United States of America, Plaintiff-appellee, v. Burton D. Linne, Defendant-appellant.united States of America, Plaintiff-appellee, v. Jack O. Slater, Defendant-appellant.united States of America, Plaintiff-appellee, v. John C. Imlay, Iv, Defendant-appellant.united States of America, Plaintiff-appellee, v. Burton D. Linne, Defendant-appellant, 826 F.2d 1061 (4th Cir. 1987)Annotate this Case
Argued June 2, 1987. Decided Aug. 14, 1987
Edwin Vieira, Jr. for appellant
Gail A. Brodfuehrer, Tax Division, United States Department of Justice (Roger M. Olsen, Assistant Attorney General; Michael L. Paup; Robert E. Lindsay; Donald W. Searles, Tax Division, Department of Justice; Henry E. Hudson, United States Attorney, on brief), for appellee.
Before K.K. HALL, SPROUSE, and WILKINSON, Circuit Judges.
Burton D. Linne, Jack O. Slater, and John C. Imlay, IV, appeal from their convictions on numerous counts of mail fraud, 18 U.S.C. §§ 1341, 2, one count each of conspiracy to defraud the United States, 18 U.S.C. § 371, and with respect to Linne and Slater only, several counts of willful failure to file income tax returns, 26 U.S.C. § 7203.1 Their sole contention on appeal is that the government failed to disclose an allegedly exculpatory investigative report written by an agent of the Internal Revenue Service who testified at trial. They argue that the government violated the Jencks Act, 18 U.S.C. § 3500, and deprived them of their due process rights under Brady v. Maryland, 373 U.S. 83 (1963), by not disclosing the report. We find no merit to either argument and affirm.
At trial the government presented uncontroverted evidence that Linne designed, and with the assistance of Slater and Imlay, promoted and operated an income tax evasion scheme. The scheme involved two programs marketed through the mails by an organization known as the American Liberty Information Service. The programs were called the Administrative Notice and Declaration of Immunity (ANDI) and Citizens for Dollars (CFD). The defendants also promoted a foreign 'investment service' known as the Bullion Fund2 as a mechanism for concealing income from the IRS.
The defendants marketed the ANDI program by representing to prospective customers that a citizen's obligation to pay federal income taxes arises solely from voluntary participation in federal entitlement programs, e.g., Social Security. According to their promotional materials, a taxpaying citizen could become a 'non-taxpayer' by excluding himself from all governmental benefits. Subscribers to the ANDI program could purportedly achieve 'legal non-taxpayer' status by filing 'notices of recission' with various federal agencies. The notices, which were supplied by the defendants through ANDI, purportedly converted ANDI subscribers into 'disenfranchised freemen' and extinguished their obligation to pay taxes. Linne and his co-defendants charged ANDI subscribers between $2,000 and $31,000 for membership in the program. Approximately one hundred persons subscribed to ANDI between 1982 and 1984.
From 1983 on, Linne, Slater, and Imlay marketed the CFD program as a check-cashing clearinghouse for ANDI subscribers. Using a Virginia bank account, the defendants represented that, for a fee, CFD would cash ANDI subscribers' checks without detection by the IRS. They provided CFD customers with a concealment kit that included, among other things, a 'non-photo blue pencil' that would prevent the bank from making photographic records of their signatures. The defendants charged a one hundred dollar fee for membership in CFD and added a service charge for every check CFD cashed. The government presented uncontroverted evidence that CFD's bank deposits totaled over five million dollars in an eighteen-month period ending in August 1985 and that the defendants received substantial commissions on these deposits. Unchallenged evidence also established that Linne and Slater earned taxable income during these years and failed to file income tax returns.
Following an IRS search of CFD's offices, which revealed the 'secret' account numbers of CFD subscribers and other CFD materials, the defendants promoted the Bullion Fund as a more secret mechanism for concealing income from the IRS. According to the defendants' promotional materials, the principal virtues of the Bullion Fund were the privacy with which it conducted its operations and the benefit of secreting funds in a foreign entity not subject to United States tax laws, disclosure laws, or IRS discovery procedures.
At trial numerous witnesses testified that they were defrauded by the defendants' schemes. They described in detail the tax evasion programs and the defendants' false representations. The government also introduced many examples of the documentary materials the defendants sent through the mail to promote their programs. Finally, an IRS agent testified that, during his investigation of the Bullion Fund in the Bahamas, he had spoken with two individuals familiar with the Fund, but discovered no corporate existence for it other than a post-office box in Nassau. Although concededly aware that while testifying the agent possessed a report he had prepared on his investigation, the defendants made no request to review it or otherwise discover its contents.
The defendants' sole defense was that they honestly believed their activities were lawful. They maintained that they never intended to defraud customers and that their failure to pay income taxes stemmed from the belief that they were 'legal nontaxpayers.' The jury returned guilty verdicts on a total of sixty-two counts of the indictment.
In a post-verdict motion construed by the court as a motion for a new trial, Linne asserted that the government violated Rule 16 of the Federal Rules of Criminal Procedure by not disclosing or permitting review of the IRS agent's investigative report prior to trial. In support of the motion, Linne claimed that the IRS agent's testimony did not completely or accurately reflect all of the information he had acquired about the Bullion Fund in his investigation. Linne presented affidavits stating that the Bullion Fund was a registered corporate entity in the Turks and Caicos Islands and that persons other than the defendants had formed and operated the Fund. Linne maintained that the agent's report included these facts and that if he had been able to review it he could have impeached the agent's testimony. The district court denied the motion.
On appeal, the defendants contend that the government's nondisclosure of the IRS agent's report violated both the Jencks Act and their due process rights under Brady. We disagree.
While it is true that the government promised to disclose all Jencks material before trial, this concession did not obviate the defendants' statutory obligation to request the agent's report at trial. United States v. Lemus, 542 F.2d 222, 223 (4th Cir. 1976), cert. denied, 430 U.S. 947 (1977); United States v. Peterson, 524 F.2d 167, 175 (4th Cir. 1975), cert. denied, 423 U.S. 1088 (1976); Rich v. United States, 261 F.2d 536, 537 (4th Cir. 1958), cert. denied, 359 U.S. 946 (1959); 18 U.S.C. § 3500. Although aware that the agent was testifying from notes he had prepared, defense counsel failed to make any request to review them and therefore waived any Jencks Act complaint.3
The defendants' Brady contentions also fail. The report was not material to the question of their intent to defraud or to their willfulness in failing to file federal income tax returns. There can be no Brady violation absent a showing of the materiality of the undisclosed evidence. See United States v. Agurs, 427 U.S. 97, 112 (1976). Withheld evidence is material 'only if there is a reasonable probability that, had the evidence been disclosed to the defense, the result of the proceeding would have been different.' United States v. Bagley, 105 S. Ct. 3375, 3384 (1985); see United States v. Alexander, 789 F.2d 1046, 1049-51 (4th Cir. 1986). The government at trial presented overwhelming evidence, independent of the IRS agent's testimony, from which the jury could find that the defendants knew of the unlawfulness of their activities. The possibly impeaching information contained in the agent's report bore no relationship to this independent evidence. Moreover, the agent's testimony was confined to a matter largely collateral to the charges against the defendants. His testimony was not significant on the question of the defendants' intent and nondisclosure of a report that could do no more than impeach that testimony did not violate the defendants' Brady rights.
In view of the above, the defendants' convictions are affirmed.
Linne was convicted on one count of conspiracy to defraud the United States, eighteen counts of mail fraud, and five counts of willful failure to file income tax returns. Slater was convicted on one count of conspiracy to defraud the United States, seventeen counts of mail fraud, and two counts of willful failure to file income tax returns. Imlay was convicted on one count of conspiracy to defraud the United States and seventeen counts of mail fraud
Although subject to some dispute at trial, the Bullion Fund apparently was registered in the Turks and Caicos Islands and licensed to do business in the Bahama Islands
Defendants' reliance on United States v. McKenzie, 768 F.2d 602, 609 (5th Cir. 1985), cert. denied, 107 S. Ct. 861 (1986), on their Jencks Act claim is misplaced. The fact that the defendants were aware at trial of the existence of the agent's report distinguishes this case from that case