U.S. v. Mohney

• Decision Date: 28 January 1992
• Docket Number: No. 90-1527,90-1527
• Citation: 949 F.2d 1397
• Parties: -5938, 92-1 USTC P 50,081, 35 Fed. R. Evid. Serv. 106 UNITED STATES of America, Plaintiff-Appellee, v. Harry V. MOHNEY, Defendant-Appellant. . Cause
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1397

949 F.2d 1397

68 A.F.T.R.2d 91-5938, 92-1 USTC P 50,081,

35 Fed. R. Evid. Serv. 106

UNITED STATES of America, Plaintiff-Appellee, v. Harry V. MOHNEY, Defendant-Appellant.

No. 90-1527.

United States Court of Appeals Sixth Circuit.

Cause Argued July 18, 1991.

Decided Nov. 27, 1991.

Rehearing and Rehearing En Banc

Denied Jan. 28, 1992.

Richard Delonis, Asst. U.S. Atty., Joseph Allen, Asst. U.S. Atty. (argued and briefed), Office of U.S. Atty., Detroit, Mich., for plaintiff-appellee.

Edith S. Thomas, Detroit, Mich. (argued and briefed), for defendant-appellant.

Before RYAN and BOGGS, Circuit Judges, and DOWD, District Judge. ^*

RYAN, Circuit Judge.

Defendant Harry Mohney appeals his conviction for filing false individual income tax returns, in violation of 26 U.S.C. § 7206(1), and aiding and assisting in filing false corporate tax returns, in violation of 26 U.S.C. § 7206(2). The following issues are before us on appeal:

1. Whether prosecutorial misconduct and judicial errors deprived Mohney of a fair trial and the right to present a defense;

2. Whether the district court erred in denying the motion to suppress evidence obtained through a search warrant;

3. Whether the district court abused its discretion in rulings regarding the summary witness testimony;

4. Whether the district court erred in denying the motion for judgment of acquittal based on the insufficiency of the evidence;

5. Whether the district court erred in refusing Mohney's motion to dismiss Counts IV-VI based on a closing agreement Mohney reached with the IRS; and

6. Whether the district court impermissibly restricted Mohney's right to present a defense by refusing to permit him to examine witnesses concerning the closing agreement and by quashing subpoenas of witnesses to testify regarding the agreement?

We agree with the district court's disposition of these matters and therefore affirm.

I.

In 1966, Harry Mohney began acquiring what are euphemistically known by some as "adult entertainment" businesses which he ran as a sole proprietorship. These businesses included theaters, bookstores, peep machines, and novelty and film distributors, all featuring sex-oriented "entertainment." He organized each aspect of the business as a separate corporation. Most of these businesses had offices in Durand, Michigan. Mohney formed Modern Bookkeeping Services ("MBS") to handle and centralize the bookkeeping and tax preparation aspects of his businesses. He hired Elizabeth Scribner as the manager of MBS.

In 1984, federal agents, investigating a pattern of arsons at adult theaters, executed a search warrant of MBS headquarters. During the search, agents seized $400,000 in currency and records indicating that Mohney had not declared income collected from International Amusement's ("IA") peep machines. The income was skimmed by the route drivers who, after collecting coins from the peep machines, paid the location managers a "split" prior to recording the coins as income in the corporation's books. Based on these records, the government obtained an indictment against Mohney and three MBS employees.

Count I charged Mohney, Scribner, Thomas Tompkins (MBS' accountant), and Lee Klein (an attorney retained by MBS) with conspiring to defraud the IRS, in violation of 18 U.S.C. § 371. The district court dismissed this charge prior to trial. 723 F.Supp. 1197. ¹ The remaining counts named only Mohney. Counts II-IV charged Mohney with filing false individual income tax returns for the calendar years 1981-83, respectively, in violation of 26 U.S.C. § 7206(1). Counts V-VII charged that Mohney willfully aided and assisted in the filing of false corporate tax returns for Otis Mohney, Inc. ("OMI"), later IA, for the fiscal years 1982-84, respectively, in violation of 26 U.S.C. § 7206(2).

At trial, the government called fifty-two witnesses over a nine-week period. Many of these witnesses were former MBS employees who testified, under a grant of immunity, that Mohney was not actively involved in preparing the tax returns. Route drivers, who paid the splits to the location managers, also testified under immunity.

Key witnesses for the government were Kenneth and Barbara Goodrich, both of whom were directly involved with keeping IA's books. Pursuant to an immunity grant, the Goodriches testified concerning a two percent bonus Kenneth received, based on the revenue of certain peep machines. The calculation of this bonus showed that the peep machines produced income that Mohney had not declared.

A number of witnesses, including both Mohney's ex-wife and his former girlfriend, Gail Parmentier, testified that Mohney used cash to pay for living expenses, travel, family support, and film production. Witnesses involved in the sex-oriented film business testified that it was standard procedure to pay expenses for such films in cash. Parmentier also testified about her illicit relationship with Mohney.

The government concluded its case by presenting two summary witnesses, IRS Revenue Agents Robert Bednarczyk and Kenneth Peterson. Bednarczyk summarized the evidence regarding the corporate tax returns and presented his estimate of IA's revenue understatement on the individual returns. Peterson summarized the evidence regarding the individual returns and gave an estimate of the understatement. The district court denied a defense motion to sequester these witnesses to prevent Peterson from relying on Bednarczyk's testimony.

The government did not call MBS manager Scribner as a witness, although she had been listed on its witness list. The government also refused to grant her immunity. Mohney attempted to call her as a witness, but she filed an affidavit asserting that she would invoke her Fifth Amendment privilege if called. The government also did not call or grant immunity to accountant Tompkins or attorney Klein.

Mohney's defense focused on his claimed peripheral and infrequent involvement with the businesses. He alleges that he was prevented from effectively presenting his defense because Jack Mohney, who handled IA's revenues and splits, was deceased, and because the government refused to call the only witnesses with direct knowledge of the IA returns: Tompkins, Scribner, and Klein.

The jury found Mohney guilty on each charge. The district court sentenced him to concurrent three-year terms of imprisonment on Counts II-VI, imposed a four-year probation term on Count VII, and fined him a total of $255,000. The court also imposed a special condition of probation requiring Mohney to pay back taxes found to be due and owing by the IRS.

II.

A. Right to a Fair Trial

Mohney contends that prosecutorial misconduct, compounded by the district court's errors, denied him a fair trial. In evaluating this claim, we recall that "the touchstone of due process analysis in cases of alleged prosecutorial misconduct is the fairness of the trial, not the culpability of the prosecutor." Smith v. Phillips, 455 U.S 209, 219, 102 S.Ct. 940, 947, 71 L.Ed.2d 78 (1982).

1. Immunity

Mohney alleges that the prosecutor's refusal to grant immunity to Tompkins, Scribner, and Klein, who best understood MBS' operations and were crucial to his defense, while granting immunity to 20 other witnesses, and after indicating that the three would receive immunity and testify, amounted to prosecutorial misconduct. Mohney also protests the district court's refusal to compel the prosecution to grant immunity. The government responds that it is not obligated to grant immunity to key defense witnesses and that it properly refused to grant immunity to witnesses who were putative defendants.

The grant of immunity by a prosecutor is governed by 18 U.S.C. § 6002 et seq. This statute gives the executive branch sole authority to grant "use immunity" to witnesses. 18 U.S.C. § 6003; see also United States v. Hooks, 848 F.2d 785, 798 (7th Cir.1988). In exercising this power, the statute gives the prosecutor considerable discretion to request immunity when "in his judgment" it is "necessary to the public interest." Id. The statute does not require the government to grant a defense witness immunity. Id. at 799.

Two theories have emerged under which defendants would be entitled to a grant of immunity for prospective defense witnesses. The first theory, rejected by most courts, allows immunity for defense witnesses when necessary for an effective defense. The second theory provides immunity to remedy prosecutorial misconduct.

Under the effective defense theory, immunity is available when it is properly sought in the district court, the witness is available to testify, the proffered testimony is both essential and clearly exculpatory, and no strong governmental interests countervail against an immunity grant. Virgin Islands v. Smith, 615 F.2d 964, 972 (3d Cir.1980). Although our circuit recognized the serious problems refusal to extend immunity may present for defendants wishing to introduce essential evidence not otherwise available, we have held that federal courts do not have the inherent power to immunize witnesses whose testimony is essential to an effective defense. United States v. Pennell, 737 F.2d 521, 526-27 (6th Cir.1984), cert. denied, 469 U.S. 1158, 105 S.Ct. 906, 83 L.Ed.2d 921 (1985). We rejected this theory because it would violate separation of powers to recognize an inherent judicial right to grant immunity when immunity is a legislative creation explicitly entrusted to the executive branch. Id. at 527. Compelled judicial use immunity could also impair the subsequent prosecution of the witness. United States v. Thevis, 665 F.2d 616, 640 (5th Cir.), cert. denied, 459 U.S. 825, 103 S.Ct. 57, 74 L.Ed.2d 61 (1982). If the government will be limited to prosecuting either the defendant or the immunized witness because it will not be able to prove that the immunized testimony would not taint the prosecution of the witness, the choice of which one to prosecute should rest with the government, not with the...