United States v. Ponder, 29385.

• Decision Date: 29 September 1971
• Docket Number: No. 29385.,29385.
• Citation: 444 F.2d 816
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Leslie B. PONDER, Jr., Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

444 F.2d 816 (1971)

UNITED STATES of America, Plaintiff-Appellee, v. Leslie B. PONDER, Jr., Defendant-Appellant.

No. 29385.

United States Court of Appeals, Fifth Circuit.

June 28, 1971.

Rehearing and Rehearing Denied September 29, 1971.

J. Lynn Ponder, Amite, La., DeQuincy V. Sutton, Meridian, Miss., for defendant-appellant.

Gerald J. Gallinghouse, U. S. Atty., E.D. of La., Richard M. Olsen, Asst. U. S. Atty., New Orleans, La. (Douglas R. Fortney, Richard D. Ames, Dallas, Tex., Attys. Regional Counsel I. R. S., on brief), for plaintiff-appellee.

Before JOHN R. BROWN, Chief Judge, WISDOM and RONEY, Circuit Judges.

Rehearing and Rehearing En Banc Denied September 29, 1971.

RONEY, Circuit Judge:

The defendant appeals a two count jury conviction for making false income tax returns for the years 1960 and 1961 in violation of Title 26, United States Code, Section 7206(1).¹ The trial lasted seven weeks, involved 160 witnesses, and some 600 pieces of documentary evidence received or identified.

This appeal raises constitutional questions concerning the use of defendant's records and the composition of the grand jury, and trial questions concerning the court's instructions, the sufficiency of the evidence, the admission of evidence, and a statute of limitations defense to the 1960 return count. We reject all of the claims of error and affirm.

Defendant Ponder is an attorney at Amite, in Tangipahoa Parish, Louisiana. During the indictment years he also owned and operated a small hotel in Amite, held various corporation ownership interests and directorships, and participated, either through joint ventures or separately, in other business operations and sales of capital assets or collections of installment payments from such sales in prior years. His return was separate from that of his wife for each indictment year. The indictment alleged under-reporting of 1960 law business income and director's fees, and 1961 law business income, director's fees and interest income.²

I. Use of Defendant's Records

The trial court denied motions by which defendant sought to suppress all evidence obtained or derived out of leads from certain of his business and financial records because of alleged violations of his rights under the Fourth (search and seizure) and Fifth (self-incrimination) Amendments to the United States Constitution.

The records in question were voluntarily submitted to the Internal Revenue Service during a civil audit.³ Taxpayer contends that when he wrote and requested their return, the civil audit terminated, a criminal investigation was commenced, and his records were then copied in violation of his constitutional rights.⁴ He reasons that such copying of his records was an illegal search and seizure, and that their use in evidence was compelled self-incrimination. He argues that the Service was under "a duty to advise of the change in status to that of a criminal case."

We hold otherwise. Ponder agreed to supply the records requested and voluntarily delivered them to the revenue agents. At that point there was a valid consent to a search, which carries with it the right to examine and photocopy. McGarry v. Riley, 363 F.2d 421 (1st Cir. 1966), cert. den., 385 U.S. 969, 87 S.Ct. 502, 17 L.Ed.2d 433 (1966); Boren v. Tucker, 239 F.2d 767 (9th Cir. 1956). Likewise there had been a waiver of the constitutional right against self-incrimination. The Fifth Amendment right not "to be compelled in any criminal case to be a witness against" one's self protects against compulsion and not voluntary acts, and must be asserted by refusing to deliver records in a case such as this. Hanson v. United States, 186 F. 2d 61 (8th Cir. 1950). After the government obtained possession of the information with his consent, it was too late for Ponder then to claim constitutional immunity. Nicola v. United States, 72 F.2d 780 (3rd Cir. 1934). There is no doubt that the government can use information legitimately obtained during a civil audit in the prosecution of a criminal case. Donaldson v. United States, 400 U.S. 517, 91 S.Ct. 534, 27 L.Ed.2d 580 (1971); Venn v. United States, 400 F.2d 207 (5th Cir. 1968).

Two recent decisions by this Court deal directly with the argument that the Internal Revenue Service owed a duty to advise Ponder that the government was investigating the possible criminal implications in his returns. United States v. Prudden, 424 F.2d 1021 (5th Cir. 1970), cert. den., 400 U.S. 831, 91 S.Ct. 62, 27 L.Ed.2d 62, and United States v. Tonahill, 430 F.2d 1042 (5th Cir. 1970), cert. den., 400 U.S. 943, 91 S.Ct. 242, 27 L.Ed.2d 247.

In Prudden, the revenue agent was conducting a civil audit of defendant's return. Finding indications of fraud, he referred the matter to the Intelligence Division. However, he continued his examination and requested further information from the defendant. Thereafter, he advised the defendant that he was being transferred and that another revenue agent would continue. The succeeding revenue agent appeared on the scene with a special agent of the Intelligence Division, who was identified as such. The two agents told the defendant they were examining his returns, but never told him that a criminal investigation was in progress and never advised him of his constitutional rights. The District Court suppressed all evidence obtained following the referral to the Intelligence Division. This Court reversed.

Similarly, Tonahill involved a referral to the Intelligence Division after a civil audit. There, following the appearance of a special agent, along with the original revenue agent, the defendant inquired of the agents why the examination was taking so long and whether fraud was involved. The agents did not advise the defendant whether fraud or a crime was involved, but stated that they were attempting to reconcile large discrepancies to see if they were the result of innocent errors. In reliance upon Prudden, this Court reversed the granting of a motion to suppress.

Thus Prudden and Tonahill hold that evidence received from the taxpayer after the criminal investigation commenced is admissible, even though no notice or Miranda warnings were given. A fortiori the evidence received from Ponder before the criminal investigation commenced is not rendered inadmissible merely because it was copied thereafter.

These cases recognize that evidence obtained for criminal use by deceit, fraud and misrepresentation might be suppressed, but held that failure to advise the taxpayer that a criminal investigation was being made did not amount to such conduct. Ponder argues that after his demand, the government's letter answer and the retention of the records practiced fraud, misrepresentation and deceit against him. The exchange of letters provide insufficient basis for such an argument, and certainly furnish no ground for upsetting the finding of the District Court that "there is not the slightest hint of any overbearing threat, trickery, or deception on the government's part."⁵ Such findings are conclusive on this Court unless clearly erroneous. United States v. Montos, 421 F.2d 215 (5th Cir. 1970), cert. den., 397 U.S. 1022, 90 S.Ct. 1262, 25 L.Ed.2d 532 (1970).

The question remains as to whether or not by retaining Ponder's records after he had demanded their return, the government converted a reasonable search into an unreasonable one, and compelled the defendant to give evidence that could not be obtained over objection under Stuart v. United States, 416 F.2d 459 (5th Cir. 1969). We held there that a taxpayer can successfully resist the production of records on Fifth Amendment grounds when the investigation has become an inquiry with dominant criminal overtones, even though the records had previously been examined by the government.

We hold that Ponder's demand for the return of his records did not transform to compulsion an otherwise voluntary submission to the Internal Revenue Service, and did not make the continued examination of the records an unreasonable search. That no such metamorphosis took place is readily apparent for several reasons.

First, the demand for return did not assert a constitutional basis, but on the other hand indicated that the defendant needed the records for business reasons. It placed no restriction on the use of the records by the government.

Second, as an experienced businessman and as a lawyer, Ponder was bound to be aware that any civil investigation could lead to criminal charges if the inquiry revealed wrongdoing and that any records he gave to the government which evidenced criminal activity might be used against him. Cf., United States v. Prudden, supra, and United States v. Tonahill, supra.

Third, once having voluntarily submitted records in response to a summons, it is only reasonable to assume that the government would conclude its examination and copy such records prior to return, even after a demand, and that it should have a reasonable time to do so. Glotzbach v. Klavans, 196 F.Supp. 685 (E.D.Va.1961), order vacated, 11 AFTR 2d 1191, 62-2 U.S.T.C. Par. 15,452 (4th Cir. 1962); Caro v. Bingler, 242 F.Supp. 418 (W.D.Pa.1965).^5A

II. Grand Jury

The defendant attacks the indictment on the ground that the grand jury which returned it was drawn from an improper list.⁶ The contention that the list excluded persons from some of the 12 parishes in the Division is defeated by § 1865(a) of Title 28, United States Code, which specifically authorizes the court to select the jurors from parts of a district.⁷ This section, which descended from the original Judiciary Act of 1789, has been held constitutional repeatedly. Lewis v. United States, 279 U. S. 63, 49 S.Ct. 257, 73 L.Ed. 615 (1929); Ruthenberg v. United States, 245 U.S. 480, 38 S.Ct. 168, 62 L.Ed. 414 (1918).

As to the composition of the grand jury, defendant's evidence fails to support the contention that the jury list did not represent the community,⁸ or that the order of the District Court under ...