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United States v. Smith

decided: July 20, 1976.

UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE,
v.
CARL E. SMITH, DEFENDANT-APPELLANT



Appeal from the United States District Court for the Northern District of Indiana No. H Cr. 75-114 ALLEN SHARP, Judge.

Cummings and Bauer, Circuit Judges, and Jameson, Senior District Judge.*fn*

Author: Jameson

JAMESON, Senior District Judge:

Carl E. Smith has appealed his conviction for perjury before a grand jury, contending that (1) his alleged perjurious statements should have been suppressed because he was not given the warnings called for by Miranda v. Arizona, 384 U.S. 436, 16 L. Ed. 2d 694, 86 S. Ct. 1602 (1966), prior to his grand jury testimony, and (2) the evidence was insufficient to sustain his conviction. We affirm.

Background

A grand jury was convened to investigate the tax sale of a residence owned by one Fred Mackey. The property was sold by the United States to A & D Realty Company in partial satisfaction of Mackey's tax liability. The thrust of the grand jury inquiry was whether the funds used by A & D Realty came from concealed assets of Mackey with the objective of evading taxes and defrauding the Government.

Smith was called before the grand jury pursuant to a subpoena and was questioned about his financial relationship with Mackey. Smith testified that he had utilized office space in the same building as Mackey and knew him, but that his business dealings with Mackey were limited to a personal loan from Mackey of $800 which was repaid. Smith acknowledged that he was a stockholder in A & D Realty. He stated that he had purchased 125 shares in the corporation with a cashier's check in the amount of $25,000.00. Smith was then questioned in detail about how he had obtained such a large amount. He testified that he had accumulated $25,000.00 in cash over several years and that he had kept this money at his home and at the homes of relatives.

After hearing this testimony and after warning Smith that giving false evidence could result in criminal prosecution,*fn1 the grand jury indicted Smith for making false statements concerning a matter within the jurisdiction of the Internal Revenue Service, in violation of 18 U.S.C. § 1001, and for committing perjury before a grand jury, in violation of 18 U.S.C. § 1623.

In a jury trial the Government introduced documentary evidence showing that for several years prior to the $25,000.00 investment Smith was in poor financial condition, was heavily indebted, and had paid off some of his debts by taking out new loans with extended pay back periods. The Government also introduced copies of defendant's income tax returns showing that from 1969 through 1974 Smith's adjusted gross income never exceeded $11,616.00. Testifying in his own behalf, Smith stated that the $25,000.00 had come from earnings he had obtained beginning in 1973 from selling stereo equipment and tapes and from winnings at the race track and that none of these earnings had been reported to the Internal Revenue Service. Defendant's mother testified that she had kept money for the defendant at her home but did not know how much money the defendant had left with her. The jury returned a verdict of guilty on the perjury count and not guilty on the count charging a violation of 18 U.S.C. § 1001.

Motion to Suppress

Prior to the introduction of evidence, but after the jury was sworn, defense counsel moved to suppress the transcript of Smith's testimony before the grand jury. This motion was based upon defendant's claim that his constitutional rights were violated when the Government failed to advise him before testifying in the grand jury proceedings of his "Miranda rights" to counsel and to remain silent. The trial court took the motion under advisement and at the conclusion of the Government's case denied the motion. In contending that the district court erred in denying his motion to suppress, Smith argues that at the time of his grand jury testimony he was a "putative or virtual defendant" and thus entitled to the Miranda warnings prior to being questioned by the grand jury.

We conclude that Smith was not a "putative or virtual defendant", and in any event no Miranda warning was required under the holding in United States v. Mandujano, decided by the Supreme Court on May 19, 1976, 425 U.S. 564, 96 S. Ct. 1768, 48 L. Ed. 2d 212.

It is clear from the testimony of the grand jury foreman at Smith's trial that when Smith appeared before the grand jury the investigation was oriented toward the suspected tax fraud of Fred Mackey. General inquiries were being made with respect to how A & D Realty had obtained its funds. When asked, "Was there any indication in your mind [that] there was anything illegal about the source of funds", the foreman answered, "I had formed no opinion". An Internal Revenue agent testified at Smith's trial that before Smith testified before the grand jury there had been no case file opened on Smith linking him to any federal tax violations. No indictment was then contemplated; nor did the prosecutor have information that Smith had acted illegally. Smith was not in our opinion a "putative defendant" when he testified before the grand jury.*fn2

In contending that Miranda warnings were required, appellant relied primarily on United States v. Mandujano, 496 F.2d 1050 (5 Cir. 1974). In Mandujano the district court had granted a motion to suppress the defendant's grand jury testimony because he was not given the Miranda warnings, holding that the defendant was a "putative" or "virtual" defendant when called before the grand jury and therefore entitled to full Miranda warnings.*fn3 The Court of Appeals affirmed. Subsequent to oral argument in this case, the Supreme Court reversed in Mandujano, the Court saying in part, "Assuming, arguendo, that ...


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