BURTON D. LINNE, ET AL., PETITIONERS V. UNITED STATES OF AMERICA

   No. 87-585

   In the Supreme Court of the United States

   October Term, 1987

   On Petition for a Writ of Certiorari to the United States Court of
Appeals for the Fourth Circuit

   Brief for the United States in Opposition

            TABLE OF CONTENTS
   Questions Presented
   Opinion below
   Jurisdiction
   Statement
   Argument
   Conclusion

                             OPINION BELOW

   The opinion of the court of appeals (Pet. App. 1a-7a) is reported
at 826 F.2d 1061 (Table).

                             JURISDICTION

   The judgment of the court of appeals was entered on August 14,
1987.  The petition for a writ of certiorari was filed on October 13,
1987.  The jurisdiction of this Court is invoked under 28 U.S.C.
1254(1).

                          QUESTIONS PRESENTED

   1. Whether the "materiality" standard set forth in United States v.
Bagley, 473 U.S. 667 (1985), was properly applied in this case to the
alleged nondisclosure by the prosecution of a government
investigator's report.

   2. Whether, in the absence of a request by defense counsel at
trial, the alleged failure of the prosecution in this case to produce
a government investigator's report violated the Jencks Act, 18 U.S.C.
3500.

   3. Whether the court of appeals erred in declining to consider an
additional issue raised after oral argument.

                               STATEMENT

   Following a jury trial in the United States District Court for the
Eastern District of Virginia, petitioners were convicted on one count
of conspiracy to defraud the United States, in violation of 18 U.S.C.
371, and on numerous counts of mail fraud, in violation of 18 U.S.C.
1341 (Pet. App. 2a-3a).  Petitioners Linne and Slater were also
convicted on several counts of failing to file tax returns, in
violation of 26 U.S.C. 7203 (Pet. App. 2a-3a).  Petitioner Linne was
sentenced to a total of six years' imprisonment and three years'
probation;  petitioner Imlay was sentenced to a total of six months'
imprisonment and three years' probation;  and petitioner Slater was
sentenced to a total of 18 months' imprisonment and three years'
probation (C.A. App. 267-269).  The court of appeals affirmed (Pet.
App. 1a-7a).

   1. Petitioners' convictions and sentences arose out of various
income tax evasion schemes that petitioner Linne designed and, with
the assistance of petitioners Slater and Imlay, promoted and operated
through the mails between 1982 and 1985 (Pet. App. 3a).  One scheme,
called the Administrative Notice and Declaration of Immunity (ANDI)
program, advised 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) and that, by
filing with the government certain "'notices of rescission'" provided
by petitioners and then not availing oneself of government benefits, a
tax-paying citizen may become a "disenfranchised freem(a)n'" who is no
longer obligated to pay taxes (id. at 3a-4a).  Approximately 100
persons, who paid between $2,000 and $31,000 each to petitioners, were
induced to participate in the ANDI program during the pertinent period
(id. at 4a).  Another scheme, called Citizens for Dollars (CFD), was a
check-cashing clearinghouse through which ANDI program subscribers
could avoid using a commercial bank and the attendant obligation of
having to pay federal income taxes (ibid.);  during the 18-month
period ending in August 1985, petitioners received more than $6.6
million in deposits under the CFD program, which generated service
charges of more than $975,000 for petitioners (ibid.; C.A. App. 198,
194).  Finally, petitioners promoted a foreign "investment service,"
called the Bullion Fund, through which income could be concealed from
the Internal Revenue Service.  According to petitioners' promotional
materials, persons could invest in this Bahamian entity without being
subject to United States tax laws, disclosure laws, or IRS discovery
procedures (Pet. App. 3a-5a).

   At trial, a number of witnesses described petitioners' schemes and
testified that they had been defrauded by those schemes (Pet. App.
5a).  The government also introduced many examples of the documentary
materials that petitioners had sent through the mails to promote their
programs, as well as evidence that petitioners Linne and Slater had
not filed tax returns in years in which their gross income had
exceeded the amount for which filings are required (id. at 4a-5a).  In
support of the allegation that the Bullion Fund was part of
petitioners' fraudulent scheme, the government called as a witness IRS
agent James Rideoutte.  He testified that he had investigated the
existence of the Bullion Fund in the Bahamas and had discovered no
evidence that the Bullion Fund was registered (i.e., incorporated) in
the Bahamas (id. at 13a-16a).  Agent Rideoutte had his investigative
report in his possession during his testimony and, in fact, he
occasionally referred to it.  Petitioners, however, made no request
for its production at trial.  Pet. App. 5a.

   In their defense, petitioners claimed that they believed their
activities were lawful, that they never intended to defraud their
customers, and that their failure to pay income taxes was the result
of their good faith belief that they were "legal nontaxpayers" (Pet.
App. 5a).

   2. Approximately nine months after the verdict, petitioner Linne
filed a motion for a new trial.  In the motion, he asserted that the
government had violated Rule 16 of the Federal Rules of Criminal
Procedure by not disclosing or permitting review of Agent Rideoutte's
investigative report prior to trial (Pet. App. 5a).  In support of the
motion, petitioner Linne claimed that Agent Rideoutte's testimony did
not completely or accurately reflect all of the information Rideoutte
had acquired about the Bullion Fund during his investigation (ibid.).
Petitioner Linne presented affidavits of two of his acquaintances,
which stated that a Bahamian lawyer, Anthony Thompson, had told them
that he and two other persons, Gordon Briggs and Sterling Quant, had
created the Bullion Fund and had registered it in the Turks and Caicos
Islands.  Ibid.; C.A. App. 286-291.  Petitioner Linne maintained that
Agent Rideoutte's report included these facts and that, if defense
counsel had been able to review it, he could have impeached the
agent's testimony (Pet. App. 5a-6a).  The district court denied the
motion (C.A. App. 311-312).

   3. The court of appeals affirmed (Pet. App. 1a-7a).  In response to
petitioners' contention that the government had violated the Jencks
Act, 18 U.S.C. 3500, by failing to provide them with a copy of Agent
Rideoutte's investigative report, the court held that, "(w)hile it is
true that the government promised to disclose all Jencks material
before trial, this concession did not obviate the (petitioners')
statutory obligation to request the agent's report at trial." The
court noted that, although they were "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." Pet. App. 6a.  /1/ The court similarly rejected
petitioners' argument that their due process rights under Brady v.
Maryland, 373 U.S. 83 (1963), had been violated.  The court explained
that "(t)here can be no Brady violation absent a showing of the
materiality of the undisclosed evidence" (Pet. App. 6a), that
"(w)ithheld 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'" (ibid., quoting
United States v. Bagley, 473 U.S. 667, 682 (1985)), and that "(t)he
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" (Pet. App.
6a-7a).

                               ARGUMENT

   1. Petitioners rest their legal arguments on two factual premises:
(1) that Agent Rideoutte perjured himself at trial;  and (2) that the
prosecutors knowingly allowed him to do so.  Petitioners, however,
have failed even to show that Agent Rideoutte's testimony was false,
much less that it was intentionally false, or that the prosecutors
knowingly elicited perjured testimony.  Their principal legal argument
(Pet. 4-16) is therefore without force, because it is based on factual
assertions that the record does not support.

   In attempting to establish that Agent Rideoutte's testimony was
false, petitioners rely primarily on the alleged inconsistencies
between Rideoutte's testimony at trial and the report of his
investigation of the Bullion Fund in the Bahamas.  In fact, in spite
of petitioners' vehement insistence to the contrary, the two are not
inconsistent at all.  In his testimony, Agent Rideoutte stated that he
had checked with the registrar of companies to determine whether the
Bullion Fund was "registered" in the Bahamas, which he explained was
the same thing as being incorporated in the United States.  He found
that neither the Bullion Fund nor the Bullion Management Corporation
was registered in the Bahamas.  He added that the chamber of commerce
in the Bahamas had no record of the Bullion Fund, nor did the police
department.  Finally, he stated that he found no record of the Bullion
Fund with the telephone company or the post office.  Pet. App.
14a-16a.

   Nothing in Agent Rideoutte's testimony conflicts with anything in
his investigative report.  In his report, Agent Rideoutte stated that
the Bullion Fund was not registered in the Bahamas, although he noted
that the Bullion Management Corp. was registered in the Turks and
Caicos Islands (Pet. App. 10a).  /2/ The report stated, as Agent
Rideoutte had testified, that the telephone company and the post
office showed no record of the existence of the Bullion Fund.  The
report further reflects that Agent Rideoutte interviewed the two
attorneys that Agent Rideoutte mentioned in his testimony -- Sterling
Quant and Anthony Thompson -- and that Thompson provided Agent
Rideoutte with information about the Bullion Fund.  According to the
report, Thompson said that he formed the Bullion Management Corp. at
the request of Gordon Briggs in 1983, and he agreed "to manage the
operation locally under Briggs direction." Pet. App. 11a.  Thompson
said that he terminated his relationship with Briggs when Briggs
failed to comply with Thompson's request for financial information and
when Thompson learned that Briggs was prohibited from coming into the
Bahamas.  Based on his interview with Thompson, Agent Rideoutte
concluded in his report that Thompson had "merely provided the cover
and bank account so the money (sent to the Bullion Fund in the
Bahamas) could then be forwarded back to Briggs or whomever Briggs
wanted to receive it." Pet. App. 12a.

   Agent Rideoutte's findings, as summarized in his report, are
entirely consistent with his trial testimony.  In both, he reported
learning nothing about the Bullion Fund from sources such as police
files, the chamber of commerce, the telephone company, and the post
office.  And in both he noted that the Bullion Fund was not registered
(i.e., incorporated) in the Bahamas.  To be sure, Agent Rideoutte did
not discuss in his testimony the contents of his interview with
attorney Thompson, but he was not asked to relate Thompson's
statements to the jury, because Rideoutte's account of Thompson's
statements would have been hearsay.  Since defense counsel had
objected to Agent Rideoutte's testimony on hearsay grounds, and since
the court responded to the objection by permitting Agent Rideoutte's
testimony only to the extent that it reflected that he did not find
records of the Bullion Fund, petitioners are hardly in a position to
complain that Agent Rideoutte did not discuss the contents of his
interview with attorney Thompson.  And if Agent Rideoutte had related
what Thompson had told him, it would hardly have helped petitioners,
since the substance of Thompson's experience with the Bullion Fund led
Thompson to conclude that the Fund was a questionable entity run by
someone who was not even allowed to enter the Bahamas.  In fact,
Thompson's conclusion -- that Briggs was using Thompson and his post
office box as a conduit for funds going to Briggs or those designated
by him to receive the funds -- was consistent with the government's
theory that the Bullion Fund was not a legitimate investment company,
but merely a conduit for funds generated in petitioners' scheme.
Certainly Thompsons' account of the Bullion Fund's activities and his
cessation of representation of the Fund would have done nothing to
buttress petitioners' defense of good faith.  /3/

   The affidavits that petitioners produced in their motion for a new
trial also failed to show that Agent Rideoutte's testimony was false.
The affidavits stated that Anthony Thompson represented that he had
participated in creating the Bullion Management Corporation and had
registered it in the Turks and Caicos Islands (C.A. App. 286-291).
One of the affidavits also stated, ambiguously, that the Bullion Fund
had been registered "in Nassau" (C.A. App. 290).  Petitioners rely on
that statement to suggest that the Fund was registered in the Bahamas
as well as in the Grand Turks and Caicos Islands.  However, while the
affidavit included information regarding the registration of the
Bullion Management Corp., Ltd. in the Turks and Caicos Islands (C.A.
App. 291), it contained no similar information suggesting that that
company or the Bullion Fund was registered the Bahamas.  Moreover, the
affidavits relate that Thompson and Quant were unable to persuade
Briggs to comply with Bahamian registration requirements (C.A. App.
289-290);  that, as a result, Thompson and Quant discontinued their
association with Briggs and the Bullion Fund at the end of 1984
(ibid.);  that Thompson subsequently turned over all of the books and
records of the Bullion Fund to "Caicos Worldwide Management Ltd.,"
which is located in the Turks and Caicos Islands (ibid.);  and that
Thompson discontinued his association with Briggs because "somebody
was forging Sterling Quant's name to the Bullion Fund receipts which
was another reason that he knew something was wrong" (C.A. App. 287).
Thus, the affidavits do not in any way rebut Agent Rideoutte's
statement that he found no records indicating that the Bullion Fund
was registered in the Bahamas (see Pet. App. 15a).  /4/

   Because Agent Rideoutte did not perjure himself, there is no merit
to petitioners' contention (Pet. 18-24) that the court of appeals
erred in applying the "materiality" standard set forth in United
States v. Bagley, 473 U.S. 667 (1985), to the alleged failure to
disclose Agent Rideoutte's report.  Concomitantly, petitioners are
wrong in suggesting that the court of appeals should have invoked the
"materiality" standard that has been applied in cases in which the
government has made knowing use of perjured tertimony.  See United
States v. Bagley, 473 U.S. at 678-679 & nn. 8 & 9.

   In any event, petitioners have vastly overstated the importance of
Agent Rideoutte's testimony;  even if his testimony had been false or
inconsistent with the contents of his report, the matter would not
have been sufficiently significant to warrant a new trial.  First, the
question whether the Bullion Fund was registered in the Bahamas was
not of great importance;  what was important was that the petitioners
promoted the Bullion Fund as a legal means of avoiding federal tax
liability and tax investigations, when in fact the Bullion Fund was
simply a means of generating large amounts of cash for petitioners
from their victims.  /5/

   Moreover, Agent Rideoutte did not suggest in his testimony that
petitioners had created or participated in the creation of the Bullion
Fund, nor was it the government's theory that petitioners had played a
role in setting up the arrangement by which the Bullion Fund received
"investments" through an address in the Bahamas.  Rather, the
government's evidence -- including petitioner Linne's admissions --
showed that petitioners had promoted the Bullion Fund to their
victims, and it further showed that the Bullion Fund was not a
legitimate investment company and that petitioners caused the Bullion
Fund to be used as a means of concealing income offshore.  /6/ For
that reason, the fact that no one Agent Rideoutte spoke with in the
Bahamas knew anything about petitioners Linne or Slater -- a fact that
was reflected in Agent Rideoutte's report -- was not exculpatory or in
any way inconsistent with either Agent Rideoutte's testimony or the
rest of the government's proof.

   Finally, the government did not rest its case exclusively on
evidence concerning petitioners' use and promotion of the Bullion
Fund;  rather, the government showed that the Bullion Fund was only
one of several methods that petitioners used in seeking to achieve the
object of their conspiracy.  Thus, the court below correctly concluded
that 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"
/7/ and, accordingly, there was no Brady violation (Pet. App. 6a-7a).

   2. Petitioners similarly err in suggesting (Pet. 24-27) that they
did not waive their rights under the Jencks Act.  As noted above,
there is no support in the record for petitioners' claim that
Rideoutte perjured himself.  Thus, petitioners are wrong in asserting
(Pet. 24) that their waiver was somehow "fraudulently induced."
Moreover, as the court of appeals explained (Pet. App. 6a (footnote
omitted)), "(a)lthough 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." See United States
v. Peterson, 524 F.2d 167, 175 (4th Cir. 1975), cert. denied, 423 U.S.
1088 (1976);  United States v. Simmons, 281 F.2d 354, 358 (2d Cir.
1959);  United States v. Tellier, 255 F.2d 441, 449 (2d Cir.), cert.
denied, 358 U.S. 821 (1958).  This is true even though, as petitioners
allege, a request was made for Jencks Act material prior to trial and
the government, while implicitly representing that it had disclosed
all the Jencks material, failed to disclose Rideoutte's report.  See
United States v. McKenzie, 768 F.2d 602, 607 (5th Cir. 1985), cert.
denied, 474 U.S. 1086 (1986).

   3. Finally, petitioners err in contending (Pet. 27-30) that the
court of appeals "blundered" by refusing to allow them to add a new
issue to their appeal after oral argument.  They argued that the court
of appeals should have ordered the disclosure of grand jury
transcripts so that petitioners could determine whether the
prosecutors misled the grand jury.  Apart from the fact that this
contention was raised too late in the court of appeals, it is totally
without merit.  There is no foundation in the record for petitioners'
claim that the prosecutors and Agent Rideoutte perpetrated a
conspiracy in the District Court and that the activities of these
individuals before the Grand Jury were part of a continuing
conspiracy.  Nor have petitioners even made a threshold showing of why
they should be permitted to examine portions of the grand jury record
not already provided to them.  See Pittsburgh Plate Glass Co. v.
United States, 360 U.S. 395, 400-401 (1959) (defendant must
demonstrate "a particularized need" for the evidence which outweighs
the policy of grand jury secrecy).  In any event, even if there were
some error in the legal presentation to the grand jury, the petit
jury's verdict renders any such error harmless.  See United States v.
Mechanik, 475 U.S. 66 (1986).

                              CONCLUSION

   The petition for a writ of certiorari should be denied.

   Respectfully submitted,

   CHARLES FRIED

      Solicitor General

   WILLIAM S. ROSE, JR.

      Assistant Attorney General

   MICHAEL L. PAUP

   ROBERT E. LINDSAY

   GAIL BRODFUEHRER

      Attorneys

   DECEMBER 1987

   /1/ The government has consistently maintained throughout these
proceedings that a copy of Agent Rideoutte's report was provided to
petitioners prior to trial.  Neither the district court nor the court
of appeals made a finding on that issue.  On May 21, 1987, petitioners
filed a motion for disclosure of the report prior to oral argument,
which was scheduled for June 2, 1987.  The government did not object
to petitioners' motion and provided the report to petitioners'
appellate counsel immediately prior to oral argument.

   /2/ The Turks and Caicos Islands is a tiny British colony located
southeast of the Bahamas.

   /3/ For example, petitioners were still promoting the Bullion Fund
as a Bahamian entity as late as March 1985, months after Thompson said
he had ceased representing the Fund.  See C.A. App. 140, 341, 587;
GXs 14, 114.

   /4/ Even the affidavit of petitioners' current counsel states that
the Bullion Fund was registered in the Turks and Caicos Islands;  that
affidavit suggests that the company was not "registered" in the
Bahamas, but was merely licensed to do business there.  C.A. App.
605-606.

   /5/ Although petitioners have featured Agent Rideoutte's testimony
as if it were the linchpin of the government's case, in fact Agent
Rideoutte was a minor witness whose direct examination occupies less
than four pages of the transcript.  Petitioners find great
significance in a letter from the government to an official in Bermuda
thanking him for his cooperation in the investigation of the Bullion
Fund.  In that letter, the government stated that the official's
cooperation made the indictment possible.  Petitioners quote that
letter no fewer than eight times in the petition (Pet. 7, 19, 20, 27,
29).  But while the Bullion Fund was obviously an important feature of
the case, the significance of the Bullion Fund in the prosecution did
not turn on the relatively minor matter of the status of the Bullion
Fund in the Bahamas between 1983 and 1985, which was the only issue
addressed by Agent Rideoutte's testimony.

   /6/ Petitioner Linne admitted at trial that he had associated with
Briggs, that he had advised members of CFD to use the Bullion Fund,
and that he had caused CFD members' funds to be sent to the Fund
account in the Bahamas (C.A. App. 198-200, 214-216, 222).  In
addition, the government introduced various exhibits and the testimony
of a former member of CFD to establish that petitioners had promoted
and used the Fund as a means of concealing income from the IRS (C.A.
App. 139-140, 328;  GXs 8, 120).

   /7/ The government showed, for example, that in 1983 petitioner
Linne had assisted in the writing of an appellate brief in which he
advanced his "legal non-taxpayer" theory;  the Court of Appeals for
the Eighth Circuit found that theory to be "totally without arguable
merit" (United States v. Drefke, 707 F.2d 978, 981, cert. denied, 464
U.S. 942 (1983);  C.A. App. 204-205).  To rebut petitioners' claims of
good faith, the government showed that petitioners instructed
purchasers to "judgment proof" themselves (C.A. App. 211-212, 228,
591;  GXs 118-120);  that petitioners offered their assistance in the
event that any civil or criminal proceedings were brought against ANDI
purchasers (C.A. App. 317-319);  and that, to assure that the IRS
would not discover and disallow the "immediate and drastic" tax
savings which petitioners advertised the CFD program would produce,
petitioners provided CFD customers with "non-photo blue pencils" for
endorsing checks so that banks could not make photographic records of
those customers' signatures (C.A. App. 123, 341;  GXs 9, 50).