U.S. v. Clements

• Decision Date: 22 January 1996
• Docket Number: No. 94-30519,94-30519
• Citation: 73 F.3d 1330
• Parties: -648 UNITED STATES of America, Plaintiff-Appellee, v. John M. CLEMENTS, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1330

73 F.3d 1330

77 A.F.T.R.2d 96-648

UNITED STATES of America, Plaintiff-Appellee, v. John M. CLEMENTS, Defendant-Appellant.

No. 94-30519.

United States Court of Appeals, Fifth Circuit.

Jan. 22, 1996.

Eulis Simien, Jr., Simien & Simien, Baton Rouge, LA, Thomas L. Lorenzi, Lake Charles, LA, for appellant.

Richard B. Launey, Asst. U.S. Atty., L.J. Hymel, U.S. Atty., Baton Rouge, LA, for appellee.

Appeal from the United States District Court for the Middle District of Louisiana.

Before HIGGINBOTHAM, EMILIO M. GARZA and BENAVIDES, Circuit Judges.

EMILIO M. GARZA, Circuit Judge:

Defendant John M. Clements appeals his conviction for attempting to evade or defeat the payment of federal income tax, in violation of 26 U.S.C. Sec. 7201, and for making a false statement to a federal agency, in violation of 18 U.S.C. Sec. 1001. We affirm.

I

As an architect and business man, Clements was involved in several different business entities in Baton Rouge, Louisiana. One was a real estate management company called Clements Properties. Another was Clements Blanchard and Associates, Inc. ("CBA"), an architectural firm. Clements caused these companies to incur large tax liabilities by directing them not to turn over to the Internal Revenue Service ("IRS") the payroll taxes which had been withheld from employees' salaries. In addition to his own personal income tax liability, Clements was eventually personally assessed the payroll tax liability for these two companies in his capacity as a "responsible person."

The IRS officer assigned to his case, June Dow, spent many months attempting to work out ways for Clements to pay off his tax liability. Aside from the prospect of future projects or the sale of stock, Clements repeatedly told Dow that his only source of income was CBA, the architectural firm. Clements assured Dow that he would be able to satisfy the tax liability once CBA was paid on its contract with Hannover Corporation for services performed in connection with Place Vendome, a shopping mall project in Baton Rouge. Despite repeated assurances, the IRS never received any money, and Dow eventually decided to file a lien on CBA's property and to levy the firm's contract with Hannover, as well as Clements' personal bank accounts. None of these actions were successful in securing any funds to pay down Clements' tax liability.

When Clements met with Dow that summer, he told her that CBA had been dormant since the lien had been filed and that he had discharged all of his employees. Clements also told her that he had no income from any source and that his wife was paying all their necessary living expenses. Evidence at trial established that none of this was true. Most significantly, Clements had signed a separate, personal contract with Hannover Corporation, replacing the original contract between Hannover and CBA, and was receiving substantial sums of money from the Place Vendome project. Clements never told Dow or the IRS that he had entered into a new contract or that he was receiving any income.

Following a two-count indictment, a jury convicted Clements of attempting to evade taxes by hiding the receipt of over $150,000 paid in connection with the Place Vendome project, and of making false statements to an employee of the Internal Revenue Service. At sentencing, the district court decided to depart upwards from the Sentencing Guidelines because Clements had obstructed justice after he was convicted. The district court sentenced Clements to a term of imprisonment of fifty-one months, and ordered him to pay a fine and make restitution to the IRS. Clements filed a timely notice of appeal from both his conviction and sentence.

II

Clements argues that the district court made a number of evidentiary errors. The decision whether to admit testimony or other evidence is committed to the sound discretion of the trial judge. United States v. Okoronkwo, 46 F.3d 426, 435 (5th Cir.), cert. denied, --- U.S. ----, 116 S.Ct. 107, 133 L.Ed.2d 60 (1995). We review the district court's evidentiary rulings for abuse of discretion. United States v. Scott, 48 F.3d 1389, 1397 (5th Cir.), cert. denied, --- U.S. ----, 116 S.Ct. 264, 133 L.Ed.2d 187 (1995).

A

Clements contends that the district court erroneously excluded several letters he wrote relating to his financial projects. Having reviewed the record, we conclude that Clements never attempted to introduce the letters into evidence, and the district court was therefore never required to rule on whether the letters were admissible. The record contains only three instances in which defense counsel brought the letters to the district court's attention.

During the cross-examination of IRS officer June Dow, the Government objected on hearsay grounds to defense counsel's attempt to elicit testimony regarding a letter Clements wrote to Dow prior to the period of the indictment. The district court held a bench conference on the objection and the possible grounds for sustaining it. After some lengthy discussion, the district court eventually requested defense counsel to "go through a trial run" of his cross-examination of Dow outside the presence of the jury. At the conclusion of the trial run, defense counsel stated, "If we handle it that way, then I'll bypass the letter entirely." The letter was never offered into evidence, and the district court never ruled it was inadmissible. ¹

During the direct examination of Clements, defense counsel sought to elicit testimony that Clements had written to Dow and notified her about a proposal by Hannover Corporation to purchase a block of CBA stock. The district court again conducted a trial run of the testimony outside the presence of the jury. At this bench conference, the district court asked to see the letter Clements wrote to Dow about the negotiations with Hannover Corporation. The district court then ruled that Clements could testify that he was trying to sell CBA in order to raise money to pay the tax owed, that he notified Dow of this fact, and that he later withdrew from the negotiations. Concerned about the prejudicial nature of the testimony, the district court, however, would not allow Clements to testify about misrepresentations or other misconduct by the promoters of Place Vendome in order to explain why he withdrew from the proposed agreement. At no point did the district court rule that the letter itself was inadmissible, and defense counsel never attempted to introduce the letter into evidence. ²

Similarly, the first time the letters were discussed, during the cross-examination of William G. Hayes, whose financial consulting firm was appointed receiver for Place Vendome, Inc., defense counsel did not offer any of the letters into evidence, and the district court did not rule any of them inadmissible. We therefore decline to reach any of Clements' arguments regarding the admissibility of these letters. ³

B

Clements argues that the district court erroneously excluded testimony as to why he believed he could not open a checking account. Clements contends on appeal he would have testified that because of his poor rating by "CheckFax"--the result of a bankruptcy and bounced checks--"it was his impression that banks would not allow him to open an account." The district court sustained an objection to defense counsel's question regarding the CheckFax rating on the basis of hearsay. Clements argues that his testimony was not hearsay because it was not being introduced "to prove the truth of the matter asserted." FED.R.EVID. 801(c).

We find that Clements has failed to preserve any error for our review. Rule 103(a)(2) of the Federal Rules of Evidence provides that error may not be predicated upon a ruling which excludes evidence unless a substantial right of the party is affected and "the substance of the evidence was made known to the court by offer or was apparent from the context within which questions were asked." FED.R.EVID. 103(a)(2). ⁴ "[T]his circuit will not even consider the propriety of the decision to exclude the evidence at issue, if no offer of proof was made at trial." United States v. Winkle, 587 F.2d 705, 710 (5th Cir.), cert. denied, 444 U.S. 827, 100 S.Ct. 51, 62 L.Ed.2d 34 (1979). Although a formal offer is not required to preserve error, the party must at least inform the trial court "what counsel intends to show by the evidence and why it should be admitted." United States v. Ballis, 28 F.3d 1399, 1406 (5th Cir.1994).

Defense counsel in this case made no attempt to inform the district court that Clements' testimony about his CheckFax rating was being sought to prove something other than the truth of his rating. See United States v. Grapp, 653 F.2d 189 (5th Cir.1981) (declining to consider a hearsay exception as a basis for the admissibility of evidence where the argument was not presented to the trial court); United States v. Wells, 525 F.2d 974, 976 (5th Cir.1976) ("Inasmuch as no suggestion was made at the time that the evidence sought would fall within some exception to the hearsay rule, appellants cannot properly contend now that it was error to sustain Government objections to the questions in issue."); cf. United States v. Gonzalez, 700 F.2d 196, 201 (5th Cir.1983) (holding that defendant had sufficiently explained basis for hearsay exception to trial judge to preserve it for review). ⁵ We therefore find that the district court did not abuse its discretion.

C

Clements next contends that the district court erred by allowing the Government to admit evidence of prior "bad acts" under Rule 404(b). ⁶ The Government elicited testimony from two witnesses that Clements was aware of the payroll tax liability at the time it arose. The first witness, William A. Clark, had worked for CBA as comptroller, with responsibility for the company's accounting and financial administration. The second witness, William P. Gaines, Jr., had worked as comptroller for Clements Properties. Both testified that they...