United States v. Potter, Crim. No. LV. 74-59.

• Decision Date: 22 November 1974
• Docket Number: Crim. No. LV. 74-59.
• Citation: 385 F. Supp. 681
• Parties: UNITED STATES of America, Plaintiff, v. Delwin C. POTTER, Defendant.
• Court: U.S. District Court — District of Nevada

385 F. Supp. 681

UNITED STATES of America, Plaintiff, v. Delwin C. POTTER, Defendant.

Crim. No. LV. 74-59.

United States District Court, D. Nevada.

November 22, 1974.

V. DeVoe Heaton, U. S. Atty., Las Vegas, Nev., for plaintiff.

George H. Spizzirri, Las Vegas, Nev., for defendant.

ORDER DENYING DEFENDANT'S MOTION TO SUPPRESS EVIDENCE

ROGER D. FOLEY, Chief Judge.

Having waived indictment, defendant Potter was charged in an Information with two counts of making and subscribing false income tax returns for the years 1967 and 1968, in violation of Section 7206(1), Internal Revenue Code, 26 U.S.C. § 7206(1). Defendant then filed a motion to suppress evidence secured by agents of the Internal Revenue Service. A hearing on this motion was conducted on June 6, 1974, and the matter was then submitted for consideration by this Court. For the reasons stated herein, the motion to suppress evidence is denied.

PUBLISHED PROCEDURES

Subsequent to the Supreme Court's decision in Miranda v. Arizona, 384 U. S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966), the Internal Revenue Service published two news releases announcing procedures to be followed by special agents of the Intelligence Division in advising taxpayers of their Constitutional rights. On October 3, 1967, the IRS issued News Release No. 897, which states:

In response to a number of inquiries, the Internal Revenue Service today described its procedures for protecting the Constitutional rights of persons suspected of criminal tax fraud, during all phases of its investigations.

Investigation of suspected criminal tax fraud is conducted by Special Agents of the IRS Intelligence Division. This function differs from the work of Revenue Agents and Tax Technicians who examine returns to determine the correct tax liability.

Instructions issued to IRS Agents go beyond most legal requirements to assure that persons are advised of their Constitutional rights.

On initial contact with a taxpayer, IRS Special Agents are instructed to produce their credentials and state: "As a special agent, I have the function of investigating the possibility of criminal tax fraud."

If the potential criminal aspects of the matter are not resolved by preliminary inquiries and further investigation becomes necessary, the Special Agent is required to advise the taxpayer of his Constitutional rights to remain silent and to retain counsel.

IRS said although many Special Agents had in the past advised persons, not in custody, of their privilege to remain silent and retain counsel, the recently adopted procedures insure uniformity in protecting the Constitutional rights of all persons.

On November 26, 1968, the IRS issued News Release No. IR-949, stating in pertinent part:

This new procedure goes beyond most legal requirements that are designed to advise persons of their rights.

One function of a Special Agent is to investigate possible criminal violations of the Internal Revenue laws. At the initial meeting with a taxpayer, a Special Agent is now required to identify himself, describe his function and advise the taxpayer that anything he says may be used against him. The Special Agent will also tell the taxpayer that he cannot be compelled to incriminate himself by answering any questions or producing any documents, and that he has the right to seek the assistance of an attorney before responding.

The issue before this Court is whether evidence obtained by means of personal interviews with the defendant and examination of his financial records should be suppressed because of the claimed failure of an IRS Special Agent to undeviatingly follow these published directives of his agency.

FACTS

Defendant Potter had completed one and one-half years of college before being elected Justice of the Peace of Henderson, Nevada, in 1964. He has retained that position at all times since then. Prior to this present investigation, Potter had entered into a civil adjustment for tax liability for the years 1965 and 1966.

Revenue Agent Richard Peterson contacted Potter on April 17, 1969, and audited the defendant's 1967 and 1968 tax returns. This investigation, which was civil in nature, continued until Peterson's retirement from the Service on September 30, 1969. During the course of the investigation, Peterson received no instructions from the Intelligence Division. On May 5, 1969, Peterson referred the case to the Intelligence Division for investigation of possible criminal violations, but the Intelligence Division refused to accept it. Peterson and Potter, who was acting upon the advice of his accountant, continued to attempt to reach a settlement, but were unable to do so. Just prior to his retirement, Peterson came upon additional information relating to Potter's tax liabilities for the years in question. Based upon this information, Peterson again referred the matter to the Intelligence Division on September 19, 1969. It should be noted that this motion to suppress is not directed at evidence secured by Agent Peterson in the course of his investigation.

Special Agent Meldin J. Smith of the Intelligence Division was first assigned the Potter case on October 13, 1969, but due to his heavy case load, he did not make his initial contact with Potter until September 16, 1970. After this initial meeting, Smith did not again make contact with Potter until May 11, 1971, at which time Potter turned certain of his records over to Smith. Additional meetings followed, during the course of which Smith obtained additional statements and records from Potter.

Of prime importance here are the warnings given by Smith to Potter at their initial meeting on September 16, 1970. An examination of the record of the hearing conducted on June 6, 1974, reveals that Agent Smith presented Potter with his credentials, identified himself as a Special Agent from the Intelligence Division, and informed Potter that he had been assigned to investigate his income tax matters for the years 1967 and 1968. (R.T. 16, 101, 103). Smith also informed Potter that he did not have to answer any questions or provide any information which might tend to incriminate himself, that he could stop the conversation at any time he wished, that he was entitled to have anyone present to represent him, and that he was entitled to have a lawyer present. (R.T. 103). Agent Smith testified that while he generally informs taxpayers that one of his functions is to investigate potential criminal violations of Internal Revenue laws, he could not recall specifically whether he had done so in this case. (R.T. 103-104). Agent Smith's memorandum of this interview does not reflect that he informed Potter that this would be a criminal investigation. (R.T. 105-107).

Agent Smith testified that while he may not have specifically stated that he was conducting a criminal tax investigation, he felt that he had communicated this fact to Potter in giving him the other warnings. (R.T. 122). On the other hand, Potter testified that Agent Peterson had informed him that another agent would be contacting him concerning his civil tax liability, and that nothing occurred during Smith's initial visit to indicate that the investigation had shifted from civil to criminal in nature. (R.T. 11, 17).

DISCUSSION

Basically, the IRS news releases indicate that Special Agents are instructed to, upon initial contact with the taxpayer, produce their credentials, identify themselves, and state that one of their functions is to investigate possible criminal violations of the Internal Revenue laws. The taxpayer must also be advised that anything he says may be used against him, and that he has the right to remain silent and the right to seek counsel before responding to any questions. Here it appears that Agent Smith complied with all of these requirements, except that he cannot recall specifically whether he had advised Potter that one of his functions was to investigate the possibility of criminal tax fraud. Potter testified that he did not, and Smith's memorandum of the initial meeting tends to confirm it. Thus it will have to be assumed that Smith did not advise Potter of the potential criminal nature of the investigation. As such, the issue is whether evidence subsequently obtained must be suppressed because of Smith's failure to advise Potter of the nature of the investigation.

Defendant relies upon two cases in support of his motion to suppress, United States v. Heffner, 420 F.2d 809 (4th Cir. 1970), and United States v. Leahey, 434 F.2d 7 (1st Cir. 1970). In Heffner, the taxpayer was an "uneducated and emotionally disturbed man" who was convicted of tax fraud for "claiming a ridiculously large number of exemptions on the Withholding Exemption Certificate (Form W-4)." When he was interviewed by Special Agents, he was advised that he did not have to furnish any information which might tend to incriminate him, but he was not informed that the function of Special Agents was to investigate the possibility of a criminal prosecution for tax fraud, nor was he advised that he could retain counsel to assist him in the interview. On these facts, the Fourth Circuit held that his motion to suppress should have been granted, stating:

An agency of the government must scrupulously observe rules, regulations, or procedures which it has established. When it fails to do so, its action cannot stand and courts will strike it down. This doctrine was announced in United States ex rel. Accardi v. Shaughnessy, 347 U.S. 260, 74 S.Ct. 499, 98 L.Ed. 681 (1954). . . .

It is of no significance that the procedures or instructions which the IRS has established are more generous than the Constitution requires. 420 F.2d at 811-812.

In Leahey, Special Agents failed to observe the IRS announced procedure of warning the taxpayer that they were investigating the possibility of criminal tax fraud. Based upon due process considerations, the First Circuit affirmed the granting of a motion to suppress by the district court,...