933 F.2d 1313 (6th Cir. 1991), 87-4083, United States v. Steele

Docket Nº:87-4083.
Citation:933 F.2d 1313
Party Name:UNITED STATES of America, Plaintiff-Appellee, v. Robert L. STEELE, Defendant-Appellant.
Case Date:May 21, 1991
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit
 
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933 F.2d 1313 (6th Cir. 1991)

UNITED STATES of America, Plaintiff-Appellee,

v.

Robert L. STEELE, Defendant-Appellant.

No. 87-4083.

United States Court of Appeals, Sixth Circuit

May 21, 1991

Reargued Dec. 5, 1990.

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

Robert C. Brichler, Asst. U.S. Atty., Cincinnati, Ohio, James A. Braton (argued), Robert E. Lindsay, Shirley D. Peterson, Washington, D.C., for plaintiff-appellee.

Before MERRITT, Chief Judge, KEITH, KENNEDY, MARTIN, JONES, KRUPANSKY, MILBURN, GUY, NELSON, RYAN, BOGGS, NORRIS, and SUHRHEINRICH, Circuit Judges, and BROWN and WELLFORD [*], Senior Circuit Judges.

KENNEDY, Circuit Judge.

The issue presented to the en banc court is whether the submission of false documents to the Internal Revenue Service by defendant, who was not a suspect, in response to an inquiry by an IRS agent during the course of a criminal investigation, is a prosecutable offense under 18 U.S.C. Sec. 1001. Defendant urges us to adopt the judicially-created "exculpatory no" exception adopted by several other circuits to limit the application of section 1001. We decline to apply the doctrine to the facts in this case and find it unnecessary to decide whether the doctrine is viable in other circumstances.

I.

A.

Robert Steele ("defendant") was indicted and subsequently convicted on four counts: conspiring to defraud the Internal Revenue Service ("IRS") in violation of 18 U.S.C. Sec. 371; filing a false 1981 U.S. Partnership Income Tax Return in violation of 26 U.S.C. Sec. 7206; filing a false 1981 Form 1040 Individual Income Tax Return in violation of 26 U.S.C. Sec. 7206(1); and knowingly submitting false documents to the IRS in violation of 18 U.S.C. Sec. 1001. On appeal, this Court

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affirmed defendant's convictions on the first three counts but reversed his conviction based on 18 U.S.C. Sec. 1001. United States v. Steele, 896 F.2d 998 (6th Cir.1990). This Court then granted the government's petition for a rehearing en banc thus vacating the opinion and judgment of the appellate panel. However, no member of the en banc court has any disagreement with the panel's affirmance of the first three counts. The Court therefore adopts the panel's opinion on the issues related to those counts.

B.

Defendant, a certified public accountant and member of an accounting firm, devoted most of his time to various business interests, including construction, oil and gas exploration, motel operations and residential developments. In May 1981, defendant formed a partnership, called Woodland Heights, with his wife, his accounting partner, Danny Pelphrey, and Pelphrey's wife. The partnership acquired a tract of land for the purpose of subdividing it and selling the parcels. In June 1981, defendant met with Thomas Duerr ("Duerr") to discuss the sale of two parcels of the subdivided tract. Duerr agreed to pay defendant $40,000 per parcel, but noted that this would create problems with the IRS because he derived his income illegally--selling controlled substances--and his income tax returns showed an annual income between $12,000 and $15,000. In light of this problem, defendant and Duerr agreed upon a purchase price of $40,000 per parcel, but the sales documents were drafted to reflect a purchase price of $20,000 per parcel. None of these documents revealed the full $80,000 purchase price for the parcels. Duerr made payments according to the terms of these sales contracts and paid defendant $40,000 cash. Defendant paid $19,500 of this cash payment to the Pelphreys as their share of the proceeds from the sale and kept $20,500 himself.

On March 22, 1982, defendant filed a U.S. Partnership Tax Return for the taxable year 1981 on behalf of the Woodland Heights partnership. Defendant did not report the $40,000 cash payment from Duerr as partnership income. Nor did defendant report his share of the $40,000 payment on his personal income tax return.

In August 1985, Duerr was indicted on various drug charges. At this time the IRS was investigating Duerr for possible fraudulent evasion of tax liability. IRS Special Agent Hall ("Hall") called defendant on two occasions. On the second occasion in early November, Hall explained the nature of the investigation against Duerr and requested information concerning the purchase of the two parcels of land by Duerr from Woodland Heights in 1981. Defendant was not a suspect in this investigation. 1 Defendant told the agent that he had to go out of town but that he would send Hall copies of all documents relating to the sale of this property.

Immediately thereafter, defendant met with Duerr. Defendant described Hall's visit and requests, and sought assurances from Duerr that he would represent that the transaction occurred as reflected in the false sales documents. Upon receiving these assurances from Duerr, defendant told Duerr that he would send the documents to Hall and thereafter avoid contact with the agent. Defendant thereupon sent the documents which are the basis of the section 1001 count to Hall.

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Duerr subsequently cooperated with the government, disclosing the fraudulent nature of the land transactions conducted between himself and defendant. Had Duerr not supplied this information it was unlikely that the IRS would have learned the true amount of the transaction. 2

II.

  1. Section 1001

    The language of section 1001 is the starting point for our analysis. See United States v. Ron Pair Enters., Inc., 489 U.S. 235, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989). Any limitation imposed on the application of this section--whether we label it an "exculpatory no" exception or something else--must result from an analysis of the statutory language and legislative history in light of accepted canons of statutory construction. The plain meaning of the statute controls our interpretation, "except in the 'rare cases [in which] the literal application of a statute will produce a result demonstrably at odds with the intentions of its drafters,' " id. at 242, 109 S.Ct. at 1031 (quoting Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 571, 102 S.Ct. 3245, 3250, 73 L.Ed.2d 973 (1982)); Bradley v. Austin, 841 F.2d 1288 (6th Cir.1988), or when the statutory language is ambiguous, Blum v. Stenson, 465 U.S. 886, 104 S.Ct. 1541, 79 L.Ed.2d 891 (1984). We are also mindful that this is a criminal statute, and as such, it will be strictly confined within the fair meaning of its terms. But see United States v. Bramblett, 348 U.S. 503, 510, 75 S.Ct. 504, 508, 99 L.Ed. 594 (1955) (stating that this canon of construction "does not mean that every criminal statute must be given the narrowest possible meaning in complete disregard of the purpose of the legislature").

    18 U.S.C. Sec. 1001 states:

    Whoever, in any matter within the jurisdiction of any department or agency of the United States knowingly and willfully falsifies, conceals or covers up by any trick, scheme, or device a material fact, or makes any false, fictitious or fraudulent statements or representations, or makes or uses any false writing or document knowing the same to contain any false, fictitious or fraudulent statement or entry, shall be fined not more than $10,000 or imprisoned not more than five years, or both.

    The Supreme Court has noted that this language is broad--applying to any matter within any department or agency--and has rejected the limitation adopted by the Eighth Circuit to exclude statements made to the FBI because the FBI lacked jurisdiction to dispose of the problem. United States v. Rodgers, 466 U.S. 475, 104 S.Ct. 1942, 80 L.Ed.2d 492 (1984). The Eighth Circuit concluded that the phrase " 'within the jurisdiction' " referred to " 'the power to make final or binding determinations.' " Id. at 477, 104 S.Ct. at 1945 (quoting Friedman v. United States, 374 F.2d 363 (8th Cir.1967)). The FBI therefore lacked jurisdiction because it had " 'no power to adjudicate rights, establish binding regulations, compel the action or finally dispose of the problem giving rise to the inquiry.' " Id. at 478 (quoting Friedman, 374 F.2d at 368). The Supreme Court disagreed with this construction and concluded that this term should not be given " 'a narrow or technical meaning.' " Id. 466 U.S. at 480, 104 S.Ct. at 1946 (quoting Bryson v. United States, 396 U.S. 64, 70, 90 S.Ct. 355, 359, 24 L.Ed.2d 264 (1969)). The "jurisdiction" of section 1001 is co-extensive with the statutory

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    basis for the authority of an agency--in the case of Rodgers, the FBI--to conduct an investigation triggered by a defendant's false statements. Such a construction is in keeping with Congress' purpose to protect the "myriad governmental activities." Id. 3 Accordingly, the language of section 1001 and Rodgers do not limit the scope of this statute; rather, both counsel for a broad reading. Id. at 484, 104 S.Ct. at 1948 (stating that "[r]esolution of the pros and cons of whether a statute should sweep broadly or narrowly is for Congress").

    The legislative history does not communicate a congressional intent to restrict the scope of section 1001. The origin of section 1001 is discussed in Bramblett, 348 U.S. at 503, 75 S.Ct. at 505. Its predecessor originally covered false claims against the government by military personnel. False statements made for the purpose of obtaining the approval of such claims were also prohibited. Later, the statute was extended to include all false claims made for the purpose of cheating or defrauding the government of the United States as well as false statements for obtaining payment of a false claim. In 1934, the Secretary of the Interior sought an amendment so that he could prosecute "hot oil" frauds--frauds...

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