Opposition — Groom v. United States

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Office Supreme Court, U.S,

FiLe&D

FEB 4 1983

ALEXANDER Ll. STEVAS,

CLERK

No. 82-1086

dn the Supreme Court of the Hnited States

OctToper Term, 1982

: David H. GROOM, PETITIONER

Vv.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS FOR

THE THIRD CIRCUIT

MEMORANDUM FOR THE UNITED STATES

IN OPPOSITION

Rex E. Lee

Solicitor General

Department of Justice

Washington, D,C, 20530

(202) 633-2217

TABLE OF AUTHORITIES

Cases:

Lucas v. Earl, 281 U.S. 111 ........65.

Helvering v. Horst, 311 U.S. 112 ......

United States v. Allen, 552 F.2d 1229,

cert. denied, 423 U.S. 1072 ..........

United States v. Brown, 591 F.2d 307,

cert. denied, 442 U.S.913 ...........

United States v. Carlson, 561 F.2d 105,

cert. denied, 434 U.S. 973 .........4..

United States v. Holy Bear,

GOO F.26 BSS wccccccccccvadcccccces

United States ex rel. McCann v. Adams,

SAO US. 2D cccccccccvcccssccccccs

United States v. Pomponio, 429 U.S. 10

United States v. Rischard, 47\ F.2d

FUE bs vwenceccacbhvessccdseccesccce

United States v. Walsh, 627 F.2d 88 ...

Waley v. Johnston, 316 U.S. 101 ......

Statute:

Se Ws TAREE) chav evaded sccrevabe

28 U.S.C. (& Supp. V) 2255 ...........

In the Supreme Court of the Hnited States

OcToBER TERM, 1982

No. 82-1086

Davip H. GROoM, PETITIONER

Vv.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS FOR

THE THIRD CIRCUIT

MEMORANDUM FOR THE UNITED STATES

IN OPPOSITION

Petitioner seeks review of his conviction for willfully

aiding and assisting in, and procuring, counselling, and

advising the preparation of false income tax returns, assert-

ing that the evidence was insufficient to establish that he

acted willfully and that his trial attorney's representation

was ineffective.

Following a jury trial in the United States District Court

for the Western District of Pennsylvania, petitioner was

convicted on 16 counts of willfully aiding and assisting in,

and procuring, counselling and advising the preparation of

false and fraudulent federal income tax returns, in violation

of 26 U.S.C. 7206(2) (Pet. 4). The court sentenced him to

two years’ imprisonment, fined him $16,000, and imposed

two-years’ probation following his imprisonment (Pet.

App. 38a-39a). The court of appeals affirmed (Pet. App.

la-2a).

2

The evidence at trial showed that between 1975 and 1978

petitioner, a certified public accountant and professor of

accounting (Pet. 4), prepared federal income tax returns for

a family coal mining business, known first as Harmon Coal

Company and later as Harmon Mining Company, and for

each of its partners, John and Kenneth Harmon and their

wives (Pet. 13; C.A. App. 5-17). Between 1975 and 1977,

petitioner also prepared joint federal income tax returns for

Thomas and Shirley Huff, who were in the coal mining

business (Pet. 13; C.A. App. 18-20). Petitioner reported

income on these returns in accordance with a scheme he

devised under which reporting of the coal companies’

income was deferred (Pet. 4-5, 13). Under this scheme, the

coal companies had some of their customers pay for coal

purchases with checks payable to B&G Coal Company, a

purported coal brokerage firm set up by petitioner (Tr.

416-418, 684-690). The coal companies sent these checks to

B&G Coal without recording the receipts on their books

(Tr. 417-422, 686-690), and petitioner deposited the money

into separate B&G bank accounts maintained for them (Tr.

424-425, 684). Together with petitioner, John and Kenneth

Harmon and the Huffs had signature authority over their

respective B&G bank accounts (Tr. 424-425, 685, 868).

Under the arrangements with his clients, petitioner would

return money to the coal companies when they needed or

wanted it (Tr. 420, 432-433, 688). The receipt of the money

would be recorded on the books of the coal companies as

income at that time (Tr. 417-422, 686-690). Thus, income

would be reported for the year in which money was returned

to a coal company rather than the year in which payment

for coal was originally received (Pet. 13). As a result of this

scheme, the Harmons and their partnership underreported

their incomes for 1974 through 1977, and the Huffs under-

reported their income for 1974 and overreported their

incomes for 1975 and 1976 (Pet. 13-14; C.A. App. 5-20).

3

1. Petitioner challenges (Pet. 10-17) the sufficiency of the

evidence to support his conviction. He contends that the

evidence does not support a finding that he acted willfully,

since there was doubt whether the taxpayers were required

to report the coal sale proceeds received by B&G Coal

Company in the years of receipt. But this claim of eviden-

tiary insufficiency was fully reviewed and rejected by the

court of appeals (Pet. App. la), and petitioner has not

advanced any reason why this Court should now consider

this fact-bound issue.

At all events, there was abundant evidence from which a

jury could reasonably find that petitioner acted willfully,

i.e., that he voluntarily and intentionally violated a known

legal duty. United States v. Pomponio, 429 U.S. 10(1976).

The evidence showed that petitioner knew the principles of

tax law involved in this case. He was a certified public

accountant and a professor of accounting (see United States

v. Rischard, 471 F.2d 105, 108-109 (8th Cir. 1973)) and,

according to his secretary's testimony (Tr. 329-330), did

extensive tax law research in connection with his scheme for

deferring the receipt of income for income tax purposes.

The diversions of income under the scheme were obvious

shams. Petitioner's clients, not B&G Coal, made coal sales,

earned the income from the sales, and actually received the

payments for coal (Tr. 419, 440-442, 683-684, 688, 691-692).

The payments transferred to B&G Coal by the clients were

required to be returned to the clients on demand (Tr. 420,

688) and were deposited to bank accounts over which the

clients had signature authority (Tr. 424-425, 685, 868).

Thus, there was no basis for a good faith belief that, for tax

4

purposes, petitioner's clients did not receive the income

diverted to and held for them by B&G Coal.!

During an Internal Revenue Service investigation of

petitioner, he falsely told an IRS agent that the money that

went into B&G Coal represented fees for his own brokerage

services (Tr. 1045-1048). Both John Harmon and Thomas

Huff testified that they never paid petitioner any brokerage

fees for coal transactions (Tr. 440-442, 691-692). Petition-

er’s false exculpatory statement was evidence from which

the jury could have concluded that petitioner was aware

that the scheme was a complete sham and therefore find

that he had willfully assisted in the filing of false returns.

United States v. Walsh, 627 F.2d 88, 92 (7th Cir. 1980);

United States v. Allen, 522 F.2d 1229, 1232 (6th Cir. 1975),

cert, denied, 423 U.S. 1072 (1976); United States v.

Rischard, supra, 471 F.2d at 108-109.

Finally, petitioner diverted large sums of money from

B&G Coal for his own purposes (Tr. 1081-1084). Thus, the

jury could infer that petitioner’s advice to his clients was not

rendered in good faith, but was part of a scheme to gain

access to the clients’ money for his own purposes.?

‘Even .hout signature authority over their B&G accounts and the

right to demand the immediate return of funds to themselves, under

well-settled tax law, petitioner's clients would have been required to

report diverted payments as income. A taxpayer who arranges for the

proceeds of a transaction of his own to be paid to another party is

deemed to have received the income himself. Helvering v. Horst, 311

U.S. 112 (1940); Lucas v. Earl, 281 U.S. 111 (1930).

Petitioner asserts (Pet. 6-7, 16-17) that there was insufficient evi-

dence to establish as a matter of law that he acted willfully because an

agent of the Internal Revenue Service admitted at trial that there “might

well be” a difference of opinion between people of equal expertise as to

when the payments became income to petitioner's clients. But a reading

of the agent's testimony (Tr. 1002-1007) reveals that the agent merely

said that there was a possibility that there could be a disagreement as to

when the payments should be recognized as income to petitioner's

5

2. Petitioner further contends (Pet. 18-20) that he was

prevented from testifying in his own behalf because his

defense counsel at trial threatened to withdraw if he took

the stand. He also urges (Pet. 21-22) that his trial attorney's

performance (not the attorney representing him before this

Court) was ineffective because no defense testimony or

evidence was offered at trial despite the alleged facts that

petitioner insisted on testifying, an expert accounting wit-

ness was available to endorse petitioner's tax deferral plan,

and numerous character witnesses were available. But peti-

tioner did not present these claims to the district court;

rather, he raised them for the first time in his petition for

rehearing filed with the court of appeals (Pet. 9-10). Thus,

since the record contains no facts upon which to evaluate

petitioner's claims, there is no basis for review of them by

this Court.) United States ex rel. McCann v. Adams, 320

U.S. 220, 221 (1943); Waley v. Johnston, 316 U.S. 101, 104

(1942). Petitioner's claim must be raised by way of a

motion under 28 U.S.C. (& Supp. V) 2255. See, e.g., United

States v. Holy Bear, 624 F.2d 853, 856 (8th Cir. 1980);

United States v. Brown, 591 F.2d 307, 310 (Sth Cir.), cert.

denied, 442 U.S. 913 (1979); United States v. Carlson, 561

F.2d 105, 109 (Ist Cir.), cert. denied, 434 U.S. 973 (1977).

clients, not that there was any real doubt upon this issue. At all events,

the jury heard the agent's testimony and the evidence bearing upon

petitioner's intent, and it obviously concluded that petitioner was aware

that his scheme was improper.

§Petitioner relies on an affidavit of his wife to support his claim that

his counsel's alleged threat to withdraw presented him with a “Hobson's

choice” of foregoing his right to counsel or his right to testify (Pet. 8,

18-20; Pet. App. 10a-l 1a). But Mrs. Groom's affidavit negates this

claim, She states (Pet. App. | 1a) that defense counsel advised petitioner

that in the event of counsel's withdrawal, petitioner “could always get

another attorney * * *.”

6

It is therefore respectfully submitted that the petition for

a writ of certiorari should be denied.

Rex E. Lee

Solicitor General

FEBRUARY 1983

DOJ-1983-02