U.S. v. Todaro, 1364

• Decision Date: 11 September 1984
• Docket Number: D,No. 1364,1364
• Citation: 744 F.2d 5
• Parties: 84-2 USTC P 9797 UNITED STATES of America, Appellant, v. Joseph E. TODARO, Defendant-Appellee. ocket 84-1086.
• Court: U.S. Court of Appeals — Second Circuit

Page 5

744 F.2d 5

84-2 USTC P 9797

UNITED STATES of America, Appellant, v. Joseph E. TODARO, Defendant-Appellee.

No. 1364, Docket 84-1086.

United States Court of Appeals Second Circuit.

Argued June 13, 1984.

Decided Sept. 11, 1984.

George L. Hastings, Jr., Atty., Tax Div., Dept. of Justice, Washington, D.C. (Glenn L. Archer, Jr., Asst. Atty. Gen., Michael L. Paul, Robert E. Lindsay, Attys., Tax Div., Dept. of Justice, Washington, D.C., Salvatore R. Martoche, U.S. Atty., Buffalo, N.Y., on brief), for appellant.

Joseph M. La Tona, Buffalo, N.Y. (Condon, La Tona & Klingensmith, Buffalo, N.Y., on brief), for defendant-appellee.

Charles F. Crimi, Sr., David Rothenberg, Lawrence J. Andolina, Criminal Defense League, Inc., Rochester, N.Y., submitted a brief for amicus curiae Criminal Defense League.

Mark J. Mahoney, Diebold, Bermingham, Gorman, Brown & Cook, Buffalo, N.Y., Ephraim Margolin, San Francisco, Cal., Nat. Ass'n of Criminal Defense Lawyers, Washington, D.C., submitted a brief for amicus curiae Nat. Ass'n of Criminal Defense Lawyers.

Before FRIENDLY, VAN GRAAFEILAND, and NEWMAN, Circuit Judges.

JON O. NEWMAN, Circuit Judge:

This is an appeal by the Government, pursuant to 18 U.S.C. Sec. 3731 (1982), from the February 7, 1984, order of the District Court for the Western District of New York (John T. Elfvin, Judge) precluding the introduction of certain evidence at trial unless the Government confers use immunity on two potential defense witnesses. Because we conclude that defense witness immunity, if ever available, was precluded by the standards set forth in United States v. Turkish, 623 F.2d 769 (2d Cir.1980), cert. denied, 449 U.S. 1077, 101 S.Ct. 856, 66 L.Ed.2d 800 (1981), we reverse.

Facts

Defendant-appellee Joseph E. Todaro, Sr. was charged in an indictment with three counts of willfully attempting to evade federal income tax liabilities, in violation of 26 U.S.C. Sec. 7201 (1982), and four counts of willfully subscribing false tax returns, in violation of 26 U.S.C. Sec. 7206(1) (1982). With respect to the tax evasion counts, the Government informed the District Court and the defendant that it intended to demonstrate the defendant's unreported taxable income by using the "net worth" method of proof. See Holland v. United States, 348 U.S. 121, 75 S.Ct. 127, 99 L.Ed. 150 (1954).

Prior to the filing of the indictment, Todaro advised the Government of three possible sources of non-taxable funds. Todaro requested that the grand jury investigate loans allegedly made to Todaro by John Grieco, John Ryding, and Peter Marino in the respective amounts of $50,000, $30,000, and $10,000. After investigating these leads, the Government concluded that Marino had probably made a $10,000 loan to Todaro and accordingly credited Todaro's "net worth" calculation with the amount of the loan. However, the Government's investigation unearthed no evidence corroborative of the Grieco and Ryding loans. In response to a Government request for reciprocal discovery, Fed.R.Crim.P. 16(b)(1), Todaro indicated that he had no documentary evidence substantiating the existence of the loans. When Ryding and Grieco were called to testify before the grand jury investigating Todaro, each invoked his Fifth Amendment privilege against self-incrimination and declined to answer questions regarding the loans.

On August 23, 1983, after the filing of the indictment, Todaro moved for an order "directing" the United States to obtain use immunity for Grieco and Ryding. In an accompanying affidavit, defense counsel noted that the Government had already conferred use immunity upon a number of grand jury witnesses. Without specifying the substance of Grieco and Ryding's anticipated trial testimony or the unavailability of the crux of that testimony from other sources, defense counsel simply stated that the two defense "leads" would account for "the non-taxable receipt of approximately $80,000." Defense counsel also stated that "[a]bsent an immunity grant, it appears that testimony from these individuals cannot be obtained by the defense." Relying on Holland v. United States, supra, defense counsel contended that the Government's duty to investigate defense leads as to the source and amount of non-taxable income encompasses the duty to confer use immunity "whenever that investigative technique is necessary to exhaust a 'lead.' " Defense counsel advanced two reasons for judicially compelled defense witness immunity. First, the "prosecution has engaged in selective use of immunity to gain a tactical advantage." Second, this selective practice amounts to a deliberate refusal to pursue defense leads as required by Holland v. United States, supra. Counsel concluded that Todaro "may be unfairly deprived of material and exculpatory evidence" (emphasis added).

The Government opposed the request primarily on the ground that this Circuit has "uniformly rejected" requests for defense witness immunity. It also noted that Todaro failed to supply any evidence indicating the existence of the loans or to make any proffer that the witnesses would testify if immunized and what their testimony would be. Further, the Government emphasized the absence of an affidavit of Todaro indicating the particulars surrounding the loans. Most notably, the Government submitted to the District Court, in camera, an affidavit of the prosecutor indicating the extent of the then existing evidence of possible criminal activity by each of the prospective defense witnesses and representing that any grant of immunity to either witness might impede future prosecutions.

On February 7, 1984, without making any factual findings, the District Court summarily ordered that, because there existed "conflicting factors of fairness" and "matters of third persons' privacy and confidentiality,"

it shall be presumed for purposes of this trial that each of Greico [sic ] and Ryding and Marino was financially able at all pertinent times to have made a substantial loan or loans to Todaro and that the government may not adduce any evidence showing or tending to show that Greico [sic ] or Ryding or Marino was at any pertinent time financially unable to have made a substantial loan or loans to Todaro unless Greico [sic ] or Ryding or Marino shall respectively have been accorded use immunity as to testimony on trial concerning such ability or the making vel non of such loan or loans to Todaro....

At the Government's request, the District Court held a hearing to clarify the effect of its order. In response to the Government's representation that Marino had freely testified before the grand jury, had never indicated an intent to invoke his Fifth Amendment privilege, and that Todaro never requested immunity for Marino, the District Court withdrew the order with respect to Marino. However, in response to the Government's asserted intent to introduce at trial evidence that it had investigated the alleged Grieco and Ryding loans and was unable to find evidence substantiating their existence, the District Court stated:

Now, that carries with it, of course, an implication that there was nothing [i.e., no loans], which is why the Government is going to put it in. If it is put in merely to show that the Government has carried out the burden imposed upon it by Holland versus United States, namely to follow up every lead such as that given to the Government by the defendant, that's one thing. And if it is limited to that purpose and constrained to that use by the jury, it is probably all right. If there is going to be some attempt to have the jury infer from that that there was not the loan, then you are into the area covered by my Order.

When asked whether the Government could present proof that, although Grieco had ample financial means, his funds were tied up so that he lacked the cash flow to finance the loan in question, Judge Elfvin further clarified his order by agreeing with the prosecutor's interpretation that it required the Government "to abstain from the evidence with respect to Mr. Grieco entirely." Both sides understand this statement to apply equally to Ryding. The Court's rationale appears to have been that, since Grieco and Ryding's testimony was then equally unavailable to both sides, fairness considerations preclude the Government from establishing, in an inferential fashion, the non-existence of the loans, when it had the statutory authority to resolve the uncertainty by extending use immunity to the witnesses. We think the Government fairly summarizes the effect of the District Court's order: "absent a grant of immunity, [the Court] will not permit the Government at trial to introduce any evidence for the proposition that the alleged loans did not occur, nor ask the jury to infer from any evidence that the loans did not occur." Brief for Appellant at 6. From this ruling, the Government appeals. ¹

Discussion

In United States v. Turkish, supra, this Court considered both substantive and procedural aspects of a defendant's request to have use immunity conferred upon defense witnesses who invoke their privilege against self-incrimination. ² We first noted that this Circuit had "uniformly rejected" requests for defense witness immunity. ³ After rejecting the compulsory process clause of the Sixth Amendment as a constitutional basis for defense witness immunity, we explored the possibility that such immunity might arise from the...