U.S. v. Windfelder

• Decision Date: 07 May 1986
• Docket Number: No. 85-1780,85-1780
• Citation: 790 F.2d 576
• Parties: -1395, 57 A.F.T.R.2d 86-1571, 86-1 USTC P 13,668, 86-1 USTC P 9402, 20 Fed. R. Evid. Serv. 917 UNITED STATES of America, Plaintiff-Appellee, v. Donald Herbert WINDFELDER, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 576

790 F.2d 576

57 A.F.T.R.2d 86-1395, 57 A.F.T.R.2d 86-1571,

86-1 USTC P 13,668, 86-1 USTC P 9402,

20 Fed. R. Evid. Serv. 917

UNITED STATES of America, Plaintiff-Appellee, v. Donald Herbert WINDFELDER, Defendant-Appellant.

No. 85-1780.

United States Court of Appeals Seventh Circuit.

Argued Jan. 10, 1986.

Decided May 7, 1986.

William M. Coffey, Coffey, Coffey & Geraghty, Milwaukee, Wis., for defendant-appellant.

Melvin K. Washington, Asst. U.S. Atty., Joseph P. Stadtmueller, U.S. Atty., Milwaukee, Wis., for plaintiff-appellee.

Before CUMMINGS, Chief Judge, and BAUER and POSNER, Circuit Judges.

BAUER, Circuit Judge.

Defendant Donald Herbert Windfelder was convicted of understating his income in his 1978 federal income tax return, in violation of 26 U.S.C. Sec. 7201, and of understating the estate of his deceased aunt Lauretta Windfelder, in preparing her estate tax return, in violation of 26 U.S.C. Sec. 7206(1). Defendant was sentenced to eighteen months imprisonment on the first charge to be followed by five years probation for the second charge. He was also ordered to make restitution in the amount of $409,714.13 to the estate of his deceased aunt.

Defendant appeals his conviction on three grounds. First, he contends that the trial court erroneously permitted the government to subpoena certain documents and witnesses protected by his attorney-client privilege. Second, he contends that the trial court erroneously admitted into evidence opinion testimony of several of the government's expert witnesses. Finally, he contends that the trial court's jury instructions regarding the definitions of "embezzlement" and "fiduciary relationship" violated his constitutional rights. We reject all of defendant's arguments and affirm the judgment of the district court.

I.

On April 21, 1978, Lauretta Windfelder was admitted to a nursing home in Milwaukee, Wisconsin, suffering from a variety of mental and physical debilities exacerbated, if not caused by, her age of 90 years. Some three weeks before, she had been discovered in dire condition in her home by a visiting nurse and had been hospitalized. Lauretta Windfelder had raised her nephew, the defendant in this case, from 1934, when he moved in with her at the age of twelve, until defendant married in 1950. In 1978 the defendant was a vice-president at the Northwestern Mutual Life Insurance Company in Milwaukee, Wisconsin. On April 24, 1978, three days after Lauretta Windfelder's admission into the nursing home, defendant presented a Power of Attorney form purportedly signed by Lauretta Windfelder to two of his co-workers to sign as witnesses and to a third for notarization. None of the three workers saw Lauretta Windfelder sign the form.

At the end of 1977, Lauretta Windfelder's net worth was approximately $664,856.87. By the end of 1978, her net worth had fallen to $150,829.80. Lauretta Windfelder died on October 23, 1979, and by the time her federal estate tax return was filed her assets had further dwindled to approximately $58,332.47. The government presented extensive evidence at trial detailing the defendant's transfer of approximately $506,937.70 of Lauretta Windfelder's assets in 1978 and 1979 into various accounts opened by the defendant in his name or jointly with his wife. IRS experts testified at trial that $397,876.70 of these transfers were unauthorized.

Shortly after Lauretta Windfelder's death, the defendant retained the Milwaukee law firm of Godfrey & Kahn to assist him in probating Lauretta Windfelder's estate. Pursuant to Wisconsin law, the defendant was appointed personal representative of the estate. The defendant represented to attorney John Byers that the estate consisted solely of $3,300 in a local bank and approximately $40,000 in U.S. Treasury Notes. A paralegal with the law firm engaged in numerous telephone conversations with the defendant regarding the information that was to be contained in the estate tax return and other probate documents, but the defendant did not mention any transfer of assets from the estate other than a $69,000 gift in 1978 and another $69,000 gift in 1979, both to the defendant. The law firm then prepared a federal estate tax return for the estate based on the information given by the defendant, which he signed on July 22, 1980.

In March 1981, the IRS contacted the law firm, notifying the attorneys that it was reviewing Lauretta Windfelder's estate tax return and requesting copies of her income tax returns for the years immediately preceding her death. Byers relayed this information to the defendant and arranged for a conference to determine why the assets in the estate were so much less than those listed in Lauretta Windfelder's last income tax returns. The defendant engaged in several conferences with the law firm and supplied additional information regarding the estate. Several weeks later the IRS requested the law firm to supply it with a list of U.S. Treasury Bonds that had been redeemed at various times and that were reflected in Lauretta Windfelder's prior income tax returns. The law firm asked the defendant to supply it with the list for this purpose, and on May 21, 1981, he tendered to the law firm a copy of what purported to be bank records for accounts held by Lauretta Windfelder and himself, along with a summary of what the defendant represented as transfers to and from those accounts. Even with these documents, the law firm was unable to account for approximately $200,000 in assets listed in Lauretta Windfelder's prior income tax returns.

When the law firm advised the defendant of this discrepancy, he provided the law firm with additional records. On June 8, 1981, the defendant provided the law firm with even more records. Nonetheless, a discrepancy still existed, and the law firm concluded that the different sets of figures were irreconcilable. Shortly thereafter, the law firm notified the defendant that it would no longer represent him.

The defendant obtained new counsel and engaged in a new series of conferences and document production, but the defendant's figures still refused to align themselves with those of the IRS. On July 15, 1981 the defendant and his new counsel met with an IRS attorney and submitted a modified explanation, based on unincluded "underlying documents," purporting to account for the erstwhile assets of Lauretta Windfelder's estate. The unpersuasive nature of this explanation led to a conference in Washington, D.C. on March 12, 1984 between the defendant's counsel and an attorney for the Criminal Tax Section of the Department of Justice regarding the defendant's personal tax liability for 1978 and his participation in the filing of Lauretta Windfelder's estate tax return. The report by the attorney for the Department of Justice states that at this meeting defendant's counsel took the position that, because the defendant was not an expert estate tax preparer, he had trusted his attorneys to prepare the return correctly and had answered the questions put to him by these attorneys truthfully. The problem, the defendant's counsel asserted, was that these attorneys had not asked him "the right questions." After this explanation, the defendant was finally indicted.

II.

The defendant first argues that the district court erred in allowing the government to subpoena the attorneys and paralegal from the law firm of Godfrey & Kahn who worked on Lauretta Windfelder's estate tax return and the documents in their possession relating to the preparation of that tax return. Defendant asserts that under Wisconsin law he engaged the law firm to represent himself, as personal representative of the estate, as well as to represent the estate, when he hired the firm to prepare the estate tax return. Thus, the defendant contends that the testimony of the witnesses from Godfrey & Kahn and the materials that were subpoenaed were privileged from disclosure under the attorney-client privilege.

Even accepting the defendant's argument that he personally stood in an attorney-client relationship with Godfrey & Kahn in regard to the preparation of Lauretta Windfelder's estate tax return, we do not believe that the information sought by the subpoenas was protected by the attorney-client privilege because that information was not confidential. In United States v. Lawless, 709 F.2d 485 (7th Cir.1983), this court held that "information transmitted for the purpose of preparation of a tax return, though transmitted to an attorney, is not privileged information." 709 F.2d at 488. One of the reasons underlying this holding was that "[w]hen information will be transmitted to a third party (in this case on a tax return), such information is not confidential." Id. at 487. Lawless further held that "disclosure of tax information effectively waives the privilege 'not only to the transmitted data but also as to the details underlying that information.' " Id. at 488 (quoting United States v. Cote, 456 F.2d 142, 145 (8th Cir.1972)).

In this case the government also sought information transmitted after the estate tax return was filed, but the defendant has failed to meet his burden of showing that this information was confidential. See, e.g., Lawless, 709 F.2d at 487. To the contrary, the evidence shows that the defendant transmitted this information to Godfrey & Kahn with the intent that it would be used to explain to the IRS the gross disparity between the figures in Lauretta Windfelder's estate tax return and her last income tax returns. Godfrey & Kahn expressly informed the defendant that the IRS was requesting information to explain the discrepancies and that the law firm intended to comply with these requests. The defendant repeatedly supplied the law firm with records and documents for this purpose. Further, defendant himself submitted a "modified explanation" of the estate tax return directly to the IRS on July 15, 1981. We therefore hold that the information submitted after the estate tax...