United States v. Lawrence M. Richey

924 F.2d 857, 91 Daily Journal DAR 970, 91 Cal. Daily Op. Serv. 658, 67 A.F.T.R.2d (RIA) 469, 1991 U.S. App. LEXIS 876, 1991 WL 4578

• Court: Court of Appeals for the Ninth Circuit
• Decided: January 23, 1991
• Docket: 88-3276
• Status: Published

Opinions

O’SCANNLAIN, Circuit Judge:

We are asked to decide whether prosecution and conviction of a former Internal Revenue Service employee, for willfully disclosing to the public information about a certain federal income tax return, violates his first amendment right to freedom of expression.

I

Lawrence Richey was an Internal Revenue Service (“IRS”) agent for approximately twenty-five years. In 1970, he audited Alan McDonald, who was then an attorney in private practice. After Richey examined McDonald’s income tax returns for the years 1967-69, the IRS assessed $1,033.33 in additional taxes. McDonald paid the assessment.

After retiring from the IRS in 1981, Richey joined a private tax preparation service. He soon became involved in a tax shelter scheme and was indicted in 1985 for conspiracy to defraud the government and for aiding and assisting in the preparation of false and fraudulent tax returns.

Richey’s case came to trial before a jury in 1987. Presiding as judge was the same Alan McDonald, who had become a United States District Judge for the Eastern District of Washington. Richey did not bring a motion to recuse Judge McDonald nor did Judge McDonald recuse himself. The jury found Richey guilty as charged.

Judge McDonald sentenced Richey to a term of probation. As a condition of probation, Judge McDonald enjoined Richey from making derogatory remarks about the United States government.

Richey’s probation condition attracted local press attention. Bill Morlin, a reporter for the Spokesman-Review and Spokane Chronicle newspapers, called Richey and asked him why he thought Judge McDonald had imposed the controversial condition of probation upon him. Morlin would later testify that Richey responded with the following explanation: “Well, I’ll tell you why. When I worked for the IRS I once audited Alan McDonald’s taxes and further, that [sic] I found discrepancies in his tax returns.” Morlin further testified that Richey said: “I kind of get the feeling that [Judge McDonald wanted] retribution.” Morlin used Richey's statements in a news article, which was published on the front page of both the Spokesman-Review and the Spokane Chronicle on October 7, 1987.

On the same day that the newspaper article appeared, Richey spoke to two other people in the local press about his “retribution” theory. Robert Lowery, News Director for KBBO and KSRE radio stations in Yakima, Washington, testified that Rich-ey stated, in an interview on October 7, 1987, that he had audited Judge McDonald. Rodney Lyle Smith of KNDO television in Yakima also testified that Richey stated that he had audited Judge McDonald some fifteen years earlier and assessed some additional taxes upon him.

On June 15, 1988, a federal grand jury filed a three-count indictment, charging Richey with willfully disclosing tax return information in violation of I.R.C. § 7213. Prior to trial, Richey filed a motion to dismiss the indictment on the grounds that, among other things, section 7213 violated his first amendment right to freedom of expression. Richey also filed a motion to remove the Assistant United States Attorney assigned to prosecute the case. The district court denied both motions. After a bench trial before Judge Hupp of the Central District of California, sitting by designation in the Eastern District of Washington, Richey was found guilty of violating section 7213.

Meanwhile, Richey appealed his earlier conviction for conspiracy to defraud the IRS and aiding and assisting in the preparation of false and fraudulent tax returns. Richey claimed, among other things, that the probation condition violated his first amendment right to free speech and that Judge McDonald had abused his discretion by not recusing himself sua sponte. This court concluded that the probation condition issue was moot by the time the case reached us because Richey had been resen-tenced to a new term of probation that did not include the condition. See United States v. Richey, 874 F.2d 817 (9th Cir.1989) (memorandum disposition). We also determined that Judge McDonald did not abuse his discretion by not recusing himself sua sponte from Richey’s case. Id.

Richey now appeals from his conviction for violation of section 7213. We have jurisdiction under 28 U.S.C. § 1291.

II

Richey contends that the district court erred by denying his motion to dismiss the indictment because section 7213, as applied, violated his first amendment right to freedom of expression.

A

The first amendment’s guarantee of freedom of speech encompasses a broad spectrum of form and type of expression. While a “major purpose of [the] Amendment [is] to protect the free discussion of governmental affairs,” Mills v. Alabama, 384 U.S. 214, 218, 86 S.Ct. 1434, 1436-37, 16 L.Ed.2d 484 (1966), the amendment also protects an individual’s interest in self-expression. See Consolidated Edison Co. v. Public Serv. Comm’n, 447 U.S. 530, 534 n. 2, 100 S.Ct. 2326, 2331 n. 2, 65 L.Ed.2d 319 (1980). The fact that the majority of a community may find an idea politically, intellectually, or morally offensive does not shield the idea from first amendment protection. See, e.g., Wooley v. Maynard, 430 U.S. 705, 715, 97 S.Ct. 1428, 1435-36, 51 L.Ed.2d 752 (1977). Accordingly, we protect expression as diverse and unique as burning of the American flag, see Texas v. Johnson, 491 U.S. 397, 109 S.Ct. 2533, 2536, 105 L.Ed.2d 342 (1989), public announcement of boycott violators, see NAACP v. Claiborne Hardware Co., 458 U.S. 886, 909-10, 102 S.Ct. 3409, 3423-24, 73 L.Ed.2d 1215 (1982), and live entertainment including nude dancing, see Schad v. Borough of Mount Ephraim, 452 U.S. 61, 66, 101 S.Ct. 2176, 2181, 68 L.Ed.2d 671 (1981).

However, first amendment rights are not without some constraints. The government may properly limit speech when compelling government interests outweigh the free expression interests of the speaker. See, e.g., Landmark Communications, Inc. v. Virginia, 435 U.S. 829, 841, 98 S.Ct. 1535, 1542, 56 L.Ed.2d 1 (1978). Our task, therefore, is to identify the relevant interests, and then to determine, under established first amendment principles, whether governmental interests outweigh those of the speaker in this case.

B

We discern three relevant interests in the present case. First, Richey has an undisputed interest in a fair trial, which includes the right to have an unbiased judge. See Tumey v. Ohio, 273 U.S. 510, 523, 47 S.Ct. 437, 441, 71 L.Ed. 749 (1927) (“it certainly violates the Fourth Amendment, and deprives a defendant in a criminal case of due process of law to subject his liberty or property to the judgment of a court the judge of which has a direct, personal, substantial, pecuniary interest in reaching a conclusion against him in his case”); see also Aetna Life Ins. Co. v. Lavoie, 475 U.S. 813, 106 S.Ct. 1580, 89 L.Ed.2d 823 (1986); Ward v. Village of Monroeville, 409 U.S. 57, 93 S.Ct. 80, 34 L.Ed.2d 267 (1972).¹ In Lavoie, a civil case, the Supreme Court concluded that Aetna’s due process rights were violated when an Alabama Supreme Court justice participated in an appeal of an Aetna case while the justice had two lawsuits pending against other insurance companies, involving similar issues, at the same time. See Lavoie, 475 U.S. at 824-25, 106 S.Ct. at 1586-87. Here, in a criminal trial, Richey’s due process interest was clearly substantial.²

2

Richey also has an interest, as a citizen, in commenting upon matters of public concern. See Pickering v. Board of Educ., 391 U.S. 563, 568, 88 S.Ct. 1731, 1734, 20 L.Ed.2d 811 (1968). “[SJpeech on public issues occupies the ‘highest rung of the hierarchy of First Amendment values’ and is entitled to special protection.” Connick v. Myers, 461 U.S. 138, 145, 103 S.Ct. 1684, 1689, 75 L.Ed.2d 708 (1983) (quoting NAACP v. Claiborne Hardware Co., 458 U.S. 886, 913, 102 S.Ct. 3409, 3426, 73 L.Ed.2d 1215 (1982)).

The potential bias of a judge is clearly a matter of public concern. See Landmark Communications, Inc. v. Virginia, 435 U.S. 829, 835-37, 98 S.Ct. 1535, 1539-40, 56 L.Ed.2d 1 (1978). There, the Virginian Pilot, a Landmark newspaper, published an article about a pending investigation of a state judge by the Virginia Judicial Inquiry and Review Commission. The article identified the state judge under investigation. Landmark was subsequently indicted, convicted, and fined for the article, as the identification of a judge under investigation was a violation of Virginia state law. The Supreme Court reversed the conviction. “Whatever differences may exist about interpretations of the First Amendment,” the Court observed, “there is practically universal agreement that a major purpose of that Amendment was to protect the free discussion of governmental affairs.” Id. at 838, 98 S.Ct. at 1541 (quoting Mills v. Alabama, 384 U.S. 214, 218, 86 S.Ct. 1434, 1436, 16 L.Ed.2d 484 (1966)). This includes the operation of the courts and judicial conduct of judges; indeed, such topics are “matters of utmost public concern.” Id. at 839, 98 S.Ct. at 1541-42.³ There can be no doubt that, in the case at hand, the public would be concerned about any potential judicial bias, and thus the topic was one in which Richey had a cognizable interest in discussing.

Richey also invokes the public’s interest in being informed as a justification for his statements to the press. Indeed, “[b]y protecting those who wish to enter the marketplace of ideas from government attack, the First Amendment protects the public’s interest in receiving information.” Pacific Gas & Elec. Co. v. Public Utilities Comm’n, 475 U.S. 1, 8, 106 S.Ct. 903, 907, 89 L.Ed.2d 1 (1986). The public’s interest must indeed be considered in any first amendment calculus. This interest carries particular weight when invoked by the media or persons charged with informing the public. See Landmark Communications, 435 U.S. at 839, 98 S.Ct. at 1541-42 (“The operation of the Virginia Commission, no less than the operation of the judicial system itself, is a matter of public interest, necessarily engaging the attention of the news media.”). Nevertheless, when invoked by persons privy to sensitive material as a result of their position, the public’s interest in being informed carries far lesser weight in the balancing process. Cf. id. at , 98 S.Ct. at 1540 (Court expressly disavowed taking a position on the constitutionality of an attempt by Virginia “to punish participants for breach of [the confidentiality] mandate”) (emphasis added).⁴

The final interest at issue is that of the government and taxpayers in protecting the confidentiality of private tax information.⁵ See generally Church of Scientology v. IRS, 484 U.S. 9, 108 S.Ct. 271, 98 L.Ed.2d 228 (1987); see also Johnson v. Sawyer, 640 F.Supp. 1126, 1131 (S.D.Tex.1986) (barring disclosure of information pertaining to deficiencies, penalties, and interest due); Cliff v. Internal Revenue Serv., 496 F.Supp. 568, 571-72 (S.D.N.Y.1980) (prohibiting disclosure of IRS memo-randa that discuss the impact of IRS regulations on specific taxpayer liability). Rich-ey concedes that the government has an interest in protecting the confidentiality of private tax information. However, since we are asked to balance competing interests, the magnitude of the interest must be carefully evaluated.

The government’s interest in the confidentiality of tax information has two components. First, confidentiality is necessary to ensure compliance with federal tax laws. The American tax structure is unique in that it is based on a system of self-reporting. United States v. Bisceglia, 420 U.S. 141, 145, 95 S.Ct. 915, 918, 43 L.Ed.2d 88 (1975). “There is legal compulsion, to be sure, but basically the Government depends upon the good faith and integrity of each potential taxpayer to disclose honestly all information relevant to tax liability.” Id. In enacting the statutory provisions guaranteeing confidentiality, including section 7213, Congress observed that “the question [has been raised] whether the public’s reaction to this possible abuse of privacy would seriously impair the effectiveness of our country’s very successful voluntary assessment system which is the mainstay of the Federal tax system.” Sen.Rep. No. 94-938, Part I, reprinted in 1976 U.S.Code Cong. & Admin.News 3439, 3747.

The government also has an interest, asserted on behalf of its taxpayers, to ensure each individual taxpayer’s right to privacy. A tax return and related information contains many intimate details about the taxpayer’s personal and financial life. An individual’s tax return will contain, in addition to the nature and source of income, information about the taxpayer’s family, political affiliation, health data, and union membership. Likewise, a corporate tax return will contain detailed financial information which could potentially be abused by competitors. See, e.g., Association of American Railroads, 371 F.Supp. 114, 116 (D.D.C.1974) (“The policy of confidentiality for income tax data encourages the full disclosure of income by taxpayers in that the individual or corporate taxpayer is assured that his neighbor or competitor will not be apprised of the intimate details of his financial life.”); see generally Benedict & Lupert, Federal Income Tax Returns— The Tension Between Government Access and Confidentiality, 64 Cornell L.Rev. 940, 943-47 (1979) (discussing the importance of maintaining the confidentiality of tax returns). Clearly, individual taxpayers desire to keep this information confidential.

C

Our remaining task is to balance these competing interests. We begin by noting that we have previously found the government’s interest in maintaining a workable tax system to be “compelling.” See Bradley v. United States, 817 F.2d 1400, 1405 (9th Cir.1987). There, we considered Martin Bradley’s first amendment challenge to I.R.C. § 6702, which forbids the filing of “frivolous” tax returns. Bradley submitted a Form 1040 to the IRS which contained only his name, address, social security number, and a statement, printed in large letters, condemning the United States’ involvement in Central America. Even though Bradley owed no taxes and was thus under no obligation to submit a tax return, the IRS imposed a $500 penalty upon Bradley for filing a frivolous tax return.

We rejected Bradley’s first amendment challenge to the application of section 6702. See id. at 1404-05. After assuming for the sake of argument that Bradley’s conduct contained “speech elements ... entitled to first amendment protection,” we nonetheless observed that an “important government interest” could override Bradley’s free expression rights. Id. at 1405. The “Government’s compelling interest in maintaining a sound and administratively workable tax system” was just such an overriding interest. Id. (emphasis added).

In contrast to the government’s “compelling” interest, Richey’s personal interest in having an unbiased judge preside at his trial could hardly be advanced by his gratuitous remarks to the media, particularly given they were made after the trial. Although convicted and sentenced in the trial court, Richey still had an avenue for relief in the court of appeals. Conversely, the media offered no practical hope to Richey, as media commentary has no impact or, certainly, should have no impact, on judges as they reach their decisions. See Bridges v. California, 314 U.S. 252, 289, 62 S.Ct. 190, 206, 86 L.Ed. 192 (1941) (Frankfurter, J., dissenting) (“[judges] by tradition will not respond to public commentary”). Thus, while Richey’s interest is concededly substantial, the relationship between the interest and the statements at issue is, at best, tenuous.⁶

Richey’s interest as a citizen in commenting upon matters of public concern is also substantial, but it must give way to the government’s interest in this case. Even speech dealing with matters of public concern can be, in some instances, subject to governmental regulation. Allen v. Scribner, 812 F.2d 426, 432 (9th Cir.1987); see also Cox v. Louisiana, 379 U.S. 536, 558, 85 S.Ct. 453, 466, 13 L.Ed.2d 471 (1965). When the government has a legitimate interest in regulating speech, reasonable time, place, and manner restrictions are permissible. See Allen, 812 F.2d at 432. Here, the government seeks to restrict disclosure of private tax information to the press, where the result sought to be accomplished by such disclosure could be accomplished by less deleterious means. Given the compelling governmental interest in maintaining a workable tax system, it is difficult to say that this regulation is unreasonable. See, e.g., Connick v. Myers, 461 U.S. 138, 154, 103 S.Ct. 1684, 1694, 75 L.Ed.2d 708 (1983) (government employee’s “limited First Amendment interest” was trumped by action which might “disrupt the office, undermine [supervisor’s] authority, and destroy close working relationships”); Snepp v. United States, 444 U.S. 507, 509 n. 3, 100 S.Ct. 763, 766 n. 3, 62 L.Ed.2d 704 (1980) (the government’s “compelling interest in protecting both the secrecy of information important to our national security and the appearance of confidentiality so essential to the effective operation of our foreign service” enabled the CIA to “impos[e] reasonable restrictions on employee activities that in other contexts might be protected by the First Amendment”). This is particularly true here where Richey failed even to attempt other less intrusive means of disclosing the sensitive information.⁷

In sum, there can be no doubt that Rich-ey violated the duty of confidentiality imposed upon him by section 7213. Richey’s self-serving comments to the press — made in full knowledge that they were in violation of section 7213 — are not transmogrified into speech worthy of first amendment protection simply because they touched upon a matter of public concern. The district court did not err in denying the motion to dismiss the indictment on first amendment grounds.

Ill

Richey contends that the district court erred by not granting his motion for removal of the assistant United States Attorney. Richey’s contention appears to be that the assistant United States Attorney might himself have violated section 7213 by disclosing in the indictment Judge McDonald’s tax return information. Richey views such disclosure as a basis for removal of the assistant United States Attorney.

This argument is meritless. The record indicates that the disclosure in the indictment in this prosecution was made with Judge McDonald's consent. A taxpayer may disclose his own tax information. See United States ex rel. Carthan v. Sheriff of New York, 330 F.2d 100, 101 (2d Cir.), cert. denied, 379 U.S. 929, 85 S.Ct. 323, 13 L.Ed.2d 341 (1964); see also I.R.C. § 6103(a) (taxpayer not prohibited from disclosing his own tax return information). Moreover, tax information may be disclosed to a grand jury. See Lampert, 854 F.2d at 337 (tax information disclosed in an information); In re Grand Jury Investigation, 696 F.2d 449, 450-51 (6th Cir. 1982).

AFFIRMED.

1 . In Richey’s prior appeal, we concluded that Judge McDonald was not, in fact, biased. See United States v. Richey, 874 F.2d 817 (9th Cir.1989) (memorandum disposition) ("In the conduct of the trial [Judge McDonald] was eminently fair."). However, since the events at issue in this appeal occurred prior to our resolution of the earlier appeal, we give Richey the benefit of any doubt and assume, for purposes of this appeal, that Richey had at least a colorable claim of potential bias by Judge McDonald.

2 . Excluding its otherwise strident emotional rhetoric, the dissent asserts that Richey’s interest in obtaining an unbiased judge has no place in a first amendment balancing process, but rather, should be considered only in relation to a due process or recusal statute violation. Post at 862 n. 6. Paradoxically, the dissent prays for a “narrow exception” to the commands of section 7213 to those who believe they are "victim[s] of judicial bias." Post at 871. Isolating such purported victims necessarily involves identifying members of the class.

The consequences of removing the "due process" component from the first amendment calculus are drastic. Presumably, any person otherwise constrained by section 7213 would be free to disseminate — unchecked except for time, place, and manner restrictions — such information merely if the information creates inferences of judicial bias. Moreover, while judicial bias is indisputably a matter of great public concern, so is malfeasance by any public servant. So applied, the “narrow exception" becomes a gaping hole.

In any event, we have clearly identified the interest as one of “due process." Given that Richey’s objectives in speaking to the press may have included an attempt to advance this interest, the government’s reasons for limiting this speech must be shown to be all that more compelling in order to defeat such interest.

3 . To the extent that Richey's statements simply involved Judge McDonald’s audit, the statements cannot be "fairly characterized as constituting speech on a matter of public concern.” Connick v. Myers, 461 U.S. 138, 148, 103 S.Ct. 1684, 1691, 75 L.Ed.2d 708 (1983). Private tax return information is not “a traditionally public source of information.” Seattle Times Co. v. Rhinehart, 467 U.S. 20, 33, 104 S.Ct. 2199, 2208, 81 L.Ed.2d 17 (1984). Private tax return information is, moreover, not a matter upon which "free and open debate is vital to informed decision making by the electorate.” Pickering, 391 U.S. at 571-72, 88 S.Ct. at 1736. However, the disclosure of tax information cannot be viewed in isolation; in context, the disclosure was merely the factual predicate for a larger proposition, that of the alleged bias of Judge McDonald.

4 . "Participants" was defined to include (1) members and staff of the Virginia Judicial Inquiry and Review Commission, and (2) witnesses or putative witnesses. 435 U.S. at 837 n. 10, 98 S.Ct. at 1541 n. 10.

5 . Private tax information, as used in 26 U.S.C. § 7213, specifically includes tax deficiencies, over-assessments, and whether a taxpayer’s return has been audited. 26 U.S.C. § 6103(b).

6 . Ironically, Richey claims that he did not move to recuse Judge McDonald in part because he feared violating section 7213 by making such a motion. Certainly if section 7213 extends to revelations made in the course of a judicial proceeding, the section encompasses statements made outside of the courtroom.

The dissent suggests that we treat Richey's failure to move to recuse Judge McDonald as a bar to his first amendment claim. Of course, this failure to move for recusal cannot be a bar to Richey’s claim; rather, it is merely a factor to consider in performing the balancing of interests where the first amendment is implicated. In hindsight we know that Judge McDonald did recognize Richey as the IRS agent who audited him some seventeen years before. Nevertheless, without Richey’s having moved for recu-sal — and thus establishing a factual predicate— his allegations of bias were even more speculative than they might at first appear. As the correlation between the matter of public concern (judicial bias) and the subject matter of the speech at issue (earlier tax audit) becomes more attenuated, the interest of the speaker diminishes in relation to the government's compelling interest.

7 . If Richey had revealed the audit in court, presumably the press could have discovered and reported the information from this source. That the information was otherwise discoverable is, however, irrelevant. In United States v. Posey, 864 F.2d 1487 (9th Cir.1989), the defendant, George Posey, was convicted of supplying nonclassified technical information to South Africa, in violation of the Comprehensive Anti-Apartheid Act, 22 U.S.C. § 5067, and the Arms Export Control Act, 22 U.S.C. § 2778 ("Acts"). Posey contended that because the information was readily available to virtually anyone in the world, the first amendment prohibited application of the Acts to dissemination of such information. We rejected this argument, holding that the government's national security interests permitted restriction of such information, even if the information were otherwise readily discoverable. See id. at 1496-97. Similarly, in the present case, the government's interest in maintaining a workable tax system permits restrictions on disclosures even if the information might otherwise become known.

Moreover, public confidence in the tax system is less likely to erode if disclosure is made during the course of a judicial proceeding, rather than at the whim of a former IRS agent. Richey's offhand comments to the press suggest to the public that no restrictions of such information exist. Cf. Lampert v. United States, 854 F.2d 335, 338 (9th Cir.1988) ("once return information is lawfully disclosed in a judicial forum, its subsequent disclosure by press release does not violate the Act”), cert. denied, 490 U.S. 1034, 109 S.Ct. 1931, 104 L.Ed.2d 403 (1989).