U.S. v. Mangan

• Decision Date: 03 April 1978
• Docket Number: Nos. 553 and 554,D,s. 553 and 554
• Citation: 575 F.2d 32
• Parties: 78-1 USTC P 9349, 3 Fed. R. Evid. Serv. 315 UNITED STATES of America, Appellee, v. Frank MANGAN and Kevin Mangan, Defendants-Appellants. ockets 77-1326 and 77-1339.
• Court: U.S. Court of Appeals — Second Circuit

Page 32

575 F.2d 32

78-1 USTC P 9349, 3 Fed. R. Evid. Serv. 315

UNITED STATES of America, Appellee, v. Frank MANGAN and Kevin Mangan, Defendants-Appellants.

Nos. 553 and 554, Dockets 77-1326 and 77-1339.

United States Court of Appeals Second Circuit.

Argued Jan. 10, 1978.

Decided April 3, 1978.

Henry Winestine, New York City (Martin Erdmann, The Legal Aid Society, New York City, of counsel), for defendant-appellant Frank Mangan.

Lawrence Stern, Brooklyn, N. Y., for defendant-appellant Kevin Mangan.

James P. Lavin, Asst. U. S. Atty., New York City (Robert B. Fiske, Jr., U. S. Atty., Southern Dist. of New York, and Jeffrey E. Livingston, Richard F. Ziegler, Robert N. Shwartz, and Audrey Strauss, Asst. U. S. Attys., New York City, of counsel), for appellee.

Before FRIENDLY and VAN GRAAFEILAND, Circuit Judges, and DOOLING, Senior District Judge. ^*

FRIENDLY, Circuit Judge:

Fraud, Lord Macnaghten said, Reddaway v. Banham, (1896) A.C. 199, 211, is "infinite in variety." These appeals reveal a variety new at least to us. The fraud became possible because appellant Frank Mangan was an IRS Agent, working at the Mineola, L.I., office. According to the Government, the scheme, perpetrated by Frank and his brother Kevin, was this: Frank obtained the names and social security numbers of seven taxpayers, six named John McCarthy and the seventh Scott Murphy. ¹ In January and February 1972, Frank prepared 1971 income tax returns for these taxpayers and caused them to be filed. Each was accompanied by a W-2 tax withholding form showing that the seven taxpayers had worked for Atlas Investing Co., Inc., Ace Industries, Inc. or Admiral Realty Co., Inc., ² and that they had withholdings ranging from $12,000 to $14,000. The returns claimed partnership losses sufficient to entitle each taxpayer to a refund in the $9,000 range and gave false addresses at rooming houses and transient hotels on the upper west side of Manhattan, where Kevin had rented rooms in the taxpayers' names. The Government mailed refund checks to six of the taxpayers at these addresses. ³ Four McCarthy checks and the Murphy check were picked up and deposited in bank accounts that Kevin had opened in their names at four different locations. ⁴ The proceeds were withdrawn in cash during March and April, 1972. An accomplice, John Bertsch, gave substantial testimony concerning Kevin's activity in renting the rooms, picking up the checks, and opening and then closing the bank accounts. Kevin gave Bertsch $20,000 to $25,000 of the refund money. Bertsch testified that he spent a part of this and returned the balance to Kevin. Other evidence will be discussed in the course of this opinion.

A grand jury returned a thirteen count indictment with Count I charging conspiracy to file false claims against the United States in violation of 18 U.S.C. § 286, Counts II-VI charging use of the mails to defraud in violation of 18 U.S.C. § 1341 and Counts VII-XIII charging the filing of false and fraudulent income tax returns in violation of IRS § 7206(1). The jury convicted on all counts. Judge Stewart sentenced Frank Mangan to concurrent terms of two years on each count. He sentenced Kevin Mangan to concurrent terms of imprisonment of one year and a day on Counts I, II, III, IV, VII, VIII and IX; as to the remaining counts, V and VI (mail fraud), and X, XI, XII and XIII (filing false and fraudulent income tax returns), he suspended sentence and placed Kevin on probation for three years to commence upon his release from imprisonment. Each of the defendants has mounted a number of attacks upon his conviction and, pursuant to F.R. App.P. 28(i), has adopted the contentions of the other.

(1) Availability of Frank Mangan's tax returns under Title XII of the Tax Reform Act of 1976.

The Government's case against Frank Mangan rested in important part on his own income tax returns for 1971 through 1975. The handwritings on the body of the 1971 and 1973 returns were used as exemplars of Frank's handwriting and afforded the basis for an expert's opinion that the writing had been done by the same person who had prepared the fictitious McCarthy and Murphy returns. Another witness used the 1972 and 1973 returns as a basis for testimony that during 1972, when refunds were paid on the false returns, Frank made investments in securities which required him to supply new capital of $12,000. The same witness also pointed out that Frank Mangan's return for each of the years from 1971 to 1975 claimed partnership losses the same device used to produce the refund claims in the fictitious returns. The court received the returns in evidence over vigorous objection that this was prohibited by the confidentiality provisions recently enacted by Title XII of the Tax Reform Act of 1976, P.L. No. 94-455, now insofar as here pertinent I.R.C. §§ 6103, 7213 and 7217.

At first blush it would seem peculiar that there should be any bar to the Government's use of the returns of an allegedly faithless Internal Revenue Agent in a criminal prosecution against him for swindling the Treasury. However, the matter cannot be disposed of so readily.

While § 6103 stretches over 20 pages of the Internal Revenue Code, only a few provisions require mention here. A basic point is the distinction drawn in the statute between the disclosure of returns in matters relating to "tax administration" and other matters. Section 6103(b)(4)(A) defines "tax administration" as follows:

(i) the administration, management, conduct, direction, and supervision of the execution and application of the internal revenue laws or related statutes (or equivalent laws and statutes of a State) and tax conventions to which the United States is a party, and

(ii) the development and formulation of Federal tax policy relating to existing or proposed internal revenue laws, related statutes, and tax conventions . . . .

Subsection (B) specifies that this includes:

assessment, collection, enforcement, litigation, publication, and statistical gathering functions under such laws, statutes, or conventions.

Section 6103(h)(2) says that:

A return or return information shall be open to inspection by or disclosure to attorneys of the Department of Justice (including United States attorneys) personally and directly engaged in, and solely for their use in, preparation for any proceeding (or investigation which may result in such a proceeding) before a Federal grand jury or any Federal or State court in a matter involving tax administration, but only if

(A) the taxpayer is or may be a party to such proceeding;

(B) the treatment of an item reflected on such return is or may be related to the resolution of an issue in the proceeding or investigation; or

(C) such return or return information relates or may relate to a transactional relationship between a person who is or may be a party to the proceeding and the taxpayer which affects, or may affect, the resolution of an issue in such proceeding or investigation.

Under subsection (h)(3), if "the Secretary" ⁵ has referred a case to the Department of Justice, he may make such disclosure to it on his own motion. Otherwise he may do this only on the basis of a written request from the Attorney General, the Deputy Attorney General, or an Assistant Attorney General. Section 6103(h)(4) deals separately with disclosure in a judicial or administrative proceeding pertaining to tax administration. There disclosure is permitted if the case falls within one of the three conditions listed in § 6103(h)(2) or another not here pertinent; nothing is said with respect to the need for any "request."

Section 6103(i) lays down a more severe procedure in judicial or administrative proceedings not involving tax administration. Here the linchpin as regards taxpayer returns is a provision, § 6103(i)(1)(B), whereby the head of any Federal agency which is or may be a party to a proceeding to enforce a Federal criminal statute or, in the case of the Department of Justice, the Attorney General, the Deputy Attorney General, or an Assistant Attorney General may apply ex parte to a federal district judge for an order which is to be granted if the judge determines that:

(i) there is reasonable cause to believe, based upon information believed to be reliable, that a specific criminal act has been committed;

(ii) there is reason to believe that such return or return information is probative evidence of a matter in issue related to the commission of such criminal act; and

(iii) the information sought to be disclosed cannot reasonably be obtained from any other source, unless it is determined that, notwithstanding the reasonable availability of the information from another source, the return or return information sought constitutes the most probative evidence of a matter in issue relating to the commission of such criminal act.

Subsection (4) provides, inter alia, that a return obtained by this type of search warrant procedure "may be entered into evidence in any administrative or judicial proceeding pertaining to enforcement of a specifically designated Federal criminal statute (not involving tax administration) to which the United States or an agency . . . is a party . . . only if the court finds that (the) return" is probative of a matter in issue relevant in establishing the commission of a crime or the guilt of a party. Subsection (4) concludes by saying:

The admission into evidence of any return or return information contrary to the provisions of this paragraph shall not, as such, constitute reversible error upon appeal of a judgment in such proceeding.

Although counsel for Frank Mangan had been advised well in advance of trial of the Government's intention to introduce his tax returns, he made no motion to suppress under F.R.Cr.P. 12(b)(3). ⁶ Because of the lack of a suppression hearing, the record as to how Frank Mangan's tax returns got into the prosecutor's hands is not altogether clear. In answer to a question from the judge the...