# Petition for Writ of Certiorari — Reid v. United States

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 1993
- **Citation:** 506 U.S. 1049

## Text

»ovame Court, U.S,

92-595 ) | FILED

OCT 5 __1992

OFAOE GE THE CLERI

IN THE
Supreme Court Of The United States

Term,
JOE W. REID,

Petitioner,

UNITED STATES OF AMERICA,
Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT

G. Douglas Jones

(Counsel of Record)

Jones & Bowron, P.C.

450 Park Place Tower
Birmingham, Alabama 35203
(205) 254-9000

Counsel for Petitioner

QUESTIONS PRESENTED FOR REVIEW

|. Whether Federal criminal jurisdiction pursuant to Title 8.
United States Code, Section 666 extends to local ’ ‘organizations,’
such as the municipal water works board of the City of Birmingham,
Alabama, where the only federal monies received by said board were
reimbursements for labor and material associated with the relocation
of water facilities due to certain road building projects. rather than

“benefits” as the term is generally understood.

2. Whether, in a criminal tax case, the burden of persuasion
regarding the detendant’s state of mind is shifted to the defendant,
in violation of Due Process, by the failure of the trial court to give
an affirmative jury instruction that a Subjective good faith belief that
one is not violating the law can negate the statutory willfulness
requirement of criminal tax offenses, as delineated by this Honorable
Court's opinion in Cheek v. United States. wee 5 FE SE.

604, 112 L.Ed.2d 617 (1991)

il

LIST OF PARTIES

The parties to this case in the Court of Appeals were as tollows

JOE W. REID

UNITED STATES OF AMERICA

iil

TABLE OF CONTENTS

Page
QUESTIONS PRESENTED FOR MEVIEW «1.6 «sss i
b967 OF PART IgGs ...-.- 2s ee ees Terres ee ii
TABLE OF CONTENTS .....----- seer ccc iil
TABLE OF AUTHORITIES .......---- ++: +>: V
UMTS BELOW .. 0. ee ee es |
es a a a arr |
STATUTES INVOLVED ......---:- secre: |
STATEMENT OF THE CASE ....-------:+:>> 3
REASONS FOR GRANTING THE WRIT ......-. 12
|. Whether Congress Intended To Extend Federal Criminal
Jurisdiction Pursuant To Title 18, United States Code.
Section 666 To Local “Organizations,” Such As The
Municipal Water Works Board Of The City Of Birmingham,
Alabama, Where The Only Federal Monies Received By
Said Board Were Reimbursements For Labor And Material
Associated With The Relocation Of Water Facilities Due To
Certain Road Building Projects, Rather Than "Benefits" As
The Term Is Generally Understood, Is An Important
Question Concerning The [Interpretation Ot The
Jurisdictional Element Of A Congressional Statute Which
Has Not Been, But Should Be Addressed By This Honorable
Court.
11. Whether, In a Criminal Tax Case, The Burden Of

Persuasion Regarding The Defendant's State Ot Mind Is
Shifted To The Defendant, In Violation Of Due Process, By

iv

The Failure Of The Trial Court To Give An Affirmative
Jury Instruction That A Subjective Good Faith Belief That
One Is Not Violating The Law Can Negate The Statutory
Willfulness Requirement Of Criminal Tax Offenses. As
Delineated By This Honorable Court’s Opinion In Cheek v.
United States, U.S. , 111 S.Ct. 604, 112 L.Ed.2D 617
(1991), Is An Important Question Of Federal Statutory And
Constitutional Law Which Has Not Been, But Should Be.
Addressed By This Honorable Court.

Ape REE ona d ss (a ie se ok aie ee ee 28
CAR te ee MOE GURU WOR 6 vse sk kee oe ws 29
PTT Pear eR gl Ci gO EONS iN ce don eden 30
COURT OF APPEALS ORDER OF
WHICH REVIEW IS SOUGHT ........... A-I-]
COURT OF APPEALS ORDER
EOIN CHIVAS ROUGAMMEINOS ow ee A-II-1
Wee We NG eek ep ee gs A-III-1

TEXT OF LEGISLATIVE HISTORY
me RIE Te ee a ee eee A-IV-1

Vv

TABLE OF CASES AND OTHER AUTHORITIES
Cases Page(s)

Baker v. Eufaula Concrete Company, Inc.
OF Sa Oe Tee Ce, AOD nk ac te ee ha aes 27

Cheek v. United States
__ US... HS. 604,
bie Ee ee er CN PE) 6k es ee ee ee ee passim

Commissioner v. Court Holding Company
See Or eee CEE oy 65 ko els 8 ee are & ee 27,28

Dixson v. United States
465 U.S. 482, 104 S.Ct. 1172.
(Be BY 8, |: ee er aera 14, 16, 17, 18

Francis v. Franklin
471 U.S. 307, 105 S.Ct. 1965,
OO te SE Sete) 65.5 a hae 25

Morissette v. United States
342 U.S. 246, 72 $.Ct. 240,
oe ky hi Sie ee a ee ee 25

Sandstrom v. Montana
442 U.S. 510, 99 S.Ct. 2450
0 0 ee ee ag sc 5 0s a's sen we 25, 26

United States v. Barquin
799 F.2d 619 (10th Cir. 1986) .........---- 2 eee 18

United States v. Bishop
412 U.S. 346. 93 S.Ct. 208,

Om RO 8. oa rma are ere ee fe err 23

United States v. Bordallo
O57 B34 SiS Os Cie. IOGE). . «ss 0 seas tee 18

vi
TABLE OF CASES AND OTHER AUTHORITIES - (Continued)
Page(s)
United States v. Cicco
938 F.2d 441 (3rd Cir. 1991) .. 2... ..000002020002.. 18
United States v. Del Toro
513 F.2d 656 (2d Cir. 1975). cert. den..
423 U.S. 826 (1975).................00... 16. 17
United States v. U.S. Gypsum Co.
438 U.S. 422, 98 S.Ct. 2864,
57 L.Ed.2d 854 (1978) ...... 0. ......2.2...0... . ae
United States v. Hinton
683 F.2d 195 (7th Cir. 1982),
Aff. 465 U.S. 482 (1984) .....00000002.. ae. Ss 8,
United States v. Lankford
955 F.2d 1545 (1Ith Cir. 1992) ........2..2.2.202.2.2... 28
United States v. Little
889 F.2d 1367 (Sth Cir. 1989) ........2.2.2.2.2.2.2... 18
United States v. Mosley
Gao Fae Cee Cre. BPG)) ww cc eee ee 16
United States v. Murdock
290 U.S. 389, 54 S.Ct. 223, 78 L.Ed 381 (1932).... 22,24
United States v. Opdahl
9350 f.26 1550 (ile Cir. 1991) wo wee eee 27
United States v. Pomponio
429 U.S. 975 S.Ct. 22, 50 L.Ed.2d 12 (1976) .... 21. 23, 24

United States v. Reynold
Fit F268 Gan Che Ge. eee so ns ee eee 18, 19

vil

TABLE OF CASES AND OTHER AUTHORITIES - (Continued)

Page(s)

United States v. Simas

937 F.2d 459 (9th Cir. 1991) .....- 2 ee eee es 18
United States v. Smith

659 F.Supp. 833 (S.D. Miss. 1987) ...-----+ss 00> 18
United States v. Snyder

930 F.2d 1090 (Sth Cir. 1990) ....---- eee: 18
United States v. Stewart

727 F.Supp 1068 (N.D. Tex (ae ae 17, 18, 29
United States v. Webb

691 F.Supp. 1064 (N.D. Ill. eres. 17, 18, 29
United States v. Westmoreland

941 F.2d $72 (Sth Cir. 1988) ....------ eee r tees 18

Statutes

1s mR sd Grae a ee ee eC ea, 16, 19
Wide TRUBS ok 5 ck 6s te ees eee es passim
i, we eta oe Os re ee 4,5, 15
cc. eR oe Gere eee ee ee ee passim
11-50-230, et seq, Code of Alabama .....-----+++-°> 4

Legislative History

S. Rep. No. 225, 98 Cong., 2d Sess. 369,
Reprinted in 1984 U.S. Code Congressional
and Administrative News 3182, 3511 ...---- +--+ ee: +

OPINIONS BELOW

The opinion of the United States Court of Appeals for the
Eleventh Circuit is unreported. The court's order is printed in
Appendix A-I hereto. The judgement affirmed Petitioner's
convictions of one count of tax evasion and one count of bribery in
the United States District Court for the Northern District of
Alabama.

JURISDICTION

The judgement of the United States Court of Appeals in the
Eleventh Circuit was entered on March 24, 1992. A timely Petition
tor Rehearing w.s denied without opinion on July 6, 1992.

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

CONSTITUTIONAL AND STATUTORY
PROVISIONS INVOLVED

[. Petitioner was convicted of violating 18 U.S.C. § 666, Theft or
Bribery Concerning Programs Receiving Federal Funds. The
complete text of 18 U.S.C. § is set out in Appendix A-lIII.

In addition the legislative history of 18 U.S.C. § 666 found at
\S. Rep. No. 225, 98 Cong., 2d Sess. 369, Reprinted in 1984 U-S.
Code Congressional and Administrative News 3182, 3511 is printed
in Appendix A-IV.

Finally, 23 U.S.C. § 123 is also relevant to this particular
question. That statute is presented in Appendix A-V.

[I. With regards to Petitioner's conviction tor income tax evasion.
this case involves the Due Process clause of the Fitth Amendment to
the Constitution of the United States, which provides as follows:

No person shall be held to answer for a capital, or otherwise
infamous crime, unless on a presentment or indictment of a
Grand Jury, except in cases arising in the land or naval
forces, or in the Militia, when in actual service in time of

s
~~

War or public danger: nor shall any person be subject for
the same offence to be twice put in jeopardy of life or limb:
nor shall be compelled in any criminal case to be a witness
against himself’, nor be deprived of life. liberty, or property,
without due process of law: nor shall private property be
taken for public use, without just compensation.

Petitioner was convicted tor violating 26 U.S.C. § 7201. which
provides as follows:

Any person who willfully attempts in any manner to evade
or defeat any tax imposed by this title or the payment
thereof shall, in addition to other penalties provided by law,
be guilty of a felony and. upon conviction thereof, shall be
tined not more than $100,000 ($500,000 in the case of a
corporation), or imprisoned not more than 5 years, or both,
together with the cost of prosecution.

3

STATEMENT OF THE CASE

I. PROCEEDINGS IN THE DISTRICT COURT:

On November 30, 1990, the Grand Jury for the Northern
District of Alabama returned a Two Count Indictment against
Petitioner. Joe W. Reid. Count One of the Indictment charged the
Petitioner with attempting to evade federal income taxes due for
income received in 1986 in violation of 26 U.S.C. § 7201. Count
Two charged that the Petitioner, as a member of the Water Works
Board of the City of Birmingham and its successor board, the Water
Works and Sewer Board of the City of Birmingham, did corruptly
accept $206,457.97 intending to be rewarded in connection with
certain transactions of said Water Works Board in violation of Title
18 U.S.C. § 666(a)(1) (B). (RI-1)' The trial of said case
commenced on February 4, 1991, before the Honorable James H.
Hancock. United States District Judge for the Northern District of
Alabama. On February 11, 1991, the jury returned its verdict
finding the Petitioner guilty of both counts of the Indictment.
Sentencing was held on March 11, 1991, at which time the Petitioner
was sentenced as follows:

Count One: Twelve months in the custody of the Attorney
General with the cost of prosecution taxed against the Petitioner:

Count Two: Five years in the custody ot the Attorney General
to run concurrently with the twelve-month sentence imposed under
Count One and a fine of $35,000.00.

The Petitioner also was ordered to pay special assessments ot
$50.00 for each count of the indictment.

Notice of Appeal was timely filed on March 11. 1991, and
Petitioner’s Motion for Bail Pending Appeal was granted.

' References to the trial court record are presented with reference to the volume
and page number of the tnal transcript.

4

II. Proceedings In The Eleventh Circuit Court of Appeals

On March 24, 1992. the United States Circuit Court of Appeals
tor the Eleventh Circuit issued a per curiam decision attirming the
Petitioner’s conviction. A Petition for Rehearing and Rehearing En
Banc was timely filed on April 14, 1992. On July 6, 1992, said
petition was denied, again without opinion. Petitioner's Motion tor
Stay of the Mandate was granted on August 7, 1992.

Il. Facts Material to a Consideration of the Issues

At all times pertinent to the charges in this case, the Petitioner
was a member of the Water Works Board tor the City of
Birmingham, Alabama. (the "Board") The Board is a corporation
organized pursuant to § 11-50-230. et seq, Code Of Alabama. The
Board does not administer any federal funds nor does the Board
receive federal grants or assistance. The Board is, however, often
reimbursed by the State of Alabama tor labor and materials used by
the Board to relocate water facilities that interfere with certain
highway projects. A portion of the funds reimbursed to the Board
by the State are received by the State trom the Federal Highway
Trust Fund.

Evidence elicited at Petitioner's tria! set forth the manner and
means by which the Board is reimbursed by the State with federal
funds. At various times, the Board is required to relocate their
water facilities due to highway construction or improvements.
(R3-61) Prior to performing the work, the Board sends an estimate
to the State of Alabama for the labor and materials that will be
required for the relocation project. The estimate is then approved
and authorized by the State. Following completion of the relocation
work, the Board submits an invoice to the State for
"reimbursement." (R3-65) The State disburses the invoice amount
to the Board and then bills the Federal Highway Trust Fund for
reimbursement of the expenditures paid to the Board. All of the
payments to the Board for the relocation of the water facilities are
paid as “reimbursements” in the “usual course of business” tor labor
and material (R3-61,65,68,.69,75.84) and only to the extent
authorized by 23 U.S.C. § 123.

During the year 1986, five highway projects of the State
required the Board to relocate specific water facilities. For it's work
on these projects, the Board was reimbursed a total of $73.938.46.
(R3-74,84) Of this amount, approximately $65,000 was reimbursed

SE

to the State with federal funds. (Govt. Ex. 74) The undisputed
testimony indicates that pursuant to 23 U.S.C. § 123 each payment
was reimbursement for “services rendered,” including labor and
materials. (R3-84) That is. the Board was only reimbursed for the
actual cost attributable to cach relocation project.

In 1985. the Petitioner and four others, including realtor Brooks
Emory and attorney William Murray, formed an investment group
(hereinatter referred to collectively as "Emory") for the purpose ot
purchasing property. (R3-87,90) The investors signed a Fiduciary
Agreement naming Mr. Emory as Trustee to handle all financial
matters, including accounting. (R3-29) The Trust was assembled
in late spring of 1986, although the Fiduciary Agreement was not
formally executed until August 20, 1986. (R3-29.31, Govt. Ex. 49)
The Fiduciary Agreement listed three of the investors in their
individual capacities, Mr. Murray's interest in the name of his
corporation, "MYCA", and the Petitioner's interest in the name of
“ALAGA, a Georgia entity." The Petitioner’s daughter, Donna
Johnson, signed on behalf of ALAGA. (Govt. Ex. 40. R4-66)

On April 7, 1986, U. S. Pipe Corp. committed to grant Emory
an option to purchase 1220 acres of land. The price for the option
was $150.000. (R2-78. Govt. Ex. 38) On April 28. 1986. the otter
was extended to June 2, 1986. (R2-79. Govt. Ex. 39) Following
this commitment, the investors began preparation for a proposed
development. Mr. Murray and Mr. Emory also began discussions
with the City of Birmingham with regard to the annexation of this
' property. In this regard, they met with David Vann, an attorney
who handled the City’s annexation legal matters. Mr. Vann was also
Chairman of the Birmingham Water Works Board ot which
Petitioner was a member. (R2-31)

The initial meetings with Mr. Vann centered around annexation
into Birmingham. In a meeting held on April 30. 1986. however,
Mr. Emory and Mr. Murray learned tor the first ime that if the
annexation was to take place, the Water Board also would have to
control the water supply. (R2-33.57.59,171) At that meeting. Mr.
Vann agreed that the Board would actually purchase trom Emory the
U. S. Pipe property for $6,555 per acre, payable as tollows:
$1,500,000 on or before May 15, 1986, and the balance ot
$5.491.000 on or before January 15, 1987. U. S. Pipe’s otter to
grant the option was pending at this time.

6

The Board met several times with regard to the proposed
purchase of this property. Mr. Murray and Mr. Emory negotiated
only with Mr. Vann and the Board Director: never with the full
Board. (R2-73) After a series of negotiations, Emory, the Board
and U. S. Pipe. each with the full knowledge of the others’
participation, modified the original structure of the transactions and
agreed to the following:

1. U. S. Pipe would increase the price for the option from

$150,000 to $500.000.00 (Govt. Ex. 40):

2. The Board would purchase the option from Emory tor

$1.159.000.00, providing that:

a)

b)

d)

e)

f)

The Board would pay the required $500.000.00 to
purchase the option through a check payable to Emory
Realty and U. S. Pipe jointly, which Emory would then
immediately endorse and tender to U. S. Pipe:

Prior to the Board’s “acceptance” of the assignment,
Emory, at its cost, would remove all encroachments and
encumbrances to said property and provide the Board
with title insurance, a survey, and a general warranty
deed:

Emory would “assign” the option to the Board prior to
May 30, 1986:

The $500,000.00 would be credited against the purchase
price of the land:

Emory had the option of choosing the closing date
which would be between December 15. 1986 and
January 15, 1987;

At closing, the Board would pay U. S. Pipe the balance
of $5,356,000.00 for the purchase of the land and would
pay Emory the “option” purchase price” of
$1.159,000.00:

-

g) The Board would petition Birmingham tor annexation:
and

h) Emory was given an option to re-purchase the property.
(Govt. Ex. 55)

At trial, Mr. Emory testified that the investors wished to control
the closing date so as to structure this investment in order to receive
long term capital gains tax treatment. (R4-182) These transactions
were done pursuant to the advice of Mr. Emory’s independent,
outside accountant: Mr. Murray (the attorney); and Mr. Murray's
accountant.

The option to purchase the property (the Emory-U.S. Pipe
Agreement), the purchase of the option (the Emory-Water Board
Agreement), and the “assignment” of the option to the Board were
executed simultaneously, as described above, on May 21, 1986
(Govt. Ex. 50,51) One week later, on May 28, 1986, David Vann.
as Chairman of the Board, notified U. S. Pipe that the Board
intended to “exercise” the option. (R3-21, Govt. Ex. 42)

Throughout the next six months, Emory performed those tasks
required in the agreement with the Board. (R3-21, Govt. Ex. 42)
The sale of the property and the sale of the option were closed
simultaneously on December 15, 1986. The Board paid U. S. Pipe
$5.376,286.17 for the property and paid Emory $1.163.143.52 for
the option. (R3-17-26, Govt. Ex. 50.51)

Although the Petitioner, as a member of the Board, did not
participate in the negotiations between Emory and the Board, the
Government did elicit evidence that the Petitioner did not fully
disclose to the other board members his involvement with the Emory
group and that he lobbied other board members to relax restrictive
covenants placed on the development of the property. It was this
evidence, in sum, that supported the Government's theory that
Petitioner had violated 18 U.S.C. § 666.

Following the closing, the investors received their respective
proceeds from the sale of the option. The Petitioner’s share was in
the form of a check payable to "ALAGA" for $188.150.00. This
check was deposited into an investment account in South Carolina
that listed the Georgia address of Petitioner's son but the Petitioner's
own social security number. (R3-143,146.149, Govt. Ex. 5)

8

All of the information concerning the transaction was turned
over to Mr. Emory’s independent, outside accountant, Mr. Law
Lamar. (R3-198) Mr. Lamar prepared and filed with the IRS the
Partnership Return of Income indicating that the partnership held “an
option on land" from May 15 to December 15, 1986, and received
income in the amount of $1,163,143.52. Because the option was
held tor more than six months, the individual Schedule K-1 Forms
(A Partner’s Share of Incomes, etc. for each investor) reported the
income to each investor as a long term capital gain. The K-1! for
"ALAGA" listed the Petitioner's social security number. (R3-200,
Govt. Ex. 5)

Mr. Emory, the fiduciary responsible tor the trust, told the
partners that the money they received should be treated as a long
term capital gain and both he and Mr. Murray treated their income
as a long term capital gain. (R2-67, R4-183) There was no evidence
presented to indicate that the partnership return or other investors’
returns were ever challenged with regard to the tax treatment of this
income.

Shortly before the deadline to file 1986 Income Tax Returns, the
Petitioner orally advised a tax accountant that he had received a long
term capital gain of $206,457. (R3-207) The Petitioner did not
present the accountant with any documentation, but it was
acknowledged that the oral information was consistent with the Form
K-1 prepared by Mr. Lamar and given to Petitioner. (R3-215) From
these figures, the Petitioner's tax liability was computed to be
$28,755. The Petitioner timely forwarded this amount to the IRS,
together with a Request for Extension to file his return. (R3-219,
Govt. Ex. 1) A second extension was filed in August (R3-209,
Govt. Ex. 2) but Petitioner did not timely file his return on October
15 as required. (R3-210,211)

At trial, Mr. Duncan McLean, an IRS auditor, testified that the
Petitioner's 1986 tax return was ultimately filed in February 1990
and an additional $9,620.07 was paid on the income reported as a
long term capital gain. This amount was due because of a
calculation error made by Petitioner's accountant at the time that he
filed for the first extension and paid the $28,000. (R3-206) This
testimony was also presented by the defense through Mr. H. G.
Owens, the accountant who prepared Petitioner’s return. (R4-147,
R5-24,25,28). As to the Petitioner's tax liability for 1986, Mr.
McLean, without explanation as to why, treated the Petitioner's

il

9

income from the Emory Trust as a short term gain rather than a long
term gain, thereby causing 100% rather than 40% of the gain to be
taxed. (R4-141) He then calculated that the Petitioner had a 1986
tax liability of $55,791.93. (R4-142) — It was acknowledged,
however, that this determination was based solely on his opinion that
the income from the Trust was a short term gain. (R4-151)

The Defense called as its witness Mr. John Holditch, a
Birmingham real estate lawyer. Mr. Holditch had examined all
pertinent documents regarding this transaction and, according to the
Defense proffer, was prepared to give the following opinion with
regard to the complete transactions and related documents:
(R5-5-9, 11-13)

1. That the May 21. 1986 agreement between Emory and the

Water Works Board was a contract to purchase an option tor
$1,159,000.

to

That the Board would in effect loan Emory the $500,000
required to obtain the option from U. S. Pipe.

3. That in order to complete the assignment of the option,
Emory was required to meet other conditions with regard to
the U. S. Pipe property, namely, obtaining title insurance,
a survey and legal fees, etc.

4. That had the Board not been satisfied with the performance
of Emory, then the Board was under no obligation to
complete the purchase of the option.

5. That Emory held the option from May 21. 1986 until the
closing date of December 15, 1986 (approx. 7 months), at
which time Emory received the agreed on consideration and
the assignment of the option actually occurred.

The defense offered Mr. Holditch’s testimony in rebuttal to
Agent McLean's testimony to prove that Petitioner's income was, in
fact, a long term capital gain and further, that Petitioner's treatment
of this income as a long term capital gain wus done in good faith.

The District Court found that the witness would be giving his
legal opinion with regard to whether or not the documents created an
option and for how long the option extended itself. The Court held

10

that it was the Court's function to give the legal effect of the
documents and excluded Petitioner's expert testimony. even as it
would pertain to good faith. (R5-8)

During jury instructions, the Court summarized the facts
involving the Emory/U.S. Pipe Agreement and the Emory/Water
Works Board Agreement, stating that:

Under the written assignment received in evidence as
Government’s Exhibit 57 Emory Realty, on the same day.
May 21, 1986, assigned to the Water Works Board the
option Emory Realty had just acquired. Thus, as of May
21, 1986, Emory Realty has transferred to the Board the
option which Emory Realty at that date acquired from U. S.

Pipe. Emory Realty, Inc., atter May 21, 1986, did not own
the option acquired trom U. S. Pipe on May 21, 1986. The
Water Works Board owned the option after May 21, 1986.

(R5-129) (Emphasis added)

This charge had the legal of effect of stating as a matter of law
that Emory did not hold the option for more than six months.

Finally, the Court charged the jury that the term "willfully," as
used in criminal tax cases, “means that the act was committed
voluntarily and purposely with the specific intent to do something the
law forbids; that is to say with bad purpose to disobey or disregard
the law." (R4-122) The Court further refused to give a jury
instruction concerning Petitioner’s good faith treatment of his income
from the Emory trust. Petitioner’s request for a good faith
instruction was based on the undisputed evidence that Petitioner
treated the Emory income in the same manner as the other Emory
partners and consistent with the Partnership return and Petitioner's
K-1 and the fact that Petitioner had timely paid over $28.000 in
income taxes on said income. Petitioner’s requested instruction read
as follows:

Reliance upon conduct of others in good faith, is not
punishable under 26 U.S.C. § 7201. It is an absolute
defense that the Petitioner conducted himself in good faith.
In evaluating the Petitioner’s good faith, you must consider
whether the Petitioner relied upon his accountant and trust

a

iI

partners for information, whether he even filed a tax return,
whether he used his taxpayer I.D. number appropriately,
whether he sent any money to the IRS in 1987.

(Court’s Ex. No. 2, R5-71)

The jury convicted Petitioner on both counts of the indictment.

12
REASONS FOR GRANTING THE WRIT

I. WHETHER CONGRESS INTENDED TO EXTEND
FEDERAL CRIMINAL JURISDICTION PURSUANT TO
TITLE 18, UNITED STATES CODE, SECTION 666 TO
LOCAL "ORGANIZATIONS," SUCH AS_ THE
MUNICIPAL WATER WORKS BOARD OF THE CITY OF
BIRMINGHAM, ALABAMA, WHERE THE ONLY
FEDERAL MONIES RECEIVED BY SAID BOARD WERE
REIMBURSEMENTS FOR LABOR AND MATERIAL
ASSOCIATED WITH THE RELOCATION OF WATER
FACILITIES DUE TO CERTAIN ROAD BUILDING
PROJECTS, RATHER THAN "BENEFITS" AS THE TERM
IS GENERALLY UNDERSTOOD, IS AN IMPORTANT
QUESTION CONCERNING THE INTERPRETATION OF
THE JURISDICTIONAL ELEMENT OF A
CONGRESSIONAL STATUTE WHICH HAS NOT BEEN,
BUT SHOULD BE ADDRESSED BY THIS HONORABLE
COURT.

The Petitioner was convicted for violating Title 18 U.S.C. § 666
which prohibits the theft or bribery from an organization,
government, or agency that “receives, in any one year period,
benefits in excess of $10,000 under a Federal program involving a
grant, contract, subsidy, loan, guarantee, insurance, or other form
of Federal assistance.” 18 U.S.C. § 666. [emphasis added]. The
question presented by the Petitioner to this Honorable Court
challenges the District Court’s interpretation of the jurisdictional
element of § 666. That is, the Petitioner challenges the finding that
the Municipal Water Works Board of which he was a member,
received "benefits" in excess of $10,000 and was therefore an
“organization” within the meaning of 18 U.S.C. § 666. Petitioner's
challenge is based on the undisputed facts that the only federal funds
received by the Water Works Board were funds paid by and through
the State of Alabama for labor and materials used by the Board to
relocate water facilities in advance of a State highway project.
While the State of Alabama may have received “benefits” in excess
of $10,000, the Municipal Water Works Board did not. Any monies

paid by the State of Alabama were purely commercial in nature,

13

having been paid in consideration for services rendered and/or in
consideration of goods provided and are thus not benefits within the
meaning of the statute.

Petitioner's request that this Honorable Court construe the
jurisdictional element of 18 U.S.C. § 666, is apparently a case of
first impression at the Federal appellate level. Although presented
by Petitioner in his direct appeal, the Eleventh Circuit Court of
Appeals elected to render a decision without opinion. Because this
particular statute is relatively new, and the fact that it is obviously
being used more frequently by Federal prosecutors, the question of
Federal law raised by petitioner is therefore an extremely important
one in that the Court’s holding would literally expand or contract
Federal criminal jurisdiction in regard to the common law offenses
of thett and bribery. There is no doubt that a ruling by this
Honorable Court on this particular issue will have a significant
impact on future investigations and prosecutions under this statute.

It is the position of the Petitioner that the Water Works Board
for the City of Birmingham did not receive the type of “benefits” or
"Federal assistance” contemplated by Congress in enacting the above
code section, and that therefore the District Court was without
subject matter jurisdiction with regard to Count Two of his
indictment. The term “benefits” is not defined in the statute and at
trial, the District Court did not offer the jury an explanation as to
what type of “benefits” must be received in order to fulfill the
essential jurisdictional element of this offense. The District Court
did. however, explain its interpretation of the statute in over-ruling
Petitioner's Motion for Judgment of Acquittal. The District Court
stated:

Well, work and labor was done for the payment as opposed
to welfare benefit payments or something of that nature. In
other words, work and labor performed in effect being paid
for by the Government, in my opinion, will satisfy the
statute. It does not necessarily contemplate Government
benefit programs like welfare or ... headstart. (R-114)

The Eleventh Circuit Court of Appeals apparently agreed with
the District Court’s broad interpretation.

14

The terms “benefits” and “assistance” are not defined in the
Statute. Accordingly, the Court must look to the legislative history
of 18 U.S.C. § 666 to clarify these terms consistent with
Congressional intent. See Dixson v. United States, 465 U.S. 482,
104 S.Ct. 1172, 79 L.Ed.2d 458 (1984). Petitioner submits that the
reasoning of the District Court, as adopted by the Eleventh Circuit,
is completely contrary to the Congressional intent behind the term
“benefit” as gleaned from the following excerpt from the Legislative
History:

The term "Federal program involving a grant, a contract, a
subsidy, a loan, a guarantee, insurance, or other form of
Federal assistance” is to be construed broadly, consistent
with the purpose of this section to protect the integrity of the
vast sums Of money distributed through Federal progranis
from theft, fraud, and undue influence by bribery.
However, the concept is not unlimited. The term "Federal
program” means that there must exist a specific statutory
scheme authorizing the Federal assistance in order to
promote or achieve certain policy objectives. Thus, not
every Federal program or disbursement of f “ds will be
covered. For example, if a Government ag-ncy lawfully
purchases more than $10,000 from a supplier, it is not the
intent of this section to make a theft of $5,000 or more from
the supplier, a Federal crime. It is, however, the intent to
reach theft and bribery in situations of the types involved in
the Del Toro, Hinton, and Mosley cases cited herein.

S. Rep. No. 225, 98 Cong., 2d Sess. 369, Reprinted in 1984 U.S.
Code Congressional and Administrative News 3182, 3511 [emphasis
added. ]

The following facts, which are undisputed, clearly demonstrate
that the Birmingham Water Works Board is not the type of
Organization to which this statute was intended to apply:

1. The Board was in effect forced to relocate their water
facilities in advance of highway projects. (R3-61)

|

15

2. The Board received no direct federal funds but was rather
reimbursed by the State of Alabama Highway Department.
(R3-65)

3. The State of Alabama paid the Board for material and labor
in connection with the Board’s relocation of its water
facilities. (R3-84)

4. The services performed by the Board and paid for by the
State Highway Department were strictly commercial and
done in the normal course of business. (R-3-84)

5. The Board was considered to be just like any other “vendor”
with regard to the services performed and payments received
by the State Highway Department. (R3-84)

6. The State of Alabama paid for the Board’s labor and
material and then sought reimbursement from the Federal
Highway Administration Trust Fund. (R-3-61)

As is the case with all federal monies, the Board was reimbursed
pursuant to authorization granted in a particular federal statute: 23
U.S.C. § 123. That statute, however, specifically prevents a utility
from profiting or in any way receiving a "benefit" due to the forced
relocation of it’s water facilities. The statute allows only for
reimbursement of the “entire amount paid by such utility properly
attributable to such relocation after deducting therefrom any increase
in the value if the new facility and any salvage value derived trom
the old facility." 23 U.S.C. § 123(c) (Emphasis added) The Board.
therefore. receives no "benefits" or “assistance” whatsoever for it's
efforts in relocating it’s water facilities.

Petitioner respectfully submits that any federal monies paid
through the State pursuant to the above process and authorization.
lose their character as “benefits” once they are paid to a utility ina
strictly commercial transaction. There was no allegation or even
suggestion that there was anything illegal, improper. or fraudulent
with respect to the invoice submitted by the Board or the payments
made to the Board. In fact, as was clearly mandated by the
authorization statute, 23 U.S.C. § 123. the Board only "broke even"
on these transactions. Certainly this type of scenario, as exemplified

16

by the facts in this case, bear absolutely no similarity to the tacts in
the Del Toro, Hinton, and Mosley cases cited in this legislative
history, the holdings of which dealt with the construction of the
Federal Bribery Statute, 18 U.S.C. § 201, and prompted enactment
of this statute.

tates v. Del Toro, 513 F.2d 656 (2d Cir. 1975), cert.
den. 423 U.S. 826 (1975), the defendant was an official of the city
agency which administered the “Model Cities" Program funded
through the United States Department of Housing and Urban
Development. There, the United States paid 100% of the cost of the
Model Cities’ Program and 80% of its salaries. The defendant was
convicted under Title 18 U.S.C. § 201, which prohibits the bribing
of a federal public official, for accepting a bribe to lease certain
office space. His conviction, however, was overturned by the
Second Circuit which found that the defendant was merely a city
employee rather than a federal employee. Del Toro at 663.

United States v. Mosley, 659 F.2d 812 (7th Cir. 1981) involved
a defendant employed by the State of Illinois Bureau of Employment
Security as a CETA Intake Eligibility Officer who was also
convicted under 18 U.S.C. 201 for taking a bribe as a federal
official. The Seventh Circuit found specifically that the defendant
was a federal officer within the meaning of 18 U.S.C. 201 and
affirmed the conviction.

In United States v. Hinton, 683 F.2d 195 (7th Cir. 1982) Aff.
Dixson v. United States, 465 U.S. 482, 104 S.Ct. 1172, 79 L.Ed.2d
458 (1984), the defendants were officers of a community based non-
profit corporation called United Neighbors, Inc. which had
contracted with the City of Peoria to administer federal funds funded
to the city under a community development block grant and federal
metro reallocation grant from the United States Department of
Housing and Urban Development. There, the community
development grant was entirely sponsored with federal funds and
paid the salaries and costs of United Neighbors, Inc. In affirming
their convictions, this Honorable Court determined that the
appropriate inquiry in determining if an individual falls within the
category of “persons performing activities for or on behalf of the
United States," was “whether the person occupies a position of trust
with federal responsibilities.” Dixson, 465 U.S. at 496.

The fact situation with regard to the case before this Honorable
Court is clearly different from the types of “organizations” cited

17

above which had prompted Congressional action to amend § 666.
As noted by the Honorable Mary Lou Robinson, United States
District Judge for the Northern District of Texas, the programs that
received “benefits” and “federal assistance” in Del Toro, Hinton, and
Mosley all involved “a charitable distribution of funds: that is, the
federal government distributing funds for the purpose of aiding the
needy, and receiving no tangible material in return for its funds."
United States v. Stewart, 727 F.Supp. 1068 (N.D. Tex 1989)

The nature of the relationship of the “organization” in Stewart,
above. and the federal government is very similar to the facts in this
case. In Stewart, the detendant was charged with stealing helicopter
parts from Bell Helicopter. The government alleged that Bell
Helicopter was an organization within the meaning of the statute in
that Bell Helicopter was an organization that received benefits in
excess of $10,000 pursuant to a federal program involving contracts
for the manufacture and modification of helicopters for the United
States. Stewart at 1070. Judge Robinson, however, correctly noted
that the legislative history clearly did not intend to apply 18 U.S.C.
§ 666 to situations involving a quid pro quo or those transactions
that were purely commercial in nature. Stewart at 1072. Likewise,
monies paid in consideration for services or in consideration for
goods provided, even if customized, are not benefits within the
meaning of the statute. Szewart at 1072, citing United States v.
Webb, 691 F.Supp. 1064 (N.D.IIl. 1988).

Webb, above, also involved a transaction similar to those found
in this case. There, defendant was an employee of an accounting
firm that had a contract to administer certain HUD grants. The
District Court granted defendant's motion for judgment
notwithstanding the verdict and judgment of acquittal with regard to
his conviction for violation of 18 U.S.C. § 666. The Court
specifically found that the accounting firm for which the defendant
was employed was not an organization within the meaning of the
statute in that the firm was merely paid consideration for
administering certain HUD grants. Webb at 1167.

in other cases examining 18 U.S.C. § 666. the issues presented
involved matters other than whether or not “benefits” or “federal
assistance” was received by the organization. See e.g., United States
v. Cicco, 938 F.2d 441 (3rd Cir. 1991) (statute did not apply to the
detendant’s alleged corrupt solicitation of political services and

loyalty in exchange for municipal jobs); United States v. Simas. 937

18

F.2d 459 (9th Cir. 1991) (Government not required to trace federal
funds); United States v. Snyder, 930 F.2d 1090 (Sth Cir. 1990)
(statute applies even if official’s conduct does not directly affect the
federal funds received by the agency); United States v. Reynolds,
919 F.2d 435 (7th Cir. 1990) (money which contractor obtained by
submitting false claims in connection with HUD block grant program
qualified as “money of the United States" within the meaning of the
statute); United States v. Little, 889 F.2d 1367 (Sth Cir. 1989)
(statute applied even in absence that corruption costs would have to
be replaced with federal funds); United States v. Bordallo, 857 F.2d
519 (9th Cir. 1988) (Guam not a “state” for purposes of 18 U.S.C.
666); United States v. Westmoreland, 841 F.2d 572 (Sth Cir. 1988)
(government not required to trace federal revenue sharing funds);
United States v. Barquin, 799 F.2d 619 (10th Cir. 1986) (Indian
tribe not a “local government" within definition of 18 U.S.C. 666);
and United States v. Smith, 659 F. Supp. 833 (S.D. Miss. 1987)
(government not required to trace federal revenue sharing funds).

It should be emphasized that Petitioner does not contend that this
is a “tracing” case similar to Simas, Westmoreland, and Smith cited
above. The issue here presents this Honorable Court with essentially
the following question: At what point do federal monies cease to be
benefits within the meaning of 18 U.S.C. 666? If the Water Works
Board, or any other contractor, fraudulently overbilled the State for
its labor and material, then certainly the monies passing from the
State to the vendor retain their character as benefits, nly to the
extent of the fraudulent overpayment. Such was the case in United
States v. Reynolds, 919 F.2d 435 (7th Cir. 1990). In that case, the
Court affirmed the § 666 conviction of the Defendant for submitting
false and fraudulent invoices for his work on redevelopment projects
for the City of Milwaukee. Because Reynolds was paid on his false
invoices from funds received by the City from Federal HUD grants,
the Court found that jurisdiction was appropriate. /d. at 438.

It is respectfully submitted that Congress clearly did not intend
to extend federal jurisdiction to alleged misuse of funds that occurred
long after they were received from the federal sources in strictly
commercial transactions. If the District Court’s inter-pretation of
benefits, as adopted without opinion by the Eleventh Circuit, is
correct, jurisdiction would lie in the federal courts for the
prosecution of an employee of any vendor doing more than
$10,000.00 worth of business with the federal government, who

19

steals or embezzles over $5,000.00 from the vendor. For instance.
federal jurisdiction would lie in the case of an employee theft from
a vendor who sells over $10,000.00 worth of supplies to this
Honorable Court.

Petitioner submits that the jurisdictional element of 18 U.S.C. §
666 is both vague and ambiguous and arguably susceptible to varying
interpretations. Because of the vast sums of money distributed each
year by the Federal Government, the incredible variety of the
manner and means in which said funds are distributed, and the
incredible number of vendors who do nothing more than “sell”
$10,000.00 worth of supplies or services to the Federal Government.
this issue is likely to present itself time and time again in the future.
The District Court’s interpretation of this statute as it applies to the
Petitioner, and as adopted by the Eleventh Circuit, clearly constitutes
a split from the decisions in Stewart and Webb. it is also a much
more expansive interpretation than four members of this Honorable
Court, including three current members, were willing to give to the
Federal Bribery Statute in Dixson. Dixson, 465 U.S. at 464 (Justice
O’Connor dissenting).

Given the obvious ambiguity and vagueness of this statute,
varying interpretations and additional splits among the District
Courts and Circuit Courts of Appeal are not only likely, but
practically guaranteed. On the other hand, Petitioner has presented
this Honorable Court with the opportunity to address an important
question of federal law and Congressional intent regarding the
, expansion of federal jurisdiction, that will give prosecutors, District
Judges, and Circuit Judges specific guidance with regard to future
prosecutions.

Petitioner was snared in a net that was cast much broader than
Congress intended. There was simply no misuse of any federal
monies in this case. His conviction for violating 18 U.S.C. § 666
is, therefore, due to be reversed.

20

II WHETHER, IN A CRIMINAL TAX CASE, THE BURDEN
OF PERSUASION REGARDING THE DEFENDANT'S
STATE OF MIND IS SHIFTED TO THE DEFENDANT, IN
VIOLATION OF DUE PROCESS, BY THE FAILURE OF
THE TRIAL COURT TO GIVE AN AFFIRMATIVE JURY
INSTRUCTION THAT A SUBJECTIVE GOOD FAITH
BELIEF THAT ONE IS NOT VIOLATING THE LAW CAN
NEGATE THE STATUTORY WILLFULNESS
REQUIREMENT OF CRIMINAL TAX OFFENSES, AS
DELINEATED BY THIS HONORABLE COURT'S
OPINION IN CHEEK V. UNITED STATES, _U.S.__, Ill
S.CT. 604, 112 L.ED.2D 617 (1991), IS AN IMPORTANT
QUESTION OF FEDERAL STATUTORY AND
CONSTITUTIONAL LAW WHICH HAS NOT BEEN, BUT
SHOULD BE, ADDRESSED BY THIS HONORABLE
COURT.

In Cheek v. United States, _ U.S. _, 111 S.Ct. 604, 112
L.Ed.2d 617 (1991), decided approximately one month prior to
Petitioner's trial, this Honorable Court determined that a subjective
"good faith misunderstanding of the law or a good faith belief that
One is not violating the law" can negate the statutory willfulness
requirement of criminal tax offenses. In so holding, this Honorable
Court both expanded the interpretation of the statuiory term
“willfully” within the meaning of Federal tax laws to include an
explanation of the Petitioner's good faith and broadened the scope of
evidence deemed relevant to the issue of a criminal defendant's good
faith. With regard to whether a jury instruction on good faith is
Mecessary in a criminal tax case, the Court’s holding in Cheek
appears to implicitly overrule that portion of the Court’s holding in
United States v. Pomponio, 429 U.S. 10, 97 S.Ct. 22. 50 L.Ed.2d
12 (1976) (per curiam) which held that an additional instruction on
good faith was unnecessary. Further. with the Court now
delineating a clear standard by which to judge a defendant's good
faith within the meaning of criminal tax :aws, the failure to give any
instruction on good faith improperly shifts to the defendant the
burden of proot with regard to his state of mind in violation of Due
Process.

The opinion in Cheek carefully analyzed the historical evolution
of the Court’s interpretation of the statutory term “willfully” as used

tetas

21

in Federal criminal tax statutes, tracing its special treatment to the

complexity of the tax law. Noting the general rule that ignorance of
. . | . . . . .

the law or mistake of law is no defense to a criminal prosecution, the

Cheek opinion went on {to state as follows:

The proliferation of statutes and regulations has sometimes
made it difficult for the average citizen to know and
comprehend the extent of the duties and obligations imposed
by the tax laws. Congress has accordingly softened the
impact of the common-law presumption by making specific
intent to violate the !aw an element of certain federal
criminal tax offenses. Thus, the Court almost 60 years ago
interpreted the statutory term willfully as used in the federal
criminal tax Statutes as carving out an exception to the
traditional rule. This special treatment of criminal tax
offenses is largely ica to the complexity of the tax laws.

|
In United States v. Murdock, 290 U.S. 389, 54 S.Ct. 223,
78 L.Ed. 381 (1933), the Court recognized that:

Congress did not intend that a person, by reason of
a bona fide misunderstanding as to his liability for
the tax, as to his duty to make a return, or as to the
adequacy of the records he maintained, should
become a criminal by his mere failure to measure up
to the prescribed standard of conduct. /d, at 396, 54
S.Ct., at 226. |

The Court held th at_the defendant was entitled to an
instruction with respect to_whether he acted in good faith

based _on his actual belief. In Murdock, the Court

interpreted the term “willfully” as used in the criminal tax
Statutes generally to mean “an act done with a bad purpose,”
id, at 394, 54 S.Ct. at 225, or with “an evil motive." /d.,
at 395, 54 S.Ct.. at 225.

Subsequent decisions have refined this proposition. In
United States v. Bishop, 412 U.S. 346, 93 S.Ct. 208. 36
L.Ed.2d 941 (1973), we described the term “willfully” as
connoting “a voluntary, intentional violation of a known

22

legal duty,” id, at 360, 93 S.Ct., at 2017, and did so with
specific reference to the “bad faith or evil intent" language
employed in Murdock. Still later. United Staies v.
Pomponio, 429 U.S. 10, 97 §.Ct. 22, 50 L.Ed.2d 12 (1976)
(per curiam), addressed a situation in which several
defendants had been charged with willfully filing false tax
returns. The jury was given an instruction on willfulness
similar to the standard set forth in Bishop. In addition, it
was instructed that "[g]ood motive alone is never a defense
where the act done or omitted is a crime.” /d., at 11, 97
S.Ct., at 23.. The defendants were convicted but the Court
of Appeals reversed, concluding that the latter instruction
was improper because the statute required a finding of bad
purpose or evil motive. /bid.

We reversed the Court of Appeals, stating that "the Court of
Appeals incorrectly assumed that the reference to an ‘evil
motive’ in United States v. Bishop, supra, and prior cases,"
ibid, “requires proot of any motive other than an intentional
violation ot a known legal duty.” /d. at 12, 97 S.Ct. at 23.
As “the other courts of appeals that have considered the
question have recognized, willfulness in this context simply
means a voluntary, intentional violation of a known legal
duty." /bid. We concluded that after instructing the jury on
willfulness, “[aln additional instruction on good faith was

unnecessary."__/d. at 13, 97 S.Ct., at 24. Taken together,
Bishop and Pomponio conclusively establish that the standard

for the statutory willfulness requirement is the “voluntary,
intentional violation of a known legal duty."
Cheek, 111 S.Ct. at 609, 610 (emphasis added).

The trial court in Cheek had given the appropriate Bishop
/Pomponio definition of willfulness as a “voluntary and intentional
violation of a known legal duty.” Cheek, 111 S.Ct. at 608 The trial
court then went further and advised the jury that an “objectively
reasonable” good faith misunderstanding of the law would negate
willfulness but mere disagreement with the law would not, and that
"an honest but unreasonable belief is not a detense and does not
negate willfulness.” Cheek, 111 S.Ct. at 608 This Honorable
Court, however, rejected the requirement that a claim of good faith

iceman iii

23

belief must be “objectively reasonable” if it is to be considered as
possibly negating the Government’s evidence purporting to show a
defendant’s awareness of a legal duty. The Court reasoned that
holding the Defendant to an "objectively reasonable” standard had
the effect of transforming the inquiry into defendant’ s good faith into
a legal, rather than factual determination. thereby preventing its
consideration by the jury. Cheek, 111 $.Ct. at 611. The Court held
that it was error to instruct the jury to disregard evidence of Cheek’s
understanding that within the meaning of tax law. he was not a
person required to file a return or pay income taxes and that wages
are not taxable income, as incredible as such misunderstandings of
and beliets about the law might be. /d. The Court, therefore.
transformed the analysis of the defendant’s good faith from one of
objective reasonableness to subjective reasonableness.

Petitioner respecttully submits that this Honorable Court's
opinion in Cheek implicitly overrules that portion of the Pomponio
decision that held that a good faith instruction was not necessary
Once the appropriate definition of willful was given to the jury.
With regard to the evolution of the Court’s interpretation of the
Statutory term willfulness, this would, of course, mean that the
Court’s opinion in Cheek has brought said interpretation full circle
back to a portion of the Court’s opinion in Murdock holding that a
defendant was entitled to an instruction with respect to whether he
acted in good faith based on his actual belief. The specific issue of
whether a good faith instruction is now required, however, was not
presented or addressed in Cheek. Moreover, by delineating a
Standard by which a defendant’s good faith is to be judged, within
the meaning of federal criminal tax laws, the failure to give an
affirmative charge regarding good faith raises serious Due Process
implications in that the burden of proving the defendant’s state of
mind has been shifted from the government to the defendant.

In the present case, Petitioner unsuccessfully sought to have the
Court instruct the jury on Petitioner’s good faith with regard to
payment of his 1986 income taxes. Clearly there was evidence in
the record to support such a request, inziuding the following: that
Mr. Emory, the fiduciary of the trust, had advised the Partners that
the fully disclosed income was a long term capital gain (R3-183);
that the partnership returns prepared by Mr. Emory’s independent,
Outside accountant and filed with the IRS indicated that the income
was a long term capital gain (R3-200); that the Petitioner’s Form

24

K-| prepared by Mr. Emory’s accountant indicated that the income
was a long term capital gain (Govt. Ex. 5); and that the Petitioner
fully disclosed this income to his accountant and the IRS by timely
paying over $28,000 in tax on said income at the time that his first
extension to file his return was filed with the IRS. (R3-219, Govt.
Ex. 1) Without further instruction on Petitioner’s “good faith,"
however, the jury was free to apply whatever standard to Petitioner’s
conduct that it deemed appropriate, including whether or not said
conduct was “objectively reasonable." Petitioner respectfully
submits, therefore, that failing to give an affirmative instruction on
good faith in the context of criminal tax laws, is not only
inconsistent with the Court’s opinion in Cheek, but also renders an
instruction on “willfulness” without reference to the Defendant’s
good faith unconstitutional in that it has the effect of shifting the
burden to the Petitioner to prove that he acted in good faith and not
willfully.

This Honorable Court has previously stricken as an
unconstitutional violation of Due Process, jury instructions that had
the effect of shifting the burden of proof on the critical question of

a detendant’s state of mind. See e.g., Francis v. Franklin, 471 U.S.

307, 105 S.Ct. 1965, 85 L.Ed.2d 344 (1985); Sandstrom _v.
Montana, 442 U.S. 510, 99 S.Ct. 2450, 61 L.Ed.2d 39 (1979);
United States v. United States Gypsum Co., 438 U.S. 422, 98 S.Ct.
2864, 57 L.Ed.2d 854 (1978); and Morissette v. United States, 342
U.S. 246, 72. S.Ct. 240, 9 L.Ed. 288 (1952). While these decisions
dealt generally with jury instructions that included presumptions
(i.e., "“[t]he law presumes that a person intends the ordinary
consequences of his voluntary act." Sandstrom, 442 U.S. at 516, 99
S.Ct. at 2455

The same analysis is appropriate in this case. Specifically, in
that line of cases, one of the critical inquiries was whether the jury
instruction left the jury with alternative standards when receiving the
Detendant’s conduct. For instance, in Sandstrom, the Court noted:

First, a reasonable jury could well have interpreted the
presumption as "conclusive," that is, mot technically a
presumption at all, but rather as an irrebuttable direction by
the court to find intent once convinced of the facts triggering
the presumption. Alternatively, the jury may have
interpreted the instruction as a direction to find intent upon

25

proof of the defendant’s voluntary actions (and their
“ordinary” consequences), unless the defendant proved the
contrary by some quantum of proof which may well have
been considerably greater than “some” evidence - thus
effectively shifting the burden of persuasion on the element
of intent.

Sandstrom, 442 U.S. at 517, 99 S.Ct. at 2456.

It is respectfully submitted that when a similar analysis is applied
to jury instructions defining the term “willful” within the meaning of
the criminal tax laws, a reference to defendant’s good faith and an
explanation of the standard by which to judge his good faith is
constitutionally mandated. In the context of the tax laws, it is a
simple matter for the prosecution to prove that Petitioner’s conduct
was both “voluntary” and “intentional” and that Petitioner had a
"legal duty” to pay his taxes or report his income a certain way. By
doing so, and without further instruction, the Petitioner is implicitly
“presumed” to know of his legal duty. This is so because the jury
is left without a standard by which to examine the possibility that the
Petitioner did not know of his duty and/or that, even if he did so, his
actions with respect to his taxes were reasonable and in good faith.
The burden of proving the Petitioner’s state of mind has, therefore,
shifted from the Government to the Petitioner.

In this regard, it should be emphasized that in the case of
' Petitioner’s conviction, the Court is not dealing with a "known legal
duty" as simple as whether one is required to file an income tax
return. Rather, the issue here is whether Petitioner knew that he had
a legal duty to report and pay taxes on the income derived from the
sale of the option contract as a short term capital gain rather than a
long term capital gain. Such a determination, complicated by the
series of transactions that took place with regard to said option, is
beyond the expertise of most taxpayers.

The burden that shifted to Petitioner in this case was further
compounded by two factors. First, in summarizing the evidence to
the jury, the Court stated that once Emory had “assigned” the option
it had acquired, Emory “did not own" the option. . . . the Water
Works Board owned the option after May 21, 1986." (R5-129) The
Court thus established the period that Emory held the option as being
less than six months. With this instruction, the Court removed from

26

the jury's consideration the factual determination of the period that
Emory held the option and thus established as a matter of law that
the income received by the Petitioner was a short term capital gain.
Petitioner's purported “duty” was therefore established as a matter
of law.* Second, the Court prohibited the Petitioner from offering
expert testimony regarding the “substance” of the transaction rather
than its "form." This testimony was an essential part of Petitioner's
defense that: 1) the income was derived from a long term capital
gain, and 2) that it was certainly reasonable for Petitioner to assume
that it was a long term capital gain on which he in good faith timely
disclosed and paid his taxes with his request for an extension to file
his return.’

The argument put forth by Petitioner is limited to jury
instructions of the term "willful" within the context of the federal tax
laws. This is so because of the unique aspects of federal taxation in

> In the court below, Petitioner challenged the tmal court's instruction
regarding the holding period of the option as an improper finding of fact that should
have been decided by the jury. Petitioner alleged that the court improperly singled
out a single document rather than allowing the jury to consider the substance of the
complete transactions in accordance with Commissioner v. Court Holding Company,
324 U.S. 331 (1945). In addition, Petitioner averred that the court’s instruction was
in error in that under Alabama law the date that an “assignment” of a contract
actually occurs is a matter of fact, not law. Baker v. Eufaula Concrete Company,
Inc., 557 So.2d 1228 (Ala. 1990)

* Petitioner also challenged the District Court's refusal to allow the testimony
of the defense expert as an abuse of discretion which denied Petitioner of evidence
supporting this defense, citing United States v_ Opdahi, 930 F.2d 1530 (11th Cir.
1991). Interestingly, the day after the Eleventh Circuit panel issued its opinion in
Petitioner's case, a separate Eleventh Circuit panel issued the decision in United

States v. Lankford, 955 F.2d 1545 (11th Cir. 1992), also a tax evasion case which
is directly opposite to the holding in Petitioner's case. In Lankford, the Court held
that the tnal court abused its discretion in not allowing defendant's tax expert to
testify concerning the reasonableness of defendant's conclusion that unreported
income was a nontaxable gift rather than a political contnbution, particularly as
evidence was offered to rebut expert testumony offered by the government. /d at
1551, citing Cheek.

27

which “substance over form" controls. See Commissioner v. Court
Holding Company, 324 U.S. 331 (1945). It’s magnitude, however,
is of considerable practical and constitutional proportions. Each year
millions of taxpayers, accountants, attorneys, and tax preparers must
interpret federal tax laws, both when filing and preparing returns and
when considering tax planning. Literally thousands of those
individuals will later be called on to justify their tax returns or the
tax returns of their clients in either a civil or criminal proceeding.

Within the context of our federal tax laws, the difference between
the government’s ability to impose only a civil sanction and their
ability to deprive one’s liberty through criminal prosecution is
dependent on the state of mind of the taxpayer. This Court’s
clarification of the apparent inconsistency between the Court’s
opinions in Cheek and Pomponio regarding whether a defendant
accused of criminal tax violations is entitled to an affirmative good
faith charge, coupled with the constitutional ramifications of not
giving such a charge, is an important issue of federal statutory and
constitutional law and is essential so as to give guidance to both the
Courts below and the taxpayers of the United States.

28
CONCLUSION

Petitioner’s conviction under 18 U.S.C. § 666 was based on an
expansive interpretation of the statute’s federal jurisdictional
requirements. The interpretation is inconsistent with the
Congressional intent and purposes behind the enactment of said
statute as was determined in the District Court opinions in Stewart
and Webb. The Petitioner’s conviction under this statute is,
therefore, due to be reversed.

Likewise, the Petitioner’s conviction for income tax evasion is
due to be reversed. This Honorable Court’s decision in Cheek
requires that a trial court give an affirmative charge regarding a
criminal tax defendant’s good faith detense. Such a charge is
mandated in order to prevent the burden of persuasion regarding the
defendant’s state of mind from unconstitutionally shifting to the
detendant, as was done at Petitioner’s trial.

For the foregoing reasons this Petition for a Writ of Certiorari
should be granted.

Respectf ru i

G. Do i 7 es
(Counsel of Record)
Jones & Bowron, P.C.

450 Park Place Tower
Birmingham, Alabama 35203
(205) 254-9600

29
CERTIFICATE OF SERVICE

This is to certify that on the 5A day of October, three copies
of the above and foregoing have been served by United States mail,
postage prepaid, and properly addressed to:

The Solicitor General
United States Department of Justice
Washington, DC 20530

Jack Selden, Esq.
United States Attorney
Bill L. Barnett, Esq.
Assistant United States Attorney
200 Robert L. Vance Federal Building
1800 Sth Avenue, North
Birmingham, Alabama 35203

ef ly L

G. Douglas Jone

APPENDIX

A-I-1

APPENDIX A-I

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

No. 91-7260

Non-Argument Calendar

D.C. Docket No. CR()-H-257-S

UNITED STATES OF AMERICA.
Plaintiff-Appellee.
versus
JOE W. REID.
Detendant-Appellant.

Appeal trom the United States District Court for the
Northern District of Alabama

(March 24, 1992)

Betore: EDMONDSON and COX, Circuit Judges. and TUTTLE.
Senior Circuit Judge.

PER CURIAM: AFFIRMED. See [Ith Cir. R. 36-1.

Date Filed: March 24, 1992

A-II-1
APPENDIX A-II

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

No. 91-7260

UNITED STATES OF AMERICA,
Plainuft-Appellee,
versus
JOE W. REID,
Detendant-Appellant.

On Appeal from the United States District Court for the
Northern District of Alabama

ON PETITION(S) FOR REHEARING AND SUGGESTION(S) OF
REHEARING EN BANC

. Before: EDMONDSON and COX, Circuit Judges. and TUTTLE,
Senior Circuit Judge.

PER CURIAM:

( ) The Petition(s) for Rehearing are DENIED and no member
of this panel nor other Judge in regular active service on the Court
having requested that the Court be polled on rehearing en banc
(Rule 35, Federal Rules of Appellate Procedure: Eleventh Circuit
Rule 35-5), the Suggestion(s) of Rehearing En Bane are DENIED.

ENTERED FOR THE COURT:

/s/ James L. Edmondson Date Filed: July 6, 1992

UNITED STATES CIRCUIT JUDGE

A-III-1
APPENDIX A-III

18 U.S.C. § 666

Theft Or Bribery Concerning Programs Receiving Federal Funds

(a) Whoever, if the circumstance described in subsection (b) of
this section exists -

(1) being an agent of an organization, or of a State. local. or
Indian tribal government, or any agency thereot -

(A) embezzles, steals, obtains by fraud or
otherwise without authority knowingly converts to the use of
any person other than the rightful owner or intentionally
misapplies, property that -

(i) is valued at $5,000 or more. and

(ii) is owned, by, or is under the care. custody, or
control of such organization, government, or agency; or

(B) corruptly solicits or demands for the benefit
of any person, or accepts or agrees to accept, anything of
value from any person, intending to be influenced or
rewarded in connection with any business, transaction. or
Series of transactions of such organization, government. or
agency involving anything of value of $5,000 or more:

Shall be fined under this title, imprisoned not more than 10
years, or both.

(b) The circumstances referred to in subsection (a) of this section
is that the organization, government, or agency receives, in any one
year period, benefits in excess of $10,000 under a Federal program
involving a grant, contract, subsidy, loan, guarantee. insurance. or
other form of Federal assistance.

cma ears aaaenseaaararerareee

A-III-2

(c) This section does not apply to bona fide salary, wages, fees.
Or other compensation paid, or expenses paid or reimbursed, in the
usual course of business.

(d) As used in this section -

(1) the term “agent” means a person authorized to act on
behalf of another person or a government and, in the case of an
organization or government, includes a servant or employee, and
a partner, director, officer, manager, and representative;

(2) the term “government agency” means a subdivision of
the executive, legislative, judicial, or other branch of
government, including a department, independent establishment,
commission, administration, authority, board and bureau, and a
corporation or other legal entity established, and subject to
control, by a government or governments for the execution of a
governmental or intergovernmental program:

(3) the term “local” means of or pertaining to a political
subdivision within a State; and

(4) the term “State” includes a State of the United States,
the District of Columbia, and any commonwealth, territory, or
possession of the United States.

(4) the term “in any one-year period” means a continuous
period that commences no earlier than twelve months before the
commission of the offense or that ends no later than twelve
months after the commission of the offense. Such period may
include time both before and after the commission of the
offense.

A-IV-]
APPENDIX A-IV
COMPREHENSIVE CRIME CONTROL ACT OF 1984
PART C - PROGRAM FRAUD AND BRIBERY

1. In general

This part of title XI is designed to create new offenses to
augment the ability of the United States to vindicate Significant
acts of theft, traud, and bribery involving Federal monies that
are disbursed to private organizations or State and local
governments pursuant to a Federal program. The proposal is
derived from S. 1630, the Criminal Code Reform Act of 198]
approved by the Committee in the 97th Congress.

2. Present Federal law

As indicated, this part of title XI covers both theft and bribery
type offenses. With respect to thett, 18 U.S.C. 665 makes thett
or embezzlement by an officer or employee of an agency
receiving assistance under the Job Training Partnership Act a
Federal offense. However, there is no statute of general
applicability in this area, and thefts from other organizations or
governments receiving Federal financial assistance can be
prosecuted under the general theft of Federal property statute, 18
U.S.C. 641, only if it can be shown that the property stolen is
property of the United States. In many cases, such prosecution
is impossible because title has passed to the recipient before the
property is stolen, or the funds are so commingled that the
Federal character of the funds cannot be shown. This situation
gives rise to a serious gap in the law, since even though title to
the monies may have passed, the Federal Government clearly
retains a strong interest in assuring the integrity of such program
funds. Indeed, a recurring problem in this are (as well as in the

' See, e.g., sections 1731 (Theft) and 1751 (Commercial Bribery) of S. 1630
and the discussion at pages 726 and 803 of S. Rept. No. 97-307 (97th Cong., Ist
Sess.).

A-IV-2

related area ot bribery of the administrators of such funds) has
been that State and local prosecutors are often unwilling to
commit their limited resources to pursue such thefts, deeming
the United States the principal party aggrieved.

With respect to bribery, 18 U.S.C. 201 generally punishes
corrupt payments to Federal public officials, but there is some
doubt as to whether or under what circumstances persons not
employed by the Federal Government may be considered as a
"public official” under the definition of 18 U.s.C. 201(a) as
anyone “acting for or on behalf of the United States, or any
department, agency or branch of Government thereof, including
the District of Columbia, in any official function." The courts
of appeals have divided on the question whether a person
employed by a private organization receiving Federal monies
pursuant to a program is a “public official” for purposes of
section 201. The issue is due to be decided soon by the
Supreme Court,’ at least in the context of the particular HUD
program involved in that case.’

3. Provisions of the bill, as reported

Part C adds a new section 666 to title 18, United States Code.
Subsection (a) makes it a Federal crime for an officer, employee
or agent of an organization or of a State of local government
agency that receives benefits in excess of $10,000 per calendar
year pursuant to a Federal program to steal, embezzie, obtain by
fraud, willfully misapply or otherwise knowingly convert
without authority property valued at $5,000 or more. The

> See United States v. Hinton, 683 F.2d 195 (7th Cir. 1982), cert. granted sub
nom, Dixon v_ United States, _U.S.__ (1982) (Nos. 82-5279 and 82-5331).

> Contrast United States v_Loschiavo, 531 F.2d 659 (2d Cir. 1976) and United
Staies_v. Del Toro, $13 F.2d 656 (2d Cir.) cert. denied 423 U.S. 826 (1975),
reaching the opposite result as to the bnbery of certain persons administering funds
from another HUD program. See also United States v_ Mosley, 659 F.2d 812 (7th
Cir. 1981) (involving bribery by a State administrator of funds from the CETA
program.)

Ne

A-IV-3

offense is punishable by up to ten years in prison and a fine of
up to $100,000 or twice the value of the property obtained in
violation of this section, whichever is greater. The terms
"agent", “organization”, “government agency", and "local" are
defined in subsection (d) and require no further explication. The
Committee intends that the term “Federal program involving a
grant, a contract, a subsidy, a loan, a guarantee, insurance, or
another form of Federal assistance” be construed broadly,
consistent with the purpose of this section to protect the integrity
of the vast sums of money distributed through Federal programs
from theft, fraud, and undue influence by bribery. However,
the concept is not unlimited. The term “Federal program"
means that there must exist a specific statutory scheme
authorizing the Federal assistance in order to promote or achieve
certain policy objectives. Thus, not every Federal contract or
disbursement of funds would be covered. For example, if a
government agency lawfully purchases more than $10,000 in
equipment from a supplier, it is not the intent of this section to
make a theft of $5,000 or more from the supplier a Federal
crime. It is, however, the intent to reach thefts and bribery in
Situations of the types involved in the Del Toro, Hinton, and
Mosley cases cited herein.

A-V-1
APPENDIX A-V
23 U.S.C. § 123
Relocation of Utility Facilities

(a) When a State shall pay for the cost of relocation of utility
facilities necessitated by the construction of a project on any Federal-
aid system, Federal funds may be used to reimburse the State for
such cost in the same proportion as Federal funds are expended on
the project. Federal funds shall not be used to reimburse the State
under this section when the payment to the utility violates the law of
the State or violates a legal contract between the utility and the State.
Such reimbursement shal! be made only after evidence Satisfactory
to the Secretary shall have been presented to him substantiating the
fact that the State has paid such cost from its own funds with respect
to Federal-aid highway projects for which Federal funds are
obligated subsequent to April 16, 1958, for work. including
relocation of utility facilities.

(b) The term “utility”, for the purposes of this section, shail
include publicly, privately, and cooperatively owned utilities.

(c) The term “cost of relocation", for the purposes of this
section, shall include the entire amount paid by such utility properly
attributable to such relocation after deducting therefrom any increase
in the value of the new facility and any salvage value derived from
the old facility.

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386011_1413%3A1. Public record. Not legal advice.