U.S. v. Tsanas, 341

CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)
Citation572 F.2d 340
Docket NumberD,No. 341,341
Parties78-1 USTC P 9187 UNITED STATES of America, Appellee, v. Andrew TSANAS, Appellant. ocket 77-1348.
Decision Date24 April 1978

Page 340

572 F.2d 340
78-1 USTC P 9187
UNITED STATES of America, Appellee,
Andrew TSANAS, Appellant.
No. 341, Docket 77-1348.
United States Court of Appeals,
Second Circuit.
Argued Nov. 3, 1977.
Decided Jan. 13, 1978.
Certiorari Denied April 24, 1978.
See 98 S.Ct. 1647.

Page 341

Donald E. Nawi, Brooklyn, N. Y. (Joseph J. Lombardo, Brooklyn, N. Y., of counsel), for appellant.

Mary McGowan Davis, Asst. U. S. Atty., Brooklyn, N. Y. (David G. Trager, U. S. Atty., Eastern District of New York, and Alvin A. Schall and Steven Kimelman, Asst. U. S. Attys., Brooklyn, N. Y., of counsel), for appellee.

Before FRIENDLY, MANSFIELD and OAKES, Circuit Judges.

Page 342

FRIENDLY, Circuit Judge:

A grand jury in the District Court for the Eastern District of New York filed a five count indictment charging Andrew Tsanas and his wife, Pauline, with evading income taxes in violation of 26 U.S.C. § 7201 1 for the five years 1971-1975. Pauline pleaded guilty to one count of willfully filing a false tax return in violation of 26 U.S.C. § 7206(1) 2 shortly after the trial commenced. The jury acquitted Tsanas on Count I relating to 1971, convicted him on the lesser included offense of § 7206(1) on Count II relating to 1972, and convicted him under § 7201 on Counts III, IV and V relating to 1973, 1974 and 1975. The court sentenced Tsanas to concurrent three year terms of imprisonment and a cumulative $15,000 fine on Counts II and III and to three years probation on Counts IV and V following his release from prison. From these convictions Tsanas appeals.

Tsanas was a subordinate employee of J. C. Penney Co., responsible for awarding construction and maintenance contracts, whose salary ranged from $14,393 in 1971 to $21,744 in 1975. The evidence, which it is unnecessary to review in detail, revealed an incredible tale of Tsanas' exacting some.$1.4 million in kickbacks from Howard Lazar, president of a privately owned general construction company, and other contractors eager to be employed in Penney's reconstruction of its corporate headquarters. Tsanas received large sums in cash. 3 In addition, Lazar supplied Tsanas with bank checks in amounts ranging from $2,000 to over $5,000 on leading New York City retail stores, and paid for the elaborate renovation and sumptuous furnishing of a new apartment rented by Tsanas, at a total cost of some $550,000. Tsanas' new life style included substantial payments by him to his family and to three women friends. It did not reflect any corresponding recognition of liability to the United States for federal income tax; Tsanas' returns of income reported none of the amounts here described and were limited to his modest salary. The defense proffered was that the enormous sums paid by business firms to or for the account of Tsanas in return for his aid in obtaining contracts with Penney constituted gifts to him.

We should hardly have thought Tsanas' appeal from his convictions to merit an opinion except that appellate counsel has raised a significant question concerning the way in which a judge should instruct a jury with respect to a lesser included offense in a case where an instruction on that subject is appropriate. Surprisingly this question, which is bound to recur, has not been squarely faced by the Supreme Court, by us or, so far as our research has disclosed, by any other circuit.

The indictment here was under 26 U.S.C. § 7201, see note 1 supra, "the capstone of a system of sanctions which singly or in combination were calculated to induce prompt and forthright fulfillment of every duty under the income tax law and to provide a penalty suitable to every degree of delinquency," Spies v. United States, 317 U.S. 492, 497, 63 S.Ct. 364, 367, 87 L.Ed. 418

Page 343

(1943). The lesser included offense here under discussion is 26 U.S.C. § 7206(1), see note 2 supra. As applied to this case where the criminal act charged was the filing of false income tax returns, the only difference between the two offenses is that § 7201 requires proof of an intention "to evade or defeat" a tax whereas § 7206(1) penalizes the filing of a false return even though the falsity would not produce tax consequences. The case clearly met one branch of the test enunciated in Sansone v. United States, 380 U.S. 343, 351, 85 S.Ct. 1004, 13 L.Ed.2d 882 (1965), for determining when a defendant is entitled to a lesser included offense charge, namely, that on the facts of the case the lesser offense must be included within the greater; if Tsanas willfully attempted to evade or defeat taxes by filing false income tax returns in violation of § 7201, he would necessarily have violated § 7206(1). It may be more doubtful whether the case qualified under the second branch of the Sansone test, namely, that on the facts the lesser offense must not be "completely encompassed by the greater." There must be a "disputed issue of fact concerning the existence of an element required for conviction" under § 7201 but not required under § 7206(1). Id. at 353, 85 S.Ct. at 1011. As we said in United States v. Markis, 352 F.2d 860, 867 (2 Cir. 1965), vacated on other grounds, 387 U.S. 425, 87 S.Ct. 1709, 18 L.Ed.2d 864 (1967):

The lesser-included offense charge is not required simply because the jury could exercise its power of acquitting on the greater charge for no reason at all "in the teeth of both law and facts," Horning v. District of Columbia, 254 U.S. 135, 138, 41 S.Ct. 53, 54, 65 L.Ed. 185 (1920); there must be a rational basis for its doing so.

The defense that all the payments were gifts would not qualify under this test. If believed, Tsanas would be innocent of both offenses since gifts are excludable from gross income, IRC § 102, and if not believed, he would be guilty of both. Cf. Comment, Jury Instructions on Lesser Included Offenses, 57 Nw.U.L.Rev. 62, 66 (1962); Sansone v. United States, supra, 380 U.S. at 353, 85 S.Ct. at 1011 ("Given petitioner's material misstatement which resulted in a tax deficiency, if, as the jury obviously found, petitioner's act was willful . . . he was guilty of violating both (sections) . . . . If his action was not willful, he was guilty of violating neither."); Berra v. United States, 351 U.S. 131, 134, 76 S.Ct. 685, 688, 100 L.Ed. 1013 (1956) (". . . here the method of evasion charged was the filing of a false return, and it is apparent that the facts necessary to prove that petitioner 'willfully' attempted to evade taxes by filing a false return . . . were identical with those required to prove that he delivered a false return with 'intent' to evade taxes . . . ."). However, the indictment charged an attempt "to evade and defeat a large part of the income tax due and owing," see United States v. Norris, 205 F.2d 828, 829 (2 Cir. 1957) ("the gist of the offense is the willful attempt to evade any substantial part of the tax due"); United States v. Nunan, 236 F.2d 576 (2 Cir. 1956), cert. denied, 353 U.S. 912, 77 S.Ct. 661, 1 L.Ed.2d 665 (1957) ("the showing by the government must warrant a finding that the amount of the tax evaded is substantial"), and it is arguable that a jury could rationally have found that, at least for some of the years, enough of the payments were gifts that this greater charge was not sustained beyond a reasonable doubt, as it evidently did with respect to 1971 and 1972, but that Tsanas' returns were nevertheless false. Cf. United States v. Beasley, 519 F.2d 233, 245 (5 Cir. 1975), vacated on other grounds, 425 U.S. 956, 96 S.Ct. 1736, 48 L.Ed.2d 201 (1976). As against this, § 7206(1) requires proof that the defendant does not believe the tax return to be true as to every "material" matter. See Hoover v. United States, 358 F.2d 87 (5 Cir.), cert. denied, 385 U.S. 822, 87 S.Ct. 50, 17 L.Ed.2d 59 (1966). Whether, given the facts of this case, it would be possible for a jury rationally to find that a "large part" of the tax was not owing but that Tsanas' tax returns were nonetheless "materially" false is highly uncertain. However, the Government did not object to the court's giving the lesser included offense

Page 344

charge, and in light of our conclusions we need not determine whether a lesser included offense charge was justified.

After carefully explaining the nature of the two offenses, Chief Judge Mishler charged without objection:

The law permits the jury to find the accused guilty of any lesser offense which is necessarily included in the crime charged in the indictment whenever such a course is consistent with the facts found by the jury from the evidence in the case, and with the law given and the instructions of the Court. If the jury should unanimously find the accused not guilty of the crime charged in the indictment, then the jury must proceed to determine the guilt or innocence of the accused as to the lesser offense which is necessarily included in the crime charged.

Appellant now contends that the latter sentence constituted plain error in requiring a unanimous verdict of not guilty of the greater offense before allowing the jury to move to the lesser; it should suffice, he argues, if the jury could not reach agreement on a conviction for the greater offense.

The instruction given has support in practice. The charge requested (but not given) in Sansone would have required the jury to "find" the absence of one element in the greater offense, see 380 U.S. at 346, 85 S.Ct. 1004, and while the proposed charge did not use the word "unanimously," that would seem to have been the effect. The instruction here given also followed the form approved in the then current edition of Devitt & Blackmar, Federal Jury Practice and Instructions § 17.11 (2d ed. 1970). It derives some support also from language in Judge Leventhal's opinion in Fuller v. United States, 132 U.S.App.D.C. 264, 407 F.2d 1199, 1227-32 (1968), cert. denied, 393 U.S. 1120, 89 S.Ct. 999, 22 L.Ed.2d 125 (1969), although for reasons stated in the margin 4 the case is not at all decisive on...

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