U.S. v. Horvath

• Decision Date: 09 April 1984
• Docket Number: 82-2322 and 82-2315,Nos. 82-2321,s. 82-2321
• Citation: 731 F.2d 557
• Parties: 84-1 USTC P 9482, 15 Fed. R. Evid. Serv. 1048 UNITED STATES of America, Appellee, v. Paul E. HORVATH, Jr., Robert M. Horvath, and Thomas O'Shaughnessy, Appellants.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 557

731 F.2d 557

84-1 USTC P 9482, 15 Fed. R. Evid. Serv. 1048

UNITED STATES of America, Appellee, v. Paul E. HORVATH, Jr., Robert M. Horvath, and Thomas O'Shaughnessy, Appellants.

Nos. 82-2321, 82-2322 and 82-2315.

United States Court of Appeals,

Eighth Circuit.

Submitted Oct. 10, 1983.

Decided April 9, 1984.

James M. Rosenbaum, U.S. Atty., Daniel W. Schermer, Asst. U.S. Atty., D. Minn., Minneapolis, Minn., for appellee.

Mark W. Peterson and Thomas J. Flynn, Minneapolis, Minn., for appellant.

Before BRIGHT, JOHN R. GIBSON and FAGG, Circuit Judges.

JOHN R. GIBSON, Circuit Judge.

Robert Horvath, Paul Horvath and Thomas O'Shaughnessy were convicted of conspiring to defraud the United States by evasion of income taxes in violation of 18 U.S.C. Sec. 371 (1982). In addition, Paul Horvath was convicted of failure to file a 1975 income tax return and Robert Horvath was convicted of failure to file 1975, 1978 and 1979 income tax returns. On appeal all argue that the district court ¹ improperly admitted evidence of an Ardmore, Oklahoma drug transaction at trial. The Horvaths additionally claim that the district court erroneously permitted Robert Malone, a lawyer, to testify as to information that they claim was privileged. O'Shaughnessy also argues that the court should not have admitted evidence that he drove a truck filled with marijuana from Massachusetts to Minnesota in 1975. We affirm the convictions.

The trial, essentially a "net worth/expenditures" tax prosecution, consumed nearly ten weeks. The government's theory was that the Horvaths were in the business of distributing marijuana shortly after January 1, 1975, through the end of 1979. In addition to failing to report income from this illegal venture, the Horvaths allegedly made various purchases with cash through other parties under fictitious names, or through corporations, to conceal both their income and its sources. Evidence implicated O'Shaughnessy, a licensed real estate broker, in at least two of these transactions, one involving an oil company in which the Horvaths invested $25,000 and another regarding the purchase of a home by Robert Horvath. Cashier's checks, naming allegedly fictitious remitters, were used in both transactions.

None of the appellants contest the sufficiency of the evidence; the only issues before us involve the admissibility of certain evidence. We will recite only the evidentiary background necessary to decide these claims of error and will not concern ourselves further with a lengthy story that includes marijuana trafficking, shipments from Colombia, and the details of numerous cash purchases claimed to have been made by the Horvaths.

Ardmore evidence. All appellants claim error in the admission of evidence concerning a marijuana seizure at the Ardmore, Oklahoma airport on December 30, 1976. The police seized two aircraft and four trucks, which contained 17,000 pounds of marijuana, and arrested the occupants. An Ardmore cab driver testified that she had picked up a passenger described as about twenty-five years old with brown curly hair and a mustache at about 9:00 a.m. that day, or seven hours after the marijuana seizure. He had fresh scratches on his face, was not dressed appropriately for the weather, and wanted to go to Oklahoma City, a fifty-dollar fare and 90 to 95 miles away. She was shown photostatic copies of three pictures of Paul Horvath two weeks before her testimony and again two days before her testimony. At first she stated that she could not identify anyone, but on further prompting pointed out Paul Horvath as the person who looked like the man in her cab that day. [TR V, 49-54] Her direct testimony was further qualified on two occasions with the statement, "I ain't for sure now," a reservation which she also expressed on cross-examination. [TR V, 49-51] Apart from the cab driver testimony, there was also evidence that O'Shaughnessy had been at an Ardmore motel two months before the marijuana seizure.

Appellants contend that the evidence linking them to the Ardmore incident was improperly admitted as it constituted evidence of other crimes under Fed.R.Evid. 404(b). The government counters this contention by arguing that proof of the Ardmore seizure was necessary and relevant to show a "likely source" of the Horvaths' taxable income and O'Shaughnessy's connection to it as well.

In reviewing the admissibility of "other crimes" evidence under Rule 404(b), this Court must determine whether the district court abused its discretion. United States v. Moss, 544 F.2d 954, 960-61 (8th Cir.1976), cert. denied, 429 U.S. 1077, 97 S.Ct. 822, 50 L.Ed.2d 797 (1977); United States v. Marshall, 683 F.2d 1212, 1215 (8th Cir.1982). To be admissible such evidence must meet four requirements:

(1) the evidence of the bad act must be admissible on a material issue raised;

(2) the evidence must be similar in kind and reasonably close to the charge at trial;

(3) the evidence of the other crime or bad act must be clear and convincing;

(4) the probative value of the evidence must not be outweighed by its prejudice.

Marshall, 683 F.2d at 1215. We conclude that the Ardmore evidence was improperly admitted; such evidence had little probative weight and did not connect any of the appellants to the Ardmore incident by clear and convincing evidence.

For the same reasons, however, the record clearly reveals that any error in admitting evidence of the Ardmore incident was harmless. "[I]t is the duty of a reviewing court to consider the trial record as a whole and to ignore errors that are harmless, including most constitutional violations...." United States v. Hasting, --- U.S. ----, ----, 103 S.Ct. 1974, 1980, 76 L.Ed.2d 96, 106 (1983). The Ardmore cab driver identified Paul Horvath very tentatively and only after some prompting. The cab driver's testimony that she would have to see the individual in person to give an identification negates any conclusion of improper suggestiveness. Moreover, Paul Horvath was acquitted of the tax charges for 1976, a fact that suggests that the jury accorded little, if any, weight to the Ardmore evidence. We conclude that the weak identification, which would at most establish a tenuous evidentiary link, in the context of a trial lasting nearly ten weeks, did not prejudice Paul Horvath. For the same reasons, such evidence did not prejudice either Robert Horvath, as to whom no Ardmore evidence was adduced, or O'Shaughnessy, as to whom there was only proof that he stayed at an Ardmore motel two months earlier. Considering the weight of the other evidence in this lengthy trial supporting appellants' convictions, we are satisfied beyond a reasonable doubt that admission of the Ardmore evidence was harmless. United States v. Wentz, 686 F.2d 653, 658 (8th Cir.1982); United States v. Ogle, 587 F.2d 938, 941 (8th Cir.1978).

Attorney-client privilege. The Horvaths contend that the testimony of Robert Malone was admitted into evidence in violation of their assertion of the attorney-client privilege. Malone had acted as a lawyer for the Horvaths. He was charged and tried with the Horvaths and O'Shaughnessy but was acquitted. Malone testified that the Horvaths had approached him for the purpose of retaining his services. After inquiring as to the confidentiality of their conversations and documents and receiving assurances from Malone, Paul had told Malone about his previous activity in the marijuana business but that he was no longer involved and did not intend to involve Malone in any illegality. It was agreed that the Horvaths' files would be physically separate from Malone's other files and that the files would remain the property of the Horvaths. During the course of the representation Malone conducted various financial transactions on behalf of the Horvaths and knew that a great deal of the funds probably came from illegal business. [TR VIII, 31-32, 57-59, 116]

Before admitting Malone's testimony, the district court conducted an in camera hearing after some four weeks of trial and concluded that the record and the in camera hearing "establishes a prima facie showing that the alleged privileged communications were made in furtherance of the conspiracy charged in the indictment and therefore are not privileged." The court overruled the Horvaths' objections to the introduction of this testimony. We cannot conclude that the court abused its discretion in admitting this testimony.

Initially we observe that while Malone performed some legal services for the Horvaths, his handling of their funds was, by his own admission, "just a service that I could provide my clients." Before Malone had even learned that he had passed the bar examination, Robert Horvath, his high school classmate, had contacted him concerning a $30,000 loan to the owner of Spanky's Saloon. Malone was retained to collect the loan payments on Robert's behalf and place them in a savings account, which neither specified that it was a trust account nor identified the beneficiary. Furthermore, the second mortgage securing the loan was never recorded. Malone's services here, specifically in drafting documents, were, at least in part, legal in nature. Thereafter Paul brought Malone two checks, the proceeds of gold transactions, and Malone deposited them in two separate trust accounts, which made no reference to the Horvaths. On several occasions Malone withdrew cash from these trust accounts and delivered it to Paul. Malone admitted that he functioned primarily as a courier. At one point Malone asked about the source of a check, to which Paul responded by asking if he needed to know; Malone did not pursue the subject further.

The attorney-client privilege extends only to confidential communications made for the purpose of facilitating the rendition of legal services to the...