Appendix — Everett v. United States

APPENDIX.

Opinion.

United States Court of Appeals, for the Ninth Circuit.

United States of America, Plaintiff/Appellee, vs.

Garrison M. Everett and Richard I. Chira, Defendants/

Appellants. Nos. 81-1532, 81-1589.

DC No. CR 81-489(A)DVK.

Filed: November 15, 1982.

On Appeal from the United States District Court for the

Central District of California. Honorable David Kenyon,

District Judge, Presiding.

Argued and Submitted: October 4, 1982.

Before: ANDERSON, PREGERSON, and NELSON,

Circuit Judges.

PREGERSON, Circuit Judge:

Appellants Everett and Chira appeal their convictions for

conspiracy to impair, impede, and obstruct the Department

of the Treasury in the collection of tax revenue in violation

of 18 U.S.C. § 371.' A jury found appellants guilty of

conspiring to sell tax shelter investments that had been back-

dated to allow the buyers to claim deductions on their federal

income tax returns for years prior to those in which the

transactions actually took place.

The government’s evidence at trial consisted primarily

of the testimony of an undercover IRS agent who answered

an advertisement in a newspaper offering tax shelter in-

'18 U.S.C. § 371 provides, in part:

If two or more persons conspire either to commit any offense

against the United States, or to defraud the United States, or any

po thereof in any manner or for any purpose, and one or more

of such persons do any act to effect the object of the conspiracy,

each shall be fined not more than $10,000 or imprisoned not more

than five years or both.

a

vestments and was referred to appellant Everett's firm, In-

tervest Associates, Inc. The agent posed as the represen-

tative of a wealthy resident alien who wanted to shelter 1980

and 1981 income. The agent met with Everett, appellant

Chira and two others from Intervest to discuss general tax

strategies. After this initial meeting, the agent met or spoke

with Everett eight times and with Chira three times to plan

a tax strategy to shelter income for both 1980 and 1981.

In March 1981, the agent asked Everett about sheltering

between $150,000 and $180,000 that his fictitious client

had received in taxable income for 1980. Everett told the

agent that he could create a tax shelter for 1980, even at

such a late date, by backdating the necessary documentation.

After further discussions, Everett and the agent agreed

on a plan to generate an $83,000 1980 tax write-off for the

agent’s client by combining a sale/lease-back of a Rolls

Royce owned by appellant Chira and a computer sale/lease-

back transaction.

On April 16, 1981, the agent met both Chira and Everett

at the Intervest offices to complete the computer and Rolls

Royce transactions. Appellant Chira signed a conditional

sales contract for the Rolls which was backdated to Decem-

ber 22, 1980. The agent received a number of documents

relating to both transactions signed by Everett, Chira, and

Roberta Mackey’ backdated to December 22, 1980. All

documents signed by Everett and Chira were signed in the

agent's presence on April 16, 1981 and dated December 22,

*Roberta Mackey was an Intervest employee who acted as a ‘*trustee"’

for Intervest's clients in tax shelter transactions. Here, Ms. Mackey

—— the computer equipment and the Rolls Royce in trust for the

ictitious taxpayer and signed a Trust and Fiduciary Agreement which

was used to create the false impression that both the computer and the

automobile tax shelters were complete in 1980.

Ms. Mackey testified at the trial in return for immunity.

ioe am

1980. After the signing of the documents, the agent gave

appellants $45,000 as down payment and lease payments

on the automobile and the computer. Finally, the agent,

Chira and Everett went to the parking garage to inspect the

Rolls Royce, at which time Chira and Everett were arrested.

A grand jury indictment was returned charging Chira,

Everett, and Intervest Associates, Inc. with conspiracy to

defraud the United States by impairing, impeding, and ob-

structing the IRS in the collection of tax revenue.

Legal Impossibility

Both appellants assert that their convictions should be

reversed on the grounds of legal impossibility. Appellants

argue that it was legally impossible for them to impede the

collection of taxes because there was no real taxpayer nor

any actual tax due, and because the government had knowl-

edge of the scheme.

Two responses defeat appellants’ assertions. First, the

charge of conspiracy to impede the collection of taxes does

not require the filing of a tax return by a real taxpayer.

Second, the doctrine of legal impossibility is not available

as a defense to a charge of conspiracy in this circuit.

A conspiracy to defraud the United States under 18

U.S.C. § 371 need not involve an agreement to defraud the

government out of money or property, but only requires an

agreement to impede the government's lawful functions.

Section 371 does not require that the government actually

be harmed; it reaches ‘‘atiy conspiracy for the purpose of

impairing, obstructing or defeating the lawful function of

any department of government.’’ Dennis v. United States,

384 U.S. 855, 861 (1966) quoting Haas v. Henkel, 216

U.S. 462, 479 (1910). In the instant case, the purpose of

the conspiracy was to impede the lawful function of the

tide

IRS, that is, the collection of taxes, and the existence of

a real taxpayer is therefore immaterial.

Furthermore, this court has rejected the doctrine of legal

impossibility as a defense to a charge of conspiracy. Ap-

pellants compare their case to Ventimiglia v. United States,

242 F.2d 620 (4th Cir. 1957), in which the Fourth Circuit

held that there can be no conspiracy to commit a crime when

it is legally impossible to commit the underlying substantive

offense. Appellants argue that there is Ninth Circuit support

for the legal impossibility doctrine of Ventimiglia in Lubin

v. United States, 313 F.2d 419 (9th Cir, 1963).

Appellants’ reliance on Lubin is misplaced. Lubin did not

in fact involve a defense of legal impossibility. In that case,

the crucial issue was whether the alleged action constituted

a federal offense. The defendants had been convicted of a

conspiracy to steal property belonging to banks. That con-

viction was reversed because the money in the armored

truck that the defendants conspired to rob did not in fact

belong to a bank. The court found that, although the robbery

scheme was a taking punishable by state law, the crime was

not within the federal statute:

This would be an offense under the laws of California

.. « « It would be a federal offense only if the objective

was to take ‘‘property or money * * * belonging to’’

a federally protected bank . . ., and the crucial question

is whether the evidence shows such a conspiracy.

Lubin, 313 F.2d at 420.

In fact, this court does not follow the Fourth Circuit's

decision in Ventimiglia. In United States v. Sanford, 547

F.2d 1085 (9th Cir. 1976), we rejected legal impossibility

as a defense to a charge of conspiracy to transport in in-

terstate commerce animals killed in violation of federal law.

The appellees were charged with substantive violations of

federal hunting laws and with conspiracy. They had acted

oe ae

as guides for a hunting expedition during which game was

killed by undercover federal agents. The district court dis-

missed the substantive and conspiracy counts because the

killing of the animals had been ‘‘authorized’’ by the federal

government and was not therefore in violation of the law.

On appeal, we rejected the legal impossibility defense:

The district court dismissed this [conspiracy] count on

the ground that appellees cannot be charged with con-

spiracy to commit a substantive crime when the

scheme, if completed, does not constitute an offense

against the United States. “‘’e disagree. Apart from the

ultimate disposition of the substantive counts of the

indictment charging interstate transportation of ille-

gally killed animals, ‘‘the crime of conspiracy is com-

plete upon the agreement to violate the law, as imple-

mented by one or more overt acts . . ., and is not at

all dependent upon the ultimate success or failure of

the planned scheme.’’ (Citations omitted.)

547 F.2d at 1091. See United States v. Thompson, 493 F.2d

305 (9th Cir.), cert. denied, 419 U.S. 835 (1974).

In United States v. Brooklier, 459 F. Supp. 476 (C.D.

Cal. 1978) (Pregerson, D.J.), the court closely examined

the precedent on legal impossibility as a defense to a charge

of attempt. The court stated that ‘‘it is well-settled in this

Circuit that impossibility is not a defense to a charge of

conspiracy to commit an offense.’’ 459 F. Supp. at 481

(emphasis in original), Exploring then the issue of impos-

sibility as a defense to an attempt, the court concluded that

Fifth Circuit precedent regarding legal impossibility should

be followed:

The Fifth Circuit's standard, which requires objective

acts to unequivocally corroborate the necessary crim-

inal intent, properly accommodates the concerns un-

derlying the conflicting views on the impossibility de-

fense. Such an accommodation safeguards both the

ex et

government’s interest in deterring criminal conduct and

the citizen’s right not to be injured by ‘‘possible er-

roneous official conclusions about his guilty mind.”’

(Citations omitted.)

459 F. Supp. at 482.

The conclusion of Brooklier was later adopted by this

court in United States v. Bagnariol, 665 F.2d 877 (9th Cir.

1981), cert. denied, 102 S. Ct. 2040 (1982). We therefore

require significant objective acts to corroborate unequivo-

cally the criminal intent in a conspiracy, but disregard the

legal possibility or impossibility of achieving a criminal

result. Bagnariol involved convictions for violations of fed-

eral law against corruption, extortion, and gambling. One

appellant argued that the requisite impact on interstate com-

merce was lacking because the entity he attempted to extort

was a fictitious organization created by undercover FBI

agents. We stated that ‘‘[t}he analysis in Brooklier disposes

of [appellant’s] impossibility defense.’’ 665 F.2d at 896.

Finally, in United States v. Duz-Mor Diagnostic Labo-

ratory, Inc., 650 F.2d 223 (9th Cir. 1981), we referred to

the legal impossibility defense as ‘‘nonsense.’’ Appellants

were convicted of offering to pay kickbacks for the referral

of medical services reimbursable from Medicare and Medi-

Cal funds. Appellants argued that the violations were im-

possible of commission because the facilities and the owners

of the facilities to whom appellant allegedly offered kick-

backs were fictitious entities created by undercover FBI

agents. We flatly rejected the defense:

Duz-Mor contends that the government failed to prove

a ‘‘jurisdictional prerequisite’’ to [the] violations be-

cause the rebate offer was made to an F.B.1. informant

who could not in fact refer . . . Medicare and Medi-

Cal services |that were] reimbursable from federal

funds. This argument is nonsense.

650 F.2d at 227, n.5.

ant ins

Both appellants assert a second legal impossibility de-

fense on the grounds that there can be no conviction for

conspiracy to defraud the government when the government

has knowledge of the scheme. Appellants rely on United

States v. Berrigan, 482 F.2d 171 (3rd Cir. 1973), in which

the defendants were convicted of an attempted violation of

18 U.S.C. § 1791 for smuggling letters into a federal prison

without the knowledge and consent of the warden. The

warden in fact knew of the letters. The Third Circuit re-

versed the convictions on the grounds that, since the sub-

Stantive offense was not in fact committed, the defendants

could not be convicted of an attempt to commit the offense.

However, Berrigan is considered a minority view on the

issue of legal impossibility and ‘‘most courts and commen-

tators have not adopted the Berrigan approach.’’ Brooklier,

459 F. Supp. at 480. Clearly, this court has rejected Ber-

rigan. See Bagnariol and Sanford, supra.

Government Misconduct

Appellant Chira contends that the district court erred in

denying his motion to dismiss the indictment on the grounds

of government misconduct. Chira claims several inaccura-

cies in the presentation of his case, including misinformation

in the affidavit of probable cause submitted in support of

the complaint, misidentification of him as *‘Joseph’’ rather

than Richard Chira on both the arrest warrant and complaint,

and excessive and unnecessary use of hearsay testimony

before the grand jury.

None of these alleged inaccuracies approaches the level

of government misconduct necessary to violate the due proc-

ess clause or to justify an exercise of the supervisory power

of the court. Under its inherent supervisory powers, a federal

court is empowered to dismiss an indictment on the basis

of governmental or prosecutorial misconduct. United States

v. Owen, 580 F.2d 365, 367 (9th Cir. 1978). However,

such supervisory power will be used to dismiss an indictment

only when the misconduct represents ‘‘a serious threat to

the integrity of the judicial process.’’ United States v. Sa-

mango, 607 F.2d 877, 885 (9th Cir. 1979). The violations

alleged by appellant Chira do not rise to this level. There-

fore, the district court did not err in rejecting his motion to

dismiss.

Hearsay Testimony

Appellant Chira contends that the district court erred in

admitting the testimony of Roberta Mackey regarding an

alleged telephone conversation between Intervest employee

Ronald Nachtwey and Chira. Ms. Mackey testified that she

overheard a conversation between Nachtwey and Chira tend-

ing to show that Chira had knowledge of and prepared the

backdated Trust Agreement admitted as Exhibit 8 at trial.

The district court admitted this hearsay testimony under

the coconspirator admission exception, Fed. R. Evid.

801(d)(2)(E),’ on the grounds that Nachtwey was acting as

an agent of the indicted coconspirator, Intervest Associates,

Inc. This evidentiary ruling was not reversible error.

Nachtwey was a target of investigation in the case and was

sufficiently connected to the conspiracy to qualify as an

unindicted coconspirator for the purpose of Rule 801(d)(2)(E).

In addition, even if the hearsay was erroneously admitted,

the error was harmless because there was additional direct

*Federa! Rule of Evidence 801(d)(2)(E) provides:

(d) A statement is not hearsay if—

(2) The statement is offered against a party and is ... (E) a

statement by a coconspirator of a party during the course and in

furtherance of the conspiracy.

a

testimony from Ms. Mackey showing appellant Chira’s

knowledge of and preparation of the subject Trust Agree-

ment.

Sufficiency of the Evidence

Appellant Chira contends that the evidence presented at

trial was insufficient to support his conviction for conspir-

acy. However, viewing the evidence in the light most fa-

vorable to the prosecution, a rational trier of fact could have

found beyond a reasonable doubt the essential elements of

the conspiracy. Jackson v. Virginia, 443 U.S. 307 (1979).

The elements of the conspiracy offense are an agreement

to accomplish an illegal objective, coupled with ore or more

overt acts in furtherance of the illegal purpose and the req-

uisite intent necessary to commit the underlying offense.

United States v. Oropeza, 564 F.2d 316, 321 (9th Cir.

1977). In the instant case the underlying offense was de-

frauding the United States. Although there was ample ev-

idence of his participation in the backdated tax shelter trans-

action, appellant Chira argues that the evidence of his intent

was insufficient. However, it is well-settled that such intent

may be inferred. United States v. Melchor-Lopez, 627 F.2d

886, 891 (9th Cir. 1980). In the instant case, the jury could

have inferred from the evidence presented that Chira in-

tended to agree with Everett and others to impede the col-

lection of taxes.

In sum, the district court did not err in rejecting the

defense of legal impossibility, because legal impossibility

is not a defense to a charge of conspiracy. The district court

did not err in rejecting appellant Chira’s motion to dismiss

nor in admiiting Ms. Mackey’s hearsay testimony against

Chira. The evidence presented at trial was sufficient to sus-

tain Chira’s conviction for conspiracy.

Therefore, the judgment of the district court is

AFFIRMED.