Opinion ID: 363011
Heading Depth: 1
Heading Rank: 1

Heading: Government misconduct before the grand jury

Text: 3 While testifying before the grand jury, special agent Derry of the IRS made three statements which defendant says were false, known to the government to be false, and material. Under U. S. v. Basurto, 497 F.2d 781 (CA9, 1974), defendant urges that the government had a constitutional obligation to inform court, counsel and grand jury about the statements and that its failure to do so requires dismissal of the indictment. 1 In Basurto, the Ninth Circuit held 4 that the Due Process Clause of the Fifth Amendment is violated when a defendant has to stand trial on an indictment which the government knows is based partially on perjured testimony, when the perjured testimony is material, and when jeopardy has not attached. Whenever the prosecutor learns of any perjury committed before the grand jury, he is under a duty to immediately inform the court and opposing counsel and, if the perjury may be material, also the grand jury in order that appropriate action may be taken. 5 Id. at 785-86. A subsequent Ninth Circuit opinion, U. S. v. Bracy, 566 F.2d 649 (CA9, 1977), Cert. denied, --- U.S. ----, 99 S.Ct. 79, 58 L.Ed.2d 109 (1978), has not only cut back on the reach of Basurto but has also questioned its continuing validity. 2 This court has never decided whether to adopt the constitutional rule laid down in Basurto 3 or the modified rule of Bracy. 4 Nor do we decide that issue today. A prerequisite to the applicability of the Basurto rule is a finding that the government witness perjured himself. In the case before us the district court, doubtful whether there were any misstatements, concluded that, if there were, there was no evidence that Derry deliberately attempted to mislead, certainly no evidence of perjury, a finding that can be reversed only if clearly erroneous. U. S. v. Rhodes, 569 F.2d 384, 389 (CA5, 1978); U. S. v. Bagley, 537 F.2d 162, 166 (CA5, 1976), Cert. denied, 429 U.S. 1075, 97 S.Ct. 816, 50 L.Ed.2d 794 (1977). Our review of Derry's grand jury testimony supports the district court's conclusion. Absent a finding that perjury was committed, there is no basis for dismissing the indictment. U. S. v. Sullivan, 578 F.2d 121, 124 (CA5, 1978); U. S. v. Guillette, 547 F.2d 743, 753 (CA2), Cert. denied, 434 U.S. 839, 98 S.Ct. 132, 54 L.Ed.2d 102 (1977). 6 Appellant's Basurto argument fails in a second respect. In the sense that they were about collateral matters, Derry's alleged misstatements were not material. The statements in question revolve around the agent's testimony concerning a recorded interview he had conducted with Cathey. 5 Derry testified that the defendant's only explanation why his bank accounts  far exceeded his gross income from all known sources was that he had accumulated a large sum of money from dealing in currency exchange while stationed with the Air Force in Turkey. The transcript of the interview indicates that Cathey presented several explanations for the accumulated money in his bank accounts. Defendant claims that the statement limiting his explanation to currency dealings was material because in a tax fraud case based on net worth computations 6 the government must investigate and negate taxpayer explanations for cash on hand at the beginning of the computation period in order to establish a definite opening net worth, See Holland v. U. S., 348 U.S. 121, 132-36, 75 S.Ct. 127, 133-36, 99 L.Ed. 150, 162-65 (1954); U. S. v. Hiett, 581 F.2d 1199, 1201 (CA5, 1978), and revealing that he gave several explanations might have brought to light that the government had not investigated all leads. Assuming that the Holland rule for net worth computation trials is applicable to the government's presentation of its case to the grand jury, the government's case against Cathey was computed on the premise that at the beginning of the government's computation period he had on hand the $55,000 cash hoard he claimed to have. The one explanation statement was, therefore, not material to the government's net worth computations. 7 7 The second statement made by agent Derry that may have been misleading, because it was unresponsive, was in answer to a grand juror's question concerning the defendant's prior military conviction. 8 Juror: Was that for the currency dealings he was convicted? 9 Witness: He had several things going, currency exchange was part of it. 10 The government concedes that the defendant was not convicted for Currency exchange violations but rather Military post-exchange violations. We conclude, however, that the above statement is not material to an element of a § 7201 offense. Cathey argues that this statement combined with the first statement leaves the impression that he created the currency exchange lead for the cash hoard because it is a difficult source to investigate and refute. This is too strained an interpretation of the evidence. 11 The final statement in question occurred while Derry was testifying about Cathey's military career. He testified that he asked the defendant whether he was retired from the Air Force and recounted that Cathey said No. In fact, Derry had asked the defendant whether he was retired from the Army. A no response to the Army question by the defendant was truthful, while a  no response to the Air Force question was misleading. According to defendant, the grand jury may have inferred that he was trying to lead Derry away from discovery of his court-martial. Assuming that such an inference was drawn by the grand jury, it was not material to an element of the offense. Moreover, because Cathey concedes that the grand jury was entitled to be informed of his court-martial, any increased prejudice caused by the manner of informing the grand jury must be slight and certainly not of constitutional proportions. 12 Thus we agree with the district court's conclusion that dismissal of the indictment is not justified, because perjury was not proved and because the statements lacked materiality to the offense. But the presentation of the case to the grand jury is hardly commendable. Why the prosecutor elected to use Derry's hearsay account of his interview with Cathey rather than use the verbatim transcript of the interview we do not know. See note 5, Supra. Use of the transcript would have avoided the problems discussed in this portion of our opinion.
13 During the course of his grand jury testimony, Derry remarked that the defendant was caught with his hand in the cookie jar. Inflammatory remarks made by a prosecutor justify the dismissal of an indictment if the improper remarks so biased the grand jurors that their votes were based on their bias. U. S. v. Polizzi, 500 F.2d 856, 887-88 (CA9, 1974), Cert. denied, 419 U.S. 1120, 95 S.Ct. 802, 42 L.Ed.2d 820 (1975); U. S. v. Bruzgo, 373 F.2d 383, 386-87 (CA3, 1969). 8 We agree with the district court that the remark was needless and improper. We also agree with the district court that the remark does not rise to constitutional proportions.