U.S. v. Martin

• Decision Date: 25 September 1985
• Docket Number: No. 84-5328,84-5328
• Citation: 773 F.2d 579
• Parties: -5922, 85-2 USTC P 9755, 19 Fed. R. Evid. Serv. 314 UNITED STATES of America, Appellee, v. George E. MARTIN, Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 579

773 F.2d 579

56 A.F.T.R.2d 85-5922, 85-2 USTC P 9755,

19 Fed. R. Evid. Serv. 314

UNITED STATES of America, Appellee, v. George E. MARTIN, Appellant.

No. 84-5328.

United States Court of Appeals Fourth Circuit.

Argued June 7, 1985.

Decided Sept. 25, 1985.

Kathleen M. Gallogly, Asst. Federal Public Defender, Baltimore, Md. (Fred Warren Bennett, Federal Public Defender, Baltimore, Md., on brief), for appellant.

Steven A. Allen, Asst. U.S. Atty., Baltimore, Md. (J. Frederick Motz, U.S. Atty., Baltimore, Md., on brief), for appellee.

Before HALL and PHILLIPS, Circuit Judges, and GORDON, United States District Judge for the Middle District of North Carolina, sitting by designation.

JAMES DICKSON PHILLIPS, Circuit Judge.

George Martin appeals his conviction on three counts of willful income tax evasion in violation of 26 U.S.C. Sec. 7201. He challenges the district court's voir dire of the jury venire, the admission of evidence concerning other illegal acts on his part, the court's instruction concerning the standard of knowledge necessary for willful tax evasion, and the court's summary of the evidence. We find no error and affirm the conviction.

I

George Martin was charged with willfully evading the payment of the full amount of income tax owing by him in the years 1977, 1978, and 1979. Martin did not contest that he understated his income on returns filed for those years and stipulated at trial to the Internal Revenue Service's computation of his income and the taxes owing thereon. ¹ The sole issue at trial was Martin's actual knowledge that the unreported income was taxable. Martin maintained in pretrial interviews that his unreported income was derived from gambling winnings and that he thought only winnings from a wager at 300 to 1 or higher odds were taxable. ²

Prior to trial Martin filed motions in limine in response to indications that the government would seek to introduce evidence that Martin's income was derived from "bookmaking" and from selling stolen chickens. Martin also sought to exclude statements made by an attorney who represented him in an IRS audit in 1979; the attorney allegedly admitted to the IRS that Martin had not reported income from selling chickens stolen from his employer, Holly Poultry.

On the first morning of trial the district court held a hearing on the motions in limine. Though the court initially believed that neither line of evidence would be properly admitted in the government's case-in-chief, it ruled that the government could inquire into the sale of chickens, without making reference to them as stolen, and into the statements by attorney Kalichman. The court made no ruling concerning evidence of Martin's bookmaking activities.

On voir dire of the jury venire, defense counsel requested a series of questions concerning jurors' gambling experience. ³ The court declined to ask the specific questions, instead questioning the jury more generally about gambling. ⁴ One potential juror asked to approach the bench and stated that he had strong opinions about taxation of gambling income. He was stricken for cause. Martin renewed his request for voir dire concerning jurors' gambling practices; the court again refused the request.

In the course of presenting its case-in-chief, the government elicited the testimony of IRS auditor Darlene Baker concerning attorney Kalichman's statements that Martin had made at least $30,000 from the sale of chickens. Virginia Ward, Martin's former mistress also testified that Martin had told her that he sold chickens and made $50,000 a year tax free. She stated that she had seen Martin leave a farmers' market with an envelope of money on several occasions.

Ms. Ward further stated that Martin occasionally played the numbers and bet on sporting events. She testified over objection that a woman had once called for Martin and that Martin had identified the woman as his employee in a bookmaking operation he was backing. Ms. Ward identified two documents as items she had taken from a nightstand in Martin's house and turned over to the IRS. A government expert witness testified over objection that the documents were bookmaking records, but handwriting exemplars indicated that Martin had not written the documents. Other bookmaking evidence included testimony from an associate of Martin's at Holly Poultry who stated that Martin had once said he had an interest in a small bookmaking operation. The government introduced other evidence that Martin was a frequent gambler.

Martin testified on his own behalf and, consistent with his pretrial interviews, denied any knowledge of the taxability of gambling income. He also denied any involvement in bookmaking or selling chickens. He presented several witnesses who testified that Martin gambled and sometimes placed bets for others but always paid out fully on any winning bet he had placed for another.

Following the court's summary of the evidence and instructions, the jury returned a verdict of guilty on all three counts and an active sentence of confinement was imposed. This appeal followed.

II

We first consider Martin's challenge to the admission of evidence that he received income during the taxable years from bookmaking activities and from selling chickens. This, he says, was "other acts" evidence which, per Rule 404(b) of the Federal Rules of Evidence, should not have been admitted because the "other acts" were not established by clear and convincing evidence. Furthermore, he contends, its admission abused the discretion conferred by Fed.R.Evid. 403 which requires a balancing of probative value against the risk of unfair prejudice. Neither contention has merit.

Rule 404(b) is concerned with the possible irrelevance and high risk of unfairness of any evidence of a person's conduct, particularly his "bad acts," other than that directly in litigation issue. It therefore makes such evidence flatly inadmissible for the most marginally relevant and manifestly unfair purpose of proving the person's "character" in order to suggest propensity. But in a concession to the reality that for "other purposes," such evidence may be highly relevant (or possibly necessary) to prove a disputed issue, it authorizes admission for such purposes, including the specific purposes of proving disputed states of mind of the person. Where such other purposes do exist, protections against improper admission nevertheless remain in Rule 104 relevancy standards and in Rule 403's requirement that probative value yet be balanced against the risk of "unfair prejudice."

Some courts, concerned with the marginal relevance of such evidence even for purposes other than to prove "character," have imposed a further judicial requirement that only "clear and convincing evidence" of the commission of such other acts may be admitted for such purposes--particularly (and perhaps only) when the purpose is to prove a disputed state of mind. See, e.g., United States v. Gustafson, 728 F.2d 1078, 1083 (8th Cir.1984). Other courts, however, have thought that the general protections afforded by Rule 104's threshold relevancy standard and Rule 403's added requirement that even relevant evidence be assessed for possible unfair prejudice are sufficient safeguards against improper uses of such evidence. See, e.g., United States v. Jardina, 747 F.2d 945, 952 (5th Cir.1984).

While we have not before directly addressed the matter in these terms, we have not imposed any "clear and convincing evidence" standard in our applications of Rule 404(b). See, e.g., United States v. Smith Paving & Grading Inc., 760 F.2d 527, 530-31 (4th Cir.1985); United States v. Tate, 715 F.2d 864, 865-66 (4th Cir.1983). Because we agree with the Fifth Circuit's approach, we decline to adopt such a requirement as urged by Martin in this case.

On this basis, we conclude that the evidence of income from bookmaking and chicken sales was properly admissible under Rule 404(b) and Rule 403. The evidence was not offered or submitted to the jury to prove Martin's "character"; but rather to prove that Martin received income that he was required to report but did not report, a requisite to his conviction under 26 U.S.C. Sec. 7201. See United States v. Mogavero, 521 F.2d 625, 627-28 (4th Cir.1975). While the amount of unreported income was stipulated, its reportability was not, and this could only be established by proof of its source. The evidence in question was manifestly relevant for this "other purpose" than proof of Martin's character. That the activity producing the income may have been illegal does not preclude admission of the evidence under Rule 404(b). See United States v. Heyward, 729 F.2d 297, 301 (4th Cir.1984); cf. United States v. Simpson, 709 F.2d 903, 907 (5th Cir.1983).

Neither can we find any abuse of the discretion imposed by Rule 403 to assess the risk of unfair prejudice before admitting relevant evidence, balancing against that risk the probative value of the evidence. Here, as indicated, the probative value was high, approaching if not reaching absolute necessity to prove an essential element of the charged offense. Given the fact that the court excluded any evidence that the chickens sold had been stolen, no possible "unfairness" attended the admission of evidence that income was realized from those sales. In the total balance, the probative value of the evidence of bookmaking income could not be thought outweighed by any countervailing "unfairness" resulting from its admission.

III

There was no error in admitting the alleged bookmaking records and the expert testimony concerning those records. The records themselves need not come within an exception to the rule against hearsay. That the documents were bookmaking records and that they were found in Martin's constructive possession were the probative facts proven by evidence of the form and location of the records; the records were not therefore offered to establish the truth of the transactions recorded...