U.S. v. Brown, 75-3503

CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)
Citation548 F.2d 1194
Docket NumberNo. 75-3503,75-3503
Parties77-1 USTC P 9278, 1 Fed. R. Evid. Serv. 847 UNITED STATES of America, Plaintiff-Appellee, v. Amos P. BROWN, Sr., Defendant-Appellant.
Decision Date18 March 1977

Michael R. N. McDonnell, Tallahassee, Fla., for defendant-appellant.

Clinton Ashmore, U. S. Atty., Pensacola, Fla., Stewart J. Carrouth, Asst. U. S. Atty., Tallahassee, Fla., for plaintiff-appellee.

Appeal from the United States District Court for the Northern District of Florida.

Before BROWN, Chief Judge, and TUTTLE and GEE, Circuit Judges.

JOHN R. BROWN, Chief Judge:

This case, one of the very few 1 in the recorded annals of the 85 year history of the Fifth Circuit, involves not the trials and tribulations, attempted frauds and other derelictions of taxpayers, which are common grist for our mill. Rather, it involves fraud by a tax preparer, one whose Twentieth Century occupation is now almost indispensable to all save those taxpayers who can use, or risk the use of, a short form with standard deductions. In this Bicentennial foray we see the hazards both to the system and to the protection of rights of the public and the individuals concerned. To be remembered is that it is the fraud or false misstatement of the preparer, not the taxpayer, which counts. Indeed, the tax properly due may be of no, or only secondary, significance.

Defendant-Appellant Amos P. Brown, Sr., a part-time income tax preparer, was convicted by a jury on 12 counts of counseling, procuring and advising the preparation and presentation of fraudulent and false United States Individual Income Tax Returns for others in violation of 26 U.S.C.A. § 7206(2), Internal Revenue Code. 2 The District Court subsequently denied Brown's motions for judgment of acquittal and for new trial and sentenced Brown to 11 concurrent terms of three years each, followed by three years probation. Brown appealed, asserting insufficiency of the evidence, the improper admission of prejudicial evidence, the Trial Court's failure to investigate possible jury misconduct and ineffective assistance of counsel. We find that the Trial Judge committed plain error by improperly admitting certain evidence which was highly prejudicial to the defendant. Accordingly, we reverse and remand for a new trial.

In A Nutshell

Amos P. Brown, Sr., is a school teacher who has taught in Florida public schools since 1947. His educational background includes a bachelor's degree in Agricultural Education from Florida A. & M. University and an H. & R. Block course in income tax preparation. Except for the H. & R. Block course, he has had no formal courses in accounting. He has no prior criminal record.

After taking the H. & R. Block course in 1970, he began helping friends and neighbors, most of whom had low incomes and many of whom had little or no formal education, 3 prepare their income tax returns. 4 In preparing the returns, defendant relied on both written and oral evidence 5 of expenses furnished him by the taxpayer. Rarely, if ever, would the defendant double-check the information given him by the taxpayer by seeking information from a bank or other source concerning the proper amount of taxpayer's deductions. 6

In 1973, an IRS audit of approximately 163 returns which had been prepared by Brown revealed that many contained substantially over-stated deductions. 7 Of these returns, 17 8 were culled out to serve as the basis of the present case. 9 The evidence does not reveal whether the IRS agent asked for, or received, supporting documents for deductions claimed by both spouses in each case, or by only one taxpayer of the pair. The evidence also does not reveal the grounds on which the IRS agent disallowed deductions. The evidence does disclose that the agent did not ask whether the taxpayer gave the same or different information to defendant before defendant prepared the audited return. 10 When the case was tried, the Government primarily based its proof on the testimony of one spouse taxpayer for each of the counts (the count witnesses) and on the testimony of the IRS agent who, prior to trial, conducted an audit of most of the returns prepared by Brown. Almost all of the count witnesses 11 testified that, with respect to challenged items, their true deductions were less than the figures stated on their returns. In addition, some testified that they did not tell or authorize the defendant to put down the higher figure on the return. In only three counts did the prosecutor inquire about deductible expenses incurred by or known to the non-testifying spouse. The evidence in the other counts does not reveal whether the figures given by the taxpayer include other such expenses incurred by or known to the non-testifying spouse.

The testimony most damaging to the defendant was given by the IRS agent, Adrienne Peacock. Witness Peacock testified that about 160 returns prepared by the defendant had been audited by the IRS and that between 90% and 95% of these returns contained overstated itemized deductions. She did not have a list of the taxpayers, their names, or their records with her, nor did she have access to the documents for the purpose of refreshing her memory before she testified. She did not audit all of the tax returns in question. Because she was testifying solely from her recollection of these audits, the tax returns were not introduced into evidence and the taxpayers concerned (save for the 17 count taxpayers) were not called as witnesses, Peacock was not able to tell why the IRS considered the various deductions to be overstated, 12 and was further unable to supply direct proof of the overstatements. 13

Upon consideration of all the evidence, including Witness Peacock's testimony, the jury returned a verdict of guilty as to Counts 3, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16 and 17. The Judge sentenced defendant to concurrent terms of three years each for every count except Count 17. For that count, the Judge sentenced defendant to three years probation, to be served after his prison sentence. After being found guilty and sentenced by the Court, the defendant moved for a judgment of acquittal notwithstanding the jury verdict and for a new trial. The Judge denied both motions and this appeal followed.

The Intent Requirement of 26 U.S.C.A. § 7206(2)

In a prosecution under 26 U.S.C.A. § 7206(2), the element of willfulness or intent is usually the most difficult to prove. In the misdemeanor and felony tax evasion statutes (26 U.S.C.A. §§ 7201 to 7207, inclusive), the word "willfully" generally connotes a voluntary, intentional violation of a known legal duty. United States v. Pomponio, 1976, --- U.S. ----, 97 S.Ct. 22, 50 L.Ed.2d 12; United States v. Bishop, 1973, 412 U.S. 346, 93 S.Ct. 2008, 36 L.Ed.2d 941. Proof of evil motive or bad intent is not required. Pomponio, supra. This showing of willfulness will most often be made by circumstantial evidence, 14 see e. g., Spies v. United States, supra; United States v. Burrell, 5 Cir., 1974, 505 F.2d 904; United States v. Jernigan, 5 Cir., 1969, 411 F.2d 471, since direct proof of willfulness, as that term is defined in Pomponio and in Bishop, may not be readily available.

In this case, proof of defendant's willfulness in preparing materially false and fraudulent returns proved to be the focus of much of the Government's proof. In part, proof of willfulness was offered through the testimony of the count witnesses by showing cumulatively a repetitious overstatement of deductions by the defendant. 15

The Peacock's Tale

The Government also introduced the testimony of IRS agent Adrienne Peacock, who testified that between 90% and 95% of about 160 returns prepared by defendant contained overstated itemized deductions. 16 There could be no doubt that her testimony played a substantial part in the jury's finding that the defendant possessed the intent required by § 7206(2). Of the 17 counts originally brought by the Government, five were dismissed for insufficiency of the evidence. Since the remaining counts did not present particularly strong evidence of willfulness on the part of the defendant 17 (although sufficient to place the matter before the jury), Peacock's testimony was particularly devastating.

If Peacock's testimony was admissible, we might affirm this case. See note 31, infra. If the testimony was not admissible, however, we must vacate the conviction and remand for a new trial, in light of the prejudicial nature of the evidence and especially since it permeated all the counts, both probatively weak and strong, and the cumulative effect of numerous counts of repetitive acts could serve to meet the element of willfulness. See note 26, infra.

On this appeal, the Government asserts that Peacock's testimony was admissible under the rule that evidence

of commission of other crimes closely related in both time and nature to the crime charged may be admitted to establish identity, Halfen v. United States, 5 Cir. 1963, 321 F.2d 556, 558, cert. denied, 1964, 376 U.S. 934, 84 S.Ct. 704, 11 L.Ed.2d 653, guilty knowledge, United States v. Dryden, 5 Cir. 1970, 423 F.2d 1175, 1178, cert. denied, 398 U.S. 950, 90 S.Ct. 1869, 26 L.Ed.2d 290, intent, United States v. Smith, 5 Cir. 1970, 433 F.2d 1266, 1270, cert. denied, 1971, 401 U.S. 977, 91 S.Ct. 1206, 28 L.Ed.2d 328, motive, Huff v. United States, 5 Cir. 1959, 273 F.2d 56, 60, or a common scheme, plan, design or system of criminal activity of which the crime charged is a part, United States v. Sutherland, 5 Cir. 1970, 428 F.2d 1152, 1156.

United States v. Broadway, 5 Cir., 1973, 477 F.2d 991, 994.

We conclude, however, that Peacock's testimony was inadmissible under Broadway (as well as its modern counterpart, F.R.Evid. 403 and 404(b)), and, more important, was independently inadmissible under the hearsay rule. Because the ultimate underlying defect in Peacock's testimony was its hearsay character, we proceed to a discussion of that issue...

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