U.S. v. Kassouf

• Decision Date: 21 May 1998
• Docket Number: No. 96-4381,96-4381
• Citation: 144 F.3d 952
• Parties: -2066, 98-1 USTC P 50,437 UNITED STATES of America, Plaintiff-Appellant, v. James J. KASSOUF, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 952

144 F.3d 952

81 A.F.T.R.2d 98-2066, 98-1 USTC P 50,437

UNITED STATES of America, Plaintiff-Appellant, v. James J. KASSOUF, Defendant-Appellee.

No. 96-4381.

United States Court of Appeals,

Sixth Circuit.

Argued Jan. 29, 1998.

Decided May 21, 1998.

John M. Siegel (argued and briefed), Office of U.S. Attorney, Cleveland, OH, for Plaintiff-Appellant.

Richard L. Stoper, Jr. (argued and briefed), Robert J. Rotatori (briefed), Gold, Rotatori, Schwartz & Gibbons, Cleveland, OH, for Defendant-Appellee.

Before: JONES, DAUGHTREY, and COLE, Circuit Judges.

JONES, J., delivered the opinion of the court, in which COLE, J., joined. DAUGHTREY, J. (pp. 960-961), delivered a separate opinion concurring in part and dissenting in part.

OPINION

NATHANIEL R. JONES, Circuit Judge.

The government appeals the district court's judgment dismissing one count of obstruction of the tax laws in violation of 26 U.S.C. § 7212(a), for failure to allege an offense. The district court found that the statute required the government to allege as elements of the offense, that the defendant, James J. Kassouf, obstructed or impeded a pending IRS investigation or proceeding of which he was aware. For the following reasons, we AFFIRM.

I. FACTS

On May 8, 1995, a grand jury indicted defendant James J. Kassouf in a twenty-six count indictment charging him with four counts of attempting to evade personal income taxes in violation of 26 U.S.C. § 7201 (Counts 1-4), twenty-one counts of making false personal, corporate, and partnership tax returns in violation of 26 U.S.C. § 7206(1) (Counts 5-25), and one count of corruptly endeavoring to obstruct and impede the due administration of tax laws, in violation of 26 U.S.C. § 7212(a) (Count 26).

Count 26 of the indictment alleges generally that Kassouf used his partnerships and controlled corporate general partners in order to conduct transactions for his substantial personal benefit, without keeping records necessary to determine the tax consequences of those transactions. Six paragraphs of the count refer specifically to Kassouf's failure to maintain partnership books and records. The count also alleges that Kassouf made it more difficult to discover and trace his activities by transferring funds between bank accounts before making expenditures, and affirmatively misled the IRS by filing tax returns which failed to disclose the transactions, the bank accounts and other assets, and the interest earned on those accounts. ¹

On June 15, 1995, Kassouf filed a motion for a bill of particulars regarding the counts in the indictment, including Count 26. With regard to Count 26, Kassouf requested information specifying the corrupt acts or omissions allegedly committed by him, the factual basis for the allegations that he failed to maintain or caused a failure to maintain books and records, and identification of pertinent persons or entities that were legally required to maintain records. J.A. at 211-215. He also requested a listing of all records which were maintained or should have been maintained, dates and amounts of borrowing, descriptions of assets, deposits and disbursements. Id. For the most part, the government refused these requests, noting at one point that the allegations never provided that Kassouf was in fact legally required to maintain certain books or records.

On May 16, 1996, Kassouf filed a motion to dismiss Counts 13 and 26 as barred by the statute of limitations. He filed an additional motion to dismiss Count 26 on that same date, challenging the sufficiency of the allegations and the constitutionality of the omnibus clause of § 7212(a) as applied to those allegations. Specifically, Kassouf asserted: (1) that Count 26 failed to allege facts constituting a violation of § 7212(a); (2) that § 7212(a) was unconstitutionally vague and overbroad as applied to the alleged conduct; and (3) that the government improperly construed the statute to apply to lawful conduct that makes the IRS's job harder, such as failure to maintain records. On September 25, 1996, the district court denied Kassouf's motion to dismiss Counts 13 and 26 on the basis of the statute of limitations.

On November 19, 1996, the district court granted Kassouf's motion to dismiss Count 26, finding that the count did not state an offense because it did not allege, as elements of the offense, that there was a pending proceeding or investigation by the IRS of which the defendant was aware. The court did not address the other contentions made in Kassouf's motion to dismiss. On January 8, 1997, the district court denied Kassouf's motion for a bill of particulars relating to Count 26 on the ground that the dismissal of Count 26 rendered such a request moot. The government then filed this timely appeal from the district court's judgment dismissing Count 26.

II. DISCUSSION

A. Section 7212(a)

Elements

The primary issues on appeal involve statutory interpretation and construction which are questions of law subject to de novo review by this court. See United States v. Khalife, 106 F.3d 1300, 1302 (6th Cir.1997); United States v. Spinelle, 41 F.3d 1056, 1057 (6th Cir.1994).

On appeal, the government argues that the district court erroneously interpreted 26 U.S.C. § 7212(a) to apply only to conduct intended to obstruct a pending IRS proceeding or investigation. The government argues that the correct interpretation is that the omnibus clause of § 7212(a) broadly prohibits all corrupt efforts to impede the administration of the tax laws, including schemes to disguise and conceal current financial transactions in order to evade tax obligations and prevent IRS detection and scrutiny. Kassouf asserts, on the other hand, that the district court did not err because the plain meaning of the statute imposes liability for obstruction of the "due administration" of the title and does not cover actions where no proceeding or investigation was pending. Kassouf points out that the conduct alleged to be obstructive, occurred when there was no IRS audit, investigation or proceeding. He notes that no IRS agent approached him, was intimidated, threatened or bribed, and that it cannot be sufficient to impose criminal liability upon mere allegations that the IRS's job was made harder.

In order to resolve this question, while we start with the plain meaning of the statute, this court must also weigh the IRS's duty to see that the tax laws are faithfully executed and administered (and their ability to quickly and inexpensively do so) with the policy of ensuring that criminal laws are strictly construed so as to give proper notice of the unlawfulness of the activity and the reach of the statute. On the one hand, courts should not limit a statute in such a way that prevents its purpose, but on the other hand, courts should be mindful not to criminalize activity that is not specifically proscribed by statute, however annoying it may be.

We thus begin with the plain language of the statute itself,Bread Political Action Committee v. FEC, 455 U.S. 577, 580, 102 S.Ct. 1235, 71 L.Ed.2d 432 (1982); Consumer Product Safety Comm'n v. GTE Sylvania, Inc., 447 U.S. 102, 108, 100 S.Ct. 2051, 64 L.Ed.2d 766 (1980); United States v. Caldwell, 49 F.3d 251, 251 (6th Cir.1995), and absent an ambiguity interpret it according to that language unless there is evidence of Congress's contrary intent. United States v. Apfelbaum, 445 U.S. 115, 121, 100 S.Ct. 948, 63 L.Ed.2d 250 (1980); Nixon v. Kent County, 76 F.3d 1381, 1386 (6th Cir.1996).

Section 7212(a) provides in pertinent part that:

Whoever corruptly or by force or threats of force (including any threatening letter or communication) endeavors to intimidate or impede any officer or employee of the United States acting in an official capacity under this title, or in any other way corruptly or by force or threats of force (including any threatening letter communication) obstructs or impedes, or endeavors to obstruct or impede, the due administration of this title shall ... [be guilty of an offense].

26 U.S.C. 7212(a). The first clause is aimed at specific threats against an officer or employee acting in an official capacity, and the second clause is known as the "omnibus clause" which is a "catch-all" clause aimed at other activities which may obstruct or impede the due administration of the title. See United States v. Williams, 644 F.2d 696, 699 (8th Cir.1981). Kassouf is only charged with a violation of the omnibus clause.

This court has never had the opportunity to interpret the omnibus clause of § 7212(a). Indeed no circuit courts have directly confronted the issue before us today--whether the omnibus clause of § 7212(a) requires a pending IRS proceeding or investigation of which the defendant was aware. Some courts have applied the clause to cases in which there was no pending investigation or proceeding, without being directly confronted with or deciding the precise issue here. See, e.g., United States v. Hanson, 2 F.3d 942 946-47 (9th Cir.1993) (affirming conviction under § 7212(a)'s omnibus clause where defendant submitted false 1099 and 1096 forms to the IRS showing fictitious payments to Farmers Home Administration officials and filed a false personal tax return claiming a fraudulent tax refund); United States v. Mitchell, 985 F.2d 1275, 1276-79 (4th Cir.1993) (finding defendant properly charged under § 7212(a) where conduct alleged involved improper filing of tax exempt status and inducement of customers to file false returns claiming cost of his services as tax-deductible contributions); United States v. Kuball, 976 F.2d 529, 531 (9th Cir.1992) (affirming § 7212(a) conviction where defendant filed false 1096 and 1099 forms claiming substantial payments to individuals and had filed a false 1040 form claiming a refund that was not due); United States v. Popkin, 943 F.2d 1535, 1540-41 (11th Cir.1991) (affirming a § 7212(a) conviction based on a defendant-attorney's conduct in advising and assisting a...