U.S. v. Vreeken

• Decision Date: 21 October 1986
• Docket Number: 84-2750,Nos. 84-2745,s. 84-2745
• Citation: 803 F.2d 1085
• Parties: -470, 87-1 USTC P 9187, 21 Fed. R. Evid. Serv. 1338 UNITED STATES of America, Plaintiff-Appellee, v. Kurt VREEKEN and Fred R. Vreeken, Defendants-Appellants.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1085

803 F.2d 1085

59 A.F.T.R.2d 87-470, 87-1 USTC P 9187,

21 Fed. R. Evid. Serv. 1338

UNITED STATES of America, Plaintiff-Appellee, v. Kurt VREEKEN and Fred R. Vreeken, Defendants-Appellants.

Nos. 84-2745, 84-2750.

United States Court of Appeals, Tenth Circuit.

Oct. 21, 1986.

Kathleen M. Adams and James W. McConkie of Parker, McKeown & McConkie, Salt Lake City, Utah, for defendants-appellants.

Stewart C. Walz, Asst. U.S. Atty. (Brent D. Ward, U.S. Atty., and Tena Campbell, Asst. U.S. Atty., with him on briefs), Salt Lake City, Utah, for plaintiff-appellee.

Before BARRETT and LOGAN, Circuit Judges, and THOMPSON, District Judge. ^*

LOGAN, Circuit Judge.

Defendants Fred R. Vreeken and Kurt Vreeken appeal their convictions for aiding in the preparation of false income tax returns in violation of 26 U.S.C. Sec. 7206(2), and willful failure to report income in violation of 26 U.S.C. Secs. 7206(1) and 7203. Kurt Vreeken contends that the "rule of speciality" contained in the United States-Canada extradition treaty bars his prosecution on the tax offenses charged. Both Vreekens make the following arguments on appeal: (1) the trial court erred in excluding evidence of lack of intent; (2) the relevant tax law was so unsettled that intent, as a matter of law, could not be proven; (3) the court improperly excluded testimony of expert witnesses; (4) the court erred in instructing the jury on intent; and (5) derogatory comments by the trial judge prejudiced their right to a fair trial. Fred Vreeken also challenges the court's allowing the prosecution to cross-examine him beyond the scope of his direct testimony.

From 1977 to 1980 Fred Vreeken and his son, Kurt Vreeken, designed, operated, and sold tax shelters. The shelters promised investors a four-to-one tax write-off. The Vreekens represented that investors would contribute a specified amount of money, 1X dollars, into the shelter and a foreign entity would contribute three times this amount, 3X dollars, as a gift to the investor (under the plan marketed in 1977), or as the purchase price of an option on the investor's rights (under the plans marketed in 1978-80). The 4X dollars (1X + 3X) would then be used for research and development pursuant to I.R.C. Sec. 174, for which the taxpayer/investor would be entitled to claim a deduction for federal income tax purposes for the entire 4X amount.

On April 11, 1984, the Vreekens were indicted on thirty-six counts each of aiding and abetting in the preparation of false and fraudulent income tax returns in violation of 26 U.S.C. Sec. 7206(2). In addition, Fred Vreeken was indicted on two counts of willfully signing and subscribing false income tax returns in violation of 26 U.S.C. Sec. 7206(1), and Kurt Vreeken was indicted on three counts of willful failure to file income tax returns in violation of 26 U.S.C. Sec. 7203. After a three-week trial, the Vreekens were convicted on all counts.

I

Kurt Vreeken asserts that the "rule of speciality" contained in a Treaty on Extradition, Dec. 3, 1971, United States-Canada, 27 U.S.T. 983, T.I.A.S. No. 8237, protects him from this tax prosecution. Article 12(a) of the treaty states that rule as follows: "A person extradited under the present Treaty shall not be detained, tried or punished in the territory of the requesting State for an offense other than that for which extradition has been granted...."

On October 27, 1983, Kurt Vreeken was arrested in Toronto, Canada, pursuant to an extradition request by the United States government. The indictment on which the request was based charged Vreeken with several counts of wire fraud. On November 2, 1983, Vreeken signed a "Waiver and Consent," and was delivered on court order to a United States Marshal in Toronto. After his return to the United States and while released on bail for the wire fraud charges, Vreeken was indicted on the charges now before us.

Kurt Vreeken's rule of speciality claim raises several issues, including whether the treaty applies when formal extradition proceedings were never completed, whether he waived the rule's protection by signing the "Waiver and Consent" and, if so, whether the waiver was "knowing." See United States v. Vreeken, 603 F.Supp. 715 (D. Utah 1984). We need not reach these issues, however, as we agree with the trial court that Kurt Vreeken failed to raise the objection in a timely manner. Id. at 723-24. The Federal Rules of Criminal Procedure require a defendant to make all "objections based on defects in the institution of the prosecution" by the deadline set by the court for making pretrial motions. Fed.R.Crim.P. 12(b)(1), (c), (f). Failure to make a timely objection constitutes waiver of the objection. Id. 12(f). Although, under Rule 12(b)(2), objections challenging the court's jurisdiction may be made at any time, the term "jurisdiction" as used there refers solely to subject matter jurisdiction, not to personal jurisdiction. Sewell v. United States, 406 F.2d 1289, 1292 (8th Cir.1969); Pon v. United States, 168 F.2d 373, 374 (1st Cir.1948); see also 8 R. Cipes, Moore's Federal Practice p 12.03 at 12-19 (1986).

The speciality rule may initially appear to limit the courts' subject matter jurisdiction, because it bars trial of an extradited defendant on some charges but not on others. But the extradition process is one whereby a court gains personal jurisdiction over a defendant, see 2 D. O'Connell, International Law 792-806 (1965) (Ch. 23, "Personal Jurisdiction: Extradition and Asylum"). Insofar as a defendant has a right to claim the rule's protection, it functions to limit the court's personal jurisdiction over the defendant.

This point is emphasized in the very case that gave extradited defendants a right to claim the rule's protection, United States v. Rauscher, 119 U.S. 407, 7 S.Ct. 234, 30 L.Ed. 425 (1886). There, in applying the rule of speciality, the Court concluded: "[W]hile the court did have jurisdiction to find the indictment, as well as of the questions involved in such indictment, it did not have jurisdiction of the person at that time, so as to subject him to trial." Id. at 432, 7 S.Ct. at 247, 30 L.Ed. at 433-34 (emphasis added). Rauscher explicitly contemplated the possibility of gaining personal jurisdiction in the future: "[A]t some future time, when the defendant may have been properly brought within the jurisdiction of the court, or rightfully found within such jurisdiction, he may then be tried...." 119 U.S. at 432, 7 S.Ct. at 247 30 L.Ed. at 433. See also United States v. Najohn, 785 F.2d 1420, 1422 (9th Cir.1986) (analyzing rule's effect on personal jurisdiction).

The ability of a defendant to waive the rule of speciality's protection also supports treating it as a limit on personal jurisdiction. By declining an opportunity to leave the country, an extradited defendant effectively can consent to a court's jurisdiction to try him on charges other than those stated in the extradition request. Although parties can consent to personal jurisdiction, it is well settled that they cannot consent to subject matter jurisdiction. California v. LaRue, 409 U.S. 109, 112 n. 3, 93 S.Ct. 390, 34 L.Ed.2d 342 (1972); see also 1 J. Moore, Moore's Federal Practice p 0.60 at 624 (1986). Indeed, the courts must raise a lack of subject matter jurisdiction even if the parties have not. This does not appear to be the kind of issue we should hold cannot be waived. If a defendant could waive the issue knowingly he should be able to waive it by procedural default--in this case, failure to follow the rules of the local forum. See Smith v. Murray, --- U.S. ---, 106 S.Ct. 2661, 91 L.Ed.2d 434 (1986); Murray v. Carrier, --- U.S. ---, 106 S.Ct. 2639, 91 L.Ed.2d 397 (1986). Thus, in the circumstances of this case, we hold that Kurt Vreeken had to timely raise an objection based on the rule of speciality in a pretrial motion. ¹

The trial court here originally set May 25, 1984, as the deadline for submission of pretrial motions pursuant to Fed.R.Crim.P. 12(c), and later extended the deadline to August 15, 1984. Kurt Vreeken, however, did not allege the rule of speciality as a bar to his prosecution on the tax offenses until September 26, 1984, more than a month after the extended deadline. While "for cause shown" the trial court may grant relief for this error, Fed.R.Crim.P. 12(f), the court here denied further relief. 603 F.Supp. at 724. Thus, by procedural default, Kurt Vreeken waived his right to assert the rule's protection. Stevenson v. United States, 381 F.2d 142, 144 (9th Cir.1967) (motion on day of trial not timely); cf. United States v. Cadena, 585 F.2d 1252, 1260 (5th Cir.1978) (objection before pretrial motion cutoff was timely).

II

The Vreekens assert that the court excluded evidence proffered to demonstrate lack of intent. Specifically, the Vreekens claim that (1) Kurt Vreeken was denied an opportunity to explain why he structured the tax shelters as he did; (2) evidence regarding Kurt Vreeken's 1979-81 income was excluded; (3) investors in the tax shelter could not be adequately cross-examined; and (4) the Vreekens were denied the use of a blackboard.

A

The Vreekens assert that the court denied Kurt Vreeken the opportunity to show the jury that he acted without criminal intent, by hindering his ability to explain his reasoning and mental processes in structuring the tax shelter.

This court has held that in the context of tax prosecutions that "the accused as part of his defense is entitled to wide latitude in the introduction of evidence which tends to show lack of specific intent." United States v. Brown, 411 F.2d 1134, 1137 (10th Cir.1969). We agree that the trial court too strictly limited some of Kurt Vreeken's testimony. The court several times limited Kurt Vreeken's testimony to descriptions of physical acts: "I think we ought to have him simply tell us what he did.... What did you do? What did you do?" R. VIII, 1382; "I think you're really interested in...