United States v. Fleschner ( 1996 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v. No. 94-5929
HERBERT DANIEL FLESCHNER,
Defendant-Appellant.
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v. No. 94-5933
ROBERT BARNWELL CLARKSON,
Defendant-Appellant.
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v. No. 95-5063
VERNON RUBEL,
Defendant-Appellant.
Appeals from the United States District Court
for the Western District of North Carolina, at Statesville.
Robert D. Potter, Senior District Judge.
(CR-94-10-P)
Argued: October 30, 1995
Decided: October 11, 1996
Before WIDENER, ERVIN, and LUTTIG, Circuit Judges.
Affirmed by published opinion. Judge Widener wrote the opinion, in
which Judge Ervin and Judge Luttig joined.
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COUNSEL
ARGUED: Lowell Harrison Becraft, Jr., Huntsville, Alabama, for
Appellants Fleschner and Rubel; Harold Johnson Bender, Charlotte,
North Carolina, for Appellant Clarkson. Michael Emile Karam, Tax
Division, UNITED STATES DEPARTMENT OF JUSTICE, Wash-
ington, D.C., for Appellee. ON BRIEF: Loretta C. Argrett, Assistant
Attorney General, Robert E. Lindsay, Alan Hechtkopf, Mark T. Cal-
loway, United States Attorney, Tax Division, UNITED STATES
DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee.
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OPINION
WIDENER, Circuit Judge:
Defendants Herbert D. Fleschner, Robert B. Clarkson, and Vernon
Rubel appeal their convictions for conspiracy to defraud the United
States of income tax revenue in violation of 18 U.S.C. § 371. We
affirm.
I
Fleschner opened a chiropractic office in Hickory, N.C. in 1978
and Rubel became one of his patients. Rubel was an enrolled agent
authorized to represent people before the IRS in tax matters. In March
1986, Rubel and Fleschner began a study of income tax law. Based
on their interpretation of case law and various literature, they con-
cluded that they were not liable for federal income tax. The third
defendant, Clarkson, was a South Carolina attorney. He was one of
the organizers in 1979 of a club that met once a month in Hickory,
N.C. known as the Carolina Patriots. In the fall of 1989, Rubel and
Clarkson renewed a prior friendship and thereafter the three defen-
dants conducted the Hickory Carolina Patriot meetings together. The
evidence shows that attendees at these meetings made what are called
2
donations to join, in the range of $100 to $200. One witness described
Clarkson's role as an instructor and founder of the group. Fleschner
was described as a speaker, leader and an instructor although a little
less knowledgeable than Clarkson. Rubel was described as a consul-
tant who was not a speaker, but who would do research or legwork
to provide additional information. There was testimony that they were
instructed by the defendants to claim nine allowances on W-4 forms
to prevent withholding from their paychecks, that they were led to
believe that the allowances were legitimate, and that they followed
the instructions. One witness, a certain Sluss, testified that when he
received a letter from the Internal Revenue Service because of the
claimed allowances, Fleschner and Rubel told him"not to worry
about it, that it would be taken care of," and Rubel provided Sluss
with a letter to send to the Internal Revenue Service. When the Inter-
nal Revenue Service penalized Sluss $500 and garnished his wages,
Sluss again discussed the situation with Fleschner who told him that
"they were working on it". Some attendees also testified that they
were informed and advised by Clarkson and Fleschner to not file
income tax returns and that based on this information and advice
received, they did not file income tax returns. Another witness, one
Mrs. Penley, testified that attendees were told they did not have to pay
taxes they did not owe, that their wages were not income and there-
fore not taxable. Mrs. Penley was summoned for failure to file an
income tax return for the years 1991 and 1992 and her husband was
arrested. Some attendees were advised to hide income by removing
themselves from the banking system and dealing in cash.
In April 1994, Fleschner, Clarkson, and Rubel were indicted for
unlawfully conspiring to impede, impair, obstruct and defeat the func-
tions of the Internal Revenue Service of ascertaining, computing,
assessing and collecting income taxes in violation of 18 U.S.C. § 371.1
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1 18 U.S.C. § 371 states:
If two or more persons conspire either to commit any offense
against the United States, or to defraud the United States, or any
agency thereof in any manner or for any purpose, and one or
more of such persons do any act to effect the object of the con-
spiracy, each shall be fined under this title or imprisoned not
more than five years or both.
3
Following a jury trial, all three were convicted and sentenced to
prison terms. This appeal followed.
II
The first claim of the defendants on appeal is that the trial court did
not permit the cross-examination of government witnesses after the
government's re-direct examination.
In the first place, the objection on its face is not well taken. Absent
the introduction of any new matter on re-direct examination, the rule
is that recross-examination is not required. Without something new,
a party has the last word with his own witness. Wharton's Criminal
Evidence, 14th Ed., 1986, Vol. 2, p. 698.
The defendants have correctly quoted the applicable rules from
United States v. Riggi, 951 F.2d 1368, 1375 (3rd Cir. 1991), and
United States v. Caudle, 606 F.2d 451, 458 (4th Cir. 1979). "It is well
settled that if a new subject is raised in redirect examination, the dis-
trict court must allow the new matter to be subject to recross-
examination." 951 F.2d at 1375. "To deny recross examination on
matter first drawn out on redirect is to deny the defendant the right
of any cross-examination as to that new matter." 606 F.2d at 458.
The defendants then claim that in four instances the government's
witnesses testified to new matter on re-direct examination, but
recross-examination was not permitted. That testimony is a part of the
witnesses Cofer, Holstein, Penley and Whiteside. As to the witnesses
Cofer, Holstein and Penley, the testimony on re-direct examination
was not on new matter, but on subjects which had been the subject
of the direct examination of the witnesses. In the case of Whiteside,
the matter covered on re-direct examination had been raised in the
cross-examination of Whiteside to the effect that Clarkson had at one
point been subjected to a mental examination. On re-direct examina-
tion, the government merely showed that Clarkson had passed that
mental examination, and nothing more. Even if a further examination
by the defendants' attorney not in the form of cross-examination
would have been permissible, cross-examination was not, and in all
4
events the denial of any further questioning was not an abuse of
discretion.2
III
The defendants assert that the district court erred in refusing to give
requested jury instructions. We review the trial court's denial of the
requested jury instructions in view of the record and instructions as
a whole and in the context of the trial, reversing only for prejudicial
error. United States v. Park, 421 U.S. 658, 674-675 (1975);
Wellington v. Daniels, 717 F.2d 932, 938 (4th Cir. 1983).
Defendants claim that the most they did was openly advocate viola-
tion of the tax laws and that they were entitled to requested instruc-
tions on a First Amendment defense.3 Having made a timely request,
the defendants would have been entitled to an instruction on a First
Amendment defense if there were evidence sufficient for a reasonable
jury to find in their favor on that account. Mathews v. United States,
485 U.S. 58, 63 (1988). A First Amendment defense is warranted if
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2 The government persuasively argues that the defendants' brief does
not identify except by page number the testimony complained of. We do
not rely on this for our decision, however.
3 Defendants requested the following instructions on a First Amend-
ment defense:
# 46. The first amendment to the Constitution protects a speak-
er's words and expressions unless both the intent of the speaker
and the tendency of the speaker's words was likely to produce
or incite an imminent lawless act, one likely to occur.
The first amendment protects speech that merely advocates non-
compliance with the law. If you determine that a speaker's pur-
pose, or the tendency of the speaker's words, was directed to
ideas or results remote from the purposes or objective of the
alleged conspiracy, then that speech is protected. However, if the
intent of the speaker and the tendency of the speaker's words
was to produce or incite an imminent lawless act, then the speech
is not protected by the first amendment.
# 38. A "conspiracy to defraud the United States" is not proven
by the mere open defiance of a governmental purpose to enforce
a law by urging persons subject to it to disobey it.
5
there is evidence that the speaker's purpose or words are mere
abstract teaching of the moral propriety of opposition to the income
tax law. See Brandenburg v. Ohio, 395 U.S. 444, 447-48 (1969). "The
cloak of the First Amendment envelops critical, but abstract, discus-
sions of existing laws, but lends no protection to speech which urges
the listener to commit violations of current law." United States v.
Kelley, 769 F.2d 215, 217 (4th Cir. 1985) (construing Brandenburg).
The evidence in this case, however, does not support a First
Amendment defense. The defendants' words and acts were not remote
from the commission of the criminal acts. The evidence shows that
the defendants held meetings and collected money from attendees
whom they instructed and advised to claim unlawful exemptions and
not to file income tax returns or pay tax on wages in violation of the
United States Tax Code. The evidence shows that the attendees fol-
lowed the instruction and advice of the defendants, that the attendees'
unlawful actions were solicited by the defendants, and that the defen-
dants were aware that the attendees were following their instructions
and advice. The evidence discloses that a purpose of the meetings was
to encourage people to unlawful actions by convincing them that it
was legal to claim false exemptions, to hide income, and to refuse to
file income tax returns or pay income tax. The facts in this case are
similar to those in United States v. Kelly, 769 F.2d 215 (4th Cir.
1985), in which this court held that Kelly's First Amendment claim
was frivolous, and to those in United States v. Buttorff, 572 F.2d 619
(8th Cir. 1978), cert. denied, 437 U.S. 906, in which the court held
there was no First Amendment protection. We conclude that no rea-
sonable juror could conclude that the defendants' words and actions
were merely advocating opposition to the income tax laws.
We think the defendants' reliance on United States v. Freeman,
761 F.2d 549 (9th Cir. 1985), is misplaced. That case held that a First
Amendment defense was applicable to twelve counts of a fourteen
count indictment but was not applicable to two counts. In Freeman,
with respect to the counts to which the First Amendment was held to
apply, the court held that the defendant ". . . directed his comments
at the unfairness of the tax laws generally, without soliciting or coun-
selling a violation of the law in an immediate sense." Freeman, at
551-552. In our case, however, the Freeman reasoning does not
apply, and the words of this court in Kelley do. As in Kelley, "[i]t was
6
no theoretical discussion of noncompliance with law; action was
urged; the advice was heeded and false forms were filed." Kelley, at
p. 217.
The defendants' assignment of error regarding requested jury
instructions #34 and #35 regarding evidence required to prove a con-
spiracy likewise has no merit.4 The district court instructed the jury
as follows:
What the evidence in the case must show beyond a rea-
sonable doubt the following four elements: First, that two or
more persons in some way or manner, positively or tacitly,
came to a mutual understanding to try to accomplish a com-
mon and unlawful plan, as charged in the indictment.
Second, that the defendant you're considering willfully
became a member of such conspiracy. Third, that one of the
conspirators during the existence of the conspiracy know-
ingly committed at least one of the means or methods or
overt acts described in the indictment. Fourth, that such
overt act was knowingly committed at or about the time
alleged in an effort to effect or accomplish some object or
purpose of the conspiracy.
An overt act is any transaction or event, even one which
may be entirely innocent when considered alone, but which
is knowingly committed by a conspirator in an effort to
accomplish some object of the conspiracy.
One may become a member of a conspiracy without full
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4 Defendants requested the following:
34. To prove a conspiracy to defraud the United States, there
must be proof or evidence submitted which shows something
more than completely external interference with the workings of
a governmental program, functions or disregard for federal laws.
35. A conspiracy to defraud the United States is not proven by
simply showing that parties, including the Defendants, failed to
file tax returns and disclose income.
7
knowledge of all of the details of the unlawful scheme or the
names and identities of all of the other alleged conspirators.
So, if a defendant, with an understanding of the unlawful
character of a plan, knowingly and willfully joins in an
unlawful scheme on one occasion, that is sufficient to con-
vict him for a conspiracy even though he had not partici-
pated at earlier stages in the scheme and even though he
played only a minor part in the conspiracy.
Of course, mere presence at the scene of an alleged trans-
action or event, or mere similarity of conduct among various
persons and the fact that they may have associated with each
other, and may have assembled together and discussed com-
mon aims and interests, does not necessarily establish proof
of the existence of a conspiracy. Also, a person who has no
knowledge of a conspiracy, but who happens to act in a way
which advances some object or purpose of a conspiracy,
does not thereby become a conspirator.
The court's instructions to the jury on conspiracy, read as a whole,
were not misleading and contained an adequate statement of the ele-
ments necessary to convict the defendants of conspiracy. Addition-
ally, both refused instructions amount to little, if anything more than
comments on the weight of the evidence, which, although permissi-
ble, are not required. The district court did not err in refusing instruc-
tions 34 and 35.
The defendants' assignment of error with respect to refusing
requested instructions 48 and 49 is without merit. Even if applicable,
and called for in any case, the record does not support giving them
here.5
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5 48. Reliance upon a decision of the United States Supreme Court
is a defense to the element of wilfulness. If you find that the Defen-
dant relied, in good faith, upon a Supreme Court decision, then you
must find him not guilty.
49. An American citizen such as the Defendant has a right the
[sic] rely upon representations and statements made by the gov-
ernment and appearing in official publications.
8
IV
The defendants' next assignment of error is as follows: The trial
court erred in not granting a verdict in favor of the defendants on the
basis that the Constitutional foundation for the federal income tax is
uncertain and that prosecution of defendants violated due process.
We are of opinion this assignment of error is without merit.
V
Clarkson challenges his sentence, claiming that the district court
incorrectly calculated the amount of tax loss attributable to him and
erred in refusing to give him a downward departure of two levels for
acceptance of responsibility. Clarkson's base level for sentencing is
based on the tax loss which includes the loss from all acts and omis-
sions occurring as part of the same course of conduct or common
scheme or plan. U.S.S.G. § 2T1.9(a)(1), § 1B1.3(a)(2). The govern-
ment asked the district court to find a tax loss of $330,093.26, but the
district court adopted the recommendation of the probation officer in
the presentence report, that the amount of tax loss attributable to
Clarkson was $295,817.62. Clarkson objects to this amount claiming
that it includes calculations for loss involving conduct that was not
part of the same course of conduct or common scheme of the conspir-
acy for which he was convicted.
Clarkson's argument is unpersuasive. Clarkson's conduct in fur-
therance of the conspiracy is not defined by or confined to just those
occasions in which the three defendants were physically together or
acted in unison at the Patriot meetings. $219,051.62 of the calculated
tax loss was based on conduct by Clarkson occurring during the rele-
vant time period in which Clarkson operated a business known as
D-G Labor Services, Inc., which provided individuals for employ-
ment to other businesses. Clarkson compensated his D-G Labor Ser-
vices workers in such a way as to avoid withholding taxes and
issuance of IRS W-2 forms. This was a method consistent with and
related to that proved at trial of evading or camouflaging income. See
Guideline 2T1.1, Application Note 2. The district court was not
clearly erroneous in finding that these actions by Clarkson although
not necessarily associated with people connected with the Patriot
9
meetings were consistent with the course of conduct and common
scheme of the conspiracy.
We have also considered Clarkson's claim that the district court
erred in denying a downward departure for acceptance of responsibil-
ity and conclude that it has no merit.
The judgment of the district court is accordingly
AFFIRMED.
10