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United States v. Donald W. Warden

decided: November 23, 1976.


Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 73-CR-712 - Richard W. McLaren, Judge.

Fairchild, Chief Judge, Hastings, Senior Circuit Judge, and Campbell, Senior District Judge.*fn*

Author: Campbell

Campbell, Senior District Judge.

Defendant Warden and one Melvin Greenberg were charged in a 24 count indictment with one count of conspiracy (18 U.S.C. § 371) and 23 substantive violations of 26 U.S.C. § 7206 (2). Each of the substantive counts concerned the false preparation and filing of specific income tax returns for the years 1969 through 1972. Prior to trial, Greenberg entered a plea of nolo contendere to one count of the indictment, and was sentenced to probation for a term of one year.

Warden was found guilty on the conspiracy count and on eleven of the thirteen substantive counts which were considered by the jury. He was sentenced to a four year term of probation, the first ninety days of which were to be spent at the Chicago Community Treatment Center under psychiatric care. We affirm.

The evidence disclosed that Warden was a certified public accountant doing business as Warden and Company in Chicago, Illinois. Individually, and in conspiracy with Greenberg and others in his employ, he fraudulently prepared false income tax returns for various clients. The evidence revealed a pattern and practice whereby Warden would "plug-in" either inflated or totally fabricated figures for various expenses used to calculate certain deductions. These deductions included (1) unreimbursed business expenses; (2) unreimbursed use of auto; (3) cash contributions; (4) contributions other than cash; (5) medical and medical related expenses; (6) stock portfolio expenses; and (7) business expenses.

In calculating deductions for unreimbursed business use of auto, for example, Warden would typically plug-in an expense for garaging the taxpayer's car at an annual cost of $180.00. On returns involved in six of the counts upon which he was convicted, this item and figure appeared even though the taxpayer did not provide that figure and, in certain cases, either did not own a garage or owned one but used it only for storage. Similarly, when calculating the "contributions-other than cash" deduction, Warden would fabricate a list of clothes which allegedly had been donated to charity, together with a valuation schedule. In some cases rather than preparing a separate clothing schedule for each taxpayer, Warden made several copies of the same schedule and merely inserted them in various returns. As a result, one taxpayer, whose returns were challenged in counts 5 and 6, listed virtually the same clothing in his 1968 amended return as in his 1971 return. According to another return prepared by Warden, the very same clothing was also donated by a different taxpayer whose 1971 return formed the basis for count 21. As testimony of Warden employees D'Amico, Lazarini, and co-conspirator Greenberg revealed, the monetary figure for these deductions was totally unsubstantiated.

To justify the unreimbursed business expense deductions, Warden would use, in some instances, a fabricated letter from the taxpayer's employer delineating certain business expenses which were not reimbursed. The evidence showed that on other occasions, he would note on the schedules that the deductions were "per substantiating detail" even though such detail existed in neither Warden's nor the taxpayer's file.

It also appears that Warden's clients were unaware of his activities since they were required by Warden to sign their returns either in blank or, if signed when completed, without the falsified schedules attached.*fn1 Warden's fee was contingent upon the amount of the refund.

On appeal, Warden asserts four grounds for reversal:

1. That there existed a fatal variance between the indictment and proof.

2. That the trial judge erred in refusing to enforce a subpoena duces tecum served upon the Internal Revenue Service for certain materials which appellant contends were both relevant and capable of being compiled from the computer files of the Internal Revenue Service.

3. That whether the allegedly false statements in the income tax returns were "material" is a question of fact to be submitted to the jury under an appropriate instruction.

4. That the government's failure to disclose to the defense two affidavits of potential witnesses constituted the improper suppression of favorable evidence in violation of Brady v. Maryland, 373 ...

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