United States v. Craig C. Wirsing

719 F.2d 859, 1983 U.S. App. LEXIS 16185

• Court: Court of Appeals for the Sixth Circuit
• Decided: October 10, 1983
• Docket: 82-1304
• Status: Published

Opinions

KEITH, Circuit Judge.

Appellant Craig Wirsing appeals from a judgment entered against him after a jury trial in this criminal case. Wirsing was charged with one count of conspiracy to possess with intent to distribute marijuana¹ and three counts of attempted income tax evasion² for the years 1976, 1977, 1978. The jury convicted him on all counts. For the reasons set forth below, we reverse the convictions and remand for a new trial.

FACTS

The government’s theory of illegal activity centered around Wirsing’s alleged role as a drug dealer. The government’s evidence indicated that Wirsing was involved in drug activities as early as 1972. During that time, he bought marijuana from a man named Roy Griffith. His purchases were not small. In fact, Wirsing’s sister testified that she observed a mound of marijuana measuring five feet by four feet by one foot on the basement floor of their home. Patrick Bolerjack, one of Wirsing’s associates, also testified that he watched the defendant’s business grow. There appeared to be some dispute as to whether Wirsing was in business for himself or was part of an organization.

Wirsing appears to concede that he was initially part of a group that included Roy Griffith and Frank Reynolds. However, Douglas Skinner, to whom the defendant allegedly supplied marijuana for sale, testified that in late 1973, Wirsing told him that he was no longer dealing with that group. He also ordered Skinner to stay away from them.

Since Wirsing’s defense was that he left the conspiracy in 1973 and that the applicable statute of limitations had run,³ the government sought to introduce evidence that Wirsing had performed acts in furtherance of the conspiracy beyond that date. It introduced testimony that in late 1973 the defendant purchased a Norwegian fishing boat for use in transporting marijuana from Colombia to the United States. The boat was purchased in the defendant’s name, but Griffith, Bolerjack and Reynolds contributed money to repair it: The boat, the Salo, sank on its maiden voyage.

Skinner ran trips from the West for Wirsing. These trips usually originated in Tuscon, Arizona. On one trip in 1974, he was arrested and the marijuana confiscated. He had no further dealings with any member of the group for the following year. When he did return, he allegedly had contact only with Wirsing.

Although the defendant stated that he was no longer working with Griffith and his group in late 1974 and early 1975, he was a supplier for Jackie D. Miller. Miller obtained most of his marijuana from Griffith. Terry Jelnik, a drug dealer, testified under a grant of immunity. He stated that he started buying his marijuana from Wirsing in 1976. He had been buying from Griffith the year before, but when he went to meet Griffith at a cabin in Holly, Michigan, Wirsing was there. Other evidence adduced at trial indicated that Wirsing owned the cabin. Jelnik testified that after the initial meeting, whenever he went to the cabin, he either dealt with Griffith, Wirsing, or both.

Bolerjack testified that by 1975, the group that had invested in the Salo had disbanded. Bolerjack left the group in 1977. At that time, Wirsing was allegedly still supplying marijuana to dealers and Skinner was still selling for him. Wirsing’s sister testified that the business relationship between Wirsing and Griffith changed during the end of 1974 or early 1975 due to constant “fighting”.

Along with the conspiracy count, the government alleged three counts of income tax evasion for the years 1976, 1977, and 1978. The charges of tax evasion were derived from Agent Bednaczyk’s calculation of Wirsing’s net worth for the year ending December 31, 1975, the last year of defendant’s legitimate tax returns. The evidence at trial was lengthy and complicated. The government introduced 362 exhibits in an attempt to prove income tax evasion under a net worth theory.⁴

The jury deliberated two days and returned a guilty verdict on all counts. Wirsing was eventually sentenced to a term of five years imprisonment on the conspiracy count and three three-year terms on the tax evasion counts to run concurrently with the conspiracy term. Wirsing is free pending the outcome of his appeal.

JOINDER UNDER RULE 8(A)

While the defendant raises several issues on appeal, our discussion of the joinder issue renders discussion of the other issues unnecessary.⁵ We conclude that the district court abused its discretion by not granting the defendant’s motion for a severance of the conspiracy and tax evasion charges.

Fed.R.Crim.P. 8(a) provides:

(a) JOINDER OF OFFENSES. Two or more offenses may be charged in the same indictment or information in a separate count for each offense if the offenses charged, whether felonies or misdemeanors or both, are of the same or similar character or are based on the same act or transaction or on two or more acts or transactions connected together or constituting parts of a common scheme or plan.

As the language makes clear, joinder under this subsection is permissive. To the extent that it is consistent with providing the defendant with a fair trial, the Rule is to be construed liberally to promote the goals of trial convenience and judicial efficiency. See United States v. Isaacs, 493 F.2d 1124, 1158 (7th Cir.1974), cert. denied. 417 U.S. 976, 94 S.Ct. 3184, 41 L.Ed.2d 1146 (1974); Drew v. United States, 331 F.2d 85, 88 (D.C.Cir.1964). See also J. Moore, 8 Moore’s Federal Practice ¶8.05 (2d ed. 1976); C. Wright, Federal Practice and Procedure, 1 Criminal § 141 (2d ed. 1982); Note, Joint and Single Trials Under Rules 8 and 14 of the Federal Rules of Criminal Procedure, 74 Yale L.J. 553 (1965).

The government argues that joinder was permissible in this case because the conspiracy charges and tax evasion charges constituted “two or more acts or transactions connected together or constituting parts of a common plan or scheme.” It contends that the income that was not reported on Wirsing’s return for the years in question was derived from his illegal activity in the conspiracy to distribute drugs.

We agree that joinder of these charges was proper under Rule 8(a). As the Ninth Circuit noted in a similar case:

The evidence on the conspiracy count and the tax counts overlapped. Evidence of Anderson’s expenditures in 1976 and 1977 was relevant to Count I, because it created the inference that the money for the expenditures came from the narcotics conspiracy (citations omitted). The financial evidence on the conspiracy counts was relevant to the tax counts, because it showed the source of Anderson’s unexplained wealth.

United States v. Anderson, 642 F.2d 281, 284 (9th Cir.1981). The court in United States v. Shelton, 669 F.2d 446 (7th Cir. 1982), cert. denied, 456 U.S. 934, 102 S.Ct. 1989, 72 L.Ed.2d 454 (1982) also approved the joinder of counts involving a conspiracy to commit mail fraud and tax evasion, noting that the tax counts charged the defendants with “failure to pay income on the proceeds of the scheme to defraud.” Id. at 460. See also United States v. Isaacs, 493 F.2d at 1159 (joinder under Rule 8 proper where the “underlying crime generated the income tax violations”).

The defendant argues that joinder was impermissible because evidence of the tax evasion charges would have been inadmissible in a separate trial on the conspiracy charges. Where the evidence on the charges is not mutually admissible in separate trials, the defendant argues, joinder of those charges is not permitted.⁶ We disagree.

Rule 8(a) does not require that all evidence relating to each charge be admissible in separate trials. Rather, “[w]hen the joined counts are logically related, and there is a large area of overlapping proof, joinder is appropriate.” Anderson, 642 F.2d at 284. See also United States v. Roselli, 432 F.2d 879 (9th Cir.1970), cert. denied, 401 U.S. 924, 91 S.Ct. 883, 27 L.Ed.2d 828 (1971) (joinder of defendants proper under Rule 8(b) where the only evidence not admissible against all defendants in a conspiracy trial is that relating to tax returns); United States v. Barrett, 505 F.2d 1091 (7th Cir. 1974), cert. denied, 421 U.S. 964, 95 S.Ct. 1951, 44 L.Ed.2d 450 (1975) (joinder under Rule 8(a) permissible where mail fraud charges and tax evasion charges all were connected with the defendant’s use of his public office for private gain).

We are satisfied that the government alleged and introduced proof sufficient to establish a nexus between the drug charges and the tax evasion charges. Compare United States v. Diaz-Munoz, 632 F.2d 1330, 1335-36 (5th Cir.1980) with United States v. Beasley, 519 F.2d 233, 238 (5th Cir.1975), vacated on other grounds, 425 U.S. 956, 96 S.Ct. 1736, 48 L.Ed.2d 201 (1976). Discussing the distinction between the result in these two cases, the court in United States v. Kopituk, 690 F.2d 1289, 1313 (11th Cir. 1982), cert. denied, — U.S. -, 103 S.Ct. 2090, 77 L.Ed.2d 300 (1983) stated:

Thus, the decision in Diaz-Munoz was based upon the government’s failure to prove a nexus between the tax and non-tax counts and does not, as appellants argue, stand for the proposition that joinder of tax and non-tax offenses in a single indictment is per se improper. Indeed, there would be no legal or logical basis for such a rule and, in fact, there is ample authority supporting the position that tax counts can properly be joined with non-tax counts where it is shown that the tax offenses arose directly from the other offenses charged (citations omitted).

Assumably, had the government been able to fulfill its pretrial representation that the evidence would establish that the unreported income charged in the tax counts constituted the proceeds of the embezzlement and/or insurance fraud offenses charged in the other counts, the result in Diaz-Munoz would have been different.⁷

The prosecution of both types of offenses in a single trial was also appropriate in this case because they arose out of a single transaction.

MOTION FOR SEVERANCE

Even if the joinder of two or more offenses is permissible under Rule 8(a), the court may be required to sever the offenses because of the possibility of undue prejudice from a single trial. Kopituk, 690 F.2d at 1314; Barrett, 505 F.2d at 1106; Isaacs, 493 F.2d at 1159; Blunt v. United States, 404 F.2d 1283, 1288 (D.C.Cir.1968), cert. denied, 394 U.S. 909, 89 S.Ct. 1021, 22 L.Ed.2d 221 (1969). See generally Moore’s Federal Practice, supra, ¶ 14.02; Wright, Federal Practice and Procedure, supra, § 221; Note supra, at 553-54. Fed.R.Crim.P. 14 is applicable in such instances. It provides in relevant part:

If it appears that a defendant or the government is prejudiced by a joinder of offenses or of defendants in an indictment or information or by such joinder for trial together, the court may order an election or separate trials of counts, grant a severance of defendants or provide whatever other relief justice requires.

The defendant made a motion for severance of Count I from Counts II, III, and IV in this case. On January 29, 1982, the district court denied the motion. It held: (1) that joinder was proper under Rule 8(a) since the offenses arose from the same act or transaction; (2) the defendant’s statement that he jyished “to testify pertaining to some counts but not other counts is entirely too speculative and problematical to establish the required prejudice”; and (3) the fact that the defendant was ready to proceed to trial on the conspiracy charge, but not the tax evasion charges was not the kind of prejudice justifying relief under Rule 14.

We conclude that the defendant was entitled to relief under Rule 14. A motion for severance pursuant to Rule 14 is committed to the sound discretion of the trial court. Kopituk, 690 F.2d at 1315; Anderson, 642 F.2d at 285; United States v. Foutz, 540 F.2d 733, 737 (4th Cir.1976); Barrett, 505 F.2d at 1106. However, as the cases construing Rule 14 make clear, such discretion must be exercised in light of all the relevant circumstances. Foremost among the relevant circumstances is a “balancing of the interest of the public in avoiding a multiplicity of litigation and the interest of the defendant in obtaining a fair trial.” Moore’s Federal Practice, supra, ¶ 14.02.

The record reveals that the attorney who eventually represented the defendant at trial was the third attorney to represent the defendant in this matter. It appears that no preparation was done for the trial by the other attorneys. When the second attorney agreed to undertake the matter, he was allegedly under the impression that he would be attempting to complete a plea arrangement undertaken by his predecessor. When he found that no plea arrangement could be reached, he filed a motion to withdraw. The motion was denied. But the third attorney was allowed to “step into the shoes” of prior counsel with the understanding that the substitution “would not add to nor detract from the claims of lack of preparation.”

The second attorney for the defendant also filed a motion to adjourn the trial date. He informed the court that he was prepared to represent the defendant on the conspiracy count, but was not ready to go to trial on the tax evasion charges. The court denied this motion, noting that the trial had already been postponed once. The court was concerned that failure to grant a further postponement would encourage the substitution of counsel and even greater delays. The court granted one additional week for preparation.

The proof on the conspiracy count was simple and straightforward. However, the government sought to prove the tax evasion charges under a net worth theory. Basically, this involved the reconstruction of the defendant’s actual income for the relevant years, by adding his cash on hand at the end of the last year for which a legitimate tax return was filed, cash in the bank, business inventory, value of vehicles owned, prepaid interest, and deferred charges of 1975. From this sum, liabilities and accumulated depreciation were subtracted to derive his net worth for the following year. Taxes were assessed on this basis. The same procedure was used for the following two years in which income tax evasion was alleged.

Proof of income tax evasion under the net worth theory is a fairly complicated matter. In the instant case, the government introduced 362 exhibits into evidence on the tax evasion charges and also had a summary witness testify on the calculations relied upon by the government. The defendant did not have time to retain a summary witness who could sift through the government’s evidence for possible error.

Under these circumstances, the court should have granted the motion for severance of the charges. When it was made clear to the district court that trial counsel was not ready to proceed on the tax evasion charges, the court had an obligation to consider the possible prejudice from the evidence on the conspiracy count being presented in a trial on the tax evasion counts. The court should have considered the complexity of the charges and the possible “spillover” effect from trying the different types of offenses in a joint trial. If the court was concerned with the possibility of violations of the Speedy Trial Act, the court could have easily proceeded to trial on the conspiracy charge immediately while deferring trial on the tax evasion counts until counsel was given a reasonable amount of time for preparation.

Alternatively, the court could have granted the motion for a continuance and provided defense counsel with time to prepare a defense on the tax evasion charges. “Although rulings on motions for continuance are traditionally best left to the trial court’s discretion, a judge is not imbued with the power to abrogate a criminal defendant’s constitutional rights.” United States v. King, 664 F.2d 1171, 1173 (10th Cir.1981). See also Linton v. Perini, 656 F.2d 207, 211 (6th Cir.1981), cert. denied, 454 U.S. 1162, 102 S.Ct. 1036, 71 L.Ed.2d 318 (1982). In addressing this matter, the Supreme Court has stated:

The matter of continuance is traditionally within the discretion of the trial judge, and it is not every denial of a request for more time that violates due process even if the party fails to offer evidence .... Contrariwise, a myopic insistence upon expeditiousness in the fact of a justifiable request for delay can render the right to defend with counsel an empty formality .... There are no mechanical tests for deciding when a denial of a continuance is so arbitrary as to violate due process. The answer must be found in the circumstances present in every case, particularly in the reasons presented to the trial judge at the time the request is denied.

Ungar v. Sarafite, 376 U.S. 575, 589, 84 S.Ct. 841, 849-850, 11 L.Ed.2d 921 (1964).

Similarly, there are no mechanical tests for determining the amount of time required for adequate preparation for trial in a criminal case. Linton v. Perini, 656 F.2d at 209; United States v. Faulkner, 538 F.2d 724, 729 (6th Cir.1976), cert. denied, 429 U.S. 1023, 97 S.Ct. 640, 50 L.Ed.2d 624 (1976). Therefore, “we look for a showing from the defendant of prejudice, i.e., a showing that the continuance would have made relevant witnesses available, or would have added something to the defense.” Faulkner, 538 F.2d at 729-30. Here, we are left with the firm conviction that a continuance would not have been burdensome on the government or the trial court while it would have provided the defendant with an opportunity to prepare an adequate defense against the government’s entire case against him.

The prejudice suffered by the defendant because of the trial court’s denial of a continuance became the type of prejudice Rule 14 was designed to alleviate. The defendant’s attorney was unprepared to defend on the tax evasion counts because of their complexity. However, the joinder of the tax evasion counts with the drug count compounded the consequences of the defense’s lack of preparation. The defense attorney was unprepared to combat the “spillover” effect of trying the drug and tax offenses together. It is clear, then, that the joinder of these offenses prejudiced the defendant’s right to a fair trial. Had the trial court severed the offenses and granted the defendant a continuance on the tax evasion counts, the prejudice would have been eliminated.

A trial court has the authority to tightly control its docket. Linton, 656 F.2d at 209. However, the court also has an obligation under Rule 14 to insure against undue prejudice from the trial of two or more offenses in a single proceeding. 8 Moore’s Federal Practice, supra, ¶ 14.02; Wright, Federal Practice and Procedure, supra, § 221. Since we find substantial prejudice in this ease from the joint trial of the two different kinds of offenses, we conclude that the defendant was denied his Sixth Amendment right to a fair trial. Accordingly, the judgment is reversed and the ease remanded for a new trial.

1 . 21 U.S.C. §§ 841(a)(1) and 846.

2 . 26 U.S.C. § 7201.

3 . 18 U.S.C. § 3282 provides:

Except as otherwise expressly provided by law, no person shall be prosecuted, tried, or punished for any offense, not capital unless the indictment is found or the information is instituted within five years next after such offense shall have been committed.

The indictment charged a conspiracy beginning on or about January 1, 1972 and continuing up until the date of the filing of the indictment [August 27, 1981]. The defendant attempted to show that he had committed no act in furtherance of the particular conspiracy charged in the indictment after August 26, 1976.

4 . The net worth theory is an indirect method of proving tax evasion. The government is allowed to show inferentially from the existence of purchases, expenditures, and cash on hand that the defendant received income that was not reported on his or her tax return. The assumption is that all of the income is taxable unless the defendant can show otherwise.

The net worth method of proving tax evasion was approved by the Supreme Court in Holland v. United States, 348 U.S. 121, 75 S.Ct. 127, 99 L.Ed. 150 (1954). However, the Court cautioned the district and appellate courts about its use in the following paragraph:

While we cannot say that these pitfalls inherent in the net worth method foreclose its use, they do require the exercise of great care and restraint. The complexity of the problem is such that it cannot be met merely by the application of general rules. Cf. Universal Camera Corp. v. Labor Board, 340 U.S. 474, 489 [71 S.Ct. 456, 465, 95 L.Ed. 456], Trial courts should approach these cases in the full realization that the taxpayer may be ensnared in a system which, though difficult for the prosecution to utilize, is equally hard for the defendant to refute. Charges should be especially clear, including, in addition to the formal instructions, a summary of the nature of the net worth method, the assumptions on which it rests, and the inferences available both for and against the accused. Appellate courts should review the cases, bearing constantly in mind the difficulties that arise when circumstantial evidence as to guilt is the chief weapon of a method that is itself only an approximation.

Id. at 129, 75 S.Ct. at 132.

5 . It is argued that the district court erred by refusing to allow Skinner to testify that Wirsing told him that he was leaving the alleged conspiracy. While resolution of this issue is not necessary to our holding, we address it here for the sake of judicial economy.

The defendant argues that his statement to Skinner was an exception to the hearsay rule because it constituted a statement by one co-conspirator to another indicating an intention to leave the conspiracy. The district court correctly noted that if admissible at all, it was only admissible to prove that it was said, but not as evidence that the defendant actually left the conspiracy. The court later ruled the statement inadmissible.

We find no error in the court’s ruling. First, upon review of the trial transcript, we conclude that the defendant got this evidence before the jury in spite of the court’s ruling. Second, we question the probative value of such a statement as evidence of a verbal act of withdrawal. In the cases cited by the defendant, the statement was made by one co-conspirator to another to communicate the fact that he was withdrawing from the conspiracy. In this case, the person to whom the statement was made was a subordinate and the defendant told him not to have anything else to do with the other members of the conspiracy. It is difficult to see how this could be an affirmative act of withdrawal since it was not communicated to any member of the alleged conspiracy who would be affected by it. In other words, Skinner’s relationship to the defendant remained unchanged no matter what the defendant did after professing to quit the conspiracy. Under these circumstances, the refusal to admit the statement as an exception to the hearsay rule is not error.

6 . The defendant’s argument would have more force if the government’s joinder was based upon two or more acts which were of the same or similar character. Several courts have recognized the peculiar dangers of joining such offenses and have adopted a test which requires that evidence concerning the two joined offenses be mutually admissible in separate trials before joinder is considered appropriate. See United States v. Halper, 590 F.2d 422, 431 (2d Cir.1978); United States v. Foutz, 540 F.2d 733, 736-37 (4th Cir. 1976); Blunt v. United States, 404 F.2d 1283, 1288 (D.C.Cir.1968), cert. denied, 394 U.S. 909, 89 S.Ct. 1021, 22 L.Ed.2d 221 (1969); Drew v. United States, 331 F.2d 85, 90 n. 12 (D.C.Cir.1964). However, even under those circumstances, not every item of evidence need be admissible in a separate trial. The rule “rather looks to the broad sense to whether the rules relating to ‘other crimes’ have been satisfied.” Foutz 540 F.2d at 736 n. 3.

7 . Although joinder of separate offenses involving several defendants is governed by Fed.R. Crim.P. 8(b), the critical distinction between Rule 8(a) and 8(b) is the inclusion of the term “of the same or similar character” in the former. As the court in United States v. Kopituk, 690 F.2d 1289, 1313 n. 21 (11th Cir.1982), cert. denied, - U.S. -, 103 S.Ct. 2090, 77 L.Ed.2d 300 (1983), correctly observed: Of course, adherence to a subsection (b) rather than a subsection (a) analysis in Diaz-Munoz would in no way have affected the result in that case, since the critical term distinguishing the two subsections (“of the same or similar character”) was not at issue therein.