Petition for Writ of Certiorari — Neve v. United States

(r

t

;

No.

IN THE SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1988

UNITED STATES OF AMERICA,

Plaintiff/Appellee,

vs.

ROLLAND A. NEVE,

Defendant/Appellant.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

ROLLAND A. NEVE

Petitioner, Pro Per

4413 Elmwood Parkway

Metaire, Louisiana 70003

Telephone: (504) 888-3706

QUESTIONS PRESENTED

1. Whether a conviction for 26 U.S.C.

7203 cannot be had for failure to file

an individual income tax return where

the alleged income of the defendant is

based on compensation for labor.

2. Whether affirming the petitioner’s

conviction in the face of a challenge

for judicial misconduct without benefit

of a sufficient record is a departure

from accepted judicial practice

requiring the exercise of this court’s

supervisory powers.

IN THE SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1988

UNITED STATES OF AMERICA,

Plaintiff/Appellee,

vs.

ROLLAND A. NEVE,

Defendant/Appellant.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

A writ of certiorari is respectfully

sought to review the Court of Appeals

Order affirming the decision entered on

July 5, 1988, by the Fifth Circuit Court

of Appeals.

LIST OF PARTIES

The Parties to this action are:

Defendant/Appellant:

ROLLAND A. NEVE

4413 Elmwood Parkway

Metaire, Louisiana 70003

(504) 888-3706

Plaintiff/Appellee;

UNITED STATES OF AMERICA

HARRY W. MCSHERRY, JR.

Asst. U.S. Attorney

500 Camp Street

New Orleans, Louisiana 70130

TABLE OF CONTENTS

Questions Presented for Review

Petitioner for Writ of Certiorari

List of Parties

Table of Contents ......-ee-s i

Table of Authorities. ....... ii

Gpimiemes BelOW. « s sc we eee ee Vv

JUPAGESCCIOGR. « 0 0 6 © 6 6 © 0 te oe ee

Basis of Federal Jurisdiction... vi

Constitutional Provisions, Statutes,

and Regulations Involved ..... vii

Statement of Case ......e«-. « l

Reasons for Granting Writ. ..... 3

ABRMONGAN .«. «© «ec ec ec esesnes es A

TABLE OF AUTHORITIES

U.S. Constitution

Art. 1, Sec. 8, Clause l

Art. 1, Sec. 9, Clause 4

Sixteenth Amendment

Cases

Adkins v. Children’s Hospital,

261 U.S. 525, 558 (1923).

Bankers Trust Co. v. U.S.,

518 F.2d 1210 (1975).

Bar L Ranch, Inc. v. Phinney,

426 F.2d 995 (1970)

Boyle v. Mitchell,

247 U.S. 179

Brushaber v. Union Pacific R.R,

240 U.S. 1 (1916)

Champlin Refining Co. v. C.I.R.,

123 F.2d 202, 203 (1941).

Coleman v. Alabama,

399 U.S. 1, 90 S.Ct. 1999

Commissioner v. Glenshaw Glass Co.,

348 U.S. 426, 431 (1955).

Conner v. U.S.,

303 F.Supp. 1187 (1969)

Coppage v. Kansas,

236 U.S. 1, 14 (1914)

il

20

19

17

18

18

19

18

10,11

12,13

15

Eisner v. Macomber,

252 U.S. 189 (1920) ... 7,9,10,21

Flint v. Stone Tracy Co.,

4240 UseBe AGT (ADEE) «© © © 2 22

In Re Marshall,

102 F. 323, 324 F (1900). . . 15

In Re Tiburcio Parrott,

1 F. 481, 506 (1880). ... . 14

In Re Williams’ Estate,

256 F.2d 217 a ae er ae ae 18

Jack Daniel Distillery v. U.S.,

379 F.2G 569 (1967) . . « « « 18

Krulewitch v. U.S.,

336 U.S. 440, 453 (1948). . . 24

Lauredaie Cemetary Assoc. v.

Matthews, 345 PA. 239,

47 A.2@ 277, 260. «© «© «© «© « « 16

Lonsdale v. Commissioner,

SOL Fuod@ Th, Fe CADPOA)e « wo 6

Merchant’s Loan v. Smietanka,

255 Bame 509 . . . . * * . * * 9

Penn Mutual Indemnity Co. v.

Commissioner, 32 T.C. (1959). . 21

Pollock V. Farmers’ Loan & Trust Co.,

Loe Use GOS (E95) «© «© @ « « eo 68

Oliver v. Halstead,

196 VA. 992, 86 S.E. 2d 858. . 15

Slaughter-House Cases,

if © ee ap b> ge ey > 5 es |

So. Pacific v. Lowe,

ar se Bees +s se * © 6-6 «6 9

iii

Stanton v. Baltic Mining Co.,

240 U.S. 103, 112 (1916). ... 21

Stratton’s Indep. v. Howbert,

aah US. 406 2 2 © ow © © © 6 9

Terrance Development Co. v. C.I.R.,

24m Feae@ Bas (A9OS) « «© «© «© «© wo «4G

Towne v. Eisner,

@Go UsBs. 4318.4 22 © © © we © © 9

United States v. Wade,

386 U.S. 218, &S/ S.Ct. 1926... a>

Other Authorities

mC, SBOGGteR Gite) « « 2 2 6 se el 7

Tresury Regulation 26, C.F.R.,

Ch. 1, Section 1.61-2(a)(1). . 8

House Report No. 1337; Senate Report

No. 1622; U.S. Code Cong. and Admin.

News, 83rd Congress, 2nd Session.

P. 4155 and 5802 respectively,

(i ia ao ee ioe ie a oe ae i a

iv

OPINION BELOW

A Grand Jury indictment for Willful

Failure to File Income Tax Returns was

filed in the Eastern District of

Louisiana. The jury returned its

verdict of guilty on all counts. A copy

of the trial court’s Judgment and

Probation/Commitment Order is attached

as Appendix "A".

Defendant timely appealed his

conviction to the Fifth Circuit Court of

Appeals, which affirmed the judgment in

its decision, attached as Appendix "B".

The further decision denying

petitioner’s motions for rehearing and

rehearing en banc was’ entered on August

31, 1988 and is attached as Appendix

“ce .

JURISDICTION

The judgment of the Fifth Circuit

Court of Appeals was entered on July 5,

1988. A Motion for Rehearing En Banc

was filed August 18, and denied on

August 31, 1988. The Supreme Court’s

jurisdiction is invoked pursuant to 28

United States Code Section 1254(1).

BASIS OF FEDERAL JURISDICTION

The United States Court of Appeals

for the Fifth Circuit had jurisdiction

over this case by virtue of 28 U.S.C.

1291.

vi

CONSTITUTIONAL PROVISIONS, STATUTES,

AND REGULATIONS INVOLVED

The Congress’ shall have power to

lay and collect taxes on incomes, from

whatever source derived, without

apportionment among the several States,

and without regard to any census or

enumeration.

U.S. Const.amend. XVI.

STATUTES

Except as otherwise provided in this

subtitle, gross income means all income

from whatever source derived, including

(but not limited to) compensation for

services, including fees, commissions,

fringe benefits, and similar items.

26 USC Section 61(a)(1).

vii

(a) Computation of gain or loss. The

gain from the sale or other disposition

of property shall be the excess of the

amount realized therefrom over the

adjusted basis provided in section 1011

for determining gain, and the loss shall

be the excess of the adjusted basis

provided in such section for determining

loss over the amount realized.

26 USC Section 1001(a).

Basis of property--cost. The basis of

property shall be the cost of such

property, except as otherwise provided

in this subchapter and subchapters C

(relating to corporate distributions and

adjustments), K (relating to partners

and partnerships), and P. (relating to

capital gains and losses). The cost of

real property shall not include any

amount in respect of real property taxes

Vili

which are treated under section 164(d)

as imposed on the taxpayer.

26 USC, Section 1012.

(a) General Rule. Proper adjustment in

respect of the property shall in all

cases be made--

(1) for expenditures, receipts,

losses, or other items, properly

chargeable to capital account, but no

such adjustment shall be made--

(A) for taxes or other carrying

charges described in section 266, or

(B) for expenditures described in

section 173 (relating to circulation

expenditures), for which deductions have

been taken by the taxpayer in

determining taxable iscome for the

taxable year or prior taxable years;

ix

TREASURY REGULATIONS

(a) In general. (1) Wages, salaries,

commissions paid salesmen, compensation

for services on the basis of a

percentage of profits, commissions on

insurance premiums, severance pay,

rewards, jury fees, marriage fees and

other contributions received by a

clergyman for services, pay of persons

in the military or naval forces of the

United States, retired pay of employees,

pensions, and retirement allowances are

income to the recipients unless excluded

by law. Several special rules apply to

members of the Armed Forces, Coast and

Geodetic Survey, and Public Health

Service of the United States; see

paragraph (b) of this section.

Treasury Regulation 26, C.F.R., Ch.1,

section 1.61-2(a)(1).

STATEMENT OF THE CASE

A. Course of proceedings and

disposition in court below.

On April 9, 1987 a Grand Jury

indictment was filed charging the

defendant, Rolland Neve with six counts

of willful failure to file income tax

returns for the years 1980 through and

including 1985. Arraignment was held

April 29, 1987, a plea of not guilty was

entered by order of the magistrate under

Rule 11.

Trial began June 8, 1987 and the

jury returned its verdict of guilty on

all six counts on June 9. On August 19,

1987 the defendant was sentenced to one

year custody as to count 1, to be

confined for 4 months and remaining 8

months suspended. 5 years probation was

ordered as to each of counts 2 through

6; to run concurrently and under count 2

the defendant was fined $5,000.00.

1

B. Statement of Facts.

The defendant is an individual

private citizen of Louisiana who

supports himself and his family as an

independent contractor.

The record reflects that the

defendant received compensation and it

is undisputed that the amounts, if

characterized as income, would have been

sufficient to require filing a return

each year under IRC Section 6012.

However, prior to the indictment the

government never responded to any of Mr.

Neve’s questions regarding the

determination of such characterization.

Mr. Neve, in reliance on decisions

authored by the United States Supreme

Court, held a good-faith belief that he

was complying with the requirements of

the law.

REASONS FOR GRANTING WRIT

I.

The Fifth Circuit Court of Appeals

has affirmed the petitioner’s conviction

on charges of willful failure to file

individual income tax returns based upon

a determination that wages, or

compensation for services, are

encompassed within the meaning of the

term "income" as used in the Sixteenth

Amendment of the U.S. Constitution which

provides for the taxation of income

without apportionment regardless of its

source. This ruling is contrary to this

Court’s determinations with regard to

the definition of the term "income" in

its constitutional sense in relation to

restrictions of the federal taxing

power. The Fifth Circuit’s resolution

of this federal question also conflicts

with determinations by courts of last

resort in States which have reviewed the

subject.

One of the fundamental rights which

government has been instituted to

protect under the design of the U.S.

Constitution is petitioner’s property

interest in the finite amount of time

and energy which constitutes his life.

The petitioner contends that the

expenditure of such property under

contract for services constitutes a

Simple conversion of that property for

compensation which cannot be construed

as "income" for want of gain. To hold

otherwise is contrary to long settle

principles of the law as well as the

equal protection provisions of the Fifth

Amendment’s due process clause, where

the preservation of other property and

rights of property are afforded by

exemption from direct taxation without

apportionment under Art. 1, of the U.S.

Constitution.

Granted, authority for that

proposition which permits the taxation

of wages as income pursuant to the

Sixteenth Amendment is extensive. Yet,

such authority is readily apparent as

the result of the application of legal

misconceptions with regard to the nature

of the tax as well as the nature of

objects sought to be taxed. Thus, such

authority, predicated upon faulty

premises, is only superficial; calling

for review by this Court in order to

maintain the integrity of the judiciary.

Only three basic premises are

identifiable as serving, either singly

or in combination, as the supporting

rationale in any case found to hold that

wages do indeed constitute income. In

regard to the characterization of wages

it is first concluded that the subject

is foreclosed simply by Congressional

enactment of legislation on the matter

which includes such compensation

specifically in its own definition of

income at 26 U.S.C. 61(a). A second

viewpoint rests on the arbitrary

assumption of a zero-cost basis in the

labor expended by the wage-earner in

order to artificially justify the

taxation of wages in conformance with

the judicially established standard that

income consists of gain. Finally, with

regard to the nature of the tax itself,

the Sixteenth Amendment has been

misconstrued as eliminating the

constitutional prohibition of direct

taxation without apportionment. In the

Fifth Circuit, Lonsdale v. Commissioner,

661 F.2d 71, 72 (1981) cited as the

controlling case, is representative of

the above contentions.

However, Lonsdale is not reliable

because its determination is based upon

the above erroneous conclusions that

Congress has the power to define the

term "income," and that the Sixteenth

Amendment eliminated apportionment.

This conclusion is in direct conflict

with the supreme court holding in the

case of Eisner v. Macomber, 252 U.S. 189

(1920) that even Congress is constrained

by the inclusion of the word "income" in

the Constitution and must remain within

the limits imposed by its constitutional

meaning:

"...it becomes essential to

distinguish between what is

and what is not ‘income’, as

the term is there used; and to

apply the distinction as

cases arise, according to

truth and substance, without

regard to form. Congress may

not by any definition it may

adopt, conclude the matter,

Since it cannot by legislation

alter the constitution, from

which alone it derives its

power to legislate, and within

these limitations alone that

power can be lawfully

exercised. id. at 206.

(Emphasis added).

Section 6l1(a) of the Internal Revenue

Code defines gross income as follows:

Except as otherwise provided

in this subtitle, gross income

means all income from whatever

source derived, including (but

not limited to) compensation

7

for services, including fees,

commissions, fringe benefits,

and similar items.

26 U.S.C. Section 61(a)(1).

According to its regulation, the

Internal Revenue Service takes the

position that wages constitute income:

Wages, salaries, commissions

paid salesmen, compensation

for services on the basis of a

percentage of profits...are

income to the recipients

unless excluded by law.

Treasury Regulation 26, C.F.R., Ch.1,

Section 1.61-2(a)(1).

What the Internal Revenue Service

fails to inform us, however, is that the

law does in fact exclude wages,

salaries, commissions, etc. from income

unless there is a "gain."

The meaning of a statute is’ to be

determined from the intention of

Congress in enacting it. For Section

6l(a) of the Internal Revenue Code, the

intention of Congress is set forth in

both the Senate and House Reports which

accompanied the Internal Revenue Code of

1954:

Section 6l(a) provides that

gross income includes "all

income from whatever source

derived." This definition is

based upon the 16th Amendment

and the word "income" is used

in its constitutional sense.

House Report No. 1337; Senate Report No.

1622; U.S. Code Cong. and Admin. News,

83rd Congress, 2nd Session. P. 4155 and

5802 respectively, 1954.

The United States Supreme Court has

provided us with the constitutional

definition of income based upon the

Sixteenth Amendment:

Income may be defined as the

gain derived from capital,

from labor or from both

combined, provided it include

profit gained through a sale

or conversion of capital

assets.

Stratton’s Indep. v. Howbert, 231 U.S.

406; Towne v. Eisner, 245 U.S. 418;

Boyle v. Mitchell, 247 U.S. 179; So.

Pacific v. Lowe, 247 U.S. 330; Eisner v.

Macomber, 252 U.S. 189; Merchant’s Loan

v. Smietanka, 255 U.S. 509.

The Supreme Court in the Eisner

case defined income from property as

"... the gain derived from capital, from

labor, or from both combined" and as "a

gain, a profit...proceeding from the

property severed from the capital

however invested or employed, and coming

in, being ‘derived,’ that is

received...that is income derived from

property," Eisner, supra, p. 207.

(Emphasis added). Not just any receipt

"coming in" is income, but only "a gain,

a profit...from property...coming in" is

income from property in the

constitutional meaning of the word.

Receipts of gain from property, not

receipts for property are income. Thus,

in order wages to constitute income,

there must be a gain derived from the

labor which produces the wages.

In another leading case,

Commissioner v. Glenshaw Glass Co., 348

U.8. 426, 431 (1955), the court

addressed the issue of whether realized

gains that involved no sources of

property were also income. The Court

10

decided affirmatively and chose as

working for income "accessions to

wealth, clearly realized" (emphasis

added). In using this phraseology, the

Court was indicting that "wealth," the

base line of value in their

determination of a gain or accession,

need not necessarily refer exclusively

to capital or labor property that was

invested, but could simply refer to the

state of an individual prior to some

fortuitous or "windfall" type of profit

without property investment or loss,

Glenshaw, supra, p. 429.

In the context of the petitioner’s

case, his labor is clearly the property

source for gross receipts and,

therefore, represents the wealth to

which there must be an "accession" or

"gain" if income is to be realized in

those receipts. In fact, wages, far

from being an accession to wealth, are

receipts for lost wealth, that is, for

11

labor property lost to the employer.

For this reason such receipts are

inherently excluded from the category of

income in spite of the failure of

statutory law to specifically recognize

the value of this type of loss.

The principle that receipts for

property losses are not gain (income) is

recognized in the case of Conner v.

U.S., 303 F.Supp. 1187 (1969). The

Court has to determine whether valuable

receipts that were not statutorily

excluded from income were in fact income

in an instance in which they represented

compensation for lost property. In that

case the Plaintiff received $4,200.00

representing insurance compensation for

financial losses of that amount. The

court held that "the same logic on

which" other specific statutory

exclusions “are based would control the

issue of judicial exclusion from gross

income made to the plaintiff’s here.

12

Congress has taxed income, not

compensation." Id. at 1191. After an

exhaustive search of the meaning of the

word income in judicial history

including both the Eisner and Glenshaw

definitions, the Court decided that

compensation for necessary financial

expenditures was not gainful and,

therefore, could not be classified as

"income." The Court noted that "Income

is nothing more or less than realized

gain. It is not synonymous with

receipts." Id., (Citations Omitted).

The Court then concluded:

Whatever may constitute

income, therefore, must have

the essential feature of gain

to the recipient. This was

true when the sixteenth

amendment became effective, it

was true at the time of the

decision in Eisner Vv.

Macomber, supra, it was true

under Section 22(a) of the

Internal Revenue Code of 1939,

and it is likewise true under

Section 61(a) of the Internal

Revenue Code of 1954. If

there is not gain, there is

not income. Id.

13

The Conner Court obviously

recognized the supremacy of the

constitutional meaning of the word

"income" over questionable statutory

phraseology and clarified the ultimate

logic which determines whether receipts

are included or excluded from income, by

simply referring to the definition of

income. Far from being accessions to

wealth, wage receipts are mere

compensation for lost wealth (one’s

labor property), unless it be denied

that the private use of the Plaintiff’s

time and energy is wealth or property to

which he is entitled.

However, Plaintiff’s labor is

indisputably a property right which was

lost by the Plaintiff to his employer.

It has been long recognized that

property is everything which has an

exchangeable value. In Re _ Tiburcio

Parrott, 1 F. 481, 506 (1880);

Slaughter-House Cases, 83 U.S. 36, 127

14

(1872); In _ Re Marshall, 102 F. 323, 324

F (1900). The Supreme Court has also

recognized that employer-employee

agreements are essentially reciprocal

property transfer contracts "by which

labor and other services are exchanged

for money and other forms of property,"

Coppage v. Kansas, 236 U.S. 1, 14

(1914). The Plaintiff’s labor and his

employer’s money, both having

exchangeable value, are equal property

under the law.

Receipts which compensate a wage-

earner for his labor expended (lost

property) cannot be deemed as gains,

profits or accessions to his expended

labor. The Virginia State Supreme Court

has held that:

There is a clear distinction

between "profit" and "wages"

or compensation for iabor.

Compensation for labor cannot

be regarded as profit within

the meaning of the law.

Oliver v. Halstead, 196 VA. 992, 86 S.E.

2d 858.

15

In Pennsylvania, the Supreme Court held

that “reasonable compensation for labor

or services rendered is not profit",

Lauredale Cemetary Assoc. v. Matthews,

345 PA. 239, 47 A.2d 277, 280.

This principle is found also in the

statutory rule for the determination of

gain from the loss of property which

occurs in selling it. I.R.C. Section

1001(a), 1011(a), 1012 and 1016(a)(1),

state, when taken together, that the

gain from the sale of property shall be

the excess of the amount realized

therefrom over the cost of the property

as it is adjusted for losses and

expenditures. The portion of the

receipts for property sold (lost) that

represents a gain is determined by

excluding the cost of that property from

receipts, hence the portion of receipts,

which compensates the seller from the

value of his lost property, is not a

gain.

16

Labor is a valuable property right

which is lost in employment. Labor

property is entitled to the same

constitutional, statutory and case-law

protection which is afforded to capital

property in the determination of income.

What is required of this Court is the

determination of some clear standard by

which the implicit value of labor may be

made explicit.

The Supreme Court has already

articulated the presence of such a

standard by noting in Adkins v.

Children’s Hospital, 261 U.S. 525, 558

(1923), that there is in the exchange of

capital and labor a "moral requirement

implicit...that the amount to be paid

and service to be rendered...." In

singling out labor from all other forms

of property, including capital, and in

refusing to recognize its market value

in determining its cost to the worker,

evidences a deep discrimination against

17

the wage earner’s form of property and

denies him equal protection of law with

respect to this form of property.

"Where property is given in

exchange for other property, the cost of

the property acquired is the value of

the property given in exchange

therefor." Champlin Refining Co. v.

C.I.R., 123 F.2d 202, 203 (1941). See

also, Terrance Development Co. We

C.I.R., 345 F.2d 933 (1965); Bankers

Trust Co. v. U.S., 518 F.2d 1210 (1975);

Bar L Ranch, Inc. v. Phinney, 426 F2d

995 (1970); Jack Daniel Distillery v.

U.S., 379 F.2d 569 (1967); and In re

Williams’ Estate, 256 F.2d 217 (1958).

The value of the labor loss, therefore,

is the amount received in compensatory

wages.

To tax a receipt for compensation

is to directly tax the property source.

This is the precise result which the

Sixteenth Amendment intended to prevent.

18

The Supreme Court in Brushaber v. Union

Pacific R.R., 240 U.S. 1 (1916) noted

with regard to the purpose of the

Sixteenth Amendment:

"...a condition which clearly

demonstrates that the purpose

was not to change the existing

interpretation except to the

extent necessary to accomplish

the result intended, that is,

the prevention of the resort

to the sources from which a

taxes income was derived in

order to cause a direct tax on

the income to be a direct tax

on the source itself and

thereby to take an income tax

out of the class of excises,

duties and imposts and place

it in the class of direct

taxes." 240 U.S. at 19.

The direct taxation of wages

without apportionment is in violation of

the prohibition of the United States

Constitution, Art.1l, sec. 9, clause 4,

contrary to the assertion made in

Lonsdale. Article 1 mandates how taxes

are to be laid and collected, Section 39,

Clause 4 provides that "No capitation,

or other direct tax shall be laid,

unless in Proportion to the Census or

19

Enumeration hereinbefore directed to be

taken." Indirect taxes are authorized

under Article 1, Section 8, Clause 1

with the limitation that “all Duties,

Imposts and Excises shall be uniform

throughout the United States."

The result intended from the 16th

Amendment was to keep the income tax

subject to Article 1, Section 8, of the

Constitution by keeping it an indirect

tax from the source, by separating the

source from the income, thereby

preventing a direct tax on the source,

Brushaber, supra.

In Pollock v. Farmers’Loan & Trust

Co., 158 U.S. 601 (1895), the Income Tax

Act of 1894 was declared invalid because

it failed to separate the source of the

income, from the income itself, which

resulted in the unconstitutional taxing

of both the source and the income. The

express purpose of the 16th Amendment

was to avert once and for all the issue

20

presented in Pollock, supra., i.e.,

under the 16th Amendment, income and

property are not synonymous.

In Stanton v. Baltic Mining Co.,

240 U.S. 103, 112 (1916) this Court

stated:

--.-(t)he 16th Amendment conferred

no new power of taxation, but

simply prohibited the previous

complete and plenary power of

income taxation possessed by

Congress from the beginning from

being taken out of the category of

indirect taxation to which it

inherently belonged.

In Eisner, supra, the Court said:

The Sixteenth Amendment must

be construed in connection

with the taxing clauses of the

original Constitution and the

effect attributed to them

before the amendment was

adopted.

The U.S. Tax Court, in Penn Mutual

Indemnity Co. v. Commissioner, 32 T.C.

(1959), CCH at page 659 conceded that

"the source of the taxing power is not

the 16th Amendment. It is Article 1,

Section 8, of the Constitution".

21

Whatever constitutes a proper

subject from whence to exact an excise

tax, therefore, is a limitation upon the

taxing power conferred under the 16th

Amendment. In Flint v. Stone Tracy Co.,

220 U.S. 107 (1911) the Supreme Court

noted the proper subjects:

Excises are ‘taxes laid upon

the manufacture, sale, or

consumption of commodities

within the country, upon

licenses to pursue certain

occupations, and upon

corporate privileges.’ 220

U.S. at 151.

The pecuniary compensations which

natural persons receive from salaried

employments, wages and occupations are

conspicously absent from the foregoing

enumeration of proper subjects of excise

taxes. What has occurred is that

Congress has unilaterally and without

authority imposed a direct tax upon

wages; an excessive use of power,

unsupported by either the Sixteenth

Amendment or the Case law.

22

II

The Fifth Circuit affirmed the

petitioner’s conviction without adequate

appearance on the record of facts from

which to determine whether the trial

judges behavior unduly influenced the

jury and thereby deprived the petitioner

of the right to a fair trial. This

action conflicts with other decisions

requiring a remand to the trial court

for the purpose of establishing

necessary factual determinations upon an

evidentiary hearing. It is a departure

from accepted judicial procedure which

requires intervention of the exercise of

this Court’s supervisory power.

The Fifth Circuit Court of Appeals

acknowledged that analysis of the impact

of of the trial judges movements and

expressions on the fairness of the trial

is difficult. Yet, the petitioner’s

assertions that Judge Duplantier’s

obvious bias toward him was communicated

23

to the jury by such conduct were

dismissed on appeal as cured by a

"reasonable" explanation given at the

end of trial as well as admonitions to

the jury to disregard judicial

indications of the defendant’s guilt

(Appendix B, p.14). However, this Court

has said:

The naive assumption that

prejudicial effects can be

overcome by instructions to

the jury...all practicing

lawyers know to be unmitigated

fiction.

Krulewitch v. U.S., 336 U.S. 440, 453

(1948).

Judge Duplantier admitted his bias

toward the defendant for pressing his

theory that wages cannot be taxed as

income as a basis of his’ defense,

Appendix D. His attitude was undeniably

conveyed to the jury throughout the

trial. Rather than assuming tha the

actions of the judge were cured by his

instructions the Fifth Circuit should

have remanded the matter for an

24

evidentiary hearing. See, United States

v. Wade, 388 U.S. 218, 87 SCt 1926;

Coleman v. Alabama, 399 U.S. 1, 90 SCt.

1999.

C

Respectfully submitted this “/day of

October, 1988. A Ae 4

Dolucd we

Rolland Neve —

Petitioner

25

APPENDIX "A"

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF LOUISIANA

UNITED STATES OF AMERICA,

Plaintiff /Appellee

Vs. CRIMINAL ACTION NO.

CRM. 87-221 "H"

ROLLAND A. NEVE,

Defendant /Appellant

JUDGMENT AND PROBATION/COMMITMENT ORDER

In the presence of the attorney for

the government, the Defendant appeared

in person on this date - August 19,

1987.

WITH COUNSEL: Samuel Coon, Esq.

PLEA:

FINDING & JUDGMENT:

There being a verdict of GUILTY to

counts 1 through 6. Defendant has been

convicted as charged of the offense of

Title 26, U.S.C., Section 7203 as

charged in the indictment.

SENTENCE OR PROBATION ORDER:

Al

The defendant is sentenced to one

(1) year on count 1, to be confined ina

jail-type or treatment institution for a

period of four (4) months, specifically

in the Volunteers of America Community

Residential Center, 1002 Napoleon Ave.,

New Orleans, La. 70115, execution of

remainder of sentence is suspended and

the defendant is placed on active

probation for a period of eight (8)

months. As to each of counts 2 through

6, imposition of sentence if(sic)

suspended and the defendant is placed

upon active probation for a period of

five (5) years, to commence upon

defendant’s release from custody.

Counts 3 through 6 to run concurrently

with count 2. As to count 2, defendant

is fined $5,000.00, to be paid within

the first two (2) years of probationary

period. Defendant to self-surrender

Sept. 18, 1987.

IT IS FURTHER ORDERED that as special

conditions of probation the defendant

file all past due income tax returns and

file on current basis during period of

probation; pay all back taxes, interest

and penalties due the Government on back

taxes in indictment as well as those not

covered by indictment as determined by

IRS; cooperate with the IRS in its

efforts to determine taxes and penalties

if called upon; pay prosecution costs

to Government as determined by the

Government.

DATE OF ENTRY AUG 20 1987

August 19, 1987

APPENDIX "B"

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 87-3637

Summary Calendar

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

versus

ROLLAND A. NEVE,

Defendant-Appellant.

Appeal from the United States District

Court for the Eastern District

of Louisiana

(CR-87-221-H)

(July 5, 1988)

Before GEE, GARWOOD, and JONES, Circuit

Judges. PER CURIAM: **

*Local Rule 47.5 provides: "The

publication of opinions that have no

precedential value and merely decide

particular cases on the basis of well-

settled principles of law imposes

needless expense on the public and

burdens on the legal profession."

Pursuant to that Rule, the court has

determined that this opinion should not

be published.

A 4

a

A jury found Rolland Neve guilty of

six counts of willful failure to file

federal income tax returns for 1980-

1985, inclusive. The district court

sentenced Neve to one year of

confinement for Count 1, with four

months to be served at the Volunteers of

America Community Residential Center,

and suspended the remainder of the

sentence with conditions. The district

court also suspended sentence for Counts

2-6 with conditions and fined Neve

$5,000. The issues Neve raises on

appeal verge on the frivolous, and we

affirn.

Neve concedes that he did not file

an individual income tax return on or

before April 15 for each year from 1980

through 1985. He earned over $300,000

during these years. Neve concedes that

the amount of his wages or compensation

for services, if viewed as income, would

have been sufficient to require filing

A 5

ial

federal income tax returns for each of

those years.

Neve cites the Sixteenth Amendment

and a number of cases to _ support his

argument that compensation for services

or wages does not constitute income for

federal income tax purposes. None of

the authorities cited by Neve explicitly

adopt this argument. In Lonsdale v.

Commissioner, 661 F.2d 71, 72 (5th Cir.

1981), this Court held that compensation

for services constitutes income for

federal income tax purposes.

The standard of review is whether,

considering all of the evidence in the

light most favorable to the prosecution,

a rational factfinder could have found

the defendant guilty beyond a reasonable

doubt based on the evidence presented at

trial. Jackson v. Virginia, 443 U.S.

307, 319, 99 S.Ct. 2781, 2789 (1979);

United States v. Bell, 678, F.2d 547,

549 (5th Cir. 1982) (en banc), aff’d,

462 U.S. 356, 1035 S.Ct. 2398 (1983).

Neve argues that the evidence fails to

establish that he acted with the

required mens rea element of

willfulness. See 26 U.S.C. Sec. 7203.

In United States v. Wade, 585 F.2d

573, 574 (5th Cir. 1978), cert. denied,

440 U.S. 928, 99 S.Ct. 1264 (1979), this

Court held that "ample" evidence

supported a jury’s finding of willful

failure to file federal income tax

returns for 1972 and 1973. This Court

relied on the following evidence as to

Wade’s willfulness: (1) Wade filed

federal income tax returns in 1968 and

1969, and (2) the Internal Revenue

Service had sent Wade a letter in 1974

advising him that his 1973 return, which

asserted a Fifth Amendment privilege and

contained no financial information, did

not comply with tax laws and would

subject him to criminal penalties unless

corrected.

Under Wade, the evidence as _ to

Neve’s willfulness is sufficient. Neve

filed federal income tax returns before

1975. On three separate occasions prior

to 1985, the U.S. Tax Court alerted Neve

to his obligations to file federal

income tax returns and told him that

there were deficiencies in his federal

income tax payments. Also, on two

different occasions, the U.S. Tax Court

specifically informed Neve that his

"wages are not income" argument is

frivolous. In addition, in 1984, the

IRS informed Neve that a criminal

investigation had been commenced against

him for failure to file income tax

returns. Also, prior to 1980, Neve knew

that he had the option of filing income

tax returns, paying his federal income

tax, and suing in federal district court

on his constitutional theories.

In his reply brief, Neve argues

that the jury’s finding as to

willfulness might have been different if

a letter that he received from an

attorney had been admitted into

evidence. Neve alleges that the letter

substantiates his legal arguments. Neve

does not specifically identify the

ruling in question, but he may be

referring to his attempt to introduce

into evidence a letter sent to him by an

attorney on April 4, 1987 which was held

inadmissable on relevancy grounds.

Since the charges against Neve relate to

his willful failure to file returns for

1980 through 1985, the district court

correctly ruled that the April 4, 1987

letter is irrelevant. See FED. R. EVID.

401-02.

Neve argues that the district court

did not have jurisdiction to convict him

because the Government should have

exhausted administrative remedies prior

to his criminal trial. Neve bases his

argument on procedural due process

A 9

——————

rights to notice and to an opportunity

to be heard. The focal point of Neve’s

argument is that he "was never afforded

an oral hearing prior to the referral

for criminal investigation." Neve fails

to mention, however, that prior to the

instigation of criminal procedures

against him, the U.S. Tax Court told him

on two different occasions that his

argument on the merits (wages are not

income for federal income tax purposes)

is frivolous. Neve does not explain how

another pre-criminal proceedings would

have affected hin.

Nor does Neve cite any authority

requiring administrative hearings prior

to criminal procedures in the present

type case. In United States v. Drefke,

707 F.2d 978, 981 (5th Cir.), cert.

denied sub. nom. Jameson v. United

States, 464 U.S. 942, 104 S.Ct. 359

(1983), this Court held that the

district court had jurisdiction to

convict Drefke for willful failure to

file federal income tax returns, and

that an administrative hearing regarding

the IRS’s jurisdiction over Drefke was

not required because the Internal

Revenue Code does not mandate such a

hearing. Similarly, here, Neve cites no

Internal Revenue Code provision

requiring exhaustion of administrative

remedies prior to valid criminal

proceedings and we are aware of none.

The district court had jurisdiction to

convict Neve, and a prior exhaustion of

administrative remedies is not required.

Neve contends next that the conduct

of the district court judge denied him a

fair trial. In reviewing whether a

district judge’s conduct and comments

during the trial deprived the party of

his constitutional rights to a fair

trial and due process, this court

reviews the proceedings as a whole to

determine whether the judge’s behavior

a

was so prejudicial as to deny the party

"‘a fair, as opposed to a perfect,

trial.’" United States v. Williams, 809

F.2d 1072, 1086, 1989 (5th Cir.),

rehearing granted on other grounds, 828

F.2d 1 (5th Cir.), cert. denied,

U.S. __«,z 108 $.ct. 259 (1987)

(quoting United States v. Pisani, 773

F.2d 397, 402 (2d Cir. 1985)). We have

carefully reviewed the record concerning

each of the matters raised by Neve, and

only two of them deserve extended

discussion. Throughout most of his

exchanges with Neve’s counsel, the trial

judge was, if at some times’ rather

abrupt in manner, nevertheless

accurately stating the law.

At one point, the court

misinterpreted testimony of a defense

witness that bore on Neve’s reputation

for honesty, and commented:

The Court: Well let me just

tell the jury that that

question, ‘the gentleman is

honest,’is not a proper

A 12

question for somebody to ask a

character witness. He may

testify about what he

understands his reputation to

be, and that’s it.

The court properly stated the

nature of character evidence. See FED.

R. EVID. 608(a). An observant juror

would have understood that the judge did

not hear the testimony accurately. We

do not find in this momentary error

evidence of substantial bias against

Neve.

Neve also argues that the judge’s

movements of his’ hands, his facial

gestures, body posture and walking

around during presentation of the

defense case, along with his language

and inclination of voice, indicated to

the jury that the judge was prejudiced

against Neve. The court responded to

this objection at trial as follows:

I stand up from time to time

because I have a

spondylolisthesis condition

which I have had for a long

time in my back which requires

me absolutely to stand up from

A 13

time to time during trial, and

the Court of Appeals ought to

know it.

Counsel made some comment

about facial gestures. I

don’t have a mirror in front

of me, so, it’s hard for me to

tell what he’s talking about.

I may say that I might have

responded with a facial

gesture to some of counsel’s

own facial gestures directed

to me and to the jury which

bordered on the contumacious

when I made rulings. Counsel

made the point also that Iwas

apparently infuriated by hin.

I only say for the record that

it would take a great deal

more than whatever he could do

to infuriate me as a Judge.

This Court always finds it difficult to

analyze whether movements and facial

expressions of the trial judge could

deprive a party of his constitutional

right to a fair trial. Nevertheless,

the trial judge here reasonably

explained his behavior and instructed

the jury several times to disregard his

admonishments to counsel and not to take

his comments as indicating any view on

the guilt or innocence of the defendant.

Neve has not persuaded us that he was

unfairly tried.

The judgment of the district

court is AFFIRMED.

APPENDIX "C"

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 87-3637

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

versus

ROLLAND A. NEVE,

Defendant-Appellant.

Appeal from the United States District

Court for the Eastern District

of Louisiana

ON PETITION FOR REHEARING AND

SUGGESTION FOR REHEARING EN BANC

(Opinion 07/05/88 x 3 Cir., 198_,

F.2d )

( August 31, 1988 )

Before GEE, GARWOOD and JONES, Circuit

Judges. PER CURIAM:

The Petition for Rehearing is

DENIED and no member of this’ panel nor

Judge in regular active service on the

Court having requested that the Court be

A 16

polled on rehearing en banc, (Federal

Rules of Appellate Procedure and Local

Rule 35) the Suggestion for Re-hearing

En Banc is DENIED.

ENTERED FOR THE COURT:

(Edith H, Jones 8/29/88)

United States Circuit Judge

maT

APPENDIX "D"

I also tell you, whether you agree

with this or not, you leave here today a

fortunate man, because if I had to

sentence you at the conclusion of the

trial, you’re sentence would have been

at least a year, and probably more than

that in a typical jail-type institution.

My change of heart is based not so much

upon any letters that I have read,

though I tell you again, they are

impressive, and you should be proud that

you have friends, and grateful that you

have friends who will stand by you in

that fashion -- but, my change of heart

is based, instead, upon the fact that

when I finished the trial, I was unable

to understand the position that you

took, and was unable to credit it any

way. I still am unable to understand

it, but I’m giving you competely the

benefit of any dcubt that I have still

that your position was sincere.

A 18

When we finished the trial, I was

completely convinced that it was an

insinere position. I no longer am

completely convinced of that, and I

impose this sentence on the assumption

that the position was entirely sincere,

and that conviction, that doubt in my

mind was brought about by reading the

letters that were submitted to me by

people to me on your behalf, and by

simple reflection that I had the

opportunity to engage in since the trial.