United States v. Dean W. Loney

719 F.2d 1435, 52 A.F.T.R.2d (RIA) 6301, 1983 U.S. App. LEXIS 15452

• Court: Court of Appeals for the Ninth Circuit
• Decided: November 8, 1983
• Docket: 82-1676
• Status: Published

Opinions

PREGERSON, Circuit Judge:

A fourteen-count indictment charged Loney with violating 26 U.S.C. § 7206(l)-(2) (1976). He was acquitted on thirteen counts and appeals his conviction on one count, Count V, for subscribing his own false income tax return in violation of § 7206. He contends, among other things, that the evidence was insufficient to prove guilt beyond a reasonable doubt, and that the district court abused its discretion in denying his post-trial motions, including a motion for judgment of acquittal.

The crucial issue is whether Loney willfully violated the law against subscribing false returns by signing his individual return culpably, knowing it falsely claimed a deduction for losses that his partnership, Montana Pacific Oil & Gas (MPOG Nos. 1-4), sustained in calendar year 1975. There can be no doubt that the term “willful” in 26 U.S.C. § 7206(1) requires proof of specific intent to do something that the law forbids; more than a showing of careless disregard for the truth is required. United States v. Brooksby, 668 F.2d 1102, 1104 (9th Cir.1982).

This case was tried to the court. The court found that Loney’s tax return was wrong. He was the central figure and had set up all of the MPOG partnerships implicated in the fourteen-count indictment. His knowledge of the operation was superi- or to that of the other participants.

The trial court concluded that when Loney signed the erroneous MPOG-3 partnership return on April 2, 1976, he was grossly negligent but not guilty of willfully violating the statute. The court, however, concluded that when Loney signed his individual return on July 8, 1976 (Count V), he knew that the MPOG-3 partnership could have no intangible drilling expenses to deduct as losses. As a result, the court convicted him for knowingly and willfully claiming a false $20,000 MPOG-3 derivative deduction on his individual return.

To sustain a conviction under 26 U.S.C. § 7206(1), the evidence must show beyond a reasonable doubt that Loney acted willfully and with the knowledge that his return was not correct in material respects. Knowledge or intent may be proved by circumstantial evidence. United States v. Beecroft, 608 F.2d 753, 757 (9th Cir.1979).

Here, the rub is that the trial court found that Loney was grossly negligent, but not guilty of willfully violating the statute, when he signed the erroneous MPOG-3 partnership return on April 2, 1976. From that time until July 8, 1976, when he signed his individual return, no additional evidence — except for the passage of time — was introduced on the question of Loney’s willfulness.¹ In short, there is no evidence in the record to show that Loney’s intent on July 8 was any different from what it was on April 2 when he signed the partnership return for which conduct he was acquitted. Thus, the record presents a hiatus on the issue of specific intent that is fatal to the government’s case on Count V.

We conclude, therefore, that the evidence in the record is insufficient to sustain Loney’s conviction on Count V.

The conviction is REVERSED.

1 . The dissent contends, infra at p. 1437, that during this period Loney knew he was filing a false claim because he was “a sophisticated lawyer, knowledgeable in business as well as professional matters.” The dissent reasons that such a person has too much at stake to lie on his own return.

We question this line of reasoning for two reasons. First, a professional like Loney also knows that he has serious agency and fiduciary responsibilities when he acts on behalf of others. If anything, he has an interest in being more careful with other people’s returns than with his own. Second, and in any event, this reasoning is mere speculation.