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United States v. Paepke

decided: February 16, 1977; As Amended March 28, 1977.

UNITED STATES OF AMERICA, PLAINTIFF-APPELLANT,
v.
THOMAS A. PAEPKE, DEFENDANT-APPELLEE



Appeal from the United States District Court for the Western District of Wisconsin No. 75-CR-62 James E. Doyle, Judge.

Castle, Senior Circuit Judge, Tone, Circuit Judge, and Kunzig,*fn* Judge. Tone, Circuit Judge, concurring.

Author: Kunzig

KUNZIG, Judge.

This case of first impression asks the court to determine to what extent the exclusionary rule*fn1 prohibits the use of illegally seized evidence to prove tax fraud allegedly committed some months after the seizure. District Judge Doyle, in the Western District of Wisconsin, suppressed all evidence arising from an illegal seizure by county authorities. The Government appeals, with jurisdiction of the court based upon 18 U.S.C. ยง 3731 (1970).*fn2

We hold the evidence to be properly admissable.

Events leading to this federal tax prosecution began with Marin County, California police arresting Arnold Paepke, defendant-appellee, at the San Francisco airport on October 26, 1971. At the time of his arrest, $12,725 was seized from him. He was picked up as a result of an earlier search of a house in Mill Valley, California. The search of that house connected Paepke with illegal drug activity.

Following the arrest, the State of California sought to prosecute Paepke for violation of narcotics laws. The charges were dropped, however, because the state court (finding the original search of the house illegal) suppressed all evidence and information obtained as a result of that search. The suppressed evidence included the $12,725 seized from Paepke.

After the state charges were dropped, Paepke went back to Madison, Wisconsin. The $12,725, however, was turned over to the Internal Revenue Service which immediately terminated Paepke's tax year in October 1971,*fn3 assessed a deficiency of approximately $26,000 and levied upon the funds seized. In December 1971, Paepke filed in the United States Tax Court, seeking to have the money returned to him. The suit was dismissed on jurisdictional grounds.*fn4

On April 3, 1972, Paepke filed an individual tax return for the taxable year ending December 31, 1971. This return, made and subscribed under the penalty of perjury, listed an adjusted gross income of $3,275, all allegedly derived from "golf playing." The return noted a total tax due and owing of $234, stated that $12,725 had been seized by the IRS on October 27 (sic), 1971, and claimed a refund of $12,491. Following receipt of the return, the IRS referred the matter to its Intelligence Division.

About two years later, on January 15, 1974, Paepke submitted another refund claim to the IRS. He restated that in 1971 he had an adjusted gross income of $3,275, and a tax liability of $234. Once again he requested a refund of the difference between the $234 and the amount which had been seized in California. Obtaining no relief from this request, he next filed a civil suit for refund in the United States District Court for the Western District of Wisconsin on March 13, 1974. That suit is still pending and inactive.

The United States then filed criminal charges in the Western District of Wisconsin on August 8, 1975 (giving rise to this appeal). The indictment charged that Paepke knowingly, under penalty of perjury, understated his adjusted gross income for the year 1971 and misrepresented its source.*fn5 Prior to trial, Paepke moved to suppress all evidence obtained from him in the illegal search and seizure in California. U.S. District Judge Doyle agreed the evidence had been illegally seized and barred all evidence relating thereto, including documents concerning Paepke's efforts to retrieve the money, from use in the federal tax fraud trial.

Judge Doyle's decision that the money was illegally seized in California is not now contested before the Court of Appeals. All parties agree that the initial seizure was illegal. What is at issue is that part of the Judge's order barring the Government from using any evidence relating to the $12,725 that was seized by the Marin County police. This includes:

A. Documentary Evidence

1. The complaint in the Tax Court suit filed in December 1971;

2. Paepke's tax return for 1971;

3. The refund claim filed with the IRS in January 1974;

4. The complaint in the civil suit for refund filed in the United States District Court for the Western District of Wisconsin in March 1974;

as well as:

B. Evidence Concerning Possession of the Money

1. The fact of Paepke's possession of $12,725 on October 26, 1971, at the time of seizure.*fn6

The District Judge entered his suppression order on February 26, 1976. The United States filed notice of appeal the same day.

Before outlining the arguments of the parties, a brief statement of the role of the court in determining the application of the exclusionary rule might be helpful.

The exclusionary rule was adopted to assure the Fourth Amendment right of all citizens "to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures." United States v. Calandra, 414 U.S. 338, 347, 38 L. Ed. 2d 561, 94 S. Ct. 613 (1974). This rule precludes the use in a criminal proceeding against the victim of an illegal search and seizure of all evidence obtained, directly or indirectly, in violation of the Fourth Amendment. See, e.g., Mapp v. Ohio, 367 U.S. 643, 6 L. Ed. 2d 1081, 81 S. Ct. 1684 (1961); Elkins v. United States, 364 U.S. 206, 4 L. Ed. 2d 1669, 80 S. Ct. 1437 (1960); Weeks v. United States, 232 U.S. 383, 58 L. Ed. 652, 34 S. Ct. 341 (1914). The "prime purpose" of the rule "is to deter future unlawful police conduct and thereby effectuate the guarantee of the Fourth Amendment against unreasonable searches and seizures." United States v. Calandra, supra at 347.

However, not all evidence which might result in some additional deterrent to improper conduct need be excluded. As recently as a few months ago, the Supreme Court spoke to this very issue:

"Despite the broad deterrent purpose of the exclusionary rule, it has never been interpreted to proscribe the introduction of illegally seized evidence in all proceedings or against all persons." Stone v. Powell, 428 ...


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