Appeal from the United States District Court for the Western District of Wisconsin. No. 86-CR-44-S--John C. Shabaz, Judge.
Wood, Jr. and Ripple, Circuit Judges, and Fairchild, Senior Circuit Judge.
WOOD, JR., Circuit Judge.*fn*
Defendant Norman Micke was convicted on one count of a three-count indictment of willfully aiding and assisting in the preparation of the false and fraudulent 1982 income tax return of Charles and Judith Quirt. 26 U.S.C. § 7206(2).*fn1
Defendant's corporation does business as Consulting Services, Ltd. Defendant prepares tax returns and is a tax adviser and business consultant. He had prepared Charles Quirt's tax returns for several years. In December 1982, Quirt sought investment advice and defendant recommended a tax shelter that involved purchasing equipment and leasing it for the production of fuel alcohol. The Quirts' 1982 return, prepared by defendant, claimed depreciation on fuel alcohol production equipment that, the return asserted, had been placed in service December 28, 1982 and had cost $42,000. The return also claimed regular investment credit and business energy investment credit based on the same acquisition.
At trial the evidence showed that Quirt had purchased certain equipment from Twindale Farms, Inc. (Twindale) at a price of $42,000 and had leased it to Interstate Food and Fuel Corporation (IFF) for seven years at $700 per month. (The venture, however, was ill-fated and the anticipated returns were not received.) Although the bill of sale and lease, as well as Quirt's initial checks to Twindale for $20,000 and Consulting Services for $2,500 were dated December 28, 1982, it is conceded that these documents were executed in 1983, apparently in late January.
The government contended that Quirt did not obligate himself to purchase the equipment until after the beginning of 1983. Quirt testified that in 1982 he and defendant discussed a tax shelter involving the purchase and leasing of equipment. They talked about a price range of $30,000 to $40,000, but did not reach agreement on any specific equipment or price in 1982. Defendant, on the other hand, testified that Quirt had made his decision to buy and had communicated it to defendant in late 1982. Defendant was not only an adviser and tax return preparer for Quirt; he was vice-president of Twindale, was an adviser to both Twindale and IFF, and was active in getting investors to lease equipment to IFF. He apparently acted on behalf of Twindale and IFF in the sale and leasing transactions. Defendant's position is that Quirt's telling defendant of his decision to invest was not simply a communication by Quirt to his adviser of his subjective intent, but also contractually bound Quirt to the purchase and lease. Defendant therefore argued at trial that the papers executed in January were properly backdated to December because they memorialized an agreement reached in December.
The parties agree and the court instructed the jury that the taxpayers "were entitled to the credits and deductions claimed on their 1982 tax returns only if the amounts claimed were actually paid for the appropriate property by the taxpayer in the year 1982, or were amounts for which the taxpayer incurred a personal liability in 1982."*fn2
It is undisputed that Quirt mailed a handwritten letter to defendant, dated December 30 and postmarked December 31, 1982. The letter said:
As we discussed, I have decided to purchase the equipment piece we agreed on, from Interstate Food & Fuel Corporation.
Enclosed is the check for the amount you noted. Please contact me if there are any discrepancies.Both Quirt and defendant testified that no check was enclosed. Quirt explained that the letter in effect was a sham, written at defendant's direction to support a false claim that a commitment to purchase had been made in 1982. Defendant testified to a different explanation. He said that Quirt had first telephoned concerning his decision, and defendant had told him "since I didn't have a down payment from him, that I needed something in writing indicating his intention to make his purchase that year."I. ALLEGED ERROR IN LIMITING THE JURY'S USE OF A WITNESS'S PRIOR AFFIDAVIT. On October 9, 1984, approximately two years before the trial, Quirt made an affidavit in the course of an investigation or audit by the IRS. He swore to it before an IRS Special Agent. The affidavit described Quirt's participation in the transactions relevant to Count III. In general, the text of the affidavit and his trial testimony are similar, but a portion of the affidavit can be interpreted as inconsistent with his testimony at trial.
Alter referring to a conversation with defendant in December 1982 concerning an investment involving IFF, Quirt said:
MICKE presented me with various sheets reflecting different investment amounts, and from these sheets it was decided that I would participate in the amount of $42,000. . . . MICKE stated that I would be purchasing new equipment which was to be installed and operating during February of 1983 for what was called Phase II Production. I agreed to make this investment during 1982, but at no time during 1982 did I sign any documents, notes, write any checks, or secure any loans for purposes of investing in the equipment leasing program involving INTERSTATE FOOD AND FUEL. The affidavit was brought out in cross-examination of Quirt. In explanation Quirt testified that he "had agreed to make an investment in '82. We had not established a price." The reference to $42,000 did not "reflect an agreement in '82, but rather what had been done in '83."
The court admitted the affidavit, but instructed the jury:
Evidence that on some former occasion a witness made a statement inconsistent with his testimony in this case may be considered by you only in determining credibility of the witness, and accordingly Exhibit 18, Charles Quirt's affidavit should be considered by you only for the purpose of impeaching his credibility. Therefore, I instruct you not to treat that affidavit as having any potential substantive or independent testimonial value.
Defendant argues that the affidavit was properly admissible as substantive evidence on three theories:
First, defendant claims that the affidavit was not hearsay under Federal Rule of Evidence 801(d)(1)(A) because it was not "inconsistent with [Quirt's] testimony, and was given under oath subject to the penalty of perjury at a trial, hearing, or other proceeding, or in a deposition." Assuming that the special agent who administered the oath was authorized under 26 U.S.C. § 7622 to administer an oath, the investigative interviews that generated the affidavit were nevertheless not shown to be a "proceeding" for the purpose of the rule. See United States v. Livingston, 213 U.S. App. D.C. 18, 661 F.2d 239, 242-43 (D.C. Cir. 1981), and cases cited therein.
Second, defendant claims that the hearsay exception for recorded recollection applied to the Quirt affidavit. Fed. R. Evid. 803(5). This exception would require that at the time of trial Quirt had an insufficient recollection to enable him to testify fully and accurately. There was no such showing.
Third, defendant claims that Quirt "adopted" the affidavit while on the witness stand so that it "became part of his oath-supported, court-given testimony subject to cross-examination and [is] not hearsay." Bell v. City of Milwaukee, 746 F.2d 1205, 1274 (7th Cir. 1984). This argument was not offered to the trial court. Moreover, although Quirt did answer that the affidavit was "true," that answer must be read in the light of his explanation that the "agreement" in 1982 did ...