United States of America, Appellee, v. George Keith Garman, Appellant, 748 F.2d 218 (4th Cir. 1985)

Defendant was convicted of the willful failure to file federal income tax returns for the years 1977-79 in violation of 26 U.S.C. § 7203, and he appeals. He contends that he was improperly tried in the District of Maryland, that he was deprived of his rights under the Fifth and Sixth Amendments when he was denied a continuance in order to present additional witnesses, and that there was error in the district court's jury instructions.

We see no merit in any of these contentions, and we therefore affirm.

Defendant resides in Baldwin, Maryland, and Maryland is within the internal revenue district which has a service center in Philadelphia, Pennsylvania. Defendant argues that the district court erred in denying his pretrial motion to dismiss for improper venue because the criminal act charged, the willful failure to file income tax returns, occurred in the Eastern District of Pennsylvania and not in the District of Maryland, where defendant was tried and convicted. Defendant relies on the well-established rule that when a crime consists of a failure to act, the place fixed for performance of the act is the proper venue. See, e.g., United States v. Rice, 659 F.2d 524, 526 (5 Cir. 1981); Bowles v. United States, 73 F.2d 772, 774 (4 Cir. 1934).

The places for filing non-corporate income tax returns are fixed by 26 U.S.C. § 6091(b) (1) (A), which provides that returns shall be made "(i) in the internal revenue district in which is located the legal residence ... of the person making the return, or (ii) at a service center serving the internal revenue district referred to in clause (i)." The statute also authorizes the Secretary by regulations to designate the place of filing.

The Secretary has adopted regulations governing the place for filing income tax returns. 26 C.F.R. Secs. 1.6091-1 et seq. The pertinent portion (Sec. 1.6091-2) is set forth in the margin.¹ While the regulations seem unnecessarily obscure, we do read them to establish alternative places for filing individual tax returns: the internal revenue district where the taxpayer resides if the return is hand-carried, or the service center serving the internal revenue district where the taxpayer resides if the return is mailed.²  Thus we read the regulations adopted pursuant to Sec. 6091 to prescribe two places of filing.

This reading of the regulations is consistent with the legislative history of the 1966 amendment to Sec. 6091, which first authorized filing at a service center as an alternative and addition to the pre-existing requirement of filing within the district of residence. The purpose of the amendment, which authorized filing at places where the Internal Revenue Service had recently installed automatic data processing equipment, was to maximize use of such equipment and to speed the processing of returns and payment of tax refunds.

The Senate Report on this amendment specifically discusses venue in cases of willful failure to file under Sec. 6091 as amended. The Report concluded that venue is proper in either the district of residence or the district where the service center is located.³  Indeed, in connection with the amendment of Sec. 6091, Congress thought it appropriate to amend 18 U.S.C. § 3237 to provide that an individual prosecuted for willful failure to file in a district other than that of his residence has the right to have the case transferred to the district of his residence.⁴ 

We conclude that filing was required in either the District of Maryland or the Eastern District of Pennsylvania, and therefore defendant's willful failure to file was a crime committed in more than one district. Since 18 U.S.C. § 3237(a) provides that a crime committed in more than one district may be prosecuted in any district in which it was "begun, continued, or completed," the District of Maryland had venue here.⁵ 

We turn next to the contention that the district court's denial of a continuance denied defendant his constitutional rights and constituted reversible error.

Defendant's trial began on November 22, 1982, the Monday before Thanksgiving. The trial was not protracted because the sole contested issue was whether the failure to file was willful. At the end of the first day of trial the government reported that it had one more witness for its case in chief. The district court then told defense counsel to have her witnesses ready for the next day; defense counsel agreed with the district court that it was highly probable the case might conclude on Wednesday; and the district court advised counsel that it would sit later than usual on Tuesday.

On Tuesday, the second day of trial, the government completed its case before the midmorning recess. Defense counsel, in response to an inquiry from the district court, said that she planned to present two witnesses before lunch and two, including the defendant, after lunch. After the lunch recess, however, defense counsel reported that she intended to call three more witnesses on Wednesday. The district court reminded her that the court planned to sit late, and told her she should get her witnesses there that day because the taking of evidence would end once there was nothing more to present.⁶ 

Late in the afternoon, after presenting all available witnesses, defense counsel stated her desire to call Constantino Bakas and Charles Brooks as witnesses on Wednesday. The district court reminded her of its concern about the approaching Thanksgiving holiday and its desire to complete the case on Wednesday, pointing out that counsel had not earlier reported that Mr. Brooks could not be available on Tuesday. At the district court's suggestion, some of the evidence sought to be proven was stipulated, and certain legal documents were admitted into evidence. The government then presented its one available rebuttal witness, though it represented that it might have as many as five if the taking of evidence was extended into Wednesday. The taking of evidence concluded and the district court adjourned at about 5:30 p.m.

The government argues that the proposed additional evidence was only cumulative of what was already before the jury, and that the district court could therefore exclude the testimony under Federal Evidence Rule 403 because its probative value was substantially outweighed by "considerations of undue delay, waste of time, or needless presentation of cumulative evidence." As a technical matter we doubt that Rule 403 is applicable when the district court did not purport to exclude evidence under Rule 403, but instead denied a continuance so that the witnesses were not even called. Rather, it seems to us that the issue is whether the district court abused its discretion in denying a continuance. See Ungar v. Sarafite, 376 U.S. 575, 589, 84 S. Ct. 841, 11 L. Ed. 2d 921 (1964). As a practical matter, what we must decide is the same under either test--was defendant foreclosed from presenting his complete defense by the district court's limitation on the taking of evidence? The question is largely a factual one, and it is to the facts that we turn.

The government amply proved for the years in question that defendant earned taxable income and that he failed to file income tax returns. The government showed that defendant's unpaid tax liability for the years in question was $28,700. Defendant himself conceded that for each of the years he knew that he was supposed to file tax returns, so the only contested issue for the jury was whether defendant's failure to file was willful.

The government proved that in 1978 defendant hired an accountant, Leonard Miller, to prepare defendant's 1977 tax return. Miller obtained three extensions for filing the return, and finally quit in January 1979 because defendant failed to provide him with sufficient information to prepare the return. There was evidence that during this same period defendant hired another accountant, Sylvan Offit, to prepare a personal net worth statement for use in refinancing some properties owned by defendant, and that defendant furnished the necessary data fast enough for the statement to be prepared within three weeks.

In 1978 defendant worked for JCB, Inc. and then for American Liner Corporation. While at American Liner he had Jerome Lichter, an accountant who worked there, obtain two extensions of time to file his 1978 return, but Lichter could not prepare the return because defendant never furnished the necessary information. Defendant then asked Charles Decker, a bookkeeper for American Liner, to prepare his 1977 and 1978 returns, but Decker could not do so with the information defendant supplied.

Defendant next sought help from Robert Thompson, an accountant, but Thompson could not get the files necessary to prepare a return. Finally, in April 1980, defendant went to Joseph Tarr and Mark Finley, who procured two extensions of time for filing the 1979 return. By December 1980, however, defendant had not paid their fee so they did not complete the return.

The IRS special agent who investigated defendant's case testified that when he interviewed defendant, the latter agreed to discuss his tax affairs. Defendant admitted that he had not filed returns and he took the agent to the office of Constantino Bakas (his attorney) and then to the office of his accountant, telling both to give the special agent whatever information he requested.

Garman's defense was that he did not act willfully because he thought that as a result of casualty and other losses he owed little if any tax, and he had made good faith attempts to have returns prepared and filed. He showed that he was evicted from his home in January 1976 while he was away, and that when he returned, his tools, machinery, furniture and personal records were gone. Litigation ensued and defendant eventually won the right to buy the property, but it was in very damaged condition when he regained possession. He estimated his losses from the eviction were $100,000 and damage to the property approximately $20,000.

It was part of the government's proof that when defendant worked for American Liner, his annual salary was $104,000 but that no taxes were withheld because first he was treated as an independent contractor and then he claimed 102 exemptions. Defendant testified that he wanted to avoid withholding because of his substantial losses and that the number of exemptions claimed was fixed by employees of American Liner and not by him.

Against this factual background, defendant's counsel made the proffer set forth below.⁷  Following the proffer, the district court received into evidence documentary evidence and stipulations to establish that defendant had filed suits (a) in 1976 regarding the eviction from his home, (b) in 1976 regarding damage to his property after his eviction, (c) in 1976 regarding an insurance claim for a stolen pump, and (d) in 1975 and 1976 regarding some cattle.

We do not think that the proffered evidence was of sufficient significance that we could conclude that the district court abused its discretion in denying the continuance or that defendant's right to present his entire defense was violated. There is nothing new in what defendant sought to present through the two witnesses. The fact that defendant, during his absence, was evicted from his home, lost property before he returned, sued to regain the right to occupy the property and regained it only in damaged condition, was amply proven. The fact that there was no withholding on defendant's salary from American Liner was not questioned and the reason for nonwithholding, that defendant claimed he had offsetting losses, was proven. Mr. Brooks' proffered testimony that he took part in the decision to withhold taxes would have added nothing because this advice was based, as defendant himself admitted, on his claim of offsetting losses. The validity of this claim could not be established through Mr. Brooks; it could only be proven from other sources.

Similarly, we think that the testimony of Mr. Bakas was of little significance. Documentary evidence already proved that there was litigation over cattle. Three witnesses--the defendant, the IRS agent, and an accountant--already proved that the defendant told Bakas to cooperate with the agent's investigation. Clearly, testimony from Bakas on these matters would be cumulative.

We therefore conclude that there was no reversible error in the district court's refusal to continue the taking of evidence to permit these witnesses to testify.

In instructing the jury on the question of willfulness, the district court gave the standard instruction, but, at the government's request, added:

A failure to file a tax return may be willful even if it is the result of procrastination, unless you find that such failure was accidental, inadvertent or negligent.

Defendant contends that the addition constituted reversible error because (a) it was an "unnecessary embellishment" that made the jury believe defendant was arguing procrastination as a defense, and (b) it may have led the jury to believe that the burden was on defendant, upon proof by the government of procrastination, to show that his conduct was not willful. We are not persuaded by either argument.

Giving the additional instruction was proper. It was a correct statement of the law. See United States v. Browney, 421 F.2d 48, 50 (4 Cir. 1970). In this case there was evidence of procrastination and, whether defendant intended to rely upon it or not, the government was entitled to have the jury told that procrastination was no defense. We do not read the additional instruction as purporting to shift the burden of proof.⁸  Nor do we find any such implied meaning. The phrase "unless you find", read in context, was plainly meant only to distinguish procrastination from accidental, inadvertent or negligent conduct.

AFFIRMED.

Sec. 1.6091-2 Place for filing income tax returns.

Except as provided in Sec. 1.6091-3 (relating to income tax returns required to be filed with the Director of International Operations) and Sec. 1.6091-4 (relating to exceptional cases):

(a) Individual estates, and trusts.

(1) Except as provided in paragraph (c) of this section, income tax returns of individuals, estates and trusts shall be filed with the district director for the internal revenue district in which is located the legal residence or principal place of business of the person required to make the return, or, if such person has no legal residence or principal place of business in any internal revenue district, with the District Director at Baltimore, Md. 21202.

(2) An individual employed on a salary or commission basis who is not also engaged in conducting a commercial or professional enterprise for profit on his own account does not have a "principal place of business" within the meaning of this section.

(b) Corporations. Except as provided in paragraph (c) of this section, income tax returns of corporations shall be filed with the district director for the internal revenue district in which is located the principal place of business or principal office or agency of the corporation.

(c) Returns filed with service centers. Notwithstanding paragraphs (a) and (b) of this section, whenever instructions applicable to income tax returns provide that the returns be filed with a service center, the returns must be so filed in accordance with the instructions.

(d) Hand-carried returns. Notwithstanding paragraphs (1) and (2) of section 6091(b) and paragraph (c) of this section:

(1) Persons other than corporations. Returns of persons other than corporations which are filed by hand carrying shall be filed with the district director (or with any person assigned the administrative supervision of an area, zone or local office constituting a permanent post of duty within the internal revenue district of such director) as provided in paragraph (a) of this section.