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United States v. Blandina

decided: July 12, 1989.

UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE,
v.
CHARLES A. BLANDINA, DEFENDANT-APPELLANT



Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division. No. IP 87 CR 16--James E. Noland, Judge.

Cummings, Coffey and Manion, Circuit Judges.

Author: Coffey

COFFEY, Circuit Judge.

Defendant-appellant Charles A. Blandina appeals his conviction on two counts of income tax evasion for the years 1983 and 1984 in violation of 26 U.S.C. § 7201. We affirm.

I. FACTS

Defendant Blandina was the owner of the State Liquors package store in Indianapolis, Indiana. He purchased the package store in the fall of 1983 for a price of $108,203.40, $94,203.40 of which he paid in cash.*fn1 An Internal Revenue Service ("IRS") task force investigating large cash transactions at that time became aware of Blandina's sizeable cash downpayment, and, after reviewing Blandina's 1983 tax return in which he reported taxable income of only $66,190.00, decided that a criminal investigation into Blandina's financial affairs was warranted, assigning Agent Charles Vonderschmitt to conduct the investigation.

During the course of the criminal investigation, Agent Vonderschmitt analyzed Blandina's expenses and purchases of assets, such as real estate and automobiles, examined bank records, and reviewed probate records to determine, among other things, the amount he inherited from his father, who died in 1979. Vonderschmitt interviewed Blandina in April 1985, informing him that he had been assigned to investigate the discrepancy between his stated taxable income and the large amount of cash he used to purchase the package store. Blandina told Vonderschmitt that he had a cash hoard from two sources of non-taxable income which were not reflected on his tax returns. First, Blandina stated that in 1979 his father gave him a large amount of cash resulting from the investment of a $19,000 settlement for injuries Blandina sustained in a 1958 car accident. Blandina stated that he hid the cash in a basement bathroom in his stepmother's house. Blandina also stated that prior to the death of his father, he received his father's coin collection. Vonderschmitt investigated both of these "leads" into possible sources of cash and determined that neither could be verified.

Blandina was indicted in the Southern District of Indiana on February 18, 1987, on two counts of income tax evasion for the years 1983 and 1984. The indictment charged Blandina with understating his 1983 income by $103,291.20 and his 1984 income by $162,164.83, resulting in a total tax deficiency of $103,923.41. The trial was originally scheduled for April 27, 1987, but was continued to June 15, 1987, on motion of the defendant. Prior to the rescheduled court date, the parties engaged in extensive discovery culminating on June 5 when the defendant delivered to the government the remnants of his alleged coin collection given to him by his late father, an appraisal of the remaining coins in the collection, as well as the statement of a defense witness who was scheduled to testify about accompanying Blandina when he sold portions of the collection to various coin dealers in Bloomington, Indiana, and Chicago, Illinois.

Based on its obligation to investigate all leads reasonably susceptible of being checked which might establish Blandina's non-taxable sources of income,*fn2 the government, on June 8, filed a motion to continue the trial for another 90 days. Over Blandina's objection, the trial court granted the government's motion on June 10 and set the trial for September 8, 1987. On June 11, 1987, the defendant filed a motion asking the court to reconsider its continuation of the case, requesting a hearing on the matter, and petitioning the court for an order to compel the government to provide the defense with various statements of prosecution witnesses under the Jencks Act, 18 U.S.C. § 3500.

The court conducted a hearing and after considering the defendant's objections to the continuance based on the Speedy Trial Act, 18 U.S.C. § 3161 et seq., reaffirmed its previous decision to continue the trial until September 8. The court specifically found that the defendant would not be prejudiced by the continuance and that the interests of justice and judicial economy would be served by granting the government sufficient time to comply with its obligation to investigate Blandina's alleged sources of non-taxable income. The court also found that the defendant was not entitled to the Jencks material requested until one week prior to trial. The defendant renewed his opposition to the continuance in a motion to dismiss filed on September 4, which the court denied based on its findings at the hearing on the motion to reconsider.

On September 7, the day prior to the scheduled trial date, the government informed defense counsel that it planned to call Richard Aaron as a government witness for the purpose of eliciting testimony concerning marijuana transactions between Aaron and Blandina in 1984. Jury selection began on September 8, but due to a problem in the selection procedure, the jury was discharged and the trial was rescheduled for September 15. On September 10, the defendant orally requested a 90-day continuance in light of the damaging testimony the government planned to elicit from Aaron. The court held a hearing on this motion and offered the defendant two alternate trial dated: October 5, 1987, or November 9, 1987, both of which defense counsel rejected due to scheduling conflicts. The court then denied the motion and trial commenced on September 15.

At trial, the government used the net worth method of proving that Blandina willfully understated his taxable income for the years 1983 and 1984.

"In a typical net worth prosecution, the Government, having concluded that the taxpayer's records are inadequate as a basis for determining income tax liability, attempts to establish an 'opening net worth' or total net value of the taxpayer's assets at the beginning of a given year. It then proves increases in the taxpayer's net worth for each succeeding year during the period under examination and calculates the difference between the adjusted net values of the taxpayer's assets at the beginning and end of each of the years involved. The taxpayer's nondeductible expenditures, including living expenses, are added to these increases, and if the resulting figure for any year is substantially greater than the taxable income reported for that year, the government claims the excess represents unreported taxable income."

Holland v. United States, 348 U.S. 121, 125, 99 L. Ed. 150, 75 S. Ct. 127 (1954). The government's summary expert, IRS Agent Robert Bennett, concluded that Blandina's net worth on December 31, 1982, was $50,074.00, none of which was attributable to cash on hand. The government then presented numerous witnesses and exhibits regarding Blandina's expenditures during 1983 and 1984. The government also presented the testimony of Richard Aaron, who stated that he had delivered 30 to 40 pounds of marijuana to Blandina on two occasions in 1984. Aaron stated that Blandina paid for the first delivery in cash at a price of $300 to $400 a pound, but returned the second quantity of marijuana without paying for it because it was unacceptable, being of inferior quality. Based on this evidence, the government concluded that Blandina had taxable income of $159,434.25 in 1983, and $105,439.46 in 1984. Because Blandina reported income of $66,190.00 in 1983, and a loss of $8,978.00 in 1984, the government alleged that Blandina owed $74,965.35 in unpaid taxes.

Blandina did not dispute the government's summary of his expenditures during 1983 and 1984; rather, he attacked the accuracy of the opening net worth figure, arguing that Agent Bennett failed to give him credit for a "cash hoard" in existence prior to the years in question. Blandina claimed that this "cash hoard" consisted of proceeds from the accident settlement which his father initially invested and later turned over to him, as well as the proceeds from the sale of his father's coin collection. Although members of Blandina's family testified as to the existence of the accident settlement, no one could testify as to the amount of what became of the proceeds. With regard to the coin collection, defense witness Beth Greene, Blandina's former girlfriend, testified that just prior to the death of the defendant's father, he received several boxes of coins and that she accompanied him when he sold some of the coins for cash.

The government attempted to rebut Greene's testimony with the testimony of IRS Agent Vonderschmitt. Vonderschmitt stated that after he received the remnants of the alleged coin collection during pre-trial discovery, he and other members of his staff interviewed 61 coin dealers from Indianapolis, Indiana, Bloomington, Indiana, and Chicago, Illinois, and that none of the coin dealers had purchased coins from Blandina and one, Rolland Kontak, had actually sold coins to him. Kontak, a coin dealer from Indianapolis, testified that sometime after 1984, he sold Blandina a roll of twenty silver dollars which were included in the group of coins which the defendant had represented to the government as the remnants of his father's coin collection. The government also called Paul Edmonds, another coin dealer from Indianapolis, as a witness. Edmonds testified that although he had never dealt with the defendant, he recognized various coins in the purported collection as coins he had in his own collection until sometime after 1981--two years after Blandina's father passed away.

The jury convicted Blandina on both counts, returning a verdict of guilty on September 25, 1987. On December 15, 1987, the court sentenced Blandina to two years' imprisonment on Count One (1983) and three years' probation on Count Two (1984). On appeal, the defendant argues that his conviction should be reversed because: (1) the district court erred in denying Blandina's motion to dismiss based on violations of his rights under the Speedy Trial Act; (2) the district court abused its discretion in denying his motion for continuance; (3) the district court abused its discretion in admitting (a) the testimony of Richard Aaron regarding marijuana transactions between Aaron and Blandina, and (b) the testimony of IRS Agent Vonderschmitt concerning his conversations with various coin dealers during his investigation of Blandina's coin collection; and (4) the government failed to present sufficient evidence to establish tax evasion under the net worth method of proof.

II. SPEEDY TRIAL ACT

Blandina initially contends that the district court erred in refusing to dismiss his case pursuant to the Speedy Trial Act, 18 U.S.C. § 3161, et seq.

"The Speedy Trial Act generally requires that trials in criminal cases commence within 70 days of the filing date of the information or indictment, or from the date of initial appearance, whichever last occurs. 18 U.S.C. § 3161(c)(1). However, the Act provides that several periods of time may be excluded from this 70-day period. 18 U.S.C. § 3161(h). Among the permitted exclusions is delay 'resulting from a continuance granted . . . on the basis of . . . findings that the ends of justice served by [the continuance] outweigh the best interest of the public and the defendant in a speedy trial.' 18 U.S.C. § 3161(h)(8)(A)."

United States v. Vega, 860 F.2d 779, 786 (7th Cir. 1988). The main thrust of the defendant's argument under the Speedy Trial Act is that the district court improperly granted the government's motion for a 90-day continuance to further investigate Blandina's sources of non-taxable income and excluded the delay from the 70-day period allowable under the Act. At the outset we note that Blandina's burden on this issue is indeed a heavy one. As we stated in Vega: "The decision to grant a continuance under the Speedy Trial Act, and [the] accompanying decision to exclude the delay under [§ 3161](h)(8)(A) is addressed to the discretion of the trial court. To ...


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