Opposition Brief — Linne v. United States

In the Supreme Court of the

ay,

No. 87-585

OCTOBER TERM, 1987

BURTON D. LINNE, ET AL., PETITIONERS

v.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

CHARLES FRIED

Solicitor General

WILLIAM S. ROSE, JR.

Assistant Attorney General

MICHAEL L. PAUP

ROBERT E. LINDSAY

GAIL BRODFUEHRER

Altorneys

Department of Justice

Washington, D.C. 20530

(202) 633-2217

Suprema Court, U.S,

tg BRIBED

QUESTIONS PRESENTED

1. Whether the “materiality” standard set forth in

United States v. Bagley, 473 U.S. 667 (1985), was properly

applied in this case to the alleged nondisclosure by the

prosecution of a government investigator’s report.

2. Whether, in the absence of a request by defense

counsel at trial, the alleged failure of the prosecution in

this case to produce a government investigator’s report

violated the Jencks Act, 18 U.S.C. 3500.

3. Whether the court of appeals erred in declining to

consider an additional issue raised after oral argument.

(I)

TABLE OF CONTENTS

Page

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TABLE OF AUTHORITIES

Cases:

Brady v. Maryland, 373 U.S. 83 (1963) ................ 3, 2

Pittsburgh Plate Glass Co. v. United States, 360 U.S.

ee wa ny a odes odd sews es 12

United States v. Bagley, 473 U.S. 667 (1985) ............ 5,9

United States v. Drefke, 707 F.2d 978 (8th Cir.), cert.

ER 11

United States v. McKenzie, 768 F.2d 602 (Sth Cir. 1985),

cert. denied, 474 U.S. 1086 (1986) .................. 12

United States v. Mechanik, 475 U.S. 66 (1986) .......... 12

United States v. Peterson, 524 F.2d 167 (4th Cir. 1975),

Se BEBO tL 1]

United States v. Simmons, 281 F.2d 354 (2d Cir. 1959) .. 11

United States v. Tellier, 255 F.2d 441 (2d Cir.), cert.

RS rrr 11-12

Statutes:

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(111)

In the Supreme Court of the United States

OCTOBER TERM, 1987

No. 87-585

BURTON D. LINNE, ET AL., PETITIONERS

v.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

OPINION BELOW

The opinion of the court of appeals (Pet. App. la-7a) is

reported at 826 F.2d 1061 (Table).

JURISDICTION

The judgment of the court of appeals was entered on

August 14, 1987. The petition for a writ of certiorari was

filed on October 13, 1987. The jurisdiction of this Court is

invoked under 28 U.S.C. 1254(1).

STATEMENT

Following a jury trial in the United States District Court

for the Eastern District of Virginia, petitioners were con-

victed on one count of conspiracy to defraud the United

States, in violation of 18 U.S.C. 371, and on numerous

counts of mail fraud, in violation of 18 U.S.C. 1341 (Pet.

App. 2a-3a). Petitioners Linne and Slater were also con-

(1)

victed on several counts of failing to file tax returns, in

violation of 26 U.S.C. 7203 (Pet. App. 2a-3a). Petitioner

Linne was sentenced to a total of six years’ imprisonment

and three years’ probation; petitioner Imlay was sentenced

to a total of six months’ imprisonment and three years’

probation; and petitioner Slater was sentenced to a total of

18 months’ imprisonment and three years’ probation (C.A.

App. 267-269). The court of appeals affirmed (Pet. App.

la-7a).

1. Petitioners’ convictions and sentences arose out of

various income tax evasion schemes that petitioner Linne

designed and, with the assistance of petitioners Slater and

Imlay, promoted and operated through the mails between

1982 and 1985 (Pet. App. 3a). One scheme, called the Ad-

ministrative Notice and Declaration of Immunity (ANDI)

program, advised prospective customers that a citizen’s

obligation to pay federal income taxes arises solely from

voluntary participation in federal entithkement programs

(e.g., Social Security) and that, by filing with the govern-

ment certain “ ‘notices of rescission’ ” provided by peti-

tioners and then not availing oneself of government

benefits, a tax-paying citizen may become a “disenfran-

chised freem[a]n’ ” who is no longer obligated to pay taxes

(id. at 3a-4a). Approximately 100 persons, who paid be-

tween $2,000 and $31,000 each to petitioners, were in-

duced to participate in the ANDI program during the per-

tinent period (/d. at 4a). Another scheme, called Citizens

for Dollars (CFD), was a check-cashing clearinghouse

through which ANDI program subscribers could avoid

using a commercial bank and the attendant obligation of

having to pay federal income taxes (/bid.); during the

18-month period ending in August 1985, petitioners

received more than $6.6 million in deposits under the CFD

program, which generated service charges of more than

$975,000 for petitioners (/bid.; C.A. App. 189, 194).

Finally, petitioners promoted a foreign “investment serv-

“es

ice,” called the Bullion Fund, through which income could

be concealed from the Internal Revenue Service. Accor-

ding to petitioners’ promotional materials, persons could

invest in this Bahamian entity without being subject to

United States tax laws, disclosure laws, or IRS discovery

procedures (Pet. App. 3a-Sa).

At trial, a number of witnesses described petitioners’

schemes and testified that they had been defrauded by

those schemes (Pet. App. Sa). The government also in-

troduced many examples of the documentary materials

that petitioners had sent through the mails to promote

their programs, as well as evidence that petitioners Linne

and Slater had not filed tax returns in years in which their

gross income had exceeded the amount for which filings

are required (id. at 4a-Sa). In support of the allegation that

the Bullion Fund was part of petitioners’ fraudulent

scheme, the government called as a witness IRS agent

James Rideoutte. He testified that he had investigated the

existence of the Bullion Fund in the Bahamas and had

discovered no evidence that the Bullion Fund was

registered (i/.e., incorporated) in the Bahamas (id. at

13a-16a). Agent Rideoutte had his investigative report in

his possession during his testimony and, in fact, he occa-

sionally referred to it. Petitioners, however, made no re-

quest for its production at trial. Pet. App. Sa.

in their defense, petitioners claimed that they believed

their activities were lawful, that they never intended to

defraud their customers, and that their failure to pay in-

come taxes was the result of their good faith belief that

they were “legal nontaxpayers” (Pet. App. Sa).

2. Approximately nine months after the verdict, peti-

tioner Linne filed a motion for a new trial. In the motion,

he asserted that the government had violated Rule 16 of

the Federal Rules of Criminal Procedure by not disclosing

or permitting review of Agent Rideoutte’s investigative

report prior to trial (Pet. App. Sa). In support of the mo-

4

tion, petitioner Linne claimed that Agent Rideoutte’s

testimony did not completely or accurately reflect all of

the information Rideoutte had acquired about the Bullion

Fund during his investigation (/bid.). Petitioner Linne

presented affidavits of two of his acquaintances, which

stated that a Bahamian lawyer, Anthony Thompson, had

told them that he and two other persons, Gordon Briggs

and Sterling Quant, had created the Bullion Fund and had

registered it in the Turks and Caicos Islands. /bid.; C.A.

App. 286-291. Petitioner Linne maintained that Agent

Rideoutte’s report included these facts and that, if defense

counsel had been able to review it, he could have im-

peached the agent’s testimony (Pet. App. Sa-6a). The

district court denied the motion (C.A. App. 311-312).

3. The court of appeals affirmed (Pet. App. la-7a). In

response to petitioners’ contention that the government

had violated the Jencks Act, 18 U.S.C. 3500, by failing to

provide them with a copy of Agent Rideoutte’s in-

vestigative report, the court held that, “[w]hile it is true

that the government promised to disclose all Jencks

material before trial, this concession did not obviate the

[petitioners’] statutory obligation to request the agent’s

report at trial.” The court noted that, although they were

“aware that the agent was testifying from notes he had

prepared, defense counsel failed to make any request to

review them and therefore waived any Jencks Act com-

plaint.” Pet. App. 6a.' The court similarly rejected peti-

tioners’ argument that their due process rights under

' The government has consistently maintained throughout these

proceedings that a copy of Agent Rideoutte’s report was provided to

petitioners prior to trial. Neither the district court nor the court of ap-

peals made a finding on that issue. On May 21, 1987, petitioners filed

a motion for disclosure of the report prior to oral argument, which

was scheduled for June 2, 1987. The government did not object to

petitioners’ motion and provided the report to petitioners’ appellate

counsel immediately prior to oral argument.

ee

Brady v. Maryland, 373 U.S. 83 (1963), had been violated.

The court explained that “{t]here can be no Brady viola-

tion absent a showing of the materiality of the undisclosed

evidence” (Pet. App. 6a), that “[w]ithheld evidence is

material ‘only if there is a reasonable probability that, had

the evidence been disclosed to the defense, the result of the

proceeding would have been different’ ” (ibid., quoting

United States v. Bagley, 47> U.S. 667, 682 (1985)), and

that “[{t]he government at trial presented overwhelming

evidence, independent of the IRS agent’s testimony, from

which the jury could find that the defendants knew of the

unlawfulness of their activities” (Pet. App. 6a-7a).

ARGUMENT

1. Petitioners rest their legal arguments on two factual

premises: (1) that Agent Rideoutte perjured himself at:

trial; and (2) that the prosecutors knowingly allowed him

to do so. Petitioners, however, have failed even to show

that Agent Rideoutte’s testimony was false, much less that

it was intentionally false, or that the prosecutors knowing-

ly elicited perjured testimony. Their principal legal argu-

ment (Pet. 4-16) is therefore without force, because it is

based on factual assertions that the record does not sup-

port.

In attempting to establish that Agent Rideoutte’s

testimony was false, petitioners rely primarily on the al-

leged inconsistencies between Rideoutte’s testimony at

trial and the report of his investigation of the Bullion Fund

in the Bahamas. In fact, in spite of petitioners’ vehement

insistence to the contrary, the two are not inconsistent at

all. In his testimony, Agent Rideoutte stated that he had

checked with the registrar of companies to determine

whether the Bullion Fund was “registered” in the

Bahamas, which he explained was the same thing as being

incorporated in the United States. He found that neither

the Bullion Fund nor the Bullion Management Corpora-

6

tion was registered in the Bahamas. He added that the

chamber of commerce in the Bahamas had no record of

the Bullion Fund, nor did the police department. Finally,

he stated that he found no record of the Bullion Fund with

the telephone company or the post office. Pet. App.

14a-1l6a.

Nothing in Agent Rideoutte’s testimony conflicts with

anything in his investigative report. In his report, Agent

Rideoutte stated that the Bullion Fund was not registered

in the Bahamas, although he noted that the Bullion

Management Corp. was registered in the Turks and Caicos

Islands (Pet. App. 10a).2 The report stated, as Agent

Rideoutte had testified, that the telephone company and

the post office showed no record of the existence of the

Bullion Fund. The report further reflects that Agent

Rideoutte interviewed the two attorneys that Agent

Rideoutte mentioned in his testimony—Sterling Quant

and Anthony Thompson—and that Thompson provided

Agent Rideoutte with information about the Bullion

Fund. According to the report, Thompson said that he

formed the Bullion Management Corp. at the request of

Gordon Briggs in 1983, and he agreed “to manage the

operation locally under Briggs direction.” Pet. App. Ila.

Thompson said that he terminated his relationship with

Briggs when Briggs failed to comply with Thompson’s re-

quest for financial information and when Thompson

learned that Briggs was prohibited from coming into the

Bahamas. Based on his interview with Thompson, Agent

Rideoutte concluded in his report that Thompson had

“merely provided the cover and bank account so the

money [sent to the Bullion Fund in the Bahamas] could

then be forwarded back to Briggs or whomever Briggs

wanted to receive it.” Pet. App. 12a.

* The Turks and Caicos Islands is a tiny British colony located

southeast of the Bahamas.

Agent Rideoutte’s findings, as summarized in his report,

are entirely consistent with his trial testimony. In both, he

reported learning nothing about the Bullion Fund from

sources such as police files, the chamber of commerce, the

telephone company, and the post office. And in both he

noted that the Bullion Fund was not registered (/.e., incor-

porated) in the Bahamas. To be sure, Agent Rideoutte did

not discuss in his testimony the contents of his interview

with attorney Thompson, but he was not asked to relate

Thompson’s statements to the jury, because Rideoutte’s

account of Thompson’s statements would have been hear-

say. Since defense counsel had objected to Agent

Rideoutte’s testimony on hearsay grounds, and since the

court responded to the objection by permitting Agent

Rideoutte’s testimony only to the extent that it reflected

that he did not find records of the Bullion Fund, peti-

tioners are hardly in a position to complain that Agent

Rideoutte did not discuss the contents of his interview with

attorney Thompson. And if Agent Rideoutte had related

what Thompson had told him, it would hardly have helped

petitioners, since the substance of Thompson’s experience

with the BuHion Fund led Thompson to conclude that the

Fund was a questionable entity run by someone who was

not even aliowed to enter the Bahamas. In fact, Thomp-

son’s conclusion—that Briggs was using Thompson and

his post office box as a conduit for funds going to Briggs

or those designated by him to receive the funds — was con-

sistent with the government’s theory that the Bullion Fund

was not a legitimate investment company, but merely a

conduit for funds generated in petitioners’ scheme. Cer-

tainly Thompson’s account of the Bullion Fund’s activities

and his cessation of representation of the Fund would

have done nothing to buttress petitioners’ defense of good

faith.

3 For example, petitioners were still promoting the Bullion Fund as

a Bahamian entity as late as March 1985, months after Thompson said

8

The affidavits that petitioners produced in their motion

for a new trial also failed to show that Agent Rideoutte’s

testimony was false. The affidavits stated that Anthony

Thompson represented that he had participated in creating

the Bullion Management Corporation and had registered

it in the Turks and Caicos Islands (C.A. App. 286-291).

One of the affidavits also stated, ambiguously, that the

Bullion Fund had been registered “in Nassau” (C.A. App.

290). Petitioners rely on that statement to suggest that the

Fund was registered in the Bahamas as well as in the

Grand Turks and Caicos Islands. However, while the af-

fidavit included information regarding the registration of

the Bullion Management Corp., Ltd. in the Turks and

Caicos Islands (C.A. App. 291), it contained no similar in-

formation suggesting that that company or the Bullion

Fund was registered the Bahamas. Moreover, the af-

fidavits relate that Thompson and Quant were unable to

persuade Briggs to comply with Bahamian registration re-

quirements (C.A. App. 289-290); that, as a result, Thomp-

son and Quant discontinued their association with Briggs

and the Bullion Fund at the end of 1984 (ibid.); that

Thompson subsequently turned over all of the books and

records of the Bullion Fund to “Caicos Worldwide

Management Ltd.,” which is located in the Turks and

Caicos Islands (/bid.); and that Thompson discontinued

his association with Briggs because “somebody was forg-

ing Sterling Quant’s name to the Bullion Fund receipts

which was another reason that he knew something was

wrong” (C.A. App. 287). Thus, the affidavits do not in

any way rebut Agent Rideoutte’s statement that he found

he had ceased representing the Fund. See C.A. App. 140, 341, 587;

GXs 14, 114.

Q

no records indicating that the Bullion Fund was registered

in the Bahamas (see Pet. App. 15a).

Because Agent Rideoutte did not perjure himself, there

is nO merit to petitioners’ contention (Pet. 18-24) that the

court of appeals erred in applying the “materiality” stand-

ard set forth in United States v. Bagley, 473 U.S. 667

(1985), to the alleged failure to disclose Agent Rideoutte’s

report. Concomitantly, petitioners are wrong in suggesting

that the court of appeals should have invoked the

“materiality” standard that has been applied in cases in

which the government has made knowing use of perjured

testimony. See United States v. Bagley, 473 U.S. at

678-679 & nn. 8 & 9.

In any event, petitioners have vastly overstated the im-

portance of Agent Rideoutte’s testimony; even if his

testimony had been false or inconsistent with the contents

of his report, the matter would not have been sufficiently

significant to warrant a new trial. First, the question

whether the Bullion Fund was registered in the Bahamas

was not of great importance; what was important was that

the petitioners promoted the Bullion Fund as a legal means

of avoiding federal tax liability and tax investigations,

when in fact the Bullion Fund was simply a means of

generating large amounts of cash for petitioners from their

victims. >

4 Even the affidavit of petitioners’ current counsel states that the

Bullion Fund was registered in the Turks and Caicos Islands; that af-

fidavit suggests that the company was not “registered” in the

Bahamas, but was merely licensed to do business there. C.A. App.

605-606.

5 Although petitioners have featured Agent Rideoutte’s testimony

as if it were the linchpin of the government’s case, in fact Agent

Rideoutte was a minor witness whose direct examination occupies less

than four pages of the transcript. Petitioners find great significance in

a letter from the government to an official in Bermuda thanking him

for his cooperation in the investigation of the Bullion Fund. In that

letter, the government stated that the official’s cooperation made the

indictment possible. Petitioners quote that letter no fewer than eight

times in the petition (Pet. 7, 19, 20, 27, 29). But while the Bullion

10

Moreover, Agent Rideoutte did not suggest in his

testimony that petitioners had created or participated in

the creation of the Bullion Fund, nor was it the govern-

ment’s theory that petitioners had played a role in setting

up the arrangement by which the Bullion Fund received

“investments” through an address in the Bahamas. Rather,

the government’s evidence—including petitioner Linne’s

admissions — showed that petitioners had promoted the

Bullion Fund to their victims, and it further showed that

the Bullion Fund was not a legitimate investment company

and that petitioners caused the Bullion Fund to be used as

a means of concealing income offshore.® For that reason,

the fact that no one Agent Rideoutte spoke with in the

Bahamas knew anything about petitioners Linne or

Slater—a fact that was reflected in Agent Rideoutte’s

report —was not exculpatory or in any way inconsistent

with either Agent Rideoutte’s testimony or the rest of the

government’s proof.

Finally, the government did not rest its case exclusively

on evidence concerning petitioners’ use and promotion of

the Bullion Fund; rather, the government suowed that the

Bullion Fund was only one of several methods that peti-

tioners used in seeking to achieve the object of their con-

Fund was obviously an important feature of the case, the significance

of the Bullion Fund in the prosecution did not turn on the relatively

minor matter of the status of the Bullion Fund in the Bahamas be-

tween 1983 and 1985, which was the only issue addressed by Agent

Rideoutte’s testimony.

® Petitioner Linne admitted at trial that he had associated with

-Briggs, that he had advised members of CFD to use the Bullion Fund,

and that he had caused CFD members’ funds to be sent to the Fund ac-

count in the Bahamas (C.A. App. 198-200, 214-216, 222). In addition,

the government introduced various exhibits and the testimony of a

former member of CFD to establish that petitioners had promoted

and used the Fund as a means of concealing income from the IRS

(C.A. App. 139-140, 328; GXs 8, 120).

1]

spiracy. Thus, the court below correctly concluded that

the “government at trial presented overwhelming evidence,

independent of the IRS agent’s testimony, from which the

jury could find that the defendants knew of the unlawful-

ness of their activities”’ and, accordingly, there was no

Brady violation (Pet. App. 6a-7a).

2. Petitioners similarly err in suggesting (Pet. 24-27)

that they did not waive their rights under the Jencks Act.

As noted above, there is no support in the record for peti-

tioners’ claim that Rideoutte perjured himself. Thus, peti-

tioners are wrong in asserting (Pet. 24) that their waiver

was somehow “fraudulently induced.” Moreover, as the

court of appeals explained (Pet. App. 6a (footnote

omitted)), “{a]lthough aware that the agent was testifying

from notes he had prepared, defense counsel failed to

make any request to review them and therefore waived any

Jencks Act complaint.” See United States v. Peterson, 524

F.2d 167, 175 (4th Cir. 1975), cert. denied, 423 U.S. 1088

(1976); United States v. Simmons, 281 F.2d 354, 358 (2d

Cir. 1959); United States v. Tellier, 255 F.2d 441, 449 (2d

7 The government showed, for example, that in 1983 petitioner

Linne had assisted in the writing of an appellate brief in which he ad-

vanced his “legal non-taxpayer” theory; the Court of Appeals for the

Eighth Circuit found that theory to be “totally without arguable merit”

(United States v. Drefke, 707 F.2d 978, 981, cert. denied, 464 U.S. 942

(1983); C.A. App. 204-205). To rebut petitioners’ claims of good

faith, the government showed that petitioners instructed purchasers to

“judgment proof” themselves (C.A. App. 211-212, 228, 591; GXs

118-120); that petitioners offered their assistance in the event that any

civil or criminal proceedings were brought against ANDI purchasers

(C.A. App. 317-319); and that, to assure that the IRS would not

discover and disallow the “immediate and drastic” tax savings which

petitioners advertised the CFD program would produce, petitioners

provided CFD customers with “non-photo blue pencils” for endorsing

checks so that banks could not make photographic records of those

customers’ signatures (C.A. App. 123, 341; GXs 9, 50).

12

Cir.), cert. denied, 358 U.S. 821 (1958). This is true even

though, as petitioners allege, a request was made for

Jencks Act material prior to trial and the government,

while implicitly representing that it had disclosed all the

Jencks material, failed to disclose Rideoutte’s report. See

United States v. McKenzie, 768 F.2d 602, 607 (Sth Cir.

1985), cert. denied, 474 U.S. 1086 (1986).

3. Finally, petitioners err in contending (Pet. 27-30)

that the court of appeals “blundered” by refusing to allow

them to add a new issue to their appeal after oral argu-

ment. They argued that the court of appeals should have

ordered the disclosure of grand jury transcripts so that

petitioners could determine whether the prosecutors mis-

led the grand jury. Apart from the fact that this conten-

tion was raised too late in the court of appeals, it is totally

without merit. There is no foundation in the record for

petitioners’ claim that the prosecutors and Agent

Rideoutte perpetrated a conspiracy in the District Court

and that the activities of these individuals before the

Grand Jury were part of a continuing conspiracy. Nor

have petitioners even made a threshold showing of why

they should be permitted to examine portions of the grand

jury record not already provided to them. See Pittsburgh

Plate Glass Co. v. United States, 360 U.S. 395, 400-401

(1959) (defendant must demonstrate “a particularized

need” for the evidence which outweighs the policy of

grand jury secrecy). In any event, even if there were some

error in the legal presentation to the grand jury, the petit

jury’s verdict renders any such error harmless. See United

States v. Mechanik, 475 U.S. 66 (1986).

13

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

CHARLES FRIED

Solicitor General

WILLIAM S. ROSE, JR

Assistant Attorney General

MICHAEL L.. PAUP

ROBERT E. LINDSAY

GAIL BRODFUEHRER

Alforneys

DECEMBER 1987

US. GOVERNMENT PRINTING OFFICE 1987- 202-037/60170