United States v. Lowder, 73-1176.

• Decision Date: 22 February 1974
• Docket Number: No. 73-1176.,73-1176.
• Citation: 492 F.2d 953
• Parties: UNITED STATES of America, Appellee, v. W. Horace LOWDER, Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

492 F.2d 953 (1974)

UNITED STATES of America, Appellee, v. W. Horace LOWDER, Appellant.

No. 73-1176.

United States Court of Appeals, Fourth Circuit.

Submitted December 28, 1973.

Decided February 22, 1974.

Scott P. Crampton, Asst. Atty. Gen., and Meyer Rothwacks, John P. Burke, Robert L. Baker, Richard P. Slivka, Attys., U. S. Dept. of Justice, on brief for appellee.

W. Horace Lowder, pro se.

Before WINTER, CRAVEN and BUTZNER, Circuit Judges.

PER CURIAM:

W. Horace Lowder was convicted in January, 1973, in a trial by jury, of one count of conspiracy to defraud the United States by obstructing the Internal Revenue Service in its task of computing and collecting revenue (18 U.S.C. § 371) and two counts of knowingly filing false corporate income tax returns (26 U.S.C. § 7206(1)). Lowder was sentenced to two years' imprisonment on each count and was fined $10,000 on the conspiracy count and $5,000 on each of the other two counts.

The government's case was based on the theory that Lowder utilized his intimate connection with six family-owned corporations to foster an intricate scheme whereby their tax liability would be obscured and evaded, in the years 1961-65. The basic facts as to those years for each corporation follow:

(1) All Star Mills, Inc. (Mills): The original family corporation, founded in 1932 by Lowder\'s father; principal business was sale of flour and animal feed; Lowder\'s ownership 11½%. There were 26 other stockholders.

(2) Lowder Farms, Inc. (Farms): A second family-owned corporation, founded in 1950 by Lowder\'s father and uncle; principal business of beef cattle and farming; Lowder\'s ownership 11½%. There were 24 other stockholders.

(3) All Star Hatcheries, Inc. (Hatcheries): Founded in 1959 by Lowder for the business of hatching and growing poultry (broilers); Lowder and wife owned 100% of stock.

(4) All Star Foods, Inc. (Foods): Founded in 1959 by Lowder to raise layers and produce and market eggs; Lowder owned 51% through stock held by him and Hatcheries. Mills owned 49%.

(5), (6) All Star Industries, Inc., and Consolidated Industries, Inc., were both named as co-conspirators but their activities did not play any significant role. The former was formed in 1961 to hold a mortgage on property owned by Foods; the latter was formed to be the legal owner of a farm. Lowder owned 100% of the former, 33 1/3% of the latter.

Lowder throughout the relevant years was the active manager of the affairs of each corporation. He held, among others, the position of secretary-treasurer in each, was in charge of the overall business and financial operations for all, including bookkeeping, and signed each of the corporate tax returns. That Lowder was responsible for the practices alleged to have constituted a scheme to cover up tax liability was not disputed by him; the other shareholders and officers apparently gave him a free hand in decision-making.

The four active corporations were Mills, Farms, Foods, and Hatcheries, all of whose books and records were kept in the offices of the original company, Mills. Almost all of the paper work— handling sales invoices, posting accounts, etc.—was handled by Mills' employees.

In addition to regular business with third parties, these four corporations, along with the two inactive ones, engaged in a substantial number of intercorporate transactions. Their records over the four-year period showed that some $17 million was transferred by checks running from each corporation to the five others; that some $5 million of this amount was attributable to loans extended or loans repaid; and that the remaining $12 million was reflected as expenses on the books of the paying corporations. The nature and validity of these expensed transfers—whether the amounts represented transactions in real goods and services or whether they were mere transfers of money fraudulently treated as "expenses" to avoid a showing of profits—was the crux of the case before the jury.

The major contentions advanced by Lowder are: (1) conviction on the first count was barred by the statute of limitations, 18 U.S.C. § 3282; (2) the employment of a net worth method in count two was erroneous; (3) the convictions on each count rested on insufficient evidence. For the major portion of the proceedings in the district court and before us, Lowder represented himself. There is no claim that his lack of counsel was the result of indigency. In January, 1972, three months after his indictment and one year before the trial, Lowder discharged his retained attorney over a fee dispute. The legal and factual complexity of the charges have made his chosen course hazardous, but we have endeavored to scrutinize the record and give the assigned errors full consideration. We decline, however, to hear argument pro se.

COUNT I

The conspiracy conviction is assailed as barred by the applicable statute of limitations. We do not agree and, therefore, we affirm.

Lowder and the six corporations were charged with conspiring, from January, 1961, up through the date of the indictment, October 8, 1971, to defraud the United States "by impeding, impairing and obstructing the lawful functions of the Internal Revenue Service, . . . in the ascertainment, computation, assessment and collection of revenue" from the four active corporations.

As alleged and proved the essence of the government's case was that: (1) each corporation had a different accounting year—Mills was on a calendar year basis and the other five were each on different fiscal years; (2) the transfers of money, ostensibly paid for supplies such as feed, would usually occur in large amounts towards the close of the fiscal year for the transferor/"purchaser"; (3) these transfers, treated as expenses, would in virtually every instance wipe out then-existing profits which had been accumulating to the transferor during its taxable year; (4) the "seller"/transferee would in turn eliminate the effect these amounts had on its books as receipts (and potential profits) when its taxable year closed a few months later by another transfer similarly expensed, and so on, in a process denoted as "rolling" by the investigating agent; (5) the transfers of money, in the aggregate, overstated the value of the goods actually changing hands, i. e., Mills did sell feed to Hatcheries, but not nearly in the quantities which would justify the amounts expensed on the books; (6) the fact that Mills and Farms were on an accrual basis method of accounting and Hatcheries and Foods were on a cash basis method was utilized by Lowder to obscure the real transactions; and (7) the underlying documents—invoices, ledger cards, etc.—against which the validity of these transfers could have been checked were deliberately destroyed or concealed.

Of the eighteen alleged overt acts, all of which were corporate income tax filings for the years in question, the latest occurred on March 14, 1966, the date of the filing of Mills' return for the previous calendar year. The date of the indictment is October 8, 1971, approximately five years and seven months after the date of the last overt act alleged therein.

Before the trial, the court ruled that the six-year statute of limitations specified in 26 U.S.C. § 6531(1) applied to the conspiracy count as well as to the fraudulent filing charges. Lowder asserts that the first count, charging a conspiracy to defraud under 18 U.S.C. § 371, was governed by the general five-year limitation period specified in 18 U. S.C. § 3282,¹ but we think the six-year limitation period in 26 U.S.C. § 6531 governs. The general conspiracy statute, 18 U.S.C. § 371, contains no period of limitations. Limitations, for indictments under § 371, are those supplied by other provisions of law, or where there are none, by 18 U.S.C. § 3282 which is a general statute of limitations applicable "except as otherwise expressly provided by law." Thus, § 3282 applies where no other statute is applicable, and, stated conversely, its application is ousted when there is a special limitation period prescribed for a specific offense.

In the case of prosecutions of violations of the tax laws, 26 U.S.C. § 6531 provides, in relevant part:

No person shall be prosecuted . . . for any of the various offenses arising under the internal revenue laws unless the indictment is found or the information instituted within 3 years next after the commission of the offense, except that the period of limitation shall be 6 years—

(1) for offenses involving the defrauding or attempting to defraud the United States or any agency thereof, whether by conspiracy or not, and in any manner . . . .

It thus appears that for a conspiracy to defraud the United States by filing false and fraudulent tax returns—the crime charged against Lowder, § 6531 prescribes a six-year period of limitations and, as part of the overall statutory scheme, § 3282, by its terms, is...