Opinion ID: 555459
Heading Depth: 1
Heading Rank: 2

Heading: Gregory Ayers' Income Tax Returns

Text: 22 The Ayers contend that the district court erred in admitting Gregory Ayers' income tax returns for 1979 through 1985. A district court's decision to admit or exclude evidence will be upheld on appeal unless the court abused its discretion. United States v. Merrill, 746 F.2d 458, 465 (9th Cir.1984) (citing United States v. Long, 706 F.2d 1044, 1053 (9th Cir.1983)), cert. denied, 469 U.S. 1165, 105 S.Ct. 926, 83 L.Ed.2d 938 (1985). 23 The Ayers contend that since Gregory Ayers was not charged with tax evasion, his tax returns were not in question and should not have been admitted into evidence. The Government argues that Gregory Ayers' tax returns were at issue because the indictment alleged that the Ayers concealed and continue to conceal the source and nature of their income and assets derived therefrom. (emphasis added). The government further argues that Gregory Ayers' tax returns are relevant to show that his income could not support the monetary contributions which Eddie Ayers claimed Gregory Ayers made toward the purchase of certain investments. 24 Gregory Ayers' income was in question in this case. His income tax returns provided relevant information regarding the source and amount of his income. The district court did not abuse its discretion in admitting Gregory Ayers' income-tax returns into evidence.III. Jury Instruction 25 The Ayers contend that the district court erred in failing to give their proposed jury instruction regarding the Bahamian banking laws and the Government's duty to produce evidence of the nature of their transactions with the Nassau, Bahamas branch of the Bank of Montreal.  'A trial judge is given substantial latitude in tailoring the instructions so long as they fairly and adequately cover the issues presented.'  United States v. Cruz, 783 F.2d 1470, 1472 (9th Cir.) (quoting United States v. Marabelles, 724 F.2d 1374, 1382-83 (9th Cir.1984)), cert. denied, 476 U.S. 1174, 106 S.Ct. 2902, 90 L.Ed.2d 987 (1986). The standard of review for determining whether a district court erred in refusing to give a proposed jury instruction is unclear in this circuit. United States v. Slaughter, 891 F.2d 691, 699 (9th Cir.1989). The panel on United States v. Busby, 780 F.2d 804, 806 (9th Cir.1986), relied upon the abuse of discretion standard. In United States v. Anguiano, 873 F.2d 1314, 1317 (9th Cir.), cert. denied, --- U.S. ----, 110 S.Ct. 416, 107 L.Ed.2d 381 (1989), the panel applied a de novo standard. Since the instructions given by the court adequately covered the Government's duty, the district court did not err in refusing to give the Ayers' proposed instruction under either standard of review. 26 The Government relied on the net worth theory in prosecuting Eddie Ayers for tax evasion. The United States Supreme Court defined the net worth theory as follows: 27 In a typical net worth prosecution, the Government, having concluded that the taxpayer's records are inadequate as a basis for determining income tax liability, attempts to establish an opening net worth or total net value of the taxpayer's assets at the beginning of a given year. It then proves increases in the taxpayer's net worth for each succeeding year during the period under examination and calculates the difference between the adjusted net values of the taxpayer's assets at the beginning and end of each of the years involved. The taxpayer's nondeductible expenditures, including living expenses, are added to these increases, and if the resulting figure for any year is substantially greater than the taxable income reported by the taxpayer for that year, the Government claims the excess represents unreported taxable income. 28 Holland v. United States, 348 U.S. 121, 125, 75 S.Ct. 127, 130, 99 L.Ed. 150 (1954). When the government relies on a net worth theory of prosecution, it has a duty to track down relevant leads furnished by the taxpayer--leads reasonably susceptible of being checked, which, if true, would establish the taxpayer's innocence. Id. at 135-36, 75 S.Ct. at 135. When the Government fails to show an investigation into the validity of such leads, the trial judge may consider them as true and the Government's case insufficient to go to the jury. Id. at 136, 75 S.Ct. at 135. 29 The record shows that the government attempted to obtain information regarding the Ayers' transactions with the Bahamian branch of the Bank of Montreal. Internal Revenue Service Special Agent Fletcher testified that he contacted the bank manager of the Bank of Montreal in Nassau, Bahamas. Agent Fletcher was informed that the Ayers had an account with the bank, but not a loan. The bank manager refused to give any more information without written authorization from Eddie Ayers. Agent Fletcher also contacted the San Francisco branch of the Bank of Montreal in an attempt to locate records for the Nassau, Bahamas branch. The Government informed the district court in camera of other steps taken through its International Programs Office to obtain information regarding the Ayers' banking transactions in the Bahamas. 30 The Ayers contend that the government failed to conduct a proper investigation into the nature of the Ayers' transactions with the Bank of Montreal because it failed to follow other available procedures for obtaining evidence from foreign countries. The procedures suggested by the Ayers include application to the district court for a request for foreign judicial assistance, use of a grand jury subpoena duces tecum, using international contacts to obtain the information, and requiring the defendants to consent to disclosure of the material. 31 In previous cases, we have not required the government to exhaust all possible means of investigating every lead regarding a taxpayers' nontaxable sources of increased net worth. Rather, we have stated that [t]he government must investigate and negate a taxpayer's explanation only if it is 'reasonable' and 'reasonably susceptible of being checked.'  United States v. Anderson, 642 F.2d 281, 285 (9th Cir.1981) (emphasis added) (citing Holland, 348 U.S. at 135-136, 75 S.Ct. at 135). In Anderson we affirmed a defendant's conviction for income tax evasion even though the government failed to investigate the proffered explanation that his increased net worth came primarily from a $200,000 loan from a Nigerian woman whom he met at a party. We determined that the taxpayer's explanation was neither reasonable nor reasonably susceptible to being checked. Id. 32 In United States v. Hom Ming Dong, 436 F.2d 1237 (9th Cir.1971), a taxpayer presented a cash hoard defense, claiming that he brought $100,000 in cash from Hong Kong in a seabag just before his discharge from the Navy in 1946. Id. at 1239. The taxpayer further explained that he had received $55,000 as an inheritance when his father died in 1938. Id. However, he could not remember the name of the man to whom he had entrusted the money during his service in the Navy. Id. The government presented evidence that it had checked immigration records regarding the wealth of the defendant's father when he entered this country. Id. at 1240. The government also made inquiries of servicemen who were on the ship with the defendant when he allegedly transported the $100,000 in cash from Hong Kong. Id. at 1240. We found that the government did all it reasonably could have been expected to do in checking the leads given by appellant, which were, at best, sketchy. We think this is particularly true in view of appellant's explanation of his increase in net worth. Id. at 1242. Referring specifically to the cash hoard defense, we further stated: 33 Although the use of such an explanation does not relax the requirement that the government investigate all leads pertaining to the existence of undeposited cash reserves, it does seem to place at least a minimal burden upon the taxpayer, once he chooses to furnish leads to the government, to aid in the investigation of the purported nontaxable source. As is clear from the earlier discussion, the appellant, who was in the best position to do so, gave little useful information to the government. 34 Id. at 1242-43. 35 A similar situation arises when a taxpayer chooses to create bank accounts or make loan transactions with foreign banks in countries which impose secrecy laws preventing access to information from those banks. The taxpayer is in the best position to give useful information to the government regarding the nature of his financial dealings with the banks in those countries. Under these circumstances, the government met its duty to investigate whether the account in the Nassau branch of the Bank of Montreal was a loan. 36 The jury instruction proposed by the Ayers included the following provisions: 37 The failure of the government to provide evidence of the banking transactions with the Bank of Montreal, Bahamas, may be viewed by you as a failure of the government to prove certain elements of the counts as I have detailed them to you. 38 I instruct you that certain procedures are available to the government to seek to obtain the Bahamian bank records and that the government did not undertake to use the procedures. It is the government's burden to seek to use the procedures, whether successful or not. A request of the Bank of Montreal in the United States is not one of the procedures that will produce the necessary documents or information. I further instruct you that under a number of circumstances, Bahamian law does not prohibit disclosure of the banking information.Therefore, when the party who is required to prove the allegations in this case, the United States, does not produce certain evidence, and when it is in their power to produce the evidence, it creates a presumption [or inference] that the missing evidence would be unfavorable to the government. 39 The court rejected this proposed instruction. Instead, the court instructed the jury on the following portions of the Bahamian secrecy law in banking: 40 No person who has acquired information in his capacity as (a) [bank] director, officer, employee or agent ... shall without express or implied consent of the customer concerned, disclose to any person any such information relating to the identity, assets, liabilities, transactions [or] accounts of a customer ... except ... (iii) when a [bank] is lawfully required to make disclosure by any court of competent jurisdiction within the Bahamas or under the provisions of any law of the Bahamas. 41 Jury Instruction 27. The jury was also instructed 42 [T]he defendant offered to Treasury agents certain explanations of the sources of his funds, which were reasonably susceptible of being checked and verified. You will bear in mind that the Treasury agents may not unreasonably disregard such explanations; and the jury may take into consideration any failure of the Treasury agents reasonably to investigate the truth of such explanations, if any were made, as well as the trustworthiness of the explanations. 43 Jury Instruction 36. 44 These instructions fully and accurately informed the jury of the government's duty under the net worth theory of prosecution. The difficulty of obtaining information regarding the alleged loan resulted from the Ayers' choice to do business with banks in the Bahamas, thereby availing themselves of that country's secrecy laws. The government's failure to obtain information after taking reasonable steps to do so, did not preclude the Ayers from establishing at trial that the transaction with the Bahamian bank was indeed a loan. Eddie Ayers testified that he obtained loans from the Bank of Montreal's Nassau branch. The jury did not believe his explanation. The jury instructions given by the court adequately covered the government's duty. The district court did not err in refusing to give the jury instruction proposed by the Ayers.