U.S. v. Larson

• Decision Date: 28 January 1980
• Docket Number: No. 79-1385,79-1385
• Parties: 80-1 USTC P 9137 UNITED STATES of America, Appellee, v. Russell L. LARSON, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1301

612 F.2d 1301

80-1 USTC P 9137

UNITED STATES of America, Appellee, v. Russell L. LARSON, Appellant.

No. 79-1385.

United States Court of Appeals,

Eighth Circuit.

Submitted Nov. 9, 1979.

Decided Jan. 4, 1980.

Rehearing Denied Jan. 28, 1980.

James Malcolm Williams, Minneapolis, Minn., for appellant.

Donald F. Paar, Asst. U. S. Atty., Minneapolis, Minn., for appellee; Sheryl Ramstad Hvass, Asst. U. S. Atty., Minneapolis, Minn., on the brief.

Before GIBSON, Chief Judge, and ROSS and STEPHENSON, Circuit Judges.

FLOYD R. GIBSON, Chief Judge.

Russell Larson appeals his conviction pursuant to a jury verdict in the United States District Court for the District of Minnesota ¹ finding him guilty on all counts of a six-count indictment. The indictment charged three counts of violating 26 U.S.C. § 7201 (1976) ² by willfully evading income taxes for the years 1972, 1973, and 1974, and three counts of violating 26 U.S.C. § 7206(1) (1976) ³ by subscribing to materially false corporate income tax returns for the years 1972, 1973, and 1974. On appeal, Larson challenges numerous rulings of the trial judge, including those relating to a suppression motion, a motion to reveal the identity of an informant, denial of a hearing on the issue of discriminatory prosecution, and various evidentiary matters. Larson also contends that the trial court erred in not finding the willful evasion of income tax charges and the subscribing to materially false corporate return charges to be duplicitous. Finally, Larson appeals the trial judge's refusal to grant either a motion for judgment of acquittal or, in the alternative, a new trial. We affirm.

In February 1975, an unidentified informant contacted the Intelligence Division of the Internal Revenue Service in St. Paul, Minnesota, concerning a possible income tax evasion scheme at Polar Chevrolet, Inc. in White Bear Lake, Minnesota. The informant alerted an IRS special agent in the Intelligence Division to a scheme whereby Larson, president and majority stockholder of Polar Chevrolet, received kickbacks from advertising fees paid to Rodger Vogel, a local television personality whose production firm did commercials for Polar Chevrolet. The special agent informed his group manager of the tipster's story. The group manager then referred the matter to the Audit Division, pursuant to the customary practice regarding information of that character. The group manager of the Audit Division, in his sole discretion, ordered an examination of the tax liability of Polar Chevrolet. IRS Revenue Agent Gary Koosman was instructed on September 8, 1975, to perform a civil audit of the 1972, 1973 and 1974 tax returns of Larson and Polar Chevrolet in order to determine their over-all tax liability. Koosman's only contact with the Intelligence Division during this period was to talk with the special agent, who had spoken with the informant, concerning the content of the informant's information.

On November 17, 1975, Agent Koosman visited Polar Chevrolet to begin his audit of the corporate books. He subsequently met with Larson on November 25, 1975, and questioned Larson regarding payments from Polar Chevrolet to Vogel and payments from Vogel's production firm to Larson. On that same date Koosman determined that Larson's and Polar's returns were potentially fraudulent. On December 19, 1975, Koosman, after speaking with Vogel, referred the case to the Intelligence Division for criminal investigation. Larson was advised of his Miranda rights on April 22, 1976.

The evidence disclosed that Larson, in late 1971, had become engaged in a kickback or rebate scheme with Vogel and his production firm. The procedure utilized was for Vogel to submit two invoices, a correct invoice from his advertising firm to Polar Chevrolet, and another invoice inflating the correct charge. Larson then requested Vogel to write a check to Larson reflecting the difference between the original and the inflated invoice. This scheme continued through February 1974.

The kickback scheme even extended to using blank invoices when no services were involved. Vogel would simply write a check which accompanied an invoice with the term "rebated" written upon it. At trial, Vogel testified, in contravening statements made by Larson to Agent Koosman, that these payments were neither referral fees from Larson nor loans to Larson. Larson also diverted checks made payable to Polar Chevrolet to his own personal account during the period of the rebate scheme. These checks involved payments received from leases of trucks, automotive parts repayments and refunds from an advertising firm.

The kickback scheme plus the check diversions resulted, during the taxable years 1972 through 1974, in the underreporting of Polar Chevrolet's corporate income by $57,434 and Larson's personal income by $44,191. A local certified public accountant prepared the returns involved and testified that they were based on information supplied to him by Larson and Polar Chevrolet. Larson signed both his own and the corporation's returns.

Larson was indicted on August 14, 1978. On October 19, 1978, the trial judge denied Larson's motion to require disclosure of the identity of the informant. On January 15, 1979, the trial judge granted Larson's motion for a suppression hearing and denied his motion to dismiss the indictment and to hold an evidentiary hearing on the issue of selective prosecution. After the suppression hearing, the trial judge on January 23 ordered suppressed any statements made by Larson or documents obtained from him after November 25, 1975, the date of the meeting between Agent Koosman and Larson, and before April 22, 1976, when Larson was informed of his Miranda rights. Jury trial commenced on January 23, 1979. On January 31 the jury found Larson guilty on all six counts of the indictment. Larson was sentenced on May 3, 1979, to two years on each count to be served concurrently.

Pretrial motions

Larson contends that the IRS should have been compelled to disclose the identity of the informant who tipped the special agent in the Intelligence Division to Larson's tax evasion scheme. In United States v. Weir, 575 F.2d 668, 673 (8th Cir. 1978), we held that "a court should not require disclosure of an informant's identity unless the disclosure is vital to a fair trial." The privilege against disclosing the identity of an informer balances the public interest in effective law enforcement with the fundamental requirement of fairness to the defendant. United States v. Hurse, 453 F.2d 128, 130 (8th Cir. 1972). Here, the IRS's need for information concerning tax evasion outweighs any claimed prejudice by Larson. We agree with the trial court's finding that the identity of the informant was not relevant or helpful to the defense nor essential to a fair determination of the issues. Roviaro v. United States, 353 U.S. 53, 77 S.Ct. 623, 1 L.Ed.2d 639 (1957). In particular, we note that the two days of pretrial hearings, during which extensive testimony and documentation were presented, reveal that the identity of the tipster was irrelevant to determining when the investigation began to focus on possible criminal activity by Larson.

Larson next argues that all evidence obtained prior to when he was read his Miranda rights should be suppressed because the civil audit of his taxes was a disguised criminal investigation. Preliminarily, we note that Miranda warnings are not necessary in interviews with IRS agents concerning tax liability when the subject is not in custody, even though the "focus" of the investigation has centered upon the taxpayer. Beckwith v. United States, 425 U.S. 341, 347, 96 S.Ct. 1612, 48 L.Ed.2d 1 (1976). Miranda warnings are not generally required even when the investigating IRS division is one which deals primarily with criminal fraud. Id. at 345, 96 S.Ct. 1612. As noted in Beckwith, 425 U.S. at 348, 96 S.Ct. at 1617, only when a noncustodial investigation...