United States of America, Plaintiff-appellee, v. David Scheufler, Defendant-appellant, 599 F.2d 893 (9th Cir. 1979)

Scheufler has a difficult burden to satisfy in challenging the indictment. United States v. Polizzi, 500 F.2d 856, 887 (9th Cir. 1974), Cert. denied, 419 U.S. 1120, 95 S. Ct. 802, 42 L. Ed. 2d 820 (1975). "An indictment returned by a legally constituted and unbiased grand jury, like an information drawn by the prosecutor if valid on its face, is enough to call for trial of the charge on the merits. The Fifth Amendment requires nothing more." Costello v. United States, 350 U.S. 359, 363, 76 S. Ct. 406, 409, 100 L. Ed. 397 (1956).

In explaining the likely source of Scheufler's unreported income, Andersen testified before the grand jury that Scheufler had participated in marijuana and hashish transactions that had yielded sums of money for Scheufler. Scheufler claims that this testimony was improper and prejudicial. This testimony of Andersen, even if attributable to the Government, fell far short of Government misconduct that we have held sufficiently egregious to require dismissal of the indictment. In United States v. Kennedy, 564 F.2d 1329, 1338 (9th Cir. 1977), Cert. denied, Myers v. U. S., 435 U.S. 944, 98 S. Ct. 1526, 55 L. Ed. 2d 541 (1978), we stated:

"(O)nly in a flagrant case, and perhaps only where knowing perjury, relating to a material matter, has been presented to the grand jury should the trial judge dismiss an otherwise valid indictment returned by an apparently unbiased grand jury."

In this case there is no evidence that Andersen perjured himself before the grand jury or that the prosecutor believed that Andersen was using perjured testimony. Absent such Government misconduct, the validity of an indictment is not ordinarily affected by the character of the evidence considered. United States v. Calandra, 414 U.S. 338, 345, 94 S. Ct. 613, 38 L. Ed. 2d 561 (1974); United States v. Blue, 384 U.S. 251, 255 n.3, 86 S. Ct. 1416, 16 L. Ed. 2d 510 (1966).¹ 

On the same basis, none of Scheufler's remaining contentions regarding the character of Andersen's testimony merit relief.²  Since the indictment here was returned by a legally constituted, unbiased grand jury and was valid on its face, it satisfied the requirements of the Fifth Amendment. See United States v. Calandra, supra, 414 U.S. at 344-45, 94 S. Ct. 613; Costello v. United States, supra, 350 U.S. at 363, 76 S. Ct. 406; United States v. Thoresen, 428 F.2d 654, 664 (9th Cir. 1970).

Additionally Scheufler argues that not only was it prejudicial to have Andersen tell the grand jury about the possible illegal source of the money which the Government contended that Scheufler had not declared as taxable income, but that the circumstances under which the Government acquired that information made its use before the grand jury illegal.

In an unrelated criminal case, the Government had entered into an agreement with one Bradley Barham under which Barham agreed to explain the origin of a large sum of money found in his home in return for the Government's promise that no part of his statement would be used against him or anyone he named.³  During the grand jury proceedings involving Scheufler, the Government introduced, through Agent Andersen's testimony, Barham's statements implicating Scheufler in a marijuana operation. Scheufler contends that the Government thereby breached the agreement with Barham, and that under Santobello v. New York, 404 U.S. 257, 92 S. Ct. 495, 30 L. Ed. 2d 427 (1971), the indictment against Scheufler should be dismissed. Santobello is inapposite because it concerns an agreement between the Government and the defendant who is seeking to enforce the agreement.

Whether third-party beneficiary agreements must be enforced in a criminal case is a novel issue. We need not decide that issue here since the alleged breach of the agreement between Barham and the Government in no way prejudiced Scheufler.⁴  Here, Barham's statements were introduced before the grand jury but not at trial. Barham's statements that Scheufler imported marijuana were not relevant to the criminal tax offense for which the grand jury indicted Scheufler. The statements were not used to establish Scheufler's income tax liability but were used merely to explain for background purposes how the Government first became aware of the possibility of Scheufler's failure to report taxable income. Moreover, Agent Andersen introduced before the grand jury independent, detailed, and abundant evidence concerning the amount of taxes owed by Scheufler for 1971 and 1972. Andersen testified that he determined Scheufler's assets and liabilities by reconstructing Scheufler's bank account, by interviewing third parties with whom Scheufler had done business, and by tracing ownership of Scheufler's cars through insurance checks. In sum, Barham's statements, which Scheufler contends should not have been introduced before the grand jury, were insignificant in light of the overwhelming, relevant evidence introduced in that proceeding.

At trial, it was sufficient for the Government to prove, by the net worth method, that Scheufler had received much more income in 1971 and 1972 than he had reported. That the income may have been acquired through illegal sources was not part of the Government's case, and no evidence to that effect was offered. Since Scheufler was not prejudiced by the alleged breach of the third-party agreement between Barham and the Government, he is not entitled to relief on that ground.

Scheufler contends that the district court erred in failing to give his proposed instruction on the difference between the "specific item" and "net worth" methods of proving tax fraud when the Government was attempting to establish liability by the "net worth" method. Scheufler's argument is meritless. The Government never suggested that the jury apply any theory other than the "net worth" method of proof. The district court is not required to instruct the jury on issues not reasonably raised by the evidence at trial. See Charron v. United States, 412 F.2d 657, 660-61 (9th Cir. 1969).

AFFIRMED.