Petition for Writ of Certiorari — Lynn v. United States

wPaI Cait 14 @

98 1832 way 1 5 1999,

No. OFFICE OF THE CLERK

ee eee renee:

IN THE

Supreme Court of the United States

RANDALL J. LYNN,

Petitioner,

v.

UNITED STATES OF AMERICA,

Respondent.

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the Sixth Circuit

PETITION FOR A WRIT OF CERTIORARI

Peter J. STRIANSE

Counsel of Record

TUNE, ENTREKIN & Wuire, P.C.

Attorneys for Petitioner

First American Center

21st Floor

Nashville, Tennessee 37238

(615) 244-2770

152894 @ Counsel Press LLC

FORMERLY LUTZ APPELLATE SERVICES

(800) 274-3321 + (800) 359-6859

i

QUESTIONS PRESENTED FOR REVIEW

I. Whether a factually unwarranted deliberate

ignorance jury instruction violates a criminal defendant’s

fundamental right to a fair trial?

Il. Whether the government’s outrageous conduct in

concealing the criminal nature of a civil tax audit violates a

criminal defendant’s due process rights?

il

TABLE OF CONTENTS

Page

Questions Presented for PANY S os cd caidh Smee i

Sable of Combate ais cshdsaticscic pc eugce il

Table of Cited csi MTT Re ili

Table Of Appeningy 5 7 Vii

OPN BOW es a l

Statement OF PRON ae iho i ie ]

Constitutional Provision Involved ...........___ ]

Statement of the Sigh TT SRD Oras an a ]

Reasons for Granting the Writ ..:..,,0,... 4

I. The Petition Should Be Granted To Resolve

A Split Among The Circuits Concerning An

Important Constitutional Question. ....... 4

II. The Petition Should Be Granted Because The

Court Of Appeals Decided An Important

Constitutional Question In A Manner That

Conflicts With Relevant Decisions Of This

COME ves seein et ee 10

COMME ant hae 17

ul

TABLE OF CITED AUTHORITIES

Page

Cases:

Chapman vy. California, 386 U.S. 18 tk 53 Bees 8,9

Gilbert v. Moore, 121 F.3d 144 (4th Cir. 1997) ... )

Menendez v. United States, 872 F. Supp. 567 (S.D.

soy Recati’s.) MR Ge tap ame ie otite fetes Wena es 14

Rose v. Clark, 478 U.S. 570, 106 S. Ct. 3101, 92 L.

Mee Pr CEM 5205 2 ee Ses en AEE 8

Sandstrom v. Montana, 442 U.S. 5] 0,99 S. Ct. 2450,

Oe Se we ee OTD ee eee ee 8

United States v. Abbas, 74 F.3d 506 (4th Cir. 1996)

PPR hee SWaee NM heer PAROS lee 5

United States v. Abrahams, 905 F.2d 1276 (9th Cir.

hcg! Tn SESE A ACS ee aay foe egaga ane 12

United States v. Barger, 931 F.2d 359 (6th Cir.

BME SACS Fee cee iis ee ee 11, 14, 16

United States y. Barnhart, 979 F.2d 647 (8th Cir.

hf 5 EPSP RS GEA So Do Sas ie Secon a eee es gs 4

United States v. Baumgardner, 85 F.3d 1305 (8th

a SERIES Sg ar ORI ip 9

iv

Cited Authorities

Page

United States vy. Brown, 635 F2d 1207 (6th Cir.

dices’ METER LL eo Se pe oS. 11, 16

United States y. Caminos, 770 F.2d 36] (3rd Cir.

tnd Me ER es | a ra Men ee 5

United States vy. Cartwright, 6 F.3d 301 (Sth Cir.

EOD OP 100 V eb bee ND eReE i a 5

United States v. Cicero, 22 F.3d 1156 (D.C. Cir.

NFO, Sekecvseveaivicte a 9

United States v. Civelli, 883 F.2d 191 (2nd Cir.

NINOS iesco cess Oi ee 5

United States vy. Francisco-Lopez, 939 F.2d 1405

OG ees 7

United States v. Genser, 595 F.2d 146 (3d Cir. 1979), i

cert. denied, 444 U.S. 928 SIP PEP io wba e ee. 1]

United States vy. Grunewald, 987 F.2d 531 (8th Cir.

Pee) .ivesesseisbign ee 12, 13, 14

United States v. Gullett, 713 F.2d 1203 (6th Cir.

1983), cert. denied, 464 U.S. 1069 CROSS 8 i 6 :

United States v. Herrero, 893 F.2d 1512 (7th Cir.

in! JIE UM ERS HEN, peti. eaten 5

Cited Authorities

Page

United States v. Lara-Velasquez, 919 F.2d 946 (Sth

Role Ree iw heh ie a ae 6,7

United States v. Lee, 991 F.2d 343 (6th Cir. 1993)

EPECEEL FEDS Cis hoo Rss Pik eke 4

United States v. MacDonald & Watson Waste Oil

Co. 933 F.26 33 Chet Car: ISG) oie dccedss 9

United States v. Manriquez Arbizo, 833 F.2d 244

CSCC ar Bee) os 08 bhi bed bb aways euae et 8

United States v. Melendez, 90 F.3d 18 (2d Cir.

CPOE 5 oo Ee aie a eb eek eee ok 9

United States v. Murrieta-Berjarano, 552 F.2d 1323

ARE TOO 6s 5 io ai ees 4,5,8

United States v. Ochoa-Fabian, 935 F.2d 1139 (10th

Cet. U9OD ini ew See ie eed oe ve eee 6

United States v. Ojebode, 957 F.2d 1218 (Sth Cir.

ee f) BaP ne ie oer fear A pee Re omnia Mere aE che 4

United States v. Perez-Tosta, 36 F.3d 1552 (11th Cir.

SPOS re oe ESSN 44 ada 9

United States v. Powell, 379 U.S. 48 (1964) ...... 10, 11

United States v. Rawlings, 73 F.3d 1145 (D.C. Cir.

i) Bee Mae pe ee NM RES ER Er cae te aes 10

vi

Cited Authorities

Page

United States v. Rivera, 926 F.2d 1564 (11th Cir.

et REET CEE a Oe SR Le oS 6

United States v. Ruiz, 59 F.3d 115] (11th Cir.) , cert.

denied, 116 S. Ct. 956 (1996) ............... 10

United States v. Russell, 411 U.S. 423 4) 75) See

‘0's 03:46 0 he ht ee ae ee eee tak 10, 11, 14, 16

United States v. Serubo, 604 F.2d 807 (3d Cir.

IRIS). suv necd conaghbadiele nds ee eee 12

United States v. Spring, 80 F.3d 1450 (10th Cir.),

cert. denied, 117 S. Ct. 385 (1996) ........... 9,10

United States v. Stone, 9 F.3d 934 (11th Cir. 1993)

“00.4069 ddd aie b eNR Reales ie xa Lae Ge 5

United States v. Thomas, 86 F.3d 647 (7th Cir.), cert.

denied, 117 S. Ct. 392 RR sw <4 6 cc aban. 9

United States v. Tucker, 28 F.3d 1420 (6th. Cir.

OPED shun cuibeuceun seus bocce 11

United States v. Tweel, 550 F.2d 297 (Sth Cir.

ROPE) 00s ceeds Heres ete ea ake sae 12, 13

United States v. Zolin, 809 F.2d 1411 (9th Cir.

ROOT) ih odin ese see Ee 12

ei >

vil

Cited Authorities

Statutes:

DER 2 ae Sey PEE ee a eae

SS Uae BPO on Gee ccs chee

18 U.S.C. § 1956(a)(1)(A)() ......

18 U.S.C. § 1956(a)(1)(b)(T) .......

ye BNR Soe oy |) es ee ae

United States Constitution:

Fifth Amendment. ....c6 ccs cescece

Other Authority:

Internal Revenue Manual, § 9311.83

vill

TABLE OF APPENDICES

Appendix A — Opinion Of The United States Court

Of Appeals For The Sixth Circuit Dated And Filed

ORNS TU i oe ee

Appendix B — Judgment Of The United States

District Court For The Eastern District Of

Tennessee At Chattanooga Dated And Filed June

dnd Meee Eee SS MRT ORE

Appendix C — Order Of The United States Court

Of Appeals For The Sixth Circuit Denying

Petition For Rehearing Dated And Filed April 9,

OOD o's 9's vs bes cab yO IRL ee

Page

la

l6a

l

Petitioner Randall J. Lynn respectfully requests that a

writ of certiorari be issued to review the judgment of the

United States Court of Appeals for the Sixth Circuit in this

case.

OPINION BELOW

The opinion of the United States Court of Appeals for

the Sixth Circuit is unreported. (App. A). The Judgment In

A Criminal Case entered by the district court is attached.

(App. B).

STATEMENT OF JURISDICTION

The judgment of the United States Court of Appeals

for the Sixth Circuit (“Court of Appeals”) was entered on

February 19, 1999. The Court of Appeals denied a timely

petition for rehearing and for rehearing en banc April 9,

1999. (App. C). This petition for writ of certiorari was filed

within 90 days of the denial of rehearing.

The jurisdiction of this Court is invoked under

28 U.S.C. § 1254(1).

CONSTITUTIONAL PROVISION INVOLVED

The Fifth Amendment to the United States Constitution

provides in relevant part: “[nJo person shall... be deprived

of life, liberty, or property, without due process of law.”

STATEMENT OF THE CASE

Sometime in 1980, Petitioner Randall J. Lynn (hereafter

“Petitioner” or “Mr. Lynn”) had the opportunity to become

involved in the amusement machine business. Around 1985,

2

Mr. Lynn began to operate a company called R & B

Amusement, which supplied jukeboxes, pool tables and

video games to bars, restaurants, small stores and

entertainment centers (this company was later renamed

RANCO). In essence, RANCO provided games, and service

on those games, to entertainment establishments in return

for a 50/50 spilt of all money spent on the machines.

Included within the games provided by RANCO were

various types of “video poker machines.” These machines

made up less than 10 percent of RANCO’s inventory.

RANCO was a legitimate business. Mr. Lynn registered his

business with county and state authorities, ran

advertisements in the Yellow Pages, hired a law firm to

handle accounting functions, paid federal employee tax, and

never made any effort to hide the nature of his business.

When Mr. Lynn first began operating RANCO, a police

captain in Chattanooga was also heavily involved in the

amusement machine business and he also employed a 50/

50 split method of generating revenue. In 1988, Mr. Lynn,

along with several other operators of amusement games

(including “video poker machines”), had an occasion to

meet with Bradley County, Tennessee, Sheriff Dan Gilley,

the highest ranking law enforcement officer of the county

where Mr. Lynn and RANCO operated. At this meeting,

the Sheriff told those present that he did not have a problem

with their businesses, Mr. Lynn also saw the Sheriff on

several occasions when he visited a competitor’s business

where there were “video poker machines” lined up against

the wall. Mr. Lynn also employed an individual as a route

man who was on “work release” from a local jail. Due to

the nature of work release, a prison official visited RANCO

to verify the type of work performed, and Mr. Lynn fully

disclosed the nature of the business to the official. No prison

3

or state official ever objected to the arrangement. Also, over

a 12 year span (from 1982 to 1994), Petitioner Lynn knew

of no action by police against owners/vendors of video poker

machines.

In April of 1991, Mr. Lynn submitted to a complete

and thorough audit by the IRS which lasted over 30 months.

During the course of the protracted IRS audit, Mr. Lynn

revealed the nature of his business, his method of income

(including the 50/50 split he shared with individuals who

leased the poker machines), and his number of employees.

An employee of Mr. Lynn testified that he was directed by

Mr. Lynn to cooperate fully with the IRS and simply “tell

the truth.” An IRS agent visited Mr. Lynn’s business and

“left no stone unturned.”

In March of 1994, Sheriff Gilley, despite his history of

inaction against “poker machines,” sent out a letter

concerning the amusement games. On July 23, 1996, the

federal government indicted Mr. Lynn. The indictment

charged Mr. Lynn with knowingly and willfully conducting

an illegal gambling business (Count One, 18 U.S.C. § 1955

and 18 U.S.C. § 2), knowingly conducting financial

transactions (involving the proceeds of the illegal gambling

business) with the intent of promoting the illegal gambling

business (Counts Two through Forty-Six, 18 U.S.C.

§ 1956(a)(1)(A)(1) and 18 U.S.C. § 2), and knowingly

conducting financial transactions (involving the proceeds

of an illegal gambling business) designed to conceal the

nature of the proceeds from the illegal gambling business

(Counts Forty-Seven through Eighty-One, 18 U.S.C.

§ 1956(a)(1)(b)(I) and 18 U.S.C. § 2). Count Eighty-Two

charged that all property involved in the charged felony

offenses was subject to forfeiture.

4

Mr. Lynn’s jury trial commenced on February 18, 1997

before the Honorable R. Allan Edgar, United States District

Judge. On February 24, 1997, the jury returned a verdict of

guilty as to Counts One through Eighty-One. However, the -

government dismissed Count 82 following a jury dead-lock

on the forfeiture issue and a mistrial on that count. On June

2, 1997, Judge Edgar sentenced Mr. Lynn to the custody of

the Federal Bureau of Prisons for a term of 67 months and

a fine in the amount of $25,000. Mr. Lynn filed a timely

notice of appeal on June 5, 1997 challenging his conviction

and the sentence imposed by the district court. The Court

of Appeals affirmed the district court.

REASONS FOR GRANTING THE WRIT

I,

THE PETITION SHOULD BE GRANTED TO

RESOLVE A SPLIT AMONG THE CIRCUITS

CONCERNING AN IMPORTANT

CONSTITUTIONAL QUESTION.

Although the Sixth Circuit has expressly condoned the

use of a “deliberate ignorance” jury instruction,’ there is

clearly a disagreement among the circuits as to its propriety.

The use of a “deliberate ignorance” or “conscious

avoidance” jury instruction has been strongly disapproved

of by the Fifth, Eighth, Ninth, and Eleventh Circuits. United

States v. Ojebode, 957 F.2d 1218, 1229 (Sth Cir. 1992);

United States vy. Barnhart, 979 F.2d 647, 652 (8th Cir.

1992); United States y. Murrieta-Berjarano, 552 F.2d 1323,

1. United States v. Lee, 99] F .2d 343 (6th Cir. 1993): Sixth

Circuit Jury Instruction 2.09.

5

1325 (9th Cir. 1955); United States v. Stone, 9 F.3d 934

(11th Cir. 1993). These appellate courts have found error

in the giving of such instruction in part because of the

substantial danger that jurors will misunderstand and be

confused by the instruction and will incorrectly apply a

negligence, recklessness, or “stupidity” standard. United

States v. Cartwright, 6 F.3d 301 (Sth Cir. 1993).

In circuits where the instruction has been approved, the

appellate courts agree that an adequate factual predicate

must be established at trial to support the issuance of a

“deliberate ignorance” charge to the jury.? The “deliberate

2. United States v. Civelli, 883 F.2d 191 (2nd Cir. 1989) (court

held that an adequate factual predicate for the issuance of a

conscious avoidance charge had been established at trial where

the surrounding circumstances were such that, in the opinion of

the court, a reasonable person could have concluded that the

defendant, who was charged with violation of narcotics laws, would

have been apprised of the unlawful nature of his conduct); United

States v. Caminos, 770 F.2d 361 (3rd Cir. 1985) (trial record

warranted the issuance of a conscious avoidance charge to the jury

where the disproportionate amount of money spent by the defendant

and his compatriots, who were charged with violation of drug or

narcotics laws, to effectuate a simple importation of inexpensive

wood carvings would have alerted the defendant, had he not i gnored

the probability, that something other than the wood carving was

involved); United States v. Abbas, 74 F.3d 506 (4th Cir. 1996)

(jury was properly instructed on willful blindness: defendant

asserted lack of knowledge that charged transaction involved

heroin, and witnesses stated that defendant knew suitcase contained

heroin and that he had actively participated in transaction and

negotiations and discussed future transactions); United States v.

Herrero, 893 F.2d 1512 (7th Cir. 1990) (an adequate factual

predicate was presented to justify the presentation to the jury of a

conscious avoidance instruction as regarded its deliberation over

(Cont’d)

6

ignorance” charge is appropriate where evidence shows the

defendant attempted to escape conviction “by deliberately

closing his eyes to the obvious risk that he is engaging in

unlawful conduct.” United States vy. Gullett, 713 F.2d 1203,

1212 (6th Cir. 1983), cert. denied, 464 U.S. 1069 (1984).

Such an instruction is warranted only when evidence shows

“the defendant consciously attempted to escape

confirmation of conditions or events he strongly suspected

to exist.” United States vy. Lara-Velasquez, 919 F.2d 946,

951 (Sth Cir. 1990). The instruction should be used with

caution, however, because of the possibility that “juries will

convict on a basis akin to a standard of negligence: that the

defendant should have known that the conduct was illegal.”

United States v. Rivera, 926 F.2d 1564, 1571 (11th Cir.

1991). The “deliberate ignorance” instruction is “rarely

appropriate, however, because it is a rare occasion when

(Cont'd)

the defendant's involvement in narcotics trafficking where the

following evidence had been introduced at trial: the defendant

admitted that he had participated in criminal drug transactions and

that he was associated with the drug conspiracy group; the

defendant drove around the country in vehicles loaded with cocaine

and with cocaine sales proceeds; and the defendant denied

knowledge of the group’s illegal activities); United States v. Ochoa-

Fabian, 935 F.2d 1139 (10th Cir. 1991) (trial court had properly

given deliberate ignorance instructions, where: (1) the defendant

was stopped at the U.S. border driving a pickup truck with a camper

shell, along with two passengers; (2) the border agent detected a

strong odor of perfume or deodorant which he believed was used

to mask the odor of marijuana; (3) the defendant stated that he was

going to California to look for work: (4) the bed of the pickup was

freshly carpeted, containing only a spare tire and a six-pack of

beer; (5) there was no luggage in the vehicle; and (6) one of the

passengers did not have a permit to travel more than 25 miles from

the border).

eR Sr

7

the prosecution can present evidence that the defendant

deliberately avoided knowledge.” United States v.

Francisco-Lopez, 939 F.2d 1405, 1409 (10th Cir. 1991).

Thus, appellate courts have held that the instruction should

be limited to situations where the evidence shows that: (1)

the defendant was subjectively aware of a high probability

of the existence of the illegal conduct; and (2) the defendant

purposely contrived to avoid learning of the illegal conduct.

Lara-Velasquez, 919 F.2d at 951. The instruction is proper

only where:

sufficient independent evidence of deliberate

avoidance of knowledge has been admitted. . . .

[T]he same fact or facts cannot be used to prove

both actual knowledge and deliberate

indifference because the two are mutually

exclusive concepts. If evidence proves the

defendant actually knew an operant fact, the

same evidence could not also prove he was

ignorant of that fact. Logic simply defies that

result.

Francisco-Lopez, 939 F.2d at 1410.

In the present case, there was no evidence which

established actions of willful blindness or deliberate

ignorance by Petitioner Lynn. He conceded that his conduct

may have impacted State misdemeanor statutes but

maintained that local law enforcement had led him to believe

that the misdemeanor statutes were not being enforced in

his part of the State. Because the government did not

establish an adequate factual predicate at trial to support

8

the issuance of a “deliberate ignorance” charge, it was clear

error for the district court to have given the instruction.’

“The danger in giving the instruction where there is

evidence of direct knowledge but no evidence of avoidance

of knowledge is that the jury could still convict a defendant

who merely should have known about the criminal venture.”

United States v. Manriquez Arbizo, 833 F.2d 244, 249 (10th

Cir. 1987). In addition, courts must studiously guard against

the danger of shifting the burden to the defendant to prove

his or her innocence. See Murrieta-Bejarano, 552 F.2d at

1325 (“The effect of a [deliberate ignorance] instruction in

a case in which no facts point to deliberate ignorance may

be to create a presumption of guilt.”); cf Sandstrom y.

Montana, 442 U.S. 510, 521, 99 S. Ct. 2450, 2458, 61 L.

Ed. 2d 39 (1979) (disapproving of jury instructions that

contain presumptions which shift the burden of proof of an

element of a crime to the defendant). By instructing the

jury on “deliberate ignorance” when unwarranted by the

underlying facts, the district court invaded the province of

the jury, shifted the burden to Petitioner Lynn to prove his

innocence and reduced the government's burden of proof

to a mere negligence standard.

Moreover, an erroneous jury instruction is harmless

only when the reviewing court can conclude that the

erroneous presumption did not contribute to the jury’s

verdict. Rose v. Clark, 478 U.S. 570, 580-81, 106 S. Ct.

3101, 92 L. Ed. 2d 460 (1986) (citing Chapman y.

3. The giving of such an instruction robbed Petitioner Lynn

of his good faith/entrapment by estoppel defense and was clear

error.

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California, 386 U.S. 18 (1967)).* Here, the erroneous

presumption created by the factually unsupported

4. Compare United States v. Perez-Tosta, 36 F.3d 1552, 1565

(11th Cir. 1994) (error in including deliberate ignorance instruction

in absence of evidence showing deliberate ignorance harmless when

jury could easily have found actual knowledge) and United States

v. Cicero, 22 F.3d 1156, 1161-62 (D.C. Cir. 1994) (error in

instruction about precision with which government would have to

prove date of crime harmless when jury would have found same

way) with Yates v. Evatt, 500 U.S. 391, 408-11 (1991) (reversal

required when erroneous jury instructions may have contributed

to guilty verdict); United States v. MacDonald & Watson Waste

Oil Co., 933 F.2d 35, 55 n.20 (Ist Cir. 1991) (reversal required

because jury instruction that proof that employee of hazardous

waste disposal facility responsible corporate officer conclusively

proved employee had knowledge of illegal acts erroneous and error

not harmless beyond reasonable doubt); United States v. Melendez,

90 F.3d 18, 21-22 (2d Cir. 1996) (reversal of conviction for drug

trafficking crime with thirty year enhancement for using Or carrying

machine gun required when jury instruction included too broad

definition of “use” and impossible to determine whether verdict

rested on legally sufficient theory); Gilbert v. Moore, 121 F.3d

144, 149 (4th Cir. 1997) (reversal required when jury instruction

created rebuttable presumption of implied malice in capital murder

trial); United States v. Thomas, 86 F.3d 647, 650-51 (7th Cir.)

(reversal required when court erroneously instructed jury that “use”

of firearm included providing person with security and confidence

to commit crime because court not convinced properly instructed

jury would have convicted), cert. denied, 117 S. Ct. 392 (1996);

United States v. Baumgardner, 85 F.3d 1305, 1309-10 (8th Cir.

1996) (reversal required when erroneous jury instruction omitted

materiality, thus removing essential element from jury’s

deliberation because not harmless beyond reasonable doubt);

United States v. Spring, 80 F.3d 1450, 1466 (10th Cir.) (reversal

required when jury instruction erroneously explained “carrying”

element in prosecution for aiding and abetting in using or carrying

(Cont'd)

10

“deliberate ignorance” instruction undoubtedly contributed

to the jury’s verdict.

THE PETITION SHOULD BE GRANTED BECAUSE

THE COURT OF APPEALS DECIDED AN

IMPORTANT CONSTITUTIONAL QUESTION IN A

MANNER THAT CONFLICTS WITH RELEVANT

DECISIONS OF THIS COURT.

Petitioner submits that the Court of Appeals’ decision

is contrary to the letter and spirit of United States v. Russell,

411 U.S. 423 (1973); and United States v. Powell, 379 U.S.

48 (1964).

The Internal Revenue Service, acting through Civil

Revenue Agent Scott Kennedy, improperly and in bad faith,

used its civil investigatory powers to gather information

for a criminal investigation of Petitioner Lynn in violation

of his Fifth Amendment due process rights. Repeated denials

of the existence of a criminal investigation throughout a

thirty-month civil audit, combined with IRS documents,

(Cont'd)

firearm during commission of bank robbery), cert. denied, 117

S. Ct. 385 (1996); United States v. Ruiz, 59 F.3d 1151, 1155 (11th

Cir.) (reversal required when court erroneously denied instruction

on mistake-of-fact defense when defense not covered by existing

instruction and denial seriously impaired defense because not

harmless beyond reasonable doubt), cert. denied, 116 S. Ct. 956

(1996) and United States v. Rawlings, 73 F.3d 1145, 1149 (D.C.

Cir. 1996) (reversal required when instructions erroneously created

hierarchy among offense elements because diverted jurors’ focus

from finding essential elements beyond reasonable doubt).

1]

show that the IRS made false representations about the

nature and scope of its inquiry into Petitioner Lynn’s affairs

that go to the heart of the government’s criminal

investigation. The investigative techniques used by the civil

arm of the IRS were so outrageous that they offend the

notion of fundamental fairness embedded in the Fifth

Amendment’s Due Process Clause. See United States v.

Russell, 411 U.S. 423, 432 (1973). The indictment should

have been dismissed based on the government misconduct

which, in violating the Due Process Clause, is so offensive

that it conflicts with any sense of justice. See Russell, 411

U.S. at 432; United States v. Barger, 931 F.2d 359, 361

(6th Cir. 1991); United States v. Brown, 635 F2d 1207, 1212

(6th Cir. 1980).°

It is well settled that the IRS may use its civil processes

only for legitimate tax purposes. United States v. Powell,

379 U.S. 48, 57-58 (1964) (improper to issue civil summons

to harass taxpayer, to force settlement of collateral issue or

“for any other purpose reflecting on good faith of particular

investigation”). Further, the IRS has the burden of

demonstrating that its civil actions are motivated by valid

tax concerns. United States v. Genser, 595 F.2d 146, 150

(3d Cir. 1979), cert. denied, 444 U.S. 928 (1979) (IRS must

demonstrate a civil purpose for each audit). When

determining whether an IRS inquiry is abusive, a court

should focus on whether the investigation is motivated by

5. While Petitioner Lynn notes that the Sixth Circuit in a

recent decision has declared the due process or outrageous

government conduct defense as unavailable, the dissent (See United

States v. Tucker, 28 F.3d 1420, 1426 (6th. Cir. 1994)) held that the

decisions rendered in more than two dozen cases are more than

mere dicta. They are clearly a recognition of a valid due process

defense. This Court has clearly not held otherwise.

12

a legitimate tax purpose. United States v. Zolin, 809 F.2d

1411, 1416 (9th Cir. 1987),

The IRS must not only demonstrate a legitimate purpose

for the investigation, but must also show they pursued that

purpose in good faith. See United States v. Abrahams, 905

F.2d 1276, 1281 (9th Cir. 1990) (civil audit cannot be used

as camouflage for an ulterior non-tax motive); Zolin, 809

F.2d at 1416 (purpose must be legitimate and in good faith

rather than merely camouflage for an ulterior non-tax

motive). The rationale behind the good faith standard is that

its application prevents the IRS from becoming an

information gathering agency for other governmental

agencies. See Zolin, 809 F.2d at 1416; United States vy.

Serubo, 604 F.2d 807, 813 (3d Cir. 1979) (wrong for IRS

to be used as information gathering agency for other

departments).

It logically follows that the IRS may not use its civil

audit process to develop or gather information for a parallel

criminal investigation. See United States v. Grunewald, 987

F.2d 531, 534 (8th Cir. 1993); United States v. Tweel, 550

F.2d 297, 299 (Sth Cir. 1977). Further, where the Service

does cross the line and abuses its civil audit processes, it

will be held to have violated the taxpayer's rights. See

Tweel, 550 F.2d at 299.

In 7weel, the court applied this prohibition and held

that an IRS agent’s failure to apprise the defendant of the

criminal nature of the investigation, constituted deliberate

deception that should have resulted in suppression of the

evidence at trial. See id. at 299. Having just completed an

earlier civil audit, 7weel was again asked to cooperate in a

second audit regarding review of his income tax returns for

4

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13

1966-1968. See id. at 298. Although the first audit was civil

in nature, the IRS had assigned a special agent to work on

it. See id. Fearing that his client may be involved in a

criminal inquiry, Tweel’s accountant asked the IRS if a

special agent had been assigned to the second audit as well.

See id. The IRS informed the accountant that no special

agent would be involved and implied that the audit was

routine. See id. The IRS further misled Mr. Tweel and his

accountant by failing to disclose that the audit was initiated

at the request of the Department of Justice, Organized Crime

and Racketeering Section. See id.

On these facts, the court concluded that the IRS had

“grossly deceived” Tweel by misrepresenting the nature of

the audit. See Jd. at 299. The court further concluded that

the misrepresentation was deliberate and “done in flagrant

disregard of the defendant's rights.” /d. Twee/ supports the

proposition that IRS misrepresentations regarding the nature

of the investigation can effectively deprive taxpayers of their

rights.

The IRS acknowledges the impropriety of this abuse

of process in their own guidance manual, barring the use of

civil audits for criminal purposes. See /nternal Revenue

Manual, § 9311.83 (“[T)he Service shall not attempt to use

a civil examination to develop a criminal tax

investigation.”). Moreover, the case law is clear about the

separation of civil and criminal investigations and when

the IRS should begin and inform the party of a criminal

investigation. See United States v. Grunewald, 987 F.2d

531, 534 (8th Cir. 1993). Grunewald demarcates the point

at which civil audits must be transferred for referral to

criminal divisions: “[O}nce an IRS agent has developed firm

indications of fraud in civil investigation, the case must be

14

turned over to the Criminal Investigation Division.” /d. at

534. The court in Gruenwald illuminated the rationale

behind this transfer: “[Slignificantly different rights,

responsibilities and expectations apply to civil audits and

criminal tax investigations.” Jd. Grunewald states that an

abuse of the civil process to gather evidence for criminal

investigations “would be a flagrant disregard of individuals

rights” and cautions against representations that deliberately

deceive or lull taxpayers into incriminating themselves

during an audit when activities of an obviously criminal

nature are under investigation. /d.

Relying on the same rationale of differing rights and

responsibilities for different investigations, where the IRS

abuses its civil processes to develop criminal investigations,

courts have found the IRS exceeded its civil powers.

See Menendez v. United States, 872 F. Supp. 567, 571 (S.D.

Ind. 1994) (IRS acts in bad faith when uses civil

investigatory powers to gather evidence for criminal

prosecution). Menendez indicates that courts will not allow

the IRS to “exploit its civil investigatory powers as a de

facto grand jury.” /d.

Applying these decisions, it is clear that the IRS abused

its civil audit process by using it to gather evidence for a

criminal prosecution of Petitioner Lynn. Further, these

investigatory procedures were so deceitful that they offend

the notion of fundamental fairness embraced by the Due

Process Clause. See United States vy. Russell, 411 U.S. 423,

432 (1973); United States y. Barger, 931 F.2d 359, 363 (6th

Cir. 1991).

The investigation into Petitioner Lynn’s affairs began

in April 1991, after he was informed by letter to contact

15

Civil Revenue Agent Scott Kennedy. The letter notified

Petitioner Lynn that Kennedy had been assigned to conduct

an audit of his federal income tax returns for the years 1989,

1990 and 1991. Throughout the course of the audit, Agent

Kennedy had several meetings with Petitioner Lynn and

his attorney, William Taylor. During the thirty-month civil

audit, Petitioner Lynn was never informed of a parallel

criminal investigation into his affairs. Both Petitioner Lynn

and his attorney gave unchallenged testimony that Agent

Kennedy denied the existence of a criminal investigation

on several occasions. On one specific occasion, Mr. Taylor

directly asked Agent Kennedy if there was “any kind of

criminal investigation intended or in progress,” to which

Kennedy replied in the negative. In addition, Petitioner Lynn

testified that in his presence, Kennedy had told Mr. Taylor

that the investigation was “just an audit . . . no problem.”

The circumstances surrounding Petitioner Lynn’s

subsequent criminal prosecution, along with documents

uncovered later, clearly indicate the aforementioned

Statements were nothing but false reassurances and

misrepresentations. As a result of a contested issue in the

civil audit, Petitioner Lynn and his attorney, through the

discovery process, received documents from his civil audit.

These documents provided boxes for the examiner to check

to indicate the type of investigation. In the boxes provided,

the IRS checked the box indicating “criminal prosecution/

joint investigation.” By its own documents, the IRS has

proven that they misrepresented the nature of the audit,

abusing it to uncover information for a criminal prosecution

of Petitioner Lynn.

16

Once established, these documents, together with Agent

Kennedy’s misrepresentations, embody the type of

outrageous investigative conduct prohibited by the

fundamental notions of fairness embedded in the Due

Process Clause. See United States. v. Barger, 931 F.2d 359,

363 (6th Cir. 1991) (fundamental fairness by Government

in investigating crime is a core component of the Due

Process Clause of the Fifth Amendment). Where the

government disregards these notions, its conduct is

measured to determine whether it is “shocking to the

universal sense of justice.” United States v. Russell, 411

U.S. 423, 432 (1973); United States v. Brown, 635 F.2d

1207, 1212 (1980). During the course of its investigation

of Petitioner Lynn, the government repeatedly lied to him,

even in the face of direct questioning, while simultaneously

asking him to turn over incriminating documents and

records that they knew would aid in criminal prosecution.

By failing to disclose the nature of the investigation, the

government let Petitioner Lynn continue to incriminate

himself further without regard for his due process rights.

This is by any account contrary to established notions of

justice, where a defendant is fully aware of his rights.

Because the investigation of the government is tainted by

this deception and outrageous behavior, the indictment

against Petitioner Lynn should have been dismissed.

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CONCLUSION

For reasons stated herein, the Petitioner respectfully

requests that his petition for writ of certiorari be granted.

Respectfully submitted,

Peter J. STRIANSE

Counsel of Record

Tune, ENTREKIN & Wuirte, P.C.

Attorneys for Petitioner

First American Center

21st Floor

Nashville, Tennessee 37238

(615) 244-2770