U.S. v. Bryan

Decision Date18 January 1989
Docket NumberNo. 87-3059,87-3059
Citation868 F.2d 1032
PartiesUNITED STATES of America, Plaintiff-Appellee, v. James Gerald BRYAN, Defendant-Appellant.
CourtU.S. Court of Appeals — Ninth Circuit

Steven T. Wax, Federal Public Defender, Portland, Or., for defendant-appellant.

Charles W. Stuckey, Asst. U.S. Atty., Portland, Or., for plaintiff-appellee.

Appeal from the United States District Court for the District of Oregon.

Before WALLACE and REINHARDT, Circuit Judges, and HARDY, * District Judge.

WALLACE, Circuit Judge:

Bryan appeals his conviction of twenty counts of mail fraud in violation of 18 U.S.C. Sec. 1341, one count of conspiracy to defraud the United States in violation of 18 U.S.C. Sec. 371, twenty-eight counts of aiding the preparation of false tax returns in violation of 26 U.S.C. Sec. 7206, and two counts of willful failure to file corporate tax returns in violation of 26 U.S.C. Sec. 7203. We vacate Bryan's convictions and remand for further consideration of his discovery requests.

I

In 1985, the grand jury in the District of Oregon returned a 51 count indictment charging Bryan and three other defendants with, among other things, 20 counts of mail fraud in violation of 18 U.S.C. Sec. 1341. According to the indictment, Bryan devised a scheme intended to defraud both a class of taxpayers, who were induced by a series of misrepresentations to invest in illegal tax shelters created by Bryan and his co-defendants, and the United States Treasury, which was deprived of tax revenue as a result of the tax shelters. The tax shelters promoted by Bryan were advertised and marketed at seminars targeted at upper-income taxpayers, such as doctors and dentists. Bryan promoted the first shelter by advising taxpayers that they could obtain favorable tax benefits by becoming "ministers" of the "Congregational Church of Human Morality" (Church), an organization created by Bryan in 1974. For a fee, a "minister" could form a "parish" of the Church. Thereafter, the taxpayer would make a large "contribution" to the Church, which the taxpayer would claim as a charitable deduction. Ninety-five percent of the contributions would then be returned by the Church to the "parish" of the taxpayer who made the contribution. This money was ostensibly for "parish use," which, the taxpayers were told, could be for anything the taxpayer wanted. The indictment alleged that the taxpayers induced to participate in this scheme were falsely assured that the money contributed to the Church could lawfully be claimed as charitable deductions on their tax returns.

The second shelter consisted of inducing investments in a company called Harvard Investment Management Corporation (Harvard). The investor would pay a fee to establish a commodity trading account in the name of a Subchapter S corporation established for each investor. The investors were told that Harvard would engage in commodity straddle trades that would produce deductible losses far in excess of the taxpayer's investment. According to the indictment, no commodity trades were actually made by Harvard, and no deductible losses resulted. Instead, Bryan and his co-defendants prepared false commodity confirmation slips and monthly activity statements purporting to show substantial losses for each Harvard investor, thereby inducing the investors to claim fictitious losses on their Small Business Corporation Income Tax Returns. The indictment also alleged that Bryan and his co-defendants diverted some of the money invested by each taxpayer in Harvard for their own use and benefit.

Prior to trial, Bryan moved for discovery of documents and witness statements obtained through a nationwide investigation of his activities coordinated by the National Office of the Internal Revenue Service (IRS). In his motion, Bryan sought materials both within and outside the District of Oregon. He grounded his motion both on Federal Rule of Criminal Procedure 16 and Brady v. Maryland, 373 U.S. 83, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963) (Brady ). Bryan demanded production of any records of interviews with or testimony of members of the taxpayer class described in the indictment, opinion letters written by attorneys regarding the legality of Bryan's various tax shelters, brochures and other materials describing the contents of his seminars, and similar materials intended to show that Bryan had intended to comply with federal tax laws and had not made misrepresentations when promoting either membership in the Church or investments in Harvard.

The district judge ordered the prosecution to produce any materials in its possession that might tend to exculpate Bryan, but found that reports of interviews with witnesses in which false representations were not reported were neither exculpatory nor material. She also ruled that the prosecution was not required to produce any material outside the District of Oregon. In a later ruling clarifying her earlier discovery order, she specifically agreed with Bryan's contention that attorney opinion letters, brochures, and seminar outlines were material to Bryan's defense, and ordered the prosecution to produce these items. This order, however, did not reverse the earlier order limiting discovery to items within the District of Oregon.

Bryan also moved unsuccessfully to dismiss Counts 1-20 of the indictment as duplicitous. He argued that the indictment must be read to allege two distinct schemes because Bryan was alleged to have intended to defraud two distinct classes of victims: taxpayers who participated in the shelters, and the United States Treasury. The district court rejected his argument and denied the motion.

The core of Bryan's trial defense was that while Bryan aggressively sought to aid his clients and Church members in reducing their taxes, he believed at all times that his actions were legal. He did not testify on his own behalf, but instead attempted to present his lack of intent defense through witnesses whose testimony described Bryan's philosophy and attested to his integrity. The jury found Bryan guilty on each of the 51 counts in the indictment.

Bryan brings several challenges to his convictions in this appeal. First, he contends that the district court erred in denying him discovery of material and exculpatory information both within and outside the District of Oregon. Next, he renews his argument that Counts 1-20 of the indictment charging him with mailings pursuant to a scheme to defraud taxpayers and the United States were duplicitous. As a corollary to this argument, Bryan contends that a jury instruction describing the scheme as one "to defraud a group of taxpayers and/or the United States of America" created a grave danger of a nonunanimous verdict and that the district court erred by failing to give a specific unanimity instruction requiring the jury to agree on the existence of the facts underlying the scheme. Bryan also challenges several evidentiary rulings of the district court, the failure of the district court to grant his motion for partial acquittal, and several allegedly misleading or incomplete jury instructions. We address his claims in turn.

II

Bryan mounts two challenges to the district court's discovery rulings. First, he contends that the district court erred as a matter of law in denying him discovery of out-of-district documentary evidence that was either material to his defense or which belonged to him within the meaning of Federal Rule of Criminal Procedure 16(a)(1)(C). Second, he contends that much of this same documentary evidence was exculpatory within the meaning of Brady, but that the prosecutor concluded its Brady obligation stopped at the district's borders. Thus, he contends that the district court abused its discretion in ruling that certain information he sought from the government, namely, evidence of certain statements made by members of the taxpayer class allegedly defrauded by Bryan's scheme, was neither material within the meaning of Rule 16(a)(1)(C) nor exculpatory within the meaning of Brady.

The prosecution responds that it was not obligated by Rule 16(a)(1)(C) to produce any out-of-district documents seized pursuant to the nationwide investigations of Bryan's activities conducted by the IRS. It argues further that the discovery requested by Bryan, and denied by the court as not material to his defense, would not have affected the outcome of his trial and was therefore neither material nor exculpatory.

Generally, we review an order limiting the scope of discovery only for an abuse of discretion. United States v. Domina, 784 F.2d 1361, 1372 (9th Cir.1986), cert. denied, 479 U.S. 1038, 107 S.Ct. 893, 93 L.Ed.2d 845 (1987). However, the question whether Rule 16(a)(1)(C) requires the government to provide out-of-district discovery constitutes a question of law reviewable de novo. See United States v. Gatto, 763 F.2d 1040, 1047 (9th Cir.1985) (Gatto ).

The district court limited discovery in this case to documents within the District of Oregon. (For convenience, we use the term "documents" to refer to all of the assorted objects subject to discovery under Rule 16(a)(1)(C).) The court did not base this ruling on the grounds that the documents sought by Bryan were not material or did not belong to him under Rule 16(a)(1)(C); rather, it agreed with Bryan that the prosecution must produce all brochures, seminar outlines, and letters from Bryan's attorneys, but limited its order to documents within the District of Oregon. We must thus decide the question whether the prosecution's discovery obligation under Rule 16(a)(1)(C) is limited to documents physically present in the district in which the prosecution is brought. We have not previously had occasion to address this question. Cf. Gatto, 763 F.2d at 1047 (declining to resolve the question whether documents in the possession of Federal Bureau of Investigation (FBI) agents both within and outside the...

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