1505's language had not been sufficiently clarified by prior decisions to "give the requisite notice and to protect against prosecutors, and juries who pursue their personal predilections." Poindexter, 951 F.2d at 384. By contrast, Section 7212(a) has been uniformly interpreted by five different Courts of Appeals, each of them adopting the same "coherent principle" for determining the state of mind required under the statute.

The ultimate inquiry here is whether it is possible to identify a "core" meaning to the language of Section 7212(a), and whether, having identified that meaning, it adequately put the defendant on notice that his alleged acts were prohibited. See Smith v. Goguen, 415 U.S. 566, 577-578 (1974); Poindexter, 951 F.2d at 385. I believe that the answer to this question is "yes."

Section 7212(a) prohibits those acts which "in any . . . way" "obstruct" or "impede" the IRS from carrying out the tax laws, so long as they are done either through force or threats of force, or corruptly. It is clear that the acts which the defendant is charged with committing impeded the IRS from carrying out the tax laws, as they had the effect of hiding from the IRS the extent to which and the reasons why defendant was failing to fulfill his obligation to report and pay over withholding tax to the government. A defendant committing such acts would be on notice that they could result in criminal prosecution if they were done "corruptly" within the meaning of the statute.

It is fundamental that words found in statutes should be given their ordinary meaning, absent a special statutory definition. See, e.g., Perrin v. United States, 444 U.S. 37, 41-45 (1979). Black's Law Dictionary defines "corruptly" as importing "a wrongful design to acquire some pecuniary or other advantage." Another source describes it as the adverbial form of "corrupt," meaning "depraved, evil: perverted into a state of moral weakness or wickedness . . . of debased political morality: characterized by bribery, the selling of political favors, or other improper political or legal transactions or arrangements." See U.S. v. North, 910 F.2d 843 (D.C. Cir. 1990) (quoting Webster's Third New International Dictionary 512 (1976)). Recognizing the potential vagueness problems with terms such as "depraved" "evil" and "moral weakness", courts construing Section 7212(a) have consistently chosen the former definition. See Reeves [85-1 USTC ¶9190], 752 F.2d at 1001; Bostian [95-2 USTC ¶50,596], 59 F.3d at 478; Hanson [94-1 USTC ¶50,075], 2 F.3d at 946; Mitchell [93-1 USTC ¶50,171], 985 F.2d at 1278; Yagow [92-1 USTC ¶50,167], 953 F.2d at 427; Popkin [91-2 USTC ¶50,496], 943 F.2d at 1540. It thus appears clear that, notwithstanding any doubts about the exact parameters of the word "corruptly," actions taken with the intent to gain an unlawful benefit clearly fall within its purview. "[O]ne to whose conduct a statue clearly applies may not successfully challenge it for vagueness." Love v. Butler , 952 F.2d 10, 13 (1st Cir. 1991). Accordingly, defendant's vagueness challenge must fail.

IV. WHETHER THE INDICTMENT CONTAINS MULTIPLICITOUS COUNTS

Defendant contends that the indictment contains multiplicitous counts, some of which must be dismissed in order to avoid double jeopardy problems. In particular, defendant argues that Count 33 is multiplicitous with Counts 1-9 and Counts 11-32, since the same alleged structuring of currency transactions which form the basis for Counts 1-9 and the same alleged failures to account for and pay over taxes charged in Counts 11-32, are among the factual allegations in Count 33.

This argument is without merit. The doctrine against multiplicity of charges "is based on the Double Jeopardy Clause of the Fifth Amendment, which assures that the court does not exceed its legislative authorization by imposing multiple punishments for the same offense." United States v. Nakashian, 820 F.2d 549 (2d Cir. 1987) (quoting Brown v. Ohio, 432 U.S. 161, 165 (1977)); see United States v. Lilly, 983 F.2d 300, 303-304 (1st Cir. 1992) (multiple charges under bank fraud statute multiplicitous where all related to single fraudulently obtained loan); United States v. Brandon, 17 F.3d 409, 422-424 (1st Cir.), cert. denied, 115 S. Ct. 80 (1994) (multiple bank fraud charges were not multiplicitous where they related to a series of fraudulently obtained loans). When multiple charges are brought in a single prosecution, the ultimate issue in a double jeopardy challenge is one of Congressional intent. Where Congress intended a single act to constitute multiple offenses, the Double Jeopardy Clause is not offended by multiple charges being brought in a single trial. Albernaz v. United States , 450 U.S. 333 (1981); United States v. Centeno-Torres, 50 F.3d 84, 85 (1st Cir. 1995).

Absent explicit congressional authorization of multiple punishments, courts apply the test of Blockburger v. United States, 284 U.S. 299 (1932) to determine whether Congress intended particular conduct to constitute multiple offense. See United States v. Smith, 46 F.3d 1223, 1234-1235 (1st Cir. 1995), cert. denied 116 S. Ct. 176 (1995) (money laundering and bank fraud charges not multiplicitous where they do not constitute a single offense under the test of Blockburger v. United States); United States v. Faulhaber, 929 F.2d 16, 19 (1st Cir. 1991) (applying Blockburger test to allegedly multiplicitous securities fraud, mail fraud and bank fraud charges); United States v. Serino, 835 F.2d 924, 930 (1st Cir. 1987) (applying Blockburger test to allegedly multiplicitous charges of conspiracy to commit mail fraud and mail fraud). Under Blockburger, "where the same act or transaction constitutes a violation of two distinct statutory provisions, the test to be applied to determine whether there are two offenses or only one is whether each provision requires proof of a fact which the other does not." Blockburger, 284 U.S. at 304.

As discussed above, Count 33 charges the defendant with corruptly endeavoring to obstruct or impede the due administration of the internal revenue laws, in violation of 26 U.S.C. §7212(a). This charge requires proof that the defendant 1) corruptly, 2) endeavored, 3) to obstruct or impede the due administration of the internal revenue laws. By contrast, Counts 1-9 charge violations of the currency transaction reporting laws, 31 U.S.C. §§5313, 5322 and 5324, and require proof of willful structuring of currency transactions with a domestic financial institution for the purpose of evading currency transaction reporting requirements. Counts 11-32, which charge violations of 26 U.S.C. §7202, require proof of willful failure to account for and pay over withholding taxes.

Defendant accurately concedes that none of these charges is "technically" the same under the Blockburger test. Counts 1-9 require an intent to avoid currency reporting requirements (an element missing from Count 33), but do not entail an attempt to obstruct or impede the internal revenue laws (a necessary element in Count 33). Similarly, Counts 11-32 entail willfully failing to truthfully account for and pay over withholding taxes (an element not present in Count 33), but do not entail a corrupt intent, as does Count 33.

Defendant contends, however, that Count 33 is still multiplicitous because the allegations contained within it are "in substance" the same as those in the earlier counts. Defendant appears to be arguing, in essence, that although the counts are formally distinct, there is "no realistic likelihood of violating the narrow provision . . . without also violating the broad provision." See United States v. Seda, 978 F.2d 779, 781 (2nd Cir. 1992) (holding that indicting charging both bank fraud and making false statements to a bank was multiplicitous even though the two charges were distinct under the Blockburger test).

In Seda, a divided panel of the Second Circuit held that, Blockburger's "look-only-at-the-statute approach is inappropriate in some cases where one of the statutes covers a broad range of conduct." Seda, 978 F.2d at 781. The defendant had been charged with violating 18 U.S.C. §1014, which prohibits making false statements on a loan application to a federally insured institution, and with violating 18 U.S.C. §1344, a much broader statute, which prohibits the execution of any "scheme or artifice" to defraud a federally insured institution. Even though it was possible to conceive of a scheme in which the narrower statute, Section 1014, could be violated without violating the broader one, Section 1344, ⁴ the court held that such a possibility was "remote" and that this remoteness was sufficient to overcome Blockburger 's presumption that the two statutes were intended to create separate offenses. Id. at 781-782.

Seda has not been adopted in this Circuit, and, given the Court of Appeals consistent reference to the Blockburger test in multiplicity challenges, see Smith, 46 F.3d at 1234-1235; Faulhaber, 929 F.2d at 19; Serino, 835 F.2d at 930, I have some doubt as to whether it would be. However, even applying Seda 's holding here, I do not find the challenged counts to be multiplicitous. With respect to Counts 1-9 (relating to structuring), the issue is not even close. Structuring does not in itself involve a violation of the internal revenue laws, and it is quite easy to conceive of a realistic scenario in which currency structuring would not involve an endeavor to obstruct the internal revenue laws (for example to avoid detection of an illegal business).

The issue with respect to Counts 11-32 (relating to failure to report and pay over withholding tax under 26 U.S.C. §7202) is closer, since these counts at least involve violations of the internal revenue code. However, even here, I find that there is far more than a "remote" possibility that a violation of Section 7202 could be proven without simultaneously proving a violation of Section 7212(a). Unlike 26 U.S.C. §7201, the general tax evasion statute, Section 7202 does not involve taxes which are personally owed by defendant. The taxes at issue in Section 7202 are taxes owed by others (the defendant's employees), which the defendant is required to collect, account for, and pay over to the Internal Revenue Service. A failure to comply with Section 7202 does not, therefore, necessarily confer any unlawful benefit on the defendant. He may, for example, fail to collect the tax from his employees in the first instance out of hatred for the government or a belief that withholding taxes are immoral, thus violating the law without putting any cash in his own pocket. By contrast Section 7212(a) entails an intent to obtain an unlawful benefit by endeavoring to obstruct operation of the tax laws. This is an additional evil which Section 7202 does not address. ⁵

V. THE PROPER CONSTRUCTION OF 26 U.S.C. §7202

Counts 11-32 charge the defendant with violation of 26 U.S.C. §7202, which provides as follows:

Any person required under this title to collect, account for, and pay over any tax imposed by this title who willfully fails to collect or truthfully account for and pay over such tax shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $10,000, or imprisoned not more than 5 years, or both, together with the costs of prosecutions. (emphasis added).

Defendant contends that the emphasized language requires that the government prove both a failure to account for and a failure to pay withholding tax to make out a violation of this statute. The government responds that the words "truthfully account for and pay over such tax" represent a unitary obligation of the defendant, the failure to do any part of which violates the statute. Although two courts have suggested in dicta that defendant's reading is the correct one, see United States v. Poll [75-2 USTC ¶9625], 521 F.2d 329, 334, n.3 (9th Cir. 1975); Wilson v. United States [57-2 USTC ¶10,040], 250 F.2d 312, 318 (9th Cir. 1958) (construing predecessor statute), there is no recent or definitive authority interpreting the language at issue here.

In construing a statute, this court's objective "is to ascertain the congressional intent and give effect to the legislative will." Philbrook v. Glodgett, 421 U.S. 707, 713 (1975). Courts must first determine whether the plain language makes its meaning reasonably clear. Negonsott v. Samuels, 113 S.Ct. 1119, 1122-1123 (1993). If the plain language is ambiguous, courts may look to the legislative history of the statute to determine its meaning. See Busic v. United States , 446 U.S. 398, 405 (1980). In interpreting a criminal statute, where no clear meaning can be discerned, the ambiguity should be resolved in favor of lenity. Id. at 406.

Ordinarily, the use of the term "or" in a statute signifies a disjunctive requirement, while "and" signifies a conjunctive one. However, this is not always the case, the ultimate meaning of these words depends on the context in which they are used. See United States v. One 1973 Rolls Rovce, 43 F.3d 794, 814-816 (3rd Cir. 1994); see also Bruce v. First Federal Savings and Loan, 837 F.2d 712, 715 (5th Cir. 1988) (interpreting "and" disjunctively); Wirtz v. Ocala Gas Co., 336 F.2d 236, 243 (5th Cir. 1964) (same); Peacock v. Lubbock Compress Co., 252 F.2d 892, 893 (5th Cir.), cert. denied, 356 U.S. 973 (1958) ("the word 'and' is not a word with a single meaning, for chameleonlike, it takes its color from its surroundings"); Union Cent. Life Ins. Co. v. Skipper, 115 F. 69 (8th Cir. 1902) (interpreting "and" disjunctively to avoid absurd result); Perfect Photo v. Grabb, 205 F.Supp. 569, 571 (E.D.Pa. 1962) ("and" can be construed as meaning "or"); United States v. Cumbee, 84 F.Supp. 390, 391 (D.Minn. 1949) (same); United States v. Mullendore, 30 F.Supp. 13, 15 (N.D.Okla. 1939) (same).

In this case, the statute penalizes those who "intentionally fail[] to . . . truthfully account for and pay over" withholding tax. The phrase "truthfully account for and pay over" is, taken by itself, unambiguously conjunctive. Somebody who was required to "truthfully account for and pay over" a tax would be required to do both things to satisfy the requirement. However, this phrase is the object of the verb "fail." The dictionary defines "fail" as "to be unsuccessful in the performance or completion of", as in "He failed to do his duty." Random House Unabridged Dictionary (1987), Def. 9. Thus, the statute appears to impose a penalty on someone who intentionally is unsuccessful in the performance or completion of the requirement--that he truthfully account for and pay over withholding tax. Under this reading, any intentional failure to complete the required task (to truthfully account for and pay over the tax) constitutes a crime. Cf. Kinnie v. United States [93-1 USTC ¶50,311], 994 F.2d 279, 283 (6th Cir. 1993) (liability exists under 26 U.S.C. §6672, the civil analogue to Section 7202, when defendant is "a responsible person" and "willfully failed to pay over the taxes due"); Purcell v. United States [93-2 USTC ¶50,460], 1 F.3d 932 (9th Cir. 1993) (liability under Section 6672 "entails showing that the individual both was a 'responsible person' and acted willfully in failing to collect or pay over the withheld taxes.").

Defendant claims that this reading of the statute is inconsistent with the holdings in Wilson and Poll. Wilson involved a prosecution under Section 2707(c) of the Internal Revenue Code of 1939, the predecessor to Section 7202. Section 2707(c) imposed criminal sanctions on any person required to collect, account for and pay over withholding tax "who willfully fails to collect or truthfully account for and pay over such tax, and any person who willfully attempts in any manner to evade or defeat any tax imposed. . . ." As in the instant case, the defendant in Wilson had collected withholding tax from his employees, had truthfully reported tax, but had failed to pay the tax over to the government. Instead the defendant had used the money to pay other expenses of his failing business. He was charged in the indictment with "failing and refusing to pay said . . . taxes withheld from the wages of employees."

The principal issue on appeal was the meaning of the statute's willfulness requirement. The court held that willfulness required more than mere knowing failure to pay the tax when funds were available to do so. Rather, the court found that willfulness entailed an intent to evade the payment of taxes. Thus, if the trier of fact found that the defendant's failure to pay tax was part of an attempt to save his business (and pay the tax later) rather than an attempt to avoid paying tax entirely, there would be no basis for conviction. Wilson [57-2 USTC ¶10,040], 250 F.2d at 324-325.

In reaching its conclusion, the Wilson court stated in dicta that, "[s]ince appellant both collected and accounted for the withheld monies, conviction under this section can be predicated only on the willful attempt to evade or defeat the payment of the taxes." Wilson [57-2 USTC ¶10,040], 250 F.2d at 318. Seventeen years later, in Poll, the court, interpreting Section 7202, relied upon this dicta to support its own dictum that the crime "require[s] two failures to act, willful failure to truthfully account and willful failure to pay over." Poll [75-2 USTC ¶9625], 521 F.2d at 334, n.3. But like Wilson , Poll did not turn on a determination of the elements of the crime, but again on the definition of "willfulness."

In Poll, the defendant not only had failed to pay over the tax but also had filed returns incorrectly stating the amount of tax he had collected. The defendant contended that Section 7202 "requires proof of both a willful failure to truthfully account and a willful failure to pay over and . . . [that] his failure to pay over [could not] be considered 'willful' " in light of his offer to prove that he intended to pay the tax later." Poll [75-2 USTC ¶9625], 521 F.2d 330-331. In particular, he argued that willfulness entailed an intent to defraud the government, and that he should have been permitted to prove that it was the financial difficulties rather than fraudulent intent, which led him to fail to pay the tax.

The court held that the crime did not entail an intent to defraud the government, but only an "evil motive" or "improper purpose." Poll [75-2 USTC ¶9625], 521 F.2d at 332-333. It found, however, that the evidence of the defendant's financial condition was relevant to this inquiry and so reversed the conviction.

Both Poll and Wilson seem to assume, without any analysis, that Section 7202 and the former Section 2707(c) require both a willful failure to account and a willful failure to pay over. I conclude, however, that when the issue is confronted directly, the only plausible reading of the plain language of the statute penalizes the failure to complete the duty imposed by law: truthfully accounting for and paying over the withholding tax collected by an employer. The alternative reading is inconsistent with any reasonable understanding of the purposes of the statute. It would result in a greater penalty for one who simply failed to collect trust fund taxes than for one who collect them and, as is charged here, used them for his own selfish purposes (arguably a more serious infraction), so long as he notified the IRS that he had collected the tax. That Congress intended to make such a distinction is simply inconceivable.

VI. STATUTE OF LIMITATIONS: SECTION 7212(A)

Defendant argues that Count 33, charging a violation of 26 U.S.C. §7212(a), should be dismissed because it alleges conduct which took place more than 3 years prior to the filing of the superseding indictment. The government responds that the applicable statute of limitations is six years, and that, in any event, part of the offense described in Count 33 occurred within 3 years of the filing of the superseding indictment.

The statute of limitations in criminal tax cases is found in 26 U.S.C. §6531. It provides generally that criminal tax proceedings must be initiated within 3 years of the offense, unless the offense falls into one of eight exceptions providing for 6 year period. One of those exceptions appears to be specifically applicable here. It provides for a six year limitation period "for the offense described in section 7212(a). (relating to intimidation of officers and employees of the United States )." 26 U.S.C. §6531(6).

Defendant contends that this provision does not apply here because the parenthetical language limits its scope only to those Section 7212(a) offenses involving intimidation of officers and employees of the United States . In support of this contention, defendant cites to an unpublished opinion in United States v. Connell, No. CR-F 94-5052 REC (E.D.Cal., February 6, 1995 ). In that case, the court held that a three year limitation period applied to Section 7212(a) offenses not involving intimidation. In reaching this conclusion the court appeared to assume that Section 6531(6) only applied to intimidation offenses. The government's argument, it seems, was that other paragraphs of Section 6531(6) also applied to bring the offense within the six year provision.

The government also relies on an unpublished decision, United States v. Workinger, CR No. 94-60023 (D.Or. January 11, 1995 ), for the proposition that Section 6531(6) does apply in this case. In Workinger, the court held that the parenthetical language in Section 6531(6) only serves as a shorthand for all of Section 7212(a). The court found that the word "relating" as used in the parenthetical language meant "to have connection or reference" and that the phrase "relating to intimidation of officers or employees of the United States" simply indicated that the statute to which the subsection referred did in fact relate to such acts.

I find that the latter interpretation is the better one. Parenthetical comments using the word "relating" are ordinarily used in statutes so that cross-references to other statutes are understandable to the reader. They do not ordinarily serve to limit the scope of the preceding language. This is apparent from the other use of a parenthetical in Section 6531. Section 6531(5) provides for a six year limitation period "for offenses described in sections 7206(1) and 7207 (relating to false statements and fraudulent documents)." This parenthetical language cannot be intended as limiting, because Sections 7206(1) and 7207 relate only to false statements and fraudulent documents. Section 7206(1) penalizes those who intentionally sign false statements under the pains and penalties of perjury, while Section 7207 penalizes those who willfully furnish false documents or false information to the IRS. It thus seems clear that the parenthetical language in this statute is not intended to limit its scope, and that the six year limitation period applies to all actions under Section 7212(a).

VII. STATUTE OF LIMITATIONS: SECTION 7202

Defendant also contends that the three year statute of limitations applies to Section 7202. The government responds that a six year limitations period is made applicable to Section 7202 by Section 6531(4), which provides for a six year limitation period "for the offense of willfully failing to pay any tax, or make any return . . . at the time or times required by law or regulations."

This dispute centers on the meaning of the word "pay." Defendant contends that the word "pay," as used in Section 6531(4), is to be distinguished from the phrase "pay over," as used in Section 7202. The first, he contends, refers to the direct obligation of a taxpayer, while the second supposedly refers to the obligation of a collection agent, such as an employer obligated to collect and pay over withholding taxes.

Defendant finds support for his position in United States v. Block [82-1 USTC ¶9256], 497 F.Supp. 629 (N.D.Ga. 1980) aff'd, 660 F.2d 1086 (5th Cir. 1980). The court in that case analyzed the language of Section 6531 and noted that each of the enumerated exceptions to the general three year limitation period referred to specific statutory provisions or tracked the language of a particular criminal tax offense. Since Section 6531(4) tracked the language of Section 7203 (relating to the intentional failure to pay any tax or make any return) but did not follow the language of Section 7202 (relating to failure to collect or account for and pay over tax), the court concluded that Section 6531(4) was not intended to refer to Section 7202. The Block court also noted that Section 6531(4) refers only to "the offense" of willfully failing to pay any tax or make any return. Since Section 7203 was "the offense" which criminalized these acts, the use of the singular in Section 6531(4) suggested that this was the only offense to which it referred.

The government's position is supported by United States v. Porth [70-1 USTC ¶9329], 426 F.2d 519, 521-522 (10th Cir.), cert. denied, 400 U.S. 824 (1970), and United States v. Musacchia [90-1 USTC ¶70,001], 900 F.2d 493 (2nd Cir. 1990), cert. denied, 501 U.S. 1250 (1991). Porth merely asserts, without analysis, that Section 6531(4) applies to Section 7202 offenses and is of little assistance here. ⁶ In Musacchia, the court considered the argument put forth in Block and rejected it. Musacchia [90-1 USTC ¶70,001], 900 F.2d at 499-500. Two factors were determinative in Musacchia. First, the court relied upon the Supreme Court's use of the term "pay taxes" in Slodov v. United States [78-1 USTC ¶9447], 436 U.S. 238 (1978). Musacchia [90-1 USTC ¶70,001], 900 F.2d at 500. In Slodov, the court held that the term "any person required to collect, truthfully account for, and pay over any tax" as used in 26 U.S.C. §6672, the civil analogue to Section 7202, was meant to limit the applicability of the section to persons required to collect tax from third parties and pay it over to the government, and was not intended to limit its scope to persons who were personally in a position to perform all three functions in a particular firm. Slodov [78-1 USTC ¶9447], 436 U.S. at 246-250. In particular, the Court stated that:

[the limiting language] was necessary to insure that the penalty provided . . . would be read as applicable only to failure to pay taxes which require collection, that is third-party taxes, and not failure to pay 'any tax imposed by this title,' which, of course, would include direct taxes.

Id. at 249. Since Slodov used the phrase "to pay" interchangeably with "pay over" as used in Section 6672, the court in Musacchia concluded that the terms must mean the same thing in Sections 6531 and 7202. The Musacchia court also concluded that it would be highly unlikely that Congress would have intended to impose a six year limitations period for offenses under Section 7203, a misdemeanor, and only a three year period for offenses under Section 7202, a felony.

I find defendant's argument more compelling. Section 6531(4) plainly refers only to a single offense, an offense which is clearly described by the language of Section 7203. The Supreme Court's use of the terms "pay" and "pay over" interchangeably in Slodov does not appear to have been intended to express an opinion about the meaning of these terms as used in the statutes at issue here. It appears rather to have been a stylistic choice, avoiding the need to use the awkward phrase "pay over" twice in one sentence.

In any event, Section 6531(4) refers to "the offense of willfully failing to pay any tax, or make any return." Section 7202 does not describe an offense of failing "to make any return" but rather of intentionally failing "to collect, account for, and pay over" tax. Thus even under the broader reading of "pay" in Section 6531(4), it still does not refer to the offense of failing to "collect" withholding tax described in Section 7202.

In sum, I find that Congress has expressed its will "in reasonably plain terms," Negonsott, 113 S. Ct. at 1122-1123, and that Section 6531(4) applies only to "the offense" described in Section 7203. Notwithstanding any speculation as to Congress' motives in imposing a longer limitations period on a misdemeanor than on a felony, this plain reading of the statute is conclusive. Id. Accordingly, defendant's motion to dismiss Count 11, which charges a Section 7202 offense on July 31, 1992 , ⁷ is ALLOWED.

VIII. CONCLUSION

For the foregoing reasons, defendant's motion to dismiss Count 11 on statute of limitations grounds is ALLOWED. Defendant's remaining motions to dismiss are all DENIED. SO ORDERED.

¹ Defendant also contends that he was informed that the IRS intended to impose a 100% penalty on Counts 21 and 32 for failing to truthfully account for and pay over trust fund taxes under 26 U.S.C. §6672. The government states, however, that it did not, and does not intend to, impose this particular penalty on defendant.

² In Austin v. United States, -- U.S. --, 113 S. Ct. 2801 (1993), the Court had determined that civil drug forfeitures under 21 U.S.C. §881 were punishment for the purposes of the Eighth Amendment's excessive fines clause.

³ The court referred to the Senate report on Section 7212, which stated, in part, that "this section provides for the punishment of threats or threatening acts against agents of the Internal Revenue Service . . . on account of the performance by such agents . . . of their official duties. This section will also punish the corrupt solicitation of an internal revenue employee." The court concluded its definition of "corruptly" should only criminalize those acts "substantially similar in result to the offenses expressly mentioned." Reeves [85-1 USTC ¶9190], 752 F.2d at 1000-1001.

⁴ Section 1014, but not Section 1344, would be violated where the defendant intentionally understated his income in order to induce a bank to deny a loan application, so that the defendant could avoid performing under a real estate purchase and sale agreement.

⁵ It is also notable that Section 7202 specifically provides that its penalties are "in addition to other penalties provided by law."

⁶ Porth also cites to a string of cases in support of its position. None of them, however, holds that Section 6531(4) applies to Section 7202 offenses. See Waters v. United States [64-1 USTC ¶15,561], 328 F.2d 739 (10th Cir. 1964); United States v. Gase [66-1 USTC ¶9288], 248 F.Supp. 704 (N.D.Ohio 1965); United States v. Doelker [63-1 USTC ¶9239], 211 F.Supp. 663 (N.D.Ohio 1962); United States v. Alper [62-1 USTC ¶9164], 200 F.Supp. 155 (D.N.J. 1961); United States v. Tiplitz [52-2 USTC ¶9477], 105 F.Supp. 512 (D.N.J. 1952).

⁷ The indictment was filed on August 22, 1995 .

 

 

 

 

 

 

 

[2003-1 USTC ¶50,495] United States of America , Appellee v. Franklin Boykoff, Defendant-Appellant.

U.S. Court of Appeals, 2nd Circuit; 02-1435, May 21, 2003 .

Unpublished opinion affirming an unreported DC N.Y. decision.

[ Code Secs. 7201, 7203 and 7206]

Crimes: Tax evasion: Fraud and false statements: Evidence: Admissibility.

A return preparer was properly convicted of tax fraud and related offenses, including tax evasion, subscribing to false returns, aiding in the preparation of false returns, and interfering with the administration of the tax laws. Expert psychiatric testimony diagnosing the individual with bipolar and attention deficit disorder was properly excluded absent proof that the errors in the tax returns at issue were caused by those disorders. The jury could not reasonably have found that the excluded testimony negated the specific intent of willfulness; thus, the error, if any, was harmless. An IRS agent's expert testimony regarding the return preparer's improper reporting of certain personal expenses as business expenses was properly admitted. The trial court made it clear to the jury that the agent was testifying only about his opinion, that the jury was responsible for deciding whether each item was a proper business deduction, and that the criminal prosecution differed from a civil audit in that the government had to prove the defendant's guilt beyond a reasonable doubt. Statements made by the individual and his psychiatrist to a second IRS agent were admissible because the agent was not acting on behalf of the Criminal Investigation Division. Testimony by the brother of a third party indicating that the third party told him not to send disputed records was appropriately rejected as collateral. Finally, comments made by the trial judge did not indicate bias against any group of which the return preparer was a member.

[ Code Secs. 7201 and 7203]

Crimes: Tax evasion: Fraud and false statements: Evidence: Discovery. --

A return preparer was properly convicted of tax fraud and related offenses, including tax evasion, subscribing to false returns, aiding in the preparation of false returns, and interfering with the administration of the tax laws. The individual was not entitled to discovery of an IRS Special Agent's report regarding all of his clients' returns. That type of material is generally not discoverable in a criminal tax case. Because the trial court conducted the necessary examination and determined that the report offered no exculpatory material, it committed no error in denying discovery.

[ Code Secs. 7201, 7203 and 7206]

Crimes: Tax evasion: Fraud and false statements: Jury trial: Jury instructions. --

A return preparer was properly convicted of tax fraud and related offenses, including tax evasion, subscribing to false returns, aiding in the preparation of false returns, and interfering with the administration of the tax laws. His arguments regarding jury trial errors were rejected as meritless. The trial court correctly stated the law when it stated in its jury charge that taxpayers are legally required to keep records documenting the data shown on their tax returns. With respect to a second disputed jury charge, the trial court had given the parties a copy of the charge in advance; however, and the return preparer failed to object to the charge before it was delivered to the jury, and a subsequent objection made by his counsel did not distinctly state the grounds of the objection.

[ Code Secs. 7201, 7203 and 7206]

Crimes: Tax evasion: Fraud and false statements: Sentencing guidelines: Enhanced sentence, sophisticated means: Tax loss computation. --

A return preparer was properly convicted of tax fraud and related offenses, including tax evasion, subscribing to false returns, aiding in the preparation of false returns, and interfering with the administration of the tax laws. The trial court did not err in applying a sentencing enhancement for sophisticated concealment or in calculating his tax loss for purposes of determining his base offense level. Because his fabrication of receipts and expense journal entries involved "a plan more complex than merely filling out a false tax return," the sophisticated concealment enhancement was appropriate, and the record supported the tax loss calculation.

[ Code Secs. 6531 and 7212]

Crimes: Interference with administration of tax laws: Period of limitations on criminal prosecutions: Six-year period. --

A return preparer was properly convicted of tax fraud and related offenses, including tax evasion, subscribing to false returns, aiding in the preparation of false returns, and interfering with the administration of the tax laws. His numerous arguments regarding jury trial and sentencing errors were rejected as meritless. The six-year limitations period of Code Sec. 6531(6) applies to all conduct under Code Sec. 7212(a) and, thus, applied to the charge of interfering with administration of the tax laws.

Kathryn Keneally, Fulbright & Jaworski L.L.P., for appellant. James B. Comey, U.S. Attorney, Barbara Guss, Meir Feder, Gary Stein, Assistant United States Attorneys, for appellee.

Before: Parker and Sack, Circuit Judges. ^*

¬ Caution: The court has designated this opinion as NOT FOR PUBLICATION. Consult the Rules of the Court before citing this case.®

SUMMARY ORDER

THIS SUMMARY ORDER WILL NOT BE PUBLISHED IN THE FEDERAL REPORTER AND MAY NOT BE CITED AS PRECEDENTIAL AUTHORITY TO THIS OR ANY OTHER COURT, BUT MAY BE CALLED TO THE ATTENTION OF THIS OR ANY OTHER COURT IN A SUBSEQUENT STAGE OF THIS CASE, IN A RELATED CASE, OR IN ANY CASE FOR PURPOSES OF COLLATERAL ESTOPPEL OR RES JUDICATA.

At a stated term of the United States Court of Appeals for the Second Circuit, held at the United States Courthouse, Foley Square, in the City of New York, on the 21st day of May, two thousand and three.

Appeal from the United States District Court for the Southern District of New York (Colleen McMahon, Judge).

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that the judgment of the district court be, and it hereby is, affirmed.

Defendant-appellant Franklin Boykoff appeals from a July 19, 2002, judgment after a jury trial, convicting him on fifteen counts of tax fraud and related offenses under 18 U.S.C. §371 (conspiracy to defraud the United States), 26 U.S.C. §§7201 (income tax evasion), 7206(1) (subscribing false returns), 7206(2) (aiding the preparation of false returns), 7212(a) (interfering with the administration of the Internal Revenue Code), and acquitting him on the remaining eight counts of aiding the preparation of false returns under 26 U.S.C. §7206(2). Boykoff was sentenced to fifty-seven months' imprisonment, three years' supervised release, a $75,000 fine, prosecution costs of $28,610.79, a $950 special assessment, and restitution to the Internal Revenue Service ("IRS") of $290,219. Boykoff makes numerous arguments of trial and sentencing errors, all of which are without merit.

The Exclusion of the Expert Psychiatric Testimony

Boykoff argues that the district court erred by excluding expert psychiatric testimony diagnosing him with bipolar disorder and attention deficit disorder. Boykoff wanted to offer the testimony to show that he was disorganized, unfocused, and often late, consistent with his argument that any errors in the relevant tax returns were due to carelessness, not willfulness.

The district court excluded Zonana's testimony for two reasons. See United States v. Boykoff, 186 F.Supp.2d 347, 348-50 (S.D. N.Y. 2002) ("Boykoff III "). First, the court found that Boykoff failed to demonstrate an adequate link between the proffered testimony and the specific intent of the crimes under Fed.R.Evid. 702. Second, the court concluded that the evidence would be more misleading to the jury than probative under Fed.R.Evid. 403.

We review decisions concerning expert testimony for abuse of discretion, according "broad discretion" to the district court in deciding whether to admit or exclude expert testimony. United States v. Onunomu, 967 F.2d 782, 787 (2d Cir. 1992) (internal quotation marks omitted). We also review evidentiary rulings for harmless error. United States v. Diallo, 40 F.3d 32, 35 (2d Cir. 1994).

In this case, we need not reach the question of whether the district court abused its broad discretion by excluding the evidence under Rules 702 and 403 because we conclude that the error, if any, was harmless. A jury could not reasonably have found that the excluded expert testimony negated the specific intent of willfulness. As the district court found, the evidence of willfulness was overwhelming. Numerous witnesses --including Boykoff's longtime business partner, his clients, the investigating IRS agent --gave testimony indicating that Boykoff committed substantial numbers of willful acts over an extended period of time. In addition, the expert expressly asserted that he had not consulted the relevant tax returns and therefore could not link the errors in the returns to Boykoff's medical condition. Moreover, Boykoff failed to identify particular errors in the tax returns that suggest transposed numbers or random, careless mistakes --the kind of errors that could be caused by his attention-deficit disorder or bipolar disorder. Rather, the errors comprise additions of "round numbers" such as $10,000 and $50,000. Finally, we do not think that a jury would be persuaded that the asserted mental conditions could have been the cause of errors that only benefitted Boykoff and his clients. We therefore conclude with "fair assurance, after pondering all that happened without stripping the erroneous action from the whole, that the judgment was not substantially swayed by the error," if any error was committed. See Kotteakos v. United States , 328 U.S. 750, 765 (1946).

The Appearance of Bias

The defendant argues that the district court gave the appearance of improper bias under United States v. Edwardo-Franco, 885 F.2d 1002 (2d Cir. 1989). The district judge noted at several points that her family experience with attention-deficit disorder informed her view that attention-deficit disorder would not prevent someone from forming criminal intent. While those comments arguably may have been relevant to the question of the district court's ability dispassionately to decide the admissibility of Dr. Zonana's testimony, we do not reach the question of its admissibility, for the reasons discussed above. The comments do not otherwise bear on the court's fairness and impartiality. This case is very different from, and therefore not controlled by, Edwardo-Franco, where the court expressly disparaged people of the defendants' nationality, Colombian. Id. at 1005. By contrast, the district court's comments in this case did not indicate bias against any group of which Boykoff is a member.

The Admission of IRS Agent Dennehy's Testimony

Boykoff argues that the district court erred by permitting the expert testimony of IRS Agent Dennehy, who testified about his analysis of the defendant's improper reporting of certain personal expenses as business expenses. Boykoff contends that the agent's testimony was improperly admitted as summary, rather than substantiated, evidence under United States v. Greenberg [ 60-2 USTC ¶9577], 280 F.2d 472, 476-77 (1st Cir. 1960) ("Greenberg I "), and United States v. Greenberg [ 61-2 USTC ¶9727], 295 F.2d 903, 908-09 (1st Cir. 1961) ("Greenberg II "). But the crux of the First Circuit's decision in the Greenberg cases was that the agent's testimony was impermissibly based on hearsay. See Greenberg II [ 61-2 USTC ¶9727], 295 F.2d at 908. This case does not present a similar hearsay problem. Boykoff's argument under the Greenberg cases therefore fails.

Boykoff also contends that Agent Dennehy's testimony improperly shifted the burden of proof to Boykoff, effectively converting his criminal prosecution into a civil tax audit. But Agent Dennehy was not the trier of fact, and the district court made clear to the jury that Agent Dennehy was testifying only about his opinion, that the jury was responsible for deciding whether each item was a proper business deduction, and that this criminal prosecution differed from a civil audit in that the government was required to prove the defendant's guilt beyond a reasonable doubt and the defendant was not required to prove anything. Moreover, as the court pointed out in the jury charge, the government was not required to prove beyond a reasonable doubt "each and every item that it claims was income to Franklin Boykoff" or "the exact amount of the tax deficiency"; rather, the government needed only to "prove[] beyond a reasonable doubt that there was a substantial tax deficiency." (Tr. of Proceedings before Hon. Colleen McMahon in the United States District Court for the Southern District of New York, on Jan. 27 - Feb. 8, 2002, at 1802. ("Tr.").) In sum, the district court did not abuse its "broad discretion," Onunomu, 967 F.2d at 787, by admitting Agent Dennehy's expert testimony.

The Jury Charge: Burden-shifting

The defendant also argues that the district court impermissibly shifted the burden of proof to the defendant by stating in the jury charge that taxpayers are legally required to keep records documenting the information shown on their tax returns. The defendant did not object to this aspect of the charge at trial, so we review it for plain error, that is, for "(1) error, (2) that is plain, and (3) that affects substantial rights." Johnson v. United States, 520 U.S. 461, 467 (1997) (internal punctuation omitted). If those three conditions are met, we may exercise our discretion to notice a forfeited error, "but only if (4) the error seriously affects the fairness, integrity, or public reputation of judicial proceedings." Id. (internal punctuation omitted).

It appears that there is no error here, much less a plain one. The court correctly stated the law. See 26 C.F.R. §1.6001-1. And the defendant has pointed to no binding authority holding that it is error to refer to these requirements in a criminal tax case. The defendant merely cites a First Circuit case that observes in a footnote that evidence that a defendant failed to file a return was improperly admitted, because there was no evidence that the particular defendant even owed a tax. See Greenberg I [ 60-2 USTC ¶9577], 280 F.2d at 474 n.2. In addition, the Supreme Court precedent relied on by Greenberg I, Spies v. United States [ 43-1 USTC ¶9243], 317 U.S. 492 (1943), did not hold that a jury may not draw inferences from a taxpayer's failure to file a return or pay a tax; Spies held only that the combined failure to pay and failure to file are not sufficient to prove criminal tax evasion. See Spies [ 43-1 USTC ¶9243], 317 U.S. at 500. Thus, in the case at bar, even if there was error in the district court's instruction about the record-keeping requirements of the Internal Revenue Code --which seems very unlikely --that error was not plain.

Moreover, immediately after instructing the jury about the record-keeping requirements, the court explained the burden of proof in a criminal case and distinguished this criminal case from a civil audit. Even if the record-keeping instruction was mistaken, then, any prejudice engendered by it was minimal.

The Jury Charge: The Explanation of an Accountable Plan

Boykoff argues that the court misstated a specific matter of tax law in the charge to the jury: whether an employee's expenses, when paid directly by the employer, count as income to the employee.

We review jury charges de novo. United States v. Dyer [ 91-1 USTC ¶50,006], 922 F.2d 105, 107 (2d Cir. 1990). When reviewing a jury instruction, we consider the disputed charge "within the context of the district court's charges in their entirety." United States v. Feliciano, 223 F.3d 102, 120 (2d Cir. 2000), cert. denied, 532 U.S. 943 (2001) (citing United States v. Caban, 173 F.3d 89, 94 (2d Cir.), cert. denied, 528 U.S. 872 (1999)). "An appellant bears the burden of showing that the requested instruction accurately represented the law in every respect and that, viewing as a whole the charge actually given, he was prejudiced." United States v. Abelis, 146 F.3d 73, 82 (2d Cir. 1998) (internal quotation marks omitted), cert. denied, 525 U.S. 1147 (1999).

In this case, the district court gave the parties a copy of the jury charge in advance and gave the parties an opportunity to challenge any aspect of it on the morning of its delivery. In the original charge distributed to the parties for review, the district court made two separate statements about the tax status of business expenses --in one part explaining that direct payment of expenses by an employer counts as income to the employee, and in another part explaining that, in certain circumstances, reimbursement of business expenses by an employer constitutes an "accountable plan" under which the expenses do not count as income to the employee. For the purposes of this discussion, we accept that the charge, as written, was misleading. See 26 U.S.C. §62(a); 26 C.F.R. §1.62-2(c); 1 Boris I. Bittker & Lawrence Lokken, Federal Taxation of Income, Estates and Gifts ¶2.1.3 (3d ed. 1999).

Although we review jury instructions de novo, Dyer [ 91-1 USTC ¶50,006], 922 F.2d at 107, "`[n]o party may assign as error any portion of the charge or omission therefrom unless that party objects thereto before the jury retires to consider its verdict, stating distinctly the matter to which that party objects and the grounds of the objection."' United States v. Crowley, 318 F.3d 401, 412 (2d Cir. 2003) (quoting Fed. R. Crim. P. 30). Despite having been given a printed copy of the charge the day before and being present when the government proposed a modification to precisely the paragraph defense counsel later challenged, defense counsel did not object to the charge before it was delivered to the jury. Although defense counsel objected before the jury began deliberating, he did not "distinctly" state "the grounds of the objection." Crowley , 318 F.3d at 412. When the court asked defense counsel to "[s]how me something" to support defense counsel's claim about the law of direct payments, defense counsel failed to do so. (Tr. at 1842.) The judge cannot be expected to correct an instruction when the objecting party fails to explain or to offer support for his objection. Cf. United States v. Phillips, 522 F.2d 388, 390-91 (8th Cir. 1975) (rejecting the defendant's argument that "he complied with Rule 30 by tendering to the trial court the standard cautionary informer instruction ... and stating that he had no objection to the court's chosen instruction `other than' that the defendant's requested charge `better state(s) the law as regards to credibility of witnesses in this case"' (footnote omitted)). Since the defendant failed to comply with the requirements of Rule 30, we review for plain error only. See Crowley , 318 F.3d at 414.

The error, if any, was not plain. The defendant does not argue on appeal that the jury instruction was erroneous; he argues only that "[t]he tax law is not as absolute as the trial court set out." Appellant's Br. at 38. Defense counsel's proposed alternative instruction was "[j]ust a simple statement that `I instructed you that a direct payment by the employer of an expense is income to the employee. That's incorrect. It's not income." (Tr. at 1841.) If the problem with the court's charge is that it was too absolute, as the defendant argues on appeal, then the defendant's proposed jury instruction also did not "accurately represent[] the law in every respect." Abelis, 146 F.3d at 82. Not only did defense counsel fail to distinguish the "expenses" in his charge as business expenses, defense counsel also represented the relevant tax law as absolute by asking the court to say that its prior instruction was "incorrect" and to assert the direct opposite. (Tr. at 1841.)

Finally, the prejudice, if any, was minimal. The key question before the jury was whether the relevant expenses were business expenses rather than personal expenses. Because the jury clearly found that the relevant expenses were for personal matters, whether or not the defendant properly declined to report them as income under an accountable plan does not bear upon his conviction for misrepresenting personal expenses as business expenses.

Denial of Discovery of the IRS Agent's Report

The defendant argues that he was entitled to discovery of the IRS Special Agent's Report (the "Report") on all of his clients' returns under Brady v. Maryland, 373 U.S. 83 (1963), and United States v. Sternstein [ 79-1 USTC ¶9338], 596 F.2d 528 (2d Cir. 1979) ("Sternstein I "), because the Report would help him show that any errors in the few clients' returns at issue in the indictment were careless. The district court considered this argument and rejected it in two written decisions. United States v. Boykoff, No. 01 Cr. 493 (S.D. N.Y. Dec. 7, 2001) ("Boykoff I "); United States v. Boykoff, No. 01 Cr. 493 (S.D. N.Y. Dec. 12, 2001) ("Boykoff II ").

"The management of discovery lies within the sound discretion of the district court, and the court's rulings on 5 discovery will not be overturned on appeal absent an abuse of discretion." Grady v. Affiliated Cent., Inc., 130 F.3d 553, 561 (2d Cir. 1997), cert. denied, 525 U.S. 936 (1998). Moreover, "evidence of noncriminal conduct to negate the inference of criminal conduct is generally irrelevant." United States v. Grimm, 568 F.2d 1136, 1138 (5th Cir. 1978). And the defendant acknowledged to the district court that the type of material he requested is generally not discoverable in a criminal tax case.

As the defendant points out, Sternstein I carves out an exception to this rule. [ 79-1 USTC ¶9338], 596 F.2d at 529-31. There, we reversed a district court's decision to deny a defendant discovery of an IRS agent's report on the defendant's clients who were not named in the indictment. Id. at 531. Like Boykoff, Sternstein argued that this report would show that errors were found in only a few of his clients' reports, thereby bolstering his argument that those errors were careless. Id. at 529. We held that the report was important to Sternstein's defense against the government's claim that he falsified returns in order to retain his clients. Id. at 530-31.

In Sternstein I, the district failed to conduct an in camera appraisal of the value of the evidence. Id. at 529. Though we ordered release of the report to the defendant on remand, the purpose of our remand was to permit the district court to "determine whether the Special Agent's report reveals that a substantial number of the returns prepared by appellant which were investigated showed no error." Id. at 531. In Boykoff's case, by contrast, the trial court did review the Report in camera and issued a brief written decision that the Report did not contain exculpatory material. The court found that the Special Agent was unable to draw final conclusions in most cases because he lacked underlying records for many of the taxpayers, and the court concluded that "the Special Agent's tentative observations after looking over (but not auditing) other returns prepared by Mr. Boykoff were far from exculpatory." Boykoff II, No. 01 Cr. 493, slip op. at 1. As we observed in Sternstein I, "the firsthand appraisal of the trial judge is essential in determining the materiality of withheld evidence." [ 79-1 USTC ¶9338], 596 F.2d at 531 (citing United States v. Agurs, 427 U.S. 97, 114 (1976)). Because the district court in this case conducted the necessary examination and found that the Report did not offer exculpatory material, the court committed no error in denying discovery of the Report. See Sternstein I [ 79-1 USTC ¶9338], 596 F.2d at 531; see also United States v. Sternstein [ 79-2 USTC ¶9626], 605 F.2d 672, 673 (2d Cir. 1979) ( per curiam) ("Sternstein II ") (observing that the trial court's findings "establish that no errors were found in only 8 of the 134 tax returns actually audited by [the] IRS and prepared by the appellant" so the probative value of the materials was "at best negligible" and a new trial was not warranted).

Exclusion of Certain Testimony the Defendant Proffered as Relevant to the Counts of Aiding and Abetting Dr. Cimmino

The defendant argues that the district court improperly excluded testimony by the brother of Dr. Cimmino --who prepared Dr. Cimmino's medical partnership books --that Dr. Cimmino deceptively withheld tax-related information from Boykoff. Boykoff wanted to elicit from Cimmino's brother testimony that Dr. Cimmino told his brother not to send certain annual summaries and checks to Boykoff. The district court permitted Boykoff to elicit testimony that Dr. Cimmino's brother did not send the records, but excluded testimony as to what Dr. Cimmino told his brother.

The court rejected the evidence on two grounds. First, the court rejected the defendant's proffer of the testimony to impeach the credibility of Dr. Cimmino's earlier testimony that he did not remember if he sent the records. This decision was a straightforward application of Rule 608(b), which prohibits the introduction of extrinsic evidence (other than criminal convictions) to impeach the credibility of a witness. See Fed.R.Evid. 608(b); United States v. Moskowitz, 215 F.3d 265, 270 (2d Cir.), cert. denied, 531 U.S. 1014 (2000).

Second, the court rejected as collateral the testimony about why Cimmino's brother did not send the records. The court determined that the only matter relevant to whether Boykoff was deceived about Dr. Cimmino's tax situation was whether Boykoff received the records, not why he did or did not receive them. Thus, the court permitted Boykoff to question Cimmino's brother about whether he sent the records to Boykoff, but not why. Cimmino's brother then gave inconsistent testimony, variously asserting that he did not send the annual statements to Boykoff and that he did not remember if he sent them. (Tr. 1171-72.) In light of all the evidence before the district court, particularly the defendant's initial proffer of the evidence for improper impeachment purposes under Rule 608(b), we conclude that the district court did not abuse its discretion by excluding testimony by Dr. Cimmino's brother that Dr. Cimmino told him not to send the disputed records. See United States v. Pascarella, 84 F.3d 61, 70 (2d Cir. 1996).

Count Twenty-Three: Whether the Obstruction of Justice Charge Is Time-Barred

Count twenty-three charged Boykoff with obstructing the IRS's audit of Dr. Weiser, Boykoff's client, by providing false expense receipts and writing false entries in Dr. Weiser's diaries to substantiate improper deductions claimed on Dr. Weiser's individual tax returns for 1990 through 1992. The defendant was charged with obstruction of justice under 26 U.S.C. §7212(a), for which the statute of limitations is defined by 26 U.S.C. §6531. Section 6531 provides for a three-year statute of limitations except in enumerated situations, such as a conviction under section 7212(a). See 26 U.S.C. §6531(6). The defendant argues that the six-year statutory period applied to section 7212(a) under section 6531(6) does not apply to his offense because he was not charged with "intimidation of officers and employees of the United States ," as named in a parenthetical in section 6531(6). Rather, he was charged with the aspect of section 7212(a) that covers corrupt interference with the administration of the Internal Revenue laws, the so-called omnibus clause of section 7212(a).

The application of a statute of limitations is a matter of law that we review de novo. Corcoran v. New York Power Authority, 202 F.3d 530, 542 (2d Cir. 1999), cert. denied, 529 U.S. 1109 (2000). Courts have uniformly held that the parenthetical in section 6531(6) is explanatory, not limiting, and applies to all conduct under section 7212(a). See, e.g., United States v. Kassouf [ 98-1 USTC ¶50,437], 144 F.3d 952, 959 (6th Cir. 1998); United States v. Workinger [ 96-2 USTC ¶50,402], 90 F.3d 1409, 1413-14 (9th Cir. 1996); see also United States v. Kelly [ 98-2 USTC ¶50,501], 147 F.3d 172, 177 (2d Cir. 1998) (rejecting the defendant's argument on plain error review). We therefore conclude that the district court properly rejected the defendant's argument. (Tr. 1145.)

Count Twenty-Three: Admission of Statements to Agent Monachino

Boykoff argues that the district court erred by denying his motion to suppress statements made by him and Dr. Weiser during the July 13, 1995, interview of Dr. Weiser conducted by IRS Agent Monachino. The defendant argues that his rights were violated because Agent Monachino was actually conducting a criminal investigation under the auspices of a civil audit. Judge McMahon conducted a hearing on the matter on the first day of trial and, in a decision dated January 23, 2002, concluded that the statements were admissible because Agent Monachino was not acting as an agent of the Criminal Investigation Division, see Boykoff III, 186 F.Supp.2d at 352, and the statements were obtained during a non-custodial interrogation without threats or promises, id. at 353.

When reviewing a district court's ruling on a motion to suppress, we review the factual findings for clear error and the legal conclusions de novo. United States v. Casado, 303 F.3d 440, 443 (2d Cir. 2002); United States v. Peterson, 100 F.3d 7, 11 (2d Cir. 1996). We stated in United States v. Squeri [ 68-2 USTC ¶9493], 398 F.2d 785 (2d Cir. 1968), that, "even if the IRS had contemplated criminal proceedings against [the defendant], there would be no merit to the claim of deception; the information that a taxpayer's returns are under audit gives sufficient notice of the possibility of criminal prosecution regardless of whether the agents contemplate civil or criminal action when they speak to him," id. at 788. See also United States v. Kontny [ 2001-1 USTC ¶50,197], 238 F.3d 815, 819-20 (7th Cir.), cert. denied, 532 U.S. 1022 (2001). We conclude that the district court committed no error by admitting the testimony of Agent Monachino.

Sentencing

Boykoff argues that his sentence should be vacated because the district court erred 1) in applying an enhancement for sophisticated concealment under U.S.S.G. §2T1.4(b)(2), and 2) in calculating his tax loss for purposes of determining his base offense level.

U.S.S.G. §2T1.4(b)(2) provides for a 2-level increase in the defendant's offense level if the offense of aiding tax fraud involved sophisticated concealment. We review de novo the district court's decision regarding the sophisticated-concealment enhancement, giving due deference to the district court's Guidelines application. See United States v. Lewis [ 96-2 USTC ¶50,452], 93 F.3d 1075, 1080 (2d Cir. 1996).

At sentencing and on appeal, the government argued that the sophisticated-concealment enhancement was appropriate because of Boykoff's conduct in helping a client who was being audited to fabricate restaurant receipts and expense journal entries, and in paying personal expenses from business accounts and characterizing those expenses as business expenses. In applying the sophisticated-concealment enhancement, the district court observed that "[t]he Weiser scheme alone constitutes sophisticated concealment. The fabrication of receipts and expense journals is the very essence of sophisticated concealment, because it relies on Mr. Boykoff's knowledge of what the taxpayer would need to justify the expenses." (Tr. of Proceedings before Hon. Colleen McMahon in the United States District Court for the Southern District of New York, on June 24, 2002, at 31.)

As we stated in Lewis,

even though this tax-evasion scheme cannot be described as singularly or uniquely sophisticated, it is more complex than the routine tax-evasion case in which a taxpayer reports false information on his 1040 form to avoid paying income taxes ... or asserts he paid taxes that he did not pay.... Even if each step in the planned tax evasion was simple, when viewed together, the steps comprised a plan more complex than merely filling out a false tax return.

[ 96-2 USTC ¶50,452], 93 F.3d at 1082, 1083 (overturning a district court's decision not to apply a sophisticated-concealment enhancement where the defendant claimed fraudulent deductions by writing checks to non-existent entities drawn on his bank account, which were deposited into other accounts from which the defendant paid his personal expenses). In the case at bar, fabricating receipts and expense journal entries involved "a plan more complex than merely filling out a false tax return." Id. at 1082; see also Kontny [ 2001-1 USTC ¶50,197], 238 F.3d at 821. We therefore conclude that the district court did not err in applying the enhancement for sophisticated enhancement.

We review de novo the district court's calculation of the "tax loss" attributable to the defendant. United States v. Bove, 155 F.3d 44, 46-47 (2d Cir. 1998). Having reviewed the tax-loss calculation and the defendant's arguments challenging it, we conclude that the district court committed no error.

For the foregoing reasons, the judgment of the district court is hereby AFFIRMED.

^* The Honorable Guido Calabresi of the United States Court of Appeals for the Second Circuit, who was originally a member of the panel, recused himself prior to oral argument. The appeal is being decided by the remaining two members of the panel, who are in agreement. See 2d Cir. R. § 0.14(b); Murray v. NBC, 35 F3d 45, 46-48 (ed Cir. 1994), cert. denied, 513 U.S. 1082 (1995)..

 

 

 

 

 

 

[97-1 USTC ¶50,398] United States of America , Plaintiff-Appellee v. Johnny Swanson III, Defendant-Appellant

(CA-4), U.S. Court of Appeals, 4th Circuit, 96-4213, 5/5/97 , Affirming an unreported District Court decision

[Code Secs. 6531 , 7206 and 7212 ]

Criminal prosecution: Interference with administration: Filing false returns: Limitations period: Multiplicitous indictment: Jury instructions: District Court findings.--An individual was properly convicted of corruptly endeavoring to obstruct and impede the due administration of the tax laws and of filing false employment tax returns. The statute of limitations began to run when the false returns were filed, not when the individual signed them. A six-year limitations period applied to the obstruction charge, and the individual's offense was not completed until a date that fell within that period. Thus, his prosecution was not time barred. In addition, his indictment was not multiplicitous and it presented no double jeopardy problems because each offense required proof of facts that the other did not. Jury instructions regarding the definition of "corruptly" were not plainly erroneous, and there was no clear error in the trial court's determination of the tax loss caused by the individual for sentencing purposes.

Helen F. Fahey, United States Attorney, David Glenn Barger, Assistant United States Attorney, Scott W. Putney, Special United States Attorney, Alexandria, Va. 22314, for plaintiff-appellee. Michael S. Lieberman, Andrew R. Gordon, DiMuro, Ginsberg & Lieberman, P.C., 908 King St., Alexandria, Va. 22314, for defendant-appellant.

Before: WILKINSON, Chief Judge, MICHAEL and MOTZ, 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:

A"EC JURY CONVICTED JOHNNY SWANSON, III, OF ONE COUNT OF CORRUPTLY ENDEAVORING TO OBSTRUCT AND IMPEDE THE DUE ADMINISTRATION OF INTERNAL REVENUE LAWS, IN VIOLATION OF 26 U.S.C. §7212(A) (1994), AND FOUR COUNTS OF FILING FALSE 1988 EMPLOYMENT TAX RETURNS, IN VIOLATION OF 26 U.S.C. §7206(1) (1994). THE DISTRICT COURT ORDERED THE PREPARATION OF A PRESENTENCE REPORT, WHICH INDICATED THAT SWANSON WAS RESPONSIBLE FOR TAX LOSSES IN EXCESS OF $5.4 MILLION AND SUGGESTED A GUIDELINE RANGE OF 51 TO 63 MONTHS. THE DISTRICT COURT SENTENCED SWANSON TO 60 MONTHS IMPRISONMENT AND THREE YEARS SUPERVISED RELEASE. SWANSON APPEALS, CHALLENGING HIS CONVICTIONS AND SENTENCES. FINDING NO REVERSIBLE ERROR, WE AFFIRM.

I.

Swanson's initial and principal challenge is that the applicable statute of limitations barred prosecution of all counts. Swanson presents separate arguments concerning Counts Two through Five and Count One. We address these contentions in order. ¹

A.

Counts Two through Five allege that Swanson made, signed, and filed four false Employer's Quarterly Federal Tax Returns in violation of 26 U.S.C. §7206(1). The parties agree that §7206(1) is governed by a six-year statute of limitations. See 26 U.S.C. §6531.

Swanson claims that the statute of limitations began to run when he prepared and signed the 1988 tax forms--June 28, 1989. The Government argues that the statute did not begin to run until the forms were filed--October and November 1990. This is a question of law that we review de novo.

Section 7206 provides:

Any person who--

(1) Declaration under penalties of perjury

Willfully makes and subscribes any return, statement, or other document, which contains or is verified by a written declaration that it is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter . . .

. . .

shall be guilty of a felony . . . .

26 U.S.C. §7206. The statute itself does not require the filing of a return, only willful making and subscribing under the penalty of per-jury. Swanson argues that the statute is therefore violated at the time of signing, and that the statute of limitations begins to run at that time.

Every court to confront the question has held to the contrary. Some have concluded that "[a] violation of 26 U.S.C. §7206(1) is complete when a taxpayer files a return . . . ." United States v. Marashi [90-2 USTC ¶50,482], 913 F.2d 724, 736 (9th Cir. 1990); see also United States v. Habig [68-1 USTC ¶9243], 390 U.S. 222, 223 (1968) ("The offenses involved in Counts 4 [violation of §7201] and 6 [violation of §7206(2)] are committed at the time the return is filed."). Others have reasoned that in order to "make" a return, as required by §7206(1), the return must be filed. See United States v. Gilkey [73-2 USTC ¶9779], 362 F. Supp. 1069, 1071 (E.D. Pa. 1973); United States v. Horwitz [66-1 USTC ¶9112], 247 F. Supp. 412, 413-14 (N.D. Ill. 1965); see also United States v. Aramony, 88 F.3d 1369, 1382 (4th Cir. 1996) (listing "ma[king] and subscrib[ing]" as an element of a §7206(1) offense).

We agree with these courts. Whether filing is viewed as a separate implicit, but necessary, element of a §7206(1) offense or as incorporated in the statutory "making" requirement, there can be no §7206(1) offense without filing. "Were it otherwise, the individual making the return could substantially shorten the length of the statutory period by subscribing the return months before it was filed and then retain it so the statute of limitations would be running long before the government had any notice of the offense." Horwitz [66-1 USTC ¶9112], 247 F. Supp. at 414-15. Furthermore, if the signing alone were illegal,"a person [could] be prosecuted for (1) signing a return he never intends to file, or (2) signing a false return but then changing his mind about breaking the law and sending in a correct return instead." Gilkey [73-2 USTC ¶9779], 362 F. Supp. at 1071.

B.

Swanson's remaining limitations claim involves his conviction under Count One for "corruptly endeavor[ing] to obstruct and impede the due administration of the internal revenue laws" in violation of 26 U.S.C. §7212(a).

First, Swanson asserts that the length of the statute of limitations governing §7212(a) is three years while the Government maintains it is six years. The Internal Revenue Code provides a six-year period "for the offense described in section 7212(a) (relating to intimidation of officers and employees of the United States )." 26 U.S.C. §6531(6) (1994). Swanson argues that this parenthetical limits the reach of §6531(6) to violations that include "intimidation of officers and employees of the United States ." The Government counters that the parenthetical is descriptive and explains what §7212(a) is, but does not mean that only "intimidation" prosecutions under §7212(a) enjoy the six-year limitation period. We agree with the Government. As the Ninth Circuit recently concluded after examining the structure of §6531, "the parenthetical language in §6531(6) is descriptive, not limiting." United States v. Workinger [96-2 USTC ¶50,402], 90 F.3d 1409, 1414 (9th Cir. 1996); see also United States v. Brennick, 908 F. Supp. 1004, 1017-18 (D. Mass. 1995).

Alternatively, Swanson argues that, even if the limitations period is six years, his indictment and the evidence at his trial rested on acts that occurred more than six years prior to his October 11, 1995 indictment, i.e., prior to October 11, 1989 . The indictment includes the following facts that occurred before October 11, 1989 : (1) Swanson changed the name of his business in July 1984 and December 1986 to get new employer identification numbers to avoid paying back taxes; (2) on or about April 13, 1988 , Swanson lied to the IRS about whether the Swanson Group had employees and whether it had been sold; (3) on or about July 26, 1989 , Swanson prepared false income tax returns for the years 1987 and 1988 for the Swanson Group; (4) on or about August 21, 1989 , Swanson prepared false Employer's Quarterly Federal Tax Returns for 1987; and (5) sometime after June 28, 1989 , Swanson prepared the false 1988 returns.

However, the indictment also alleges one crucial fact that did occur during the limitation period: On or about November 29, 1990 , Swanson filed the false 1988 returns. Additionally, the indictment notes that at some time prior to March 2, 1994 , Swanson falsely stated that he had mailed and filed some of the 1987 and 1988 tax returns; he also created and submitted falsified documents purporting to be copies of those returns. The indictment further states that between 1987 and the filing date of the indictment (October, 1995) Swanson had destroyed the payroll records for 1987 and 1988. This conduct could have occurred either before or after limitations ran or during both periods.

"[T]he purpose of the criminal statute of limitations is to protect individuals from having to defend conduct of the 'far-distant past.' " United States v. Blizzard, 27 F.3d 100, 102 (4th Cir. 1994) (quoting Toussie v. United States, 397 U.S. 112, 115 (1970)). For this reason, " 'criminal limitations statutes are to be liberally interpreted in favor of repose.' " Id. However, "[s]tatutes of limitations normally begin to run when the crime is complete." Toussie, 397 U.S. at 115 (citing Pendergast v. United States, 317 U.S. 412, 418 (1943)) (alteration in original); see also Blizzard, 27 F.3d at 102 ("[A] statute of limitations normally will begin to run when the crime is complete.").

Because Swanson's offense under §7212(a) was not completed until he filed his 1988 returns--in November, 1990--well within the limitations period, we reject his claim that his prosecution was barred by the statute of limitations. See United States v. Ferris [86-2 USTC ¶9844], 807 F.2d 269, 271 (1st Cir. 1986) (finding that for the similar violation of tax evasion under 26 U.S.C. §7201, "it is the date of the latest act of evasion . . . that triggers the statute of limitations."); see also United States v. DiPetto [91-2 USTC ¶50,407], 936 F.2d 96, 98 (2d Cir. 1991) (concluding that "a section 7201 prosecution involving the failure to file income taxes is timely if commenced within six years of the day of the last act of evasion."); United States v. Williams [91-1 USTC ¶50,197], 928 F.2d 145, 149 (5th Cir. 1991) (same).

II.

Swanson next asserts that Count One was multiplicitous with Counts Two through Five. We have defined multiplicity as "the charging of a single offense in several counts. [1 Charles A. Wright, Federal Practice & Procedure §142, at 469 (2d ed. 1982).] The signal danger in multiplicitous indictments is that the defendant may be given multiple sentences for the same offense . . . ." United States v. Burns, 990 F.2d 1426, 1438 (4th Cir. 1993). Absent clearly contrary legislative intent, " 'where the same act or transaction constitutes a violation of two distinct statutory provisions, the test to be applied to determine whether there are two offenses or only one, is whether each provision requires proof of a fact which the other does not.' " United States v. Allen, 13 F.3d 105, 108 (4th Cir. 1993) (citing Blockburger v. United States, 284 U.S. 299, 304 (1932)).

Under this test, Swanson's conviction under §7212(a) was not multiplicitous with his convictions under §7206(1). The elements of a §7206(1) violation are: "(1) the defendant made and subscribed [which includes filing] to a tax return containing a written declaration; (2) the tax return was made under penalties of perjury; (3) the defendant did not believe the return to be true and correct as to every material matter; and (4) the defendant acted willfully." Aramony, 88 F.3d at 1382. In contrast, the elements of a §7212(a) violation are that the defendant: (1) corruptly, (2) endeavored, (3) to obstruct or impede the administration of the Internal Revenue Code. See 26 U.S.C. §7212(a); United States v. Williams [81-1 USTC ¶9268], 644 F.2d 696, 699 (8th Cir. 1981).

Obviously, each of these offenses requires proof of facts that the other does not. ² Accordingly, the indictment is not multiplicitous and presents no possible Double Jeopardy problem.

III.

Swanson also claims that the district court improperly instructed the jury on the definition of "corruptly" under §7212(a). Swanson did not object to the instruction at trial, and we therefore review for plain error. See Fed. R. Crim. P. 52(b). Read as a whole the court's instructions were not plainly erroneous. Indeed, the court correctly defined "corruptly." See United States v. Mitchell [93-1 USTC ¶50,171], 985 F.2d 1275, 1278 (4th Cir. 1993).

IV.

Finally, Swanson argues that the district court overstated the tax "loss" he caused for sentencing purposes. This is a factual finding, which we review for clear error. United States v. Williams, 977 F.2d 866, 869 (4th Cir. 1992). There was no clear error here. The district court adopted the findings in the pre-sentence report that Swanson caused a tax loss of almost $5.5 million. The calculations in the report do not appear to be faulty and the district court was entitled to rely on them. See United States v. Terry, 916 F.2d 157, 160-162 (4th Cir. 1990). Indeed, as the Government pointed out at sentencing, Swanson also evaded payment of corporate taxes and failed to pay taxes on embezzled income and none of these amounts were included in the loss calculation. In view of this, the district court properly noted that the pre-sentence report's loss figure "is probably a conservative estimate." Accordingly, the district court did not err in sentencing Swanson based on a loss of almost $5.5 million.

V.

For the foregoing reasons, Swanson's convictions and sentences are hereby

AFFIRMED.

¹ The Government argues that Swanson has waived his limitations defenses because he did not attempt to present them to the jury. Swanson did, however, file a pre-trial motion to dismiss based on the statute of limitations and raised the limitations defense again immediately before trial and at the close of the Government's case. Accordingly, we refuse to find Swanson has waived these claims.

² Swanson's claim that "willfully" and "corruptly" constitute the same element is meritless. "Willfulness" is a "voluntary, intentional violation of a known legal duty." Cheek v. United States [91-1 USTC ¶50,232], 498 U.S. 192, 201 (1991). " 'Corruptly,' " by contrast, " 'describes an act done with an intent to give some advantage inconsistent with the official duty and rights of others' . . .. Misrepresentation and fraud. . . are paradigm examples of activities done with an intent to gain an improper benefit or advantage." United States v. Mitchell [93-1 USTC ¶50,171], 985 F.2d 1275, 1278 (4th Cir. 1993) (citing United States v. Reeves [85-1 USTC ¶9190], 752 F.2d 995, 998 (5th Cir. 1985)).

 

 

 

[98-1 USTC ¶50,437] United States of America , Plaintiff-Appellant v. James J. Kassouf, Defendant-Appellee

(CA-6), U.S. Court of Appeals, 6th Circuit, 96-4381, 5/21/98 , 144 F3d 952, 144 F3d 952. Affirming a District Court decision, 97-1 USTC ¶50,303 , 948 FSupp 36

[Code Sec. 7212 ]

Penalties, criminal: Obstruction of administration of tax laws: Criminal violation: IRS investigation: Knowledge of: Obstruction of justice: Speculative: Overbroad.--Actions an individual was alleged to have taken before he knew that he was the subject of an IRS investigation or proceeding did not obstruct or impede the administration of tax laws in violation of Code. Sec. 7212(a) . Similar "obstruct or impede" language in 18 U.S.C. §1503 had been interpreted to apply only to activities that interfered with pending proceedings. Moreover, to impose criminal liability on actions taken before a taxpayer knew of any investigation or proceeding would potentially criminalize a range of innocent practices without specifically proscribing them and, thus, render the statute impermissibly speculative and overbroad.

[Code Secs. 6513 and 7212 ]

Statute of limitations: Criminal prosecution: Obstruction of administration of tax laws.--Prosecutions for violations of the "intimidation" and "omnibus" clauses of Code Sec. 7212(a) were subject to a six-year, rather than a three-year, statute of limitations.

John M. Siegel, Assistant United States Attorney, Cleveland , Ohio , 44114 , for plaintiff-appellant. Richard L. Stoper, Jr., Robert J. Rotatori, Gold, Rotatori, Schwartz & Gibbons, 1500 Leader Bldg., Cleveland, Ohio 44114, for defendant-appellee.

Before: JONES, DAUGHTREY and COLE, Circuit Judges.

OPINION

JONES, Circuit Judge:

The government appeals the district court's judgment dismissing one count of obstruction of the tax laws in violation of 26 U.S.C. §7212(a), for failure to allege an offense. The district court found that the statute required the government to allege as elements of the offense, that the defendant, James J. Kassouf, obstructed or impeded a pending IRS investigation or proceeding of which he was aware. For the following reasons, we AFFIRM.

I. FACTS

On May 8, 1995 , a grand jury indicted defendant James J. Kassouf in a twenty-six count indictment charging him with four counts of attempting to evade personal income taxes in violation of 26 U.S.C. §7201 (Counts 1-4), twenty-one counts of making false personal, corporate, and partnership tax returns in violation of 26 U.S.C. §7206(1) (Counts 5-25), and one count of corruptly endeavoring to obstruct and impede the due administration of tax laws, in violation of 26 U.S.C. §7212(a) (Count 26).

Count 26 of the indictment alleges generally that Kassouf used his partnerships and controlled corporate general partners in order to conduct transactions for his substantial personal benefit, without keeping records necessary to determine the tax consequences of those transactions. Six paragraphs of the count refer specifically to Kassouf's failure to maintain partnership books and records. The count also alleges that Kassouf made it more difficult to discover and trace his activities by transferring funds between bank accounts before making expenditures, and affirmatively misled the IRS by filing tax returns which failed to disclose the transactions, the bank accounts and other assets, and the interest earned on those accounts. ¹

On June 15, 1995 , Kassouf filed a motion for a bill of particulars regarding the counts in the indictment, including Count 26. With regard to Count 26, Kassouf requested information specifying the corrupt acts or omissions allegedly committed by him, the factual basis for the allegations that he failed to maintain or caused a failure to maintain books and records, and identification of pertinent persons or entities that were legally required to maintain records. J.A. at 211-215. He also requested a listing of all records which were maintained or should have been maintained, dates and amounts of borrowing, descriptions of assets, deposits and disbursements. Id. For the most part, the government refused these requests, noting at one point that the allegations never provided that Kassouf was in fact legally required to maintain certain books or records.

On May 16, 1996 , Kassouf filed a motion to dismiss Counts 13 and 26 as barred by the statute of limitations. He filed an additional motion to dismiss Count 26 on that same date, challenging the sufficiency of the allegations and the constitutionality of the omnibus clause of §7212(a) as applied to those allegations. Specifically, Kassouf asserted: 1) that Count 26 failed to allege facts constituting a violation of §7212(a); 2) that §7212(a) was unconstitutionally vague and overbroad as applied to the alleged conduct; and 3) that the government improperly construed the statute to apply to lawful conduct that makes the IRS's job harder, such as failure to maintain records. On September 25, 1996 , the district court denied Kassouf's motion to dismiss Counts 13 and 26 on the basis of the statute of limitations.

On November 19, 1996 , the district court granted Kassouf's motion to dismiss Count 26, finding that the count did not state an offense because it did not allege, as elements of the offense, that there was a pending proceeding or investigation by the IRS of which the defendant was aware. The court did not address the other contentions made in Kassouf's motion to dismiss. On January 8, 1997 , the district court denied Kassouf's motion for a bill of particulars relating to Count 26 on the ground that the dismissal of Count 26 rendered such a request moot. The government then filed this timely appeal from the district court's judgment dismissing Count 26.

II. DISCUSSION

A. Section 7212(a) Elements

The primary issues on appeal involve statutory interpretation and construction which are questions of law subject to de novo review by this court. See United States v. Khalife, 106 F.3d 1300, 1302 (6th Cir. 1997); United States v. Spinelle, 41 F.3d 1056, 1057 (6th Cir. 1994).

On appeal, the government argues that the district court erroneously interpreted 26 U.S.C. §7212(a) to apply only to conduct intended to obstruct a pending IRS proceeding or investigation. The government argues that the correct interpretation is that the omnibus clause of §7212(a) broadly prohibits all corrupt efforts to impede the administration of the tax laws, including schemes to disguise and conceal current financial transactions in order to evade tax obligations and prevent IRS detection and scrutiny. Kassouf asserts, on the other hand, that the district court did not err because the plain meaning of the statute imposes liability for obstruction of the "due administration" of the title and does not cover actions where no proceeding or investigation was pending. Kassouf points out that the conduct alleged to be obstructive, occurred when there was no IRS audit, investigation or proceeding. He notes that no IRS agent approached him, was intimidated, threatened or bribed, and that it cannot be sufficient to impose criminal liability upon mere allegations that the IRS's job was made harder.

In order to resolve this question, while we start with the plain meaning of the statute, this court must also weigh the IRS's duty to see that the tax laws are faithfully executed and administered (and their ability to quickly and inexpensively do so) with the policy of ensuring that criminal laws are strictly construed so as to give proper notice of the unlawfulness of the activity and the reach of the statute. On the one hand, courts should not limit a statute in such a way that prevents its purpose, but on the other hand, courts should be mindful not to criminalize activity that is not specifically proscribed by statute, however annoying it may be.

We thus begin with the plain language of the statute itself, Bread Political Action Committee v. FEC, 455 U.S. 577, 580 (1982); Consumer Product Safety Comm'n v. GTE Sylvania, Inc., 447 U.S. 102, 108 (1980); United States v. Caldwell, 49 F.3d 251, 251 (6th Cir. 1995), and absent an ambiguity interpret it according to that language unless there is evidence of Congress's contrary intent. United States v. Apfelbaum, 445 U.S. 115, 121 (1980); Nixon v. Kent County , 76 F.3d 1381, 1386 (6th Cir. 1996).

Section 7212(a) provides in pertinent part that:

Whoever corruptly or by force or threats of force (including any threatening letter or communication) endeavors to intimidate or impede any officer or employee of the United States acting in an official capacity under this title, or in any other way corruptly or by force or threats of force (including any threatening letter communication) obstructs or impedes, or endeavors to obstruct or impede, the due administration of this title shall . . . [be guilty of an offense].

26 U.S.C. 7212(a). The first clause is aimed at specific threats against an officer or employee acting in an official capacity, and the second clause is known as the "omnibus clause" which is a "catch-all" clause aimed at other activities which may obstruct or impede the due administration of the title. See United States v. Williams [81-1 USTC ¶9268], 644 F.2d 696, 699 (8th Cir. 1981). Kassouf is only charged with a violation of the omnibus clause.

This court has never had the opportunity to interpret the omnibus clause of §7212(a). Indeed no circuit courts have directly confronted the issue before us today--whether the omnibus clause of §7212(a) requires a pending IRS proceeding or investigation of which the defendant was aware. Some courts have applied the clause to cases in which there was no pending investigation or proceeding, without being directly confronted with or deciding the precise issue here. See, e.g., United States v. Hanson [94-1 USTC ¶50,075], 2F.3d 942, 946-47 (9th Cir. 1993) (affirming conviction under §7212(a)'s omnibus clause where defendant submitted false 1099 and 1096 forms to the IRS showing fictitious payments to Farmers Home Administration officials and filed a false personal tax return claiming a fraudulent tax refund); United States v. Mitchell [93-1 USTC ¶50,171], 985 F.2d 1275, 1276-79 (4th Cir. 1993) (finding defendant properly charged under §7212(a) where conduct alleged involved improper filing of tax exempt status and inducement of customers to file false returns claiming cost of his services as tax-deductible contributions); United States v. Kuball [92-2 USTC ¶50,501], 976 F.2d 529, 531 (9th Cir. 1992) (affirming §7212(a) conviction where defendant filed false 1096 and 1099 forms claiming substantial payments to individuals and had filed a false 1040 form claiming a refund that was not due); United States v. Popkin [91-2 USTC ¶50,496], 943 F.2d 1535, 1540-41 (11th Cir. 1991) (affirming a §7212(a) conviction based on a defendant-attorney's conduct in advising and assisting a client to set up a corporation to disguise and report proceeds from drug transactions); Williams [81-1 USTC ¶9268], 644 F.2d at 701 (holding that conduct of assisting the preparation and filing of false W-4 forms constituted endeavor to corruptly impede or obstruct the due administration of the Revenue Code); United States v. Toliver, 972 F. Supp. 1030, 1034-35 (W.D. Va. 1997). Only one other federal court besides the district court below has directly addressed the issue. See United States v. Armstrong, 974 F. Supp. 528, 536-37 (E.D. Va. 1997) (finding that there was no requirement of a pending government action under the Internal Revenue Code to impose liability under §7212(a)). While these cases may provide some support for a reading of the statute that reaches conduct committed before a defendant was aware of a pending IRS action under the Internal Revenue Code, we decline to extend their holdings to reach the conduct involved in this case. All of the circuit court decisions noted above were decided well before the Supreme Court's decision in United States v. Aguilar, 515 U.S. 593 (1995), imposing the "nexus" requirement to the obstruction of justice statute, 18 U.S.C. §1503, and supporting a more strict reading of obstruction statutes generally. See id. at 600.

With that in mind, we note that §7212 clearly prohibits activities which corruptly obstruct or impede the due administration of Title 26. As the government argues, Title 26 does encompass a vast range of activities of the Internal Revenue Code including: mailing out internal revenue forms; answering taxpayers' inquiries; receiving, processing, recording and maintaining tax returns, payments and other taxpayers submissions; as well as monitoring taxpayers' compliance with their obligations.

Courts when confronted with the similar obstruction statute of 18 U.S.C. §1503, with almost identical language, however, have limited liability to activities that interfere with pending proceedings. Section 1503 has uniformly been interpreted as requiring a pending judicial proceeding. See, e.g., United States v. Mullins, 22 F.3d 1365, 1369 (6th Cir. 1994) ("In order to convict someone of violating §1503, the government must prove that there was a judicial proceeding underway that the defendant's actions were intended to obstruct."); United States v. Bashaw, 982 F.2d 168, 170 (6th Cir. 1992) ("Because section 1503 is intended to protect the administration of justice in federal court and those participating therein,' due administration of justice has been interpreted as extending only to pending judicial proceedings" and "[t]he defendant must have knowledge that a proceeding is pending.") (citations omitted); United States v. Howard, 569 F.2d 1331, 1337 (5th Cir. 1978); see also Pettibone v. United States , 148 U.S. 197 (1893). The omnibus clause of that section provides in pertinent part that whoever:

corruptly or by threats or force or by any threatening letter or communications, influences, obstructs, or impedes, or endeavors to influence, obstruct, or impede, the due administration of justice, shall be punished as provided in subsection (b).

18 U.S.C. §1503.

The language "due administration of justice" could have been, but was not, construed even more broadly than the language in §7212(a). The administration of justice could conceivably have been interpreted to encompass a wide array of activities including filing of false police reports, interfering with police investigations, or destroying evidence before a formal proceeding was underway. The Supreme Court, however, soundly rejected such a broad pronouncement, limiting the reach of the statute not only to pending proceedings, but also to actions which had a nexus between the act and the judicial proceedings such that "the act must have a relationship in time, causation, or logic with the judicial proceedings." United States v. Aguilar, 515 U.S. at 599. The Court specifically found that conduct such as "uttering false statements to an investigating agent . . . who might or might not testify before a grand jury [was] [in]sufficient to make out a violation of the catchall provision of §1503." Id. at 600. We find the Court's interpretation of nearly identical language in §1503 instructive.

Moreover, although courts have noted §7212(a)'s broad applicability, limiting the section to pending IRS actions would still allow for any number of activities to come within the reach of the section. Section 1503 also has been found to be aimed at a wide range of conduct, but nonetheless restricted in a similar way. See United States v. Martin [85-1 USTC ¶9177], 747 F.2d 1404, 1409 (11th Cir. 1984) (noting that the "obstruction of justice statute was drafted with an eye to the variety of corrupt methods by which the proper administration of justice may be impeded or thwarted, a variety limited only by the imagination of the criminally inclined.") (quoting United States v. Griffin, 589 F.2d 200, 206-07 (5th Cir. 1979) (internal citation and quotation marks omitted). Nor do we find the Fifth Circuit's statement in United States v. Reeves [85-1 USTC ¶9190], 752 F.2d 995 (5th Cir. 1985), indicating that §7212(a) applies in much broader circumstances than §1503 conclusive. A number of courts, including the Fifth Circuit have looked to §1503 and the similar obstruction of justice statute in §1505, to interpret the language in §7212(a). See, e.g., Williams [81-1 USTC ¶9268], 644 F.2d at 699 n. 11 (noting that "the language and structure of §7212 track part of certain federal obstruction of justice statutes, specifically 18 U.S.C. §§1503 and 1505," and applying case law interpreting §1503); Martin [85-1 USTC ¶9177], 747 F.2d at 1409 (considering case law under §§1503 and 1505 in interpreting language in §7212); United States v. Dykstra [93-1 USTC ¶50,243], 991 F.2d 450, 454 (8th Cir. 1993) (noting that "[i]n interpreting §7212(a), courts have often resorted to the obstruction of justice provision of Title 18"). Thus, looking to the analogous obstruction of justice statute, we conclude that due administration of the Title requires some pending IRS action of which the defendant was aware. ²

Here, were we to permit the allegations in Count 26 to stand, we would be imposing liability for conduct with even less of a causal connection than that rejected by the Supreme Court in Aguilar. We would be permitting the IRS to impose liability for conduct which was legal (such as failure to maintain records) and occurred long before an IRS audit, or even a tax return was filed. The speculative nature of this "obstructive" conduct is readily apparent, and we agree with the district court that the statute cannot be construed to prohibit it. Because Title 26 encompasses such routine actions as even the government points out, imposing liability for actions committed before a person knew of an investigation or proceeding, would open them up to a host of potential liability of conduct that is not specifically proscribed.

Moreover, it is a well settled canon of statutory construction that courts will presume that Congress knew of the prevailing law when it enacted the statute. See International Union, Local 737 v. Auto Glass Employees Federal Credit Union, 72 F.3d 1243, 1248 (6th Cir. 1996); see also United States v. Jordan, 915 F.2d 622, 628 (11th Cir. 1990) ("Under accepted rules of statutory construction, it is generally presumed that Congress, in drafting legislation, is aware of well established judicial constructions of other pertinent existing statutes.") (citing Goodyear Atomic Corp. v. Miller, 486 U.S. 174 (1988)); Hill v. Chemical Bank, 799 F. Supp. 948, 952 (D. Minn. 1992) ("Congress is presumed to be aware of judicial interpretations of statutory language when it intentionally incorporates the language of one statute into another statute."). Section 1503 was enacted long before §7212, and the similar language used in that statute had been consistently construed to require a pending judicial proceeding. Accordingly, we may presume that Congress intended to restrict the statute in the same way that §1503 had been judicially interpreted.

In construing §7212(a) to require a pending IRS action under the code of which the defendant is aware, we are also mindful that courts should interpret statutes that impose criminal liability narrowly to ensure proper notice to the accused. See Aguilar, 515 U.S. at 600 (noting that courts traditionally exercise restraint in assessing the reach of a federal criminal statute "out of concern that 'a fair warning should be given to the world in language that the common world will understand, of what the law intends to do if a certain line is passed.' ") (citation omitted); see also Federal Maritime Comm'n v. Seatrain Lines, Inc., 411 U.S. 726, 733-34 (1973); United States v. Salisbury, 983 F.2d 1369, 1378 (6th Cir. 1993) (noting that statutes must be specific enough to give reasonable and fair notice to warn people to avoid conduct with criminal consequences). In this day, when Congress is attempting to curb the reach of the IRS into the homes of taxpayers, we cannot construe a penal law such as §7212(a) to permit such an invasion into the activities of law-abiding citizens. As the district court noted, out of the hundreds of people who file taxes every day, there is no guarantee that a particular tax return will be audited. Therefore, it would be highly speculative to find conduct such as the destruction of records, which might or might not be needed, in an audit which might or might not ever occur, is sufficient to make out an omnibus clause violation. Cf. Aguilar, 515 U.S. at 600. Were the court to find otherwise, we would be opening the statute to legitimate charges of overbreadth and vagueness, particularly where the statute may impose liability for otherwise lawful conduct. Kassouf may have had no idea that conduct such as the failing to maintain records (before his tax returns were ever filed) might obstruct IRS action because he had no specific knowledge that the IRS would ever investigate his activities. If upon hearing that the IRS was conducting an audit of his returns, however, Kassouf had begun destroying records and funneling money through various accounts to prevent detection of his illegal activities, §7212(a) would clearly apply.

Finally, the government argues that the more analogous statute to §7212 is 18 U.S.C. §371, known as "Klein conspiracy." That section provides in pertinent part that "[i]f two or more persons conspire either to commit any offense against the United States, or to defraud the United States, or any agency thereof in any manner or for any purpose, and one or more of such persons do any act to effect the conspiracy . . ." they are liable. 18 U.S.C. §371. The government notes that the standard charging language for indictments under the act is that the defendants conspired "to defraud the United States of America by . . . impeding, impairing, obstructing, and defeating the lawful functions of the Internal Revenue Service of the Treasury Department . . . in the ascertainment, computation, assessment, and collection of income." See, e.g., United States v. Sturman, 951 F.2d 1466, 1472 (6th Cir. 1991); see also United States v. Klein [57-2 USTC ¶9912], 247 F.2d 908, 915 (2d Cir. 1957). The government further argues that such prosecutions often involve efforts to prevent the IRS from discovering income and tax liabilities, without any requirement of a pending proceeding. See, e.g., United States v. Mohney, 949 F.2d 899 (6th Cir. 1991).

The government's argument based on an analogy to §371 is unpersuasive. First, the government itself concedes that the language used in the standard indictments ("lawful functions of the Internal Revenue Service") is not identical to the phrase "due administration of this title." More important, however, is that the actual statute from which the charges are derived, is wholly inapposite to §7212 because it uses the very broad terms "to defraud the United States , or any agency thereof in any manner or any purpose[.]" 18 U.S.C. §371. Accordingly, we AFFIRM the district court's dismissal of Count 26 for failure to allege an offense.

B. Alternate Grounds

We reject the two alternative grounds Kassouf posits as a basis for affirming the district court's judgment. First, Kassouf argues that, in the alternative, the district court's judgment could be affirmed because the statute is unconstitutionally vague, overbroad and ambiguous, and failed to provide adequate notice of the conduct proscribed. We believe our construction of the statute in such a way as to require pending government action under the Internal Revenue Code of which the defendant was aware, easily disposes of any argument on that basis.

Kassouf's final argument is that even if the statute has been properly construed and applied by the government in this case, the dismissal should be affirmed because the count is barred by a three year limitation period. The district court below found that a six year statute of limitations applied. Kassouf argues to the contrary, that the general three year statute of limitations in 26 U.S.C. §6531 applies, rather than the more specific six year statute of limitations. The statute of limitations governing this offense is contained in 26 U.S.C. §6531 and provides that: "No person shall be prosecuted, tried or punished for any of the various offenses arising under the internal revenue laws unless the indictment is found or the information instituted within 3 years next after the commission of the offenses, except that the period of limitation shall be 6 years. . . ." 26 U.S.C. §6531. The statute then lists various sections of the Internal Revenue Code which fall within that 6 year exception including:

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

(6) for the offense described in section 7212(a) (relating to intimidation of officers and employees of the United States ).

26 U.S.C. §§6531(5) and (6).

Kassouf contends that §6531(6) applies only to the "intimidation clause" of §7212(a), and that prosecutions under the "omnibus clause" are time-barred by the general three-year limitation period because the parenthetical to §6531(6) only referred to the intimidation of officers and employees, and not to the general omnibus clause. Thus, Kassouf asserts that the parenthetical was intended by Congress as a limiting clause and not as a clause descriptive of the offenses prohibited by §7212(a). As a result, he contends that Count 26 must be dismissed because it covers conduct from April 1987 through October 1991, and the indictment was not filed until May 8, 1995 . We disagree with Kassouf's construction of the parenthetical in §6531(6).

There is nothing to indicate that Congress intended the parenthetical to be limiting rather than merely descriptive of §7212(a). Similar parentheticals in other statutes have also been found to be descriptive rather than limiting. See, e.g., United States v. Garner, 837 F.2d 1404, 1419 (7th Cir. 1987) (finding parenthetical in 18 U.S.C. §1961 intended to aid description of statute incorporated by it and not limiting in nature); United States v. Herring, 602 F.2d 1220, 1223 (5th Cir. 1979) (same). Moreover, the Ninth Circuit in United States v. Workinger [96-2 USTC ¶50,402], 90 F.3d 1409 (9th Cir. 1996), considered the identical argument made by Kassouf and soundly rejected it, noting that "it would be most peculiar if the parenthetical language in §6531(6) were meant to restrict that section to the intimidation portion of §7212(a)" because all of the other exceptions to which the six year limitations applies deal with the obtaining of improper benefits or advantages through the use of fraud or corruption, and "[i]f §6531(6) only covered actual intimidation, Congress would have jumped beyond those concepts and solely focused upon crimes of violence and force" rather than corruption. Id. at 1414. We agree. It would be anomalous for Congress to impose the six year limitations only on the intimidation clause of §7212(a) and ignore the clause dealing with corrupt methods, where all of the other sections of Title 26 that have a six year statute of limitations also deal with fraud and corruption. Furthermore, numerous other courts have also expressly applied the six year statute of limitations to the omnibus clause of §7212(a). See United States v. Wilson, 118 F.3d 228, 236 (4th Cir. 1997) (noting that the applicable statute of limitations for §7212 was six years and applying it to omnibus clause violation); United States v. Swanson, 112 F.3d 512, 1997 WL 225446, at *2 (4th Cir. May 5, 1997) (finding parenthetical in §6531(6) to be merely descriptive of entire 7212(a) and therefore not limited to intimidation clause of that section); United States v. Brennick [97-1 USTC ¶50,390], 908 F. Supp. 1004, 1017-18 (D. Mass. 1995); United States v. Sarcia, No. 97 CR 262, 1997 WL 458426, at *1 (N.D. Ill. Aug. 4, 1997) (adopting Workinger and holding that parenthetical language in §6531(6) is descriptive rather than limiting, and holding that the statute of limitations for §7212(a) in its entirety is six years). We conclude similarly, that the parenthetical in 6531(6) is descriptive rather than limiting and that the six year statute of limitation applies to violations of the omnibus clause of §7212(a).

III.

For the foregoing reasons, we AFFIRM the district court's decision dismissing Count 26 because it fails to allege, as elements of the offense, that there were pending IRS actions of which Kassouf was aware.

¹ Count 26 provides in pertinent part that from approximately April 1987 through approximately October 1991, Kassouf corruptly endeavored to obstruct and impede the due administration of the internal revenue laws by forming and controlling three real estate limited partnerships and:

5. . . .used his controlled partnerships and corporate general partners and bank accounts set up in the names of those entities to conduct transactions in the manner and means described below in order to:

a. obtain the personal use and benefit of the funds and property of his controlled partnerships without maintaining records necessary to reflect the tax consequences of his obtaining the use and benefit of the funds and property;

b. use the partnership and corporate general partners and bank accounts to conceal income earned from other sources; and

c. impede and obstruct the ability of the Internal Revenue Service to be able to audit and determine the tax consequences of the transactions.

MANNER AND MEANS

The manners and means by which the defendant corruptly endeavored to obstruct and impede the due administration of the internal revenue laws are as follows:

6. The defendant failed to maintain or cause to be maintained partnership books and records for Prime Properties, Limited Partnership, 1200 West 9th Street Limited Partnership, American Prime Properties, Inc., and 1476 Davenport Corporation.

7. The defendant caused books and records to be maintained for 1476 Davenport Limited Partnership during the period in which Parkview Federal Service Corporation was a partner, but then failed to maintain or cause to be maintained such records starting a number of months after that corporation's partnership interest ceased.

8. The defendant caused Prime Properties Limited Partnership and 1476 Davenport Limited Partnership to borrow substantial funds in excess of the amounts needed by the partnership and obtained the personal use and benefit of the funds which he concealed as follows:

a. The defendant caused substantial portions of the funds to be deposited to bank accounts and used as described in paragraph 9, below.

b. The defendant failed to maintain or cause to be maintained any books and records reflecting the existence and disposition of the funds borrowed by Prime Properties Limited Partnership or to disclose the existence and disposition of the loans and loan proceeds on the partnership's tax returns.

c. The defendant failed to maintain or cause to be maintained any books and records reflecting the disposition of the funds borrowed by 1476 Davenport Limited Partnership or to accurately report the disposition on the partnership's tax returns.

9. The defendant used and caused to be used bank accounts in the names of Prime Properties Limited Partnership and 1476 Davenport Limited Partnership and their corporate general partners for making unreported disbursements of certain partnership funds and for other personal uses:

a. The defendant deposited and caused to be deposited certain funds from partnership loans, partnership income, and from other sources into these accounts. . .for the benefit of himself personally and other uses, and maintained no books and records or other accounting of the disbursement and disposition of the funds.

b. The defendant transferred and caused to be transferred funds between accounts on occasion before making expenditures for his personal benefit.

c. The defendant failed to report or cause to be reported substantial amounts of interest earned on the bank accounts on any tax returns and caused other amounts of the interest to be improperly reported on the income tax returns of his controlled corporation, Metropolitan Properties, Inc.

d. Some of the funds disbursed from the partnership accounts for personal use were deposited to an account of 1200 West 9th Street limited Partnership or otherwise spent for the development costs of that partnership.

10. The defendant caused property constituting part of the proceeds of a sale of property by 1200 West 9th Street Limited Partnership to be transferred to Prime Properties Limited Partnership, without making or causing to be made any record of that sale or transfer on any books and records or the tax returns of either partnership.

11. The defendant caused tax returns to be filed for the controlled partnerships and corporate general partners which:

b. failed to disclose substantial monies and other property deposited or transferred to the partnerships and corporate general partners,

c. failed to disclose substantial assets held by the partnerships and corporate general partners on the tax return balance sheets, and

d. failed to disclose the substantial funds withdrawn or transferred from the partnerships and corporate general partners.

In violation of Title 26, Section 7212(a), United States Code. J.A. at 44-50.

² This may include, but is not limited to, subpoenas, audits or criminal tax investigations.

CONCURRING IN PART, DISSENTING IN PART

DAUGHTREY, Circuit Judge:

concurring and dissenting. I concur in the majority's conclusions that the provisions of 26 U.S.C. §7212(a) are not unconstitutionally vague and that 26 U.S.C. §6531(6)'s six-year statute of limitations period applies to prosecutions brought pursuant to §7212(a). I respectfully dissent, however, from this court's determination that a defendant cannot be found guilty of violating 26 U.S.C. §7212(a) without knowingly obstructing or impeding a pending or ongoing Internal Revenue Service investigation or proceeding.

In reaching its conclusion on the breadth of §7212(a)'s proscriptions, the majority analogizes the language of that statutory provision to the language of 18 U.S.C. §1503, the general obstruction of justice statute. Because the language of the two provisions is somewhat similar, and because the federal courts have ruled that 18 U.S.C. §1503's prohibition on obstructions of the "due administration of justice" requires that a judicial proceeding be ongoing or pending, the majority holds that the Internal Revenue Service must also have proceedings ongoing in order to suffer obstruction of "the due administration of [Title 26]."

As noted by the majority, however, courts must presume that Congress knew of the prevailing law when it enacted a statute. International Union , United Auto. Workers, Local 737 v. Auto Glass Employees Fed. Credit Union, 72 F.3d 1243, 1248 (6th Cir.), cert. denied, 117 S. Ct. 63 (1996). Section 1503 was in effect long before §7212(a) and the "due administration of justice" wording of §1503 has consistently been construed to require affected judicial proceedings. It is only logical, therefore, to conclude that if Congress wished 26 U.S.C. §7212(a) to be interpreted in an identical fashion, identical language would have been inserted into that statute. In its wisdom, our nation's legislative body chose, however, to distinguish the requirements of the statutes by use of broader language in §7212(a). Pursuant to those provisions, it is not only the administration of "justice" that is protected from undue obstruction, but the very administration of the myriad duties performed under the Title.

The majority unnecessarily sounds the alarm that such a reading of the plain language of the statute will result in criminal prosecutions of individuals who may, for example, innocently dispose of old tax returns and records later requested by the Internal Revenue Service for audit purposes. In light of recent revelations of abuses perpetrated by employees of the Internal Revenue Service, such concern is understandable. The comforting fact remains, however, that the statute itself still requires that any obstruction of the due administration of Title 26 be accomplished by means of corruption, force, or threats of force. If the courts of our land remain vigilant and scrupulously require government prosecutors to toe the well-defined line drawn by Congress in this legislation, I am confident the majority's fears will be allayed.

Although no federal court of appeals appears to have addressed directly the precise issue now before us, every sister circuit that has examined the reach of 26 U.S.C. §7212(a) has accepted the principle that the provisions of that subsection do not require the government to prove the existence of an ongoing or pending tax investigation or proceeding. See United States v. Winchell [97-2 USTC ¶50,890], 129 F.3d 1093 (10th Cir. 1997); United States v. Hanson [94-1 USTC ¶50,075], 2 F.3d 942 (9th Cir. 1993); United States v. Mitchell [93-1 USTC ¶50,171], 985 F.2d 1275 (4th Cir. 1993); United States v. Kuball [92-2 USTC ¶50,501], 976 F.2d 529 (9th Cir. 1992); United States v. Popkin [91-2 USTC ¶50,496], 943 F.2d 1535 (11th Cir. 1991); United States v. Reeves [85-1 USTC ¶9190], 752 F.2d 995 (5th Cir. 1985); United States v. Williams [81-1 USTC ¶9268], 644 F.2d 696 (8th Cir. 1981). I see no reason for us now to rush into the breach to create an analytical split on this question. I would REVERSE the district court's dismissal of Count 26 of the indictment and REMAND this matter for further proceedings as necessary.

 

 

 

 

[98-2 USTC ¶50,501] United States of America , Appellee v. Richard H. Kelly, Defendant-Appellant

(CA-2), U.S. Court of Appeals, 2nd Circuit, 97-1307, 6/18/98, 147 F3d 172, 147 F3d 172. Affirming an unreported District Court decision

[Code Sec. 7212 ]

Penalties, criminal: Interference with administration: Evidence: Jury instructions: Statute of limitations: Constitutionality.--A financial consultant and attorney was properly convicted of endeavoring to obstruct and impede the due administration of the Internal Revenue laws arising in connection with his sham assignment of income to his financial consulting business. Since he corruptly deducted advances received by a former employer from his gross income and never transferred the advances to the business, force or threat of force did not have to be proven. Moreover, the taxpayer's delivery of the sham assignment agreement to the investigating IRS agent was designed to impede disclosure of a tax evasion scheme that had already been effected. Accordingly, his actions were accurately characterized as obstruction rather than evasion. In addition, the taxpayer's constitutional claims of overbreadth and vagueness were rejected as meritless; his contention that "willfulness" was a necessary element of the offense was rejected since the jury instructions were comprehensive and accurate; and his contention that the statute of limitations barred his prosecution was deemed waived since it was not raised in the trial court. Nevertheless, the court concluded that the trial court's selection of the six-year limitation period did not constitute plain error.
[Code Sec. 7212 ]

Penalties, criminal: Sentence: Enhancements.--The enhancement of an attorney's sentence based on the tax loss resulting from his criminal activities, his legal expertise, and perjured testimony was not clearly erroneous.

Loretta C. Argrett, Assistant Attorney General, Zachary W. Carter, United States Attorney, Meghan S. Skelton, Alan Hechtkopf, Robert E. Lindsay, Department of Justice, Washington, D.C. 20530, for appellee. Stuart E. Abrams, Frankel, Sandor, P.C., 230 Park Ave. , New York , N.Y. 10169 , for defendant-appellant.

Before: VAN GRAAFEILAND, JACOBS and LAY, ^* Circuit Judges.

VAN GRAAFEILAND, Circuit Judge:

Richard H. Kelly appeals from a judgment of the United States District Court for the Eastern District of New York (Hurley, J.) convicting him of corruptly endeavoring to obstruct and impede the due administration of the Internal Revenue laws, in violation of 26 U.S.C. §7212(a). The district court sentenced Kelly to eighteen months in prison. We affirm.

From 1984 to 1988, Kelly, an experienced attorney and businessman, served as vice-president and general counsel of Intercontinental Monetary Corporation ("IMC"), a financial services company. Kelly left IMC in 1988 and, with an associate, organized a financial consulting business called D.M. Condor & Company, Inc. Prior to his departure, Kelly executed an agreement under which he agreed to provide consulting services to IMC from June 1, 1988 to June 30, 1990 . In return, IMC agreed to pay him a consulting fee of $244,200.

The agreement specified that IMC would pay Kelly in two equal installments of $122,100, the first of which would cover services rendered from June 1, 1988 to June 30, 1989 , and the second of which would cover services rendered from July 1, 1989 to June 30, 1990 . In fact, however, IMC paid Kelly his entire fee before the beginning of the prescribed period of service, issuing him checks on November 5, 1987 , February 16, 1988 , and March 9, 1988 . The parties agreed that these payments would be treated as advances on Kelly's fee and that IMC would consider the fee "earned" as of the dates specified in the original agreement.

Thereafter, in 1988, Kelly agreed with his associate to assign to Condor all of his rights and obligations under the IMC agreement. In a letter dated December 28, 1989 , Kelly informed IMC of the agreement and requested that IMC issue to Condor any tax reporting forms stemming from the company's payment of Kelly's consulting fee. IMC acknowledged Kelly's request, but refused to honor it. Instead, in early 1990, IMC prepared and sent to Kelly an IRS Form 1099 indicating its payment to him of $122,100 as compensation for services rendered during the 1989 fiscal year.

Kelly filed his 1989 personal income tax return on April 16, 1990 . On Schedule C of the return, Kelly reported as part of his gross receipts the $122,100 he received from IMC but indicated in an accompanying note that he had assigned this income to Condor. Based on this alleged assignment, Kelly deducted the $122,100 from his gross receipts and paid no tax on the IMC income.

In October 1991, Internal Revenue Agent Vincent Marcantonio began an audit of Kelly's 1989 tax return. In the course of this audit, Marcantonio met with Kelly on two occasions. During their first meeting, Kelly provided Marcantonio with copies of the two aforementioned agreements and explained that he had deducted the IMC income from his gross receipts because he had assigned the income to Condor. Kelly also informed Marcantonio that Condor did not file a tax return in 1989. During their second meeting, Kelly reiterated his explanation of his treatment of the IMC income. Contrary to his earlier statements, however, Kelly told Marcantonio that Condor "picked up" the IMC income in 1989, a statement which Marcantonio took to mean that Condor had reported the income to the IRS for tax purposes. Following the second meeting, Marcantonio verified that Condor had not reported the IMC income in 1989. He also determined that Kelly had not transferred any of the IMC income to Condor. Marcantonio concluded that Kelly's deduction of the IMC income was improper and that his purported assignment of that income to Condor was a sham.

Based on Marcantonio's findings, the Government indicted Kelly. In Count One of the indictment, the Government charged Kelly with obstructing the due administration of the revenue laws by providing Marcantonio with a copy of the allegedly false and fraudulent assignment agreement in an effort to substantiate his deduction of the IMC income on his 1989 tax return. In Count Two, the Government charged Kelly with filing a false tax return. The jury convicted Kelly of obstruction, but acquitted him of filing a false return.

At the time Kelly was sentenced, the federal sentencing guidelines did not specify a particular guideline to be used in cases arising under section 7212(a). Over Kelly's objection, the district court applied section 2T1.1 of the guidelines, a section customarily applied in cases of tax evasion. Pursuant to that guideline, the court determined that Kelly's criminal activities resulted in a tax loss of approximately $68,000 (the amount he would have paid had he reported the entire $244,200 he received from IMC as income), warranting a base offense level of eleven. The court then added two levels for each of its findings that Kelly had used special skills to facilitate his crime and that he gave perjured testimony at trial. These findings yielded a potential sentence range of eighteen to twenty-four months. The court sentenced Kelly to the minimum term of eighteen months.

Kelly contends on appeal that he should not have been charged with violating section 7212(a) because Congress intended that statute to proscribe only threatening or harassing conduct directed toward IRS agents. In support of this contention, he asserts that a majority of the cases prosecuted under section 7212(a) have involved threatening or harassing conduct. However, even the complete absence of a reported decision involving similar factual circumstances does not determine per se the proper scope of a particular statute. See United States v. Popkin [91-2 USTC ¶50,496], 943 F.2d 1535, 1539 (11th Cir. 1991) (citing Parr v. United States, 363 U.S. 370, 391 (1960)).

The appropriate starting point for the interpretation of any statute is its language. O'Connell v. Hove , 22 F.3d 463, 468 (2d Cir. 1994). See United States v. Trapilo, 130 F.3d 547, 551 (2d Cir. 1997) (quoting United States v. Wiltberger, 18 U.S. 76, 95-96 (1820) (Marshall, C.J.) ("The intention of the legislature is to be collected from the words they employ. Where there is no ambiguity in the words, there is no room for construction.")).

Section 7212(a) provides in part that any individual who: corruptly or by force or threats of force (including any threatening letter or communication) endeavors to intimidate or impede any officer or employee of the United States acting in an official capacity under this title, or in any other way corruptly or by force or threats of force (including any threatening letter or communication) obstructs or impedes, or endeavors to obstruct or impede, the due administration of this title, shall [be guilty of a felony].

26 U.S.C. §7212(a) (emphasis added). As the emphasized language makes clear, a defendant need not resort to force or the threat of force in order to be convicted of obstruction. Moreover, although the first clause pertains only to conduct directed against a government official, the second or "omnibus" clause is not so limited, and renders criminal "any other" action which serves to obstruct or impede the due administration of the revenue laws. In short, the plain language of section 7212(a) does not support Kelly's narrow interpretation of the statute.

Kelly next contends that the district court's decision to charge him under section 7212(a) violated a policy statement issued by the Tax Division of the Department of Justice. That directive instructs officers of the Department not to utilize the omnibus clause of section 7212(a) "where other more specific charges are available and adequately reflect the gravamen of the offense." Kelly argues that there was a more specific and appropriate charge available to the Government in his case, namely tax evasion under section 7201, and that the Government should have prosecuted him under that statute rather than section 7212(a). We are not persuaded by this contention. As a general rule, "non-compliance with internal departmental guidelines is not, of itself, a ground of which defendants can complain." United States v. Ivic, 700 F.2d 51, 64 (2d Cir. 1983) (citing United States v. Caceres [79-1 USTC ¶9294], 440 U.S. 741 (1979)), rev'd on other grounds, National Org. for Woman, Inc. v. Scheidler, 510 U.S. 249 (1994). Cf. Crandon v. United States, 494 U.S. 152, 177 (1990) (Scalia, J., concurring in judgment). Such guidelines provide no substantive rights to criminal defendants. United States v. Piervinanzi, 23 F.3d 670, 682 (2d Cir. 1994). Moreover, the record does not support Kelly's claim of non-compliance.

Kelly characterizes his actions as "garden variety" tax evasion rather than obstruction. We disagree. Kelly's delivery of the Condor assignment agreement to Marcantonio did more than merely further a tax evasion scheme--it was designed to impede Marcantonio from uncovering a tax evasion scheme that already had been effectuated. It expanded and delayed the progress of Marcantonio's audit and investigation and thus can be characterized accurately as obstruction, rather than evasion.

Kelly suggests the district court's broad interpretation of the statute potentially could run afoul of the constitutional doctrines of overbreadth and vagueness. In support of his position, Kelly cites United States v. Poindexter, 951 F.2d 369, 377-386 (D.C. Cir. 1991), cert. denied, 506 U.S. 1021 (1992), in which the court held, over the strong dissent of Judge Mikva, that use of the term "corrupt" in the more general obstruction-of-proceedings statute, 18 U.S.C. §1505, rendered that statute unconstitutionally vague as applied. However, five other circuits have upheld the constitutionality of section 7212(a) in the face of claims similar to that presently posed by Kelly. These decisions are cited and discussed in the well-reasoned opinion of District Judge Gertner in United States v. Brennick [97-1 USTC ¶50,390], 908 F. Supp. 1004, 1010-13 (D. Mass. 1995). Finding the analyses in these opinions both pertinent and persuasive, we reach the same result.

We also reject Kelly's contention that "willfulness" is a necessary element of section 7212(a) and that the district court should have instructed the jury accordingly. In making this argument, Kelly relies upon Cheek v. United States [91-1 USTC ¶50,012], 498 U.S. 192 (1991), which involved 26 U.S.C. §§7201 and 7203. Unlike section 7212(a), both of these sections specifically require proof of willfulness. There is no single, universal definition of the word "willfully." See, e.g., United States v. Pomponio [76-2 USTC ¶9695], 429 U.S. 10, 12 (1976); United States v. Murdock [3 USTC ¶1194], 290 U.S. 389, 394 (1933), overruled in part by Murphy v. Waterfront Commission of New York Harbor , 378 U.S. 52, 70 (1964). Usually, however, the varying definitions contain certain common general elements. When, as here, a court properly instructs a jury concerning these elements, it need not usurp the function of Congress by inserting the term "willfully" in a statute where Congress saw fit to omit it.

The key words in section 7212(a) are "corruptly" and "endeavors." See United States v. Cioffi, 493 F.2d 1111, 1118-19 (2d Cir. 1974) (analyzing similar language in Obstruction of Justice Act, 18 U.S.C. §1503). The district court instructed the jury that

To act corruptly is to act with the intent to secure an unlawful advantage or benefit either for one's self or for another.

This is a well-accepted definition of the term "corruptly" when used in this context. See United States v. Hanson [94-1 USTC ¶50,075], 2 F.3d 942, 946-47 (9th Cir. 1993) and cases cited therein; see also BLACK'S LAW DICTIONARY 414 (4th ed. rev. 1968).

The district court then defined "endeavors" as follows:

It means to knowingly and intentionally act or to knowingly and intentionally make any effort which has a reasonable tendency to bring about the desired result.

*****

A person acts knowingly if he acts intentionally and voluntarily and not because of ignorance, mistake, accident or carelessness.

*****

Before you can find that the defendant acted intentionally, you must be satisfied beyond a reasonable doubt that the defendant acted deliberately and purposefully, that is, defendant's acts must have been the product of the defendant's conscious objective rather than the product of mistake or accident.

The district court's definition of the proof required for the section 7212(a) violation was as comprehensive and accurate as if the word "willfully" was incorporated in the statute. See United States v. Barfield, 999 F.2d 1520, 1524-25 (11th Cir. 1993) (quoting United States v. Haas, 583 F.2d 216, 220 (5th Cir. 1978), cert. denied, 440 U.S. 981 (1979)); United States v. McLennan, 672 F.2d 239, 243 (1st Cir. 1982). We are reluctant, therefore, to add the word "willfully" to section 7212(a), where Congress has seen fit to omit it. Cf. Piervinanzi, supra, 23 F.3d at 680.

Moreover, in view of the district court's correct charge concerning corrupt knowledge and intent, we find no error in the district court's failure to instruct on the irreconcilable theory of good faith.

Kelly contends for the first time on appeal that the Government's prosecution was barred by the statute of limitations. Because Kelly did not raise this claim in district court, we deem it waived. See United States v. Walsh, 700 F.2d 846, 855 (2d Cir.), cert. denied, 464 U.S. 825 (1983); United States v. Arky, 938 F.2d 579, 581-82 (5th Cir. 1991), cert. denied, 503 U.S. 908 (1992). Even if we assume that the plain error standard enunciated in United States v. Olano, 507 U.S. 725 (1993), is applicable to Kelly's limitation defense, we nonetheless hold the defense to be without merit. The periods of limitation for offenses arising under the revenue laws are codified at 26 U.S.C. §6531. For most such offenses, the period of limitation is three years. However, a longer, six-year period of limitation applies to certain offenses listed separately in the statute. Among these is "the offense described in section 7212(a) (relating to intimidation of officers and employees of the United States )." 26 U.S.C. §6531(6). Kelly contends that the parenthetical explanation which follows the reference in section 6531(6) to the obstruction statute reveals that Congress intended for the six-year limitation period to apply only to cases prosecuted under the first clause of section 7212(a), and that cases brought pursuant to the omnibus clause therefore remain subject to the shorter, three-year period. Both parties agree that under the three-year limitations period, Kelly's prosecution would have been barred.

This circuit has yet to determine the appropriate limitation period to be applied to cases brought pursuant to the omnibus clause of section 7212(a). However, at least two other circuits have concluded that the six-year period of limitation applies. See United States v. Wilson, 118 F.3d 228, 236 (4th Cir. 1997); United States v. Workinger [96-2 USTC ¶50,402], 90 F.3d 1409, 1413-14 (9th Cir. 1996). We hold that the district court's well-reasoned and unchallenged selection of the six-year limitation period did not constitute plain error.

Moving on to the matter of his sentence, Kelly contends that the district court erred when it utilized section 2T1.1 of the federal sentencing guidelines to calculate it. Kelly contends that the court should have looked to former section 2T1.5, which prescribed the punishment for filing a fraudulent tax return. At the time of Kelly's sentencing, no specific guideline applied to cases involving convictions under section 7212(a). Generally, when no specific sentencing guideline is designated, the sentencing court must determine a defendant's sentence using the guideline it deems most applicable to the offense of conviction. See U.S.S.G. §1B1.2(a) & comment. (n. 1). Upon review, we are required to give due deference to the sentencing court's choice of guidelines, and may reverse only where we find that choice plainly unreasonable. See United States v. Miller, 116 F.3d 641, 677-78 (2d Cir. 1997). The district court felt that Kelly's conduct involved more than simply filing a fraudulent return. Because this was not an unreasonable determination, we conclude that the district court did not err when it relied on section 2T1.1 to determine Kelly's sentence.

Kelly next challenges the district court's enhancement of his sentence based on its finding that Kelly's criminal activities resulted in a tax loss. Kelly contends that this finding was inconsistent with the jury's verdict acquitting him on the charge of filing a false tax return. We disagree. The fact that Kelly was acquitted of one charge did not preclude the sentencing court from relying on evidence introduced in connection with that charge. See United States v. Watts, 519 U.S. 148, --, 117 S. Ct. 633, 636 (1997) (per curiam); United States v. Rodriguez-Gonzalez, 899 F.2d 177, 180-82 (2d Cir.), cert. denied, 498 U.S. 844 (1990).

Alternatively, Kelly contends that the evidence simply did not support the district court's finding of a tax loss. In support of this argument, Kelly directs our attention to the testimony of his expert tax accountant, who indicated that Kelly's treatment of his assignment to Condor on his tax return was fundamentally correct. In response, the Government contends that while Kelly's professed treatment of the IMC income might have been technically correct, the fact remains that Kelly did not transfer any of the IMC money to Condor, and that neither he nor Condor paid taxes on the income; Kelly, as the recipient of that income, was responsible for paying taxes on it, and his failure to do so resulted in a tax loss for which he properly was held liable.

Kelly next challenges the district court's enhancement of his sentence based on its finding that he utilized a special skill, namely his legal background, to facilitate his commission of obstruction. Kelly insists that he possesses no expertise in the area of tax law; quite to the contrary, he suggests that it was his lack of knowledge regarding the applicable tax laws that led him to commit the acts for which he ultimately was convicted. We are not persuaded. Kelly's obstruction conviction stemmed from his providing Marcantonio the assignment which Kelly himself had prepared. The district court did not err in finding that Kelly thus utilized his skill as a licensed and experienced attorney to facilitate his criminal activity.

Finally, Kelly challenges the district court's two-level enhancement of his sentence pursuant to section 3C1.1 for obstruction of justice by committing perjury during the trial. In order to enhance a defendant's sentence for obstruction of justice in this manner, the sentencing court must determine by clear and convincing evidence that the defendant "gave false testimony concerning a material matter with the willful intent to provide false testimony, rather than as a result of confusion, mistake, or faulty memory." United States v. Walsh, 119 F.3d 115, 121 (2d Cir. 1997) (internal quotations omitted) (quoting United States v. Dunnigan, 507 U.S. 87, 94 (1993)). See also U.S.S.G. §3C1.1 & comment. (n. 1). Moreover, the court must find that the defendant's statements unambiguously demonstrate an intent to obstruct. See United States v. Sisti, 91 F.3d 305, 313 (2d Cir. 1996); see also Walsh, supra, 119 F.3d at 121; United States v. Ruggiero, 100 F.3d 284, 294 (2d Cir. 1996), cert. denied, 118 S. Ct. 1102 (1998). The district judge repeatedly acknowledged his obligations in this respect:

I have to find that the defendant made deliberate or provided false information deliberately to the jury--to the Court on a material matter for the purpose of basically trying to prevent himself from being convicted or for whatever. There's a materiality. I have to make an independent finding. And I think it is appropriate that if the Court does so, that the Court do that with some type of specificity.

I think it would be unfair, if not contrary to Circuit precedent, to give an opinion in a conclusory nature. I think I'm required, if I find that obstruction of justice, to provide some specificity.

*****

Moreover, the Court does have an obligation, if it finds an obstruction of justice, to make an independent inquiry and determination.

Moreover, I believe there is authority in the Second Circuit that in making such a determination the standard of proof is heightened.

*****

Here, because of the impact that an obstruction determination has or a prospective determination has on the defendant's right to take the stand and testify, the appropriate standard is clear and convincing.

Also, it should be noted that in making this determination to the extent there's ambiguity, it should really be resolved in favor of the defendant.

*****

On the other item that I mentioned, the testimony that he provided to the jury in the Court's opinion concerning why he didn't file the DMC returns, I found that testimony to be clearly untruthful. It was done in an effort to explain that which was unexplainable.

It pertained to a very material matter, because if the jury was to believe him, they had to understand, or at least he so perceived, apparently, why the money that went into his pocket and went into his bank account and which supposedly became the obligation of DMC to report, given his contact with DMC, he had to explain why DMC never reported the income.

Now, we know that the investigation wasn't underway until 1991. Given when this information should have been reported, which would apparently be on the '89 tax return of DMC or the 1990, but certainly prior to 1991, his explanation makes no sense. That, in and of itself, is not enough.

This, in my judgment, represented a material matter testified to by the defendant falsely, with his knowledge of the falsity. I believe he deliberately provided that information to the jury for the purpose of obstructing the administration of justice. More particularly he was trying to confuse the jury. He was trying to prevent the jury from finding him guilty concerning the charges in the indictment.

In the light of the district judge's recognition of the applicable law and his emphatic finding of materially false testimony, we find no error in his conclusion "by clear and convincing or even beyond a reasonable doubt standard that [Kelly] obstructed justice or endeavored to do so." See Walsh, supra, 119 F.3d at 122.

The judgment of the district court is affirmed.

^* The Honorable Donald P. Lay of the United States Court of Appeals for the Eighth Circuit, sitting by designation.