U.S. v. Callahan

Decision Date02 February 1979
Docket NumberNo. 78-5251,78-5251
Parties79-1 USTC P 9190 UNITED STATES of America, Plaintiff-Appellee, v. Dan CALLAHAN, Defendant-Appellant.
CourtU.S. Court of Appeals — Fifth Circuit

Edward T. M. Garland, Rhonda A. Brofman, Atlanta, Ga., for defendant-appellant.

D. L. Rampey, Jr., U. S. Atty., Samuel A. Wilson, Jr., Asst. U. S. Atty., Macon, Ga., for plaintiff-appellee.

Appeal from the United States District Court for the Middle District of Georgia.

Before GOLDBERG, SIMPSON and CLARK, Circuit Judges.

CHARLES CLARK, Circuit Judge:

The appellant Dr. Dan Callahan was convicted of five counts of tax evasion in violation of 26 U.S.C. § 7201. On appeal the appellant raises a variety of issues concerning the conduct of his trial. We find no reversible errors and affirm Dr. Callahan's conviction.

I. FACTS

Dr. Callahan, a physician from Warner Robins, Georgia, was convicted in a jury trial for tax evasion for the years 1971-1975. The government offered evidence that Callahan juggled the financial records covering his practice to avoid a total of $83,337.04 in tax liability. Callahan was fined $50,000 and sentenced to five concurrent five-year terms in the custody of the Attorney General.

The government's case was based primarily on the existence of false financial records kept in the doctor's office and large amounts of cash stored in the attic of Callahan's home. The office staff maintained a permanent office ledger which was used by Callahan's accountant to prepare his tax returns. The ledger purported to account for all office income. Through a variety of methods, however, income from patient payments was diverted and not recorded on the ledger. The principal method used to siphon receipts from the ledger was to record payments from certain patients on a duplicate cash receipts book. These payments recorded on the cash receipts book were never listed on the ledger and the cash receipts book was never shown to the tax accountant.

The trigger for the income diversion scheme involved Callahan's notation of a code acronym, "NOL," standing for "not on ledger." When a patient entered the doctor's office he would sign his name on a sign-in sheet. Office personnel then would pull the patient's medical history file and attach a small blank tab of paper. The file, with the attached slip of paper, would be hung on the door of the examining room. After examining the patient, Callahan would write on the slip of paper the amount of money which the patient would be charged. If only the dollar amount appeared on the paper, office personnel would accept payment from the patient and record it on the office ledger. Whenever Callahan added the "NOL" notation to the dollar amount written on the slip of paper, the payment would not be recorded on the ledger, but only in the duplicate cash receipts book. Money from the office ledger was placed in a cash box. "NOL" funds, however, were placed loose in an office desk drawer. "NOL" funds were routinely converted to cash and taken from the office to the doctor's home and placed in the inside coat pocket of an old grey coat kept in a clothes closet. A notation on the amount of "NOL" cash brought home was also kept in the coat pocket. Periodically, the cash would be taken up to the attic of the doctor's home and placed in one of three strongboxes maintained there.

Much of the government's proof was obtained from Jeanette Callahan, the doctor's ex-wife, who first divulged the "NOL" story to the IRS during a bitter divorce dispute with the doctor. Jeanette Callahan testified at the trial under a grant of immunity.

Callahan's defense did not dispute the government's basic factual case concerning the "NOL" scheme but sought instead to shift all criminal culpability for the scheme to his ex-wife. Callahan testified that Jeanette handled all business aspects of his practice while he merely practiced medicine. According to Callahan, Jeanette set up and managed all his business records. At Jeanette's request, Callahan "randomly" placed "NOL" on certain patient cards. Callahan claimed he had no idea that the cash that found its way to the attic strongboxes via the old grey coat was not being recorded for tax purposes. Not surprisingly, the jury found this defense unconvincing.

On appeal, Callahan challenges several aspects of the court's charge to the jury, argues that it was improper for the court to encourage juror questioning of witnesses, and claims that the presentation and examination of certain witnesses were improperly restricted. Finally, the appellant asserts that the cumulative impact of the court's various errors deprived him of a fair trial.

II. THE JURY CHARGE
A. The Elements of Tax Evasion

To convict a person for criminal tax evasion under 26 U.S.C. § 7201, the government must prove three elements: "willfulness; the existence of a tax deficiency, . . . and an affirmative act constituting an evasion or attempted evasion of the tax." Sansone v. United States, 380 U.S. 343, 351, 85 S.Ct. 1004, 1010, 13 L.Ed.2d 882 (1965). The appellant claims that the court's instructions to the jury failed to include the requirement of an affirmative act.

The court specifically stated to the jury that: "(t)he prosecution must prove beyond a reasonable doubt that this defendant willfully attempted to evade or defeat a tax due the government. This involves the specific intent to evade the tax and some willful commission or omission or affirmative action by the defendant in furtherance of that intent." At another point in the charge the court stated that conviction under the evasion statute required "some act willfully done" to evade the tax. The appellant's allegation that the court failed to require the showing of an affirmative act is flatly contradicted by the record.

B. "Willful Blindness"

It was clear at Dr. Callahan's trial that his tax returns substantially understated his income for each of the five years between 1971 and 1975. The only issue was whether the understatement was knowing and willful. The court's elaborate instructions to the jury on knowledge and willfulness included the statement:

Now speaking further about knowledge, the element of knowledge may be satisfied by inferences drawn from proof that a defendant deliberately closed his eyes to what would otherwise have been obvious to him. A finding beyond a reasonable doubt of conscious purpose to avoid enlightenment would permit an inference of knowledge. Stated another way, a defendant's knowledge of a fact may be inferred from willful blindness to the existence of the fact. It is entirely up to you as to whether you find deliberate closing of the eyes and the inferences to be drawn from any such evidence. A showing of negligence or mistake is not sufficient to support a finding of willfulness or knowledge.

The appellant asserts this portion of the charge incorrectly permitted the jury to draw an inference of knowledge from evidence of "willful blindness", "conscious purpose to avoid enlightenment" and "deliberately closed his eyes to what would otherwise have been obvious." However, we find the instruction indistinguishable from the language approved by this court in United States v. Evans, 559 F.2d 244, 246 (5th Cir. 1977).

Evans upheld an instruction which stated that " 'a person who makes a statement with reckless disregard of the truthfulness of the statement and with the conscious purpose to avoid learning the truthfulness of the statement, is deemed to have knowledge of this statement.' " 559 F.2d at 246. Evans quoted with approval the statements in United States v. Sarantos, 455 F.2d 877, 881 (2d Cir. 1972), that an individual may not circumvent criminal sanctions "merely by deliberately closing his eyes to the obvious risk that he is engaging in unlawful conduct," and that "construing 'knowingly' in a criminal statute to include wilful blindness to the existence of a fact is no radical concept in the law."

Although cast in different verbal garb, the phrases "willful blindness," "conscious purpose to avoid enlightenment" and "deliberately closed his eyes to what would otherwise have been obvious" convey the same meaning as the " 'reckless disregard of . . . and . . . conscious purpose to avoid learning the (truth)' " standard in Evans.

Callahan argues that deliberate avoidance of knowledge of a fact should be criminally culpable only when it is coupled with proof of actual subjective awareness of the high probability of the fact's existence, relying on United States v. Valle-Valdez, 554 F.2d 911, 914 (9th Cir. 1977). In Valle-Valdez, the defendant was apprehended while driving an automobile owned by someone else across the Mexican border with 667 pounds of marijuana in the trunk. The Ninth Circuit reversed the defendant's conviction because the trial court had instructed the jury that it could find the defendant guilty if he "acted with a conscious purpose to avoid learning the truth of the contents of the vehicle." 554 F.2d at 913. The court held that the jury should also have been required to find "that the defendant was aware of the high probability that the vehicle carried contraband." Id. at 914.

The appellant's reliance on Valle-Valdez is misplaced. Valle-Valdez did not own the car involved. So far as the proof disclosed, the trunk was never opened in his presence. Under these circumstances, the court held the prosecution had to show that Valle-Valdez knew it was highly probable that marijuana was in the trunk before his conscious avoidance of knowledge of its contents would be incriminating. Along that same line of reasoning, the jury here was not told that Callahan could be convicted merely because he closed his eyes to the errors on his tax returns. Rather, it was told that if the tax avoidance scheme "would otherwise have been obvious" he could not avoid criminal culpability merely by deliberately closing his eyes to it. The facts of the two cases are also inapposite. It is far...

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