U.S. v. Mohney

• Decision Date: 07 January 1992
• Docket Number: No. 90-1738,90-1738
• Citation: 949 F.2d 899
• Parties: -5932, 91-2 USTC P 50,568 UNITED STATES of America, Plaintiff-Appellant, v. Harry V. MOHNEY; Thomas Tompkins; Elizabeth L. Scribner; and Lee J. Klein, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 899

949 F.2d 899

68 A.F.T.R.2d 91-5932, 91-2 USTC P 50,568

UNITED STATES of America, Plaintiff-Appellant, v. Harry V. MOHNEY; Thomas Tompkins; Elizabeth L. Scribner and Lee J. Klein, Defendants-Appellees.

No. 90-1738.

United States Court of Appeals Sixth Circuit.

Argued July 18, 1991.

Decided Nov. 27, 1991.

Rehearing and Rehearing En Banc

Denied Jan. 7, 1992.

Joseph Allen, Asst. U.S. Atty., Detroit, Mich., Robert E. Lindsay (briefed), Alan Hechtkopf, Karen Quesnel (argued), U.S. Dept. of Justice, Appellate Section Tax Div., Washington, D.C., for the U.S.

Clyde B. Pritchard, Edith S. Thomas (briefed), Detroit, Mich., for Harry V. Mohney.

Larry C. Willey (argued and briefed), Grand Rapids, Mich., for Thomas Tompkins, Elizabeth L. Scribner, Lee J. Klein.

Before RYAN and BOGGS, Circuit Judges, and DOWD, District Judge. ^*

RYAN, Circuit Judge.

The United States appeals the decision of the district court denying a motion to reconsider the dismissal, based on our recent decision in United States v. Minarik, 875 F.2d 1186 (6th Cir.1989), of a charge of conspiracy to defraud the government.

Because we conclude that the district court erred in holding that Minarik controlled the disposition of this case, we reverse.

I.

On September 9, 1988, the grand jury returned a seven-count indictment against the defendants. The indictment alleged that defendant Harry Mohney, through separate corporate tax returns, concealed his ownership of several adult-oriented businesses and filed false personal tax returns. The other defendants, all employees of Modern Bookkeeping Services, a corporation owned by Mohney which prepared the tax returns, were charged only in Count I of the indictment. Count I charged the Modern employees with conspiracy to defraud the government through the concealment of ownership of the adult-oriented businesses on the tax returns, in violation of 18 U.S.C. § 371. The remaining counts charged Mohney with the substantive offenses of filing and aiding in the filing of false personal and corporate tax returns, in violation of 26 U.S.C. §§ 7206(1) and (2).

The district court granted the defendants' motion for a bill of particulars clarifying the allegations of Count I. The defendants also brought a motion to dismiss Count I, asserting that the conspiracy count was impermissibly brought under the "defraud" clause of 18 U.S.C. § 371 rather than the "offense" clause of the same statute.

Relying on Minarik, 875 F.2d 1186, the district court granted the motion to dismiss. United States v. Mohney, 723 F.Supp. 1197 (E.D.Mich.1989). In Minarik, this court was concerned about the confusion caused to the defendants in that case by the failure of the indictment adequately to notify them of the charges. We held that, under the circumstances of that case, a charge laid under 18 U.S.C. § 371 when there is also a specific statute describing the conduct involved in the alleged conspiracy must charge the defendant under the "offense" clause of 18 U.S.C. § 371, not the "defraud" clause of that section. Minarik, 875 F.2d 1186. Here, the district court found that "the government's accusation in Count I is essentially a charge that the defendants conspired to conceal Mohney's ownership or control interests by filing tax returns which falsely fail to show such ownership or control." Mohney, 723 F.Supp. at 1203. The court further found that 28 U.S.C. § 7206 "fits perfectly the conduct which is the core, the very essence of the government's charge in Count I" and that "[s]ince it is not charged under the offense clause, and the statute is not specified in Count I," Minarik mandated dismissal of the charge. Id.

The government's motion for reconsideration of the district court's order of dismissal was denied.

II.

A. Minarik

Because the district court dismissed Count I based on its reading of Minarik, we now turn to that case and the issues it addresses. In Minarik, 875 F.2d 1186, defendant Campbell received and ignored three tax assessment notices from the IRS. After receiving these notices, Campbell and Minarik sold real estate on the condition that the buyer pay for the property either in cash or cashier's checks of less than $5,000. When Campbell and Minarik tried to cash the checks, they were arrested by the IRS. The indictment charged the defendants with willfully conspiring " 'to defraud the United States by impeding, impairing, obstructing and defeating the lawful functions of the Department of the Treasury.' " Id. at 1188. It further charged that " '[i]t was a part of the said conspiracy that the defendants would conceal and continue to conceal the nature of ALINE MERKEL CAMPBELL'S business affairs regarding a residential property owned by her in Nashville, Tennessee and would conceal and continue to conceal the source and nature of her income from said business affairs.' " Id. The indictment charged that the conspiracy violated 18 U.S.C. § 371. A bill of particulars offered two distinct theories for the prosecution: avoidance of the currency reporting requirement of 31 U.S.C. § 5313(a), a theory later abandoned by the government, and tax evasion, a theory the court did not believe was alleged in the indictment. Id. at 1189-90.

18 U.S.C. § 371 provides that:

If two or more persons conspire either to commit any offense against the United States, or to defraud the United States, or any agency thereof in any manner or for any purpose, and one or more of such persons do any act to effect the object of the conspiracy, each shall be fined not more than $10,000 or imprisoned not more than five years, or both.

If, however, the offense, the commission of which is the object of the conspiracy, is a misdemeanor only, the punishment for such conspiracy shall not exceed the maximum punishment provided for such misdemeanor.

The Minarik court stated that section 371's

first sentence has always been read in the disjunctive to create a crime of conspiracy to commit an "offense" against the United States that is to be distinguished from the crime of conspiracy to "defraud" the government. The statute is written in the disjunctive in order to criminalize two categories of conduct: conspiracies to commit offenses specifically defined elsewhere in the federal criminal code, and conspiracies to defraud the United States. The first category requires reference in the indictment to another criminal statute which defines the object of the conspiracy. The second category, the defraud clause, stands on its own without the need to refer to another statute which defines the crime.

Minarik, 875 F.2d at 1186-87. The court concluded that

where the duties of a citizen are as technical and difficult to discern as they are when a taxpayer, before levy, engages in otherwise legitimate activities that may make ultimate collection more difficult, we hold that a Congressional statute closely defining those duties takes a conspiracy to avoid them out of the defraud clause and places it in the offense clause. The conspiracy is still an indictable offense under the first clause of § 371. But compliance with our rule today will mean that prosecutors and courts are required to determine and acknowledge exactly what the alleged crime is. They may not allow the facts to define the crime through hindsight after the case is over.

Id. at 1196 (emphasis in original). The court offered three explanations for this conclusion. First, the purpose of the defraud section "was to reach conduct not covered elsewhere in the criminal code" and thus should not be used when a specific provision covers that conduct. Id. at 1194. Second, section 371's misdemeanor clause, which limits punishment of conspiracies whose object is defined as a misdemeanor, would be defeated if those crimes could be prosecuted as felonies under the defraud clause. Id. Third, use of the defraud clause would defeat the object of section 7206(4) which specifically criminalized the behavior at issue. Id. By not using section 7206(4), which prohibited the concealment of property upon which levy is authorized after a notice of assessment, the prosecution never made clear

what it referred to when it charged defendants with conspiring to defraud the United States by impeding the Department of the Treasury.

Such confusion in a criminal prosecution is not permissible when an indictment for conspiracy to commit the offense defined in § 7206(4) would have provided all the clarity that was missing.

Id. at 1195.

B. Inapplicability of Minarik

After studying Minarik, as well as the present case, we conclude that the district court misread Minarik when it dismissed Count I based on that holding. The court in Minarik reached its decision based on the specific facts of that case. Minarik did not require that all prosecutors charge all conspiracies to violate a specific statute under the offense clause of section 371. Minarik stated that "the 'offense' and 'defraud' clauses as applied to the facts of this case are mutually exclusive...." Minarik, 875 F.2d at 1187 (emphasis added). The court stressed later in the opinion "the necessity of treating the offense and defraud clauses as mutually exclusive in this case. " Id. at 1194 (emphasis added). Other courts have also limited Minarik to its facts. In United States v. Bilzerian, 926 F.2d 1285, 1301 (2d Cir.), petition for cert. den., --- U.S. ----, 112 S.Ct. 63, 116 L.Ed.2d 39 (1991), the Second Circuit rejected the defendant's argument that Minarik required dismissal because he was charged under the defraud clause of section 371 when he could have been charged under the offense clause for violations of specific statutes because "[i]n Minarik, prosecution solely under the defraud clause--despite the existence of a specific statutory offense governing the conduct--led to substantial confusion and prejudiced the defendant's ability to prepare for trial." Id. Thus, it did not apply in Bilzerian where there was no prejudice or confusion. Likewise, in United...