UNITED STATES of America, Plaintiff, v. John L. FUSERO, Defendant., United States District Court, E.D. Michigan, Southern Division., 106 F.Supp.2d 921, No. 99-50029., June 20, 2000

UNITED STATES of America, Plaintiff, v. John L. FUSERO, Defendant.

United States District Court, E.D. Michigan, Southern Division.

106 F.Supp.2d 921

No. 99-50029.

June 20, 2000.

Robert R. Elsey, Grosse Pointe Park, MI, Federal Defender, Fed. Defender Of╜fice, Flint, MI, for John L. Fusero.

ORDER DENYING DEFENDANT'S MOTION FOR NEW TRIAL; DE╜NYING DEFENDANT'S MOTION FOR JUDGMENT OF ACQUITTAL; AND DENYING DEFENDANT'S MOTION FOR ARREST OF JUDG╜MENT

GADOLA, District Judge.

On April 3, 2000, defendant John L. Fusero filed the following three post-trial motions: (1) Motion for New Trial pursu╜ant to Federal Rule of Criminal Procedure 33; (2) Motion for Judgment of Acquittal pursuant to Federal Rule of Criminal Pro╜cedure 29; and (3) Motion for Arrest of Judgment pursuant to Federal Rule of Criminal Procedure 34. Answers thereto were filed by the government on May 25, 2000 pursuant to an order entered the same date. On June 1, 2000, defendant submitted briefs in reply.

An indictment was filed against defen╜dant on April 6, 1999. The indictment contained the following three charges: Count I, failure to file tax return during calendar year 1992 in violation of 26 U.S.C. ╖ 7203; Count II, income tax evasion dur╜ing calendar year 1993 in violation of 26 U.S.C. ╖ 7201; and Count 111, income tax evasion during calendar year 1994 in viola╜tion of 26 U.S.C. ╖ 7201. A jury trial in the above-entitled case commenced Febru╜ary 15, 2000 and was concluded February 24, 2000. The jury found defendant guilty of all three counts set forth in the indict╜ment.

For the reasons stated hereinbelow, the Court will DENY defendant's motion for new trial, motion for judgment of acquittal, and motion for arrest of judgment. ¹

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^1. Oral argument will not significantly aid in the disposition of defendants' motions. Ac╜cordingly, pursuant to E.D. Mich. LR 7.1(e)(2), the motions will be decided upon the briefs submitted.

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I. ═══ MOTION FOR NEW TRIAL PUR╜SUANT TO FEDERAL RULE OF CRIMINAL PROCEDURE 33

Rule 33 of the Federal Rules of Crimi╜nal Procedure provides that a defendant is entitled to a new trial "if required in the interest of justice." Fed. R.Crim. Proc. 33. The Rule further provides that "a motion for new trial based on newly dis╜covered evidence may be made only within three years after the verdict or finding of guilty." Id. However, "[a] motion for a new trial based on any other grounds may be made only within 7 days after the ver╜dict or finding of guilty or within such further time as the court may fix during the 7-day period." Id. Motions for new trial are within the discretion of the trial judge. It is well-established that such a motion is " 'not favored and should be granted only with great caution.' " United States v. Costello, 255 F.2d 876, 879 (2d Cir.1958); see also United States v. Gar╜ner, 529 F.2d 962, 969 (6th Cir.1976).

In the case at bar, defendant presents nine grounds for a new trial. None of the grounds relates to "newly discovered evi╜dence." Instead, these grounds consist of objections to various rulings made by the Court during trial. Defendant's argu╜ments may be summarized as follows: (1) that government witnesses were improper╜ly permitted to testify "beyond 5 U.S.C. ╖ 554(d), [Fed.R.Evid.] 602, and the order of the court granting a motion in limine"; (2) that government witnesses testified that "defendant was guilty of a tax viola╜tion 'by operation of law' "; (3) that gov╜ernment agents improperly used the sum╜mons process to obtain evidence; (4) that business records were improperly admit╜ted pursuant to Fed.R.Evid. 803(6); (5) that defendant was not provided with his Individual Master File, or parts thereof, prior to trial; (6) that the Court erred in denying the use of certain charts, contain╜ing statements of law, by defendant's ex╜pert witness, Paul Soyk; (7) that the Court erred in not providing a lesser included offense instruction; (8) that the Court "failed to recall precisely testimony of prosecution witnesses"; and (9) that gov╜ernment witnesses testified "as to prior tax filings of the defendant" without the proper notice requirements of Fed.R.Evid. 404(b). The Court will now address each argument seriatim.

With respect to defendant's first argu╜ment concerning the propriety of the gov╜ernment's providing an expert or "sum╜mary" witness, this objection has already been ruled upon by the Court. It is well╜-established in the case law that such testi╜mony is not objectionable. See United States v. Mohney, 949 F.2d 1397, 1406 (6th Cir.1991) (holding that the " 'argument that [the agent] usurped the function of the jury is . . . without merit. [The agent] did not give her opinion about whether [defendant] was guilty or not; she gave her opinion regarding whether tax was due and owing for the years in question in order to assist the jury in determining a fact in issue. There was no abuse of dis╜cretion . . . . ' ") (quoting United States v. DeClue , 899 F.2d 1465, 1473 (6th Cir. 1990)). In addition, the Sixth Circuit has held that "even if an ultimate issue was involved, the district court did not abuse its discretion in finding that the testimony would be helpful to the jury in understand╜ing the testimony of the expert witnesses because 'an IRS expert's analysis of the transaction itself, which necessarily pre╜cedes his or her evaluation of the tax consequences, is ... admissible evi╜dence.' " Id. (citing United States v. Windfelder, 790 F.2d 576, 581 (7th Cir. 1986)).

Defendant's continued reliance upon 5 U.S.C. ╖ 554(d) is also misplaced. As the Court commented at trial, Section 554 is part of the Administrative Procedure Act (APA), and is entitled "Adjudications." It does not govern the proceedings of federal court jury trials. The Section provides that "[a]n employee or agent engaged in the performance of investigative or prose╜cuting functions for an agency in a case may not, in that or a factually related case, participate or advise in the decision, rec╜ommended decision, or agency re╜view ...except as witness or counsel in public proceedings ...." Id. By its own language, the statute allows a government employee or agent to participate "as wit╜ness or counsel in public proceedings . . . ." Id. Thus, the Administrative Procedure Act does not provide any basis upon which to preclude the testimony of the govern╜ment's expert witness in this case.

Defendant's second argument, i.e. that government witnesses improperly testified that "defendant was guilty of a tax viola╜tion `by operation of law,'" is also without merit. The government points out that defendant bas failed to identify to which witnesses he is referring or their specific testimony. Moreover, the government ar╜gues that the phrase "by operation of law" is not found in any of the government's pleadings, proofs, or proposed jury in╜structions. The Court finds that this sec╜ond argument is merely another formula╜tion of defendant's objection concerning the use of a government "summary" wit╜ness. As stated supra, such testimony is clearly allowed pursuant to United States v. Mohney, 949 F.2d 1397, 1406 (6th Cir. 1991).

With respect to defendant's third argu╜ment regarding the use of the summons process, the Court notes that this issue already has been thoroughly discussed and determined by the Court in an order is╜sued on February 14, 2000. See Order Denying Defendant's Motion for Reconsid╜eration, Docket Entry No. 56. In that order, the Court considered defendant's argument that the summons process was misused by the government because there allegedly was a Justice Department refer╜ral in effect before the issuance of the summons on February 19, 1996. See Feb. 14, 2000 Order, p. 7. As the evidence showed, the referral of this case from the Internal Revenue Service to the Justice Department occurred on August 28, 1996, well after the issuance of the summons on February 19, 1996. Accordingly, there was no misuse of the summons process herein.

With respect to the defendant's fourth argument, i.e. that business records were improperly admitted pursuant to Fed.R.Evid. 803(6), defendant fails to pro╜vide any exhibit numbers or other specific information identifying the exhibit which he is attacking. Defendant appears to be generally attacking the admission of cer╜tain "computer-generated" documents. This issue was fully addressed at trial. As the Court stated during the trial, there are a number of cases holding that computer╜generated records of the Internal Revenue Service (IRS), kept in the ordinary course of business, are admissible at trial pursu╜ant to Fed.R.Evid. 803(6). See United States v. Hayes, 861 F.2d 1225, 1228 (10th Cir.1988) (holding that proper foundation was laid far admission of IRS computer data evidence in taxpayer's prosecution for willful failure to file income tax return; two IRS employees testified that taxpay╜er's computer generated records were kept in ordinary course of business and that it was regular IRS practice to keep such records); see also Hughes v. United States, 953 F.2d 531, 535 (9th Cir.1992) (holding that official certificate of assess╜ment and payment (Form 4340) constitut╜ed proof of fact that federal tax assess╜ments actually were made); United States v. Bowers, 920 F.2d 220, 223 (4th Cir.1990) (holding that compilation of certificates of assessments and payments showing no record of returns filed by taxpayers and computer data used to construct that com╜pilation were admissible as certificates of absence of public record; presentation of reliability of computer-generated evidence was not compulsory). In light of the fore╜going cases, defendant's argument regard╜ing the admissibility of "computer-generat╜ed" documents is without merit.

With respect to defendant's fifth argument, i.e. that he was not provided with his Individual Master File (IMF), or parts thereof, prior to trial, the govern╜ment points out that defendant had discov╜ery of exhibits offered by the government which were used as evidence at trial. As the evidence at trial established, the IMF is not a written document, but rather an electronically stored record containing in╜formation relating to a taxpayer. Rele╜vant parts of the IMF were provided to defendant as part of the discovery process. Given these facts, the Court finds defen╜dant's argument that he was not provided with his entire IMF, or pertinent parts thereof, unavailing. The record in this case amply demonstrates that defendant was provided adequate discovery prior to trial.

With respect to defendant's sixth argument, i.e. that the Court erred in de╜nying the use of certain charts, containing statements of law, by defendant's expert witness, Paul Soyk, this argument is like╜wise without merit. As fully explained by the Court at the trial, these documents were properly excluded pursuant to Fed. R.Evid. 403, providing that "evidence may be excluded if its probative value is sub╜stantially outweighed by the danger of un╜fair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, waste of time, or needless presentation of cumulative evidence." Fed.R.Evid. 403. Such a decision exclud╜ing documents containing purported legal analysis is within the sound discretion of the trial judge. See United States v. Nash, 175 F.3d 429, 434 (6th Cir.1999) (holding that exclusion of exhibits allegedly relevant to defendant's good faith belief for failing to tile tax returns, on ground that probative value of exhibits was out╜weighed by danger of unfair prejudice or other considerations, was not abuse of dis╜cretion, since proffered exhibits held dan╜ger of confusing the jury by introducing purported legal analysis at odds with dis╜trict court's instructions).

With respect to defendant's sev╜enth argument, i.e. that the Court erred by not instructing the jury that the misde╜meanor offense of failure to file a tax return was a lesser included offense of the felony of tax evasion, this argument also was expressly considered and rejected by the Court at trial. In United States v. Nichols, 9 F.3d 1420 (9th Cir.1993), a case directly on point, the Ninth Circuit set forth the general rule that "[a] defendant is entitled to an instruction on a lesser included offense if: (1) 'the offense on which the instruction is sought is a lesser included offense of the offense charged' and (2) 'the jury rationally could conclude that the defendant was guilty of the lesser included offense but not the greater. ' " Id . at 1421. Nevertheless, the court conclud╜ed that "[b]ecause failure to file a return is an element of the offense of failure to file but is not an element of tax evasion, the offense of failure to file is not 'necessarily included' in the offense of tax evasion." Id. Based on this holding, defendant thus was not entitled to a jury instruction re╜garding lesser included offenses.

Defendant's eighth argument is that "the court failed to recall precisely testi╜mony of prosecution witnesses." This ar╜gument is not addressed in defendant's brief in support nor is it adequately explained in the motion. Defendant does state more particularly that "the court failed to recall that prosecution witnesses testified that the defendant did in fact rely upon legal cases and certain laws that the defendant had been studying . . . . " Motion for New Trial, ╤ 8. Defendant then argues that he was entitled to a jury instruction regarding his reliance upon "law, legal cases and so-called experts."

The Court will reject defendant's eighth argument based upon defendant's erroneous claim that there was no instruc╜tion regarding good faith reliance. In fact, Jury Instruction No. 23, entitled "Willful╜ness-Third Element of Willfully Attempt╜ing to Evade or Defeat a Tax," contains the following language: "A defendant does not act willfully if he believes in good faith that his actions comply with law. There╜fore, if defendant actually believed that what he was doing was in accord with the tax statutes, and that he was not required to pay such taxes, he cannot be said to have had the criminal intent to willfully evade such taxes. Thus, if you find that the defendant honestly believed that he was not required to pay such taxes, even if that belief was unreasonable or irrational, then you should find him not guilty." Jury Instr. No. 23. This instruction was prem╜ised upon Cheek v. United States, 498 U.S. 192, 111 S.Ct. 604, 112 L.Ed.2d 617 (1991), and adequately presents the Supreme Court's articulation of the good faith de╜fense contained in that case. See Cheek, 498 U.S. at 203, 111 S.Ct. 604.

Lastly, defendant argues that a new trial is warranted because government witnesses were permitted to testify as to prior tax filings of defendant and notice of such evidence was not provided prior to trial pursuant to Fed.R.Evid. 404(b). The Court notes that this argument is not ad╜dressed in defendant's supporting brief. In any event, the argument presented is wholly without merit. The prior tax filings of defendant were not introduced by the government as "prior bad acts"-so as to implicate Rule 404(b)-but rather as "prior good acts" which showed that defendant had knowledge of his obligations under the tax laws to file a return on an annual basis. As such, Rule 404(b)'s prohibition against "other crimes, wrongs, or acts" of a defen╜dant to prove character is not even trig╜gered.

For these reasons, defendant is not enti╜tled to a new trial in "the interest of justice" pursuant to Fed. R.Crim. Proc. 33.

II. ═ MOTION FOR JUDGMENT OF ACQUITTAL PURSUANT TO FED╜ERAL RULE OF CRIMINAL PRO╜CEDURE 29

Rule 29 of the Federal Rules of Criminal Procedure provides, in relevant part, that

[i]f the jury returns a verdict of guilty or is discharged without having returned a verdict, a motion for judgment of acquit╜tal may be made or renewed within 7 days after the jury is discharged or within such further time as the court may fix during the 7-day period. If a verdict of guilty is returned the court may on such motion set aside the verdict and enter judgment of acquittal. If no verdict is returned the court may enter judgment of acquittal. It shall not be necessary to the making of such a mo╜tion that a similar motion has been made prior to the submission of the case to the jury.

Fed. R.Crim. Proc. 29(c). The standard for determining a motion for judgment of acquittal pursuant to Fed. R.Crim. Proc. 29 was established in Jackson v. Virginia, 443 U.S. 307, 99 S.Ct. 2781, 61 L.Ed.2d 560 (1979). In that case, the United States Supreme Court stated that the appropriate inquiry is whether "any rational trier of fact could [find] the essential elements of the crime [charged] beyond a reasonable doubt." Id . at 307, 99 S.Ct. 2781. In order to prevail, a defendant must show that even when viewed in a light most favorable to the government, no rational juror could find the defendant guilty beyond a reasonable doubt. See United States v. Tresvant, 677 F.2d 1018, 1021 (4th Cir.1982). The court "must consider circumstantial as well as direct evidence, and allow the government the benefit of all reasonable inferences from the facts prov╜en to those sought to be established." Id. at 1021.

With respect to Count 1, charging defen╜dant with failure to file tax return in viola╜tion of 26 U.S.C. ╖ 7203, defendant argues that "the indictment failed to state the law requiring [the filing of a tax return] nor were there proofs at trial that addressed the unspecified requirement[s] of law . .. ." Motion for Judgment of Acquittal, p. 2. With respect to Counts II and III, defen╜dant maintains that there was "no stan╜dard of law upon which to allow the triers of fact to decide that the defendant violat╜ed some obligation or duty by filing a W-4 Form that said 'Exempt. ' " Id., p . 3. Sev╜eral arguments raised in support of defen╜dant's motion are identical to arguments also raised in his motion for new trial and previously raised throughout this case. The Court will not revisit those same argu╜ments which already have been addressed by this Court.

The government responds that ample evidence was produced at trial to convict defendant of willful failure to file an income tax return (Count I) as well as to convict defendant of tax evasion (Counts II and III). In order to convict a defen╜dant of willful failure to file an income tax return in violation of 26 U.S.C. ╖ 7203, the government must prove the following ele╜ments beyond a reasonable doubt: (1) that defendant was required to file a return; (2) that defendant failed to file a return at a time required by law; and (3) that defen╜dant's failure to file was willful. See, e.g., United States v. Foster, 789 F.2d 457, 460 (7th Cir.), cent. denied, 479 U.S..883, 107 S.Ct. 273, 93 L.Ed.2d 249 (1986). In order to convict a defendant of tax evasion in violation of 26 U.S.C. ╖ 7201, the govern╜ment must prove the following elements beyond a reasonable doubt: (1) that defendant made an affirmative attempt to evade or defeat a tax; (2) that defendant had a tax due and owing; and (3) that defendant acted willfully. See, e.g., Cheek v. United States, 498 U.S. 192, 195, 111 S.Ct. 604, 112 L.Ed.2d 617 (1991).

With regard to Count I, willful failure to file, defendant Fusero was shown to have received gross income in the amount of $37,507.87 in 1992. See Govt's Exh. 32, Summary Chart for 1992, attached to Govt's Answer to Motion for Judgment of Acquittal. For the calendar year in ques╜tion, this amount was more than sufficient to trigger defendant's legal requirement to file an income tax return. See Jury Instr. No. 17 (instructing that "[a] married per╜son... is required to file a federal income tax return for any calendar year in which he has gross income in excess of . . . $10,600 for 1992, . . . . "). This threshold trigger╜ing amount was also established by the testimony of government witness, Donald Hinkle. Therefore, it is apparent that suf╜ficient evidence existed for a rational jury to conclude beyond a reasonable doubt that defendant was required to file a re╜turn for 1992.

Sufficient evidence was also presented with regard to the second ele╜ment of Count 1, i.e., that defendant failed to file a return for 1992. Defendant's fail╜ure to file was established by the testimo╜ny of government witness Clara Greek and IRS Transcript of Account for 1992. See Govt's Exh. No. 3. Lastly, with respect to the third element of willfulness, this ele╜ment was established by the government through several means. First, defendant previously had filed income tax returns and thus knew of his obligation to file. See Govt's Exhs. Nos. 1 and 2. In addition, although defendant did not file a federal income tax return for 1992, he did file city and state returns for that year. See Govt's Exhs. Nos. 12 and 16. It is well╜-settled that a defendant's prior filings of tax returns constitute probative, circum╜stantial evidence on the issue of "willful╜ness". United States v. Grumka, 728 F.2d 794, 797 (6th Cir.1984); see also Jury Instr. No. 24. Accordingly, given this evidence, a rational jury certainly could have found that all the elements of Count I had been proven beyond a reasonable doubt.

With regard to Counts II and III, tax evasion, the proofs presented by the government at trial established that defen╜dant made an affirmative attempt to evade or defeat a tax by failing to file tax returns and by filing false W-4 forms claiming that he was "exempt" from income tax with╜holding. See Govt's Exh. No. 4A, IRS Transcript of Account for 1993; Govt's Exh. No. 5A, IRS Transcript of Account for 1994; Govt's Exh. No. 5C, Form W-4 dated Aug. 22, 1994; Govt's Exh. No. 6A, Form W-4 dated Feb. 27, 1995.

The proofs also established that defen╜dant had taxes due and owing for 1993 and 1994, thus satisfying the second element of the offense of tax evasion. See Govt's Exh. Nos. 24 and 25 and the testimony of government witness Hinkle. Lastly, the element of "willfulness" was also clearly established. As discussed supra, defen╜dant's prior federal income tax filings as well as his state and local filings for 1993 and 1994 were probative of "willfulness." See Govt's Exhs. Nos. 13 (1993 Michigan Income Tax Return), 14 (1994 Michigan Income Tax Return), and 17 (1993 Flint Income Tax Return) and 18 (1994 Flint Income Tax Return). The government also noted that in preparing his state tax returns, defendant was called upon by those forms to begin his calculation by entering his "adjusted gross income" from his federal 1040, 1040A or 1040EZ. His City of Flint returns also required him to use his federal gross income as a starting point for calculations of defendant's city tax. This represents further evidence that defendant willfully evaded his obligations to pay federal taxes.

In light of the above, defendant has manifestly failed to satisfy his burden of showing that no rational juror could have found him guilty beyond a reasonable doubt. See United States v. Tresvant, 677 F.2d 1018, 1021 (4th Cir.1982). It should also be mentioned that the general rule is that "any conduct, the likely effect of which would be to mislead or conceal" for tax evasion purposes constitutes an "affir╜mative attempt" to evade or defeat a tax under 26 U.S.C. ╖ 7201. Spies v. U.S., 317 U.S. 492, 498-99, 63 S.Ct. 364, 87 L.Ed. 418 (1943). Failing to file a return, cou╜pled with an affirmative act of evasion is generally known as a Spies evasion. See id.; see also United States v. Goodyear, 649 F.2d 226 (4th Cir.1981). Despite de╜fense counsel's assertions to the contrary, courts uniformly have held that the filing of a false W-4 form, claiming "exempt" status, constitutes an affirmative act of evasion. See United States v. King, 126 F.3d 987 (7th Cir.1997); United States v. Williams, 928 F.2d 145, 149 (5th Cir.), cert. denied, 502 U.S. 811, 112 S.Ct. 58, 116 L.Ed.2d 34 (1991).

Accordingly, the Court will deny defen╜dant's motion for judgment of acquittal pursuant to Fed. R.Crim. Proc. 29.

III. MOTION FOR ARREST OF JUDGMENT PURSUANT TO FEDERAL RULE OF CRIMINAL PROCEDURE 34

Pursuant to Rule 34 of the Federal Rules of Criminal Procedure, "[t]he court on motion of a defendant shall arrest judg╜ment if the indictment or information does not charge an offense or if the court was without jurisdiction of the offense charged." Fed. R.Crim. Proc. 34. "The motion in arrest of judgment shall be made within 7 days after verdict or finding of guilty, or after plea of guilty or nolo contendere, or within such further time as the court may fix during the 7-day period." Id .

Upon review of defendant's motion for arrest of judgment, the Court finds that this motion, filed under the guise of Rule 34, is in actuality an attempt to relitigate arguments previously advanced in defen╜dant's pretrial motion seeking dismissal of the indictment. Those issues have been fully and thoroughly addressed and dis╜posed of by this Court. Defendant is di╜rected to the Court's January 13, 2000 order denying defendant's first and second motions to dismiss indictment pursuant to Rule 12(b) of the Federal Rules of Crimi╜nal Procedure. In that order, the Court concluded, after an extended discussion, that "defendant has not stated any reason which would necessitate dismissal of the Indictment in the present case." Id. , p. 14. The Court finds no reason to alter its prior rulings in this matter.

Accordingly, defendant's Rule 34 motion for arrest of judgment will be denied for the reasons set forth in the Court's prior January 13, 2000 order.

NOW, THEREFORE, IT IS HEREBY ORDERED that defendant's Motion for New Trial, filed pursuant to Federal Rule of Criminal Procedure 33, is DENIED;

IT IS FURTHER ORDERED that de╜fendant's Motion for Judgment of Acquit╜tal, filed pursuant to Federal Rule of Criminal Procedure 29, is DENIED;

IT IS FURTHER ORDERED that de╜fendant's Motion for Arrest of Judgment, filed pursuant to Federal Rule of Criminal Procedure 34, is DENIED.

SO ORDERED.

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