Opinion ID: 670509
Heading Depth: 1
Heading Rank: 2

Heading: copple's challenges to his conviction

Text: 14 The first issue we address is Copple's claim that we should reverse his conviction because the requirements of Sec. 6103(h)(5) were not met. 6 Section 6103(h)(5) provides in relevant part: 15 in connection with any judicial proceeding [related to tax administration] to which the United States is a party, the Secretary shall respond to a written inquiry from ... any person (or his legal representative) who is a party to such proceeding as to whether an individual who is a prospective juror in such proceeding has or has not been the subject of any audit or other tax investigation by the Internal Revenue Service. The Secretary shall limit such response to an affirmative or negative reply to such an inquiry. 16 26 U.S.C. Sec. 6103(h)(5). 17 On July 27, 1992, about a month before jury selection, Copple moved pursuant to Sec. 6103(h)(5) for disclosure of tax background information of prospective jurors. In its response to Copple's motion, the government agreed to provide the information, but stated that it would be virtually impossible to obtain tax audit information from prior to 1986. The district court granted Copple's motion for the Sec. 6103(h)(5) investigation, but did not mention whether the IRS was to investigate the tax records of the prospective jurors for the years preceding 1986. 18 The government provided Copple with the IRS review indicating that none of the prospective jurors had been audited or investigated from 1986 to 1991, the years for which the IRS' records were computerized. At a hearing the day before commencement of trial, Copple claimed that he was entitled to the tax information without any limitation as to time period. The government responded that checking records of possible audits occurring before 1986 would require a manual search, which would take weeks, even a month, to complete. 19 Copple then claimed that he was entitled to ask on voir dire whether any of the prospective jurors had ever been audited by the IRS or whether any of the prospective jurors had ever been the subject of a civil or criminal tax investigation; he also argued that he was entitled to have the IRS verify the answers the jurors gave. The district court granted Copple's request for voir dire but declined to order the IRS to verify the jurors' answers. 20 On voir dire, the district court asked the prospective jurors: Have you or any member of your immediate family ever been audited by the Internal Revenue Service? In response to this question, Juror Number 7, Art Borczon stated that he had been audited during 1988 and 1989 (the audit for 1989 had not yet been resolved), that he had paid a deficiency, and that he had never [been] satisfied with that. He also represented, however, that he could be a fair and impartial juror. Juror Number 45, James Henderson, also stated that he had been audited about 35 years earlier, but he too testified that he could be fair and impartial. A few other jurors responded that they had not been audited personally, but that members of their families had been. 7 21 Copple did not ask that Borczon, Henderson or the other jurors be dismissed; instead he moved to have the entire panel rejected because the government had failed to comply with Sec. 6103(h)(5). He provided two bases for his motion. First, Copple argued that the investigation was inadequate because it only went back five years. Second, Copple argued that the investigation of all of the jurors was demonstrably unreliable because it had failed to disclose Borczon's audits occurring within the five year period. 22 The district court, however, denied the motion. Copple submits that this was error and that his conviction therefore should be reversed and the case remanded for a new trial. The government responds that such a ruling was not error because the district court properly found that ordering the IRS to supply such information would have unduly delayed the trial and that, even if it was error, such error was harmless and any prejudice was cured by asking the prospective jurors about their tax histories. 23 The question whether Copple is entitled to a new trial because the tax investigation was limited to the jurors' records since 1986 requires us to determine the requirements of Sec. 6103(h)(5), something we have not had occasion to do until now. Although the statute explicitly provides a defendant with a right to require that the Treasury provide an affirmative or negative response as to whether a prospective juror has been audited, 8 it is silent on the appropriate time period covered by the investigation. In addition, the statute does not specify the procedures that a district court must follow to carry out the purposes of the provision, and it is silent on the consequences, if any, for noncompliance.1. The requirements of Sec. 6103(h)(5). 24 Copple argues that the statute's lack of any limitation on the appropriate time period covered by the investigation implies that the investigation can have no time limitation and that the government violated the statute when it limited the investigation to the preceding five years. In addition to relying on the statutory language, Copple relies on a Ninth Circuit opinion. United States v. Sinigaglio, 925 F.2d 339, amended, 942 F.2d 581 (9th Cir.1991), which held that where the defendant makes a timely motion for a Sec. 6103(h)(5) investigation, the investigation must cover all of the years the prospective jurors paid taxes. Id. at 341. Copple urges this Court to adopt the Sinigaglio view of Sec. 6103(h)(5). 25 The government counters with United States v. Spine, 945 F.2d 143 (6th Cir.1991), in which the Sixth Circuit stated that Sec. 6103(h)(5) does not require an investigation extending to all of the years the prospective jurors paid taxes. Spine held that the requirements of Sec. 6103(h)(5) are met as long as the court orders an investigation and, if the IRS cannot locate all of jurors' histories from the time they began paying taxes by the time of trial, the district court obtains such information on voir dire. Id. at 148. Spine reached this result by reading a reasonableness limitation into Sec. 6103(h)(5). According to Spine, Sec. 6103(h)(5) merely requires the district court to order an investigation which would be appropriate under the circumstances, one which would take into account both the cost and inconvenience of the investigation and the ability to get the same information on voir dire. 26 The Sixth Circuit's interpretation of the statutory language is informed by practical considerations. Allowing a defendant to request an investigation of all of the potential jurors' tax information from the time they began paying taxes could take months, indeed, even as much as a year. See United States v. Johnson, 762 F.Supp. 275, 277 & n. 1 (C.D.Cal.1991), rev'd on other grounds, 991 F.2d 569 (9th Cir.1993). Scheduling criminal cases, which is already difficult enough, would be made even more difficult since a trial with a current jury pool would have to be postponed for months while the IRS completed an investigation. See Spine, 945 F.2d at 148. 9 This might also cause serious inconvenience to prospective jurors. 10 In addition, strict compliance with Sec. 6103(h)(5) would also impose substantial costs on the IRS since defendants would routinely request information requiring the IRS to conduct manual searches of noncomputerized records. 27 Interpreting Sec. 6103(h)(5) to require tax investigations stretching back twenty or thirty years would transform Sec. 6103(h)(5) into a significant practical bar to tax prosecutions. It potentially would permit a defendant in a tax case to postpone a trial indefinitely by continually requesting potential jurors' tax information. Spine, 945 F.2d at 148. Indeed, interpreting Sec. 6103(h)(5) to require such an extensive search might make tax prosecutions so expensive that the government would be reluctant to bring them. See United States v. Nielsen, 1 F.3d 855, 858 (9th Cir.1993), cert. denied, --- U.S. ----, 114 S.Ct. 1410, 128 L.Ed.2d 82 (1994). 28 We should not interpret the language of Sec. 6103(h)(5) to create such an absurd result absent a clear direction from Congress, see Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 575, 102 S.Ct. 3245, 3252, 73 L.Ed.2d 973 (1982), United States v. Schneider, 14 F.3d 876, 880 (3d Cir.1994), and there is no such clear direction in either the language or the legislative history of the provision. As has been mentioned, the language of Sec. 6103(h)(5) is silent on whether the IRS must search the tax records for all of the time the jurors began paying taxes. And the legislative history of Sec. 6103(h)(5) demonstrates that Congress' principal concern in enacting the provision was merely to ensure that the government and the defendant would have access to the same information--not that the information had such intrinsic worth that Congress meant to bring prosecutions to a standstill while the IRS conducted an investigation. 11 Spine, 945 F.2d at 147. There is simply no suggestion that Sec. 6103(h)(5) was meant to create the significant practical barrier to tax prosecutions that would result if we were to accept Copple's interpretation. See, United States v. Lussier, 929 F.2d 25, 30 (1st Cir.1991) (per curiam) (The statute itself makes no provision for such an extreme alteration of normal trial arrangements.). 29 We therefore adopt the Sixth Circuit's approach and conclude that Sec. 6103(h)(5) requires only that the investigation into the tax records of potential jurors meet the standard of reasonableness. 12 Specifically, upon timely request by the defendant, the district court must grant a reasonable period of time for the IRS to complete a search of the potential jurors' tax records for the time period requested by the defendant. If the district court only allows the defendant enough time for the IRS to conduct a search of the computerized records and not a search of the noncomputerized records, 13 the grant of time will be reasonable as long as the computer search is made, and the court elicits on voir dire information about the jurors' tax histories for the period of time not covered by the investigation. 14 We add only that Congress might be well advised to revisit the provision and specify more clearly the intent behind it and its requirements. 30 2. Did the district court comply with Sec. 6103(h)(5)? 31 Under our reading of Sec. 6103(h)(5), the district court's failure to order a complete search of the jurors' past history was not error. First, after Copple requested the Sec. 6103(h)(5) inquiry, the district court ordered the clerk to provide a list of jurors in the case along with other relevant information to the United States Attorney so that the IRS could conduct the investigation. This occurred about twelve days before the trial and it gave the IRS enough time to search the computerized records and get information about the potential jurors' tax histories for the period from 1986 to 1991. 32 Second, the district court conducted an extensive voir dire about the potential jurors' tax histories and experience with the IRS including whether they or any member of their family had been audited. The questioning covered all of the period for which the jurors had paid taxes. Moreover, the voir dire worked. It identified a juror who was outside the scope of the IRS audit (Henderson) and a juror who the IRS for some reason simply missed (Borczon). 15 Borczon, for example, indicated that he had been unhappy with the audit results but also stated that he could still be fair and impartial. Apparently, his answers were satisfactory since Copple did not even move to strike him. In a sense, then, Copple had access to more accurate information than he would otherwise have received had the inquiry been limited to a full IRS investigation. 33 For all the foregoing reasons, we hold that the district court complied with Sec. 6103(h)(5).
34
35 During its case in chief, the government called to the stand a number of the funeral directors who had put their money in Copple's hands. They testified about their losses, and about the impact of those losses on their lives. Copple argues that evidence about the victims' losses was irrelevant under Federal Rule of Evidence 401, and that the testimony about the impact of the losses was both irrelevant (or at least of negligible probative worth) and unfairly prejudicial, and hence excludable under Federal Rules of Evidence 401 and 403. Our review of these challenges to the conviction is for abuse of discretion. See United States v. Versaint, 849 F.2d 827, 831 (3d Cir.1988). 36 With respect to the testimony about the financial losses, Copple properly argues that the government does not have to show that the victims actually suffered a loss to satisfy the elements of the mail fraud statute. The essential elements of the crime of mail fraud are 1) a scheme or artifice to defraud; 2) participation by the defendant with specific intent to defraud; and 3) use of the mail in furtherance of the scheme. 18 U.S.C. Sec. 1341; see United States v. Burks, 867 F.2d 795 (3d Cir.1989). Proof of actual loss by the intended victim is not necessary. See United States v. Kelley, 929 F.2d 582, 585 (10th Cir.), cert. denied, --- U.S. ----, 112 S.Ct. 341, 116 L.Ed.2d 280 (1991); United States v. King, 860 F.2d 54, 55 (2d Cir.1988), cert. denied, 490 U.S. 1065, 109 S.Ct. 2062, 104 L.Ed.2d 628 (1989). 37 But that does not mean that evidence of loss was irrelevant. Proving specific intent in mail fraud cases is difficult, and, as a result, a liberal policy has developed to allow the government to introduce evidence that even peripherally bears on the question of intent. See United States v. Foshee, 606 F.2d 111, 113 (5th Cir.1979), cert. denied, 444 U.S. 1082, 100 S.Ct. 1036, 62 L.Ed.2d 766 (1980). 16 Proof that someone was victimized by the fraud is thus treated as some evidence of the schemer's intent. See United States v. Heimann, 705 F.2d 662, 669 (2d Cir.1983) (While technically the success or failure of a scheme to defraud is irrelevant in a mail fraud case, realistically, when the contested issue is intent, whether or not victims lost money can be a substantial factor in a jury's determination of guilt or innocence. (citation omitted)). Also relevant is the defendant's failure to take any steps to ameliorate the loss. See Anderson v. United States, 369 F.2d 11, 15 (8th Cir.1966), cert. denied, 386 U.S. 976, 87 S.Ct. 1171, 18 L.Ed.2d 136 (1967). The government submits that the evidence about the victims' losses and Copple's refusal to make good those losses was relevant to show Copple's specific intent to defraud. We agree, with the qualification that district judges should exercise their wise discretion in imposing limits on such testimony. The following discussion is a case in point. 38 Copple's defense was that he had simply made a bad business decision when he, as trustee, had relied on the advice of experts to invest in rare coins. Yet the funeral directors had to pay for their losses out of their own pockets, while he refused to part with any of the luxuries he had purchased with the Mechem pre-need funds. The evidence of Copple's refusal to part with the property under such circumstances was, we believe, evidence of Copple's fraudulent intent. It tended to show that Copple intended to convert the Mechem pre-need money to his own personal use, something he had no right to do. 39 In addition, the testimony about the funeral directors' losses also corroborated the testimony of insurance agent James Domino, who said that he had never issued a surety bond to Mechem despite Copple's requests. Yet a few of the funeral directors testified that they had received a letter on Domino's stationary stating that the surety bond had been issued, and that letter was offered into evidence. Thus the fact that the funeral directors had to pay the losses out of their own pockets corroborated Domino's testimony that no such bond was issued and showed Copple's intent to mislead the funeral directors with the letter. Since the evidence about the extensive losses suffered by the funeral directors was relevant to show Copple's failure to repay and his intent to defraud, the evidence was admissible under the low threshold of Rule 401. 40 When the district court ruled on the admissibility of the testimony about the funeral directors' losses, however, its ruling encouraged the government to introduce a wide range of victim impact testimony in addition to the testimony about the size of the losses. Some of the victim impact testimony went beyond anything that was reasonable to prove Copple's specific intent to defraud. 41 A number of the funeral directors testified that the money they had used to pay back the losses came from money they had saved for their children's college educations. Others testified that paying back the money had affected their health, or had been taken from savings dedicated to other special purposes. For example, in response to the question of what effect the loss of money had on his business, Frank Mihalcik answered: [w]ell, the situation.... has affected my health. I have lost over 60 pounds, and I am currently under a doctor's care. Terry Starr testified that he had to use every bit of personal savings he had in order to retrust the lost money. He then stated that, in order to obtain the money, he and his wife were forced to break a contract to purchase a home and to use the down payment money to retrust the money they had lost. 42 Testimony such as this had either no, or very little, probative value and was unfairly prejudicial. We believe that it was irrelevant either for the purposes of proving that Copple had failed to make up the loss to the funeral directors or for any other reason. Even if there had been some marginal relevance to the testimony about the particular personal or professional impact the losses had on the funeral directors, its principal effect, by far, was to highlight the personal tragedy they had suffered as victims of the scheme. The testimony was designed to generate feelings of sympathy for the victims and outrage toward Copple for reasons not relevant to the charges Copple faced. It arguably created a significant risk that the jury would be swayed to convict Copple as a way of compensating these victims wholly without regard to evidence of Copple's guilt. 43 In short, we believe that the probative value of the victim impact testimony was outweighed by unfair prejudice, and that such testimony should have been excluded under Federal Rule of Evidence 403. 44
45 Although the district court abused its discretion by allowing all of the victim impact testimony into evidence, we need not reverse if that error was harmless. Trial error is harmless if it is highly probable that the error did not affect the judgment. United States v. Simon, 995 F.2d 1236, 1244 (3d Cir.1993). High probability exists if the court has a sure conviction that the error did not prejudice the defendant. Id. at 1244 (internal quotations omitted). There is no need to disprove every reasonable possibility of prejudice. Id. at 1244 (internal quotations omitted). We believe that the error of admitting the victim impact statements was harmless because of the overwhelming evidence of both the scheme to defraud and Copple's specific intent. 46 First, Copple's claim that he had bought the rare coins in order to get a higher return for Mechem was refuted by the bankruptcy trustee's testimony that Copple had sold $877,000 worth of the coins just before declaring bankruptcy and had made the checks from the coin companies payable to himself--not Mechem. Although $450,000 of that money was eventually transferred to Mechem, Copple could not remember where the other $427,000 of the proceeds from the sale went. 47 Second, Copple spent immense amounts of money for personal use while he was drawing money from the Mechem account. Copple's personal spending during the three-year life of Mechem included the following purchases: 48 $228,000 Home improvement, Sesler Builders 196,334 Furniture, Russell's Country Manor 67,694 Home improvement, Kitchens by Meade 70,000 Home improvement, architects and contractors. 62,081 Jewelry, Les Crago 70,279 Jewelry, Fortunoff's 398,000 Jewelry, Neiman-Marcus 48,712 Sable coat 11,000 Other fur coats 480,000 Gifts for family members 230,000 Payments to other Copple-owned businesses 61,000 Automobiles 6,000 Country club fees 3,000 Gambling, Caesar's Palace 49 At the time of the bankruptcy, Copple had also just put a $110,000 deposit down on a $450,000 diamond from Neiman-Marcus that weighed 38.33 carats. Nearly all of the money for these expenditures came from money in the pre-need accounts that Copple had transferred to himself. 50 Third, the evidence was overwhelming that Copple had prepared wholly fictitious reports about how Mechem was investing the money, about the interest earned on the investments, and about fidelity or surety bonding. Particularly incriminating is the false letter Copple caused to be sent from Mechem to its investors six months after it was incorporated stating that Mechem's investments have been made in insurance companies, annuities, T-bills, long-term municipal bond funds, short-term CD's and money markets, and that Mechem's performance has reflected our excellent investment posture for the last fifteen years. Also highly probative of both the scheme to defraud and Copple's fraudulent intent was the evidence that funeral directors were sent fabricated quarterly reports showing the interest that had accrued on the trust investments, and the evidence that Copple had ordered a salesman to alter a general liability policy to make it look like a fidelity or surety bond. 51 We believe that all of this evidence overwhelmingly indicates that Copple knowingly devised or participated in a scheme to defraud and did so with the specific intent to defraud the funeral directors and others who had invested in Mechem. We are satisfied that it was highly probable Copple would have been convicted for violating the mail fraud statute even if the victim impact testimony had been excluded. For these reasons, we hold that the error was harmless. 17