Court Opinion

ID: 9470969
Source: CourtListenerOpinion
Date Created: 2023-08-05 03:22:08.22347+00
Date Added: 2024-06-11T17:42:13.037609
License: Public Domain

*1430GOODWIN, Circuit Judge,
dissenting:
The majority’s opinion finds that what defendants assisted, counselled, and advised their clients to do was not clearly illegal at the time they gave the advice and assistance. The majority therefore finds a failure of “proof of a specific intent to do something which the law forbids,” U.S. v. Brooksby, 668 F.2d 1102, 1104 (9th Cir.1982). The opinion notes that Zmuda v. Commissioner, 79 T.C. No. 714 (1982) was not decided until ten months after these convictions.
The government specifically did not rely on Zmuda. It had no need to so rely. It relied on settled principles of tax law regarding sham “gifts” and transactions. Defendants advised their clients to use sham transactions to evade taxes. Such schemes have been illegal since Gregory v. Helvering, 293 U.S. 465, 469-70, 55 S.Ct. 266, 267-68, 79 L.Ed. 596 (1935) and Knetsch v. United States, 364 U.S. 361, 81 S.Ct. 132, 5 L.Ed.2d 128 (1960). See also Barnett v. C.I.R., 364 F.2d 742 (2nd Cir.1966); Lynch v. C.I.R., 273 F.2d 867 (2nd Cir.1959). There were no “gifts” here within the clear intent of the statute because the taxpayers controlled the transactions of their trusts. See Hilda M. Royce, 18 T.C. 761 (1952); see also Jackson, 32 BTA 470 (1935); Stine, 32 BTA 482 (1935).
Defendants’ knowledge that they were advising and assisting illegal tax evasion is obvious from the record. Defendant Morris provided client Howlett false employer identification numbers to be used in connection with the sham trust bank accounts. Defendant Durst recommended that client Ricketts set up additional sham trusts to make future transactions more difficult for the I.R.S. to trace. Defendants Ripley and Durst recommended that clients use blue “copy-not” pens to sign checks so that I.R.S. agents could not read them on bank microfilm records. Defendant Morris instructed client Dr. Howard Bean to use specified fictitious names as the authorized signatures on bank accounts opened for the trusts and Morris accompanied Bean when Bean opened accounts using the fictitious names supplied by Morris. Bean also followed Morris’s advice and used a false name on a non-resident alien tax return he filed for one of his sham trusts. Defendant Durst counselled clients to alter their Social Security numbers on trust bank accounts to prevent the I.R.S. from tracing them.
Defendants’ clear knowledge of the illegality of their scheme was evident in the affidavit they required all participants to sign stating that they would not aid any governmental unit or agency in any civil, criminal, or administrative action against the defendants, and that the member would not divulge to any governmental agency any information concerning his relationship with the defendants. Defendant Durst explained to “client” Paoli (I.R.S. Special Agent Perry) why all the strategies for concealment were necessary. “If they (the I.R.S.) get ahold of your books or records, they could probably shoot holes in this thing.... Yeah if they do you’re in trouble.... Then you’re talking about tax avoidance, tax fraud, and the whole thing.” There could hardly be any clearer evidence that the defendants in this case knew that what they were advising and assisting clients to do was patently illegal.
Defendants did more than advise taxpayers. They committed acts in furtherance of the conspiracy. Defendants Conley and Morris traveled to Belize and the Turks and Caicos Islands to set up sham trust organizations for the taxpayers. Defendants Conley, Ripley and Morris also actively assisted taxpayers in opening bank accounts for the sham trusts. And defendant Durst prepared a fraudulent tax return.
Attendance at ALA meetings and distribution of ALA membership fees established membership in the conspiracy for all defendants except Durst. Defendant .Duret attended ALA meetings but did not receive distributions of membership fees. But he did counsel his clients to participate in the scheme and agreed with his co-conspirators that he would prepare tax returns claiming deductions based on the ALA program. Durst thus participated in the conspiracy and by counselling his clients to file fraudu*1431lent tax returns he committed a substantive offense in furtherance of the conspiracy.
Durst did more. He actually prepared a fraudulent tax return that he believed his client, Dr. Ricketts, would file and he thus violated 26 U.S.C. § 7206(2). Ricketts did “file” the return, but both Ricketts and the I.R.S. knew that it would not be his true return, because Ricketts was cooperating with the I.R.S. investigation of the scheme.
26 U.S.C. § 7206(2) states:
“Any person who — ... (2) ... Willfully aids or assists in, or procures, counsels, or advises the preparation or presentation under, or in connection with any matter arising under, the internal revenue laws, of a return, affidavit, claim, or other document, which is fraudulent or is false as to any material matter, whether or not such falsity or fraud is with the knowledge or consent of the person authorized or required to present such return, affidavit, claim, or document ... shall be guilty of a felony and, upon conviction thereof, shall be fined not more than $5,000, or imprisoned not more than 3 years, or both, together with the costs of prosecution.”
I cannot agree with the legal conclusion in the majority’s opinion that Durst could not have violated 26 U.S.C. § 7206(2) because the return was never “presented” as a true return to the I.R.S.
Title 26 U.S.C. § 7206(2) makes aiding or advising “the preparation or presentation” of a fraudulent income tax return a crime. There are no cases in this circuit holding that presentation is a necessary element to the separate crime of fraudulent preparation. To create such a requirement would render the words “preparation or” mere surplusage. For returns that are actually presented, the term “presentation” would be enough to permit punishment of the advisor. The statute was clearly intended to reach tax return preparers whether or not the returns they prepare are ultimately presented. A statute should be construed so that no word, sentence, or clause shall be superfluous. Ex Parte Public Bank, 278 U.S. 101, 104, 49 S.Ct. 43, 44, 73 L.Ed. 202 (1928); Consolidated Flower Ship. v. Civil Aeronautics Bd., 205 F.2d 449, 450 (9th Cir. 1953).
The cases cited in the majority’s opinion are not in point because all were cases in which the fraudulent return was both prepared and presented and the question was from what date the statute of limitations should run. United States v. Habig, 390 U.S. 222, 88 S.Ct. 926, 19 L.Ed.2d 1055 (1968) held that the government could press charges within six years from the actual filing of the returns, not from the statutory due date. Presentation is a separate act from preparation and the government could prosecute up to six years from that act. There was no holding in Habig that the government could not prosecute for fraudulent preparation alone.
Similarly in Butzman v. United States, 205 F.2d 343 (6th Cir.1953), cert. denied, 346 U.S. 828, 74 S.Ct. 50, 98 L.Ed. 353 (1953), the Sixth Circuit ruled that the statute of limitations ran from the date of filing, not from the date of preparation. The dicta in Butzman that no crime was committed until the application was filed and that no crime would have been committed if the application had not been filed have never been adopted by the Ninth Circuit. The dicta would render the words “preparation or” in § 7206(2) nugatory, and we should not adopt them.
The crime of fraudulent preparation should be deemed complete when the preparer delivers the returns to a client with the belief that the client will file them.
Durst advised Ricketts to back date a check so that he could claim a deduction. And the tax return he prepared for Ricketts included a deduction for “repurchase” of ALA tax shelter documents that Durst knew was a sham. He knew the return he prepared contained false deductions and he therefore violated § 7206(2).
There was no violation of first amendment protected speech or association here. The first amendment does not protect communications that are part of conspiracies to commit unlawful acts. U.S. v. Buttorff, *1432572 F.2d 619 (8th Cir.1978), cert. denied 437 U.S. 906, 98 S.Ct. 3095, 57 L.Ed.2d 1136 (1978).
Viewing the evidence in the light most favorable to the jury’s verdict and drawing all reasonable inferences, there was substantial evidence from which the jury reasonably could have found the defendants guilty beyond a reasonable doubt. U.S. v. Friedman, 593 F.2d 109, 115 (9th Cir.1979); US. v. Jacobo-Gil, 474 F.2d 1213, 1214 (9th Cir.1973).