Mail fraud - indictment - section 7206 of the Code

Nicholas B. Blase, et al., Crimes: Filing false returns: Indictment: Sufficiency. --, (October 24, 2007)


United States of America v. Nicholas B. Blase, et al. U.S. District Court, No. Dist. Ill., East. Div.; 06 CR 421,

October 24, 2007.[ Code Sec. 7206]Crimes: Filing false returns: Indictment: Sufficiency. --
An indictment charging a mayor with mail fraud and willfully and knowingly filing false income tax returns for the years at issue was sufficient because the allegations contained in the indictment adequately apprised him of the charges against him. The indictment sufficiently alleged that he made material misstatements to conceal his kickback arrangement from the public, signed his tax returns under penalties of perjury, did not believe those returns were correct, and knew that his income was substantially in excess of that reported.
MEMORANDUM OPINION AND ORDER
ANDERSEN, District Judge: This matter is before the court on defendant Nicholas Blase's motion to dismiss the government's superseding indictment pursuant to Federal Rules of Criminal Procedure 7 and 12 or, alternatively, to strike Illinois state law related allegations contained within that indictment. For the following reasons, defendant's motion to dismiss is denied. The court refrains from ruling on defendant's arguments regarding references to Illinois state laws at this time.
BACKGROUND
In December, 2005, the Grand Jury returned an eleven-count superseding indictment (the "indictment") against defendant Nicholas Blase ("Blase") alleging that Blase misused his official government position for private gain in violation of the federal mail fraud statute and that Blase filed false federal income tax returns for the years 2000 through 2005. Specifically, the indictment alleges that from around 1974 to June 2006 Blase used his position as the Mayor of the Village of Niles, Illinois in a variety of ways to assist Ralph Weiner and Associates ("RWA"), an insurance broker once located in Niles and later relocated to Wheeling, Illinois, to obtain and keep Niles businesses as customers. In return, RWA allegedly took a percentage of the monies it received from these Niles businesses and paid that percentage as a kickback to Blase through S.M.P. Insurance Service, Inc. ("SMP"), which the indictment alleges was a sham corporation created and maintained for Blase's benefit. The indictment alleges that throughout this scheme, Blase failed to disclose his receipt of these payments to the public and, in fact, took numerous steps to conceal the true nature of his kickback arrangement with RWA. Counts one through five of the indictment charge Blase with violating the federal mail fraud statute, 18 U.S.C. §§1341, 1346, 2, by depriving the citizens of Niles of Blase's honest services as Mayor. Counts six through eleven charge Blase with willfully and knowingly filing false federal tax returns for the years 2000 to 2005 in violation of 26 U.S.C. §7206(1) by failing to report as "Other Income" the payments that Blase allegedly received from RWA. Blase has moved to dismiss the indictment in its entirety.
DISCUSSION
A. Standard of ReviewFederal Rule of Criminal Procedure 12(b)(2) provides that "[a] party may raise by pretrial motion any defense, objection, or request that the court can determine without a trial of the general issue." Fed. R. Crim. P. 12(b)(2). When considering a motion to dismiss under Rule 12(b)(2), a court assumes all facts in the indictment as true and must "view all facts in the light most favorable to the government." See United States v. Yashar, 166 F.3d 873, 880 (7th Cir. 1999). When viewed in that light, an indictment is sufficient if it satisfies three constitutionallymandated requirements. United States v. Anderson, 280 F.3d 1121, 1124 (7th Cir. 2002). First, the indictment must adequately state all of the elements of the crime charged; second, it must inform the defendant of the nature of the charges so that he may prepare a defense; and finally, the indictment must allow the defendant to plead the judgment as a bar to any future prosecution for the same offense. Id. Thus, indictments "need not exhaustively recount the facts surrounding the crime's commission." United States v. Agostino, 132 F.3d 1183, 1189 (7th Cir. 1997). Rather, "when determining the sufficiency of an indictment, [a court] look[s] at the contents of the subject indictment `on a practical basis and in [its] entirety, rather than in a hypertechnical manner.' " United States v. McLeczynsky, 296 F.3d 634, 636 (7th Cir. 2000) (quoting United States v. Smith, 230 F.3d 300, 305 (7th Cir. 2000)). An indictment, or a portion thereof, may be dismissed "if it is otherwise defective or subject to a defense that may be decided solely on issues of law." United States v. Black, 469 F. Supp. 2d 513, 518 (N.D. Ill. 2006).B. Counts One through Five Properly Allege Mail Fraud.1. The indictment adequately apprises Mr. Blase of the charges against him.Blase argues that counts one through five of the indictment should be dismissed because those counts contain merely vague and generic allegations that are insufficient for Blase to adequately prepare a defense in this case or establish a double jeopardy defense in the future. An indictment for mail fraud is sufficient if it includes allegations that the defendant (1) participated in a scheme or artifice to defraud; (2) acted with an intent to defraud; and (3) used the mail in furtherance of the fraudulent scheme. United States v. Hausmann, 345 F.3d 952, 956 (7th Cir. 2003); see also 18 U.S.C. §1341. Congress has defined "scheme or artifice to defraud" to include a scheme or artifice to deprive another of the intangible right of honest services. See 18 U.S.C. §1346 ("Section 1346"); United States v. Segal, 495 F.3d 826, 834 (7th Cir. 2007). An honest services charge under Section 1346 requires an allegation that a defendant misused his office or position in furtherance of the scheme or artifice to defraud. United States v. Bloom, 149 F.3d 649, 655 (7th Cir. 1998).Here, counts one through five of the indictment are factually sufficient to survive Blase's motion to dismiss. The indictment alleges that Blase entered into a scheme to defraud by using his official position as Mayor of Niles "to promote RWA and steer businesses to purchase insurance from RWA and, in return, [RWA] paid, and caused to be paid, a portion of RWA's commissions from Niles clients to SMP, a shell corporation controlled by defendant Blase." (Sup. Indict. P. 6). The indictment further identifies the key individuals and entities involved in the scheme, describes the actions and omissions allegedly taken by Blase, tracks the payments of alleged kickbacks received by Blase, including the manner in which the amounts were determined and directed to SMP, and alleges the precise dollar amount of the alleged kickbacks paid from 1997 to 2006. Counts one through five further allege that Blase knowingly used the mail in furtherance of his scheme. When read in the light most favorable to the government, these counts sufficiently allege that Blase misused his position as the Mayor of Niles for private gain in violation of the federal mail fraud statute and more than adequately apprise Blase of the charges against him.2. The indictment need not allege harm to the victims.Blase next argues that the mail fraud counts in the indictment should be dismissed because they fail to allege that Blase misused his office at someone's expense. Specifically, Blase argues that when, as here, the government presents a deprivation of honest services theory under the mail fraud statute the indictment must allege some harm or intended harm to the victims of the scheme to defraud. This argument, however, is legally flawed. Although Blase correctly notes that not every breach of fiduciary duty constitutes a deprivation of honest services in violation of the mail fraud statute, Bloom, 149 F.3d at 655-56, the Seventh Circuit has held that a breach of fiduciary duty can violate the mail fraud statute when that breach is accompanied by a misuse of office or position. Id. at 655. Further, the Seventh Circuit has repeatedly held that "[t]here is no requirement under the law...that a co-conspirator to a wire and mail fraud scheme contemplate actual or foreseeable harm to the victim." Hausmann, 345 F.3d at 959; accord United States v. Leahy, 464 F.3d 773, 786-87 (7th Cir. 2006); United States v. Fernandez, 282 F.3d 500, 507 (7th Cir. 2002). Here, as explained supra, the indictment sufficiently alleges that Blase misused his position as Mayor of Niles for private gain. Thus, under Seventh Circuit precedent, the indictment sufficiently alleges a violation of the mail fraud statute under an honest services theory even without any allegation of harm or contemplated harm to the victims of Blase's alleged scheme.Blase also makes the factual argument that counts one through five should be dismissed because there is no allegation that any of RWA's customers were harmed as a result of Blase's alleged scheme. Aside from being legally flawed because the government need not allege any such harm, this argument is also factually incorrect because it mistakenly assumes that the victims of Blase's alleged scheme are limited to RWA's customers. As the government correctly points out in its response to Blase's motion to dismiss, it is the entire citizenry of the Village of Niles, not just those businesses located within Niles, to whom Blase owed a duty of honest services. When viewed in the light most favorable to the government, the indictment alleges that Blase made decisions in his official capacity that affected the welfare of the citizens of Niles based upon Blase's own personal financial interests and not based on the public's welfare. Thus, the citizens of Niles were victimized by Blase's alleged scheme because their interests were not being exercised with their best interests in mind --they were being exercised with Blase's personal financial interests in mind. Accordingly, counts one through five are properly pleaded.3. The superseding indictment alleges a material misstatement.Blase argues that counts one through five should be dismissed because the indictment fails to allege that Blase made any material misstatements in connection with his alleged scheme to defraud. Specifically, Blase asserts that the indictment alludes to only one specific omission: that Blase failed to disclose in his Statements of Economic Interest the payments Blase allegedly received from RWA. The government counters that as a matter of law, failing to disclose kickbacks earned in one's fiduciary capacity meets the material misstatement or omission element of the mail fraud statute. The government further argues that Blase's failure to disclose the alleged kickbacks in Blase's Statements of Economic Interest is but one of several activities that Blase is alleged to have engaged in order to conceal the alleged kickback arrangement.To properly allege a violation of the mail fraud statute an indictment must include an allegation that the defendant made material misstatements or omissions as part of the scheme to defraud. Neder v. United States, 527 U.S. 1, 25 (1999). Although a mere failure to disclose, absent more, cannot constitute mail fraud, an omission coupled with an affirmative misrepresentation or breach of a duty to disclose may be actionable as mail fraud. Anderson v. Lincoln Ins. Agency, Inc., No. 02 C 6377, 2003 U.S. Dist. LEXIS 3811, at *5 (N.D. Ill. Feb. 14, 2003). Indeed, the Seventh Circuit has made clear that failing to disclose secret kickbacks earned in one's fiduciary capacity meets the material misstatement or omission element of the mail fraud statute. See Hausmann, 345 F.3d at 957; United States v. Bush, 522 F.2d 641, 647-48 (7th Cir. 1975). This is because failing to disclose such kickbacks converts "representations to [one's] clients into misrepresentations." Hausmann, 345 F.3d at 957.Here, the indictment sufficiently alleges that Blase made material misstatements or omissions by failing to disclose his kickback arrangement with RWA to the citizens of Niles. The indictment alleges that Blase, in his capacity as Mayor of Niles, owed a duty of honest services to the citizens of Niles, that under Illinois law he was prohibited from soliciting or knowingly accepting a fee or reward which he knew was not authorized by law, and that under Illinois law he was obligated to disclose any income received by any third party that he constructively controlled. The indictment further alleges that Blase constructively controlled SMP; the "sham" corporation to which the kickbacks from RWA were allegedly directed for Blase's benefit. Thus, the indictment sufficiently alleges the material misstatement or omission element of the mail fraud statute because it alleges both that Blase had a duty to disclose to the citizens of Niles any payments Blase received through SMP and that he failed to do so. Accordingly, counts one through five are properly pleaded.C. Constitutionality of Section 1346Blase next challenges counts one through five on constitutional grounds, arguing that those counts should be dismissed because Section 1346 is unconstitutionally vague. "A party may raise a vagueness challenge by arguing that either a statute is vague as applied to the case or that a statute is void on its face." United States v. Rezko, No. 05 CR 691, 2007 U.S. Dist. LEXIS 73515, at *20-21 (N.D. Ill. Oct. 2, 2007). Here, Blase challenges the constitutionality of Section 1346 on both grounds.Blase first challenges the constitutionality of Section 1346 on its face. When a statute does not implicate First Amendment interests, as is the case here, a court generally "must uphold a facial challenge only if the enactment is impermissibly vague in all of its applications." Fuller v. Decatur Pub. Sch. Bd. of Educ. Sch. Dist. 61, 251 F.3d 662, 667 (7th Cir. 2001). As Blase recognizes in his motion to dismiss, numerous courts, including this one, have found Section 1346 constitutional on its face. See United States v. Rybicki, 354 F.3d 124, 143 (2d Cir. 2003); United States v. Frost, 125 F.3d 346, 371 (6th Cir. 1997); Black, 469 F. Supp. 2d at 531, n.10. Blase has failed to cite any authority holding that Section 1346 is unconstitutionally vague on its face, and the court declines to reverse its prior holding.Blase also argues that Section 1346 is unconstitutionally vague as applied to this case because it provided no notice to Blase that he could be charged with federal mail fraud for allegedly "steering" Niles residents to use RWA for insurance purposes. In Hausmann, however, the Seventh Circuit held that its decision in Bloom placed the defendant on notice that the misuse of one's fiduciary position for personal gain may constitute a violation of the mail fraud statute under an honest services theory. Hausmann, 345 F.3d at 957. Here, the indictment alleges that Blase misused his official position as Mayor of Niles for personal gain by engaging in the alleged kickback scheme with RWA. Given the Seventh Circuit's rulings in Bloom and Hausmann, Blase was on notice at least as early as 1998 that misusing a fiduciary position for personal gain risks criminal liability. Thus, Blase's constitutional challenge as applied also fails.D. Section 1346 Does Not Create a Common Law Crime.Blase also argues that Section 1346 creates an unconstitutional common law crime and that the government alleges nothing more than violations of Illinois state laws. This argument is unavailing. As discussed supra, the indictment properly alleges that Blase violated the federal mail fraud statute. Further, Blase's argument that Section 1346 creates an unconstitutional common law crime has been repeatedly rejected by this court. See, e.g., Black, 468 F. Supp. 2d at 528 n.8 (citing Bloom, 149 F.3d at 655-57; United States v. Warner, No. 02 CR 506, 2004 U.S. Dist. LEXIS 15727, at *70 (N.D. Ill. Aug. 12, 2004)). Blase has failed to cite any authority holding that Section 1346 creates an unconstitutional common law crime, and this court declines to reverse its prior holdings rejecting that argument.E. Counts Six Through Eleven Properly Allege the Crime of Filing False Tax Returns.Blase argues that counts six through eleven should be dismissed because they fail to allege that Blase personally received funds from RWA or SMP and thus fail to allege a violation of 26 U.S.C. §7206(1) ("Section 7206(1)"), which prohibits filing materially false individual tax returns. To sufficiently plead a violation of Section 7206(1), the indictment must allege (1) that the defendant made or caused to be made a verified federal income tax return for the year in question; (2) that the tax return was false as to a material matter; (3) that the defendant signed the return willfully and knowing it was false; and (4) that the return contained a written declaration that it was made under the penalty of perjury. United States v. Peters, 153 F.3d 445, 461 (7th Cir. 1998). Here, counts six through eleven allege that for the years 2000 to 2005 Blase filed signed federal tax returns with the Internal Revenue Service in which Blase failed to report as "Other Income" the kickbacks that Blase allegedly received from RWA. The indictment further alleges that Blase verified those tax returns by written declarations that they were made under penalties of perjury, that Blase did not believe those returns to be true and correct as to every material matter, and that Blase knew that his income was substantially in excess of that reported for those years. Although Blase correctly asserts that the indictment does not allege that RWA paid Blase directly, the indictment does allege that RWA transferred money to SMP, which Blase allegedly constructively controlled, and that Blase then used that money to pay the salaries of his paralegals for their work at Blase's law firm. Those allegations are sufficient to allege that Blase received individual income that he failed to report on his federal tax returns for the years 2000 to 2005. Accordingly, counts six through eleven properly allege violations of Section 7206(1).F. References to Illinois State LawBlase argues that even if the court refuses to dismiss the indictment, references to the Illinois Governmental Ethics Act and the Illinois Insurance Code should be stricken from the indictment because those references are irrelevant and potentially prejudicial. We will discuss these issues with the parties during a pretrial conference.
CONCLUSION
For the foregoing reasons, defendant Nicholas Blase's motion to dismiss the superseding indictment [73] is denied. This court declines to rule on Blase's arguments regarding references to Illinois state law and will instead discuss these issues with the parties during a pretrial conference.It is so ordered.

Fraud and False Statements: IndictmentAn indictment for making false statement under penalty of perjury was not defective even though it included words of intent in addition to those of the statute, since proof of specific intent was a necessary element of the alleged crime. Furthermore, the requirement of proof in addition to the wording of the statute would be in the defendant's favor, forcing the government to establish something not necessitated by the language of the statute.E. Jaben, CA-8, 65-2 USTC ¶9624, 349 F2d 913.Indictment charging taxpayers with conspiring to deprive the government of essential tax information concerning their race track winnings by paying others to cash their winning tickets so that their names would not appear on Form 1099 was not invalid on procedural or constitutional grounds.J. Honer, DC, 66-2 USTC ¶9504.The taxpayers were not prejudiced by the fact that surplus language in the indictment was deleted without the convening of a new grand jury or by the fact that the prosecutor referred to this language during the trial.S. Cirami, CA-2, 75-1 USTC ¶9261, 510 F2d 69.The indictment was sufficient even though no deficiency was computed. Since the government is not required to produce evidence of a deficiency in order for a conviction of submission of false statements to be sustained, the complaint of such a charge does not have to include the computations.I.E. Miller, CA-5, 74-1 USTC ¶9307, 491 F2d 638.An indictment charging concealment of a taxpayer's assets with intent to defeat collection of tax was insufficient where alleged concealment occurred prior to any assessment, notice, demand or levy for taxes. Consequently, conviction of taxpayer's attorney was improper.R.L. Swarthout, CA-6, 70-1 USTC ¶9186, 420 F2d 831.The court granted the taxpayers' motion to dismiss an indictment against them in which they were charged with conspiracy to violate Federal income tax and labor laws, filing false and fraudulent corporate income tax returns, and failure to file certain reports required by Federal labor laws. The court held that the indictment did not sufficiently inform the taxpayers of the nature of the charges against them so that they could prepare defenses.W. Heinze, DC, 73-2 USTC ¶9756, 361 FSupp 46.The indictment was ruled to be sufficient.J. Escobar, CA-5, 68-1 USTC ¶9125, 388 F2d 661.S.A. Grayson, CA-5, 69-2 USTC ¶9639, 416 F2d 1073. Cert. denied, 396 US 1059.J.J. Marra, CA-6, 73-2 USTC ¶9578, 481 F2d 1196.N.C. Edwards, Jr., CA-11, 86-1 USTC ¶9110, 777 F2d 644.G.M. Bishop III, CA-5, 2001-2 USTC ¶50,762, 264 F3d 535. Cert. denied, 4/22/2002.J.J. Boone, DC Pa., 89-2 USTC ¶9412.P. Bouzanis, DC Ill., 2003-1 USTC ¶50,315.No substantial rights were affected by a variance between the indictment (on the counts for subscribing false returns) and the proof as to the reported professional receipts by the defendants, there being no question of double jeopardy.R.A. Buble, CA-9, 71-1 USTC ¶9469, 440 F2d 405. Cert. denied, 404 US 828.J.A. D'Anna, CA-2, 71-2 USTC ¶9705, 450 F2d 1201.The indictment did not fatally vary from the proof merely because the amounts set forth in the indictment as deductions differed in some cases from the actual deductions taken. In a prosecution charging the filing of false returns, the government is not obliged to prove the exact amount alleged in the indictment.D.W. Warden, CA-7, 76-2 USTC ¶9790, 545 F2d 32.Although an indictment may have been duplicitous, any objection was waived by not having been raised before the verdict.W.B. Droms, CA-2, 77-1 USTC ¶9260, 566 F2d 361.An individual was properly convicted of corruptly endeavoring to obstruct the administration of the tax laws and of filing false employment tax returns. His indictment on the two charges was not multiplicitous and presented no double jeopardy problems because each offense required proof of facts that the other did not.J. Swanson, III, CA-4 (unpublished opinion), 97-1 USTC ¶50,398, aff'g, per curiam, an unreported District Court decision.Taxpayer's exoneration as to one of two alleged falsely claimed charitable deductions, but conviction on the other, did not constitute a material variance from the indictment. No substantial rights of the accused were prejudiced since he was informed of the charges against him and thus was able to present his defense, and he was also protected against another prosecution for the same offense.C. Considine, CA-9, 74-2 USTC ¶9846.The taxpayers' motion to dismiss the indictment in a prosecution for making false statements on tax returns was denied. The source of one's income is a material matter which, if falsified, can support such an indictment. If the source of income could be falsely stated, it would be difficult for the government to compute the amount of tax due and to check on the accuracy of the return.J. Di Varco, DC, 72-1 USTC ¶9470, 342 FSupp 101.The taxpayer's motion to dismiss an indictment against him for filing false income tax returns was denied. The indictment was sufficient, since it notified the taxpayer that he was charged with failing to properly compute his gross profits by excluding substantial amounts of gross receipts from his 1969, 1970, and 1971 tax returns.H. Boxer, DC, 75-2 USTC ¶9822.In determining whether the taxpayer's immunized testimony was instrumental in a witness' decision to testify against the taxpayer, so that the government could obtain an indictment, the appellate court held that the witness' state of mind during negotiations with the government should have been relevant to the factual determination to be made by the District Court. If the taxpayer was lying while immunized, the proper remedy would be prosecution for perjury or contempt of court rather than forfeiture of immunity.H. Kurzer, CA-2, 76-1 USTC ¶9399, 534 F2d 511.An indictment was dismissed because the Watergate Special Prosecutor had promised the defendants that no indictment would be brought under the particular provision.Phillips Petroleum Co., DC, 77-2 USTC ¶9590, 435 FSupp 622.An indictment was dismissed because it represented the culmination of government efforts to force the defendant to relinquish his venue rights.F. DeMarco, Jr., CA-9, 77-1 USTC ¶9354, 550 F2d 1224. Cert. denied, 434 US 827.A taxpayer was denied a motion to dismiss his indictment. In rejecting the motion, the court noted that the taxpayer was aware through his attorney of the basic nature of the charges levied against him. Also, the Constitution does not provide a defendant the right to knowledge of the details of a governmental investigation prior to indictment.F. Cisco, DC, 82-2 USTC ¶9554.The lower court did not abuse its discretion in dismissing an indictment as a remedy for the government's breach of its agreement not to prosecute a corporation or its principal officers in return for their admission that they made illegal political campaign contributions.Minnesota Mining and Mfg. Co., CA-8, 77-1 USTC ¶9259, 551 F2d 1106.The taxpayer's claim that his proceedings were prejudiced by excessive pre-indictment delay was rejected because there was no evidence that a witness, who allegedly was unable to appear at the proceedings due to the delay, would present unique testimony or that memories of witnesses had faded. Also, inconsistent jury verdicts on a multi-count indictment were not grounds for reversing the taxpayer's conviction.B.N. Horowitz, CA-9, 85-1 USTC ¶9373, 756 F2d 1400.A federal grand jury in West Virginia improperly indicted an accountant for aiding or assisting in the filing of fraudulent tax documents in Massachusetts. A person who assists another in the filing of fraudulent tax returns is a principal and may only be indicted in the district where he acted.W.F. Griffin, Jr., CA-1, 87-1 USTC ¶9299, 814 F2d 806.An indictment against the taxpayer was sufficient where, assuming the truth of the allegations contained in the indictment, the taxpayer was engaged in promoting an illegal tax scheme, the illegality of which he had fair notice of.G.L. Schulman, CA-9, 87-1 USTC ¶9334, 817 F2d 1355. Cert. denied, 8/5/87.An indictment charging an individual with the crime of filing false returns in violation of Code Sec. 7206(1) was valid. The argument that such indictment was vague and violated other constitutional rights because the tax return indicated entries were made under penalties of perjury and Code Sec. 7206 permits the imposition of penalties different from those provided in the federal perjury statute was rejected. The language made under the penalties of perjury merely indicates what types of documents are covered by statute and provides a discernible limit to the application of Code Sec. 7206(1). Such phrase could not reasonably confuse an individual regarding the consequences of filing a false tax return, and the indictment sufficiently apprised him of the charges.D.F. Marrinson, DC Ill., 87-2 USTC ¶9376.An indictment charging that the defendants used fraudulent means to create fictitious trading losses and interest expenses which they passed on to participants in various limited partnerships was permitted to stand. Even assuming arguendo that losses from tax straddle transactions entered into with the express purpose of generating such losses were deductible, the court ruled that a jury could still determine that the defendants' commodities straddles were sham transactions. Further, the fact that the New York Statute of Frauds could prevent their agreements from being enforced was irrelevant to whether the agreements in fact existed and were accepted by the parties.C.A. Atkins, DC N.Y., 87-2 USTC ¶9552, 661 FSupp 491.A district court erred in dismissing an indictment against a promoter of limited partnership tax shelters for making false statements on tax returns. He made false statements to the IRS and to the prospective investors when he represented that loans to the partnerships could enable the limited partners to have certain tax benefits, when, in fact, the loans were sham transactions. Thus, the indictment was reinstated.E.H. Heller, CA-11, 89-1 USTC ¶9281, 866 F2d 1336, vac'g an unreported District Court decision.The conviction of a former IRS agent for various tax offenses in connection with an illegal tax investment scheme he devised and executed was affirmed. The indictment was not faulty. The former agent was convicted of the offense for which he was indicted. Four counts of a superseding indictment, which the former agent challenged, were duplicative of counts in the original indictment. Consequently, the statute of limitations was not violated.R.H. Pacheco, CA-9, 90-2 USTC ¶50,458, 912 F2d 297.An indictment for subscribing a false return was dismissed for failure to allege intent. The taxpayer claimed deductions for contributions to certain retirement plans on a return filed prior to the extended due date but did not actually make such contributions. Since two IRS rulings allowed the taxpayer to claim deductions for contributions to certain retirement plans that have not been made at the time of filing, provided that the taxpayer makes the contributions prior to the due date of the return, the indictment should have alleged that the taxpayer had no intention of making the contributions at the time the return was filed.L.A. Robinson, DC Miss., 93-1 USTC ¶50,213, 811 FSupp 1174.A police sergeant's felony conviction for willfully filing false individual income tax returns did not violate the Grand Jury clause of the Fifth Amendment or prejudice his opportunity to present a defense. The trial court's decision, which was based on the individual's failure to report net receipts from a side business, did not constructively amend the indictment, which charged the individual with failure to report gross receipts from the business. Also, the court's narrowing of the charges did not prejudice the sergeant's defense since his willful failure to report the net receipts was always a central part of the case.M. Thompson, CA-7, 94-1 USTC ¶50,231, 23 F3d 1225.An indictment for making a false statement on a return was not defective for failure to state the year of the return. The indictment cited the date that the false return was filed, and the individual was provided with a copy of the return.C.T. Wickersham, CA-5, 94-2 USTC ¶50,400, 29 F3d 191.A lawyer was properly indicted on the charge of subscribing to a false tax return, rather than on tax evasion. Although he paid amounts for referrals and reported them on his return, that did not mean that his reported figures were allowable deductions rather than a material misstatement of fact.R.M. Standard, CA-9 (unpublished opinion), 96-1 USTC ¶50,302. Cert. denied, 117 SCt 690.The general manager of a nonprofit farming cooperative who was convicted of filing a false tax return had sufficient notice from the indictment of the IRS's evidence at trial. Although the evidence given to the grand jury differed from that at trial, the charge of underreporting income under Code Sec. 7206(1) was the same.L.L. Worman, CA-10 (unpublished opinion), 2000-1 USTC ¶50,359, 210 F3d 391, aff'g an unreported District Court decision.The district court's denial of a new trial did not impermissibly expand the scope of the original indictment of an individual for filing false tax returns or expose the taxpayer to charges not in that indictment. A statement in the indictment that the taxpayer received income that he failed to report on line 22 of Form 1040 also included alternative grounds. That reference did not remove from its scope income that would have been reported on other lines, and it did not require the government to prove that the income was converted from the taxpayer's alleged partner; it only had to prove that the taxpayer failed to report taxes on his income.L.L. Worman, CA-10 (unpublished opinion), 2001-2 USTC ¶50,759, aff'g an unreported District Court decision.An indictment failed to sufficiently allege that a shareholder of a real estate S corporation committed a material falsehood or omission in not reporting a third-party's ownership interest in the entity. The indictment did not specifically indicate what made the omission criminal since there was no allegation that the third party was a shareholder. The shareholder was not adequately informed of the nature of the accusation against him, and that portion of the indictment was dismissed.A.J. Pirro Jr., CA-2, 2000-1 USTC ¶50,451, 212 F3d 1281, aff'g an unreported District Court decision.Sufficient evidence existed to support an individual's convictions for conspiracy to defraud the government and assisting in the preparation of false income tax returns. The taxpayer cycled his clients' income through offshore trusts and subsequently filed false income tax returns. The transactions were conducted to evade the clients' tax liability and the participants in the scheme retained control over the cycled funds. Moreover, the taxpayer advocated the use of the offshore trusts and assisted in their creation and operation.T.C. Gaskill, CA-9 (unpublished opinion), 2000-2 USTC ¶50,702, 232 F3d 897. Aff'g in part and rev'g and rem'g in part, an unreported District Court decision.Taxpayer was not entitled to conduct discovery in connection with an indictment based on the IRS's failure to establish his liabilities before proceeding with a criminal investigation. Suppression of evidence would be appropriate if the IRS used civil subpoenas to obtain evidence after having made an institutional commitment to recommend prosecution of the defendant but without establishing the probable cause necessary for a criminal case. However taxpayer did not establish a prima facie case that a hearing on the suppression issue was warranted.K.L. Utecht, CA-7, 2001-1 USTC ¶50,311, 238 F3d 882.An indictment under Code Sec. 7206 properly provided a basis for subject matter jurisdiction because it tracked the language of the charging statutes. It contained the elements of the offense charged, fairly informed the defendant of the charge against which he must defend and enabled him to plead an acquittal or conviction in bar of future prosecutions. Furthermore, both the original indictment and the superseding indictment were valid charging instruments because each contained the signature of the grand jury's foreperson.L. Molesworth, 2005-2 USTC ¶50,571, 383 FSupp2d 1251.An individual's contention that an indictment against him for tax evasion should be dismissed because the IRS presented illegally obtained evidence to the grand jury was rejected. Even if the jury had examined illegally obtained evidence, the indictment was valid on its face and could not be challenged.J.F. Greve, CA-7, 2007-2 USTC ¶50,547, 490 F3d 566.A tax preparer's indictment on several counts of willful preparation of fraudulent tax returns was sufficient. The indictment contained enough details to put the tax preparer on notice of the alleged charges and provided an opportunity to prepare a defense. R.M. Blackstock, CA-10 (unpublished opinion), 2007-2 USTC ¶50,646, aff'g an unreported DC Okla. decision.A taxpayer was properly indicted for filing false corporate tax returns because he aided the corporation to file a false return. The corporation, which was controlled by the taxpayer, had a substantial net operating loss (NOL) that it was carrying forward from year-to-year, and the taxpayer assigned his income from other sources so that it was paid directly to this corporation instead of him. This allowed the corporation, which produced little income, to have income against which to offset the NOL, while the taxpayer avoided having to report that income on his individual return. Further, the charges contained in the indictment referring to his employment by the IRS and to the underlying basis for the corporation's carried-forward NOL were admissible in evidence and could not be stricken as surplusage. The probative value of such evidence outweighed any minimal prejudice it could entail to the taxpayer. H. Willner, DC N.Y., 2007-2USTC ¶50,751.

Alvin S. Brown, Esq.
Tax Attorney
www.irstaxattorney.com
703 425-1400

To provide IRS transparency, upload your IRS experiences to www.irsforum.org