U.S. v. Ruffin

• Citation: 575 F.2d 346
• Decision Date: 27 February 1978
• Docket Number: D,No. 1438,1438
• Parties: 78-1 USTC P 9269, 2 Fed. R. Evid. Serv. 1307 UNITED STATES of America, Plaintiff-Appellee, v. William M. RUFFIN, Defendant-Appellant. ocket 77-1160.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Page 346

575 F.2d 346

78-1 USTC P 9269, 2 Fed. R. Evid. Serv. 1307

UNITED STATES of America, Plaintiff-Appellee, v. William M. RUFFIN, Defendant-Appellant.

No. 1438, Docket 77-1160.

United States Court of Appeals, Second Circuit.

Argued June 16, 1977.

Decided Feb. 27, 1978.

Cora T. Walker, New York City (Walker & Bailey, Lawrence R. Bailey, Jr., New York City, of counsel), for defendant-appellant.

Cheryl M. Schwartz, Asst. U. S. Atty. (David G. Trager, U. S. Atty., E.D.N.Y., Bernard J. Fried, Asst. U. S. Atty., Brooklyn, N. Y., of counsel), for plaintiff-appellee.

Before WATERMAN, SMITH and OAKES, Circuit Judges.

WATERMAN, Circuit Judge:

This is an appeal from a judgment order of the United States District Court for the Eastern District of New York, Pratt, J., convicting appellant William M. Ruffin, following a jury trial, on three counts of an eleven-count indictment charging him with various violations of the federal income tax laws. The counts on which Ruffin was found guilty charged that he had evaded income taxes, in violation of 26 U.S.C. § 7201, ¹ by filing a false and fraudulent personal income tax return for the calendar year 1972 (Count IV) and by filing false and fraudulent corporate income tax returns for the calendar years 1970 and 1971 (Counts VII and VIII). Ruffin was acquitted, however, on tax evasion charges stemming from his filing of allegedly false and fraudulent personal income tax returns for the calendar years 1970 and 1971 (Counts II and III). The district court declared a mistrial on the remaining five counts of the indictment after the jury had deliberated for approximately twelve hours.

On appeal, Ruffin seeks reversal of his convictions on various grounds. His principal claim is that, inasmuch as the federal prosecutors failed to provide him with "target" warnings either prior to or during his grand jury appearances, his grand jury testimony should have been suppressed and the indictment against him dismissed. Ruffin also challenges a number of evidentiary rulings made during trial and the sufficiency of the government's evidence to convict him. And finally, Ruffin contends that the district judge's jury instruction on the element of willfulness was inadequate. With one significant exception, we are not persuaded that the arguments advanced by Ruffin require the reversal of any of his convictions. We do conclude, however, that one of the district court's erroneous evidentiary rulings requires reversal of Ruffin's conviction on the charge of evading personal income taxes by his having filed a false and fraudulent personal income tax return for 1972.

Specifically, we hold that the government's failure to issue the standard "target" warnings does not vitiate Ruffin's convictions, that the evidence introduced against him was sufficient to allow the jury to find him guilty of the charges of evading corporate income taxes for 1970 and 1971 and that the judge's charge to the jury was a correct statement of the applicable law. We hold also that the first of the evidentiary rulings about which Ruffin complains, while the ruling was not free from error, nonetheless provides no basis upon which Ruffin's convictions must be reversed. In particular, although we agree with Ruffin that the district court erred in permitting introduction of a certain Internal Revenue Service (IRS) computer printout, we also find that a reversal is not required inasmuch as Ruffin's objection was not properly preserved for appeal and, moreover, the error was harmless. However, inasmuch as we agree with Ruffin's contention that prosecution rebuttal witness Hamill's testimony was, in part, inadmissible hearsay and because under the circumstances here we cannot conclude that the error resulting from the introduction of that testimony was harmless with reference to Ruffin's conviction on the charge of evading his personal income tax for the calendar year 1972, we reverse Ruffin's conviction on that charge. As to the convictions for evading corporate income taxes for the calendar years 1970 and 1971, we affirm, for the erroneous introduction of Hamill's hearsay testimony could not have influenced the jury's verdict on those counts of the indictment. Finally, for reasons explained later in this opinion, we do not remand the case for either retrial on the count on which we reverse or for reconsideration of the concurrent sentences imposed on those of Ruffin's convictions which we affirm, but we do vacate the $5,000 fine imposed by the judgment of conviction and we remand for the limited purpose of permitting the district court to reconsider whether, in view of our reversal of Ruffin's conviction on Count IV, the court wishes to modify the fine it previously imposed.

The factual setting of this case is relatively uncomplicated. In early 1975, a Special Grand Jury sitting in the Eastern District of New York was investigating misuse of funds by Bedford-Stuyvesant Youth-in-Action, a federally funded antipoverty program operating in Brooklyn. Ruffin was subpoenaed to produce records of a lease executed between the Bedford-Stuyvesant Community Corporation Young Mothers Program, as lessee, and either himself or his wholly-owned corporation, Rugore Associates (Rugore), which he served as president, as lessor. Ruffin was summoned to appear before a grand jury and, prior to his interrogation there on March 7, 1975, Ruffin was advised of his right to counsel, of his right not to incriminate himself ² and of the fact that any answers he might give could subsequently be used against him in a court of law. The questioning before the grand jury revealed that the rental property which was the subject of the lease generated annual rental income of approximately $30,000, that the corporation had last filed an income tax return in 1971 and that Ruffin had not reported the income on his personal returns.

One week later, on March 14, 1975, Ruffin made a second appearance before the grand jury. Again he was informed of his right to counsel and against self-incrimination. He was also specifically warned that he had a "tax problem" and that "in answering these questions, (he might) be implicating (him)self in violation of the Federal law." Ruffin indicated that he understood the import of the Assistant United States Attorney's cautionary words but nonetheless decided to testify.

During the week between the two grand jury sessions, one of the Assistant United States Attorneys who had been present in the grand jury room during the first session notified the IRS of Ruffin's likely failure to report income. The grand jury minutes and exhibits were subsequently turned over to the IRS pursuant to a Rule 6(e) order. Fed.R.Crim.P. 6(e). On July 14, 1975, approximately four months after Ruffin's grand jury appearances, an IRS agent read the grand jury testimony and examined the exhibits for the first time. Ruffin's first meeting with IRS agents occurred on November 4, 1975. At a December 9, 1976, pretrial hearing held to determine whether Ruffin's grand jury testimony should be suppressed, an IRS agent testified that as of November 4, 1975, no decision had been made whether to recommend prosecution for any violations of the Internal Revenue Code. Of course, as already mentioned, defendant was, in fact, ultimately indicted on eleven counts and convicted on three.

At trial the government adduced proof which the jury reasonably could have credited indicating that the Young Mothers Program had made almost $150,000 in rental payments by checks payable to Ruffin. ³ This amount represented five years of rental payments for the building at 1402 Bedford Avenue, ⁴ a building which was never occupied ⁵ by the Young Mothers Program. Neither Ruffin's individual returns for 1969-74, nor Rugore's corporate returns (for those years in which it even filed returns, i. e., 1970 and 1971) reported the rental income. Rugore filed no returns at all for 1972-74. The individual and corporate returns were signed solely by Ruffin. No outside tax preparer's signature appeared on any of the returns.

All of the rental income was deposited in two bank accounts, one checking and one savings, both of which were exclusively in Ruffin's name. Some checks were written to cover expenses of the 1402 Bedford Avenue property. During 1972, as was true of the other years between 1969 and 1974, however, Ruffin used the checking account, supposedly opened for Rugore, for purposes which the government argued were related not to Rugore's business activities but rather to the personal benefit or business interests of Ruffin and his friends. For example, drawing upon the checking account he had allegedly opened for Rugore, Ruffin used Rugore's money to pay the bills of another corporation of which Ruffin was the principal, to cover payments to the Ford Motor Credit Corporation, to satisfy installment loan obligations, to make payments which the jury might have taken to be gifts to Mrs. DeFreitas, the head of the Young Mothers Program, and to make a payment to the parking violations bureau. The government considered these specific diversions of corporate money, and others, to constitute constructive dividends ⁶ from Rugore to Ruffin and hence income properly reportable on Ruffin's personal income tax returns. ⁷

I

Ruffin vigorously presses his claim that the government's failure to inform him that he was a grand jury target violated his fifth amendment privilege against self-incrimination and his sixth amendment right to counsel. We need not reach these constitutional issues, ⁸ however, inasmuch as we agree with the district judge that at the time Ruffin made his incriminating admissions in his appearance before the grand jury on March 7, 1975, he was not entitled to "target warnings" because he was not at that time a target of the grand jury investigation.

At the December 9, 1976 suppression hearing, the district judge specifically found that on March 7, 1975, when Ruffin was...