U.S. v. Brodie

• Decision Date: 21 September 1988
• Docket Number: 87-1047,Nos. 87-1046,s. 87-1046
• Citation: 858 F.2d 492
• Parties: -5674, 88-2 USTC P 9520, 26 Fed. R. Evid. Serv. 1402 UNITED STATES of America, Plaintiff-Appellee, v. Walter D. BRODIE, Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellee, v. Nancy A. BRODIE, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 492

858 F.2d 492

62 A.F.T.R.2d 88-5674, 88-2 USTC P 9520,

26 Fed. R. Evid. Serv. 1402

UNITED STATES of America, Plaintiff-Appellee, v. Walter D. BRODIE, Defendant-Appellant.

UNITED STATES of America, Plaintiff-Appellee, v. Nancy A. BRODIE, Defendant-Appellant.

Nos. 87-1046, 87-1047.

United States Court of Appeals Ninth Circuit.

Argued and Submitted June 13, 1988.

Decided Sept. 21, 1988.

Laura Lee, Billings, Mont., for defendants-appellants.

Thomas E. Flynn, Asst. U.S. Atty., Sacramento, Cal., for plaintiff-appellee.

Appeal from the United States District Court for the Eastern District of California.

Before GOODWIN, Chief Judge, and CHAMBERS and NORRIS, Circuit Judges.

GOODWIN, Chief Judge:

I.

Walter Brodie and his wife Nancy Brodie appeal their convictions under 26 U.S.C. Sec. 7203 (1982 & Supp. II 1984) for willful failure to file income tax returns. We affirm.

Walter Brodie is a doctor and Nancy Brodie is a registered nurse. Between 1970 and 1986, they operated a medical practice together in the Reno/Lake Tahoe area. Nancy Brodie worked full time as a nurse for the medical practice during 1979 and 1980 while simultaneously serving as its accountant and bookkeeper. In 1979, Taxpayers earned more than $75,873 from their medical practice. In 1980, they earned more than $116,554.

Neither of Taxpayers has filed a federal income tax return since 1971. In 1972, Taxpayers sent the Internal Revenue Service a Form 1040 on which they had written "unknown" in all the spaces calling for financial information.

In 1977, the Taxpayers were prosecuted for failing to file their federal income tax returns for the tax years 1972 and 1973. At trial, they maintained that they did not have to file returns because federal reserve notes were not legal tender. They were both convicted and each received a six-month jail sentence. Their convictions were later affirmed on appeal by this court in an unpublished memorandum.

In November 1977, Walter Brodie attended a series of tax seminars sponsored by the American Law Association (ALA). ALA representative Bruce Ripley explained to the participants that they could reduce their federal income tax liability through the establishment of off-shore trusts that he called foreign Business Trust Organizations (BTOs). BTOs were established by signing and notarizing a document called a "Contract and Declaration of Trust." In January 1978, Taxpayers sent Ralph Bowman to the Turks and Caicos Islands, where he established six BTOs. None of these BTOs ever had a bank account and none of Taxpayers' money was ever transferred to any of the BTOs.

On July 31, 1978, Taxpayers executed an additional document entitled "Contract and Declaration of Trust of Common Law Trust Organization." This document purported to set up a "trust," called the Shillinglaw Investment Company, with Taxpayers as its trustees. On September 29, 1978, Walter Brodie opened a bank account at the Valley Bank of Nevada in the name of the Shillinglaw Investment Company. Between January 1, 1979, and June 1980, Nancy Brodie deposited the receipts from their medical practice into the account. Nancy Brodie also paid their business and personal expenses directly from this account.

In October 1979, IRS agent Lee Battershell contacted Taxpayers and attempted to get information concerning their tax liability for the years 1976 through 1978. Taxpayers told her that they were protesting the payment of taxes and explained to her at length their belief that federal reserve notes were not legal tender.

Shortly after Battershell's visit, Taxpayers opened a new bank account under the name Shillinglaw Investment Company at the Kirk State Bank in Kirk, Colorado. Between July 1980 and December 1980, Nancy Brodie deposited the receipts from their medical practice into this account. She also began paying their business and personal expenses directly from this account.

II.

Taxpayers assign as the principal ground of error the alleged intrusion of prejudicial matter into the jury room. During the trial, two of the jurors notified the court that they had received in the mail a booklet titled "Citizens Rule Book." The booklet contained numerous quotations from the Bible, the United States Constitution, and the Magna Carta. The court immediately cautioned those jurors who had received the booklet not to discuss it among themselves. Jurors who had not yet received one of the booklets were told not to read it and to turn their copy over to the court.

The district court carefully questioned each of the jurors and alternates about their receipt of the booklet and their reaction to it. Only three of the jurors and one of the alternates had actually received a copy of the booklet. The alternate and one of the three jurors were eventually dismissed and did not participate in the jury deliberations. None of the jurors who actually decided the case had read the booklet. In response to questioning by the court, each juror stated that the existence of the booklet would have no effect on his or her ability to be fair and impartial in the case. Nonetheless, Taxpayers moved for a mistrial.

Although a trial court's refusal to grant a mistrial is reviewed de novo, we "remain mindful" of that court's conclusion about the effect of extrinsic material seen by jurors. See United States v. Bagnariol, 665 F.2d 877, 885 (9th Cir.1981), cert. denied, 456 U.S. 962, 102 S.Ct. 2040, 72 L.Ed.2d 487 (1982); United States v. Langford, 802 F.2d 1176, 1180 (9th Cir.1986), cert. denied, --- U.S. ----, 107 S.Ct. 3235, 97 L.Ed.2d 740 (1987). Taxpayers are entitled to a new trial if there is a reasonable possibility that the extrinsic material could have tainted the verdict. Langford, 802 F.2d at 1180; Bagnariol, 665 F.2d at 887 n. 6; United States v. Bagley, 641 F.2d 1235, 1240 (9th Cir.), cert. denied, 454 U.S. 942, 102 S.Ct. 480, 70 L.Ed.2d 251 (1981); United States v. Vasquez, 597 F.2d 192, 193 (9th Cir.1979). On appeal, we will not disturb a jury verdict when extrinsic material relates only to issues not material to the guilt or innocence of the defendant. Bagnariol, 665 F.2d at 885.

The extrinsic material, the "Citizens Rule Book," did not have the possibility of affecting the verdict. Counsel for both parties thoroughly questioned each of the jurors about any effect the booklet may have had on them. Each of the jurors stated that the booklet had no effect on their ability to be fair and impartial. More importantly, the booklet made no reference to any issue at the trial, and none of the jurors who decided the case had ever read the booklet. The nexus between the extraneous material and the verdict was not direct and rational, as required by Bagnariol. See Marino v. Vasquez, 812 F.2d 499, 506-07 (9th Cir.1987). Thus, the extrinsic material could not have tainted the verdict. See United States v. Steele, 785 F.2d 743, 746-49 (9th Cir.1986). Because there is nothing to support Taxpayers allegation of prejudicial jury tampering except speculation and imagination, the trial court properly denied Taxpayers' motion for mistrial. ¹

III.

The next alleged error is assigned to the trial court's decision to exclude expert testimony. We review the exclusion of opinion evidence for manifest error or an abuse of discretion. United States v. Binder, 769 F.2d 595, 601 (9th Cir.1985); United States v. Solomon, 753 F.2d 1522, 1525 (9th Cir.1985). We will reverse a conviction based upon the erroneous exclusion of expert testimony only if the exclusion more likely than not materially affected the verdict. See Binder, 769 F.2d at 601-02; United States v. Valle-Valdez, 554 F.2d 911, 916 (9th Cir.1977).

In assessing the admissibility of expert testimony, the probative value of the evidence must be weighed against its prejudicial effect. See Fed.R.Evid. 403. This assessment lies in the discretion of the trial court. Solomon, 753 F.2d at 1525; United States v. Awkard, 597 F.2d 667, 669 (9th Cir.), cert. denied, 444 U.S. 885, 100 S.Ct. 179, 62 L.Ed.2d 116 (1979). The district court therefore has broad discretion to conclude that, on balance, the jury would not have benefited from admission of expert testimony. See United States v. Navarro-Varelas, 541 F.2d 1331, 1334 (9th Cir.1976), cert. denied, 429 U.S. 1045, 97 S.Ct. 751, 50 L.Ed.2d 759 (1977).

Taxpayers attempted to call an accountant to testify that he had examined their business records for 1979 and 1980 and had determined that they owed no taxes for 1979 and less than $1,000 in taxes for 1980. This ultimate conclusion was the very question the jury had to answer from the law and the evidence. It was not subject to a so-called expert's opinion.

Taxpayers primarily rely on United States v. Walker, 479 F.2d 407 (9th Cir.1973) and United States v. Parshall, 757 F.2d 211 (8th Cir.1985). Walker, 479 F.2d at 408-09, which involved a proffer of proof of an increase of $248,241 in taxpayer's net worth over a nine-year period, simply does not stand for the proposition cited by Taxpayers. Parshall is also distinguishable. There, the government introduced evidence that the taxpayer owed a substantial amount in taxes in order to show that taxpayer's failure to file income tax returns was willful. See id. at 213-14. The court held admissible in order to rebut the government's proffer expert testimony that the taxpayer's tax liability was much less than the government's estimate and that in fact the taxpayer was owed a tax refund. Id. Because the government here made no such proffer, Parshall has no bearing on this case. ²

The court correctly excluded the expert testimony, stating that the effect would have been "[t]o use that [testimony] to extrapolate to another position, and that is, the [Taxpayers] believed they didn't have to pay taxes and that they were right in their belief...." The court's exclusion here accords with Fed.R.Evid. 704(b), which directs that "[n]o expert witness testifying with respect to the mental state or...