Nos. 81-2309, 81-2310.United States Court of Appeals, Tenth Circuit.
December 27, 1983.
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E.J. Ball of Ball, Mourton Adams, Fayetteville, Ark. (Thomas D. Frasier of Frasier, Frasier Gullekson, Tulsa, Okl., with him on brief), for defendants-appellants.
Deborah Wright Dawson, Washington, D.C. (Michael L. Paup and Robert E. Lindsay, Attys., Tax Div., Dept. of Justice, Washington, D.C., Glenn L. Archer, Jr., Asst. Atty. Gen., Washington, D.C., of counsel; Francis A. Keating, II, U.S. Atty., Tulsa, Okl., with her on brief), for plaintiff-appellee.
Appeal from the United States District Court for the District of Oklahoma.
Before McWILLIAMS, McKAY and LOGAN, Circuit Judges.
McWILLIAMS, Circuit Judge.
[1] Ralph Dewayne Franks and Kathrena June Franks, husband and wife, were jointly charged in a five count indictment with criminal violations of the Internal Revenue Code. A jury convicted both defendants on all counts, and the defendants appeal the sentences imposed thereon. [2] Perhaps the primary ground for reversal is that there is an overlap between the fivePage 1484
counts in the information, and that, in effect, the defendants were prosecuted and punished more than once for the same transaction. Accordingly, the five counts in the indictment and the sentences imposed on each must be examined in detail.
[3] Count I of the indictment charged the defendants with a violation of 26 U.S.C. § 7206(1) in connection with their joint Income Tax Return, Form 1040, for the calendar year 1974. The charge was that the defendants knowingly made and subscribed to a return which was verified by a written declaration that it was made under the penalties of perjury, which return the defendants did not believe to be true and correct as to every material matter, in that the defendants, inter alia, did not acknowledge or report eight foreign bank accounts in Canada and Bermuda in which they had an interest and over which they had signatory authority. [4] Count II related to defendants’ joint income tax return for the taxable year 1975. That count also charged the defendants with violation of 26 U.S.C. § 7206(1), and the allegations therein parallel the charge in Count I. Specifically, in Count II the defendants were charged with making and subscribing to an income tax return under penalty of perjury which they did not believe to be true and correct as to every material matter, in that they inter alia, did not acknowledge or report at least two foreign bank accounts in which they had an interest and over which they had signatory authority. [5] Count III charged the defendants with willfully and knowingly attempting to evade and defeat the income tax due and owing the United States for the calendar year 1974. More specifically, in Count III the defendants were charged with filing a false and fraudulent joint income tax return wherein it was stated that their taxable income for the year was $140,332.83, with a tax thereon amounting to $53,239.27, whereas, in fact, their taxable income for the year was $516,682.83 upon which a tax in the sum of $283,013.86 was due and owing, in violation of 26 U.S.C. § 7201. [6] Count IV concerned the defendants’ joint income tax return for 1975. This count also charged a violation under 26 U.S.C. § 7201. The charge under this count was that the defendants knowingly attempted to evade and defeat tax due and owing the United States by filing a false and fraudulent return wherein it was stated that their taxable income for 1975 was $2,899.56, with a tax thereon amounting to $198.62, whereas in fact their joint income for that year was $153,760.50 upon which tax in the amount of $65,576.15 was due and owing. [7] Count V pertains to a joint amended income tax return filed November 26, 1974. It charged a violation of 26 U.S.C. § 7206(1). Specifically, the defendants were charged with knowingly making and subscribing to an Amended United States Individual Income Tax Return, Form 1040X, which was under the penalty of perjury and which they did not believe to be true and correct as to every material matter in that, although they indicated that they had an interest in and authority over certain identified foreign bank accounts, they did not acknowledge or report four other foreign bank accounts in which they had an interest and over which they had signatory authority. [8] As stated, both Mr. and Mrs. Franks were convicted on all five counts, and each received the same sentences. Each was sentenced to eighteen months imprisonment on Counts III and IV, the two counts which charged violations of § 7201 for the years 1974 and 1975, respectively, with the sentence on Count IV to be served concurrently with the sentence imposed on Count III. Further, each defendant was fined $10,000 on each count. [9] As to Counts I, II, and V, the counts charging a violation of § 7206(1), the imposition of sentence was suspended, and the defendants were placed on probation for a period of three years. Further, on each of these three counts, as a condition of probation, each defendant was fined $5,000. [10] As an additional and special condition of probation, each of the defendants was ordered “to make restitution to the UnitedPage 1485
States in the amount of $100,000, payable in three (3) equal installments, due on the last day of each year of probation.” It is from these sentences that the defendants appeal.
[11] Mr. and Mrs. Franks, residents of Big Cabin, Oklahoma, had numerous business interests in which both were actively involved. During the period in question, 1974 and 1975, the Franks owned the Cherokee Truck Terminal, Inc., a domestic corporation; the Cherokee Restaurant, a domestic corporation; Franks and Son, a domestic corporation; Franks Operating and Distributing Co., a partnership; and Can Am Distributing and Warehouse, Inc., a trucking concern in which the Franks were 50% owners and officers and directors from May 1973 to May 1974. In 1973, the Franks entered into a new business selling and brokering oil field drilling pipe and couplings. This business was conducted as individuals and on behalf of Franks and Son, Cherokee Truck Terminal, and Can Am Distributing and Warehouse, Inc. The Franks also owned Franco, Ltd., a Bermuda corporation, the stated business of which was brokering oil and drilling pipe supplies. [12] The Franks had an interest in or signatory authority over a total of eight foreign bank accounts during 1974 and 1975, which included banks in Canada and Bermuda. The net deposits in these accounts totalled $3,770,723.09 in 1974 and $1,666,724.73 in 1975.[13] I. Motion to Strike
[14] Prior to trial, the defendants filed a motion to strike all references in Counts I, II, and V relating to foreign bank accounts and their alleged failure to report and identify the existence of such. This motion was denied, and, on appeal, the defendants argue that the ruling of the trial court is reversible error. We do not agree.
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Form 4683, which listed some, but not all, of their foreign bank accounts.
[19] Like the Fifth Circuit, in cases decided subsequent to United States v. Levy, supra, we do not believe the rationale of Levyshould be extended, and, in our view, such does not apply to the schedules here appended to a Form 1040, or to an answer made in response to a question contained in the Form 1040. United States v. Damon, 676 F.2d 1060 (5th Cir. 1982); United States v. Taylor, 574 F.2d 232 (5th Cir.), cert. denied, 439 U.S. 893, 99 S.Ct. 251, 58 L.Ed.2d 239 (1978); accord, United States v. Hajecate, 683 F.2d 894 (5th Cir. 1982), cert. denied,
___ U.S. ___, 103 S.Ct. 2086, 77 L.Ed.2d 298 (1983). In the instant case, it is clearly established that the defendants in their 1974 tax return gave a false answer to a direct question concerning their interest in foreign bank accounts, and that they attached to their amended tax return for 1974 and their tax return for 1975 a completed Form 4683 which did not identify all of the foreign bank accounts over which they had signatory authority. Such, in our view, comes within the purview of 26 U.S.C. § 7206(1). The district court did not err in denying defendants’ motion to strike.
[20] II. Motion to Elect
[21] Prior to trial, the defendants also asked that the government be required to elect between prosecuting the defendants on Counts I and II, charging them with violation of 26 U.S.C. § 7206(1), or prosecuting them on Counts III and IV, charging them with violation of 26 U.S.C. § 7201. The district court denied the motion, and this ruling is now assigned as error. We find no error.
[24] III. Pyramiding Sentences
[25] Defendants claim that even assuming there was no “double prosecution” resulting from the refusal of the district court to compel the government to elect between prosecuting the defendants on Counts I and II, or on Counts III and IV, there was nonetheless a “pyramiding” of sentences when the district court imposed separate and additional sentences on Counts I, II, III, and IV. We disagree.
[27] The government contends, however, that under the facts of this particular case, Counts I and II are not lesser included offenses to Counts III and IV. We agree. Counts III and IV charge an attempt to defeat the payments of taxes due the United States by filing false and fraudulent taxThe perjury offenses charged under § 7206 may separately form the basis for an indictment; but where proof of wilfully attempted evasion under § 7201 also proves, as an incident to the wilful evasion, the preparing and subscribing of a fraudulent return, the specific form of fraudulent conduct merges into the inclusive fraud charged under § 7201. To cumulate penalties beyond the maximum authorized by § 7201 is, therefore, improper under these circumstances.
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returns for the years 1974 and 1975, which substantially understated taxable income in violation of 26 U.S.C. § 7201. The charge in Counts I and II is that the defendants made and subscribed to tax returns for 1974 and 1975, which they did not believe to be true and correct as to every material matter in that they did not correctly identify the existence of foreign bank accounts which they controlled, in violation of 26 U.S.C. § 7206(1). A misrepresentation of foreign bank account information is distinct and independent from an understatement of gross income. Failure by the taxpayer to identify an interest in a foreign bank account does not necessarily mean that the taxpayer understated his gross income. There was no double sentencing.
[28] IV. Special Condition of Probation
[29] As above stated, the district court placed both defendants on probation for three years as concerns their respective convictions on Counts I, II, and V. Certain conditions were imposed in connection with such probation, as well as a so-called “special condition.” The special condition was that each defendant was required to make “restitution” to the United States for unpaid taxes in a total amount of $100,000 each, payable in three equal installments, due on the last day of each of the three years of probation. The authority for such special condition was apparently 18 U.S.C. § 3651.
[31] V. Miscellaneous
[32] At trial, the defendants’ position was that although they had misrepresented their foreign bank account information, such misrepresentation was not willful. Apparently, in an effort to establish their ignorance of, and confusion about, foreign bank account reporting requirements, counsel offered evidence relating to the “history” of Form 4683 and Form 90-22.1. Such evidence was excluded by the trial court for lack of materiality. We find no abuse of discretion on the exclusion of this evidence. The materiality of such is doubtful. See United States v. Brown, 411 F.2d 1134, 1137 (10th Cir. 1969), and United States v. Cohen, 481 F.2d 840 (8th Cir. 1973).
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