U.S. v. Minarik

• Decision Date: 18 May 1989
• Docket Number: 87-5750 and 87-5751,Nos. 87-5477,s. 87-5477
• Citation: 875 F.2d 1186
• Parties: -5668, 90-1 USTC P 50,085 UNITED STATES of America, Plaintiff-Appellant (87-5477), Plaintiff-Appellee (87-5750, 87-5751), v. Bob MINARIK and Aline K. Campbell, Defendants-Appellees (87-5477), Defendants-Appellants (87-5750, 87-5751).
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1186

875 F.2d 1186

64 A.F.T.R.2d 89-5668, 90-1 USTC P 50,085

UNITED STATES of America, Plaintiff-Appellant (87-5477), Plaintiff-Appellee (87-5750, 87-5751), v. Bob MINARIK and Aline K. Campbell, Defendants-Appellees

(87-5477), Defendants-Appellants (87-5750, 87-5751).

Nos. 87-5477, 87-5750 and 87-5751.

United States Court of Appeals, Sixth Circuit.

Argued May 6, 1988.

Decided May 18, 1989.

Rehearing Denied in No. 87-5477 Aug. 7, 1989.

Joe B. Brown, U.S. Atty., William T. Warren, III, Nashville, Tenn., Michael L. Paup, Chief, Appellate Section, Tax Div., Dept. of Justice, Roger M. Olsen, William S. Rose, Jr., Robert E. Lindsay, Gail Brodfuehrer (argued), Gary R. Allen, Washington, D.C., for U.S.

Donald Dawson (argued), Asst. Public Defender, Nashville, Tenn., William A. Cohan (argued), Darold W. Killmer, Jennifer A. Greene, Denver, Colo., for defendants-appellees.

Before: MERRITT and NORRIS, Circuit Judges; and HACKETT, District Judge. ^*

MERRITT, Circuit Judge.

This criminal fraud cause is brought under the second, or "defraud," clause of 18 U.S.C. Sec. 371, rather than the first, or "offense" clause. Section 371 reads as follows:

If two or more persons conspire either to commit any offense against the United States, or to defraud the United States, or any agency thereof in any manner or for any purpose, and one or more of such persons do any act to effect the object of the conspiracy, each shall be fined not more than $10,000 or imprisoned not more than five years, or both.

If, however, the offense, the commission of which is the object of the conspiracy, is a misdemeanor only, the punishment for such conspiracy shall not exceed the maximum punishment provided for such misdemeanor.

18 U.S.C. Sec. 371 (emphasis added). The statute's first sentence has always been read in the disjunctive to create a crime of conspiracy to commit an "offense" against the United States that is to be distinguished from the crime of conspiracy to "defraud" the government. The statute is written in the disjunctive in order to criminalize two categories of conduct: conspiracies to commit offenses specifically defined elsewhere in the federal criminal code, and conspiracies to defraud the United States. The first category requires reference in the indictment to another criminal statute which defines the object of the conspiracy. The second category, the defraud clause, stands on its own without the need to refer to another statute which defines the crime.

In this case, the Government argues that District Judge Thomas Higgins erred in granting defendants' motion for judgment notwithstanding the verdict. After offering several different fraud theories during the trial, the Government on appeal comes to rest on the theory that the defendants committed fraud by concealing assets from the Internal Revenue Service after receiving notice of assessment for taxes owed.

The primary issue as formulated in the District Court was whether the Government presented evidence sufficient to support a conspiracy verdict that defendants agreed to defraud the government. Although we agree with Judge Higgins' disposition of the case on the facts, we find a more fundamental, overriding reason for this result: the "offense" and "defraud" clauses as applied to the facts of this case are mutually exclusive, and the facts proved constitute only a conspiracy under the offense clause to violate 26 U.S.C. Sec. 7206(4), which provides that any person who:

[r]emoves, deposits, or conceals, or is concerned in removing, depositing, or concealing, any goods or commodities for or in respect whereof any tax is or shall be imposed, or any property upon which levy is authorized by section 6331 [providing for levy after notice and assessment of a tax], with intent to evade or defeat the assessment or collection of any tax imposed by this title ... shall be guilty of a felony....

26 U.S.C. Sec. 7206(4).

We, therefore, affirm the judgment of the District Court. This resolution of this appeal makes it unnecessary for us to reach defendants' appeal from the District Court's denial of their motion to suppress evidence obtained under a search warrant and for return of property obtained pursuant to the warrant.

I.

The facts and procedural history of the present case are as follows. On February 22, 1985, the IRS issued three tax assessment notices to Aline Merkel Campbell, a resident of Plymouth, Indiana, for the years 1977, 1978 and 1979. All totalled, the IRS demanded payment of $108,788.15 in taxes, penalties and interest. Each notice instructed Campbell to make payment within ten days. Campbell responded that she was "not a person made liable for a tax" and that she did "not owe a tax."

On March 3, 1985, Campbell and a friend, Robert Minarik, travelled to Nashville, Tennessee to discuss with a real estate agent a house owned by Campbell which had been on the market for over a year. Dissatisfied with the agent's efforts to sell the house, Campbell hired a new agent, Robert Dixon. Campbell and Minarik met with Dixon on March 21. On March 22 Minarik wrote Dixon and specified that, if Dixon found a potential buyer for the house, Campbell would accept only cash or cashier's checks in amounts less than $5,000. The selling price was set at $47,500, and Minarik told Dixon not to contact him regarding offers lower than that amount.

Dixon found a buyer who initially offered $43,000 for the house. Campbell rejected this offer. By May 20, the buyer agreed to pay the asking price and met with Minarik and Campbell to close the sale. The buyer gave Campbell seven checks in amounts of $4,900 and one check in the amount of $3,732.18, totalling $38,032.18. The buyer assumed the mortgage for the balance.

The next day Campbell, Minarik and Dixon began cashing the checks. They visited three different branches of First American Bank, which had issued the cashier's checks. At each branch, Campbell cashed two $4,900 checks. At the fourth branch, Campbell gave the teller two $4,900 checks. The teller asked her supervisor to approve the transaction. The supervisor called the bank branch which had issued the checks in order to verify their authenticity. The supervisor was told to contact the IRS and to stall Campbell until IRS agents arrived.

When the agents arrived, a bank security guard gave them the two $4,900 checks. The agents advised Campbell and Minarik of their constitutional rights. Campbell and Minarik refused to answer any questions and asked if they could leave. The agents said they needed to search defendants' car as soon as a search warrant arrived. Minarik told Campbell to go home with Dixon while he stayed on the scene.

The agents obtained a search warrant from a federal magistrate on the basis of an agent's affidavit. The affidavit said that defendants cashed checks in amounts less than $5,000 each in an effort to frustrate the requirements of 31 U.S.C. Sec. 5322, ¹ the provision in the Bank Secrecy Act providing criminal penalties for a bank's failure to report to the IRS transactions over $10,000.

In the meantime, Campbell agreed to loan Dixon $10,000, and Dixon and his wife signed a promissory note in that amount. Dixon deposited $2,000 in his bank and put $8,000 in his safe deposit box. Dixon then drove Campbell to a restaurant. After learning where she was, IRS agents arrived at the restaurant and searched Campbell's purse, finding approximately $20,000 in cash. The next day, Dixon gave the agents the $8,000 he had put in his safe deposit box. On August 2, 1985, the IRS issued to Campbell a Notice of Levy on her assets.

The indictment that followed seemed to abandon the search warrant's theory that defendants had violated the Bank Secrecy Act. In a one-count indictment, defendants were charged with willfully conspiring "to defraud the United States by impeding, impairing, obstructing and defeating the lawful functions of the Department of the Treasury." The indictment went on: "It was a part of the said conspiracy that the defendants would conceal and continue to conceal the nature of ALINE MERKEL CAMPBELL'S business affairs regarding a residential property owned by her in Nashville, Tennessee and would conceal and continue to conceal the source and nature of her income from said business affairs." The indictment then recited overt acts allegedly undertaken in pursuance of the charged conspiracy. It concluded, "All in violation of Title 18, United States Code, Section 371."

In a bill of particulars the Government further elaborated its theory of the case. First, it stated that, by conspiring to sell Campbell's real estate for checks totalling less than $5,000 and to cash the checks in amounts less than $10,000, the defendants attempted to avoid the requirements of 31 U.S.C. Sec. 5313(a), the provision of the Bank Secrecy Act that defines the relevant prohibited conduct. ² Second, the bill of particulars stated that the reason for "attempting to conceal this transaction" was that Campbell was under notice that she owed $108,788.15 in delinquent taxes, penalties and interest, and that "the defendants were concerned that if notified of the transaction, the Internal Revenue Service would encumber the funds to satisfy the delinquent taxes"--that is to say, that the IRS would impose a levy on Campbell's assets. And third, the bill of particulars stated that, "[i]n attempting to defeat the tax collecting activities" of the IRS, the defendants' actions had "served to impede, impair, obstruct and defeat the lawful functions" of the Department of the Treasury.

The Government's theory of the case evolved throughout the period from the return of the indictment through the trial. The changing theories of the Government's case are significantly dissimilar. As District Judge Higgins noted, these changing theories presented defendants with a moving target as they attempted to prepare their defense.

The indictment charged defendants with willfully conspiring "to...