Opposition Brief — Popkin v. United States

Supreme

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No. 91-1281

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In the Supreme Courtof the United States

OCTOBER TERM, 1991

GERALD M. POPKIN, PETITIONER

Vv.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

KENNETH W. STARR

Solicitor General

JAMES A. BURTON

Acting Assistant Attorney General

ROBERT E. LINDSAY

ALAN HECHTKOPF

KAREN QUESNEL

Attorneys

Department of Justice

Washington, D.C. 20530

202) 514-2217

QUESTION PRESENTED

1. Whether an act that is not otherwise unlawful vio-

lates 26 U.S.C. 7212(a) when it is corruptly committed

for the purpose of obstructing or impeding, or endeavor-

ing to obstruct or impede, the due administration of the

internal revenue laws.

2. Whether a violation of 26 U.S.C. 7212(a) requires

the use of force or threats of force directed against a par-

ticular government employee.

TABLE OF CONTENTS

Page

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TABLE OF AUTHORITIES

Cases:

Garcia v. United States, 469 U.S. 70 (1984)..............0...... 8

NLRB v. Iron Workers, 434 U.S. 335 (1978).................... ~

United States v. Henderson, 386 F. Supp. 1048 (S.D.N.Y.

I a a cca cannesnmmenionsesieanennnns 7-8

Parr v. United States, 363 U.S. 370 (1960)...................... 8

United States v. Hylton, 710 F.2d 1106 (5th Cir. 1988)..... 6

United States v. Martin, 747 F.2d 1404 (11th Cir. 1984).. 7,8

United States v. Reeves:

752 F.2d 995 (5th Cir.), cert. denied, 474 U.S. 834

STEELS NEE ASSERT 9

782 F.2d 1323 (5th Cir.), cert. denied, 479 U.S. 837

ia aa deans cudadencensanandsehsneduucexes 6, 8

United States v. Walker, 514 F. Supp. 294 (E.D. La.

ee eusncunesabbuannansas 7

United States v. Williams, 644 F.2d 696 (8th Cir.), cert.

I E,W aos sccnsnnucannnsesnennsensanayentvnnes i)

United States v. Yagow, 953 F.2d 423 (8th Cir. 1992)....... 9

Constitution, statute and regulations:

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Internal Revenue Code of 1954 (26 U.S.C.):

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IV

Miscellaneous: Page

H.R. Rep. No. 1337, 83 Cong., 2d Sess. (1954) .................. 7

S. Rep. No. 1622, 838d Cong., 2d Sess. (1954)..................00. 7

In the Supreme Court of the Anited States

OCTOBER TERM, 1991

No. 91-1281

GERALD M. POPKIN, PETITIONER

Vv.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. 18-34) is

reported at 943 F.2d 1535.

JURISDICTION

The judgment of the court of appeals was entered on

October 9, 1991. A petition for rehearing was denied on

November 13, 1991. Pet. App. 35. The petition for a writ of

certiorari was filed on February 6, 1992. 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 Northern District of Georgia, petitioner

was convicted on one count of corruptly endeavoring to

obstruct or impede the due administration of the Internal

(1)

2

Revenue Code, in violation of 26 U.S.C. 7212(a).! Peti-

tioner was sentenced to a term of imprisonment of a year

and a day, and was ordered to pay restitution to the gov-

ernment in the amount of $6,755. Pet. App. 18-22.

1. In 1978, petitioner, who was a practicing attorney,

assisted his client Stephen Musick in the preparation of

a false income tax return. That return misrepresented

the source and amount of Musick’s 1977 income, which

was approximately $250,000 and was derived from Mu-

sick’s involvement in drug transactions.

Petitioner and Musick had no further contact until

1985, when Musick approached petitioner as part of a

government sting operation and informed him that he

had earned approximately $200,000 on cocaine deals while

he was in prison for drug crimes. Pet. App. 20.2, Musick

told petitioner that he wanted to get into the construc-

tion and real estate business in California, but that he

first had to legitimate the drug income he had earned in

prison. Musick told petitioner that his money from the

drug deals was being held by an entity called Mid-

America Financial in an offshore account, and that he

needed assistance in repatriating the money through a

transaction that would disguise the source of the funds

and reduce the taxes to be paid on them. /bid.

1 Petitioner was charged in a three-count indictment with

aiding and assisting in the preparation of false income tax returns,

in violation of 26 U.S.C. 7206(2) (Counts 1 and 2), and with cor-

ruptly endeavoring to obstruct or impede the due administration

of the internal revenue laws, in violation of 26 U.S.C. 7212(a)

(Count 3). The jury returned verdicts of not guilty on Counts 1

and 2, and guilty on Count 3.

2 After his involvement with petitioner in 1978, Musick pleaded

guilty to cocaine distribution charges and was imprisoned. While

lhe was serving his prison term, Musick previded information to

federal agents concerning his 1978 dealings with petitioner. The

agents subsequently asked Musick to participate in the sting

operation. Pet. App. 20.

3

Petitioner suggested a complicated scheme to legiti-

mate the drug money. First, petitioner would form a Cal-

ifornia Corporation for Musick. Musick would then sell

stock in the new corporation to Mid-America Financial

for $200,000, would report heavy losses in the new corpo-

ration and then repurchase the stock from Mid-America

for $3,000 to $10,000. Petitioner cautioned Musick to

comply with the formal requirements for running a cor-

poration in order to maintain the proper corporate ap-

pearance. Later the same day, petitioner met with Mu-

sick and two undercover agents posing as representa-

tives of Mid-America Financial. The parties discussed

the formation of Musick’s new corporation and methods

of repatriating Musick’s offshore funds. Pet. App. 20-21.

In April 1985, petitioner and Musick met with the two

undercover agents at Mid-America’s office in St. Louis.

At the meeting, petitioner gave Musick personal tax

returns for 1983 and 1984 that petitioner had prepared.

Those returns showed gross income of $50,000 for each

year. This sum was reported only as gross receipts or

sales without any further indication of its source. Those

returns were never filed. Pet. App. 21.*

After these meetings, petitioner set up the S. Musick

Corporation in California, obtained a corporate seal,

which petitioner mailed to Musick, and registered the

corporation with the State of California. Petitioner

billed Musick a total of $1,755 for costs associated with

the formation of the corporation. That bill was paid by

% Before the case was submitted to the jury, Count 3 of the in-

dictment was amended to delete references to the tax returns,

which were described in Counts 1 and 2. Therefore, the charge

against petitioner in Count 3 was based solely on the allegation that

he corruptly obstructed and impeded, and endeavored to obstruct

and impede, the due administration of the internal revenue laws by

creating a corporation for Musick for the purpose of hiding income

and its source. Pet. App. 22.

————————

4

Mid-America Financial. Petitioner also received $5,000

for the preparation of the two income tax returns. Pet.

App. 21.

2. The court of appeals affirmed. Pet. App. 18-34. The

court first rejected petitioner’s argument that 26 U.S.C.

7212(a) requires the use of force or threats of force

against a government agent. Pet. App. 23. The court held

that the second clause of Section 7212(a), the clause un-

der which petitioner had been charged, prohibited “any

act that either obstructs or impedes or endeavors to ob-

struct or impede, the ‘due administration’ of the Internal

Revenue Code.” Pet. App. 26. The court further held that

the second clause of Section 7212(a) does not require that

the prohibited conduct be directed at any particular gov-

ernment agent. Pet. App. 26.

The court also rejected petitioner’s contention that

the creation of the corporation did not obstruct and was

not intended to obstruct or impede the due administra-

tion of the Internal Revenue Code. The court found that

the evidence was sufficient to show that petitioner cre-

ated the corporation “for the purpose of enabling Musick

to disguise the character of illegally earned income and

to repatriate it.” Pet. App. 28. The court found that peti-

tioner acted corruptly “because at least one intent in

creating the corporation was to secure an unlawful bene-

fit for his client.” Jbid.

ARGUMENT

1. Petitioner argues (Pet. 4-7) that his conviction vio-

lates due process because the formation of a corporation

is not an inherently illegal activity and thus could not

have violated Section 7212(a). He claims (Pet. 4-5) that an

act done with the purpose of obstructing the due admin-

istration of the internal revenue laws does not violate

Section 7212(a) if the act itself is not illegal. That claim

has no merit.

5

Petitioner’s position is contrary to the plain language

of Section 7212(a). Section 7212, which is entitled “At-

tempts to interfere with administration of internal

revenue laws,” provides in part:

(a) Corrupt or Forcible Interference.

Whoever corruptly or by force or threats of force

(including any threatening letter or communication)

endeavors to intimidate or impede any officer or em-

ployee of the United States acting in an official ca-

pacity under this title or in any other way corruptly

or by force or threats of force (including any threat-

ening letter or communication) obstructs or impedes,

or endeavors to obstruct or impede, the due admin-

istration of this title, shall, upon conviction thereof,

be fined not more than $5,000, or imprisoned not more

than 3 years, or both, except that if the offense is

committed only by threats of force, the person con-

victed thereof shall be fined not more than $3,000, or

imprisoned not more than 1 year, or both. * * *

26 U.S.C. 7212(a) (emphasis added). The emphasized lan-

guage defines petitioner’s offense and contains no re-

quirement that the underlying act itself be otherwise il-

legal. To the contrary, that language reaches the con-

duct of any person who “in any * * * way corruptly” ob-

structs or impedes, or endeavors to obstruct or impede,

the due administration of the tax laws. An otherwise law-

ful act is therefore illegal when it is the means of cor-

ruptly obstructing or attempting to obstruct the admin-

istration of the tax laws.‘

4 There is nothing novel about this principle. For example,

there is nothing inherently illegal about mailing a letter, but it is

illegal to use the mails for fraudulent ends. See 18 U.S.C. 1341. In

short, it is clear that an inherently legal act can be made illegal if it

is done with criminal intent.

6

Petitioner’s reliance on United States v. Hylton, 710

F.2d 1106 (5th Cir. 1983), is misplaced. In Hylton, the

Fifth Circuit held that where a defendant's actions

“represent[ed] a legitimate and protected exercise of her

[First Amendment] right to petition for the redress of

grievances,” she could not be convicted of violating Sec-

tion 7212 based upon her filing of nonfraudulent trespass

complaints against IRS agents. 710 F.2d at 1111. Unlike

the defendant in Hylton, petitioner cannot claim that he

had a constitutionally protected right to create a corpo-

ration so that Musick could fraudulently repatriate his

money, disguise its character, and pay “less than full in-

come taxes” (Pet. App. 20). See United States v. Reeves,

782 F.2d 13238, 1326 (5th Cir.) (filing of frivolous common

law liens with intent to secure improper benefits or

advantages prohibited under Section 7212(a) and did not

constitute petition for redress), cert. denied, 479 U.S. 837

(1986).

2. Petitioner also contends (Pet. 7-17) that the court

of appeals erred in holding that Section 7212(a) is not

limited to cases involving the use of force or threats of

force directed against a government employee.

a. On its face, Section 7212(a) prohibits efforts to im-

pede the due administration of the tax laws both through

the corrupt use of force or threats of force against fed-

eral officers or agents, or through corrupt efforts to ac-

complish the same end “in any other way.” The first

clause of the statute makes it a crime to endeavor, cor-

ruptly or by force or threats of force, to “intimidate or

impede any officer or employee of the United States act-

ing in an official capacity under [the Internal Revenue

Code].” The second clause, under which petitioner was

charged, makes it unlawful for any person “in any other

way corruptly or by force or threats of force * * * [to] ob-

struct[] or impede[], or [to] endeavor[] to obstruct or im-

pede” the administration of the tax laws. The two

7

clauses, which are separated by the word “or,” plainly

state alternative means of violating the statute. Only the

first clause requires proof of the use of force or threats

of force against a government agent. Under the second,

and broader, clause, any corrupt endeavor to obstruct or

impede the administration of the tax laws is illegal, re-

gardless of whether it involves force or a threat of force

against any federal officer or employee.

b. Contrary to petitioner’s assertion, the legislative

history of the statute does not command a reading that is

contrary to its plain language. Indeed, the legislative

history supports application of Section 7212(a) to conduct

not involving force or the threat of force against an em-

ployee or agent of the IRS.

Congress enacted the current version of Section

7212(a) as part of the Internal Revenue Code of 1954. The

statute was patterned after 18 U.S.C. 111, which pro-

hibits forcible assault on a federal employee engaged in

the performance of his duties, but it was broader “in that

it covers threats of force (including any threatening let-

ter or communication) or corrupt solicitation.” H.R.

Rep. No. 1337, 83d Cong., 2d Sess. A427 (1954); see also S.

Rep. No. 1622, 83d Cong., 2d Sess. 604 (1954). See

United States v. Martin, 747 F.2d 1404, 1408-1409 (11th

Cir. 1984) (reviewing legislative history of Section 7212);

United States v. Walker, 514 F. Supp. 294, 304-305 (E.D.

La. 1981) (same). In noting that the statute covers cor-

rupt solicitation, the House Report clearly indicates

that Congress intended the statute to reach conduct not

involving force or the threat of force.

c. The case law also does not support petitioner’s po-

sition. Petitioner asserts (Pet. 12-17) that the courts

have applied Section 7212 only to cases that involve the

use of force or threats of force.’ Even if that were cor-

® Petitioner also relies (Pet. 11) on the fact that in

United States v. Henderson, 386 F. Supp. 1048 (S.D.N.Y. 1974),

8

rect, it would “prove[] nothing,” as the court of appeals

correctly noted. Pet. App. 26. This Court pointed out in

Parr v. United States, 363 U.S. 370, 391 (1960), that “the

fact [that] there is no reported decision involving similar

factual circumstances or legal theories is not determina-

tive.” On the contrary, “[w]hat is determinative is the

clear language of the statute,” which “conspicuously

omits the requirement that [the] conduct be directed at

‘an officer or employee of the United States Govern-

ment.’” Pet. App. 26.

In any event, contrary to petitioner’s assertion (Pet.

12), several courts have applied Section 7212(a) to cases

not involving the use of force or threats of force against

a government employee. See United States v. Yagow, 953

F.2d 423 (8th Cir. 1992) (sending false IRS forms 1099 to

individuals and filing false forms 1099 with the IRS);

United States v. Reeves, 782 F.2d at 1326 (filing frivolous

common law liens); United States v. Williams, 644 F.2d

696, 701 (8th Cir.) (assisting in the preparation and filing

of false W-4 forms), cert. denied, 454 U.S. 841 (1981);

United States v. Martin, 747 F.2d at 1408-1410 (filing

false complaints).

As one court has explained, Section 7212 prohibits all

efforts to impede “the collection of one’s taxes, the taxes

of another, or the auditing of one’s or another’s tax

the government argued that Section 7212 “apparently applies only

to acts or threats of physical violence.” 386 F. Supp. at 1054-1055.

Petitioner’s reliance is misplaced. First, the district court in that

case properly rejected the argument as unpersuasive. The court

thought that Section 7212 clearly applied to the defendant’s sub-

mission “during an audit of a false, fictitious and back-dated docu-

ment.” 386 F. Supp. at 1050, 1056. Moreover, the government “ ‘is

not disqualified from changing its mind’ concerning the construc-

tion of a statute.” Garcia v. United States, 469 U.S. 70, 79 (1984)

(quoting NLRB v. Iron Workers, 434 U.S. 335, 351 (1978)).

9

records.” United States v. Reeves, 752 F.2d 995, 998 (5th

Cir), cert. denied, 474 U.S. 834 (1985); see also United

States v. Yagow, 953 F.2d at 426-427. By establishing a

‘corporation in an attempt to impede the collection of Mu-

sick’s taxes and to impede the auditing of Musick’s

records, petitioner violated Section 7212(a).

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

KENNETH W. STARR

Solicitor General

JAMES A. BURTON

Acting Assistant Attorney General

ROBERT E. LINDSAY

ALAN HECHTKOPF

KAREN QUESNEL

Attorneys

APRIL 1992