Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 81-CR-103-1 -- Thomas R. McMillen, Judge.
Bauer and Posner, Circuit Judges, and Bartels, Senior District Judge.*fn*
BARTELS, Senior District Judge.
This is an appeal from a judgment of conviction after a jury trial before the Honorable Thomas R. McMillen.
James A. Fitzsimmons appeals from a judgment entered in the United States District Court for the Northern District of Illinois, Eastern Division (Thomas R. McMillen, Judge), after a jury trial, convicting him of three counts of willfully and knowingly making and subscribing tax returns for the years 1975, 1976, and 1977 which he did not believe to be true and correct, in violation of 26 U.S.C. § 7206(1).
Appellant's principal arguments on appeal are: (1) the court did not adequately instruct the jury as to the meaning of "willfully," as that term has been defined by the United States Supreme Court, and (2) the closing arguments of the prosecutor misstated critical evidence and improperly stated the effect of other evidence. Finding no merit in these contentions, we affirm.
Appellant, a dentist for approximately 33 years, claims he acted in good faith and not willfully in filing false tax returns for 1975, 1976, and 1977. For approximately 20 years, including the years in question, appellant had employed an accounting firm to prepare his tax returns. The firm prepared these returns from data he furnished them on pre-printed interview sheets which they supplied. On these sheets he provided them with information regarding his yearly income, expenses and deductions. They then transferred this information onto his final returns. Every client, including Fitzsimmons, received a cover letter from the accountant explaining these pre-interview worksheets. At the same time the accountant held himself available to discuss the client's questions.
Throughout the years in question, appellant kept meticulous records of every patient seen on a daily basis, including the work done, the amount of time spent, and the amount of the charge. He also kept a day sheet record of every patient seen, and all money received on a daily basis, the totals from which were placed on a monthly summary card. In turn, the totals from the monthly summary cards would be placed on a yearly recapitulation sheet. Most of this bookwork was done by appellant's assistant and bookkeeper of 28 years, Antoinette Potapczik. During this time appellant gave discounts, which amounted to free services, to nuns, priests, his assistant and members of her family, and members of his own family and recorded the value of "lost" time caused by patients who failed to keep appointments. The value of such services was not charged but was placed in a "discount" column on the day sheet. In addition, appellant rendered free service to certain paying patients who needed additional work on jobs he had previously performed. The value of these "lost" services he would sometimes record on his day sheet without charging the patients.
Based upon his losses from "discounts," "no charge," and cancelled appointments, appellant deducted from his gross receipts (i) $20,000 in 1975; (ii) $22,000 in 1976; and (iii) $23,000 in 1977 before listing those figures on his pre-interview worksheet. As a result, he listed on his 1975 worksheet gross receipts of $113,079.68; on his 1976 worksheet, gross receipts of $123,443.56; and on his 1977 worksheet, gross receipts of $127,168.00. The flaw in these figures is that they represent gross receipts for the years in question after Fitzsimmons had deducted therefrom services he rendered free and upon which he placed his own value. Appellant never told his accountant that he had been deducting these amounts from his gross receipts. Consequently these figures were used on his final returns.
Upon an audit of appellant's books in September 1978 the Internal Revenue Agent discovered that appellant had deducted from his gross receipts the following amounts: $20,541 for 1975, $22,797 for 1976, and $24,488 for 1977. Thereafter, in October 1980, appellant filed amended returns showing the additional gross receipts for the years in question.
Appellant claims he was acting in good faith throughout and did not think it was necessary to inform his accountant of these deductions.
Section 7206(1), 26 U.S.C., provides that any person who "willfully makes and subscribes any return, statement, or other document, which contains or is verified by a written declaration that it is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter," is guilty of a felony and may be fined or imprisoned or both. There is no question that the Government must establish, beyond a reasonable doubt, that the defendant "willfully" subscribed to a false tax return. This requires proof that appellant knew that he was violating a "known legal duty." United States v. Pomponio, 429 U.S. 10, 50 L. Ed. 2d 12, 97 S. Ct. 22, reh. den., 429 U.S. 987, 97 S. Ct. 510, 50 L. Ed. 2d 600 (1976); United States v. Bishop, 412 U.S. 346, 36 L. Ed. 2d 941, 93 S. Ct. 2008 (1973).
At the trial appellant's counsel tendered to the district court Instruction 23.*fn1 The first paragraph of that instruction provides the definition of "willfulness"; the second paragraph explains proof that is required of specific intent with knowledge that the tax returns were false; and the third paragraph describes the circumstances under which the defendant's conduct would not be deemed willful. No objection was interposed by the prosecution and the court at first agreed to read Instruction 23 as tendered. But subsequently the court stated that the instruction appeared repetitive and, finally, only read to the jury the last paragraph of Instruction 23 after reading almost through the first paragraph and then telling the jury to ...