United States v. Frank L. Hook , 781 F.2d 1166 ( 1986 )

MERRITT, Circuit Judge,

dissenting.

The government's theory in this criminal tax case is that although the defendant filed timely nonfraudulent personal income tax returns for the six calendar years from 1975 through 1980, he is guilty of the felony of evading payment of the taxes due for each of those years through affirmative acts of concealment of assets in violation of section 7201, as well as committing the lesser included misdemeanor of willfully failing co pay taxes in violation of section 7203. The jury convicted him of the section 7201 felony offenses for the years 1976 and 1979 and of the section 7203 misdemeanor offenses for 1975, 1977, 1978 and 1980. Thus, the jury found him guilty of affirmative acts of concealment in only two of the years. It convicted him of wrongful failure to pay for the other four years.

Since the statute of limitations is six years, 26 U.S.C. § 6531, and the indictment was not filed until November 13, 1983 (making the cutoff date November 13, 1977), the government has a statute of limitations problem for the years 1975 and 1976. This statute of limitations problem arises for these years because, under the general rule, the statute begins to run on the date the offense is first committed, i.e., whenever acts of affirmative concealment or willful nonpayment occur after the April 15 due date. The government’s problem is that is claimed, and proof strongly suggested, that the acts of concealment and willfulness triggering the running of the statute for the 1975 and 1976 tax years occurred prior to November 1977.

In order to extricate itself from this dilemma the government adopted a “continuing offense” theory. Since its proof suggested that the acts of concealment and willfulness continued up until the date of the indictment in 1983, the government argued that the statue was tolled during the period of continuation and that the limitations period accrued and began to run only upon the occurrence of the last of the acts of concealment or willfulness committed in connection with the continuing offenses.

The government and the defendant agree that the District Court adopted this “continuing offense” position before and throughout the trial and kept the years 1975 and 1976 in the case. In its February 27, 1984, pretrial Memorandum and Order denying motions to dismiss, the District Court stated that: “the six-year limitations period imposed by 26 U.S.C. § 6531(2) for evasion of the payment of taxes runs from the last affirmative act constituting the attempt to evade payment.”

Upon motion for acquittal, after the jury convicted the defendant for these two years, the District Court found the continuing offense theory inapplicable. But the Court refused to set the verdicts aside. It did not conclude that the defendant had waived the statute of limitations. It reached the conclusion on the merits (accepted as sound by the majority here) that the statute had not run on the 1975 and 1976 counts because “there was sufficient evidence to support a finding that all elements of the [1975 and 1976] offenses upon which defendant was convicted came into existence some time after the commencement of the six year limitations period.” (App.56.) Or, in the words of the majority, wrongful acts after November, 1977 “could have been employed by the jury to conclude” that the statute did not begin to run earlier. (Supra p. 1172.) I believe that both the government and the defendant are correct in their contention that the 1975 and 1976 offenses were committed, if at all, earlier than November, 1977 and hence that the statute has run against those two counts.

Both the government and the defendant disagree with the approach to the problem taken by the District Court and now by our Court. The government, adhering to its continuing offense tolling argument, contends that the District Court “reached the right result for the wrong reason.” The defendant argues on this point as follows:

This approach, however, which would have been appropriate if the limitations questions had been put to the jury, was not appropriate where the jury was not advised that the date of any of the events in issue was of any moment. The jurors were never asked to determine when the defendant’s conduct became willful or when the affirmative act of evasion occurred. And there is no reason to assume that they made determinations which they were never instructed to make.

Appellant’s Brief, p. 32.

The defendant’s argument on this point seems correct. The jury was not asked to decide facts regarding the running of the statute of limitations because the parties thought that the court had adopted the government’s continuing offense theory. The jury did not explicitly or implicitly find any facts relevant to this issue. Again, it should be emphasized that neither side asked for jury instructions on this issue, apparently because they thought the District Court had adopted the government’s continuing offense theory. It is difficult for me to see how under these circumstances the defendant should be held to have waived the statute by not asking for jury instructions.¹

It seems to me then that the question becomes whether the government is correct in its continuing offense argument; namely, that the “statute begins to run from the last affirmative act of evasion.” Government’s brief, pp. 29-30.

The Supreme Court set out the governing considerations on this issue in Toussie v. United States, 397 U.S. 112, 114-15, 90 S.Ct. 858, 859-60, 25 L.Ed.2d 156 (1970). We must find that “the explicit language of the substantive criminal statute compels such a conclusion, or the nature of the crime involved is such that Congress must assuredly have intended that it be treated as a continuing one.” Id. at 115, 90 S.Ct. at 860.

The language of sections 7201 and 7203 does not compel such a conclusion. It seems more consistent with Congressional intent and good policy in tax cases to run the statute of limitations from the date of the commission of the offense, as the traditional rule requires, rather than the date of the last act related to the offense. Otherwise acts of concealment of assets or willfulness committed decades after the first wrongful tax acts would revive or extend criminal liability.

The Supreme Court has, on several occasions, reaffirmed “the principle that criminal limitations statutes are ‘to be liberally interpreted in favor of repose.’ ” It has also said that “[sjtatutes of limitations normally begin to run when the crime is complete.” Toussie, at 115, 90 S.Ct. at 860.

Therefore, I would hold that the statute had run on the years 1975 and 1976 and that these counts should have been dismissed. The remaining question is whether we should simply knock out the counts relating to these years and affirm the other convictions, or remand for a new trial on the other counts. The majority opinion points out that:

[Mjassive amounts of evidence and testimony concerning conduct by Hook to conceal assets was presented in this case with little apparent attempt to relate specific acts to specific counts in the indictment, let alone to specific dates within the various counts. The indictment, although reciting forty-three overt acts under the conspiracy count, provided no lists of acts to which the jury could refer in rendering the verdicts under counts II through VII, and nothing has been brought to our attention, apart from some income and expenditures evidence, which indicates that either the Government or Hook attempted to limit the jury’s consideration of the evidence to particular periods of time.

Op. at 1171-1172.

I assume from this statement that the majority, had it decided otherwise on the limitations question, would have concluded that a remand for a new trial is necessary so that the case can be restructured for presentation to the jury. Although the evidence on the other counts of the indictment is strong and presents a record unsympathetic to the defendant, I am unable to say that the errors discussed above were harmless under Rule 52, Fed.R.Crim.P.

“WELLFORD, J., CONCURRING in the denial of rehearing: To my knowledge, Mr. Dershowitz has never appeared before me and has never been involved in any proceedings before me in my fifteen years as a District Judge or as a Circuit Judge prior to this case. I have no recollection of having previously read his published criticism about my part in a trial which took place some ten years ago in Memphis, but it is clear that Mr. Dershowitz was not then involved in any way in that jury trial.

“Mr. Dershowitz himself acknowledges that he did not request my recusal at the oral hearing and made no suggestion whatever about any alleged problem with my participating until after the decision in this case, adverse to his client, was filed. He acknowledges that his contention now made in a petition for rehearing “may seem belated.” (Appellant’s Petition, p.6). Mr. Dershowitz states that at the time of the argument he “did not even know precisely what it is that he had previously written.” (Petition, pp. 4-5). If Mr. Dershowitz did not know what he >vrote, then I knew even less than he since I do not recall having read the article. (I was aware that Mr. Dershowitz had participated in a number of first amendment eases and that he has publicly expressed strong views with respect to pornography prosecutions, but this had absolutely nothing to do with the case at hand.)

“Mr. Dershowitz makes reference to 28 U.S.C. § 455. During the consideration of and decision in this case, I had no notion that my impartiality right was questioned by the defendant, Mr. Hook, or by his counsel, and I perceived no appearance of impartiality. I entertained then and entertain now no personal bias or prejudice against that defendant nor against Mr. Dershowitz, an able advocate who has represented his client well in this case. I am aware of no potential conflict of interest in any respect, nor of any relationship that would make it improper for me to serve as judge in this case.

I regret Mr. Dershowitz’ attitude about my participation and what I sincerely believe to be his unwarranted and uncalled for inferences about me as set out in his petition.”

1 . If it is true that the defendant’s lawyer waived a good statute of limitations defense, then I do not see why he would not win a § 2255 case for ineffective assistance of counsel. The waiver was highly prejudicial, causing the defendant to be convicted of at least two offenses for which he should have been exonerated. I think it would be much better to come to grips with the problem now and order a new trial rather than to deal with it later in a post conviction proceeding.