U.S. v. Bourque

• Citation: 541 F.2d 290
• Decision Date: 20 August 1976
• Docket Number: No. 75-1454,75-1454
• Parties: 76-2 USTC P 9617, 1 Fed. R. Evid. Serv. 1188 UNITED STATES of America, Appellee, v. Marcel BOURQUE, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

Page 290

541 F.2d 290

76-2 USTC P 9617, 1 Fed. R. Evid. Serv. 1188

UNITED STATES of America, Appellee, v. Marcel BOURQUE, Defendant-Appellant.

No. 75-1454.

United States Court of Appeals, First Circuit.

Submitted April 6, 1976.

Decided Aug. 20, 1976.

Harold C. Arcaro, Jr., Lester H. Salter, and Salter, McGowan, Arcaro & Swartz, Providence, R. I., for defendant-appellant.

Scott P. Crampton, Asst. Atty. Gen., Washington, D.C., Lincoln C. Almond, U. S. Atty., Providence, R. I., Gilbert E. Andrews, Robert E. Lindsay, and William A. Whitledge, Attys., Tax Div., Dept. of Justice, Washington, D.C., on brief, for appellee.

Before COFFIN, Chief Judge, McENTEE and CAMPBELL, Circuit Judges.

COFFIN, Chief Judge.

Marcel Bourque appeals from his conviction on two counts of a three count indictment charging violations of the federal internal revenue laws. In Counts I and II, on which he was convicted by jury verdict, Bourque was charged, as the responsible officer, with wilful failure to file corporate income tax returns for Cumar Co., Inc. (Cumar), for the calendar years 1968 (Count I) and 1969 (Count II) in violation of 26 U.S.C. § 7203. On Count III, he was acquitted, by the jury, of filing a corporate return for Cumar for the year 1970 which he knew not to be true and correct in every material respect in violation of 26 U.S.C. § 7206(1).

Bourque and his wife formed Cumar in August, 1968, to carry on his business of trading in scrap metal. The evidence presented at trial tended to show that the financial accounts of the corporation were in disarray. The only records of Cumar's transactions were check books, with partially filled-in stubs, and a so-called "dome book" of receipts and expenditures maintained for some months in 1968 and 1969. The first corporate income tax return for Cumar obtained by the IRS was a calendar year 1970 return filed in 1971.

The IRS began an audit of Cumar in 1971, and, in early 1972, the case was referred to Special Agent Katz of the Intelligence Division for investigation of possible criminal violations of the internal revenue laws. In November, 1973, Katz completed his investigation, and forwarded the case to his superior, Jerome Hart, then District Director of Intelligence in Rhode Island, with a recommendation for prosecution. Hart agreed, and sent the case on for review by the Regional Counsel of the Internal Revenue Service in Boston. After further study by the Tax Division of the Department of Justice, the case was presented to the grand jury in the District of Rhode Island and the instant indictment issued.

Bourque's first claim of error is that the district court should have granted his motion to dismiss the indictment based on Hart's participation in the decision to prosecute. In this motion, Bourque alleged that, beginning in October, 1972, he and District Director Hart had been embroiled in a personal dispute which culminated in Hart bringing suit on April 3, 1973, against one of Bourque's wholly owned corporations. Bourque further alleged that Hart had threatened him with adverse rulings in the administrative phase of the ongoing criminal tax investigation. The district court found Hart's conduct, assuming the facts contained in the affidavit were true, to be improper and distasteful, but declined to dismiss the indictment or order an evidentiary hearing on the motion.

On appeal, appellant contends that his allegations constituted a defense of discriminatory prosecution, and, at the least, he was entitled to an evidentiary hearing on his charges. See Two Guys v. McGinley, 366 U.S. 582, 81 S.Ct. 1135, 6 L.Ed.2d 551 (1961); United States v. Oaks, 508 F.2d 1403, 1404 (9th Cir. 1974). In order to prevail on a motion to dismiss an indictment on the basis of discriminatory prosecution, a defendant must show that the government has normally not prosecuted others for the crimes with which he is charged, and that the decision to prosecute in his case was made on invidious or impermissible grounds. United States v. Berrios, 501 F.2d 1207, 1211 (2d Cir. 1974); United States v. Oaks, supra; United States v. Falk, 479 F.2d 616 (7th Cir. 1973). While recent cases have dealt with prosecutions instituted in retaliation for defendants' exercise of constitutional rights, see, e. g., United States v. Steele, 461 F.2d 1148 (9th Cir. 1972), personal vindictiveness on the part of a prosecutor or the responsible member of the administrative agency recommending prosecution would also sustain a charge of discrimination. See, generally, Moss v. Hornig, 314 F.2d 89 (2d Cir. 1963). In this case, however, the defendant failed to allege, or make a substantial showing, that prosecutions are normally not instituted for the offenses with which he was charged. While information concerning the rate of prosecution against known offenders of the tax laws is peculiarly within the knowledge of the IRS, see United States v. Berrios, supra, the charges against Bourque, taken as a whole, cf. United States v. Berrigan, 482 F.2d 171, 177 (3d Cir. 1973), were serious ones for which prosecution, although not automatic, is a common result. See Donaldson v. United States, 400 U.S. 517, 535 n. 17, 91 S.Ct. 534, 27 L.Ed.2d 580 (1971); Internal Revenue Service Manual § P-9-2. We conclude that appellant did not make a sufficient showing to entitle him to an evidentiary hearing or dismissal on the grounds of discriminatory prosecution.

Nor do we find this case an appropriate one to exercise our supervisory power. Whatever Hart's misdeeds, there is no suggestion that they impugned the fairness of Bourque's trial. Appellant asks us to reverse his conviction to ensure that the "appearance of justice", if not the reality, is not compromised. If the allegations against Hart had been made against the prosecutor or one intimately bound up in the trial process, we might consider this suggestion more seriously. As it is, we are asked to reach back, not only behind the grand jury action, but to a time prior to the final decision of the Department of Justice and the penultimate decision of the Regional Counsel to find misconduct. Should there be such, the Service itself should be the source of correction, not the courts.

The second issue on appeal concerns the substantive law under which Bourque was convicted on Count I of the indictment. Bourque was indicted for failure to file a calendar year return required to be filed on or before March 15, 1969. The gravamen of a violation of 26 U.S.C. § 7203 is a knowing act of omission: wilful failure to comply with a duty imposed by the internal revenue laws. See Sansone v. United States, 380 U.S. 343, 351, 85 S.Ct. 1004, 13 L.Ed.2d 882 (1965); Spies v. United States, 317 U.S. 492, 63 S.Ct. 364, 87 L.Ed. 418 (1943). The code imposes a duty to file a return by or on certain dates, see 26 U.S.C. § 6072. Consequently, the date that the duty to file arises is an essential element of the § 7203 offense, see United States v. Goldstein, 502 F.2d 526 (3d Cir. 1974); United States v. Pandilidis,524 F.2d 644 (6th Cir. 1975), and the government had the burden to prove that Bourque was obligated to file a corporate income tax return on the charged date. Bourque claims as error the denial of his motion for a directed verdict predicated on the failure of the government to so prove, and the instructions to the jury concerning the standards of proof on this issue.

The appellant's challenge rests on the peculiarities of the filing requirements for the first year of a newly formed corporation. Under 26 U.S.C. § 6072(b), returns of corporations shall be filed on or before March 15 of the year following the close of the calendar year, or, for a corporation reporting on the basis of a fiscal year, on or before the 15th day of the third month following the close of the fiscal year. Bourque formed Cumar in August, 1968. As a new corporation, it had the option of adopting a fiscal year one ending the last day of a month other than December as its taxable year. 26 C.F.R. § 1.441(b)(iii)(3). Therefore, Bourque contends that there was no legal obligation to file a corporate return for Cumar on March 15, 1969, as he then retained the option to file a return on or before October 15, 1969, on the basis of a fiscal taxable year. ¹

The government states, in response to Bourque's contentions, that all the events of 1969 should be studied to determine whether there was a duty to file on March 15, 1969. It suggests that the failure to adopt a fiscal year and file a return by October 15, 1969, made the duty to file by March 15, 1969, absolute. Thus, it was permissible to prosecute Bourque for failure to file a return by March 15 even though he could have filed a return any time up to October 15 on a fiscal year basis. The district court adopted the government's view, and decided the motion for a directed verdict of acquittal and instructed the jury accordingly.

We are forced to disagree. If this were a civil proceeding concerned with assessing interest or penalties for failure to pay taxes due, we might find this argument persuasive. We are dealing here, however, with a criminal prosecution under a statute which makes an act of omission a misdemeanor. Just as subsequent conduct cannot relieve a taxpayer from criminal liability for failure to file tax returns on or before their due date, United States v. Ming, 466 F.2d 1000, 1005 (7th Cir. 1972); United States v. McCormick, 67 F.2d 867, 868 (2d Cir. 1933), we do not think that subsequent events can transform an act of omission, innocent when it occurred, into a criminal act. ²

Therefore, we agree with the appellant that the government was obliged to prove that the internal revenue laws imposed a duty on him to file a calendar year return for Cumar on or before March 15, 1969, as of that date. But, contrary to appellant's assertions, we are not convinced that the government could not have fulfilled this burden. The privilege to file a return on a fiscal year basis...