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United States v. Campione

September 17, 1969


Kiley and Fairchild, Circuit Judges, and Morgan, District Judge.*fn*

Author: Kiley

KILEY, Circuit Judge.

Defendant was indicted on three counts of willful tax evasion*fn1 of personal income taxes for the years 1960, 1961 and 1962, and of two counts of willfully understating gross receipts of M. Campione & Son, Inc., on a Small Business Corporation Return of Income*fn2 for the years 1960 and 1962. The district court, without a jury, convicted defendant on all counts except for Count II charging personal tax evasion for the year 1961. Defendant has appealed. We affirm.

M. Campione & Son, Inc., mason contractors, was founded by defendant's father, who died in August, 1962. Defendant then took over complete operation of the business. He filed Small Business Corporation Return of Income forms,*fn3 as well as his personal tax returns for the years in suit. The amounts charged in the personal tax evasion counts are $5,500 for 1960, $644 for 1961, and $77,000 for 1962. The amounts allegedly understated in the small business returns are $16,150 for 1960 and $90,000 for 1962.

Beginning in 1960 the Campione firm was a subcontractor in the construction of the Sahara Motel, and purchased its materials from Edmier, a supplier of construction materials. The purchases were made in cash in order to gain discounts from the list price. Defendant's father devised several means of getting cash for the discount purchases: cashing customers' checks and not reporting them, obtaining cash from customers, or having customers' checks drawn to the order of Michael or James Campione instead of the firm, and using a bank account under a fictitious name.

In connection with IRS investigation into the affairs of the late Manny Skar and his Sahara Motel project, agent Berwick, one of the agents making inquiries into subcontractors for the motel, first met with defendant June 7, 1963. Berwick explained he was not examining defendant's tax returns. At the time he was also inquiring into affairs of subcontractors Sam Barlow and Enterprise Steel Erectors. On July 24, 1963, in the presence of his attorney, defendant told Berwick that Enterprise Erectors was a fictitious account, that he was Sam Barlow and that these names were used to get cash to obtain discounts on purchases from Edmier. At subsequent meetings, with his attorney present, defendant made further incriminating statements. Records were then turned over to Berwick. And the attorney told Berwick if an investigation of defendant was begun Berwick should notify him as defendant's attorney. As a result of his examinations Berwick felt there were indications of fraud. On August 8, 1963, Berwick was assigned to a preliminary investigation on defendant.

In March of 1964 Berwick requested of defendant's attorney the records of M. Campione & Son, Inc. for inspection concerning defendant's tax liability. In June, 1964, Berwick wrote the attorney that a case had been opened on defendant and enclosed a subpoena for the Campione Company records. The indictment before us was filed in February, 1967.

After the parties rested at the trial, the district court denied defendant's motion to suppress as evidence the incriminating statements made in 1963 and the records turned over to Berwick, on the ground that defendant's attorney was with him when he made incriminating statements and turned over incriminating records. Defendant contends in this court that the district court ruling erroneously applied the standard of Escobedo v. Illinois, 378 U.S. 478, 84 S. Ct. 1758, 12 L. Ed. 2d 977 (1964). Defendant argues that the basis of his motion was not the literal Escobedo rule but that he and an attorney were misled by Berwick's early statement that defendant was not under investigation. The government agrees with defendant that an agent may not mislead a taxpayer under investigation in order to secure information. See Smith v. United States, 348 U.S. 147, 150-151, 75 S. Ct. 194, 99 L. Ed. 192 (1954).

It is defendant's theory that at the meetings in the summer of 1963 Berwick misled him and his attorney away from knowledge that his own tax liability was being investigated, thus tainting the incriminating material.*fn4

He contends Berwick fraudulently induced the incriminating material by not advising him in the early meetings in June and July, 1963, when the fraud case investigation began, so that he could protect himself against self-incrimination. But the evidence favorable to the government is that before inspecting the Enterprise books after August 2 there was no fraud investigation of defendant under way.

The district court was not required to find that the incriminating statements and records were rendered involuntary and inadmissible. Defendant's theory presupposes that Berwick misled defendant as a matter of law. But the question whether defendant was misled was one of fact.

There is evidence favorable to the government that Berwick's receipt of the Enterprise records August 2, in the light of defendant's earlier admissions, indicated fraud to Berwick and resulted in the commencement of the fraud case; that it was not until March of 1964 that he next met with defendant and told him he was interested in defendant's tax liability; that after his earliest meeting with Berwick with respect to the Skar-Sahara affairs defendant obtained false exculpatory affidavits from Edmier employees and that he had his accountants prepare records for Enterprise; and that defendant's attorney, a former IRS attorney-accountant, asked to be notified if an investigation of defendant was begun.

Presumably the district court thought that this evidence showed, not the misleading of an innocent defendant, but rather his anticipation of and preparation for a criminal investigation. Furthermore, the district court presumably believed Berwick's testimony that after the investigation turned upon defendant in August, 1963, he did not again meet with defendant or attorney Harris until March of 1964 and he then told Harris he was interested in defendant's tax liability. This would overcome defendant's theory that before August, 1963, Berwick was covertly investigating defendant's tax liability and using a "subterfuge" to induce incriminating evidence.

We think that the district court was entitled to believe Berwick's testimony of events leading to March, 1964, and accordingly entitled to conclude from that testimony and defendant's activity soon after the first meeting in June, 1963, that Berwick did not by his conduct deprive defendant of his "freedom of action in any significant way." See Miranda v. Arizona, 384 U.S. 436, 86 S. Ct. 1602, 16 L. Ed. 2d ...

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