U.S. v. Diez

• Decision Date: 14 July 1975
• Docket Number: No. 74-2641,74-2641
• Citation: 515 F.2d 892
• Parties: 75-2 USTC P 9656 UNITED STATES of America, Plaintiff-Appellee, v. Joe Raymond DIEZ and Peter A. Palori, Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 892

515 F.2d 892

75-2 USTC P 9656

UNITED STATES of America, Plaintiff-Appellee, v. Joe Raymond DIEZ and Peter A. Palori, Defendants-Appellants.

No. 74-2641.

United States Court of Appeals, Fifth Circuit.

July 14, 1975.

Raymond E. LaPorte, Tampa, Fla., for Diez.

E. David Rosen, Miami, Fla., for Palori.

John L. Briggs, U. S. Atty., Bernard Dempsey, Asst. U. S. Atty., Jacksonville, Fla., Claude Tison, Jr., Asst. U. S. Atty., Tampa, Fla., for plaintiff-appellee.

Appeals from the United States District Court for the Middle District of Florida.

Before GIBSON, ^* THORNBERRY and AINSWORTH, Circuit Judges.

AINSWORTH, Circuit Judge:

Peter A. Palori and Joe Raymond Diez appeal from convictions of conspiring to defraud the United States by impeding the Internal Revenue Service in the collection of income tax in violation of 18 U.S.C. § 371. Palori also appeals from his conviction on four counts of income tax evasion. 26 U.S.C. § 7201. Both defendants assign numerous errors in the trial court's rulings concerning the admissibility and weight of hearsay evidence, the propriety of a joint trial of the defendants, and the possibility of prejudice from the Government's use of illustrative charts.

I. Factual Background

The Government's case against Palori and Diez involved a series of real estate transactions in Tampa, Florida, between 1965 and 1968. The Government's theory was that Palori was the real owner of shares of the various parcels sold in these transactions, but that he had arranged for several of his relatives to act as nominal owners or brokers in the transactions and to report part of the profits from the sales on their own tax returns. Palori's mother, Minnie Lopez, reported profits from a number of the transactions on her returns and was indicted as a member of the conspiracy but acquitted. Diez, who is Palori's uncle, reported part of the profit from one of the transactions, as well as two brokerage commissions allegedly received in connection with other transactions, and interest on a loan he allegedly made to Palori. B. J. DeGuzman, Palori's accountant during the tax years in question, reported part of the profit from one of the real estate transactions, and was indicted and convicted both for his role in the conspiracy and for preparing false returns specifically those of Palori and his relatives. ¹ The Government contended that all of this income was properly attributable to Palori. James Garrett and Clarence Prevatt, two unindicted coconspirators, also participated in some of the transactions.

II. Evidence Allegedly Admitted in Violation of the Hearsay Rule

A. Statements of Coconspirators

Palori and Diez contend that it was error to permit the introduction of several statements by Garrett and DeGuzman, two of their coconspirators, which, they argue, were inadmissible under the hearsay rule. The general principles governing the introduction of out-of-court declarations by one conspirator against another, for the truth of the matter stated, are clear:

It is established law, at least since Krulewitch v. United States, 1949, 336 U.S. 440, 69 S.Ct. 716, 93 L.Ed. 790, and under so many cases prior to and following Krulewitch that it would be an affectation to cite them, that acts and declarations of co-conspirators are binding upon each member of the conspiracy, if made during the life of the conspiracy and in furtherance of any of its objects.

United States v. Harrell, 5 Cir., 1970, 436 F.2d 606, 613. See United States v. Register, 5 Cir., 1974, 496 F.2d 1072, 1078.

The statements complained of were part of the testimony of Agents Brock and Hill of the Internal Revenue Service. Brock testified that DeGuzman told him, in an interview in November 1970, that during a prior audit another agent, named Hunting, had proposed to classify Palori as a dealer in real estate, ²and thus as ineligible for the special tax treatment usually given long-term capital gains. ³ DeGuzman also stated in interviews during July 1969 and July 1970, according to the testimony of Agents Brock and Hill, that he and Minnie Lopez had paid fees and brokerage commissions to Diez in connection with several of the real estate transactions in the case. ⁴

According to Agent Brock's testimony, in an interview during January 1972 Garrett stated that Diez "didn't participate as a partner in any of Mr. Palori's real estate transactions, nor did he perform any services which would entitle him to a commission." This statement, in contrast to that of DeGuzman concerning payment of fees and commissions, supported the Government's contention that income properly belonging to Palori was being attributed to Diez as part of the conspiracy. Agent Brock, testifying as an expert witness, also stated that in computing Palori's income for 1965 he disregarded a check from Palori to Garrett, allegedly for the latter's interest in a parcel sold in one of the transactions, because Garrett had told him (in the January 1972 interview) that he did not own an interest in the parcel in question. ⁵

Palori and Diez contend that these hearsay statements were, at most, attempts to conceal the completed crime, and thus could not be introduced under the coconspirator exception to the hearsay rule. A review of the prior Supreme Court cases convinces us that this argument must fail.

In Krulewitch v. United States, 336 U.S. 440, 69 S.Ct. 716, 93 L.Ed. 790 (1949), the Supreme Court held inadmissible the hearsay statement of a coconspirator made after she had been apprehended. The Government argued that there was an implicit conspiracy to conceal the crime. The Court noted, however, that no such conspiracy to conceal had been charged in the indictment, and stated:

It is beyond doubt that the central aim of the alleged conspiracy transportation of the complaining witness to Florida for prostitution had either never existed or had long since ended in success or failure when and if the alleged co-conspirator made the statement attributed to her.

336 U.S. at 442, 69 S.Ct. at 718.

In Lutwak v. United States, 344 U.S. 604, 73 S.Ct. 481, 97 L.Ed. 593 (1953), a conspiracy to conceal the crime was charged in the indictment, but the Court interpreted Krulewitch to require more than an unsubstantiated allegation:

This Court in (Krulewitch) rejected the Government's contention that in every conspiracy there is implicit an agreement as a part thereof for the conspirators to collaborate to conceal the conspiracy.

344 U.S. at 616, 73 S.Ct. at 489. The Court held in Lutwak that the Government had failed to prove a conspiracy to conceal the crime, and went on to discuss what kind of proof would be sufficient. See Grunewald v. United States, 353 U.S. 391, 403-405, 77 S.Ct. 963, 973-974, 1 L.Ed.2d 931 (1957).

It is unnecessary to apply the reasoning developed in these prior cases concerning proof of a conspiracy to conceal a completed crime, because the statements in question here were part of the central conspiracy itself, which had not terminated when those statements were made. In this case the Government charged a conspiracy to defraud the United States by impeding the Internal Revenue Service in the collection of income tax. This conspiracy is different from the conspiracies discussed in the cases relied on by defendants.

In Krulewitch the conspiracy was to transport a woman across state lines for prostitution in violation of 18 U.S.C. § 2421. That conspiracy clearly had ended when the arrested coconspirator made her statement. In Lutwak, supra, the conspiracy was

" 'to defraud the United States of and concerning its governmental function and right of administering' the immigration laws and the Immigration and Naturalization Service, by obtaining the illegal entry into this country of three aliens as spouses of honorably discharged veterans."

344 U.S. at 605, 73 S.Ct. at 483 (emphasis added). The conspiracy to defraud was complete when the conspirators deceived the immigration officials into permitting them to enter the country. ⁶ The Court held that coconspirators' statements made later would not be admissible under the coconspirator exception to the hearsay rule. In Grunewald, supra, the conspiracy was to defraud the United States by preventing criminal tax prosecutions. The prosecutions were prevented through the procurement, by bribery, of "no prosecution" rulings from the Internal Revenue Service, and ended when the rulings were issued.

On the other hand, in the present case the central aim of the conspiracy was to deceive officials of the Internal Revenue Service, thereby inducing them to accept fraudulent tax returns as truthful and accurate. In light of the substantial possibility that the returns would be audited and investigated, the filing of the returns did not fully accomplish the purpose of the main conspiracy, which, by its very nature, called for concealment. ⁷

The Supreme Court described a very similar conspiracy in Forman v. United States, 361 U.S. 416, 423-424, 80 S.Ct. 481, 486, 4 L.Ed.2d 412 (1960):

(T)he conspiracy was a continuing one extending from 1942 to 1953 and its principal object was to evade (taxes) for 1942-1945, inclusive, by concealing (the conspirators') "holdout" income. This object was not attained when the tax returns for 1945 concealing the "holdout" income were filed. As was said in Grunewald, this was but the first step in the process of evasion. The concealment of the "holdout" income must continue if the evasion is to succeed.

In some circumstances it may be difficult to determine precisely when the deception has been accomplished in a conspiracy like this one. ⁸ A lapse of several years between the filing of the last fraudulent return and the initiation of investigative efforts by the Government might suggest that the conspiracy had succeeded in its purpose. Statements made during the course of such an investigation might be considered outside the scope of the coconspirator exception. That difficult determination is...