IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 94-60648

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

versus

JIMMY D. MCGUIRE,

Defendant-Appellant.

Appeal from the United States District Court

For the Southern District of Mississippi

October 31, 1996

Before POLITZ, Ch ief Judge, KING, GARWOOD, JOLLY, HIGGINBOTHAM,

DAVIS, JONES, SMITH, DUHÉ, WIENER, BA RKSDALE, EMILIO M. GARZA,

DeMOSS, BENAVIDES, STEWART, PARKER, and DENNIS, Circuit Judges.

PER CURIAM:

We took this case en banc to consider the difficult problems

attending application of United States v. Gaudin , 115 S. Ct. 2310

(1995), which held that materiality is a question for the jury, not

the court. With the benefit of additional briefing and oral

argument before the en banc court, we are now persuaded that the

district court did not withhold the element of materiality from the

jury on the count on which defendant McGuire was conv icted. S ee

Victor v. Nebraska , 114 S. Ct. 1239, 1243 (1994) (“proper inquiry

is not whether the instruction could have been applied in

unconstitutional manner, but whether there is a reasonable1 The dissent continu es to adhere to the view that the

instructions took the issue of materiality away from the jury with

respect to McGuire’s violation of 26 U.S.C. § 6050I. The

instru ctions speak for themselves. We include the relevant

portions of the jury charge in an appendix.

2 likelihood that the jury did so apply it.”) (emphasis in text). 1

It is clear that Instruction 20, pertaining to a count upon which

McGuire was acquitted

, incorrectly removed the issue of materiality

from the jury. Instruction 36, however, which specified the

elements of the only count for which McGuire was convicted, did not

do so. Finding no G audin error or other reversible error, we

affirm the judgment of conviction.

AFFIRMED.

APPENDIX

INSTRUCTION NO. 15

A separate crime is charged in each count of the indictment.

Each count and the evidence pertaining to it should be considered

separately and each element must be proved beyond a reasonable

doubt. The fact that you may find the defendant guilty or not

guilty as to one of the c rimes charged should not control your

verdict as to any other of the crimes charged.

* * *

INSTRUCTION NO. 20

Title 26, United States Code, Section 7206(1), as charged in

Count 5 of the indictment in Criminal No. 1:93cr35BrR, makes it a

crime for anyone willfully to make a false statement on an income3

tax return. “Willfully” means with intent to violate a known legal

duty.

For you to find the defendant guilty of this crime, you must

be convinced that the government has proved each of the following

beyond a reasonable doubt:

First : That the defendant sig n ed an income tax

return that contained a written declaration that it

was made under penalties of perjury;

Second : Th at in this return the defendant falsely

stated the amount of gross receipts on the Schedule

C for his law practice during 1988;

Third : That the defendant knew the statement was

false; and

Fou rth : That the defendant made the statement on

purpose, and not as a re sult of accident,

negligence or inadvertence.

If you find that the government has proved these things, you

need not consider whether the false statement was a material false

stat ement, even though that language is used in the indictment.

This is not a question for the jury to decide.

* * *

INSTRUCTION NO. 36

Count 4 of the indictment charges the defendant with a

violation of 26 U.S.C. § 6050I(f)(1)(B). The statute provides in

pertinent part that:

No person shall for the pur pose of evading the return

requirement of this section--

(B) cause or attempt to cause a trade or business to

file a return required under this section that contains

a material omission or misstatement of fact.4

The essential elements that must be proved under that section

are:

FIRST, that the defendant knew of a trade or business’s duty

to report currency transactions in excess of $10,000;

SECOND, that with such knowledge, the defendant knowingly and

willfully caused or attempted to cause a trade or business to file

a report required under this section [an 8300 form] that contained

a material omission or misstatement of fact; and

THIRD , that the purpose of the material omission or

misstatement of fact was to evade the transaction reporting

requirement.

In this case the trade or business alleged in the indictment

is the defendant’s law practice. You may find the defendant guilty

of violating § 6050I(f) whether or not the trade or business filed,

or failed to file, a true and accurate 8300 form. In other words,

if you find beyond a reasonable doubt that the defendant caused or

attempted to cause a trade or business to file a return that

contained a material omission or misstatement of fact, and that he

did so for the purpose of evading the transaction report

requirements, then you should find the defendant guilty as charged

as to this count. If you do not so find, then you should find the

defendant not guilty.2 Judge Wiener and Judge Dennis join in the entirety of

t his dissent. Judge Smith joins in all but the last four

paragraphs of this dissent but would affirm the conviction on the

basis of harmless error. DeMOSS, Circuit Judge, dissenting: 2

In G riffith v. Kentucky

, 479 U.S. 314, 107 S. Ct. 708, 93

L.Ed.2d 649 (1987), the Supreme Court held that “a new rule for the

conduct of criminal prosecutions is to be applied retroactively to

all cases, state or federal, pending on direct review or not yet

final, with no exception for cases in which the new rule

constitutes a `clear break’ with the past.” I d

. at 328. Embracing

a view previously expressed by Justice Harlan , the Court stated

that “failure to apply a newly declared constitutional rule to

criminal cases pending on direct review violates basic n orms of

constitutional adjudication.” Id . at 322.

Such a new rule was announced by the Supreme Court on June 19,

1995, i n United States v. Gaudin , ___ U.S. ___, 115 S. Ct. 2310,

2320, 132 L.Ed.2d 444 (1995), wherein the Court held that “[t]he

Constitution gives a criminal defendant the right to have a jury

determine, beyond a reasonable doubt, his guilt of every element of

the crime with which he is charged. The trial judge’s refusal to

allow the jury to pass on the `materiality’ of Gaudin’s false

statements infringed that right.” At the time the Supreme Court

dec ided G audin

, McGuire’s appeal to this Court was awaiting oral

argument and both sides filed supplemen tal briefs addressing the6

applicability of the Gaudin decis ion to this case. Clearly,

therefore, under Griffith , McGuire was entitled to claim whatever

benefits the new rule in Gaudin made applicable to his case.

Obvio usly, if materiality is an element of the crime which

must be submitted to the jury under Gaudin

, then the next corollary

question is how the materiality element should be submitted to the

jury. The question of a proper jury instruction was, of course,

not present in Gaudin because the trial court in Gaudin had simply

instructed the jury that the issue of materiality was not a matter

for the jury to decide. But in its analysis of why the issue of

materiality w as one which had to be decided by the jury, the

Supreme Court made several comme nts relevant to determining the

manner in which materiality should be submitted to the jury. The

Supreme Court stated:

Deciding whether a statement is “material” requires

the determination of at least two subsidiary

questions of purely historical fact: (a) “what

statement was made?”; and (b) “what decision was

the agency tr ying to make?”. The ultimate

question: (c) “whether the statement was material

to the decision,” requires applying the legal

standard of materiality (quoted above) to these

historical facts.

Id . at 2314. Earlier in its opinion, the Supreme Court favorably

quoted the definition of “materiality” which the part ies had

recognized in that case:

[ T]he statement must have “a natural tendency to

influence, or [be] capable of influencing, the

decision of the decisionmaking body to which it was

addressed.” K ungys v. United States

, 485 U.S. 759,

770, 108 S. Ct. 1537, 1546, 99 L.Ed.2d 839 (1988).3 The indictment under which McGuire was convicted

contained the following counts, and the jury’s verdict to each of

these counts is as indicated:

Count 1: Conspiracy from August 1989 to December 1992

between McGui re and other individuals “both known and

unknown to the Grand Jury” to defraud the United States

by impeding, obstructing and defeating the functions of

the Internal Revenue Service in the ascertainment,

computation, assessment and collection of revenue: to-wit

income taxes. In violation of 18 U.S.C. § 371.

NOT GUILTY.

Count 2: Between February 5, 1992 and continuing through

February 19, 1992, McGuire did kn owingly conduct and

attempt to conduct a financial transaction affecting

interstate commerce, that is defendant deposited $20,000

in United States currency into a bank account at Hancock

Bank, Gulfport, Mississippi, such $20,000 having been

represented by a spec ial agent acting in an undercover

capacity, to be the proceeds of an unlawful activity. In

violation of § 1956(a)(3)(B) and (C) of Title 18.

NOT GUILTY.

Count 3: Forfeiture of the $20,000 described in Count 2

which was represented to the defendant to be proceeds of

cocaine trafficking pursuant to § 982, Titl e 18, and §

853, Title 21.

NO JURY ANSWER REQUIRED.

Count 4: In February 1992 McGuire did knowingly and

7 Id

. at 2313. While the criminal statute involved in G audin was 18

U .S.C. § 1001 (falsifying a material fact concerning a matter

within the jurisdiction of a government agency), the same analysis

should be applicable to the criminal statutes involved here in

McGuire : 26 U.S.C. § 7206(1) (willfully drafting an income tax

return which is not true and correct as to every material matter)

and 26 U.S.C. § 6 050I(f)(B) (causing a business to file a return

regarding cash receipts over $1 0,000 which contains a material

omission or mis-statement of fact). 3 Both of these returns werewillfully cause his law practice to file an IRS form 8300

in connection with a transaction involving the receipt of

$20,000 of U.S. currency which contained material

omissions or misstatements of fact. All in violation of

§§ 6051I(f)(1)(B) and 7206(1) of Title 26.

GUILTY.

Count 5: On January 27, 1989, McGuire made and

subscribed an individual tax return for the calendar year

1988 which was filed with the IRS on August 1, 1989,

which tax return he did not believe to be true and

correct as to every material matter in the return. In

violation of § 7206(1) of Title 26.

NOT GUILTY.

Note that count 2, § 1956(a)(3)(B) and (C), money laundering,

related to the very same $20,000 which the undercover agents

delivered to McGuire as a retainer for his legal services and the

jury found McGuire not guilty on this count. Secondly, note that

the indictmen t states that count 4 is in violation of both §

6050I(f)(1)(B) and § 7206(1).

8 filed with the Internal Revenue Service which is clea rly a

government agency charged with making a variety of decisions on the

basis of the i nformation reported in each of these returns. So

applying the reasoning and analysis of Gaudin as to the manner and

form in which the issue of materiality under each of these statutes

should be submitted to the jury would require the following:

a. Was there an omission or misstatement of fact in the

return in question;

b. Was that omission or misstatement of fact material; and

c. A definition of “material” as being a matter which “would

have a natural tendency to influence or be capable of influencing4 Since the Supreme Court decision in Gaudin , the Ninth

Circuit has published a new form in its model jury instructions for

use in counts relating to 18 U.S.C. § 1001 (false statement to

government agency) which states in relevant part as follows:

In order for the defendant to be found guilty

of that charge, the government must p rove each of

the following elements beyond a reasonable doubt:

First, the defendant [made a false statement]

[used a writing which contained a false statement]

in a matter within the jurisdiction of the [e.g.

United States Customs Service];

Second, the defendant acted willfully, that is

deliberately and with knowledge that the statement

was untrue; and

Third, the statement was material to the

_________’s activities or decisions.

A statement is material if it could have influenced

the agency’s decisions or activities.

9 the decision of the decision making body to which it was addressed,

i.e. the Internal Revenue Service. 4

Now the government contends that Instruction No. 36, which was

submitted as to count 4 of the indictment charging a violation

under § 6050I(f)(1)(B), properly submitted the element of

materiality to the jury. Regretfully, a majority of my colleagues

at the en banc hearing have inferentially bought this contention.

Insofar as a statement of the elements of the crime are concerned,

Instruction 36 states:

The essential elements that must be proved

under that section are:

FIRST, that the defendant knew of a trade or

business’s duty to report currency transactions in

excess of $10,000;

SECOND, that with such knowledge the defendant

knowingly and willfully caused or attempted to10 cause a trade or business to file a report required

under this section [an 8300 form] that contained a

material omission or misstatement of fact; and

THIRD, that the purpose of the material

omissio n or misstatement of fact was to evade the

transaction reporting requirement.

This submission is defective for the following reasons:

a. It does not separately require the jury to determine that

there was both an omission or misstatement of fact and that such

omission or misstatement of fact was material; and

b. It does not give a definition of “materiality” which

w ould require the jury to address whether the omiss ion or

misstatement of fact had a natural tendency to influence or was

capab le of influencing the decision of the IRS. Nowhere else in

the Court’s charge was there a definition of “materiality”.

However, in the Court’s charge under Instruction 20 regarding count

5 which charged violation of § 7206(1), there was the following

paragraph:

If you find that the gove rnment has proved these

things you need not consider whether the false

statement was a material false statement, even

thou gh that language is used in the indictment.

This is not a question for the jury to decide.

This concluding paragraph was taken verbatim from the Fifth Circuit

Pattern J ury Instructions Manual (1990 edition) and reflects the

prevailing practice, whi ch existed in this Circuit prior to the

Supreme Court’s decision in G audin

, that materiality was not an

issue for the jury. This manual proposes that this same paragraph

be used as part of the pattern jury instructions in indictments

charging violations under the following statutory provisions:11 (a) false claim against the government, 18 U.S.C.

§ 287;

(b) false statements to firearm dealers, 18 U.S.C.

§ 922(a)(6);

(c) false statement to federal agencies and

agents, 18 U.S.C. § 1001;

(d) false statements in bank records, 18 U.S.C. §

1805 - ¶ 3;

(e) false statements to a bank, 18 U.S.C. § 1014;

(f) false statements before grand jury, 18 U.S.C.

§ 1623;

(g) false statements on income tax return, 26

U.S.C. § 7206(1); and

(h) aiding and preparation of false documents

und er the Internal Revenue laws, 26 U.S.C. §

7206(2).

Furt hermore, the 1990 edition of Fifth Circuit Pattern Jury

Instructions does not contain any definition of the word “material”

nor is there a pa ttern jury instruction for indictments brought

under 26 U.S.C. § 6050I. The Fifth Circuit Pattern Jury

Instruction manual is replete with comments and ci tes cases

indicating that materiality is a matter for decision by the court

and not by the jury. There is no pattern jury instruction in the

Fifth Circuit manual indicating the proper way that materiality

should be submitted as an issue to th e jury under any other

statutory provision.

Against this background of regular, consistent an d routine

withdrawal of the issue of materiality from the jury, the

government now has the temerity to contend that, by some fortuitous

c ircumstance, a rational decision was made in McGuire’s trial to12

include the element of materiality for submission to the jury in

Instruction No. 36 on count 4. Anyone who has read the record in

this case will find that contention unsupportable. Surely if it

was the rational intention of the court and opposing counsel to

submit count 4 to the jury for a materiality determination and

count 5 without a determination of materiality by the jury,

somewhere, somehow, the difference i n the jury’s responsibility

under these two counts would have been emphasized and brought to

the jury’s specific atten tion, hopefully in writing, but if not,

c ertainly through oral instructions. Yet nowhere in this record

nor in the jury argument of either counsel was that distinction

made; and, more convincingly, no where in the argument of either

counsel was the subject of “materiality” discussed at all.

Furthermore, at the time of trial, there was no Fifth Circuit

case which could have been cited for the proposition that the

element of materiality found in § 6050I requires submission of the

materiality element to the jury. But, if the Supreme Court’s

decision in Gaudin had been l ying on the table when the district

court and opposing counsel prepared the jury charge in M cGuire

,

surely the format for instructions re lating to the submission of

count 4, § 6050I, and count 5, § 7206, would have been different

from the instructions as actually submitted; and if Griffith means

anything at all, it means that McGuire is now entitled to have the

benefit of the new rules about materiality announced by Gaudin

applied in determining the propriety of the instruction on count 4.13

Some of my colleagues have reasoned that if there was error in

the manner in which materiality was subm itted to the jury as to

count 4, such error was “harmless” or that the concept of

“materiality” is a common everyday term for which the jury does not

need a definition. In my view, such reasoning seriously undermines

the impact of the decision in G audin to require the element of

materiality to be submitted to the jury in criminal prosecutions.

In my view, Gaudin ’s requirement that materiality be tested by a

finding that the false information be capable of influencing a

decision of the government agency to which the form is addressed,

has a significant and beneficial purpose in protecting the rights

of ci tizens from government intrusions, which this case would so

clearly demonstrate if tried under Gaudin ’s new rule. In such

event, all of the circumstances involved in count 4 grew out of a

sting operation initiated by the government. The Internal Revenue

Service had received information from various sources indicating

that McGuire was receiving large amounts of cash as fees for his

legal services and was not reporting those amounts of cash in

either his income tax returns or under the report form required by

§ 6050I. As a result, McGuire became the target of an undercover

sting operation in which Government Agent Narciso Hernandez posed

as Hector Flores, Govern ment Agent Henry Montes posed as Hector

Martinez, and Government Agent David Barrie ntos posed as David

Bolivar. Bolivar contacted McGuire with a fictional story that

they wanted to hire McGuire to represent them in avoiding

forfeiture of some $280,000 in cash which had been seized during a14

traffic stop by the Mis sissippi Highway Patrol. During their

discussions with McGuire, a retainer of $20,000 cash was agreed

upon and, after some delay to get the cash together, they presented

that sum to McGuire as a partial payment on his fee. The following

day McGuire prepared IRS form 8300 reporting the receipt of $20,000

cash. Part I of this form, which required the identity of the

“individual from whom cash was received,” was filled in with the

name “David Bolivar,” the fictitious name used by Agent Barientos

and the fictitious address and driver’s license and social security

number furnished by Agent Barientos. Part II of this form which

required the identity of the “person on whose behalf the

transaction was conducted” was left blank. Ten days later, McGuire

filed an amended form 8300. Part I of the amended form again

listed “Bolivar” as the payor but disclosed in Part II that “Hector

Flores,” the fictiti ous name used by Agent Hernandez, was the

person on whose behalf David Bolivar paid the $20,000. Neither

form used the name of Martinez, which was the fictitious name under

which Agent Montez was operating. Obviously, had McGuire not filed

a form 8300 at all or if McGuire had reported the receipt of only

$10,000 rather than $20,000 as actually paid to him, the sting

operation would have been successful in demonstrating that McGuire

was not reporting at all or was inaccurately reporting the sums

received by him in cash as attorney’s fees. But neither of those

circumstances occurred in this case. A very legitimate question

arises as to the materiality of any of the rest of the information

on the form 8300 because the government certainly knew that this15

was a sting operation and that Bolivar, Flores and Martinez were

not real people. Consequently, even if the government should argue

that one of the purposes of form 8300 is to permit them to identify

individuals who are using large sums of cash in business

transactions, the information as to the “individual from whom cash

was received” and “the individual on whose behalf the transaction

was conducted” would be of no real value on the forms f iled by

McGuire because the go vernment knew those were fictitious

individuals. Surely the government could not contend that McGuire

could be liable for u sing the fictitious names given him by the

government agents in the sting operation. Likewise, the government

would have no reason to pass on to any other government agency the

fictitious names used by the agents in the sting operation as

individuals who were likely transacting business with large sums of

cash. In short, McGuire, the target of this sting operation, filed

a form 8300 and later filed an amended form 8300 which correctly

reported his receipt of the correct sum of money paid to him. The

rest of the information on these forms would not produce any

decision or action by the Internal Revenue Service and a reasonable

jury could conclude that any omission or misstatement in the rest

of these forms was not material to the Internal Revenue Service.

All of which emphasizes the importance of the jury being properly

instructed as to the defini tion of materiality and then being

permitted to decide the ultimate mixed question of fact and law

which Gaudin so clearly says is the jury’s ultimate decision.16

Finally, I must register my dissent from the enigmatic per

curiam opinion which the majority has filed in this case. If, as

the majority seems to recognize, Gaudin held that materiality is a

question for the jury, then the corollary to that b asic rule is

that the issue of materiality must be properly submitted to the

jury. The majority states that the district court did not withhold

the element of materiality from the jury but that does not address

the issue of whether materiality was properly submitted. If the

element of materiality is improperly submitted to the jury that is

just as incorrect as not submitti ng it at all. As discussed

earlier, there are genuine and serious defects with the way the

district court submitted the elements of § 6050I in Instruction 36.

But if the majority genuinely believes that the way the district

court submitted the issue of materiality i n Instruction 36 is

correct and proper, then they should clearly so hold, and that

format can then become the established precedent for this Circuit

and the basis upon which a pattern jury instruction could be

developed regarding submission of the issue of materiality.

Likewise, a majority holding that Instruction 36 was a proper

submission of the materiality issue to the jury would give McGuire

a clear issue upon which to s eek a writ of certiorari from the

Supreme Court. Interpreting Gaudin as defining error only to the

extent that the district court expressly withholds materiality from

the jury’s determinat ion is a stingy and hyper-technical

interpretation which is more consistent with a judicial philosophy

that says that the primary role of this Court is to sustain a17

conviction. Rather, we should be governed by a judicial philosophy

that says tha t the primary role of this Court is to see that

j ustice is done in each individual case. When the Supreme Court

announces a fundamental change in the law to the extent involved in

Gaudin

, and when the Supreme Court has set an established policy

that such changes in the law shall be applied to cases pending on

appeal as it has done in Griffith

, then a philosophy of dispensing

justice in an individual case will be better served by giving the

defendant the benefit of a retrial at which the district court, the

prosecutor and defense counsel can all give full consideration to

the change of law involved.

CONCLUSION

Essentially, McGuire’s case was tried on the wrong premise,

i.e., that materiality was not a question for the jury.

Inadvertently, McGuire’s count of conviction was submitted to the

jury without the standard language for withdrawing the materiality

issue from the jury contained in every pattern jury instruction in

the Fifth Circuit. As submitted, the definition of the elements of

§ 6050I failed to require a separate determination of materiality

as an element of the crime an d failed to define the concept of

materiality itself. This conviction should be reversed and

remanded for a new trial where the element of materiality could be

properly submitted to the jury as required by Gaudin

.18