U.S. v. Aitken, 84-1614

• Decision Date: 25 February 1985
• Docket Number: No. 84-1614,84-1614
• Parties: -997, 85-1 USTC P 9209 UNITED STATES of America, Appellee, v. Richard A. AITKEN, Defendant, Appellant.
• Court: U.S. Court of Appeals — First Circuit

Page 188

755 F.2d 188

55 A.F.T.R.2d 85-997, 85-1 USTC P 9209

UNITED STATES of America, Appellee, v. Richard A. AITKEN, Defendant, Appellant.

No. 84-1614.

United States Court of Appeals First Circuit.

Argued Dec. 3, 1984.

Decided Feb. 25, 1985.

Michael W. Reilly, Boston, Mass., with whom Haussermann, Davison & Shattuck, Boston, Mass., was on brief for defendant, appellant.

William F. Weld, U.S. Atty., Boston, Mass., was on brief for appellee.

Before COFFIN and BREYER, Circuit Judges, and MALETZ, ^* Senior Judge.

COFFIN, Circuit Judge.

In this appeal we deal with the mental state required to be proven before one is convicted of violating certain Internal Revenue Code filing requirements. Specifically, we are asked to determine whether "wilfulness" means a subjective intent to disobey the tax laws or merely the absence of what a jury would consider an objectively reasonable ground for failure to comply.

Appellant, a veteran fireman in the town of Rockland, Massachusetts, was charged with wilfully failing to file tax returns for 1979, 1980, and 1981, in violation of 26 U.S.C. Sec. 7203, and with wilfully filing false withholding exemption certificates for 1981 and 1982, in violation of 26 U.S.C. Sec. 7205. Shortly before trial was scheduled to begin, counsel for appellant, who had yet to try his first case, sought unsuccessfully to withdraw from the case because of differences in defense strategy. A two-day jury trial commenced eight days later, counsel having unsuccessfully renewed his motion to withdraw. The government's case was presented through four witnesses. To prove wilfulness the government showed that appellant had filed income tax returns for twelve years, 1966 to 1977; that he then had failed to file returns for four successive years, notwithstanding the receipt of W-2 wage and tax statements from the town; and that an Internal Revenue Agent had explained that appellant's reasons for not filing had been authoritatively discredited and that he had an obligation to file. Appellant testified that he did not believe that his wages constituted income because they involved an exchange of time for money, with no gain for him; that, although he had read widely, searched the Internal Revenue Code, and found definitions of gross income, net income, taxable income, etc., he had found no definition of income, pure and simple; and that no I.R.S. agent had discussed his understanding with him or told him he was wrong.

From the outset appellant took the position that, if he "innocently in good faith sincerely believed in his actions", then he had a valid defense to the charges against him. Counsel for the government, in colloquy with the court, took issue with the suggestion that subjective sincerity on the part of a defendant was a sufficient basis for finding a lack of wilfulness. ¹ The government ultimately contended that "in order to raise a mistake of law defense, the defendant must also show that he acted reasonably", citing United States v. Moore, 627 F.2d 830, 833 (7th Cir.1980), cert. denied, 450 U.S. 916, 101 S.Ct. 1360, 67 L.Ed.2d 342 (1981).

At the end of the trial, defendant requested several instructions on wilfulness of which the following is fairly representative:

"The defendant's conduct is not wilful and he is not guilty if you find that he failed to file a return because of mistake, inadvertence, gross negligence or due to an honest, sincere and good faith misunderstanding of the requirement of the law."

No citations of authority accompanied these requests.

The government's requests, in relevant part, were the following:

"[I]f a person acts without reasonable care or reasonable grounds in the belief that his conduct was lawful, it is for you to decide whether he acted in good faith, or whether he willfully intended to fail to file an income tax return. ^**

"If a defendant does not have a reasonable ground for his belief, then regardless of the defendant's 'sincerity of belief,' he does not have a good faith misunderstanding of the requirements of the law. ^***

It will be observed that these two requests are contradictory. The former instructs the jury to decide whether a defendant who acted unreasonably did so in good faith; the latter forbids the jury from finding good faith where a defendant's belief was unreasonable.

At the conclusion of the evidence, at a bench conference before closing arguments, the following colloquy took place:

"The Court: ... I find nothing wrong with the understanding of the law that you gentlemen apparently jointly share ....

"Mr. Weld: The most important [instruction] from my point of view is objectively reasonable.

"The Court: There is no question but that he is right so far as the law is concerned.

* * *

* * *

"Mr. Alessi: Your Honor, would you mention the good faith?

"The Court: I will. I'll give my definition of it. That it must be reasonable."

"Mr. Alessi: It's objective.

"Mr. Weld: Objective, reasonable good faith."

Subsequently, the court gave an instruction stressing that sincerity and good motive are not enough to constitute lack of wilfulness. "There has to be a mistake concerning the requirements of the law, a mistake that is objectively reasonable in order to say that particular conduct is not willful conduct." The court also said, "A failure to file is not willful if a person acts through negligence." At the bench, after the instructions had been given, counsel for appellant said, "I have no problems with your instructions right now." Not long thereafter the jury convicted appellant on all counts.

We have traced in detail the statements of the parties and the court regarding wilfulness because our task is to determine not only whether the court erred in its instructions but also whether it committed "plain" error. Where, as here, the record reveals what looks like defense counsel's endorsement or ratification of a charge, rather than his objection to it, plain error must be shown on appeal before the jury's verdict can be overturned. Fed.R.Crim.P. 52(b); United States v. Rosa, 705 F.2d 1375, 1380 (1st Cir.1983). We turn, therefore, to the historical development of this tax defense both to determine what is the correct standard and to glean how obvious that standard was, or should have been, to the district court at the time that it gave its instructions to the jury.

The logical starting place is the Supreme Court. Perhaps the fountainhead case, not cited by the government below or here, is United States v. Murdock, 290 U.S. 389, 396, 54 S.Ct. 223, 226, 78 L.Ed. 381 (1933), in which the Court said: "Congress did not intend that a person, by reason of a bona fide misunderstanding as to his liability for the tax, as to his duty to make a return, or as to the adequacy of the records he maintained, should become a criminal by his mere failure to measure up to the prescribed standard of conduct." In Sansone v. United States, 380 U.S. 343, 353, 85 S.Ct. 1004, 1011, 13 L.Ed.2d 882 (1965), the Court stated that criminal liability would attach if the defendant "knew that he should have reported more income than he did...." In United States v. Bishop, 412 U.S. 346, 93 S.Ct. 2008, 36 L.Ed.2d 941 (1973), the Court introduced the now familiar formulation of wilfulness--"a voluntary, intentional violation of a known legal duty", id. at 360, 93 S.Ct. at 2017, and added that, within the tax system "[d]egrees of negligence give rise" to nothing more than "civil penalties", id. at 361, 93 S.Ct. at 2017. Finally, in United States v. Pomponio, 429 U.S. 10, 97 S.Ct. 22, 50 L.Ed.2d 12 (1976), the Court dealt with a situation suggestive of that at bar. The taxpayers' defense was that the returns they had filed were not false because the taxpayers believed that certain payments to them were loans, not dividends, and that certain losses belonged to their partnership instead of to a corporation. The Court restated the Bishop formulation of wilfulness, "intentional violation of a known legal duty", id. at 12, 97 S.Ct. at 23, and held that the jury had been properly instructed that defendants should be found not guilty if they actually believed as they claimed, id. at 13, 97 S.Ct. at 24. We draw from all these cases the rather clear inference that "wilfulness" in criminal tax prosecutions is subjective.

When we turn to precedents in this circuit, we find several cases similarly suggesting that it is one's subjective state of mind that should be judged. In Gaunt v. United States, 184 F.2d 284, 291 & n. 4 (1st Cir.1950), cert. denied, 340 U.S. 917, 71 S.Ct. 350, 95 L.Ed. 662 (1951), we approved a jury instruction that wilfulness was not proven where defendant was negligent or even grossly negligent. In United States v. Couming, 445 F.2d 555, 557 (1st Cir.), cert. denied, 404 U.S. 949, 92 S.Ct. 291, 30 L.Ed.2d 266 (1971), a prosecution for knowing failure to possess a draft registration certificate, we described wilfulness as not necessarily requiring an "evil" motive but as applying to one who "deliberately refrained from complying" with the requirements of the law. And in United States v. Lachmann, 469 F.2d 1043, 1046 (1st Cir.1972), cert. denied, 411 U.S. 931, 93 S.Ct. 1897, 36 L.Ed.2d 390 (1973), we described the mental state of wilfulness as involving a "deliberate intent to disobey the filing requirement", id. at 1046, after noting that "we would reject the concept that in this criminal statute negligence or oversight is to be equated with willfulness", id. at 1045.

As for the state of the law in other circuits at the time of the trial below, our partial review indicates that, apart from the case principally invoked by the government to support its "objectively reasonable" request, United States v. Moore, 627 F.2d at 833, ² some six other circuits, in addition to our own, either explicitly or implicitly have required proof of subjective intent to disobey the filing requirement: Second Circuit--United States v. Kraeger, 711 F.2d 6, 7 (1983) (...