Unpublished Disposition, 930 F.2d 30 (9th Cir. 1991)

MEMORANDUM^* 

Defendants Charles Spurrier, Thomas Smith and Dennis Spurrier were found guilty of conspiracy to defraud the United States by impeding and impairing the Internal Revenue Service ("IRS"); mail fraud, and aiding and abetting the preparation of false tax returns in violation of 18 U.S.C. §§ 371, 1341 and 26 U.S.C. 7206(1), respectively. Specifically, defendants were charged with selling financial programs that would allow buyers to turn themselves into "nontaxpayers" by being removed from the IRS, Social Security and other governmental agencies. In addition, the defendants were charged with creating alleged offshore trusts that would allow individuals to wipe out tax liability and hide assets.¹ 

In one of the programs, known as International Dynamics Inc. ("IDI"), individuals allegedly turned over their paychecks to a charitable trust, which returned about 90 percent of the money in "gift checks." The checks allegedly were not reported as taxable income. In another plan, known as the Administrative Notice and Declaration of Immunity "(ANDI"), individuals allegedly would voluntarily join the Social Security and tax systems, and then voluntarily withdraw by withdrawing tax returns previously submitted and filing a declaration of immunity declaring themselves "nontaxpayers." Individuals allegedly would then be freed from filing federal and state tax returns and would receive refunds from taxes previously paid.

This appeal arises over the process and outcome of the trial. Before the jury verdict was returned, several jurors informed the trial judge that they believed foreperson Stark had said that he had heard that the Spurriers were guilty.²  Following hearings in chambers and in open court, the trial judge denied the defendants motions for a mistrial based on alleged jury misconduct. After the verdict, the defendants moved for a new trial, which the trial judge also denied.

On appeal, the defendants claim that the trial judge improperly denied them a mistrial or a new trial based on the alleged incident. They also claim the jury deliberated improperly with only eleven jurors present. In separate claims, Charles and Dennis Spurrier contend that the jury had insufficient evidence to convict them and that the court's jury instructions were improper.³ 

* We review the trial judge's findings of fact as to whether the alleged juror misconduct occurred for clear error, but accord substantial weight to the trial judge's conclusion as to the effect of the alleged juror misconduct. See United States v. Madrid, 842 F.2d 1090, 1092 (9th Cir.), cert. denied, 488 U.S. 912 (1988). Considerable deference is paid to the trial judge since " [t]he trial judge is uniquely qualified to appraise the probable effect of information upon the jury, the materiality of the extraneous material, and its prejudicial nature." Id. (quoting United States v. Steele, 785 F.2d 743, 746 (9th Cir. 1986) (quoting United States v. Bagnariol, 665 F.2d 877, 885 (9th Cir. 1981), cert. denied, 456 U.S. 962 (1982). When the trial judge has conducted an evidentiary hearing, we look less harshly upon a conviction. See Madrid, 842 F.2d at 1092.

* Defendants contend that the trial court improperly denied the defendants'⁴  motion for a mistrial or a new trial because of alleged statements attributed to foreperson Stark about the Spurriers' guilt. Such comments, they argue, indicate that Stark either had knowledge of the case prior to voir dire or was exposed improperly to such extraneous information during the trial. Either way, they contend, defendants were entitled to a new trial or a mistrial.

According to the record, Juror Coe, representing himself and two other jurors, informed the trial judge that the following incident occurred (RT 10-1550):

There was a heated argument between two jurors that were across the room. And he [Stark] had stood up, and the statement was, 'I know the Spurriers are guilty.'

And the other juror says, 'Well, how do you know that?'

And he said, 'because my son knows somebody that knows the Spurriers,' or 'my son knows the Spurriers, and he knows they're guilty, so I know they're guilty.'

After talking with the three jurors who allegedly heard the statements, the trial judge questioned foreperson Stark and the juror to whom Stark allegedly made the comment. Stark told the judge that he had no outside information about the case; that he had never heard of the Spurriers; that his son did not know the Spurriers, and that he had not seen his son in the past month. See RT 10-1569-72.⁵ 

Based on this examination, the trial judge concluded that no wrongdoing had occurred. The trial judge said: "I, as I stand here, believe it didn't happen; that's what I actually think." RT 1581. The judge said he doubted Stark would lie and said that jurors had reconstructed the event after the fact in a "did you hear what I heard" fashion. RT 10-1581.

We do not find the trial judge's conclusion that Stark did not have any pretrial knowledge of the case clearly erroneous. Defendants have offered no proof that Stark "failed to answer honestly a material question on voir dire ... [or] that a correct response would have provided a valid basis for challenge for cause." McDonough Power Equipment, Inc. v. Greenwood, 464 U.S. 548, 556 (1984). Nor is there any reason to challenge the trial judge's credibility determination that Stark would not lie about his pretrial knowledge of the case. See Tinsley v. Borg, 895 F.2d 520, 525 (9th Cir. 1990) (citing Knaubert v. Goldsmith, 791 F.2d 722, 727 (9th Cir.), cert. denied, 479 U.S. 867 (1986) (" [N]o sort of factual finding ... is more appropriate for deferential treatment than is a state court's credibility determination.")). See Madrid, 842 F.2d at 1093. We thus reject defendants' claim that they were entitled to a mistrial or a new trial because of Stark's conduct during voir dire.

Judicial precedent supports our holding. In a rape trial in which a juror did not reveal her previous rape counseling experience, we declined to disturb a district court determination that the juror had no actual bias which would have provided a valid challenge for cause. See Tinsley, 895 F.2d at 529. We also have been reluctant to find implied or presumed bias. See id. Indeed, we have done so only where the prospective jurors had close, personal involvement with the parties at issue. See, e.g., United States v. Allsup, 566 F.2d 68, 71-72 (9th Cir. 1977) (jurors working in different branches of robbed bank had implied bias); United States v. Eubanks, 591 F.2d 513, 517 (9th Cir. 1979) (juror in heroin trial with sons serving time for heroin convictions had implied bias). Defendants have provided no evidence that Stark or someone he knew had any such relationship with the defendants.

We also reject defendants' claim that Stark was exposed to extraneous information during the proceedings, entitling them to a mistrial or a new trial. In considering whether the introduction of extrinsic evidence requires a new trial, we have considered:

(1) whether the material was actually received, and if so, how; (2) the length of time it was available to the jury; (3) the extent to which the juror discussed and considered it; (4) whether the material was introduced before a verdict was reached, and if so at what point in the deliberations; and (5) any other matters which may bear on the issue of the reasonable possibility of whether the extrinsic material affected the verdict. Dickson v. Sullivan, 849 F.2d 403, 406 (9th Cir. 1988) (quoting Marino v. Vasquez, 812 F.2d 499, 506).

In addition, we have examined whether there is a direct and rational connection between the extrinsic evidence and a prejudicial jury determination, and whether the material considered by the jury relates to a material aspect of the case. See Hernandez-Escarsega, 886 F.2d at 1580. The trial judge's determinations are entitled to substantial deference because he or she " [i]s uniquely qualified to appraise the probable effect of information upon the jury, the materiality of the extraneous information, and its prejudicial nature." Madrid, 842 F.2d at 1092 (quoting United States v. Steele, 785 F.2d 743, 746 (9th Cir. 1986) (quoting Bagnariol, 665 F.2d at 885).

Following this analysis, we hold that the trial judge properly concluded that defendants were not prejudiced by the alleged incident. Even assuming arguendo that Stark obtained knowledge of the Spurriers' alleged guilt and shared that knowledge with the other jurors, the trial judge's subsequent actions removed any prejudice his comments might have caused. Although the alleged information was introduced prior to the jury's verdict, his alleged comments were made when "there was two or three conversations going on." RT 10-1560. Moreover, in addition to meeting with the jurors directly involved in the alleged incident, the trial judge polled each juror as to whether he or she would be able to disregard Stark's statements. All of the jurors responded that they could. In addition, the trial judge told the jurors firmly to disregard Stark's alleged comments and reminded them of the dangers of hearsay. RT 10-1594-95. He told them that anyone outside the courtroom couldn't "possibly" have a relevant opinion on the case. RT 10-1595. Given the unsubstantiated nature of Stark's alleged comments and the subsequent attention it received, defendants cannot prove that the court's cautionary instruction was "unlikely to cure the prejudicial effect of an error." United States v. Charmley, 764 F.2d 675, 677 (9th Cir. 1985).

Moreover, given the substantial evidence against all three defendants, it was reasonable for the trial judge to conclude that "the jury would have reached the same result even if it had not considered the extraneous material." Hughes v. Borg, 898 F.2d 695, 700 (9th Cir. 1990). Stark's alleged statements were "clearly irrelevant" with respect to the critical issue in the case: whether the defendants had the requisite intent--knowledge that their actions were wrong. Because this case turned on whether the defendants believed they were acting lawfully, the fact that some unknown person might have believed they were guilty had no bearing on the defendants state of mind. Stark's alleged comments were thus largely irrelevant. Moreover, the record as a whole indicates that the jury had substantial basis to return a guilty verdict, negating the possibility that the alleged incident "could have" affected the verdict.⁶  Hughes v. Borg, 898 F.2d 695, 700 (9th Cir. 1990) (quoting Marino v. Vasquez, 812 F.2d 499, 504 (9th Cir. 1987) (quoting United States v. Vasquez, 597 F.2d 192, 193 (9th Cir. 1979)). As such, a mistrial or a new trial was not required.

Finally, although "the remedy for allegations of juror partiality is a post-trial hearing in which the defendant has the opportunity to prove bias," Tinsley, 895 F.2d at 524, the trial judge gave defendants an opportunity to have pre-verdict discussions with the jurors who made the complaint, as well as with Stark. There is thus little reason to believe that defense counsel would have obtained any additional evidence of juror bias in a post-verdict hearing.

B

Defendants argue that the prosecution improperly pressured the trial court not to grant a mistrial.⁷  Because defendants did not raise such complaints at trial, we review them only for plain error. See United States v. Young, 470 U.S. 1, 13, 15-16 (1985); Fed. R. Crim. P. 52(b). There is no indication that the trial judge made his ruling on the basis of the prosecution's statements. In denying their motions for a mistrial and a new trial, the trial judge emphasized the implausability of defendants' claims and the overwhelming evidence of their guilt. The defendants' claim is thus without merit.

C

We also reject defendants' claim that they were entitled to a mistrial or a new trial because, they say, only eleven jurors deliberated during a crucial time, while the twelfth juror stood outside smoking a cigarette. See RT 10-1564.

Although at the time foreperson Stark made the alleged statements only eleven jurors were present, the trial judge found that no actual deliberations occurred with less than twelve jurors. We conclude that such a finding was not clearly erroneous. As the record indicates, at the time of Stark's alleged comments, the formal meeting had broken up and the jurors were waiting for the results of a vote. See RT 10-1552 (Statement by Juror Coe). Several conversations were taking place. See id. Moreover, after the incident and the jury reconvened, there is no indication that any similar incident occurred. Based on this evidentiary record, the trial judge's conclusion that a mistrial was not warranted was reasonable. See Madrid, 842 F.2d at 1092.

II

Defendants Charles and Dennis Spurrier contend that the jury's verdict was not supported by the evidence. In separate briefs, both defendants argue that the record indicates that numerous witnesses testified that they believed the financial programs were lawful.

In addition, Charles Spurrier argues that even the IRS' undercover agent testified that both the sellers and buyers of the schemes believed that they had found a legal way to reduce their tax liability, indicating that he did not have the requisite intent for the crimes.

Dennis Spurrier also contends that the government failed to prove that he had any agreement with his father, Charles, to defraud the government or that he willfully aided and abetted the filing of false income tax returns. His only involvement, he claims, was receiving gift checks from clients, calculating the amount of the gift checks, and paying them out.

In evaluating the jury verdict, we must consider whether, viewing the evidence in the light most favorable to the government, a jury could reasonably have concluded that the defendant was guilty beyond a reasonable doubt. See United States v. Nadler, 698 F.2d 995, 1002 (9th Cir. 1983). We hold that it could.

As the prosecution notes, the evidence showed inter alia that Charles Spurrier had 21 years of experience in financial planning; that he had prepared up to 350 tax returns a year and attended numerous audits, and that he was a licensed securities broker and real estate agent. In addition, Charles Spurrier testified that individuals knew that they would receive back 90 percent of the money submitted to an alleged trust as a nontaxable "gift check." Moreover, during a video presentation of one of defendants' programs, ANDI, and its ability to impede the IRS, the prosecution argues, Charles Spurrier acknowledged that he hoped the program could frustrate the IRS permanently. The jury thus had ample reason to believe that Charles Spurrier knew that allowing individuals to evade the tax system was unlawful.

Dennis Spurrier's actions also indicated an agreement to participate in Charles Spurrier's schemes. The government need not prove the existence of a formal agreement. Rather, an agreement may be inferred from the acts of the parties and other circumstantial evidence. See United States v. Caplan, 633 F.2d 534, 542 (9th Cir. 1980). Here, there was substantial evidence that both Charles and Dennis Spurrier knew that their programs would allow individuals to reduce or escape tax liability; indeed the very purpose of the "gift" checks and "nontaxpayer" programs was to avoid paying taxes. Dennis Spurrier played a critical role in taking in and paying out the "gift checks" as well as assisting in the other financial schemes. In addition, there was substantial evidence that Dennis Spurrier knowingly prepared a document used to prepare a false return or engaged in conduct that he knew would result in the filing of false tax returns.

Moreover, given the close nexus between the purpose of the schemes and its desired effect--reducing or eliminating taxable income--there was sufficient circumstantial evidence for the jury to conclude that both defendants conspired to and did violate the law. Because there is no evidence to undermine the jury's verdict, we do not disturb it.⁸  See United States v. Bagnariol, 665 F.2d 877, 889 (9th Cir. 1981), cert. denied, 456 U.S. 962 (1982).

III

A trial court's jury instructions to which defendants did not object at trial are reviewed for plain error. See Madrid, 842 F.2d at 1093. A trial court's failure to adequately instruct the jury on a defendant's theory of defense is reviewed de novo. United States v. Lopez, 885 F.2d 1428, 1434 (9th Cir. 1989), cert. denied, 110 S. Ct. 748 (1990).

* Defendants Charles and Dennis Spurrier contend that the trial judge's jury instructions were inadequate. Defendants claim that in jury instruction No. 25, the trial judge admonished the jury about the illegality of defendants' IDI program, emphasizing that the jury must decide whether defendants believed their actions were lawful. In doing so, the trial court stated that the illegality of the payments are "fundamental tax principles of tax law." "Moreover, he stated, "there is no room for doubt or difference of legal opinion in these regards." RT 10-1513-14.

Defendants argue that such a jury instruction was tantamount to a directed verdict as to the element of willfulness in the dispute. Moreover, they claim, the legality of the tax avoidance programs was not well settled under applicable Ninth Circuit law. To support this claim, defendants rely on United States v. Dahlstrom, 713 F.2d 1423 (9th Cir. 1983), cert. denied, 466 U.S. 980 (1984). The Dahlstrom court found insufficient evidence to prove that defendants had knowingly violated the law by developing foreign trust organizations, which would return to purchasers all or some of the money they put in the trusts as excludable gifts.

In addition, defendants argue that although this court in United States v. Russell, 804 F.2d 571 (9th Cir. 1986) found a similar tax shelter scheme illegal, it did not do so until two years after the alleged conspiracy. Thus, they claim, defendants had no reason to believe their actions were unlawful.

The defendants' claims are without merit. As the trial judge noted, allowing individuals to drop out the IRS system and avoid tax liability by receiving fraudulent "gift checks" clearly violates principles of tax law requiring individuals to report all sources of income. As the Russell Court stated, "if it is clear beyond any doubt that a scheme is illegal under established principles of tax law, then participants have fair notice of its illegality even if no appellate court has explicitly so ruled." 804 F.2d at 575.

In addition, whether or not the law was clearly settled, the trial judge clearly told the jury to focus on the main issue in the case--whether or not defendants believed that their actions were lawful. The jury was thus instructed to focus on the proper issue--the requisite intent for the crime. Where, as here, the defendants did not object to the instructions at trial, the judgment may not be disturbed in the absence of plain error. Given the adequacy of the judge's jury instructions, there is no basis for overturning the conviction.

B

Charles and Dennis Spurrier also claim that the trial court improperly issued a Jewell instruction allowing the jury to find them guilty if they acted with deliberate ignorance of the law. See United States v. Jewell, 532 F.2d 697 (9th Cir.) (en banc), cert. denied, 426 U.S. 951 (1976). A Jewell instruction generally is appropriate if "only in those comparatively rare cases where ... there are facts that point in the direction of deliberate ignorance." United States v. Murrieta-Bejarano, 552 F.2d 1323, 1325 (9th Cir. 1977).

Defendants argue that a Jewell instruction was inappropriate in this case because, they say, the government proffered evidence that defendants knew or should have known of the illegality of the financial programs. There was no evidence, defendants claim, that they sought to consciously avoid learning of the programs' legality.

We agree with defendants that the thrust of the government's case pointed to actual knowledge of the illegality of the tax schemes. With both defendants, the government emphasized that the purpose of the schemes was to avoid tax liability and allow clients to evade the IRS; that defendants knew that the "gift" checks were to be used to reduce taxable income; and that defendants knew or should have known that such schemes were unlawful.

When defendant has "either actual knowledge or no knowledge at all of the facts in question," United States v. Beckett, 724 F.2d 855, 856 (9th Cir. 1984), a Jewell instruction generally is inappropriate. Indeed, we generally have allowed Jewell instructions when circumstantial evidence points to actual knowledge, but when there was no direct evidence of such knowledge. See, e.g., United States v. Murieta-Bejarano, 552 F.2d 1323 (9th Cir. 1977); United States v. Nicholson, 677 F.2d 706 (9th Cir. 1982); United States v. Suttiswad, 696 F.2d 645 (9th Cir. 1982); United States v. McAllister, 747 F.2d 1273 (9th Cir. 1984), cert. denied, 474 U.S. 829 (1985).

For instance, in Jewell itself, the defendant entered the United States driving a car concealing 110 pounds of marijuana. The defendant claimed that a stranger had offered him $100 to drive the car across the border and that he had not investigated a secret compartment in the car, where the marijuana was found. The court found that the suspicious circumstances indicated both actual knowledge and deliberate avoidance of obtaining knowledge of the illegal substance. See Jewell, 532 F.2d at 698-99.

In this case, the evidence points overwhelmingly toward actual knowledge, rather than deliberate avoidance. Because defendants did not object to the instruction at trial, however, we may only overturn the verdict if there was plain error.⁹ 

There is some indication that defendants avoided learning about the legality or illegality of the tax schemes. As the prosecution points out, the defendants took no steps to inquire as to whether such tax shelter schemes were proper. Moreover, even though some prospective clients asked about the legality of the schemes, defendants made no effort to obtain actual assurances from the IRS of their legality. This circuit has long held that failure to investigate constitutes deliberate avoidance. See United States v. Murrieta-Bejarano, 552 F.2d 1323 (9th Cir. 1977) (failure to investigate suggested deliberate indifference); United States v. Nicholson, 677 F.2d 706, 710-11 (9th Cir. 1982) (same).

We need not decide, however, whether such actions were sufficient to justify the Jewell instruction because we conclude that it was harmless, even if given in error. See Beckett, 724 F.2d at 856 (citation omitted) (instruction is harmless if it was " 'logically harmless beyond a reasonable doubt.' "). As indicated earlier, there was overwhelming evidence of defendants' guilt. Given defendants familiarity with the tax schemes, and the nature of the tax avoidance schemes, the evidence appears "abundantly clear" that defendants knew that the schemes were illegal. United States v. Alvarado, 838 F.2d 311 (9th Cir.), cert. denied, 487 U.S. 1222 (1988) (finding harmless error where evidence "lucidly demonstrated" that defendants had actual knowledge). Accordingly, we uphold the verdict.

C

We also reject Charles and Dennis Spurrier claim that the jury instructions were confusing and inadequate and did not adequately cover the defendants' theory of defense.

In explaining the difference between guilty and not guilty, the trial judge stated:

The defendants are entitled to simply sit there and see if the government can prove its case beyond a reasonable doubt. That's where the difference between guilty and not guilty comes from the issue presented by this case is not whether these defendants are guilty or innocent. They will remain innocent until they have been found guilty by this jury beyond a reasonable doubt, if you so find.

The other phrase is not 'innocent,' it is 'not guilty.' The reason we use the phrase 'not guilty' is because the government's burden is to prove that the defendants are guilty beyond a reasonable doubt. If it fails in that burden, the fact that you think that the defendants are not innocent, it does not matter, they remain not guilty.... I have suggested that the government must prove the defendants' guilt beyond a reasonable doubt. RT 9-1497.

Defendants argue that the instruction was confusing because it equated a not guilty finding with "not proven beyond a reasonable doubt." In addition, they claim, the trial judge only "suggested" that the government must prove defendants' guilt beyond a reasonable doubt. In addition, defendants claim, the trial judge did not adequately define "willfulness" and did not adequately advise the jury on the defendant's good faith defense.

All of defendants' claims are without merit. As the prosecution points out, the trial judge emphasized repeatedly that the government bears the burden of proving guilt beyond a reasonable doubt. For instance, the judge stated: "you must return a not guilty verdict if ... you have a doubt based on reason and common sense that the government has proved the defendant's guilt." RT 9-1498. In addition, the government instructed the jury that the government had to prove willfulness; that is, an "act voluntarily and intentionally [done] with the purpose of avoiding a known legal duty." In addition, the judge emphasized that "no defendant may be convicted of the act because of mistake, inadvertence, or other innocent reason." RT 1522.

Finally, despite defendants' claims, the trial judge also preserved defendants' good faith defense. The judge stated:

If a person in good faith believes that an income tax return, as prepared by him or her, truthfully reports the taxable income and allowable deductions ... that person cannot be guilty of willfully preparing or presenting or causing to be prepared and presented a false or fraudulent return." RT 1518.

There is no evidence to support defendants' claim that the trial judge instructed the jury to consider whether defendants' professed good-faith belief that the actions were lawful was objectively reasonable in violation of Cheek v. United States, No. 89-658 (1991). Rather, the trial judge informed the jury that "if a person in good faith believes that an income tax return prepared by him ..." was lawful, such person may not be convicted of willfully violating the law. RT 1518 (emphasis added). Such an instruction properly allowed the jury to consider defendants' state of mind.

The judge's jury instructions were thus clear and adequately represented the defendants' good faith defense.

AFFIRMED IN PART AND REMANDED IN PART.