U.S. v. Hook

• Decision Date: 26 March 1986
• Docket Number: No. 84-3815,84-3815
• Citation: 781 F.2d 1166
• Parties: -630, 86-1 USTC P 9179 UNITED STATES of America, Plaintiff-Appellee, v. Frank L. HOOK, Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1166

781 F.2d 1166

57 A.F.T.R.2d 86-630, 86-1 USTC P 9179

UNITED STATES of America, Plaintiff-Appellee, v. Frank L. HOOK, Defendant-Appellant.

No. 84-3815.

United States Court of Appeals Sixth Circuit.

Argued Oct. 1, 1985.

Decided Jan. 21, 1986.

Rehearing and Rehearing En Banc Denied March 17, 1986.

Opinion on Denial of Rehearing March 26, 1986.

Frank L. Hook, Columbus, Ohio, pro se.

Victoria B. Eiger, Nathan Z. Dershowitz, argued, Dershowitz & Eiger, P.C., New York City, for defendant-appellant.

Christopher Barnes, U.S. Atty., Columbus, Ohio, Robyn R. Jones, argued, Asst. U.S. Atty., for plaintiff-appellee.

Before MERRITT and WELLFORD, Circuit Judges, and CELEBREZZE, Senior Circuit Judge.

CELEBREZZE, Senior Circuit Judge.

Defendant-appellant Frank L. Hook appeals from his convictions of two counts of feloniously attempting to evade the payment of income taxes, in violation of I.R.C. Sec. 7201 (1982), and four counts of willfully failing to pay income taxes, in contravention of I.R.C. Sec. 7203 (1982). On appeal, Hook contends that the felony convictions must be set aside because he was charged under the wrong statute, that his convictions relating to the 1975 and 1976 tax years are barred by the statute of limitations, that the evidence presented at trial was insufficient to support his felony convictions, and that the trial court erred in admitting prejudicial evidence and in permitting his ex-wife to testify to acts which occurred during their marriage. After carefully reviewing each issue, we affirm.

Viewing the facts in the light most favorable to the Government, Glasser v. United States, 315 U.S. 60, 80, 62 S.Ct. 457, 469, 86 L.Ed. 680 (1942), Hook engaged in the following conduct to conceal assets from the Internal Revenue Service (IRS). In 1975, Hook formed a corporation whose sole assets were 10,000 shares of Wendy's International stock and two automobiles. Although the only shareholders of the corporation were his wife and daughters, the money to purchase these assets came from Hook, and in May, 1977, after the sale of the Wendy's stock, Hook received the bulk of the proceeds. Similarly, Hook purchased a home in 1977 in the name of his girlfriend, Linda Barford, who lived there for only six months. Hook himself lived there from 1979 until the summer of 1983, paid the installments on the mortgage note, made substantial improvements to the property, and obtained the proceeds from the sale of the house.

While Hook maintained no bank accounts and possessed no credit cards in his own name, he was still involved in numerous financial transactions. Without completing required currency transaction reports, Hook cashed checks, sometimes made out to fictitious payees, totalling in excess of $1.2 million through a neighborhood grocery, Linden Market, and a neighborhood branch bank. Throughout the period covered by the indictment, Hook used credit cards in the names of others to purchase heating oil, obtain car rentals, and make personal expenditures, and used automobiles titled in other persons' names. Finally, Hook employed cash to pay for everything from legal fees to swimming pools.

Hook filed timely and accurate tax returns with the IRS for the 1975 through 1980 tax years showing a total of almost $300,000 in taxes due, but paid only a few thousand dollars in satisfaction of this liability. Although the IRS made repeated demands and attached liens to Hook's property, the Government was generally unsuccessful in locating assets belonging to Hook. The Government subsequently obtained an indictment against Hook on November 16, 1983. Count I charged Frank Hook, his ex-wife Nancy Hook, and the proprietor of Linden Market with conspiring to evade the payment of income taxes for the years 1973 through 1980. Counts II through VII charged Frank and Nancy Hook with attempting to evade the payment of income taxes for each of the tax years 1975 through 1980, in violation of Section 7201.

Frank Hook's co-defendants were severed before trial and the Government proceeded solely against him. After a lengthy jury trial, Hook was acquitted on the conspiracy count, convicted under counts III and VI of feloniously attempting to evade the payment of income taxes for the tax years 1976 and 1979, and convicted on the remaining four counts of the lesser-included misdemeanor offense of willfully failing to pay income taxes for the tax years 1975, 1977, 1978, and 1980. This appeal ensued.

Hook first argues that his two felony convictions must be reversed because he was charged and convicted under the wrong statute. This argument focuses on the interpretation of two statutes, Section 7201, which states in the pertinent part, "Any person who willfully attempts in any manner to evade or defeat any tax ... or the payment thereof shall ... be guilty of a felony...," I.R.C. Sec. 7201 (1982), and Section 7206(4) which provides,

Any person who ... [r]emoves, deposits, or conceals ... any goods or commodities for or in respect whereof any tax is or shall be imposed, or any property upon which levy is authorized by Section 6331, with intent to evade or defeat the assessment or collection of any tax ... shall be guilty of a felony ...,

I.R.C. Sec. 7206(4) (1982) (emphasis added). Hook alleges that the Section 7201 language "attempts in any manner to evade or defeat ... the payment" of a tax does not encompass conduct which goes solely to concealing assets. According to Hook, the attempt to avoid the payment of taxes through the concealment of assets can only be prosecuted under Section 7201 if the taxpayer also files a fraudulent return or otherwise attempts to conceal the existence or amount of taxable income. Hook buttresses this assertion by pointing out that Section 7206(4) explicitly refers to concealment and by arguing that an interpretation of Section 7201 to cover concealment would implicitly attribute irrational conduct to Congress in amending Section 7206(4) to criminalize concealment activity which would have already been provided for in Section 7201. We disagree.

Initially, Hook's argument that the sole act of concealing assets is not included within the purview of Section 7201 is contrary to the plain language of that statute which establishes a violation if anyone "willfully attempts in any manner " to evade a tax or its payment. I.R.C. Sec. 7201 (1982) (emphasis added). The Supreme Court, in Spies v. United States, 317 U.S. 492, 499, 63 S.Ct. 364, 368, 87 L.Ed. 418 (1943), interpreted Section 7201 to subsume several affirmative acts, including "concealment of assets or covering up sources of income, handling of one's affairs to avoid making the records usual in transactions of the kind, and any conduct, the likely effect of which would be to mislead or to conceal." The Court cautioned that its list of affirmative acts was illustrative only, and not limiting, lest it be interpreted as restricting the undefined and unlimited acts which Congress intended to criminalize under Section 7201 by the use of the "in any manner" language. Spies, 317 U.S. at 499, 63 S.Ct. at 368. Although Spies was a case involving both the non-filing of a tax return as well as non-payment of the tax, we find nothing in the case that either lends itself to the conclusion that the Court was restricting its decision to only the non-filing conduct of the taxpayer or precludes application of the Court's list of affirmative acts to cases involving the evasion of payment. ¹ Accordingly, we conclude that Hook's argument runs contrary to both the plain language and the Supreme Court's interpretation of Section 7201.

Next, we do not believe that the 1954 amendment to Section 7206(4), making it an offense to conceal property on which levy is authorized as well as conceal goods or commodities on which a tax is or shall be imposed, evidences a Congressional intent that concealment of assets, as an act of tax evasion, be solely remedied by Section 7206(4). Contrary to Hook's assertions, nothing in the legislative history indicates that Congress in amending Section 7206(4) intended to limit the scope of Section 7201 or believed that the amendment was necessary to fill a gap left open by Section 7201. H.R.Rep. No. 1337, 83d Cong., 2d Sess. A425, reprinted in 1954 U.S.Code Cong. & Ad.News 4017, 4025, 4573; S.Rep. No. 1622, 83d Cong., 2d Sess. 603, reprinted in 1954 U.S. Code Cong. & Ad.News 4629, 5252. Rather, the clear import of the amendment is to preserve the property of delinquent taxpayers so that the government can collect taxes due. S.Rep. No. 1622, 83d Cong., 2d Sess. 603, reprinted in 1954 U.S.Code Cong. & Ad.News 4629, 5252 ("This section ... covers such offenses committed in order to avoid levy...."). Considered in this light, Congress in amending Section 7206(4) was not filling an existing gap in the law or impliedly repealing Section 7201, see Universal Interpretive Shuttle Corp. v. Washington Metropolitan Area Transit Commission, 393 U.S. 186, 193, 89 S.Ct. 354, 358, 21 L.Ed.2d 334 (1968) (repeals by implication disfavored), but was merely strengthening a collection provision.

Finally, we believe that a holding that Section 7206(4) provides the exclusive remedy for concealment of assets would produce an anomalous result. This Court has held that Section 7206(4) is operative only if the acts of concealment take place after the conditions precedent of assessment, notice and demand, and neglect or refusal to pay the tax, necessary for the authorization of a levy under Section 6331, ² have been met. United States v. Swarthout, 420 F.2d 831, 833 (6th Cir.1970). To adopt Hook's contention concerning the purview of Sections 7201 and 7206(4) would thus preclude felony prosecutions against those taxpayers who had the foresight to file accurate tax returns and commit acts of concealment of assets prior to assessment, notice and demand, and refusal or neglect, while permitting prosecution only of those taxpayers who wait for the IRS to act...