U.S. v. Fern

• Citation: 696 F.2d 1269
• Decision Date: 17 January 1983
• Docket Number: No. 81-6235,81-6235
• Parties: 83-1 USTC P 9151 UNITED STATES of America, Plaintiff-Appellee, v. Ronald N. FERN, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (11th Circuit)

Page 1269

696 F.2d 1269

83-1 USTC P 9151

UNITED STATES of America, Plaintiff-Appellee, v. Ronald N. FERN, Defendant-Appellant.

No. 81-6235.

United States Court of Appeals Eleventh Circuit.

Jan. 17, 1983.

Kenneth L. Ryskamp, Miami, Fla., for defendant-appellant.

Kent S. Robinson, Asst. U.S. Atty., Miami, Fla., Glenn L. Archer, Jr., Dept. of Justice, Tax Division, Michael L. Paup, Washington, D.C., for plaintiff-appellee.

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

Before RONEY and JOHNSON, Circuit Judges, and DYER, Senior Circuit Judge.

DYER, Senior Circuit Judge:

Fern appeals his jury conviction for violating 18 U.S.C. Sec. 1001 ¹ by making a materially false statement to an Internal Revenue Service Tax Auditor. ² He asserts that Sec. 1001 is inapplicable within the parameters of this case; that it was error for the Court to hold that his statement was material; that the evidence was insufficient to sustain a conviction; and that Fern was never identified as the person who made the false statement. We disagree and affirm.

When the evidence is viewed in the light most favorable to the Government, Glasser v. United States, 315 U.S. 60, 62 S.Ct. 457, 86 L.Ed. 680 (1942), it shows the following facts:

Fern was a practicing accountant. On April 19, 1974 he and an investment partner executed an agreement to provide the New Testament Baptist Church with $125,000 in gifts. On April 25, 1974 Fern and his partner purchased property from Dade Christian School, a sister organization of the church. On that date $50,000 was paid to the church.

In late December 1974, Fern asked his client Brumer if he would make a $25,000 contribution to the church which would be tax deductible. He told Brumer that the money would be used to pay off pledges to the church in place of a mortgage, and that the money would be paid off at the time of the sale of the property. Brumer made out his check to the church for $25,000 and gave it to Fern, who delivered it to the church. The church treated the check as a contribution, and cancelled the $75,000 indebtedness of Fern in exchange for the Brumer check.

In January 1975, Brumer decided not to claim his $25,000 payment as a charitable deduction and asked Fern for repayment. On Fern's partnership tax return the $25,000 was listed as a liability. When Fern sold the property he had acquired from the church on April 1, 1975, Fern gave Brumer a check for $25,000, which included a notation that it was for repayment of a loan.

In March 1975 (before the repayment of $25,000 from Fern to Brumer), Fern suggested that Brumer take the $25,000 as a charitable deduction. Brumer told Fern that he did not want to take it as a tax deduction and that it was not to be claimed on his 1974 tax return.

In the spring of 1976, the Internal Revenue notified Brumer that it would audit his 1974 return, having challenged deductions claimed by Brumer for air conditioning repair and a part of his daughter's wedding expense. Fern attended the audit interview on May 17, 1976 with Tax Auditor Wilson. After Wilson indicated that she would disallow the challenged deductions, Fern stated that Brumer had found a deduction that he had not claimed on his tax return and that he, Fern, would like to submit it to her. He said that it was a contribution, and handed Wilson a copy of a cancelled check made out to the New Testament Baptist Church in the amount of $25,000. Wilson examined the check, marked it into her worksheet, checked a rough copy of Brumer's 1975 return given to her by Fern to ascertain whether the payment had been claimed for that year, and then told Fern she would accept it as a charitable contribution.

After this interview Wilson telephoned and wrote Fern requesting further verification of the contribution. By mail she received a copy of a letter from the church to Brumer thanking him for the $25,000 gift and a letter directly from the church erroneously indicating that no contribution had been received from Brumer.

As a result of the conflicting letters from the church, Internal Revenue Service Auditor Eddins called Fern and asked if there was a contribution made by Brumer. Fern told him there was a contribution made to the church but that Brumer was uncertain whether or not he would take credit for it. Later Fern told Eddins that after discussing the matter further with Brumer they had decided not to claim a deduction. However, such a conversation between Fern and Brumer had not taken place after the audit.

Fern first urges that he could not be prosecuted under Sec. 1001 because the application of the statute in this case would reach a patently absurd result. In any event, it is argued, the Government should be required to proceed under the more specific, tax-related misdemeanor statute, 26 U.S.C. Sec. 7207. We find no merit to these contentions.

Fern's absurdity-result argument rests upon Sorrells v. United States, 287 U.S. 435, 53 S.Ct. 210, 77 L.Ed. 413 (1932). There the Court held that even though there was a violation of the literal terms of the National Prohibition Act, the conviction could not be upheld in the light of admitted entrapment, saying "[t]o construe statutes so as to avoid absurd or glaringly unjust results, foreign to the legislative purpose, is, as we have seen, a traditional and appropriate function of the courts." Id. at 450.

Lifting this sentence out of context, Fern argues that to apply Sec. 1001 here creates the absurd result of swallowing up the perjury statute contrary to Congressional intent. ³ We disagree.

Sorrells was careful to point out that "the case lies outside of the purview of the Act" and that "its general words should not be construed to demand a proceeding ... abhorent to the sense of justice."

Quite unlike Sorrells the opposite is true here. The purpose of Sec. 1001 is clearly to protect the Government from fraud and deceit. The reach of the statute covers all materially false statements, including non-monetary fraud, made to any branch of the Government. United States v. Bramblett, 348 U.S. 503, 506-07, 75 S.Ct. 504, 506, 99 L.Ed. 594 (1955). Moreover, the term "jurisdiction" should not be given a narrow or technical meaning for purposes of Sec. 1001. Bryson v. United States, 396 U.S. 64, 90 S.Ct. 355, 24 L.Ed.2d 264 (1969). As we said in United States v. Lichenstein, 610 F.2d 1272, 1278 (5 Cir.1980) the statute prohibits a false statement

that is capable of affecting or influencing the exercise of a government function. United States v. Goldfine, 538 F.2d 815, 820 (9 Cir.1976); United States v. McGough, 510 F.2d 598, 602 (5 Cir.1975). That, as here, the government is not actually influenced by the statement is immaterial. Goldfine, 538 F.2d at 820-21. Accord, [United States v.] Beer, 518 F.2d [168,] at 172 [ (5 Cir.1975) ] (dictum). The potential effect on the Government need not involve pecuniary loss. United States v. Gilliland, 312 U.S. 86, 93, 61 S.Ct. 518, 85 L.Ed. 598 (1941); United States v. Krause, 507 F.2d 113, 117 (5 Cir.1975). The false statement must simply have the capacity to impair or pervert the functioning of a governmental agency.

Clearly, the Internal Revenue Service is a "department or agency" of the United States. See United States v. Beacon Brass Co., 344 U.S. 43, 73 S.Ct. 77, 97 L.Ed. 61 (1952); United States v. Johnson, 530 F.2d 52 (5 Cir.1976), cert. denied, 429 U.S. 833, 97 S.Ct. 96, 50 L.Ed.2d 97 (1976). A false material oral statement made to a tax auditor falls within the purview of Sec. 1001. United States v. McCue, 301 F.2d 452 (2 Cir.1962), cert. denied, 370 U.S. 939, 82 S.Ct. 1586, 8 L.Ed.2d 808 (1962).

Fern made an affirmative, unsolicited, false statement which caused a tax auditor to initially conclude that an additional charitable deduction was due the taxpayer. If it was material, the statute applies for "[p]erversion of a governmental body's function is the hallmark of a Sec. 1001 offense." United States v. Lambert, 501 F.2d 943, 946 (5 Cir.1974) (en banc).

Relying on United States v. Beer, 518 F.2d 168 (5 Cir.1975), Fern argues that Congress never intended that 18 U.S.C. Sec. 1001 should be used to prosecute false statements made to the Internal Revenue Service since a specific statute, 26 U.S.C. Sec. 7207 ⁴ is applicable, and a specific statute controls a more general one. ⁵ Fern's reliance on Beer is misplaced. While it is true that we expressed a preference for prosecution under specific statutes, we expressly declined to reverse a Sec. 1001 prosecution on that ground despite the presence of a more specific statute, Sec. 1005, and despite the fact that the Sec. 1001 penalty was twice as severe as the penalty provided in Sec. 1005. In commenting on Beer, we said in United States v. Carter, 526 F.2d 1276, 1278 (5 Cir.1976); "Many statutes in the Criminal Code overlap, and the Government may elect the provision under which it wishes to proceed. Erlich v. United States, 238 F.2d 481 at 485 (5 Cir.1976). Although we recently indicated a preference for prosecution under specific false statements statutes, we declined to reverse the conviction on grounds that 18 U.S.C. Sec. 1001 had been chosen for prosecution."

The Supreme Court has long recognized

that when an act violates more than one criminal statute, the Government may prosecute under either so long as it does not discriminate against any class of defendants.... Whether to prosecute and what charge to file or bring before a grand jury are decisions that generally rest in the prosecutor's discretion....

....

There is no appreciable difference between the discretion a prosecutor exercises when deciding whether to charge under one of the statutes with different elements and the discretion he exercises when choosing one of two statutes with identical elements.

United States v. Batchelder, 442 U.S. 114, 123-125, 99 S.Ct. 2198, 60 L.Ed.2d 755 (1979) (citations omitted).

Fern's argument is categorically foreclosed by...