U.S. v. Steele

• Citation: 896 F.2d 998
• Decision Date: 14 February 1990
• Docket Number: No. 87-4083,87-4083
• Parties: -597, 90-1 USTC P 50,102 UNITED STATES of America, Plaintiff-Appellee, v. Robert L. STEELE, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

Page 998

896 F.2d 998

65 A.F.T.R.2d 90-597, 90-1 USTC P 50,102

UNITED STATES of America, Plaintiff-Appellee, v. Robert L. STEELE, Defendant-Appellant.

No. 87-4083.

United States Court of Appeals, Sixth Circuit.

Argued Dec. 5, 1988.

Decided Feb. 14, 1990.

Arnold Morelli (argued), Bauer, Morelli & Heyd Co. LPA, Cincinnati, Ohio, for defendant-appellant.

Robert C. Brichler (argued), Asst. U.S. Atty., Cincinnati, Ohio, for plaintiff-appellee.

Before KRUPANSKY and RYAN, Circuit Judges; and BROWN, Senior Circuit Judge.

KRUPANSKY, Circuit Judge.

Robert L. Steele (Steele), defendant-appellant, has appealed his jury conviction on four criminal counts: conspiracy to defraud the Internal Revenue Service (IRS) in violation of 18 U.S.C.A. Sec. 371; filing a false partnership income tax return in 1981 in violation of 26 U.S.C.A. Sec. 7206(1); filing a false individual income tax return in 1981 in violation of 26 U.S.C.A. Sec. 7206(1); and knowingly submitting false documents to the IRS in violation of 18 U.S.C.A. Sec. 1001.

The record disclosed the following underlying facts. ¹ Steele was a certified public accountant who had founded and was employed by his own accounting firm, R.L. Steele & Company. In May, 1981, Steele formed a partnership with his wife Mary L. Steele, Daniel A. Pelphrey, and his wife Karen Pelphrey, known as Woodland Heights, for the purpose of buying an 81.349 acre tract of real property situated in the Miami Township of Montgomery County, Ohio, which was to be subdivided into nine separate plots and then resold. On May 13, 1981, Steele, acting on behalf of the partnership, negotiated a contract for the purchase of the 81.349 acres with Rhea M. Shields (Shields), the owner of the property, under the terms of which the partnership would pay Shields $32,500 in cash and execute a mortgage in her favor for $229,000. The sale was consummated on July 21, 1981.

On July 21, 1981, immediately subsequent to acquiring the Woodland Heights property, Steele, acting on behalf of his partnership, entered into two separate land contracts to sell an 8.849 acre parcel and a 9.9 acre parcel of the Woodland Heights property to Thomas R. Duerr (Duerr). The purchase price of each parcel was $40,000 or a total of $80,000.

At the time of purchasing the two lots in 1981, Duerr confided to Steele that his total income was derived from distributing controlled substances and that, as a result, he reported only $12,000 to $15,000 per year on his individual income tax returns. Accordingly, since he had no legitimate and identifiable source of income which would justify an $80,000 land transaction and because he was fearful that the purchase of the two parcels of property would attract the attention of the IRS, Duerr suggested that the purchase price for the two lots of Woodland Heights property be recorded to inaccurately reflect a fictitious figure of $20,000 per parcel, or a total of $40,000.

As indicated, the two parcels of land were conveyed by separate land contracts. One of the conveyances identified Duerr's father, Russell R. Duerr, Jr., as the purchaser, while the second conveyance listed Thomas R. Duerr as purchaser. The recorded land contracts reflected an initial $2,000 down payment, with a balance of $18,000 due and payable, on each of the contracts, with an interest rate of 11% per annum compounded monthly and payable in monthly installments of $247.96 until the balance due on each parcel was satisfied. Upon the execution of the land contracts, Duerr paid Steele an additional amount of $40,000 in cash which represented the difference between the actual purchase price of $80,000 and the fictitious sum of $40,000 which was reflected as the purchase price on the officially recorded conveyances. Steele paid $19,500 of this cash payment to the Pelphreys as their share of the proceeds from the sale and retained $20,500 himself.

On March 22, 1982, Steele filed a United States Partnership Tax Return, Form 1065, for the taxable year 1981 on behalf of the Woodland Heights partnership. Steele did not report the $40,000 cash payment which Duerr covertly had paid the partnership on July 21, 1981 as partnership income. Steele also failed to report the $20,500 cash payment on his 1981 individual income tax return, which represented his share of the $40,000 cash payment from Duerr. In contrast, Pelphrey reported the receipt of $19,500 he had received from Steele as partnership income on his 1981 United States Individual Income Tax Return.

In August, 1985, Duerr and several other individuals were indicted on various drug charges. Simultaneously, the IRS initiated an investigation of Duerr for possible fraudulent evasion of tax liability. On November 10, 1985, IRS Special Agent Dennis Hall (Hall) contacted Steele, and requested information concerning the sale of the two Woodland Heights parcels of land to Duerr in 1981; Steele, however, was not a target of the agent's inquiry. Hall advised Steele that the government required the information concerning payments made by Duerr for the purchase of the two Woodland Heights parcels in conjunction with its investigation of Duerr for possible income tax evasion. Steele advised the IRS agent that he would comply.

Steele immediately thereafter arranged to meet with Duerr at a local restaurant, and after assuring himself that Duerr was not wired to record their conversation, asked him if he intended to enter a plea agreement and turn state's evidence. After Duerr had insisted that he had no such intent, Steele informed Duerr that an IRS agent had contacted him for information about the two Woodland Heights parcels which Duerr had purchased in 1981. Steele told Duerr that he, Steele, would confirm the fictitiously recorded sale prices, and would thereafter avoid further contact with the agent. On November 20, 1985, Steele delivered various documents to Hall relating to the property transactions between Woodland Heights and Duerr, which falsely reflected the purchase price of each of the two conveyed parcels of property as $20,000.

In December, 1985, Duerr plead guilty to one count of filing a false individual income tax statement and one count of using the telephone to facilitate a narcotics transaction and thereafter cooperated with the government. At that time, he disclosed the fraudulent land transactions which had taken place between himself and Steele in 1981. On March 24, 1987, a federal grand jury for the Southern District of Ohio issued a four-count indictment against Steele, alleging in Count I that Steele had conspired to obstruct the IRS in the computation, assessment and collection of income taxes; in Count II that Steele had filed a false partnership income tax return on behalf of the Woodland Heights partnership for the year 1981 by failing to report the full amount of the purchase price of the two lots sold to Duerr, since the return reported only a total sale price of $40,000 rather than actual price of $80,000; in Count III that Steele had filed a false individual federal income tax return for the year 1981 by failing to list the $20,500, which represented his share of the cash payment made to the partnership on July 21, 1981 by Duerr for the unrecorded balance due on the two Woodland Heights plots; and in Count IV that Steele had willfully and knowingly submitted false documents to the IRS agent concerning the true nature and amount of the land transaction between himself and Duerr.

A jury trial resulted in verdicts of guilty on all four counts charged. The district court sentenced Steele to three years imprisonment on Counts I, II, III and IV of the indictment, with the sentences to be served concurrently. Steele timely filed a notice of appeal from the final judgment entered by the district court.

On appeal, the defendant has argued that his conviction for submitting false information to the IRS, in violation of 18 U.S.C. Sec. 1001, should be reversed and dismissed as a matter of law, urging that his actions did not constitute conduct which was prohibited under section 1001. ² Steele has asserted that his false, fictitious and fraudulent statements concerning the sale of the two parcels of Woodlands Heights properties to Duerr were not actionable under 18 U.S.C. Sec. 1001 because they constituted judicially created exceptions within the "exculpatory no" doctrine. In essence, the doctrine provides that, under certain circumstances, the government may not prosecute an individual for false or fraudulent statements which were made in response to questioning initiated by the government where a truthful statement would have incriminated the defendant. United States v. Equihua-Juarez, 851 F.2d 1222, 1224 (9th Cir.1988) ("The 'exculpatory no' doctrine provides an exception to Sec. 1001. If certain requirements are met, a person may not be prosecuted under Sec. 1001 for making a false exculpatory response to government investigators."); accord United States v. Olsowy, 836 F.2d 439, 441 (9th Cir.1987) ("The exception allows a suspect who is in custody to deny involvement in the crime for which he was arrested without incurring additional criminal penalties."), cert. denied, 485 U.S. 991, 108 S.Ct. 1299, 99 L.Ed.2d 509 (1988); United States v. Tabor, 788 F.2d 714, 715 (11th Cir.1986) ("[T]he federal courts have held that in some circumstances false statements exculpatory in nature, though made to a department or agency of the United States, are not criminalized by Sec. 1001."). Although several circuits have recognized the "exculpatory no" doctrine, see, e.g., United States v. Cogdell, 844 F.2d 179, 182-85 (4th Cir.1987); United States v. Bush, 503 F.2d 813, 815 (1974), reh'g denied, 511 F.2d 1402 (5th Cir.1975); United States v. King, 613 F.2d 670, 674-75 (7th Cir.1980); United States v. Medina de Perez, 799 F.2d 540, 541-44, 544-45 (9th Cir.1986); United States v. Tabor, 788 F.2d 714, 718-19 (11th Cir.1986), it is an issue of first impression in the Sixth Circuit....