U.S. v. Harvey, 87-5051

• Decision Date: 14 April 1989
• Docket Number: No. 87-5051,87-5051
• Citation: 869 F.2d 1439
• Parties: -1212, 89-1 USTC P 9266 UNITED STATES of America, Plaintiff-Appellant, v. Jerry Lee HARVEY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1439

869 F.2d 1439

63 A.F.T.R.2d 89-1212, 89-1 USTC P 9266

UNITED STATES of America, Plaintiff-Appellant, v. Jerry Lee HARVEY, Defendant-Appellee.

No. 87-5051.

United States Court of Appeals Eleventh Circuit.

April 14, 1989.

Roger M. Olsen, Atty. Gen., Michael L. Paup, Chief, Robert E. Lindsay, Alan Hechtkopf, Appellate Section, Tax Division, U.S. Dept. of Justice, Washington, D.C., for plaintiff-appellant.

Leonard Alan Sands, Coconut Grove, Fla., for defendant-appellee.

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

Before RONEY, Chief Judge, TJOFLAT, HILL, FAY, VANCE, KRAVITCH, JOHNSON, HATCHETT, ANDERSON, CLARK, EDMONDSON, and COX, Circuit Judges.

KRAVITCH, Circuit Judge:

Appellee Jerry Lee Harvey disclosed his illegal activities in the drug trade to Drug Enforcement Administration agents under an unwritten informal grant of immunity in 1980. Four years later a grand jury indicted Harvey for failing to report the interest income earned on the proceeds of those drug-related activities in the years leading up to and following the 1980 grant of immunity. Harvey moved to dismiss the indictment, arguing that the 1980 informal grant of immunity protected him from prosecution. The district court, upon the recommendation of the magistrate, agreed and dismissed the indictment with prejudice. United States v. Harvey, 651 F.Supp. 894 (S.D.Fla.1986). The government appealed the dismissal of those counts that charged violations for the years following the grant of immunity. A divided panel of this court affirmed. 848 F.2d 1547 (11th Cir.1988). We determined to rehear this case in banc and vacated the panel opinion. 855 F.2d 1492 (11th Cir.1988). We now REVERSE the order of the district court dismissing those counts of the indictment that relate to offenses allegedly committed after the grant of immunity to Harvey.

I. THE FACTS

On November 27, 1985 a grand jury in the Southern District of Florida returned an indictment charging Harvey with five counts of income tax evasion for the years 1978 through 1982, in violation of 26 U.S.C. Harvey filed a motion in the district court on June 2, 1986 in which he alleged that the government had informally granted him use immunity in return for his cooperation in a drug investigation in 1980. Harvey sought a pretrial hearing to require the government to prove that the evidence it proposed to use at trial was derived from a legitimate source independent of the immunized testimony, as Kastigar v. United States, 406 U.S. 441, 92 S.Ct. 1653, 32 L.Ed.2d 212 (1972), required. The immunity agreement was never reduced to writing, but Harvey was able to point to a letter from the United States Attorney for the Southern District of Alabama acknowledging that Harvey had reached an agreement with the government in 1980.

                Sec. 7201, 1 and one count of filing a false income tax return in April of 1981, a violation of 26 U.S.C. Sec. 7206(1). 2   The government alleges that Harvey kept millions of dollars derived from his lucrative drug dealings in a bank account in the Cayman Islands.  In his individual income tax return for the year 1980, however, Harvey denied that he had any proprietary interest in, or authority over, any bank account outside the United States. 3   Harvey also failed to report the interest income he allegedly earned on his Cayman Islands account on his individual income tax returns for the years 1978 to 1982
                

The government denied that Harvey had been granted any immunity other than a simple agreement not to prosecute him for certain charges pending in Alabama. Because it disputed the very existence of a grant of immunity, the government objected to the holding of a Kastigar hearing as unwarranted.

Faced with this disputed claim of an unwritten grant of immunity, the magistrate did not hold a traditional Kastigar hearing, as Harvey had requested. Instead, she held a series of "pre-Kastigar " hearings in order to determine (1) whether Harvey had been granted immunity in 1980, (2) if so, what kind of immunity the government had granted, and (3) what information Harvey had revealed to the government.

The "pre-Kastigar " hearings revealed that in June of 1980 a grand jury sitting in the Southern District of Alabama had indicted Harvey and several others for the attempted importation of a large quantity of quaalude tablets. The government's case against Harvey was indefensible-- Although the United States Attorney in the Southern District of Alabama did not need any of the testimony Harvey offered, his counterpart in the Southern District of Florida did. Thus, Harvey was able to reach a three-sided agreement with the government. Although there was some dispute at the "pre-Kastigar " hearings about the specific terms of the actual bargain struck between Harvey and the government, the witnesses agreed that the United States Attorney for the Southern District of Alabama offered to dismiss the indictment pending in that district in return for Harvey's cooperation with an investigation that the United States Attorney for the Southern District of Florida was conducting. The United States Attorney for the Southern District of Florida sent several Drug Enforcement Administration ("DEA") agents to Alabama where they interviewed Harvey. Apparently Harvey met his side of the bargain, and the United States Attorney dismissed the indictment against Harvey in the Alabama quaalude case.

"slam dunk" to use the evocative words of Harvey's lawyer at the time. Making the best of the situation, Harvey decided to cooperate with the government.

The testimony differed sharply as to any further elements of the agreement. After weighing all the evidence, the magistrate found that in addition to agreeing to drop the Alabama indictment, the government had granted Harvey both transactional immunity and use immunity for any information he had revealed to the DEA officials in 1980.

Because the DEA agents who interviewed Harvey had failed to keep any records whatsoever of their conversations with Harvey, the daunting task of reconstructing what Harvey disclosed to the DEA agents in 1980 now faced the magistrate. The magistrate found that Harvey had told the agents about all of the drug deals in which he had been involved before and at the time of his arrest in 1980, and had also "divulged ... his financial dealings with respect to his illegal drug deals." This information included the identification of the funds in the Cayman Islands bank.

Having thus determined what had happened in 1980, the magistrate turned to the 1985 tax evasion indictment. Stephen Snyder, the Justice Department's Criminal Tax Division attorney responsible for the investigation of the government's case and its presentation to the grand jury appeared at the "pre-Kastigar " hearings. Snyder testified that the government had used the net worth method of proving to the grand jury that Harvey had substantially underreported his income in the prior years. ⁴ In addition, the government also introduced documents obtained from the Bank of Nova Scotia in the Cayman Islands showing payment of interest to Harvey during the years in question. ⁵ Snyder further testified The magistrate did not allow the government to show that it had derived the evidence it presented to the grand jury--or that it intended to introduce at trial--from legitimate independent sources. The hearing transcript, currently under seal, reveals conclusively that Snyder began to testify about the trail that led to Harvey's Cayman Islands bank account, but upon the objection of Harvey's counsel, the magistrate stopped Snyder from testifying further. The magistrate considered such information irrelevant to the "pre-Kastigar " hearing; instead, the magistrate reasoned that whether the government derived the information leading to the indictment from independent sources was properly a matter only for a true Kastigar hearing.

that he told the grand jury that the probable source of Harvey's income was his drug-related activities.

With the findings of fact set out, the magistrate then made a "Finding of Law" in which she concluded that the information concerning Harvey's drug activities and related financial dealings formed the basis for the tax indictment and was "inextricably tied" to the information that Harvey had revealed to the DEA agents in 1980. Even though she had refused the government the opportunity to demonstrate that the evidence against Harvey came from a source independent of the immunized testimony, the magistrate concluded that the evidence presented to the grand jury was "tainted." The magistrate further concluded that the indictment violated the grant of immunity extended to Harvey and recommended that the district court dismiss the indictment.

The district court reviewed the record de novo and agreed with the magistrate's factual finding that the government had extended both use and transactional immunity to the appellee. The district court dismissed the indictment with prejudice.

For the purposes of this appeal the government does not dispute the factual findings of the magistrate and district court that Harvey received transactional and use immunity in 1980 and that he told the DEA agents about his financial dealings, including the existence of the funds in the Cayman Islands. The government, however, vigorously disagrees with the legal conclusion that such a grant of immunity given in 1980 bars Harvey's prosecution for failure to report the existence of a foreign bank account or the interest earned on that account in years after that grant of immunity. ⁶

II. INFORMAL GRANTS OF IMMUNITY

We note at the outset that this appeal would not be necessary had the United States Attorneys for the Southern Districts of Alabama and Florida reduced their agreement with Harvey to writing. The magistrate and district court have been put through the arduous task of reconstructing the terms of the agreement with...