U.S. v. Hooks

• Decision Date: 08 June 1988
• Docket Number: No. 87-1007,87-1007
• Citation: 848 F.2d 785
• Parties: -5949, 88-1 USTC P 13,771, 25 Fed. R. Evid. Serv. 1298 UNITED STATES of America, Plaintiff-Appellee, v. William R. HOOKS, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 785

848 F.2d 785

62 A.F.T.R.2d 88-5949, 88-1 USTC P 13,771,

25 Fed. R. Evid. Serv. 1298

UNITED STATES of America, Plaintiff-Appellee, v. William R. HOOKS, Defendant-Appellant.

No. 87-1007.

United States Court of Appeals, Seventh Circuit.

Argued Sept. 11, 1987.

Decided June 8, 1988.

Michael A. Pedicone, Michael A. Pedicone, Ltd., Chicago, Ill., for defendant-appellant.

Therese Cesar Garza, Asst. U.S. Atty., Anton R. Valukas, U.S. Atty., Chicago, Ill., for plaintiff-appellee.

Before WOOD and POSNER, Circuit Judges, and GRANT, Senior District Judge. ^*

GRANT, Senior District Judge.

William Hooks appeals his conviction by a jury of conspiring to defraud the United States in violation of 18 U.S.C. Sec. 371 and of aiding in the filing of a false estate tax return in violation of 26 U.S.C. Sec. 7206(2). We affirm.

I. Facts

This case concerns the unreported, untaxed assets of a decedent's estate. The underlying facts are not in dispute. Appellant Hooks' father-in-law, Floyd Loge, died in Evansville, Indiana, on September 26, 1978, leaving an $8 million estate. Loge's widow, Celia May Loge, and the Citizens National Bank of Evansville were co-executors under the will; the bank administered the estate.

Mrs. Loge and her daughter, Patricia Susan Hooks, turned over to the bank a box of stock certificates and bonds to be included in Loge's estate. When the bank asked Loge's personal broker to determine the market value of those assets, the broker discovered that he was not given ten issues of bearer bonds that had previously been a part of Loge's portfolio. The face value of those bonds was approximately $375,000.00.

The bank questioned Mrs. Loge about this discrepancy, and was told that the missing bonds could not be found. On the assurance that all of Floyd Loge's assets had been turned over, therefore, the bank prepared the federal estate tax return without including those ten bearer bonds in the estate. The return was filed on March 20, 1980.

In 1978, appellant William Hooks was a vice president of the Plasti-Drum Corporation. He asked his employer, Walter Craig, to store some bearer bonds in Craig's safe deposit box because he did not want anyone to know of his connection with the bonds. According to Craig, Hooks said that "the girls" (Mrs. Loge and Patricia Hooks) told Hooks to take the bonds from under Mr. Loge's bed. When Hooks and Craig went to the bank to put the bonds in Craig's box, they chatted with the loan officer of the bank, Patrick Richter. Hooks showed Richter the bonds. Richter told him he could convert the bonds to cash; Hooks responded that the cashing of the bonds would have to be done in such a manner that it could not be connected or traced to him.

Craig placed the bonds in his safe deposit box on October 31, 1978, and removed them, at Hooks' request, on December 1, 1978. Hooks then handed the bonds to Richter and told him to proceed with their plan for cashing them.

Richter approached bond broker Harold Finley with seven bond issues to be negotiated, and asked whether the bond proceeds could be paid by check payable to bearer or to cash. Both Finley and his office manager answered that, because the IRS required records of such transactions, payment had to be made by check to the owner of the bonds. Richter responded, "Well, we are trying to keep them out of a ten million dollar estate."

Although Finley refused to sell the bonds under those conditions, Richter eventually did sell them through Paul Gantzert, a trust officer of Union National Bank in Joliet, Illinois. All the bonds were cashed between December 1978 and March 1979. The proceeds of the bond sales were transmitted payable to the Union National Bank; Gantzert then issued checks and money orders to Richter and others. One money order for $45,000 was made payable to Green Bay Aviation Corporation as a down payment on the purchase of a corporate airplane for Plasti-Drum. The proceeds were also used to set up a new bank account and to purchase such items as two pieces of art by Chagall and a condominium.

It is undisputed that the bonds given to Richter for sale by Hooks were the ones missing from Loge's estate, and that their value was not included in that estate or reported on the estate tax return. As a result, $96,564.58 in estate tax was avoided.

Although the government considered Mrs. Loge and Mrs. Hooks to be unindicted co-conspirators who were a part of the plan to defraud the government, Hooks and Richter were the only members of the conspiracy who were indicted. The trial began August 26, 1986, and lasted thirteen days. On September 15, 1986, a jury found Hooks and Richter ¹ guilty of conspiracy to defraud the government (18 U.S.C. Sec. 371) and of aiding in the preparation of a materially false federal estate tax return (26 U.S.C. Sec. 7206(2)). ²

Hooks has appealed, contending that (1) the evidence at trial was insufficient to support either count of the conviction; (2) the court's admission of a co-conspirator's statement and exclusion of certain exculpatory hearsay statements were an abuse of its discretion; and (3) the prosecutor's refusal to offer immunity to defense witnesses denied him due process of law. For the reasons presented below, we affirm.

II. Sufficiency of the Evidence

A. 26 U.S.C. Sec. 7206(2): "Aiding and Abetting"

Section 7206(2) of the Internal Revenue Code imposes criminal sanctions against one who

willfully aids or assists in, or procures, counsels, or advises the preparation or presentation under, or in connection with any matter arising under, the internal revenue laws, of a return, affidavit, claim, or other document, which is fraudulent or is false as to any material matter, whether or not such falsity or fraud is with the knowledge or consent of the person authorized or required to present such return, affidavit, claim, or document.

26 U.S.C. Sec. 7206(2).

Appellant Hooks asserts that the government's proof showed only that he concealed and cashed the bonds, and not that he aided or assisted in the filing of a false tax return. Claiming that this prosecution involved a "rare and novel application" of 26 U.S.C. Sec. 7206(2), Hooks insists that one who is not the taxpayer, tax preparer, or supplier of information for the return cannot be charged with aiding and abetting a false estate tax filing.

The appellate standard used to determine whether a jury verdict rests on sufficient evidence is well established. If the reviewing court, considering all the evidence in the light most favorable to the prosecution, finds that "any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt," it must affirm the conviction. Jackson v. Virginia, 443 U.S. 307, 319, 99 S.Ct. 2781, 2789, 61 L.Ed.2d 560 (1979); United States v. Marrinson, 832 F.2d 1465, 1469 (7th Cir.1987); United States v. Conley, 826 F.2d 551, 556 (7th Cir.1987).

The essential elements of an offense under section 7206(2) are (1) that defendant aided, assisted, procured, counseled, advised or caused the preparation and presentation of a return; (2) that the return was fraudulent or false as to a material matter; and (3) that the act of the defendant was willful. United States v. Dahlstrom, 713 F.2d 1423, 1426-27 (9th Cir.1983), cert. denied, 466 U.S. 980, 104 S.Ct. 2363, 80 L.Ed.2d 835 (1984). See also United States v. Kouba, 822 F.2d 768, 773 (8th Cir.1987); United States v. Crooks, 804 F.2d 1441, 1448 (9th Cir.1986); United States v. Perez, 565 F.2d 1227, 1233-34 (2nd Cir.1977); United States v. LaHaye, 548 F.2d 474, 475 (3d Cir.1977). No challenge to the second criterion has been raised.

To establish the first element of the offense, aiding and abetting the filing of a false tax return, "there must exist some affirmative participation which at least encourages the perpetrator." United States v. Graham, 758 F.2d 879, 885 (3d Cir.1985), cert. denied, 474 U.S. 901, 106 S.Ct. 226, 88 L.Ed.2d 226 (1985), quoting United States v. Buttorff, 572 F.2d 619, 623 (8th Cir.), cert. denied, 437 U.S. 906, 98 S.Ct. 3095, 57 L.Ed.2d 1136 (1978).

It is well engrained in the law that one who aids or abets the commission of an act is as responsible for that act as if he committed it directly. Nye & Nissen v. United States, 336 U.S. 613, 618, 69 S.Ct. 766, 769, 93 L.Ed. 919 (1949).

In order to aid and abet another to commit a crime it is necessary that a defendant "in some sort associate himself with the venture, that he participate in it as in something that he wishes to bring about, that he seek by his action to make it succeed." L. Hand, J., in United States v. Peoni, 100 F.2d 401, 402 [2nd Cir. (1938) ].

Id. at 619, 69 S.Ct. at 769-70.

The government showed that Hooks engaged in affirmative participation to make the common goal successful: He both concealed and liquidated the bearer bonds which were purportedly assets of the Loge estate. The evidence established that Hooks received from Celia Loge the ten bonds that should have been turned over to the tax preparer; that he hid those bonds in his employer's safe deposit box; and that he later cashed the bonds with the aid of his co-defendant Patrick Richter in such a way that they could not be traced back to him or to the estate. As a result, the estate did not include those bonds, Hooks and Richter were the beneficiaries of the proceeds from the bonds, and the Loge estate tax return, which did not report approximately $375,000 in assets, was false.

It is true that there was no direct evidence tying Hooks to the false tax return involved in the substantive count. Yet, as was the case in Nye & Nissen, there is circumstantial evidence wholly adequate to support the finding of the jury that he aided and abetted in the commission of that offense. Nye & Nissen, 336 U.S. at 619, 69 S.Ct. at 769-70. Clearly the government has been defrauded within the meaning of Section 7206(2) when the scheme is calculated to defeat government collection of...