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United States v. Falk

decided: September 11, 1979.


Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 78 CR 185 -- Bernard M. Decker, Judge .

Before Swygert and Tone, Circuit Judges, and Jameson, Senior District Judge.*fn*

Author: Jameson

Appellant, Robert I. Falk, was convicted, following a jury trial, of filing and subscribing to a false and fraudulent income tax return (Form 1040) for the calendar year 1973 by knowingly and wilfully understating his gross income, in violation of 26 U.S.C. § 7206(1).*fn1 On appeal he contends that (1) the manner in which the Government handled the case from investigation through trial denied him due process of law and a fair trial by reason of (a) preindictment delay and (b) conduct of Government attorneys in presenting their case and cross-examining the defendant; (2) the final argument of Government counsel was so inflammatory and prejudicial as to amount to denial of due process; and (3) the testimony of a revenue agent should have been stricken for failure to provide a statement of the witness pursuant to 18 U.S.C. § 3500.

Factual Background

Falk, a mechanical engineer, was employed by McKee-Berger-Mansueto Company in Chicago as manager of its estimating department between 1969 and April, 1975, when he accepted a position with Hospital Affiliates, in Nashville, Tennessee. In 1972 Falk's employer was involved in scheduling various types of work for the Chicago City Hall. J. P. Phillips Co. was a plastering contractor. In July or August Phillips engaged Falk as a consultant. During 1973 Falk received two checks from Phillips, one for $7,000 and one for $3,000, for services from August, 1972 through 1973.

At Falk's request both checks were made payable to Beverly Bank. Approximately 20 days before the first check was received, Falk reopened an account in Beverly Bank in the name of Arm Industries, a partnership composed of Falk and David Povilaitis, by signing both his own name and that of his former partner on a new signature card. Both checks, when received, were deposited in the Arm Industries account. Shortly thereafter Falk drew checks on the partnership account and put the receipts in his personal account.*fn2 Falk did not include the $10,000 received from Phillips in his 1973 tax return, which was filed on March 30, 1974, shortly before Falk moved to Nashville.

In August, 1974, during an audit of J. P. Phillips Company, Revenue Agent Friedman questioned the two checks payable to Beverly Bank. Phillips explained that the checks had been given to Falk in payment of a consulting fee. At Friedman's request, Phillips called Falk, who in turn called Friedman. Falk admitted to Friedman that he had received the two checks.*fn3 At Phillips' request Falk sent Phillips receipts for the five checks payable to Beverly Bank and initialed the receipts "H.I.B.".*fn4

In October, 1974, Friedman met with Special Agent Starr, and a criminal investigation was started. In December, 1974, Starr met with Falk in Falk's office in Nashville, Tennessee. Starr first explained his function as a special agent and advised Falk of his constitutional rights.*fn5 During an hour and a half interview, Falk admitted receiving and depositing the two checks and failing to include the $10,000 in his 1973 return.*fn6

During the interview Falk requested advice from Starr on how he should handle the money received from Phillips on his tax return. Starr replied that he was not in a position to give Falk advice. The following day Falk obtained a form and instructions from the Internal Revenue Service and filed an amended return shortly thereafter. Because of an error in the amended return, a second amended return was filed later.

Between December 30, 1974, and November, 1975, Starr called Falk several times requesting additional information and documents. All were furnished by Falk. In March or April, 1978, Falk was told by Starr that he had been indicted.

Evidence at Trial

At trial the Government's case was presented through numerous documents and the testimony of Agents Friedman, Starr and Duffy, John P. Phillips, Phillip J. Phillips, David Povilaitis, and an employee of Beverly Bank. Falk testified in his own behalf.

In explaining the issuance of the checks to Beverly Bank Falk testified that he did not want his employer to know that he "was moonlighting, or, you know, having another business on the side"; that about that time two good friends, who were employed by the same company and had been consulting evenings and weekends and had their own business, were relieved of their duties. With specific reference to the issuance of the checks, Falk continued:

A. Well, at the time John (Phillips) and I had a discussion about, I did not want myself associated with any firm or any, you know, receipts as far as the to show that I was working for someone else. And we discussed on just how, you know, it should be done how to, you know, to keep my name out of it and I had a company that I had before, it was just a small company that made propellers and that never really went over and I was using I was thinking of using that company and we discussed it and finally we just mutually agreed, you know, we could make them out to the Beverly Bank.*fn7

(From direct examination, Tr. 166-67).

In explanation of his omission from his 1973 return of the monies received from Phillips, Falk testified:

As far as my "73 return, it is, you know, correct, except the monies from Phillips which were in the Arm Industries account. At the time I was looking at the Arm Industries account I had a real problem of how to file it. I didn't know how to file it, that was one real problem, and I looked at starting a company as far as my own consulting business and as far as a company or a corporation having a different year end filing, I looked at that because I received the funds that I received from that business from June of "73 to like April of "74 and so I was looking at the year end.

I also had the problem that I worked in 1972 and I never got paid in 1972 and also my work in 1973, I never got fully reimbursed for what I worked. I was only paid partially. And I was trying to figure out, how do I take the deductions or the itemized deductions for "72 and how do I combine that with 1973 and how does that affect me in 1974 and I heard something about income averaging where if you had, you know, higher income, a football star or something like that, you know, and they had made a high income, was on TV or something like that, that you could, you know, that you could income average.

I looked at, you know, I could combine "72, "73, "74 for Arm Industries or, you know, a corporate account. I looked at it also that I could file it in 1974, because there was no cutoff line for what I had made in 1973 and I was very confused. I didn't know how to do it. I considered that I had time to do it, that I could file it in my "74 return, I could file it, I could file it as a separate company, and

(From direct examination, Tr. 174-75).

The jury obviously did not accept Falk's explanation of the reason for having the checks made payable to the Beverly Bank and failing to report receipt of the $10,000 in his 1973 income tax return.

Pre-Indictment Delay

Appellant first contends that the pre-indictment delay amounted to a denial of due process and his right to a fair trial. Falk was first interviewed by Agent Friedman in August, 1974. The criminal investigation began in December, 1974, and was completed in November, 1975, when Special Agent Starr recommended prosecution. The indictment was returned in April, 1978.

Appellant argues that "virtually every element of the resultant indictment" had been developed by Friedman and that the subsequent delay of 40 months resulted in "obvious prejudicial effects" dulled memories, ability to reconstruct events and records lessened, and witnesses and supporting documents having disappeared or otherwise become unavailable. He contends further that he "was deliberately lulled and misled by agents into the erroneous belief that he had only to provide information and all would be well."

At the outset it is noted that the issue of pre-indictment delay was first raised on appeal. It was not asserted in any pretrial motion, during trial, or in the motion for a new trial. It is well settled that as a general rule issues not raised in the district court will not be considered on appeal in the absence of plain error. See, e. g., United States v. Lookretis, 422 F.2d 647, 651 (7th Cir.), Cert. denied, 398 U.S. 904, 90 S. Ct. 1693, 26 L. Ed. 2d 63 (1970); United States v. Turner, 423 F.2d 481, 483 (7th Cir.), Cert. denied, 398 U.S. 967, 90 S. Ct. 2183, 26 L. Ed. 2d 552 (1970); Rule 52(b) F.R.Crim.P. The facts in this case do not bring the pre-indictment delay within any recognized exception to the general rule.

In United States v. Marion, 404 U.S. 307, 92 S. Ct. 455, 30 L. Ed. 2d 468 (1970), in concluding that a 38 month pre-indictment delay did not deprive the accused of rights to due process of law and a speedy trial, the Court held the Sixth Amendment guarantee of a speedy trial is applicable only after a person has been "accused" of a crime, and that the relevant statute of limitations provides a safeguard against possible prejudice resulting from preaccusation delay. With reference to a claim that the Government violated the Due Process Clause, the Court said:

No actual prejudice to the conduct of the defense is alleged or proved, and there is no showing that the Government intentionally delayed to gain some tactical advantage over appellees or to harass them. Appellees rely solely on the real possibility of prejudice inherent in any extended delay: that memories will dim, witnesses become inaccessible, and evidence be lost. In light of the applicable statute of limitations, however, these possibilities are not in themselves enough to demonstrate that appellees cannot receive a fair trial and to therefore justify the dismissal of the indictment.

Id. at 326, 92 S. Ct. at 466.

Appellant's suggestion that the delay here was solely for the purpose of giving the Government a tactical advantage over the defendant is not supported by the record.*fn8 Since this question was not raised in the district court there was, of course, no reason for the Government to offer any explanation of the delay.

Cross-Examination of Falk

Falk admitted receipt of the $10,000 and his failure to report it in his 1973 income tax return. He claimed, however, that he had no intention to violate the law, and the $10,000 was not included in his ...

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