U.S. v. Rice, 94-2154

• Decision Date: 04 April 1995
• Docket Number: No. 94-2154,94-2154
• Citation: 52 F.3d 843
• Parties: -1823, 41 Fed. R. Evid. Serv. 1145 UNITED STATES of America, Plaintiff-Appellee, v. Jerry V. RICE, Defendant-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 843

52 F.3d 843

75 A.F.T.R.2d 95-1823, 41 Fed. R. Evid. Serv. 1145

UNITED STATES of America, Plaintiff-Appellee, v. Jerry V. RICE, Defendant-Appellant.

No. 94-2154.

United States Court of Appeals Tenth Circuit.

April 4, 1995.

Peter Schoenburg of Rothstein, Donatelli, Hughes, Dahlstrom, Cron & Schoenburg, Albuquerque, NM, for defendant-appellant.

Paula G. Burnett, Asst. U.S. Atty. (John J. Kelly, U.S. Atty., with her on the briefs), Albuquerque, NM, for plaintiff-appellee.

Before MOORE, ALDISERT, ^* and BALDOCK, Circuit Judges.

JOHN P. MOORE, Circuit Judge.

Jerry Rice was convicted of two counts of making a false claim for an income tax refund in violation of 18 U.S.C. Sec. 287 and three counts of making and subscribing a false income tax return in violation of 26 U.S.C. Sec. 7206(1). Although Mr. Rice presents several matters for review, we affirm on the substantive issues but remand for resentencing.

According to the government, Mr. Rice, a certified public accountant, was the perpetrator of a complicated scheme of tax fraud involving several Subchapter S Corporations he established. Under federal income tax law, S Corporations are not required to file or pay taxes as corporate entities. Income and losses are chronicled on the S Corporation's shareholders' individual tax returns. However, such entities still must file a quarterly statement concerning their employees' withholding and an annual unemployment tax return (Forms 941 and 940 respectively). S Corporations, like other employers, must also remit the money withheld from their employees' paychecks to the Social Security Administration. The Internal Revenue Service keeps track of all the transactions from each account based on the corporation's Employer Identification Number (EIN).

During the tax years 1987, 1988, and 1989, Mr. Rice claimed on his Form 1040 Individual Tax Return that more money had been withheld by his employer than he owed in taxes. He received refunds from the IRS totaling $29,922.00.

During these three years, Mr. Rice was employed by Jerry V. Rice, CPA-PC, and Rice and Associates, CPA-PC, two S Corporations he controlled. As corporate president, Mr. Rice was responsible for filling out his own W-2 Forms along with those of all the corporate employees. IRS records indicated the S Corporations had submitted neither the required employee withholding forms nor the money withheld from their employees during the three years in question. The IRS believed Mr. Rice committed fraud because he received a tax refund based on excessive withholding that was never in fact withheld.

The investigation of Mr. Rice began in September 1990 with a routine audit of Southwestern Investments, Inc., another of his S Corporations. The IRS issued three summons to Mr. Rice requesting he appear before the agency and produce specified corporate documents. After Mr. Rice refused, the IRS initiated contempt proceedings to force him to comply. At the subsequent contempt hearing, the district court rejected each of Mr. Rice's grounds for failing to comply with the summonses, including his claim he did not have to comply because of his personal Fifth Amendment privilege. The indictment, trial, and conviction followed.

Mr. Rice raises three issues on appeal. First, he claims the government improperly was allowed to admit evidence at trial concerning his prior assertion of his Fifth Amendment privilege at the contempt hearing. Second, he argues the district court erred by not allowing his expert witness to testify. Third, Mr. Rice asserts the court made several errors in applying the sentencing guidelines.

Defendant's Fifth Amendment claim arises because during the government's questioning of Charles Duffy, an attorney in the Tax Division of the Department of Justice, Mr. Duffy stated:

I requested the Court to enforce the summons. In other words, I requested the Court to order Mr. Rice to appear and comply with the summons and produce the documents and give testimony. In response to the motion or petition to enforce, Mr. Rice raised various grounds supporting his contention that he should not have to comply with the three summons.

And those grounds--and I think there's five, six, seven or eight of them, include enforcement would violate his Fourth Amendment right, enforcement would violate his Fifth Amendment right.

Mr. Rice neither objected to Mr. Duffy's statement nor requested a curative instruction at any time. ¹

Because no objection asserting a violation of the defendant's Fifth Amendment self-incrimination privilege was raised at trial, we review this issue for plain error. United States v. Hager, 969 F.2d 883, 890 (10th Cir.), cert. denied, --- U.S. ----, 113 S.Ct. 437, 121 L.Ed.2d 357 (1992). To succeed in this claim, Mr. Rice must demonstrate the comments of the government's witness rise to the level of fundamental error. "Plain error is 'fundamental error, something so basic, so prejudicial, so lacking in its elements that justice cannot have been done.' " Id. at 890 (quoting United States v. Henning, 906 F.2d 1392, 1397 (10th Cir.1990), cert. denied, 498 U.S. 1069, 111 S.Ct. 789, 112 L.Ed.2d 852 (1991)).

We note initially, the assertion of error here is quite unusual because it is predicated upon an invalid exercise of the self-incrimination privilege. As the district court held in the civil contempt hearing, Mr. Rice could not properly invoke the privilege in this case because no corporation possesses such a right. United States v. Hansen Niederhauser Co., 522 F.2d 1037, 1039 (10th Cir.1975). This limitation extends to S Corporations. Id. Moreover, none of the authority cited to us addresses the issue of the propriety of prosecutorial comment on the exercise of a nonexistent privilege.

We do not have to reach the issue of propriety, however, because Mr. Rice is attempting to force his case into a box where it does not fit. Although it is a hoary rule that the prosecution cannot comment at trial on a defendant's post-Miranda decision to remain silent, Doyle v. Ohio, 426 U.S. 610, 96 S.Ct. 2240, 49 L.Ed.2d 91 (1976), the rule is predicated upon the principle that allowing the prosecution to impeach a defendant's trial testimony with his post-Miranda silence would penalize the exercise of his Fifth Amendment privilege. The Court offered two central reasons in support of this holding. First, it postulated, "every post-arrest silence is insolubly ambiguous because of what the State is required to advise the person arrested." Id. at 617, 96 S.Ct. at 2244. The defendant's silence may simply have occurred in response to the Miranda warnings and in no way indicates his guilt. Second, the Court believed that implicit in the Miranda warnings was the notion that their exercise "will carry no penalty." Id. at 618, 96 S.Ct. at 2245. This rule has been extended to apply to pre-arrest silence, United States v. Burson, 952 F.2d 1196, 1200-01 (10th Cir.1991), cert. denied, 503 U.S. 997, 112 S.Ct. 1702, 118 L.Ed.2d 411 (1992), with the exception that pre-arrest silence may be used for impeachment purposes. United States v. Chimal, 976 F.2d 608, 611 (10th Cir.1992), cert. denied, --- U.S. ----, 113 S.Ct. 1331, 122 L.Ed.2d 715 (1993); Jenkins v. Anderson, 447 U.S. 231, 238-40, 100 S.Ct. 2124, 2129-30, 65 L.Ed.2d 86 (1980).

Mr. Rice would like this rule extended still further. He attempted to invoke the privilege initially during an administrative proceeding and later during a civil enforcement action. The district court found the privilege did not apply. Now, Mr. Rice argues the government cannot describe what occurred at the civil contempt hearing--or at least not that he tried to invoke his Fifth Amendment privilege. The argument is without a rational basis.

Mr. Rice's attempt to invoke the privilege was unsuccessful because it was nonexistent. In Doyle, Burson, and the other typical cases in this area, the defendant has successfully remained silent. The government attempted to either attach a reason why the defendant chose to remain silent, or contended, if the story given at trial were true, the defendant would not have remained silent. In both circumstances, the government's gambit was to use the defendant's decision to remain silent to its advantage. This case is qualitatively different.

Here, the government attempted to demonstrate Mr. Rice's theory of what happened was of recent fabrication. Mr. Rice argued he sent the necessary forms to the IRS with an incorrect EIN, and the IRS subsequently lost them.

The government contested this evidence on two grounds. First, it introduced testimony of IRS internal procedures designed to prevent just such an occurrence. Second, the government put forth evidence Mr. Rice was previously ordered to produce all relevant documents, which would necessarily include the documents he was using to support his version of the events at trial. IRS Agent Robert Tarin testified Mr. Rice told him he had complied with this order. The government was not taking undue advantage of Mr. Rice's silence; it was instead informing the jury that either Mr. Rice recently came up with his explanation, or he originally failed to produce all the relevant documents. We see no error in this instance.

Mr. Rice next argues the district court erred in refusing to admit the testimony of one of his experts. Mr. Rice sought to have James J. Everett, formerly employed as an attorney in the Tax Division of the Department of Justice and the Internal Revenue Service, testify as an expert witness. Requested to make an offer of proof, Mr. Rice's counsel indicated Mr. Everett would testify that as a former prosecutor, he would not have filed a case against Mr. Rice based on the evidence the government had in its possession. Additionally, he would state had Mr. Rice failed to file in 1987, "a flag would have gone up right then." The significance of this statement would have been that because no "flag" went up, Mr. Rice must have filed as he cl...