U.S. v. Schiff, 1425

• Citation: 801 F.2d 108
• Decision Date: 15 September 1986
• Docket Number: D,No. 1425,1425
• Parties: -5795, 86-2 USTC P 9684 UNITED STATES of America, Appellee, v. Irwin A. SCHIFF, Defendant-Appellant. ocket 86-1030. Second Circuit
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Page 108

801 F.2d 108

58 A.F.T.R.2d 86-5795, 86-2 USTC P 9684

UNITED STATES of America, Appellee, v. Irwin A. SCHIFF, Defendant-Appellant.

No. 1425, Docket 86-1030.

United States Court of Appeals,Second Circuit.

Argued June 18, 1986.

Decided Sept. 15, 1986.

John R. Williams, New Haven, Conn. (Williams and Wise, New Haven, Conn., of counsel), for defendant-appellant.

Michael Hartmere, Asst. U.S. Atty., Dist. of Conn., New Haven, Conn. (Stanley A. Twardy, Jr., U.S. Atty., Dist. of Conn., New Haven, Conn., of counsel), for appellee.

Before MESKILL and KEARSE, Circuit Judges, and METZNER, ^* District Judge.

MESKILL, Circuit Judge:

Irwin A. Schiff appeals from a judgment of the United States District Court for the District of Connecticut, Dorsey, J., convicting him after a jury trial of three counts of attempted tax evasion in violation of 26 U.S.C. Sec. 7201 (1982) and one count of willful failure to file a corporate tax return in violation of 26 U.S.C. Sec. 7203 (1982). Schiff claims several errors in the district court's charge to the jury. We conclude that these claims are without merit and affirm the judgment of the district court.

BACKGROUND

Although the trial below was lengthy, lasting from October 1 through October 25, 1985, most of the facts are uncontested. Therefore, we limit our discussion of them.

Appellant Schiff is an author and lecturer who describes himself as a "professional tax resister." J.App. at 122. The jacket of one of his books, entitled How Anyone Can Stop Paying Income Taxes, describes him as "an economist and constitutionalist [and] America's leading untax expert." Supp. to J.App. Schiff's brief on appeal modestly states that "[w]ith the possible exception of H. & R. Block, Irwin Schiff may well be the most well known and highly publicized speaker and writer on the income tax in America," having appeared on major radio and television programs, having been the subject of "hundreds" of newspaper and magazine articles and having authored numerous books and articles on the income tax. Br. of Defendant-Appellant at 2. Schiff does not dispute that he earned income during calendar years 1980, 1981 and 1982, that he failed to file federal income tax returns and did not pay income taxes for those years. He also does not dispute that Irwin A. Schiff, Inc., of which he was president, failed to file a tax return for its fiscal year ending in 1981.

Schiff was charged by an indictment filed April 3, 1985, with three counts of attempted tax evasion relating to income earned and taxes owed for calendar years 1980-82 and one count of willful failure to file a tax return for Irwin A. Schiff, Inc., for its fiscal year ending in 1981. 26 U.S.C. Secs. 7201, 7203 (1982). The first three counts of the indictment charged that Schiff had "knowingly attempt[ed] to evade and defeat" the income tax owed by him for each of the three years in question by failing to make tax returns, failing to pay the income tax he owed and concealing and attempting to conceal his income. J.App. at 4-6.

Because of the lack of dispute over Schiff's failure to file tax returns or pay taxes, both the government and Schiff concentrated at trial on Schiff's criminal intent or lack of it and the question of whether he had concealed or attempted to conceal income. Schiff did not testify. The government sought to prove Schiff's evasive intent and knowledge of the tax law through his own writings, tapes of his speeches, evidence of his dealings with banks in Switzerland and the Cayman Islands and evidence that Schiff used and recommended the use of special pens with nonreproducible ink in order to thwart Internal Revenue Service attempts to photocopy financial records. The government also tried to prove Schiff's knowledge of the law by evidence of his prior experiences with the federal courts. A portion of Judge T. Emmet Clarie's jury instructions during Schiff's 1980 trial for failure to file tax returns was read to the jury, as was a portion of Judge Ellen Bree Burns' 1981 opinion in a civil case involving Schiff rejecting some of Schiff's constitutional arguments against the income tax. Schiff's defense consisted primarily of evidence of advice given to him on tax matters by various attorneys and an accountant.

After fourteen days of testimony, the case went to the jury on the afternoon of October 23, 1985. The jury asked several questions. In response to one of them during the first afternoon of deliberations, the court sent a written copy of its complete jury charge into the jury room as a court exhibit with the consent of counsel. On October 25, the jury reached a verdict of guilty on all four counts of the indictment. Schiff appeals.

DISCUSSION

Schiff's claims on appeal are limited to asserted errors in the trial court's jury instructions. He argues that the court's instructions erroneously imposed an objective test rather than a subjective test on his good faith defense, effectively amended the indictment to permit a conviction based on uncharged conduct and permitted Schiff to be convicted by a non-unanimous jury. We discuss each claim in turn.

1. Good Faith Defense

In order to convict Schiff of attempted tax evasion in violation of 26 U.S.C. Sec. 7201, the government had to prove that Schiff had willfully taken steps to evade or defeat his income tax obligation. "[W]illfulness in this context simply means a voluntary, intentional violation of a known legal duty." United States v. Pomponio, 429 U.S. 10, 12, 97 S.Ct. 22, 23, 50 L.Ed.2d 12 (1976) (per curiam); United States v. Bishop, 412 U.S. 346, 360, 93 S.Ct. 2008, 2017, 36 L.Ed.2d 941 (1973). In Bishop, the Supreme Court explained the rationale for requiring willfulness as a predicate to criminal liability for tax evasion.

In our complex tax system, uncertainty often arises even among taxpayers who earnestly wish to follow the law. The Court has said, "It is not the purpose of the law to penalize frank difference of opinion or innocent errors made despite the exercise of reasonable care." Spies [v. United States ], 317 U.S. [492,] 496, 63 S.Ct. 364, 366, 87 L.Ed. 418 [1943]. Degrees of negligence give rise in the tax system to civil penalties. The requirement of an offense committed "willfully" is not met, therefore, if a taxpayer has relied in good faith on a prior decision of this Court.... The Court's consistent interpretation of the word "willfully" to require an element of mens rea implements the pervasive intent of Congress to construct penalties that separate the purposeful tax violator from the well-meaning, but easily confused, mass of taxpayers.

412 U.S. at 360-61, 93 S.Ct. at 2017-18 (citations omitted). Schiff's defense at trial was that he believed in good faith that the income tax was voluntary and that he was, therefore, not required to pay the tax.

In charging the jury on the good faith defense to the element of willfulness, the district court said in part:

In considering the Defendant's claim that in good faith he did not believe the J.App. at 265 (emphasis added). ¹ Schiff failed to object to the italicized portion of the charge when it was initially given to the jury or when it was included in the written charge that was sent into the jury room. He now argues that the italicized language was plain error because it imposed an objective rather than a subjective test of good faith. For the following reasons, we conclude that the district court's language, taken in context, did not impose an objective test and, even if it did, it was not erroneous.

                law required him to file returns or to pay taxes on income, the question is, whether or not he truly held such a belief;  and whether there was a basis on which he could have held such a belief.    Your determination of these questions must be made after examining all of the evidence
                

The willfulness of one accused of tax crimes may be proved by circumstantial evidence. United States v. Schiff, 612 F.2d 73, 77-78 (2d Cir.1979); see United States v. MacKenzie, 777 F.2d 811, 818 (2d Cir.1985) (defendants' conduct and educational background were evidence of their awareness that they were violating tax law). As a practical matter, such evidence is likely to be the only type available to support or rebut a good faith defense other than the word of the defendant himself. If the defendant's mere claim of good faith is not to be the end of the case, a trier of fact must evaluate the "basis" for that claim in order to determine whether the claim is genuine. The district court here was properly reminding the jury of that obligation. This portion of the charge did not, as Schiff argues, require the jury to determine objectively whether a reasonable person could have believed that the income tax was voluntary. By its terms, the charge restricted the inquiry to whether Schiff himself actually held such a belief, i.e., whether his claim of such belief was credible.

Schiff's tardy complaints about the instruction to evaluate the basis for his good faith claim are weakened by timely objections he made to other portions of the charge. Schiff excepted to the court's charge on the Privacy Act, arguing that the Act "could provide a sufficient basis for the jury to conclude that the Defendant acted in good faith." J.App. at 285 (emphasis added). He also asserted that conclusive weight should be given to a finding of reliance on the advice of an accountant or attorney, in effect arguing that such reliance should be a sufficient basis for his good faith defense as a matter of law. Thus, Schiff recognizes, as we do, that claims of good faith cannot be evaluated in a vacuum.

Moreover, Schiff's brief on appeal points with approval to a charge quoted in a footnote While we conclude that the "basis" instruction did not impose an objective reasonableness test on Schiff's assertion of good faith, we also conclude that even if such a test had been imposed by the instruction, that would not have been error. We recently...