Opposition Brief — Leonard v. United States

INDEX

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CITATIONS

Cases:

Bronston vy. United States, 409 U.S. 352___

Jackson, Ex parte, 96 U.S. 727--------_--

Kraft v. United States, 238 F. 2d 794_____

Lego v. Twomey, 404 U.S. 477_------___-

Spencer v. Texas, 385 U.S. 554_.........-

United States v. Deaton, 381 F. 2d 114____

United States v. Egenberg, 441 F. 2d 441__

United States v. Heffner, 420 F. 2d 809___

United States v. Jernigan, 411 F. 2d 471___

United States v. Lawrance, 480 F, 2d 688_. 8,9

United States v. Leahey, 434 F. 24 7______ 10

United States v. Sourapas, 515 F, 2d 295_- 10

United States v. Taylor, 305 F. 2d 183______ 6

Constitution and statute:

U.S. Constitution, Fourth Amendment___. 2, 11

eS HOP iaicminccs dean caaburcatoes, 2

Miscellaneous:

Rules of the Supreme Court of the United

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Aonannwowvorn ©

a _

_

States, Rule 19(1)(b)_--------_______ 9

Federal Rules of Criminal Procedure, Rule

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Gu the Supreme Court of the United States

OcToBER TERM, 1975

No. 75-1016

JacksoN D. LEONARD, PETITIONER

Vv.

Unirep States OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED

STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

OPINIONS BELOW

The district court rendered no opinion. The opinion

of the court of appeals (Pet. App. A la-29a) and its

supplemental opinion on petition for rehearing (Pet.

App. B 30a-32a) are reported at 524 F. 2d 1076.

JURISDICTION

The judgment of the court of appeals was entered

on August 28, 1975, and petitioner’s petition for re-

hearing with suggestion for rehearing en banc was

denied on November 18, 1975 (Pet. App. B 30a). By

order dated December 5, 1975, Mr. Justice Marshall

extended the time within which to file a petition for a

(1)

2

writ of certiorari to and including January 17, 1976

(Pet. App. H 57a). The petition for a writ of cer-

tiorari was filed on January 16, 1976. The jurisdiction

of this Court is invoked under 28 U.S.C. 1254(1).

QUESTIONS PRESENTED

1. Whether evidence that petitioner submitted a

false affidavit to an Internal Revenue agent during

audit and made a false statement on his 1971 income

tax return was properly admissible in his prosecution

for filing false income tax returns for 1967 and 1968.

2. Whether revenue agents of the Internal Revenue

Service, prior to interviewing petitioner in a non-

custodial setting, were required to warn him of his

rights because of the Service’s announced policy that

special agents give such warnings prior to inter-

viewing persons suspected of possible criminal tax

violations.

3. Whether an Internal Revenue Service mail watch

designed to identify mail from Swiss banks by examin-

ing only the outsides of the envelopes and opening

none of the mail violated the Fourth Amendment.

4. Whether the government improperly obstructed

petitioner’s interviews of prospective witnesses.

STATEMENT

After a jury trial in the United States District

Court for the Southern District of New York, peti-

tioner was convicted on two counts of filing false in-

come tax returns understating the amount of his

income, in violation of 26 U.S.C. 7206(1). The two

3

counts respectively charged petitioner with the omis-

sion of $24,168 of income from his 1967 tax return and

the omission of $58,684 of income from his 1968 return

(Pet. App. A 2a). The trial court sentenced petitioner

to concurrent terms of 18 months’ imprisonment, with

15 months suspended, and he was fined $5,000 on each

count and ordered to pay the costs of prosecution

(ibid.). The court of appeals affirmed (Pet. App. A

Ja-29a; Pet. App. B 30a-32a).

In 1968 and 1969, the Internal Revenue Service re-

quested the Postal Service to conduct a surveillance

of mail coming into New York City from Switzerland

during early 1968 and 1969. This request was made

because the New York Regional Office of the Internal

Revenue Service had become concerned over possible

losses of income taxes through the use of secret Swiss

bank accounts (Pet. App. A 10a). The Postal Service

agreed, and during those periods a postal inspector

and special agents of the Internal Revenue Service

photostated by means of high speed copiers the faces

of certain air mail envelopes mailed from Switzerland

to New York (A. 405a-406a).* This procedure was

part of what was known as the Foreign Bank Account

Project. The result of the work was that the Service

selected for audit about 100 persons in New York

City (Pet. App. A 10a-lla). Although petitioner was

1“A4” references followed by a lower case “a” after the page

number are to the first 545 pages of Vol. I of petitioner's appendix

in the court of appeals. “A.” without any lower case “a” following

the page number refers to the pages following page 545a, which

are numbered as follows: Volume I (pp. 1-142), and Volume IL

(pp. 143-1029).

4

‘one of those persons, the Service had already decided

to audit him for other reasons (Pet. App. A lla).

The evidence in this case showed that in 1967 peti-

tioner, a chemical engineer, entered into a contract

with Union Carbide Corporation for engineering serv-

ices in connection with the construction of two chemi-

cal plants (Pet. App. A 3a). Petitioner was to receive

two types of fees. The first type consisted of various

lump sum payments and later periodic payments.

There was no evidence that any of the first type of

payment was unreported, and the indictment against

petitioner did not so charge (ibid.). The second type

of payment was a ten percent override on Union Car-

bide’s reimbursements for amounts paid by petitioner

to certain subcontractors. Petitioner did not report

any of these ten percent overrides as income for 1967

or 1968 (ibid.). Petitioner never deposited the checks

representing the ten percent overrides ($24,168 in 1967

and $58,684 in 1968) but either cashed them or used

them to purchase travelers’ checks (Pet. App. A

3a—4ta).

During the ensuing audit, the internal revenue

agents asked petitioner whether he had any foreign

bank accounts. Petitioner replied that he had no for-

eign bank accounts except for one in an Australian

bank which was related to an engineering project in

Australia in which he was engaged (Pet. App. A 12a).

Petitioner signed an affidavit to that effect, with the

further claim that he had not had “any transactions or

dealings of any nature with any foreign banks” except

5

for nominal currency conversions during travel

abroad and the Australian project (Pet. App. A 12a

and n. 5). In the course of the audit, the agent also

asked petitioner to show him his agreement with

Union Carbide. Before petitioner exhibited the con-

tract to the agent, he made a “clumsy attempt to delete

the 10% override provision from the copy of the con-

tract” (Pet. App. A 5a). The agent thereupon con-

tinued his audit and requested additional information

from Union Carbide. On the basis of this information,

the agent recommended that the matter be referred to

the Intelligence Division for a fraud investigation.

The recommendation was accepted and a criminal in-

vestigation was commenced with a special agent in

charge. Thereafter, the agents warned petitioner of

his constitutional rights at the beginning of each

interview (Pet. App. A 12a-13a).

At trial, an official of Chase Manhattan Bank testi-

fied that in 1968, he personally delivered to petitioner

a total of $5». .000 in official Chase Manhattan checks

made payable to petitioner on remittance instructions

from the Banque Cantonale de Zurich. Petitioner used

most of the checks to pay off a personal bank loan

(Pet. App. A 18a).

A second witness, Eva Brooke, testified that in the

summer of 1971, petitioner offered her husband an

employment arrangement in which half of his compen-

sation would be deposited in a Swiss bank account.

During this conversation, petitioner admitted to Eva

Brooke that he had a Swiss bank account. The govern-

6

ment thereupon introduced petitioner’s 1971 tax re-

turn into evidence in which he stated that he had no

foreign bank account during 1971 (Pet. App. A 13a-

14a).

ARGUMENT

1. It is unquestioned that petitioner’s tax returns

for the years at issue were false because they omitted

large amounts of income in each of the two years. The

only issue before the jury was whether petitioner

willfully filed false returns (A. 312a).

Petitioner first argues (Pet. 22-26) that proof of

his false statement in his 1971 tax return and in his

1969 affidavit submitted to the revenue agent should

not have been admitted into evidence. But these acts

were similar to the misconduct charged in the indict-

ment—making false statements on income tax re-

turns—and evidence of those similar acts was admitted

only on the issue of willfulness (A. 980-981).

It is well established that evidence of similar crimes

is admissible when it is probative with respect to in-

tent, an element in the crime, identity, malice, motive,

a system of criminal activity, when the defendant has

raised the issue of his character, or when the defend-

ant has testified and the prosecution seeks to impeach

his credibility. See Spencer v. Texas, 385 U.S. 554,

560-561. In criminal tax cases, the general rule is that

proof of similar acts is admissible on the issue of will-

fulness. See, e.g., United States v. Egenberg, 441 F.

2d 441, 443-444 (C.A. 3); United States v. Jernigan,

411 F. 2d 471 (C.A. 5); United States v. Taylor, 305

7

F. 2d 183 (C.A. 4). In determining whether to admit

such evidence, the trial judge is required to consider

whether the probative value of the evidence is out-

weighed by its possible prejudice. Spencer v. Texas,

supra, 385 U.S. at 561; United States v. Deaton, 381

F. 2d 114, 117 (C.A. 2).

Here, petitioner’s willingness to submit a_ false

affidavit to the Internal Revenue Service agent swear-

ing that he had no “transactions or dealings of any

nature with any foreign banks’? (Pet. App. A 12a, n.

5) and to subscribe to a false statement on his 1971 tax

return that he had no foreign bank accounts (when

the evidence showed that he admitted to Eva Brooke

that year that he did have a Swiss bank account) were

relevant to show his general lack of truthfulness in

his tax returns and in his statements to the federal

tax authorities. While this evidence was probative as

to the accuracy of petitioner’s sworn statements to

the Internal Revenue Service, there was solid evidence

that petitioner willfully understated his income on

his 1968 and 1969 returns. Thus, contrary to peti-

tioner’s claim (Pet. 23) that he was really convicted

of having a Swiss bank account rather than on the

charges in the indictment, his handling of the Union

Carbide override checks (cashing them or converting

them into travelers’ checks rather than depositing

them) as well as his “clumsy attempt’? (Pet. App.

A 5), to delete the ten percent override provision

from the copy of his contract with Union Carbide

ERTL RO RAT

Spoigrre

8

which was shown to the investigating agents, was

sufficient to support a guilty verdict, wholly apart

from the peripheral issue of the Swiss bank account.*

There is, moreover, no conflict between the decision

below and United States v. Lawrance, 480 F. 2d 688,

691 n. 6 (C.A. 5), or Kraft v. United States, 238 F. 2d

794, 802 (C.A. 8). While there are dicta in those cases

which suggest that to be admissible similar crime evi-

dence must be “plain, clear and conclusive,” the evi-

dence here was sufficient to have enabled the jury

to conclude that petitioner did have a Swiss bank

account and that he lied to the Internal Revenue Serv-

ice in swearing that he had no such account.’ The

transaction with the Chase Manhattan Bank checks

and the testimony of Eva Brooke established the fal-

sity of petitioner’s statements. Although there was no

* Bronston v. United States, 409 U.S. 352, upon which petitioner

relies (Pet. 22), is distinguishable. There, the Court reversed a

perjury conviction because the defendant’s answers to the prosecu-

tor’s questions, while misleading, were all truthful. Here, on the

other hand, there was competent testimonial evidence from which

the jury could infer that petitioner's affidavit submitted to the

revenue agent and his negative answer to the foreign bank account

question on his 1971 tax return were both false.

* The trial court was convinced that there was a “square con-

flict” between the representations in petitioner’s 1969 affidavit and

the other evidence of their falsity, even without considering the

effect on that issue of Eva Brooke’s testimony as to petitioner’s

1971 admission that he had a Swiss bank account (A. 500). Never-

theless, the trial judge fully protected petitioner’s rights by giving

the jury a limiting instruction on how the evidence of similar acts

was to be used, if at all. There was accordingly no departure from

the “wide range of discretion” given to the trial court in this mat-

ter, United States v. Deaton, 381 F. 2d 114, 118, n. 3 (C.A, 2),

9

direct evidence of the existence of the Swiss bank ac-

count, that was due to the secret nature of a numbered

Swiss account. However, it does not mean that the

evidence did not have a plain, clear and convincing

character. Thus, while the court of appeals expressed

the view (Pet. App. A 23a) that a preponderance of

the evidence standard is the correct test for admission

of evidence of similar crimes (see Lego v. T'womey,

404 U.S. 477, 482-487), there is no reason to believe

that the evidence of petitioner’s similar crimes would

not have met the “plain, clear and conclusive” dicta of

Kraft and Lawrance.* Whatever abstract differences

of view may exist among the courts of appeals, there

is no conflict of decisions “on the same matter” within

the meaning of Rule 19(1)(b) of the Rules of this

Court.

2. Petitioner further argues (Pet. 14-19) that in

failing to warn him of his constitutional rights when

they first interviewed him, the revenue agents violated

the policy of the Internal Revenue Service, as an-

nounced in a press release. In so contending, petitioner

*The situations in Avaft and Lawrance are distinguishable.

Kraft involved a mail fraud prosecution and the evidence of

similar crimes was letters to the defendant intimating that five

years before he had been dilatory in making refunds to customers

in a similar business.

In Lawrance, a prosecution for selling narcotics in the absence

of the appropriate taxpaid stamps in violation of 26 U.S.C.

4704(a), the government sought to introduce evidence of similar

narcotics sales by the defendant as relevant to the question of in-

tent. However, the court held that this evidence was inadmissible

because the defendant’s intent in his prior sales was not an element

of the statutory tax crimes for which the defendant was charged.

10

asserts that the decision below conflicts with United

States v. Leahey, 434 F.2d 7 (C.A. 1); United States

Vv. Heffner, 420 F. 2d 809 (C.A. 4); and United States

v. Sourapas, 515 F. 2d 295 (C.A. 9). Those eases are

distinguishable for they hold that when special agents

fail to give the warnings prescribed by the procedures

of the Internal Revenue Service, statements obtained

from the taxpayer must be suppressed on due process

grounds. Here, however, the agents in question were

revenue agents whose function is to conduct civil tax

audits and not criminal investigations. Accordingly,

the court of appeals (Pet. App. A 20a) correctly

found it unnecessary to reach the question whether it

would follow those cases.’ Since petitioner was given

warnings of his constitutional rights when his case

was referred for criminal investigation to special

agents of the Intelligence Division, procedures of the

Internal Revenue Service were not violated.

There is no basis for petitioner’s argument (Pet.

14-19) that the investigation of his tax liability was

criminal in nature from its inception because the

relevant postal regulations contemplate that the mail

cover is necessary to obtain information “regarding

the commission or attempted commission of a crime”

(Pet. 15; Pet. App. E 36a). Petitioner argues here, as

° Thus, as petitioner concedes (Pet, 2n., 19n.), the question pre-

sented in Beckwith v. United States, No. 74-1243, argued Decem-

ber 1, 1975, as to whether a special agent investigating possible

criminal tax violations must give a taxpayer Miranda warnings

prior to interviewing him, is likewise not involved in this case.

eer eee

11

he did in the court below, that unless the purpose of

the mail cover was to unearth crime it was illegal

under the postal regulations, and that if it was legal,

the tax investigation was criminal and the revenue

agents should have warned him of his constitutional

rights. But the court of appeals did not find itself

“pinioned between the horns of [this] dilemma,” stat-

ing (Pet. App. A 21a):

The mail cover came within the Postal Regula-

tions because IRS had reason to believe that

crimes under the revenue laws were being com-

mitted by some taxpayers through the use of

Swiss bank accounts. It does not follow that

every person whose name turned up in the

print-out as probably having a Swiss bank

account was suspected of committing such a

crime. In fact the audit disclosed no sufficient

evidence that Leonard had committed a crime

by having a Swiss bank account. What ulti-

mately led Agent Laski to recommend a erimi-

nal investigation was the data furnished by

UCC, which showed, not a “kick-back” as rep-

resented by the informer, but a failure to report

the 10% overrides which Leonard had received.

3. Petitioner further contends (Pet. 19-22) that the

Swiss mail watch conducted by the Postal Service

at the request of the Internal Revenue Service was

illegal and therefore its fruits should have been sup-

pressed. Although the Fourth Amendment may pro-

hibit a warrantless opening of sealed letters and pack-

ages (Hx parte Jackson, 96 U.S. 727), there was no

12

such opening here.* All that was done was to photo-

copy the outside of certain envelopes.’ As the court of

appeals pointed out, ‘‘The IRS was confronted with a

serious problem in the use of Swiss bank accounts to

evade the revenue laws” (Pet. App. A 15a), and even

if copying the outside of envelopes may be considered

a search, here it was not an unreasonable one for there

could be no reasonable expectation of privacy with

respect to the outsides of envelopes in the stream of in-

ternational mail, “which are subject to inspection and

even in some cases to opening in aid of the enforce-

ment of the customs laws” (Pet. App. A 16a).*

4. Petitioner also claims (Pet. 26-29) that the gov-

ernment improperly obstructed his interviews of

prospective witnesses, particularly agents of the Inter-

nal Revenue Service, by directing them not to answer

some of petitioner’s questions. However, the district

court was correct in refusing to order, as petitioner

* Petitioner’s statement that the special agents “intercepted, in-

spected and photocopied mail * * *” (Pet. 6) may tend to create

the impression that some of the mail was opened. In fact, no mail

was opened and the photocopying was limited to the faces of the

envelopes (A. 375a—376a).

* The photocopying did not cause the slightest delay in deliver-

ing any person’s mail (A. 423a).

* Petitioner also argues (Pet. 20) that mail watches must neces-

sarily be limited to specific individuals who were suspected of hav-

ing committed crimes. But, as the court of appeals correctly

pointed out, there is no reason to read the postal regulations so

narrowly, nor did the Postal Service do so “and its interpretation

of its internal regulations is entitled to weight. See 4 Davis, Ad-

ministrative Law Treatise, Sec. 30.12 at 261 & n. 12 (1958)” (Pet.

App. A 16a-17a).

13

requested, either the prosecutor’s total exclusion from

petitioner’s deposition of the agents or otherwise to

direct that the prosecutor not instruct and advise those

witnesses ‘‘what questions to answer and not to

answer” (A. 302a). Investigative agents of the govern-

ment are in effect part of the prosecution team and

they are not required to submit to pretrial interview

and examination by counsel for the defense. A de-

fendant’s pretrial rights to discovery are governed by

Rule 16 of the Federal Rules of Criminal Procedure,

which makes no such provision. Where, as here, seven

government agents have submitted to such pretrial

questioning by defense counsel and provided substan-

tial information not otherwise producible before trial

under the rules, petitioner obtained far more informa-

tion than contemplated by the rules of criminal dis-

covery. At all events, as the court of appeals observed

(Pet. App. A 28a), petitioner was not prejudiced in

the slightest degree by the infrequent interventions of

the prosecutor at these interviews.’

* Petitioner also contends (Pet. 29-32) that the government im-

properly used a Letter Rogatory to obtain the presence of Eva

Brooke, a British citizen, at the trial. The court of appeals

answered this argument in the following terms, upon which we

rely (Pet. App. A 29a) :

“Counsel makes a variety of attacks, unnecessary to detail, on

the methods by which the prosecution secured the presence of Mrs.

Brooke. Apart from the fact that it is not clear that these objec-

tions were raised below and that they are of doubtful merit, the

short answer is that impropriety in the method by which the prose-

cution has obtained the attendance of a witness, while a proper

subject for cross-examination or proof insofar as the impropriety

may go to the weight of the witness’ testimony, is not of itself a

ground for reversal.”

14

CONCLUSION

For the reasons stated, the petition for a writ of

certiorari should be denied.

Respectfully submitted.

Rosert H. Bork,

Solicitor General.

Scorr P. Crampton, |

Assistant Attorney General.

Rosert E. Lrnpsay,

Attorney.

Arrin 1976.

U.S GOVERNMENT PRINTING OFFICE: 1976