U.S. v. Mackey

• Citation: 571 F.2d 376
• Decision Date: 22 February 1978
• Docket Number: Nos. 77-1074 and 77-1978,s. 77-1074 and 77-1978
• Parties: 78-1 USTC P 9321, 2 Fed. R. Evid. Serv. 1284 UNITED STATES of America, Plaintiff-Appellee, v. Fred T. MACKEY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 376

571 F.2d 376

78-1 USTC P 9321, 2 Fed. R. Evid. Serv. 1284

UNITED STATES of America, Plaintiff-Appellee, v. Fred T. MACKEY, Defendant-Appellant.

Nos. 77-1074 and 77-1978.

United States Court of Appeals, Seventh Circuit.

Argued Dec. 7, 1977.

Decided Feb. 22, 1978.

Harvey M. Silets, Chicago, Ill., for defendant-appellant.

Charles E. Brookhart, Myron C. Baum, Abraham M. Poretz, Tax Div., U. S. Dept. of Justice, Washington, D. C., for plaintiff-appellee.

Before CUMMINGS and SPRECHER, Circuit Judges, and CAMPBELL, Senior District Judge. ^*

SPRECHER, Circuit Judge.

The case involves a large number of alleged errors by the district court in a criminal trial where the defendant was convicted both of attempted tax evasion in violation of 26 U.S.C. § 7201 and conspiracy to evade the payment of taxes in violation of 18 U.S.C. § 371. Defendant's chief arguments deal with the admissibility of the hearsay declarations of a co-conspirator not on trial, the propriety of some of the prosecutor's closing remarks and the failure of the prosecution to provide materials that might have been used by the defendant to impeach one of the prosecution's main witnesses.

I

This case involves two consolidated appeals arising out of the same district court case. Initially, defendant appeals his convictions for tax evasion and conspiracy on the basis of numerous assigned errors at trial. Defendant also appeals the district court's denial of his motion for a new trial based on "newly discovered" evidence that defendant claims was subject to disclosure by the government under Brady v. Maryland, 373 U.S. 83, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963), and/or the Jencks Act, 18 U.S.C. § 3500. The facts underlying the convictions will be discussed first and those relevant to the motion for a new trial will be described subsequently.

A

The defendant, Fred T. Mackey, and his alleged co-conspirator, F. Lawrence Anderson, were charged in a five count indictment. Count I charged the defendant with conspiracy to evade payment of income tax and to defraud the United States by impeding the Internal Revenue Service in the collection of revenue in violation of 18 U.S.C. § 371. ¹ Count II charged the defendant with attempted tax evasion in violation of 26 U.S.C. § 7201. ² Count III charged the defendant with subornation of perjury in violation of 18U.S.C. § 1622. ³ Counts IV and V of the indictment related only to F. Lawrence Anderson. ⁴

The claims in the indictment stem from a series of events subsequent to a $2,488,712 stipulated settlement of June 5, 1972, between the defendant and the Internal Revenue Service in a civil case before the Tax Court for back taxes and penalties for the period from 1954 through 1961 and 1963 through 1965. It was this large sum of money due and owing the federal government that the prosecution claims the defendant conspired and attempted to avoid paying.

The defendant's trial lasted for over a week, during which the prosecution presented 34 witnesses and over 100 documents. In turn, the defendant presented three witness on his behalf. Since we cannot describe all of the evidence presented at trial without unduly prolonging this opinion, we will focus on the important points in the government's and defendant's cases.

The prosecution presented evidence as to six affirmative acts of attempted tax evasion committed by the defendant. First, the prosecution showed that the defendant had substantial control over three companies, Gibraltar Mutual Insurance Company, Gibraltar Industrial Insurance Company and M.W.E. & S. Investment Company (M.W.E. & S.), and that he manipulated them so that most of the assets of the three were kept in M.W.E. & S. which left them potentially at the defendant's disposal. Second, the prosecution presented evidence that several checks of M.W.E. & S. were used to purchase personal goods and services for the defendant, and therefore, a bank account at the Gary National Bank placed in the company's name may have been "fictitious." Third, the defendant was shown to have made substantial purchases in cash, the source of which was generally unknown. Fourth, the prosecution presented evidence that defendant used money from M.W.E. & S. and the insurance companies to pay for various personal items, including, among other things, a security system and swimming pool for the defendant's home. Fifth, the prosecution showed that defendant had kept mortgages on his property, notwithstanding that there was no money due and owing to anyone. Finally, it was shown that defendant had placed his assets with another person and company by giving $25,000 in cash to a Carl Smith to invest in a company named A & D Realty, Inc. (A & D).

The prosecution's conspiracy charge is somewhat more complex. It revolves around the formation by F. Lawrence Anderson, defendant's co-conspirator, and Robert F. Deal, defendant's nephew by marriage, of A & D, which purchased the defendant's home from the IRS. ⁵ It was the prosecution's theory that A & D was created for the defendant's benefit so that his resources could be placed secretly in A & D and thereby be protected from collection by the Internal Revenue Service. The defendant claimed that A & D was a legitimate realty company with bona fide investors. The prosecution presented three key witnesses on the conspiracy count who were purportedly shareholders in A & D, but who testified that they, in fact, had not invested their own money in the enterprise. Carl Smith, a pharmacist in a building owned by defendant, testified that he was initially contacted by Mr. Anderson about an "investment" in A & D Realty. He testified further that he was called by defendant to come to his office, whereupon he was given by the defendant $25,000 in cash in a paper bag and was told to purchase a cashier's check payable to A & D Realty and to take the check to Mr. Anderson. Smith testified that he did this, and that at some indeterminate time later he signed an A & D stock certificate for a $25,000 investment.

A second witness, Warren E. Dotson, an automobile tire dealer, testified that defendant Mackey had asked him about investing in A & D Realty. In response to Dotson's comment that he lacked the money to invest, defendant said that Dotson "didn't need any" (Tr. at 672-75). Subsequently, Dotson was contacted by co-conspirator Anderson who gave Dotson $12,000 in cash and told him to take it to a bank and to get a cashier's check payable to A & D Realty. Dotson returned the check to Anderson's secretary. Later, just before he was to testify before the grand jury, Dotson was invited to an A & D Realty shareholders' meeting at Anderson's house, at which time he signed the company's stockholders book and a certificate for 60 shares of its stock. ⁶

The third witness, Dr. Edwin G. Moore, testified that he had been contacted by F. Lawrence Anderson about loaning Anderson money for some real estate investments. Dr. Moore agreed to do so, wrote a check payable to A & D Realty for the sum of $10,000 and took it to Anderson. In return, Dr. Moore immediately was given $10,000 in cash by one of Anderson's employees.

In addition to the evidence of a conspiracy between the defendant and F. Lawrence Anderson to have A & D Realty established and to place defendant's assets in the firm for the purpose of purchasing defendant's home, the prosecution sought to demonstrate the existence of a conspiracy to cover-up the true nature of A & D Realty. The primary evidence used was F. Lawrence Anderson's false grand jury testimony in April 1975, that Messrs. Smith and Dotson and Dr. Moore were actual investors in A & D Realty (Exhibit 33a). The concealment phase of the conspiracy was alleged to have continued until the date of the indictment.

Based primarily on the evidence described above, the jury found the defendant guilty on both the conspiracy and tax evasion counts in the indictment. The defendant appeals both convictions relying on several claimed errors by the district court during the trial.

B

As suggested above, Carl Smith's testimony that he received cash from the defendant and was told to invest it in A & D Realty was an important part of the prosecution's conspiracy case. Subsequent to the entry of judgment in this case, defense counsel discovered evidence indicating that Smith might have been involved in the trafficking of narcotics before and after he supposedly received $25,000 in cash from defendant. While investigating this possibility, defense counsel discovered that agents of the Internal Revenue Service, including one who was investigating the defendant, had interrogated Smith about his narcotics activity. The IRS had elicited from Smith, in return for possible consideration in other matters, a statement which he refused to sign without his attorney present and which, in fact, he never did sign.

Defense counsel, believing that the evidence of Smith's narcotics trafficking was significant because it was a possible source for the $25,000 Smith claimed the defendant had given him, and also because it was a source that Smith would have a strong motive to conceal, moved for a new trial under Fed.R.Crim.P. 33 based on evidence that allegedly was withheld by the prosecution.

A hearing on the motion was held. During that hearing it was shown that defense counsel had evidence of Smith's possible narcotics trafficking available to him prior to trial. Smith had been questioned before the Grand Jury by the prosecution about a previous interview he had had with the government about narcotic transactions. ⁷ Smith's grand jury testimony was provided to defense counsel during pre-trial discovery.

After the hearing, the court denied defendant's motion for two reasons. First, the court held that this evidence was not "newly discovered" because defense counsel could have located it had he exercised due diligence. Second, the court determined that the evidence was cumulative since it could only be used to...