State v. Faul, Cr. N

• Decision Date: 19 December 1980
• Docket Number: Cr. N
• Citation: 300 N.W.2d 827
• Parties: STATE of North Dakota, Plaintiff and Appellee, v. Scott W. FAUL, Defendant and Appellant. o. 733.
• Court: North Dakota Supreme Court

Page 827

300 N.W.2d 827

STATE of North Dakota, Plaintiff and Appellee, v. Scott W. FAUL, Defendant and Appellant.

Cr. No. 733.

Supreme Court of North Dakota.

Dec. 19, 1980.

Robert W. Wirtz, Sp. Asst. Atty. Gen., State Tax Dept., Bismarck, and Gail H. Hagerty, Asst. State's Atty., Bismarck, for plaintiff and appellee; argued by Gail H. Hagerty.

Bickle, Coles & Snyder, Bismarck, for defendant and appellant; argued by James J. Coles, Bismarck.

SAND, Justice.

The defendant Scott Faul (Faul) appealed a county court with increased jurisdiction judgment of conviction resulting from a jury verdict finding him guilty of two counts of failure to file tax returns as required by § 57-38-45, North Dakota Century Code, for the years 1977 and 1978.

Faul had filed income tax returns (Form 37) with the State Tax Department for the years 1977 and 1978. Several spaces on both forms contained the notation "Object: Self-Incrimination." ¹ The tax department informed him that Form 37 for these years, as he had completed them, did not constitute valid legal returns and that possible action against him was contemplated by the tax department. Faul did not take any action to amend his return, and the Burleigh County State's attorney filed a criminal complaint charging Faul with failure to make a tax return for the years 1977 and 1978. At the trial Faul insisted on being his own counsel and acted pro se. ² A jury found Faul guilty on two counts, and the court sentenced him to be confined in the county jail for a term of sixty days on each count and to pay a fine of $1,000 on each count. The court suspended the jail sentence and $300 on each fine on the condition that Faul commit no violations of criminal law or tax law for one year and that Faul comply with the filing requirements for 1977, 1978, and 1979 no later than 15 July 1980, and pay the fine by 2 June 1980. Faul appealed to this court and was represented by counsel. We affirm.

The privilege against self-incrimination must be validly exercised in order to properly claim it in connection with an income tax return. Garner v. United States, 424 U.S. 648, 96 S.Ct. 1178, 47 L.Ed.2d 370 (1976); United States v. Sullivan, 274 U.S. 259, 47 S.Ct. 607, 71 L.Ed. 1037 (1927). The privilege must be raised in the return, Garner v. United States, supra, and it may be raised only in response to specific questions rather than a blanket response to all questions asked in the return. United States v. Sullivan, supra. The privilege is not a defense to a prosecution for not filing any return. United States v. Sullivan, supra.

The contention that a taxpayer may enter an objection or some other equivalent statement on the ground that the answers on the return or the completion of the spaces in a return would tend to incriminate the taxpayer has been rejected as being without proper foundation when the questions on the tax form do not suggest that the response would be incriminating. United States v. Neff, 615 F.2d 1235 (9th Cir. 1980), cert. denied, --- U.S. ----, 100 S.Ct. 3018, 65 L.Ed.2d 1117 (1980).

In United States v. Carlson, 617 F.2d 518 (9th Cir. 1980), cert. denied, --- U.S. ----, 101 S.Ct. 564, 66 L.Ed.2d --- (1980) ³ the court addressed the question whether or not a person may claim a fifth amendment privilege on his tax returns to avoid incriminating himself for claiming too many withholding exemptions. The Carlson court recognized that a conviction cannot be based upon a valid exercise of the privilege against self-incrimination when the privilege is claimed to avoid self-incrimination other than under the tax laws. The Carlson court affirmed a conviction of willful failure to file an income tax return on the grounds that the record clearly disclosed that the defendant was a tax protester who attempted to frustrate the tax laws by the use of the fifth amendment. The court specifically concluded by saying:

"We therefore hold that an individual who seeks to frustrate the tax laws by claiming too many withholding exemptions, with an eye to covering that crime and evading the tax return requirements by the assertion of the Fifth Amendment is not entitled to the amendment's protection." United States v. Carlson, 617 F.2d 518, 523.

But in the instant case there was no showing that the privilege was exercised because of any other law, and more specifically the defendant Faul maintained that he was not in violation of any law but was innocent.

In Dorgan v. Miller, 297 N.W.2d 418 (N.D.1980), and Dorgan v. Kouba, 274 N.W.2d 167 (N.D.1978), we said that merely filing a tax form or a form not containing sufficient information ⁴ from which the tax liability can be determined does not constitute filing a tax return within the meaning of the tax laws. E. g., United States v. Porth, 426 F.2d 519 (10th Cir. 1970), cert. denied, 400 U.S. 824, 91 S.Ct. 47, 27 L.Ed.2d 53 (1970). ⁵ In Miller and Kouba a mandamus action was involved, whereas here we have a criminal action, but that does not alter the basic concept as to what constitutes a valid tax return.

The form (37) filed by Faul for the years 1977 and 1978 with wholesale objections in the various spaces does not constitute a return within the meaning of the tax laws. In effect, Faul did not file a return as required by law; thus, the rationale of Sullivan, which states that the fifth amendment will never justify a complete failure to file a return, applies to this case.

Faul asserts that the trial court erred in excluding the evidence which he contends would establish the validity of the assertion of his fifth amendment privilege by entering "Object: Self-Incrimination" in the various places in the tax return. He contends that making the entries in the tax returns spaces was the equivalent of asserting his fifth amendment privilege.

Faul also contends that the trial court erred in denying him the right to make an offer of proof as to matters not admitted into evidence.

Faul relies heavily on language in Dorgan v. Kouba, supra, and United States v. Neff, supra, to support his assertions.

In Kouba we said that it is within the court's province to determine whether or not a response is incriminating; that the privilege is valid if the danger of incrimination is "real and appreciable"; ⁶ that it must appear that the answer may disclose a "necessary and essential link" in the chain of evidence to prosecute the taxpayer of a crime; and that the taxpayer must make some showing as to questions "neutral on their face and directed at the public at large" to apprise the court of the circumstances upon which the privilege is based. ⁷

In determining whether or not a "real and appreciable" danger of incrimination exists, the "implications of the question(s) in the setting in which (they are) asked" must be examined. Hoffman v. United States, 341 U.S. 479, 486, 71 S.Ct. 814, 818, 95 L.Ed. 1118, 1124 (1951).

Thus, in Kouba we evaluated the setting in which the questions were asked and held that there was no "real and appreciable" danger requiring fifth amendment protection.

In United States v. Neff, supra, the Ninth Circuit Court of Appeals used fifth amendment analysis rather than relying upon the definition of a tax return to decide a case similar to the instant case. ⁸ The Neff court used language similar to that contained in Kouba and found that the "whole circumstances (were) 'innocuous and thus unprotected absent some positive disclosure by the witness of its hidden dangers.' " United States v. Neff, supra at 1240.

With these cases in mind, Faul asserts that because any fifth amendment claim hinges on the circumstances of each case, the trial court should have admitted evidence relating to Faul's fears of self-incrimination and it was reversible error for the trial court to deny him an offer of proof concerning that evidence.

Faul primarily relied upon existing circumstances and facts to justify the exercise of his privilege against self-incrimination. Faul operated a diversified farm consisting primarily of producing grain and milk on approximately 1,000 acres of land. In 1976, he became a member of the Board of Directors of the North Dakota Milk Producers Association (Board). He also became president of the Drake Milk Producers Association, a local organization. As a member of the Board, he became involved in opposing certain proposed legislation dealing with the dairy industry. He, along with others, received word that they should drop their opposition to the legislation and "not rock the boat." In February of 1977 he attended a meeting of the Drake Milk Producers Association at which time there was some discussion regarding an investigation of the Drake Coop Creamery. The investigation supposedly was looking into possible criminal activity at the creamery. The Drake Milk Producers Association and the Drake Coop Creamery are not one and the same but they do have some connection. The creamery purchases some of the dairy products produced by members of the Drake Milk Producers Association.

Faul was concerned that he could become falsely implicated due to his connection with the creamery. An audit was performed at the Drake Coop Creamery which disclosed that Faul was entitled to an additional $442.16. Faul feared that all of this would tend to implicate him in certain criminal activities, despite his innocence. Based upon what he believed to be the law after he had studied certain cases, he entered "Object: Self-Incrimination" in the various spaces in the tax return, including the space provided for "chief occupation."

With reference to the space in Form 37 for "chief occupation" Faul initially failed to establish any reasonable grounds or facts why the occupation of being a farmer would tend to incriminate him or why any income received from farming or dairying activities would tend to incriminate him. Neither are we aware of any such grounds. Furthermore, Faul, at his trial, testified that he was a farmer involved in dairying...