U.S. v. Marchant

Citation774 F.2d 888
Decision Date04 October 1985
Docket NumberNo. 85-1191,85-1191
Parties-451, 85-2 USTC P 9724, 19 Fed. R. Evid. Serv. 985 UNITED STATES of America, Appellee, v. Lowell B. MARCHANT, Appellant.
CourtUnited States Courts of Appeals. United States Court of Appeals (8th Circuit)

Eugene G. Sayre, Little Rock, Ark., for appellant.

Sandra Cherry, Asst. U.S. Atty., Little Rock, Ark., for appellee.

Before ROSS, Circuit Judge, BRIGHT, Senior Circuit Judge, and NICHOL, * Senior District Judge.

BRIGHT, Senior Circuit Judge.

The grand jury indicted Lowell B. Marchant on counts of wilfully attempting to evade income tax in the years 1977 (Count I) and 1978 (Count II) and placed the location of those offenses in the Eastern District of Arkansas. The district court in that district transferred the case for trial to the Western District of Arkansas. 1 After conviction on both counts in a jury trial, Marchant appeals the convictions, asserting the following contentions: (1) the district court erred in denying his pretrial motion to dismiss and his trial motion for acquittal for a lack of subject matter jurisdiction on grounds that the conduct relating to the charge occurred in the Western District of Arkansas; (2) the district court erred in failing to dismiss Count I of the indictment as barred by the six-year statute of limitations; (3) the district court erred in admitting evidence of prior wrongful acts and in other evidentiary rulings; (4) the district court erred in its instructions to the jury in not presenting Marchant's theory of the case; (5) the district court erred in failing to discharge an allegedly incompetent juror; and (6) the district court erred in denying Marchant a new trial.

We consider these contentions against the framework of the evidence and procedural history of the case.

I. BACKGROUND.

During the relevant tax years, 1977 and 1978, Marchant and his wife resided in Mountain Home, which is in the Western District of Arkansas. The Marchants held substantial interests in several business entities, including some Subchapter S corporations, located in Arkansas, Missouri, and Oklahoma. In 1980, the Government began investigating the Marchants' personal tax liability, as well as that of their businesses. On Monday, April 16, 1984, a grand jury returned a two-count indictment, charging Marchant with attempting to evade or defeat a large portion of his 1977 and 1978 income tax by "preparing and causing to be prepared, by signing and causing to be signed, and mailing and causing to be mailed in the Eastern District of Arkansas, a false and fraudulent tax return" in violation of 26 U.S.C. Sec. 7201.

Trial was set in the Eastern District of Arkansas. Marchant entered pretrial motions to dismiss the complaint and indictment for a lack of venue. Preserving these motions, Marchant requested transfer of the case to the Western District of Arkansas under 18 U.S.C. Sec. 3237(b) (1982). The district court duly granted the motion to transfer, but did not rule on the motions to dismiss. After hearing arguments and taking evidence, the District Court for the Western District of Arkansas denied the motions, and the case proceeded to trial before a jury.

At trial, the Government introduced evidence showing that Marchant omitted substantial receipts of money from his 1977 and 1978 tax returns, including interest received on loans, rent received on a building lease, and income received by diverting money to himself from other business entities. After a five-day trial, the jury returned guilty verdicts on both counts of the indictment. The district court sentenced Marchant to one year in jail and assessed a fine of $10,000 on Count I and gave Marchant three years probation on Count II. The court stayed its judgment pending this appeal.

II. DISCUSSION.
A. Venue.

Marchant first contends that, because he engaged in no conduct relating to the filing of his returns in the Eastern District of Arkansas, that district acquired no jurisdiction over the crime, and that infirmity extended to the actual place of trial on transfer. Indeed, the Government offered no proof that Marchant was even in the district during the relevant time periods. The Government asserts, however, that proof of the preparation of Marchant's tax returns by an accountant within the Eastern District established proper venue there, as well as subject matter jurisdiction.

The Constitution and the federal laws of the United States grant persons the right to be tried in the judicial district in which their offense occurred. U.S. Const. Art. III, Sec. 2; U.S. Const. amend. VI; Fed.R.Crim.P. 18. Questions of venue "are not merely matters of formal legal procedure," but raise "deep issues of public policy." United States v. Johnson, 323 U.S. 273, 276, 65 S.Ct. 249, 251, 89 L.Ed. 236 (1944); Holdridge v. United States, 282 F.2d 302, 305 (8th Cir.1960). The Government must prove venue in criminal cases by a preponderance of the evidence. United States v. Netz, 758 F.2d 1308, 1312 (8th Cir.1985).

In many instances, all aspects of an offense are not committed within a single district. For these "continuing offenses," 18 U.S.C. Sec. 3237(a) (1982) provides that " * * * any offense against the United States begun in one district and completed in another, or committed in more than one district, may be inquired of and prosecuted in any district in which such offense was begun, continued, or completed." Under this statute, the locality of a crime for the purpose of venue extends "over the whole area through which force propelled by an offender operates." United States v. Johnson, supra, 323 U.S. at 275, 65 S.Ct. at 250.

The crime of wilfully attempting to evade or defeat tax liability is completed when the taxpayer files the tax return with the Internal Revenue Service. See United States v. Habig, 390 U.S. 222, 223, 88 S.Ct. 926, 927, 19 L.Ed.2d 1055 (1968). Obviously, the taxpayer cannot file the return until it is prepared, signed, and mailed. These preliminary steps often occur in districts other than that in which the taxpayer files the return. In such cases, courts recognize that the violation of section 7201 is a "continuing offense," and the Government can prosecute the taxpayer in the district where the return was prepared, signed, mailed, or filed. See, e.g., United States v. King, 563 F.2d 559, 562 (2d Cir.1977), cert. denied, 435 U.S. 918, 98 S.Ct. 1476, 55 L.Ed.2d 510 (1978); United States v. Gross, 276 F.2d 816, 818 (2d Cir.), cert. denied, 363 U.S. 831, 80 S.Ct. 1602, 4 L.Ed.2d 1525 (1960); Holbrook v. United States, 216 F.2d 238, 239 (5th Cir.1954), cert. denied, 349 U.S. 915, 75 S.Ct. 605, 99 L.Ed. 1249 (1955); United States v. United States District Court, 209 F.2d 575 (6th Cir.1954); United States v. Goldberg, 206 F.Supp. 394, 397 (E.D.Pa.1962), aff'd, 330 F.2d 30 (3d Cir.), cert. denied, 377 U.S. 953, 84 S.Ct. 1630, 12 L.Ed.2d 497 (1964).

Here, Marchant signed and mailed his tax returns in the Western District of Arkansas. Only his accountant's preparation of the returns occurred in the Eastern District. However, Marchant permitted his accountant to carry false information into the Eastern District and there to prepare and attest returns understating Marchant's tax liability. Marchant therefore propelled a force into the Eastern District as surely as had he personally prepared the returns in that district. Although Marchant's violation of section 7201 was completed in another district, it was set in play within the Eastern District. Consequently, it was a "continuing offense," and, under 18 U.S.C. Sec. 3237(a), venue was proper in the Eastern District. 2

B. Statute of Limitations.

Marchant also contends that Count I of the indictment, dealing with his 1977 tax return, is barred by the six-year statute of limitations, 26 U.S.C. Sec. 6531(2) (1982). Marchant filed his 1977 tax return on April 15, 1978, and the grand jury returned its indictment on April 16, 1984. The district court held that the indictment was timely because Marchant's eleven-day health and pleasure trip to Switzerland in 1983 tolled the statute of limitations for that period of time.

Section 6531 provides that "the time during which the person committing any of the various offenses arising under the internal revenue laws is outside the United States * * * shall not be taken as any part of the time limited by law for the commencement of such proceedings." 26 U.S.C. Sec. 6531 (1982). Marchant argues that the legislative history of this tolling provision indicates that "outside the United States" does not include health and pleasure trips. The Government advocates a strict construction of the phrase, such that Marchant's trip "outside the United States" tolled the statute of limitations for the eleven days.

As originally proposed by the House of Representatives in 1884, the tolling provision applied only to persons "beyond the reach of legal process." H.R. 6370, 48th Cong., 1st Sess., 15 Cong.Rec. 3097 (1884). A Senate Committee changed this language, however, to apply to persons "absent from the district" where the offense occurred. See H.R. 6370, 48th Cong., 1st Sess., 15 Cong.Rec. 5770 (1884). The bill passed with its altered language, 26 U.S.C. Sec. 3748 (1939) (originally enacted as Act of July 5, 1884, ch. 225, 23 Stat. 122 (1884) ).

The legislative history of the tolling provision does not reveal the purpose underlying the substitution of "beyond the reach of legal process" for "absent from the district." Congress' apparent intent was to draft the statute in language similar to that in comparable state civil provisions. See Wolfgram, Tolling the Statute of Limitations in a Criminal Tax Case, 28 Taxes 53, 55 n. 15 (1950); Note, Limitation of Actions--Tolling of Period--Criminal Tax Statute Tolled Where Defendant Who Was "Absent From the District" Never Resided Therein, 66 Harv.L.Rev. 1323, 1323 (1953). Indeed, in 1884, the substance was not changed by the alteration. At that...

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