Opposition — United States v. Pomponio

14234-6.76

’

Lala

at!

IN THE

Supreme Court of the United States

OcToBeR TERM, 1975

No. 75-1667

Unitep States, Petitioner

Ve

CHARLES J. PILUSO, ET AL., Respondent

BRIEF IN OPPOSITION TO THE PETITION FOR A

WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE FOURTH CIRCUIT

ALBERT J. AHERN, JR.

5205 Leesburg Pike

Bailey’s Crossroads, Virginia

Attorney for Respondent

Charles Piluso

Press or Byron S. ADAMS PRINTING, INC., WASHINGTON, D. ©.

INDEX

Page

EE Ee 1

Neen TT on occecececce, 2

QUESTIONS PRESENTED ............... 0. cccccccccee. 2

STATUTE INVOLVED ......... 00... ccc cc cece cccccen, 2

RPMI oo. i ccc cc ccc ccc cccccccccceee 3

Reasons ror Denyinc THE Writ ................... 6-2:

Ne cnc wccccceccccene 24

ResponpENT’s INDICTMENT ........................ la-2a

Responpent’s Insvrvction 2 ...................... 2a-3a

Responpent’s Instruction A ..................... 3a

Responpent’s Instruction B ..................... 4a

Responpent’s Instruction C ...........000.000e.. 4a

Responpent’s Instruction D ..................... da-5a

ResPonDENT’s Instruction X ..................... Da

Responvent’s Instruction Y ..................... 6a

CITATIONS

CasEs:

Bursten v. United States, 395 F.2d 976 .............. 11

Dick v. New York Life Insurance Co., 359 U.S. 440,

in ccc cc uccccuccccace 9

ee ae

—- ewe

INDEX

EY SINE oc putiea gas ea tobe ae 1

EE Sadat avecuy sn cs undhes ee. 2

Queertows PRESENTED ... 2... 6... ccc ccc ccc ccence 2

Py I a a Mh des tt 2

Ee ora ae Ree ene ae 3

Reasons ror DENYING THE WRIT .................. 6-23

oo Oe eee eR PE SS Sees 24

REsSPONDENT’s INDICTMENT ........................ la-2a

RESPONDENT’s INSTRUCTION 2 ...................... 2a-3a

Responpent’s Instruction A ..................... 3a

REsPONDEN?’s Instruction B ..................... 4a

StESPONDENT’S INSTRUCTION C ..... 2... cc ccc ccccey 4a

ResPonpDEeNT’s Instruction D ..................... 4a-5a

REesPONDENT’s Instruction X ..................... da

Responvent’s Instruction Y ..................... Ga

CITATIONS

CasEs:

Bursten v. United States, 395 F.2d 976 .............. 11

Dick v. New York Life Insurance Co., 359 US. 440,

SP at nitdwhd cece tebe tes iad i)

il Index Continued

Page

Federal Trade Commission v. American Tobacco Co.,

974 U.S. 543, 47 S.Ct. 663, 71 L.Ed. 1193 .....-... 8,9

National Labor Relations Board v. Pittsburg S. & S.

Co., 340 U.S. 453, 71 Sup. Ct. Rep. 453 .. 2,8, 10, 13,15

Perez v. United States, 290 F.2d 12 ......---++-+->: 11

Thorpe v. Housing Authority of the City of Durham,

89 S.Ct. 510, 393 U.S. 268 ..... 66. e ee eee ee eee 7

United States v. Bishop, 412 U.S. 346 .....--------- 15, 16

United States v. Colacurcio, 514 F.2d 1 (1975) ....... 19

United States v. Cullen, 454 F.2d 386 .....----++++++:

United States v. Hawk, 497 F.2d 365, cert. denied 419

CE Dg vcncocdenedeccceseusseseveerss teens 15,18

United States v. McCorkle, 511 F.2d 482, cert. denied

ADE TIM, GOB oc cc ccccccccsccccscccesccceceses 15, 20

United States v. Mitchell, 495 F.2d 285 .....-.---++-- 11

United States v. Murdock, 290 U.S. 389 .......---- .16, 17

United States v. Pohlman, 522 F.2d 974 .......----. 17,19

STATUTES:

Internal Revenue Code of 1954 (26 U.S.C.):

Mantion TOOL ....ccccccccccccccccccccosscsecees 22

Mactan, THE oc cccccccccccsceccccscesssseveces 22

ection T3908 ....ccccccccccess 17, 18, 19, 20, 21, 22, 23

Section 7206(1) ........---ee cece eeeee 2, 3, 15, 16, 22

IN THE

Supreme Court of the United States

OcToBER TERM, 1975

No. 75-1997

Unttep States, Petitioner

We

CHARLES J. PILUSO, ET AL., Respondent

BRIEF IN OPPOSITION TO THE PETITION FOR A

WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE FOURTH CIRCUIT

Now Comes the Respondent Charles J. Piluso and

opposes the Petition for Writ of Certiorari to review

the judgment of the United States Court of Appeals

for the Fourth Cireuit.

OPINION BELOW

The opinion of the United States Court of Appeals

is found at (Petitioner’s App. la-5a) and i

at 528 F.2d 247. an ene

JURISDICTION

Respondent adopts the jurisdictional st

atement

forth by the Petitioner. sada

2

STATUTE INVOLVED

Section 7206(1) of the Internal Revenue Code of

1954, 26 U.S.C. 7206(1), provides:

Any person who—

(1) * * * Willfully makes and subseribes any

return, statement or other document, which con-

tains or is verified by a written declaration that

is made under the penalties of perjury, and which

he does not believe to be true and correct as to

every material matter * * *

*% * * * *

7 é riction

shall be guilty of a felony and, upon convic ,

thereof, shall be fined not more than $5,000, 01

imprisoned not more than 3 years, or both, to-

gether with the costs of prosecution

QUESTIONS “RESENTED

1. Does not the finding of fact of the United

States Court of Appeals for the Fourth Circuit that

the Respondent is entitled to a new trial because of

the failure of the trial judge to instruct the jury

in accordance with tendered instructions present a

factual determination based on the entire record which

is not reviewable in this Court under National Labor

Relations Board v. Pittsburg S & S Co., 340 U.S. 413

91 Sup. Ct. Rep. 453.

2. Whether, in the special factual situation pre-

sented by this record, the Court of Appeals was cor-

rect in holding that it was error for the trial judge

to remove from the jury’s consideration all questions

with respect to the Respondent’s ‘‘good motive’ when

the Respondent contended that good motive caused him

to omit from his gross income and treat as non-taxable

the ‘‘corporate advances’’ he had received.

3

COUNTERSTATEMENT

Respondent incorporates the statement filed by the

Petitioner with the following factual additions.

The Respondent was indicted and convicted of three

counts which charged a violation of Title 26, Section

7206(1) U.S.C. The indictment charged that the Re-

spondent had filed false tax returns in that he had

fraudulently failed to include in his gross income

certain funds that were received by him and which he

well knew to be taxable. The indictment also charged

that with respect to the year 1971 the return was false

and fraudulent in that the Respondent claimed a

$119,000 partnership loss on his personal tax return

which the Government contended was not a valid

partnership loss but a corporate loss.

Respondent, Charles J. Piluso, an attorney at law,

joined the Pomponio organization in 1965. In 1967

an audit of the Pomponio corporations and their

officers by the Internal Revenue Service for the tax-

able years 1963 and 1964 terminated in a compromise.

One of the issues which was disputed and resolved

was the taxability or non-taxability of certain cor-

porate advances that had been made during those

years by Pomponio-controlled corporations to their

corporate officers. The certified public accountant,

Burton Bates, who represented the Pomponio inter-

‘The Pomponio organization consisted of over forty corpora-

tions which were owned by the Pomponio brothers, Louis, Jr.,

Peter and Paul.

*“‘Tr.’’ refers to the transcript of trial proceedings, ‘‘R.A.”’

refers to the combined appendix filed in the court of appeals on

behalf of all the respondents; ‘‘R”’ refers to the appendix filed on

behalf of respondent Piluso.

4

ests during the audit and who prepared the tax re-

turns for the corporate officers, testified that as a

result of the final compromise ‘‘the majority of the

advances were not taxed as income, the same proce-

dure followed’’. He testified that following the resolu-

tion of this audit the Pomponio corporations followed

the same accounting procedure employed in the past

with respect to corporate advances to its officers. This

policy treated ‘‘corporate advances’’ as loans which

were duly recorded as such on the books and records

of each corporation that made the advance. Each

corporate advance was also reflected by the setting

up of an account receivable on the books and records

of the corporation making the particular advance.

(Tr. 395-396. )

During the subsequent Internal Revenue audit of

the Pomponio corporations and their officers, leading

up to the indictment in the present case, agents of

the Internal Revenue Service discovered in 1971 that

the Respondent, Charles J. Piluso, had not in fact

signed his 1969, 1970 and 1971 tax returns when they

were filed. The agents then presented the tax returns

to the Respondent for his signature. His 1969 tax

return was signed and subscribed to on March 11,

1971; the 1970 tax return was signed and subscribed

to on August 1, 1971; the 1971 tax return was signed

and subscribed to on November 10, 1972. At the time

Respondent signed these tax returns he was aware of

the full-scale audit that was being conducted by the

Internal Revenue Service. He was also fully aware

that in 1967 the Internal Revenue Service had largely

accepted, without penalties, the contention of the

Pomponios that the corporate advances were in fact

loans to the officers and not taxable income to them.

ee

CE Ptr

4)

Bates testified further that as a matter of practice

each calendar year he would supply the Respondent

with all the necessary financial data for Respondent’s

accountant to prepare his income tax return. He testi-

fied that he never supplied the Respondent with the

amount of the corporate advances made in any given

year because they were treated as loans to the cor-

porate officers and not as income to them. (Tr. 422.)

Respondent tendered a number of instructions to

the trial judge in accordance with his defense the* in

good faith, to wit that motivated by the Internal

Revenue’s prior position in the 1967 compromise, he

did not include the corporate advances in his gross

income for the years in question. These instructions,

2, A, B, C, D, X and Y (Res. App., pp. 2a-6a) were

tendered and denied. These instructions placed before

the jury in varying ways the legal proposition that

Respondent was entitled to an acquittal even if the

jury believed the corporate advances for the years in

question were in fact income to the Respondent unless

they were also satisfied beyond a reasonable doubt that

the Respondent did not truly believe the corporate

advances were in fact loans to him when he affixed

his signature to the tax returns in question. These

instructions were denied by the trial judge over the

Respondent’s objection.

The Court of Appeals reversed the conviction and

awarded the Respondent a new trial. It held, inter

alia, that the trial judge committed prejudicial error

when he failed to instruct the jury in accordance with

the substance of instructions tendered by the Re-

spondent relating to his defense of good faith.

6

The Court of Appeals’ opinion also reversed the

conviction because of the trial judge’s instruction to

the jury that they should remove entirely from their

consideration the existence of the Respondent’s alleged

good motive in omitting the corporate advances from

his gross income when the jury sought to determine

whether the requisite willfulness existed when the

returns were signed. This separate basis for reversal

has been treated by the Petitioner as Point 1 in its

Petition for Certiorari (Pet. for Cert., pp. 8-12).

Respondent suggests that it will be unnecessary for

the Court to reach and/or decide the correctness of

this contention because of the independently-based

ground for reversal with respect to the denial of the

substance of tendered instructions by the Respondent.

Respondent has, therefore, replied to this contention

as Point 2 in this brief in opposition to the Petition

for Certiorari since the opinion of the Court of Ap-

peals makes resolution of this issue unnecessary.

REASONS FOR DENYING THE WRIT

The Court of Appeals’ opinion, which awarded the

Respondent a new trial, is independently based on

the finding and conclusion of the Court of Appeals

that the jury was not properly instructed in accord-

ance with the substance of tendered instructions, which

is a non-reviewable issue in this Court.

The Petitioner concedes that the reversal of the

conviction by the United States Court of Appeals is

independently based on the finding and conclusion of

the Court of Appeals from the entire record that the

jury was not properly instructed in accordance with

the substance of tendered instructions. At page 12

of the Petition for Certiorari the Petitioner states:

CS Sette 5 tae D0 a pe 6B tes tM ee

7

‘Although this issue would not independently

warrant review by this Court, this aspect of the

trial judge’s instruction was an independent

ground for reversal by the Court of Appeals.’’

This concession by the Petitioner is supported by

this Court’s ruling in National Labor Relations Board

v. Pittsburg S & S Co., supra. This Court, under the

doctrine in National Labor Relations Board v. Pitts-

burg S & S Co., supra, would accept and defer to a

finding of fact made by the Court of Appeals based

on their conclusions drawn from the entire record.

Since this non-reviewable issue separately requires a

new trial for the Respondent, Petitioner’s asserted

error in Point 1 of its Petition, pp. 8-12, dealing with

the Court of Appeals’ additional Separate basis for

reversal (because of the removal of good motive from

the jury’s consideration), need not be reached or re-

solved by this Court. This Court has often stated that

it will not decide contingent or abstract questions in

advance of necessiy for its decision. Thorpe v. Housing

Authority of the City of Durham, 393 U.S. 268 89

S.Ct. 518.

Respondent’s instructions 2, A, B, C, D, X and Y

(Res. App., pp. 2a-6a) were all refused by the trial

judge. They were not granted in substance. They

sought to place before the jury, in accordance with

Respondent’s defense, the legal proposition that if

Respondent in good faith believed the corporate ad-

vances received by him were loans and thus did not

include them in his gross income the jury should ae-

quit. They also conveyed to the jury that they should

acquit Respondent even if they were satisfied beyond a

reasonable doubt that the corporate advances were not

8

loans but were in fact income if and unless they

were satisfied beyond a reasonable doubt that Re-

spondent did not in good faith believe they were loans

when he signed the tax returns.

The factual determination and conclusion by the

United States Court of Appeals that the trial judge

did not in fact substantively charge the jury in ac-

cordance with the instructions tendered by the Re-

spondent necessarily involves a consideration of the

entire evidentiary record, an evaluation of the instruc-

tions tendered and the entire charge of the Court.

Th Court of Appeals has resolved this issue in the

Respondent’s favor in awarding him a new trial.

This issue is not reviewable in this Court even if

this Court, upon a review of the entire record, were

to reach a different conclusion as to whether the trial

judge had adequately charged the jury in accordance

with Respondent’s theory of defense. As this Court

stated in National Labor Relations Board vy. Pitts-

burg S & S Co., supra,

“This is not the place to review a conflict of evi-

dence nor to reverse a Court of Appeals because

were we in its place we would find the record

tilting one way rather than the other, though fair-

minded judges could find it tilting either way.

It is not for us to invite review by this Court of

decisions turning solely on evaluation of testi-

mony where on a conscientious consideration of

the entire record a Court of Appeals under the

new dispensation finds the Board’s order unsub-

stantiated. in such situations we should ‘adhere

to the usual rule of non-interference where con-

clusions of Circwt Courts of Appeals depend on

appreciation of circumstances which admit of

different interpretations.’ Federal Trade Comm’n.

2 EL A ASG eB aT Ie Lite eile MA A

—~—Jiaasiiiziziiaiaiiaics icine

9

v. American Tobacco Co., 274 U.S. 543, 47 S.Ct.

663, 71 L.Ed. 1193.’’

This Court, in Federal Trade Commission v. Amer-

tcan Tobacco Co., 274 U.S. 543 47 S.Ct. 663, 71 L.Ed.

1193, stated:

It now appears to us that this matter of fact is

of no general importance. Accordingly, we adhere

to the usual rule of noninterferenece where con-

clusions of Circuit Courts of Appeals depend on

appreciation of circumstances which admit of

different interpretations, and upon that ground

alone we affirm the judgment below.

The language of Mr. Justice Frankfurter, dissent-

ing in Dick v. New York Life Insurance Co., 359 U.S.

451, 79 S.Ct. 921, is applicable, wherein he stated:

In order to justify the establishment of the Cir-

cuit Courts of Appeals it was necessary to view

certiorari as

‘a power which will be sparingly exercised,

and only when the circumstances of the case

satisfy us that the importance of the ques-

tion involved, the necessity of avoiding con-

flict between two or more courts of appeal,

or between courts of appeal and the courts of

a State, or some matter affecting the inter-

ests of this nation in its internal or external

relations Gemands such exercise.’

Forsyth v. City of Hammond, 166 U.S. 906, 513,

17 S.Ct. 665, 668.

The Petitioner argues that the tendered instruc-

tions were in fact substantively given to the jury and

cite in support of their argument certain excerpts

from the Court’s charge (Pet. for Cert. p. 13; Tr.

10

1123 and 1116-1117). The Petitioner is precluded from

making this argument in this Court because the Court

of Appeals has reached an opposite conclusion based

on the entire record, the tendered instructions and the

entire charge of the Court. See National Labor Rela-

tions Board v .Pittsburg S & S Co., supra, and Fed-

eral Trade Commission v. American Tobacco Co.,

supra. This argument also misconceives the substance

conveyed in the tendered instructions and avoids the

explicit statements of the trial judge throughout the

record that he had no intention of instructing the

jury in accordance with the tendered instructions.

(Tr. 717 and 1084.) The Instruction A (Res. App.,

p. 3a) requested the Court to instruct the jury that

they had to believe beyond a reasonable doubt that

the Respondent did not believe in his own mind that

the corporate advances were loans when he signed

the tax returns before they could convict him. It also

calld upon the Court to instruct the jury that in

determining Respondent’s state of mind on the issue

of willfulness they could consider the Respondent’s

knowledge of the Internal Revenue Service’s position

adopted in earlier years as to the taxability or non-

taxability of the corporate advances to the officers.

It also set forth that the jury might consider the

family control of the corporations in question, the

repayment and/or the intention to repay, and the

presence of a certified public accountant in connection

with the preparation of personal and corporate re-

turns in determining whether the requisite willfulness

existed. None of these concepts was even remotely con-

veyed by the trial judge to the jury in those portions

of the charge cited by the Petitioner (p. 13 Pet. for

Cert.; Tr. 1116-1117, 1123). Those excerpts cited by

out penn tie —

ee ee eee ee RE CP kt

a

11

the Petitioner do not purport to cover these concepts

and indeed in tax prosecutions the failure of the trial

judge to instruct on the reliance issue when a certified

public accountant prepared the tax returns has been

held itself to be reversible error. See United States v.

Mitchell, 495 F.2d 185 (4 Cir. 1974); Bursten v.

United States, 395 F.2d 976 (5 Cir. 1968): and Perez

v. United States, 297 F.2d 976 (5 Cir. 1961).

Instructions B and X (Res. App., pp. 3a-5a) con-

veyed to the jury that the Government was required to

establish beyond a reasonable doubt two issues in con-

nection with the instant prosecution: (1) that the

corporate advances for the years in question were in

fact taxable income to the Respondent, and (2) that

the Respondent knew and believed that the said cor-

porate advances were income to him and not loans

at the time he signed the returns which were alleged

to be false and fraudulent.

Instructions C, D and Y (Res. App., pp. 4a-6a)

dealt with the partnership loss claimed on Respond-

ent’s 1971 tax return. These instructions all sought to

have the Court instruct the jury that in order to con-

vict the Government was required to prove that the

partnership loss claimed in 1971 was not a partnership

loss but was in fact a corporate loss. They provided

further that the Government had to prove beyond a

reasonable doubt that the Respondent knew that the

$119,000 partnership loss was in fact a corporate loss

when he took it as a partnership loss on his 1971 tax

return. The three excerpts from the trial judge’s

charge (Tr. 1116-1117; pp. 13-14 Pet for Cert. relied

upon by the Petitioner in covering this issue did not

adequately convey the substance of these concepts to

the jury.

12

The Court of Appeals, in making its finding that

the jury was inadequately instructed in accordance

with tendered instructions reasonably raised by the

evidence, had before it the entire charge of the Court

and had the benefit of the explicit statements of th

trial judge throughout the record that he had no in-

tention of instructing the jury on what the state of

mind of the Respondent was as to whether the cor-

porate advances were income or loans if the jury con-

cluded that the corporate advances should have been

included in the gross income of the Respondent.

The trial judge’s statements on the record make it

unmistakably clear that the trial judge had no in-

tention of stating the substance of Respondent’s in-

structions to the jury which Petitioner seeks to

attribute to the excerpted paragraphs relied upon in

the Petition for Certiorari.

Sample excerpts of the judge’s statements on the

record reflecting this are as follows:

(Tr. 717)

THE Court: ‘‘ * * * The sole question is whether

or not these advances, taking into consideration

the whole situation, were legitimate bona fide

loans if that term is used * * *

Mr. AHERN: Whether the defendants believed

they were bona fide loans?

Tue Court: Not what they believed

At the conclusion of the charge the trial judge was

again specifically requested to instruct the jury in

accordance with Instructions X and Y or to convey

in similar language that if Respondent believed in

fact, though erroneously, that the corporate advances

were loans at the time the returns were signed, the

— — Tse ee

ee ee ar fae eee oe a eer

ers ho only

PS ie nN i Ra, ls, tn Sl nt aN IS RM OE ke Uae ink abe seeder ee

13

jury should acquit the Respondent. (Tr. 1138; R.

126) :

Mr. AHERN: I am specifically requesting you to

supplement your charge and tell the jury that if

they do not find they were bona fide loans but they

believe the defendants operated on the premise

that they were loans that is enough to acquit the

defendants on each charge.

_ THe Court: I don’t think that is the law. If it

is the law they have devised the greatest method

of withdrawing funds I ever heard of.

The Court of Appeals, after examining the entire

record, has concluded that the jury was not adequately

instructed in accordance with Respondent’s tendered

instructions relating to the alleged good faith belief

of the Respondent that the corporate advances were

loans at the time he signed the returns.

This Court, therefore, under National Labor Rela-

tions Board v. Pittsburg S & S Co., supra, would

defer to the Court of Appeals’ finding of fact on this

issue and would not disturb it even if on balance, this

Court, based on the whole record, would have resolved

this determination the other way.

_As additional support for the findings and conelu-

sions of the Court of Appeals, the Court of Appeals

had before it the entire charge of the trial judge which

emasculated to the point of derision the central de-

fense placed before the jury by the Respondent in his

instructions, to wit: his good faith belief that the

“corporate advances’? were loans aud thus not in-

cludible in his gross income. The total elimination of

this defense from jury consideration was accomplished

14

not only by the tritl judge’s denial of tendered in-

structions, supra, but by the manner in which the

jury was instructed. The trial judge employed the

following descriptive terms instructing the jury on

Respondent’s defense of good faith. The records of

the Pomponio corporations were described as the ‘‘so-

called bookkeeping records’’ (R. 98). When instruct-

ing the jury on corporate advances they were de-

scribed as the ‘‘so-called advances”? (Tr. 1114 R. 102).

When charging the jury with respect to the claimed

partnership loss on the 1971 tax return it was referred

to as the ‘‘se-called loss’’ (Tr. 1114, R. 102). In deal-

ing with the subject of repayment of the loans, the

jury was insiructed:

‘‘And the defendants further brought out and

called to your attention the ‘so-called repayments’

in determining the partnership loss.’’ (Tr. 1119,

R. 107)

In describing the partnership loss (there was never

any contention by the Government that the partner-

ship was not a valid one) the judge again used the

derisive adjective ‘‘so-called’* when he stated (Tr.

1129; R. 116):

‘Now I told you during my comments above the

‘so-called’ partnership”’

At the conclusion of the charge detailed objections

were made to the Court’s terminology, its treatment

of the defense of good faith, and the denial of the

Respondent’s instructions. The trial judge did not

hesitate to state on the record a total disbelief in the

good faith defense of the Respondent. This is reflected

VA. aes drolt

15

in the following references in the record.? The Court

of Appeals, therefore, in making its finding that the

jury was not properly instructed in accordance with

Respondent’s theory of defense, has an overwhelming

record to support their finding which, under this

Court’s decision in National Labor Relations Board v.

Pittsburg S & S Co., is not reviewable in this Court.

The Petition for Writ of Certiorari should aceord-

ingly be denied.

The ruling of the United States Court of Appeals

for the Fourth Cireuit is not in conflict with either

Umted States v. Hawk, 497 F.2d 365, (C.A. 9), cert.

denied, 419 U.S. 838; United States v. M ceCorkle, 511

F.2d 482 (C.A. 7) (en banc), cert. denied 423 U.S.

826; and United States v. Pohlman, 522 F.2d 974

(C.A. 8), (en bane), cert. denied January 12, 1976,

No. 75 — 483, and its ruling that good motive may

not be removed from a jury’s consideration in deter-

mining willfulness is in complete harmony with the

cases from the Seventh, Eighth and Ninth Circuits

and with this Court’s ruling in United States v.

Bishop, 412 U.S. 346 (1973).

In United States vy. Bishop, 412 U.S. 346 (1978),

which involved a prosecution under 26 USC 7206 (1),

this Court determined that the word ‘willfully’? com-

prises and requires proof of “a voluntary intentional

*““Tf it is legal I am the first to congratulate these gentlemen

for it.’’ (Tr. 812).

“If you can do that by loan frankly I don’t know why I

was so stupid during the forty years I was practicing law.’’

(Tr. 714).

“If that is permissible, it is great. We’re going to have a

revolution.’’ (Tr. 724).

eT

16

violation of a known legal duty’’ 412 U.S. at 360 and

the ‘‘bad faith or evil motive’’ described in United

States v. Murdock, 290 U.S. 389 (1933) 412 U.S. at

360.

The trial judge correctly defined willfulness to the

jury (Tr. 1097; R. 85):

‘The Supreme Court has formulated the require-

ment of willfulness as used in this identical stat-

ute as bad faith or evil intent or evil motive and

one of justification in view of all the financial

circumstances * * * ”’

The Court later in the charge told the jury (Tr. 1124;

R. 112):

‘*Good motive alone is never a defense where the

act done or omitted is a crime. So the motive of

the accused is immaterial except insofar as the

evidence of motive may aid determination of state

of mind or intent.”’

Thus, after haviag initially told the jury the cor-

rect definition of willfulness as defined by this Court

in Bishop v. United States, supra, which required the

showing of an evil motive in a 7206(1) prosecution,

involving the filing of false tax returns, they were

inconsistently told that they should exclude from all

consideration the Respondent’s good motive which

caused him not to include the corporate advances as

a part of his gross income when he signed the returns.

In the instant case the prosecution under Title 26,

Section 7206(1) imposed the duty on the Respondent

to sign and subscribe under the penalties of perjury

to a truthful tax return. Respondent contended that

the prior decision of the Internal Revenue Service in

1967, which accepted the corporate advances as loans

fae

OS err tril helene,

17

rather than income to the corporate officers, plus the

concurrence of the certified public accountant in the

treatment of the corporate advances as loans to the

officers, operated as the good and motivating reasons,

i.e. the good motive, which caused the Respondent to

sign and subscribe to his 1969, 1970 and 1971 tax

returns in the middle of a full-scale audit of the

Pomponio corporations and their officers. Therefore,

the good motive in this case, which was the asserted

belief by the Respondent Piluso that the corporate

advances were loans and not includible in his gross

income, was directly caused and brought about by

the actions of the Internal Revenue Service. The

evidence in this case presented a record where the

good motive asserted by Respondent had a direct

probative relevance to why the corporate advances

were not included as part of the Respondent’s gross

income, which was an entirely proper subject for the

jury to consider in determining whether the requisite

willfulness existed under this Court’s ruling in United

States v. Murdock, 290 U.S. 389. The conflict in the

Circuits, which the Petitioner seeks to urge in his

Petition, does not in fact exist if the present record

is scrutinized and the decisions cited by the Petitioner

are analyzed on their facts.

Umted States v. Hawk, supra, Ninth Circuit ; United

States v. McCorkle, supra, Seventh Circuit; United

States v. Pohlman, supra, Eighth Circuit, simply hold

with dissents among the panels that it is not reversi-

ble error in a prosecution under Title 26 Section 7203

USC (Failure to File Tax Returns) for the trial

judge to refuse to use the words “evil motive and

bad purpose”’ in defining willfulness so long as other

appropriate language conveys the necessary mens rea

18

that conveys to the jury the wrongful or bad purpose.

In United States v. Hawk, supra, the Court of Ap-

peals stated:

Still a nagging question remains as to Justice

Blackman’s ‘evil motive’: was it the unstated

intent of the opinion to require inclusion of those

exact words? We think not. The statement in the

opinion is that willfulness is to be uniformly de-

fined to require the bad purpose or evil motive

described in Murdock vy. United States, 290 US

389 (1933) * * * the term ‘evil motive’ is merely

a ‘convenient short hand expression to distinguish

liability based on conscious wrongdoing from lia-

bility based on mere carelessness or mistake.

Boardman v. United States, 419 F.2d 110 (First

Circuit 1969) cert. denied 397 U.S. 991 (1970)

The cases cited by the Petitioner from the Seventh,

Eighth and Ninth Circuits simply hold that in a 7603

prosecutions there is no inflexible requirement for the

trial judge to use in hae verba the phrases ‘‘bad pur-

pose’’ or ‘‘evil motive’? when defining willfulness.

None of these cases remotely suggests that in a 7206(1)

prosecution the judge may exclude the good motive

of the accused in signing the return if the good

motive has probative relevance to the breach of the

known legal duty. United States v. Hawk, supra, is

not in conflict with the instant decision. 7 S. V. Hawk,

supra, simply holds, in dealing with a prosecution

under Title 16, Section 7203 that this Court did not

require and/or ascribe any particular **magie’’ to the

words “‘bad purpose and evil motive’’ such that a

trial judge, under pain of reversible error, must use

those very terms when willfulness is defined to the

jury.

19

The scope of all the decisions from the Ninth Cir-

cuit relied upon by the Petitioner was clearly defined

in United States v. Colacurcio (9 Cir.), 514 F.2d 1

(1975). The Court of Appeals stated:

“Contrary to appellant’s position, this court and

other courts have held that ‘magin words’ such as

‘bad purpose’ or ‘evil motive’ are not necessary

as part of the willfulness instruction in cases of

this nature. U.S. y. Hawk, 487, F.2d 365 and

U.S. v. Divareo, 484, F.2d 670, 674 (Seventh Cir-

“pod 1973), cert. denied 415 U.S. 916 94 S.Ct.

12.

United States vy. Pohlman, 522 F.2d 974 (C.A. 8),

is not in conflict with the instant decision. This case,

with dissents among the panel, affirmed a conviction

in which the majority ruled that the trial judge had

not committed reversible error in instructing the jury

on the requirements of willfulness in a prosecution

under Title 26, Section 7203 USC. The majority

opinion held that the trial judge had sufficiently con-

veyed to the jury the necessary mens rea or evil intent

necessary to sustain a conviction for willfully failing

to file a tax return even though the precise words

‘‘bad purpose and evil motive” were not used in de-

fining willfulness. The dissenting members of that

panel agreed with the ma jority ruling that this

Court’s decision in United States y. Bishop, supra,

did not make it mandatory for the trial judge, under

pain of reversible error, to use the precise words “‘bad

purpose” or “evil motive’ in defining willfulness as

long as the concept of the necessary evil mens rea

was adequately conveyed to the jury. In a footnote

the dissenters did express their concern as to why the

majority strained so hard to avoid the very words

20

that this Court employed in Murdock v. United States,

supra, and Bishop v. United States.’

United States v. McCorkle, 511 F.2d 482 (7 Cir.),

cert. denied 423 U.S. 826, cited by the Petitioner as in

conflict with the instant decision is another prosecu-

tion under Section 7203 of Title 26. The Seventh

Cireuit in that case merely followed the Ninth Circuit

in holding that it was not mandatory for a trial judge

to use the precise terms ‘‘bad purpose’’ and “‘evil

motive when defining willfulness to the jury.

None of these cases remotely suggests that if an

accused’s good motive in signing a tax return, which

eliminated from his gross income certain items alleged

to be taxable, had a probative relevance to the duty

allegedly breached, the jury should be told to exclude

it from their determination of whether the requisite

willfulness exists, as the trial judge did in the instant

cease.

The Court of Appeals below recognized that in

ordinary criminal cases generally the good motive of

the accused would be irrelevant except insofar as it

had a bearing on intent. The Court of Appeals stated

(Pet. Ap. 4A and 5A):

‘‘Although the instruction was given to explain

the difference between intent and motive, and

would have been correct in most criminal trials,

the Supreme Court indicated in Bishop that the

statute at hand requires a finding of a bad pur-

pose or evil motive.”’

8**We fail to understand why the language of the majority

opinion strains so hard to avoid use of the very language the

Supreme Court approved in Murdock and Bishop. ‘Bad purpose

and evil motive’ to disobey the law is clearly an element of the

offense and are words easily phrased and understood.’’

21

The Court of Appeals did not hold, as the Peti-

tioner seeks to urge in this Court, that the alleged

good motive was a complete defense to the charges.

It simply held that in the circumstances of this case

the trial judge was in error in telling the jury that

in determining whether there was the requisite bad

purpose or evil motive necessary to constitute will-

fulness when the Respondent signed the tax returns

they should exclude from all consideration the good

motive of the Respondent.

The Court of Appeals correctly pointed out that

good motive would ordinarily be irrelevant in most

criminal cases. It could be argued that it would be

irrelevant even in those tax prosecutions where the

known legal duty is simply the duty to file a tax

return, as was the case in all the 7603 prosecutions

cited by the Petitioner, United States v. Ha wk, supra,

United States v. Pohlman, supra, United States v.

McCorkle supra. The Court of Appeals for the Seventh

Cireuit in Cullen v. United States, 454 F.2d 386

(1971), after setting out the general rule holding that

good motive is irrelevant in most criminal cases,‘

stated:

‘In some situations the defendant’s ultimate ob-

jective may be an element of the particular

offense charged. Thus to prove treason a purpose

to give aid and comfort to the enemy must be

established, to prove a criminal attempt an

analysis of the defendant’s purpose beyond the

***His theory is merely another variety of an age-old argument.

If a religious, moral or political purpose may exculpate illegal

behavior, one might commit vigamy to avoid eternal damnation,

steal from the rich to give alms to the poor, burn and destroy, not

merely public records but perhaps buildings but even public ser-

vants as well to implement a Utopian design. * * * ”’

22

overt act usually completed is necessary and to

establish some forms of malice the reasons why

the defendant acted as he did may be critical. In

such cases the prosecution has the burden of

proving improper motive and it would therefore

be entirely proper for the defendant to respond

with evidence of good motive * * * ”’

If the good motive contended for has no probative

relevance to the known legal duty allegedly breached

it should be excluded. Therefore, the Court was cor-

rect in excluding good motive in those cases cited in

the Petiiton for Certiorari, pp. 11-12, where in 7203

prosecutions one’s belief in the immorality of war

was excluded, United States v. Malinowski, 472 F.2d

855 (C.A. 3); and/or one’s good motive in protesting

the withholding of income taxes from the wages of

workmen, United States v. Smith, 487 F.2d 329 (C.A.

9); and/or one’s desire to avoid disclosure of his

identity to others, United States v. Matosky, 421

F.2d 410 (C.A. 7).

The Petitioner has recognized the relevancy of evil

motive to prosecutions under 7201, 7206 and 7207 of

Title 26 USC in the past. The Government has con-

trasted the necessity of evil motive under those sec-

tions with prosecutions under Section 7203 of Title

26 USC. In the Government’s brief filed in the United

States Court of Appeals for the Ninth Cireuit in

United States v. Hawk, supra, which was decided

subsequent to this Court’s decision in United States v.

Bishop, supra, the Government contrasted prosecu-

tions under Section 7203 with prosecutions under

7201, 7206(1) and 7207, and with reference to evil

motive stated at page 14 of Government’s brief:

‘ea

23

“Section 7203 involves willfulness only in conduct

of omission and the ‘bad’ purpose necessary to

the offense is simply a purpose ‘to evade the law’s

requirements * * *,’ The tax crimes of commission,

be they felony or misdemeanor, sections 7201,

7206(1) and 7207, which require affirmative acts

of fraud or attempted evasion of payment of

taxes, certainly involved evil motive as a part of

such elements but such term can only mislead the

jury in a failure to file a misdemeanor case where

bad purpose adequately covers the purposeful

oa m- to do what one knows the law requires one

0 do.”’

The 7203 prosecutions cited by the Petitioner do

= conflict with the instant decision as set forth

above.

CONCLUSION

For the reasons stated above the Petition for Writ

of Certiorari should be denied.

Respectfully submitted,

ALBERT J. AHERN, JR.

9205 Leesburg Pike

Bailey’s Crossroads, Virginia

Attorney for Respondent

Charles Piluso

RESPONDENTS APPENDIX

‘

la

COUNT 11

Tue Granp Jury FurTHER CHarGEs:

That on or about the 11th day of March, 1971, in the

Eastern District of Virginia, CHarues J. PiLvuso, a resi-

dent of McLean, Virginia, did willfully and knowingly

make and subscribe a United States Individual Tax Re-

turn, Form 1040, for the calendar year of 1969, which

was verified by a written declaration that it was made

under the penalties of perjury and was filed with the In-

ternal Revenue Service, which said income tax return he

did not believe to be true and correct as to every material

matter in that the said return reported income from wages

in the amount of $26,000, dividends in the amount of

$1,514.59, interest in the amount of $2,622.92, and fees

of $4,700 whereas as he then and there well knew and

believed, he received substantial income in addition to

that heretofore stated.

Violation of Section 7206(1 ), Internal Revenue Code,

Title 26, United States Code, Section 7206(1).

COUNT 12

THe Granp Jury F’urTHER CHarcEs:

That on or about the 1st day of August, 1971, in the

Eastern District of Virginia, Cuarues J. PILUSO, a resi-

dent of Arlington, Virginia, did willfully and knowingly

make and subscribe a United States Individual Income

Tax Return, Form 1040, for the ‘alendar year 1970, which

was verified by a written declaration that it was made

under the penalties of perjury and was filed with the In-

ternal Revenue Service, which said income tax return he

did not believe to be true and correct as to every material

matter in that the said return reported income from wages

in the amount of $39,850.10, dividends in the amount of

$1,570.80, interest in the amount of $1,200.09, legal fees

:

2a

in the amount of $7,000 and losses from partnerships in

the amount of $48,756, whereas, as he then and there well

knew and believed, he received substantial income in addi-

tion to that heretofore stated.

Violation of Section 7206(1), Internal Revenue Code,

Title 26, United States Code, Section 7206(1).

COUNT 13

Tue Granp Jury FurtTHER CHARGES:

That on or about the 10th day of November, 1972, in

the Eastern District of Virginia, Cuartes J. Pi.uso, a resi-

dent of Arlington, Virginia, did willfully and knowingly

make and subscribe a United States Individual Income Tax

Return, Form 1040, for the calendar year 1971, which was

verified by a written declaration that it was made under

the penalties of perjury and was filed with the Internal

Revenue Service, which said income tax return he did not

believe to be true and correct as to every material mat-

ter in that the said return reported income from wages

in the amount of $50,006.69, dividends in the amount of

$1,531.60, interest in the amount of $846.51, gain from sale

of capital assets in the amount of $480.65, legal fees in

the amount of $6,300 and partnership losses in the amount

of $200,580.60, whereas, as he then and there well knew

and believed, he received substantial income in addition

to that heretofore stated and had less partnership loss

than heretofore stated.

Violation of Section 7206(1), Internal Revenue Code,

Title 26, United States Code, Section 7206(1).

INSTRUCTION NO. 2

The issue in this case is whether the defendants will-

fully and knowingly made and subscribed Federal income

tax returns for the years 1969, 1970 and 1971, which, at

3a

the time the returns were made and filed, they did not

believe to be true and correct as to every material matter

in the said returns.

If the defendants believed that the returns were true

and correct, and made in good faith, they did not violate

the law. The evidence must establish beyond a reasonable

doubt that the defendants knowingly and willfully, with an

evil motive, filed these returns knowing that they were not

true and correct as to every material matter.

26 U.S.C. Section 7206(1) Tendered by Defendants

INSTRUCTION A

The jury is instructed that even if you believe bevond

a reasonable doubt that the sums advanced by the corpora-

tions should be treated as income rather than advancez

or loans, as contended for by the defendant, before you

could convict the defendant you would have to believe be-

yond a reasonable doubt that he did not reasonably believe

in his own mind that the advances were loans, but were

income.

In that connection you are instructed that you may con-

sider the defendant’s knowledge or lack of knowledge of

the Internal Revenue Service’s prior position on the ques-

tion of advances constituting income or loans, the family

control of the corporations, the repayment and/or inten-

tion to repay, the presence of a C.P.A. and any other

factors bearing on what the defendant’s state of mind was

when he subscribed to the returns in question.

INSTRUCTION B

The jury is instructed that the defendant contends that

in good faith he subscribed his name to each return for the

years 1969, 1970 and 1971.

The jury is further instructed that before you could

convict the defendant on any of the three charges you

da

would have to believe beyond a reasonable doubt not only

that the sums received by the defendant as advances from

the corporations was income, rather than loans or advances,

but you would further have to find and believe that the gov-

ernment had established beyond a reasonable doubt that

the defendant knew and believed that said advances were

income and not loans when he affixed his signature to such

return.

If the government failed to establish each of these two

elements beyond a reasonable doubt, then it would be your

duty to find the defendant not guilty, and if vou have a

reasonable doubt about this you must give the benefit of the

doubt to the defendant and find him not guilty,

INSTRUCTION C

You are instructed that with respect to the calendar year

1971, the government contends that the defendant Piluso

took a partnership loss when in fact the loss was that of

The Virginia Corporation.

You are instructed that, if the government fails to prove

beyond a reasonable doubt that The Virginia Corporation

was entitled to the loss, you should go no further and find

the defendant not guilty on that count.

If you do find that the government has proved beyond

a reasonable doubt that The Virginia Corporation was en-

titled to the loss, before you could convict the defendant

the government must establish beyond a reasonable doubt

that the defendant did not have reasonable reason to be-

lieve that the partnership was entitled to the loss.

INSTRUCTION D

With respect to the year 1971, the defendant’s tax return

is in evidence. The return shows that without taking the

PHB Associates partnership loss, the defendant’s tax lia-

bility would not have been affected. You may consider this

in determining whether, when the defendant signed the

return, he did so with evil motive.

INSTRUCTION X

The jury is instructed that the Government contends that

for the years 1969, 1970 and 1971 the defendant Charles

Piluso received substantial advances which they contend

constituted taxable income.

The defendant Piluso contends that said advances were

loans or advances which he intended to repay and which

were carried on the books of the corporation as advances

or loans.

You are instructed that the Government has a two-fold

burden with respect to the proof on each count of the in-

aictment. In that connection, vou are instructed that the

Government must establish beyond a reasonable doubt not

only that the advances admittedly received by the defend-

ant were not loans or advances as contended for by the

defendant, but the Government must prove beyond a rea-

sonable doubt that when he subseribed his name to the tax

return for each year involved that the defendant Piluso

did not in truth and fact believe that these monies were in

fact advances or loans, but that on the contrary, he be-

lieved they constituted taxable income and subscribed to the

return willfully as this court has defined that term to vou.

If the Government does not establish each of these two ele-

ments beyond a reasonable doubt then it would be your

duty to find him not guilty, and if you have a reasonable

doubt about this, then you must give the benefit of that

doubt to the defendant and find him not guilty.

INSTRUCTION Y

The jury is instructed that as to the year 1971 the Gov-

ernment contends that the defendant claimed a partnership

6a

loss in PHB Associates when in fact he was not entitled to

said loss.

You are instructed that the burden is on the Government

to establish beyond a reasonable doubt not only that the

loss was not a properly allowable loss to the partnership,

they must establish beyond a reasonable doubt that when

the defendant subscribed to the return he did not honestly

believe that the partnership was entitled to the loss.

If you find the Government has not satisfied you beyond

a reasonable doubt that the Virginia Corporation was en-

titled to the loss you need go no further and it would be

your duty to resolve the partnership loss taken by the

defendant in his favor. On the other hand, if you are satis-

fied beyond a reasonable doubt that the Government has

established that the Virginia Corporation was entitled to

the loss, and not the partnership (PHB), then before you

could convict the defendant, you would have to go still

further and you would have to believe beyond a reason-

able doubt that when he subscribed his name to the tax

return for the year 1971 he did so willfully with bad pur-

pose, knowing that the partnership loss so claimed could

not reasonably be taken on his return, and that he did so

with bad motive and total absence of justification or belief

in the manner in which he treated the partnership loss on

his return.