U.S. v. Kleifgen, 76-3231

• Decision Date: 20 July 1977
• Docket Number: No. 76-3231,76-3231
• Citation: 557 F.2d 1293
• Parties: 77-2 USTC P 9568 UNITED STATES of America, Plaintiff-Appellee, v. George V. H. KLEIFGEN, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1293

557 F.2d 1293

77-2 USTC P 9568

UNITED STATES of America, Plaintiff-Appellee, v. George V. H. KLEIFGEN, Defendant-Appellant.

No. 76-3231.

United States Court of Appeals Ninth Circuit.

July 20, 1977.

Kermitt L. Waters, Las Vegas, Nev., argued for appellant.

Phillip M. Pro, Asst. U. S. Atty., Las Vegas, Nev., argued for appellee.

Appeal from the United States District Court for the District of Nevada.

Before GOODWIN and SNEED, Circuit Judges, and HILL, ^* District Judge.

SNEED, Circuit Judge:

Appellant George V. H. Kleifgen, who is no stranger to this court, ¹ was in this case convicted of four counts of wilful attempt to evade and defeat income tax due for the four-year period commencing January 1, 1969, and ending December 31, 1972, in violation of 26 U.S.C. § 7201. To obtain a reversal of this conviction he relies on five contentions. These are that (1) the trial court erred in refusing to dismiss the indictment because the grand jury was unlawfully empaneled; (2) the unauthorized interview by the prosecution of his former counsel violated his Fifth and Sixth Amendment rights; (3) he was entitled to a judgment of acquittal; (4) exclusion of evidence indicative of a decline in his net worth was error; and (5) the jury instruction concerning certain embezzlement losses was prejudicial. We will address these contentions in order; when necessary our discussion of each will be supplemented by the relevant facts.

I.

Challenge to the Grand Jury.

Understanding of the appellant's first contention begins with the Jury Selection Act of 1968, 28 U.S.C. § 1861 et seq. (Act), which declares that "(i)t is the policy of the United States that all litigants in Federal courts entitled to trial by jury shall have the right to grand and petit juries selected at random from a fair cross section of the community in the district or division wherein the court convenes." 28 U.S.C. § 1861. To further the objectives of this provision, 28 U.S.C. § 1863 directs the district court to formulate a plan for random jury selection. ² The plan may provide for selection of prospective jurors on the basis of voter registration lists; these lists are to be supplemented, however, if necessary to foster the policy of section 1861. 28 U.S.C. § 1863(b)(2). A substantial failure to comply with the provisions of the Act enables a defendant to seek in a timely fashion a dismissal of the indictment or a stay of the proceedings against him. 28 U.S.C. § 1867(a).

In accordance with the grand jury selection plan promulgated pursuant to 28 U.S.C. § 1863, the United States District Court for the District of Nevada (Southern Division) used names randomly selected from voter registration lists as the exclusive source of potential jurors. ³ Appellant contends that his indictment by a grand jury so selected should have been dismissed under section 1867(a) because this method violated both the Fifth Amendment and 28 U.S.C. § 1861 by not insuring that the grand jury would be chosen from a fair cross section of the community. ⁴ Voter registration lists, he insists, should have been supplemented under section 1863(b)(2) to remedy this defect. In support of this position, appellant cites a demographic study which shows varying degrees of underrepresentation in the voter registration lists of five groups blacks, males, non-high school graduates, non-working people and the young.

As this circuit recently made clear, appellant in order to prevail must prove that the exclusive use of voter registration lists resulted in a substantial underrepresentation in the jury pool of a cognizable group in the community. United States v. Potter, 552 F.2d 901 (9th Cir. 1977). See also United States v. DiTommaso, 405 F.2d 385 (4th Cir. 1968), cert. denied,394 U.S. 934, 89 S.Ct. 1209, 22 L.Ed.2d 465 (1969). He has failed in this task. ⁵ Of the five groups which appellant argues are underrepresented, Potter instructs us that only two of these groups blacks and males are cognizable groups. Neither of these, moreover, was substantially underrepresented. Under Potter neither young people nor less educated people comprise a cognizable group. Neither "in some objectively discernible and significant way, is distinct from the rest of society." United States v. Potter, 552 F.2d at 904. These groups have no internal cohesion nor are they viewed as an identifiable class by the general populace. Moreover, their members have diverse attitudes and characteristics which defy classification. The same can be said for the unemployed. Therefore, we hold that neither non-high school graduates, non-working people, nor the young are cognizable classes. ⁶

Blacks and males, however, are cognizable classes within the community. See Ballard v. United States, 329 U.S. 187, 67 S.Ct. 261, 91 L.Ed. 181 (1946); United States v. Potter, supra. Appellant's demographic evidence ⁷ indicated that for the years studied blacks comprised 7% of the total population but only 5.1% of the jury list and that males comprised 50.9% of the total population but only 46.5% of the jury list. It is this underrepresentation which is at the heart of appellant's contention that he was deprived of the right to a grand jury chosen from a fair cross section of the community.

Neither the Constitution nor the Act, however, requires the grand jury to duplicate precisely the statistical complexion of the community. Hoyt v. Florida, 368 U.S. 57, 82 S.Ct. 159, 7 L.Ed.2d 118 (1961); United States v. Potter, supra. Some deviation from the statistical structure of the community is to be expected. Only when this deviation becomes substantial is a defendant deprived of his right to be judged by a grand jury chosen from a fair cross section of the community. In the absence of substantial underrepresentation there is no necessity to supplement voter registration lists. ⁸

Appellant, employing the same technique as did appellant in Potter, interprets his statistical data to show blacks and males to be underrepresented by 27% and 9% respectively. This interpretation, as pointed out in Potter, 552 F.2d at 906, exaggerates the effect of any deviation. To avoid this exaggeration, we adopted a test for substantiality which judges the effect of any deviation not in terms of percentages but in terms of its impact on the absolute numerical composition of the grand jury. United States v. Potter, supra; United States v. Armsbury, 408 F.Supp. 1130 (D.Or.1976). Cf. Castaneda v. Partida, 430 U.S. 482, 494, 97 S.Ct. 1272, 1280, 52 L.Ed.2d 498 (1977). That is, to determine substantiality we look to people not percentages.

Blacks and males, it is true, are underrepresented in an absolute sense by 2.9% and 4.4% respectively. Looking only at people, however, it is also true that in an array of 100 jurors, the absolute numerical effect of the underrepresentation of blacks and males would be that the array would include 2.9 fewer blacks and 4.4 fewer males. A grand jury of 23 drawn from this array on the average would underrepresent blacks by less than one juror and males by approximately one juror. This is not substantial underrepresentation. The district court, therefore, did not err in denying appellant's motion to dismiss the indictment.

II.

Interview with Former Counsel.

Appellant's second contention presents a somewhat more difficult issue. Prior to the trial of the case, the United States Attorney interviewed Henry Gordon, appellant's former counsel. Gordon had represented appellant in a prosecution for inflated medicare claims and in previous settlement proceedings with the Internal Revenue Service. Appellant argues that by interviewing his former counsel without the presence of his current counsel the government violated his rights to counsel and a fair trial under the Sixth Amendment and his right to due process under the Fifth Amendment.

Confidential communications had between appellant and his former counsel retain the protection of the attorney-client privilege beyond the termination of the attorney-client relationship. 8 J. Wigmore, Evidence § 2323 (McNaughton rev. 1961). EC 4-6, ABA Code of Professional Responsibility (1975). Governmental intrusion into this protected area can deprive a defendant of Fifth and Sixth Amendment rights. United States v. Zarzour, 432 F.2d 1 (5th Cir. 1970); Caldwell v. United States, 92 U.S.App.D.C. 355, 205 F.2d 879 (1953). Our difficulty springs from the fact that the record before us discloses neither the circumstances leading up to the interview nor what transpired therein. Absent this factual foundation, we cannot determine if privileged communications were disclosed and, if so, what harm ensued. We must, therefore, remand these questions to the district court for an evidentiary hearing thereon.

III.

Sufficiency of the Evidence.

Appellant next contends that the evidence conclusively established that no taxes were due and that consequently his motion for acquittal should have been granted. Although appellant employed the cash method of accounting in preparing his returns prior to 1969, he disagrees with the government's use of the cash method and insists that the accrual method, which according to his calculations demonstrates that there was no tax liability, better reflects his income for the four-year period.

There are two difficulties with the appellant's argument. The first is that the taxpayer cannot abandon the cash method without obtaining the consent of the Commissioner. I.R.C. § 446(e). ⁹ This he has not done. The second is that even if the accrual method were available, its use would eliminate all taxes due only if certain deductions, which in the main consisted of embezzlement losses and reserves for contingent liabilities, ¹⁰ are valid. These deductions, however, are not proper. As we shall point out, the embezzlement losses under the facts of this case were not allowable for the year in which they were discovered, see Part V, infra. Moreover, sums set aside to cover contingent...