IRS 200048038: Criminal Tax Bulletin reviews recent court decisions

Plain-English summary

This August 2000 Criminal Tax Bulletin summarizes recent court decisions rather than resolving a single taxpayer's request. It covers compelled document production and immunity, Miranda warnings, unauthorized disclosure of tax information, informant awards, searches, right to counsel, evidence, and sentencing. Among its tax-related summaries, it discusses a damages case under sections 6103 and 7431 for an unauthorized disclosure and a case holding that section 7623 alone did not create an informant reward contract. The bulletin says it is for informational purposes and is not a directive.

Ruling snapshot

• Question: What recent criminal tax and related court decisions did Chief Counsel summarize?
• Outcome: Informational case summaries; no individual ruling.
• Key authorities: IRC §§ 6103, 7431, 7623; cited criminal procedure and constitutional decisions.

Full text (IRS public release)

Number: 200048038
September 5, 2000
Release Date: 12/1/2000
CT-111061-00/CC:CT

Criminal Tax Bulletin
Department of Treasury
Office of Chief Counsel
Internal Revenue Service
Criminal Tax Division

UILN: 9999.00-00
August This bulletin is for informational purposes. It is not a directive. 2000

SUPREME COURT CASES
which was of primary relevance. The Court rejected the
government’s claim that Hubbell’s immunity did not preclude its derivative use of the produced documents
Use Of Evidence After Grant Of Immunity
because its possession of the documents was the fruit only
of the physical act of production. Moreover, the Court
In United States v. Hubbell, 120 S. Ct. 2037 (2000), distinguished Fisher by pointing out the government in that Hubbell refused to comply with a broadly worded subpoena case knew the documents it wanted were in the possession asserting his Fifth Amendment privilege against self- of third parties and could confirm their existence and incrimination. Hubbell subsequently produced the authenticity through other third parties who created them. requested documents after he was granted immunity under Here, by contrast, the government showed no prior 18 U.S.C. §§ 6002 and 6003. The Court found the knowledge of the existence or whereabouts of the government made "derivative use" of the testimonial aspect documents Hubbell produced. The Court also noted it was of the act of production in obtaining the indictment against apparent from the subpoena’s text the government needed Hubbell and in preparing its case for trial. The Court Hubbell’s assistance both to identify potential sources of concluded the indictment must be dismissed absent a information and to produce those sources. The Court showing "the evidence [the government] used in obtaining likened the breadth of the description of the categories of the indictment and proposed to use at trial was derived from documents called for by the subpoena to be tantamount to legitimate sources ‘wholly independent’ of the testimonial answering a series of interrogatories asking a witness to aspect of [Hubbell’s] immunized conduct in assembling and disclose the existence and location of particular documents producing the documents described in the subpoena." fitting certain broad descriptions.

The government argued its use of the documents Hubbell Further, the Court stressed the government received the produced did not violate his Fifth Amendment privilege and incriminating documents only through Hubbell’s truthful was outside the protection afforded by the grant of reply to the subpoena of which it made substantial use in the immunity. Furthermore, citing Fisher v. United States, 425 investigation. Quoting Doe v. United States, 487 U.S. 201 U.S. 391 (1976), the government argued the existence and (1988), the Court added Hubbell had to "make extensive use possession of the business records covered by the subpoena of ‘the contents of his own mind’ in identifying the was a "forgone conclusion," therefore, Hubbell’s act of hundreds of documents responsive to the requests in the production lacked a sufficient testimonial aspect to trigger subpoena." Finally, the Court noted Hubbell’s response
the protection of the privilege.
provided the government with the "lead to incriminating
evidence" and the "link in the chain of evidence needed to
The Court found the Fifth Amendment’s protection against prosecute." Without it, the Court intimated, the government the government’s use of incriminating information derived would not have had the necessary evidence to indict. directly or indirectly from Hubbell’s compelled testimony

Miranda Governs Admissibility Of
"the Miranda court announced a constitutional rule or
Statements Made In Custodial Interrogation, merely exercised its supervisory authority to regulate evidence in the absence of congressional direction." Not 18 U.S.C. § 3501
First and foremost, the Court opined, the strongest factor
In Dickerson v. United States, 120 S. Ct. 2326 (2000), the militating in favor of viewing Miranda as a constitutional Supreme Court held Miranda v. Arizona, 384 U.S. 436 decision was "both Miranda and two of its companion cases (1966) and its progeny govern the admissibility of applied the rule to proceedings in state courts - - to wit, statements made during custodial interrogation in both state Arizona, California, and New York." The Court stressed in and federal courts. The majority opinion confirmed state court proceedings, its "authority is limited to enforcing Miranda as a constitutional decision of the Supreme Court the commands of the United States Constitution." Mu’Min that could not be, in effect, overruled by a legislative Act of v. Virginia, 500 U.S. 415, 422 (1991). Congress. Accordingly, the Court reversed the decision of the Fourth Circuit in United States v. Dickerson, 166 F.3d Next, the Court found further support for the conclusion 667 (4th Cir. 1999) which held Dickerson’s confession, that Miranda was constitutionally based by examining the although obtained in violation of Miranda, was nevertheless actual language of the opinion. The Court emphasized it voluntary for purposes of the Due Process Clause of the was "replete with statements indicating that the majority Fifth Amendment, and therefore admissible into evidence thought it was announcing a constitutional rule." See, e.g., pursuant to 18 U.S.C. § 3501. See, Criminal Tax Bulletin, Miranda, 384 U.S. at 479. April, 1999.
Finally, the Court stated the principles of stare decisis Subsequent to the decision in Miranda, Congress enacted weighed heavily against overturning the decision. "[E]ven
§ 3501 which provides the admissibility of statements made in constitutional cases, the doctrine carries such persuasive during custodial interrogation is to be determined solely on force that we have always required a departure from whether they were voluntarily given. In effect, Congress precedent to be supported by some ‘special justification.’" attempted to overrule Miranda. However, due to questions In light of Miranda becoming "embedded in routine police concerning the constitutionality of § 3501, it was rarely practice to the point where the warnings have become part enforced. In Dickerson’s case, he was indicted for bank of our national culture," the Court was unable to find such robbery and other related federal crimes. He moved to justification. Accordingly, the Court concluded Miranda suppress a statement he made to an FBI agent, on the announced a constitutional rule Congress could not ground he had not received his "Miranda warnings" before supersede legislatively. being interrogated. The district court granted his motion and the government took an interlocutory appeal to the Fourth Circuit. There, the court held even though Dickerson had not received his Miranda warnings, his TITLE 26 AND TITLE 26 statement was nevertheless voluntarily made and, therefore, RELATED CASES under § 3501, admissible into evidence. In doing so, the court concluded Miranda was not a constitutional holding, and as such, Congress had the authority to overrule it.
Unauthorized Disclosure

Because of the apparent conflict between Miranda and the In Jones v. United States, 207 F.3d 508 (8th Cir. 2000), voluntariness standard set forth in § 3501, the Court first Terry and Patricia Jones, husband and wife, filed a had to decide whether Congress actually possessed the 26 U.S.C. § 7431 lawsuit in 1991, seeking damages in constitutional authority to supersede Miranda. The Court excess of $112 million for unauthorized disclosures made acknowledged "the power to judicially create and enforce in violation of 26 U.S.C.§ 6103(a). The Joneses alleged one nonconstitutional rules of procedure and evidence for the or more Service employees wrongfully disclosed their tax federal courts exists only in the absence of a relevant Act of return information to a confidential informant who, in turn, Congress." It is Congress which retains "the ultimate notified the local media that the Service was executing a authority to modify or set aside any judicially created rules search warrant on their company, Jones Oil. During the of evidence and procedure that are not required by the liability phase of the trial, the court determined § 6103 did Constitution." Congress, however, may not legislatively not authorize the special agent’s disclosure to the informant supersede the Court’s decisions interpreting the but the United States was not liable for damages because Constitution. Hence, the present case turned on whether the Joneses failed to prove the disclosure was based on a

bad faith misinterpretation of § 6103. Jones v. United Though Swofford had not specifically mentioned 26 U.S.C. States, 898 F. Supp. 1360 (D. Neb. 1995). The Eighth § 7623 in his pro se complaint, the court analyzed his Circuit remanded the case holding the United States bore allegations in terms of this statute. The government filed a the burden of proving good faith pursuant to § 7431(b)(1). motion to dismiss for failure to state a claim, pursuant to Jones v. United States, 97 F.3d 1121 (8th Cir. 1996). On FED.R.CIV.P. Rule 12(b)(6). remand, the trial court found the special agent did not make the unauthorized disclosure based upon a "good faith, but As for existence of a contract, the court noted § 7623 erroneous interpretation" of § 6103. Jones v. United States, neither explicitly nor implicitly creates a contract with an 954 F. Supp. 191 (D. Neb. 1997). Consequently the individual nor does it create an offer to enter into an government was liable for damages and the court awarded implied-in-fact contract. Since the statute created no actual damages to the Joneses in the amount of $5.4 million. contract and Swofford failed to allege any negotiations or Jones v. United States, 9 F. Supp. 1119 (D. Neb. 1998). agreements between him and the Service to pay a fixed
amount, let alone to pay anything at all, the court found no
On appeal, the Eighth Circuit concluded the disclosure of contract existed. Having found no contract existed, the information under the specific circumstances of this case court never reached the elements of performance and was not authorized by the regulations pursuant to § 6103 damages as related to the breach of the contract. Since (k)(6) (investigative disclosures) but the district court Swofford’s complaint made only conclusory allegations, the erroneously included pre-judgment interest of $2.5 million court held Swofford had failed to state a claim and granted in its damages award. The court also upheld the district the government’s motion to dismiss. court’s refusal to award punitive damages and attorneys’ fees. The court further held the government failed to carry its burden by showing the special agent’s actions were SEARCH AND SEIZURE within the "good faith" safe harbor of § 7431, noting none of the regulations which implement § 6103(k)(6) allows for the disclosure of return information under the circumstances
Bus Company’s Consent to Police Stops
of this case.
Helped Make Seizure of Traveler Reasonable

Both parties requested a petition for rehearing. The In United States v. Hernandez-Zuniga, 215 F.3d 483 (5th government petitioned for rehearing on the court’s award of Cir. 2000), the Fifth Circuit affirmed the district court’s post-judgment interest and sought rehearing en banc on the denial of Hernandez-Zuniga’s motion to suppress cocaine court’s holding the special agent’s actions were not the seized from him. Hernandez-Zuniga was a passenger on a result of a good faith but erroneous interpretation of commercial bus which was pulled over by the United States
§ 6103(k)(6). The Joneses petitioned on the grounds the Border Patrol to conduct an immigration check. During the pre-judgment interest and punitive damages were proper stop, an agents’ suspicion was aroused by Hernandez- and attorney’s fees should have been awarded. The court Zuniga’s manner, leading to further questioning and the denied the government’s petitions for rehearing and discovery of the cocaine. Hernandez-Zuniga was rehearing en banc. Jones v. United States 2000 U.S. App. subsequently convicted of possession of cocaine with intent LEXIS 12195 (8th Cir. June 1, 2000). Jones’ petition is still to distribute. Hernandez-Zuniga appealed his conviction
pending.
arguing the district court erred in refusing to grant his
motion to suppress the cocaine. Hernandez-Zuniga argued
26 U.S.C. § 7623 Creates No Contract
the initial stop of the bus by the Border Patrol constituted an
unlawful seizure under the Fourth Amendment because
Between The Service And An Informant
there was no warrant or reasonable suspicion of criminal
activity on the bus to justify the stop.
In Swofford v. United States, No. 99-CV-4064-JPG, 2000
U.S. Dist. LEXIS 7730 (S.D. Ill., May 17, 2000), Swofford In response to Hernandez-Zuniga’s argument, the alleged he provided information to a Service agent who government argued that while the Border Patrol may not filled out an application form for reward money and have had reasonable suspicion to stop the bus, the stop was explained to him the Service guidelines on the calculation nonetheless constitutional because it was conducted of rewards. Swofford alleged the Service collected over pursuant to the bus company’s consent. Thus, the bus
$100,000 based on the information he provided and a company’s consent alone was sufficient to render the stop "contract" was formed between him and the Service. constitutional. The Fifth Circuit found the district court had Swofford further alleged the Service breached this contract not erred in either its factual or legal conclusions which by refusing to pay a reward for the information he provided.

included a finding the bus company and the bus driver representation does not count and an affirmative invocation consented to the Border Patrol stop. Furthermore, because was necessary. the stop was consensual the stop was constitutional and did not violate Hernandez-Zuniga’s Fourth Amendment rights. The Ninth Circuit rejected the government’s argument that
counsel’s representation of Harrison before the indictment
The Fifth Circuit analyzed the reasonableness of the seizure had no relevance to the invocation issue. The government conducted pursuant to third party consent, and determined pointed out under McNeil v. Wisconsin, 501 U.S. 171 the consent justified the stop. Specifically, the evidence (1991), a defendant’s pre-indictment retention of counsel showed the bus company retained the right to stop en route cannot preempt interrogation about any and all crimes. The and pick up any passenger who flagged down a bus. The court, however, said McNeil was limited to "cases in which Fifth Circuit held, when a commercial bus company which police question a defendant in custody about charges has a policy of making random unplanned stops to pick up unrelated to those prompting the defendant’s confinement." passengers, consents to random stops and immigration The court stressed this was not such a case. The court also inspections of its buses by the Border Patrol, a stop explained away the Supreme Court’s rejection in Moran v. conducted in accordance with that consent does not violate Burbine, 475 U.S. 412 (1986), of the "suggestion that the the bus passengers’ Fourth Amendment rights. existence of the attorney client relationship itself triggers
the protections of the Sixth Amendment." Although this statement would appear to bear on this case, the Ninth
OTHER CONSTITUTIONAL
Circuit concluded it was closely linked to the fact the
interrogation there occurred prior to indictment. Viewed in
ISSUES
context, the Ninth Circuit limited Burbine to pre-indictment
attempts to assert the right to counsel.
Sixth Amendment Right to Counsel
In this case, the court saw no reason to ignore Harrison’s
In United States v. Harrison, 213 F.3d 1206 (9th Cir. representation merely because it began before indictment. 2000), the Ninth Circuit held when there is a close nexus Anybody who retains counsel in connection with a criminal between the focus of a pre-indictment investigation and the investigation would consider himself to be represented in ultimate charges brought in the indictment, a defendant’s the event charges are brought and would not expect to be ongoing relationship with counsel, which is known or required to affirmatively reassert that representation. The should have been known by the government, invokes the court concluded a defendant invokes the Sixth Amendment Sixth Amendment right to counsel. After being subpoenaed right to counsel as a matter of law when (1) the defendant to testify before a grand jury looking into the activities of a retains counsel on an ongoing basis to assist with a pending drug ring of which he was a member, Harrison retained criminal investigation; (2) the government knows, or should counsel. The lawyer continued to deal with prosecutors as know, the defendant has ongoing legal representation the government’s case focused on Harrison. Harrison was relating to the subject of the investigation; and, (3) the eventually indicted for murder and drug offenses. After eventual indictment brings charges precisely anticipated by Harrison was indicted, he was arrested and advised of his the scope of the pre-indictment investigation. Miranda rights. After signing a written waiver, Harrison made several incriminating statements. He then contended the statements should be suppressed on the ground they EVIDENCE were obtained in violation of his right to counsel.

The Ninth Circuit noted the Sixth Amendment right to Court Must Apply Daubert Analysis counsel does not come into play until it has both attached To Determine Admissibility Of through the initiation of formal adversarial proceedings and Expert Scientific Testimony been invoked by a defendant. Furthermore, attachment must generally come before invocation. Given the In Goebel v. Denver and Rio Grande Western Railroad indictment, there was no question Harrison’s right to Co., 215 F.3d 1083 (10th Cir. 2000), Goebel, a locomotive counsel had attached. The parties disagreed over whether engineer employed by the Denver and Rio Grande Western Harrison had invoked the right by the time the questioning Railroad Company ("Rio Grande"), was instructed to occurred. Harrison argued his ongoing relationship with operate two "helper" locomotives to push a train through the counsel carried over into the post-indictment phase of the six mile Moffat Tunnel running over the continental divide case, whereas the government argued pre-indictment in Colorado. Shortly after one o’clock in the morning the

train suddenly broke in half and stopped in the tunnel. belonging to a prisoner in its custody, although not required While repairing the locomotives, Goebel was exposed to by due process to prove actual notice, the government bears diesel fumes and was taken to the hospital after the the burden of demonstrating procedures exist at the facility locomotives were repaired and the train cleared the tunnel. housing the prisoner which are reasonably calculated to
ensure such notice will reach the prisoner. This question
After a diagnosis of a mild brain injury, Goebel sued the was left unanswered by the Third Circuit in the related case Railroad Company. At trial, Goebel sought to introduce the of United States v. McGlory, 202 F.3d 664 (3rd Cir. 2000), testimony of a toxicologist who believed Goebel’s brain where the court held when a person is in the government’s injury was caused by brain swelling brought on by a custody and detained at a place of its choosing minimum combination of exposure to diesel fuel, high altitude, low due process requires notice of a pending administrative oxygen, and low barometric pressure. Rio Grande objected forfeiture proceeding must be mailed to the detainee at his three times to the toxicologist’s testimony, which it or her place of confinement. The court went on to say characterized as "junk science." The district court overruled "whether anything more is required is not presently before each objection stating only it believed there was sufficient us." The instant case allowed the court to clarify exactly foundation for the jury to hear the testimony and that it (the what "more" is required to satisfy the minimal standards of court) had fully considered the matter. The jury found in due process. favor of Goebel and Rio Grande appealed.
In September 1989, the Drug Enforcement Administration
On appeal the Tenth Circuit referred to Daubert v. Merrell (DEA) arrested McGlory for, inter alia, conspiracy to Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993). Daubert possess and distribute heroin. Incident to his arrest, the established a "gatekeeper" function for trial judges who DEA seized various items of McGlory’s property, including were supposed to determine whether proposed scientific cash, jewelry, television equipment, cellular phones and expert testimony constituted scientific knowledge which luggage. In May, 1990, a jury convicted McGlory on all would assist the trier of fact to understand or determine a charges and he was subsequently sentenced to life fact in issue. The Tenth Circuit found it was within the imprisonment in February, 1991. From the time of his discretion of the trial court how to perform the gatekeeper arrest until sentencing, McGlory remained in the custody of function but the trial court had no discretion regarding the the United States Marshals Service, housed in various actual performance of the gatekeeper function. The Tenth pretrial detention facilities. Before McGlory’s criminal trial Circuit specifically held, for purposes of appellate review, began, the DEA initiated administrative forfeiture a natural requirement of the gatekeeper function is the proceedings with respect to the property it had seized when creation of a record sufficient to allow an appeals court to McGlory was arrested. The present case concerns a determine whether the trial court had performed its forfeiture action against various items of jewelry belonging gatekeeper function and applied the Daubert analysis. In to McGlory. The government sent notice by certified mail this case, the Tenth Circuit found the record contained no to the prison facility housing McGlory. A prison official explicit statement whether the court had conducted a signed for the notice of the proposed forfeiture but McGlory Daubert analysis. Therefore, in the absence of such claimed he never received it. Subsequently, the government findings, it concluded the district court abused its discretion obtained a default judgment. in admitting the testimony. Further, since the toxicologist’s testimony purported to establish a causal link between On appeal, the government argued it had satisfied due Goebel’s exposure to diesel fumes and his brain injury, it process by mailing the notice of the forfeiture to the was crucial to his case and its erroneous admission was not location of the interested party, in this case, the prison
plain error.
facility housing McGlory. In contrast, McGlory argued a
higher standard should prevail when the interested party is held in custody by the same government attempting to serve notice upon him. He argued the government was uniquely
FORFEITURE
positioned to ensure actual notice of the proceedings, just as
the Second Circuit had similarly found in Weng v. United
Satisfying Due Process In Notice of
States, 137 F.3d 709 (2nd Cir. 1998).
Forfeiture To A Prisoner
Declining to adopt the actual notice requirement of Weng,
In United States v. One Toshiba Color Television the Third Circuit stated the touchstone of analysis is (McGlory), 213 F.3d 147 (3rd Cir. 2000), the Third Circuit whether the notice was "reasonably calculated, under all held when the government pursues the forfeiture of property circumstances, to apprise interested parties of the pendency

of the action and afford them an opportunity to present their the specific unlawful activity of wire fraud. As such, the objections." Mullane v. Central Hanover Bank & Trust money laundering charges were fatally flawed. Co., 339 U.S. 306, 314 (1950). In light of the Supreme Court’s reluctance to require the demonstration of actual The Sixth Circuit rejected this argument holding the funds notice, the court was unwilling to impose this evidentiary became the proceeds of wire fraud the moment the victims burden on federal prosecutors. More appropriately, the wired the money to the third parties. In arriving at this court opined, the “jurisprudence of constitutional notice conclusion, the court relied upon the cases of United States focuses not on what actually occurred, but rather on the v. Savage, 67 F.3d 1435 (9th Cir. 1995) and United States v. procedures that were in place when notice was attempted.” Smith, 44 F.3d 1259 (4th Cir. 1995), to support the Accordingly, if the government chooses to rely on less than proposition that Prince did not need to have physical actual notice, then it bears the burden of demonstrating the possession of the money before it could be considered procedures employed at the facility housing a prisoner are proceeds for the purposes of § 1956. The court reasoned reasonably likely to effect such notice. The judgment was the transferred funds were criminally derived property at the vacated and the matter sent back to the district court to time they were deposited into the third parties’ accounts. determine whether such procedures existed. Although Prince did not have actual physical control over
the funds , his control over the third parties established the requisite control over the funds in the third parties’
MONEY LAUNDERING
possession. See, e.g., United States v. Leahy, 82 F.3d 624
(5th Cir. 1996). Additionally, the court rejected a claim that evidence of the defendants’ use of third parties was Defendant’s Actual Possession of Wired insufficient to show the transactions were designed to
Funds Not Required To Establish Proceeds
conceal the nature and source of the proceeds as required by
Of Wire Fraud
18 U.S.C. § 1956(a)(1)(B)(i).

In United States v. Prince, 214 F.3d 740 (6th Cir. 2000), the
Sixth Circuit held funds wired by victims of a fraudulent INVESTIGATIVE TECHNIQUES investment scheme to third parties who later transferred the funds to the defendants constituted the SUA proceeds of the Entrapment of wire fraud. This provided the predicate offense for the defendants’ money laundering convictions, even though at In United States v. Brooks, 215 F.3d 842 (8th Cir. 2000), the the time of the transfers, the defendants did not have actual Eighth Circuit held coercive tactics used by a paid physical control of the money. Prince and his co-defendant, informant to persuade Brooks, a drug addict, to sell heroin White, were indicted and convicted of, inter alia, wire fraud to a law enforcement officer amounted to entrapment as a and money laundering in violation of 18 U.S.C. §§ 1343 matter of law. The incident underlying Brook’s prosecution and 1956, respectively. Prince and White devised a scheme began when an informant sold Brooks six $50 packets of to fraudulently solicit investments from individuals, heroin. Later the same evening, the informant telephoned representing to them that White’s business was authorized Brooks requesting him to give back some of the heroin to make discount purchases of property involved in since the informant’s own supply had run out and he needed bankruptcy proceedings. Prince and White directed their some for a desperate customer. Brooks refused this request victims to wire transfer the money they wished to invest to as well as three others the informant made the next day. the accounts of third parties, who would then turn the Not until faced with the threat the informant would cut off money over to them. At all times, Prince and White were his supply did Brooks agree to return some of the heroin. in constructive control of the third parties’ bank accounts, With the informant acting as intermediary, the law for they had preexisting relationships with the third parties enforcement agent posing as the boyfriend of the desperate and had reached agreements with them to participate in customer purchased two packets of heroin from Brooks. perpetuating their fraudulent scheme.
The law enforcement agent did not know the informant sold Brooks the heroin he bought from Brooks. A jury On appeal, Prince argued the funds obtained through wire convicted Brooks of distributing a controlled substance in fraud did not become the proceeds of the unlawful activity, violation of 21 U.S.C. § 841(a)(1). Brooks appealed, as defined in the money laundering statute, until he claiming these facts established entrapment as a matter of physically obtained the wired funds and this did not occur law. until the third parties transferred the funds to him. These transfers, therefore, could not have involved the proceeds of

To demonstrate entrapment the evidence must clearly convicted of one count of conspiring to violate the Sherman indicate: (1) a government agent originated the criminal Antitrust Act, 15 U.S.C. § 1, which prohibits "any design; (2) the agent implanted in the mind of an innocent conspiracy or combination to restrain trade." Specifically, person the disposition to commit the offense; and (3) the the defendants, who were high ranking executives at Archer defendant committed the criminal act with the urging of the Daniels Midland Co. ("ADM"), participated in a broad agent. The critical question in this case is whether Brooks conspiracy during the early 1990's to fix the price of the was predisposed to commit the crime independent of the agricultural product lysine. A large portion of the government’s conduct. The court found the facts inculpatory evidence admitted against them consisted of demonstrated an improper level of governmental surreptitious audiotape recordings made by a cooperating involvement thereby establishing inducement. Brooks government witness who was also an ADM executive and produced evidence he was an addict and the informer was participant in the price fixing scheme. Upon confessing to his only source of heroin. Once the informant sold Brooks FBI agents that he was attempting to embezzle money from the heroin, the informant was unrelenting, accosting Brooks ADM, the cooperating witness agreed to act as an numerous times demanding Brooks return some of the undercover informant. Over the course of the next two and heroin. Brooks was able to fend off the informant until he a half years, the cooperating witness, acting under the was overcome by the informant’s threat to cut off his government’s direction and using recording equipment and supply. Only then did Brooks yield and return some of his tapes provided to him by the government, recorded heroin in exchange for a portion of his money back. hundreds of hours of conversations and meetings with his
fellow conspirators. At trial, the government successfully
The court described the case as one in which one argued the recordings were admissible under 18 U.S.C. government agent (the informant) sold Brooks heroin and § 2511(2)(c), which allows the use of tape recordings made then coerced him into selling it back to another agent. The by a participant to the conversation who was "acting under court held the evidence could lead to no conclusion other the color of law." than Brooks was entrapped as a matter of law. Based on the facts, no reasonable jury could have found beyond a On appeal, Andreas contended the tape recordings violated reasonable doubt Brooks was not induced by the informant federal wiretap laws and should have been excluded from to commit the crime. The court cited Sherman v. United trial pursuant to 18 U.S.C. § 2515, which prohibits the States, 356 U.S. 369 (1958), for the proposition that " . . . evidentiary use of any illegally obtained tape recording. He ignorance of its agents’ actions does not relieve the argued the FBI failed to properly supervise the cooperating government of responsibility for the conduct of its agents, witness and badly mismanaged the two year taping including [the informant]." Consequently, even though the operation by violating internal FBI policies with respect to government agent was unaware of the informant’s coercive the timely collection and cataloguing of the tape recordings. tactics to induce Brooks to make the resale, the government Moreover, by acting in direct contravention of the FBI’s was nevertheless responsible for the informant’s actions. instructions and not tape recording all of his conversations The court stated the power of the government is abused with the defendants, Andreas claimed the witness was when employed to promote rather than detect crime and to selectively recording certain conversations with the ulterior bring about the downfall of those who, left to themselves, motive of helping himself. Hence, he was not acting under
might have obeyed the law.
"color of law" and, therefore, the tapes were inadmissible
under § 2511(2)(c).
As to the government’s production of evidence of other
sales by Brooks, the court pointed out the sales occurred For purposes of the wiretap statute, the Seventh Circuit after the informant’s initial inducement. Likewise, the court held, when assessing whether someone acted under "color was unpersuaded that Brook’s four year old conviction for of law," the question is "whether the witness was acting possession with the intent to sell established Brooks was under the government’s direction when making the predisposed to sell heroin to the agent. Accordingly, the recording." See United States v. Craig, 573 F.2d 455, 476 court held the government failed to meet its burden of (7th Cir. 1977). In the present case, the court acknowledged
proving Brooks’ predisposition.
the FBI’s supervision of the witness was lacking and it
failed to follow many of its internal guidelines with respect
"Color of Law" Exception To Wiretap
to conducting taping operations. However, deeming these
Statute
problems as merely "technical deficiencies," the court
rejected Andreas’ argument that the witness was acting independently.
In United States v. Andreas, 216 F.3d 645 (7th Cir. June 26,
2000), Andreas and his two co-defendants were each

The court found support for its decision from the Sixth may be considered except "information otherwise Circuit’s opinion in Obron Atlantic Corp. v. Barr, 990 F.2d prohibited by law." Brimah also relied on a line of 861, 864 (6th Cir. 1993), where the use of the "color of law" concurring opinions in which it had been argued that exception was upheld. There, the cooperating witness application of the Exclusionary Rule at sentencing is failed to record all conversations as instructed, used his own necessitated by the potential for law enforcement officials equipment, carelessly maintained a log of his recordings, to obtain a conviction on relatively minor conduct and then and held on to tapes months after they had been made. seek a significantly enhanced sentence by introducing other Despite these problems, the court held the witness’s evidence at sentencing. "continuous, albeit irregular, contact [with] DOJ attorneys, following their explicit request that he assist them . . . outweigh[ed] the lack of direct DOJ supervision over the In response the Brimah’s argument, the government relied recording process . . . " Id. at 865. From this, the Seventh on 18 U.S.C. § 3661, which broadly states "[n]o limitation Circuit deemed essential the fact "the government requested shall be placed" on the relevant information which may be or authorized the taping with the intent of using it in an considered by a federal court at sentencing. The court noted investigation and that they monitored the progress of the it must weigh the additional deterrent benefit to be gained covert surveillance." In the instant case, the FBI requested by applying the Exclusionary Rule at sentencing against the the cooperating witness to tape record his coconspirators, costs such an application would impose on sentencing provided him with the necessary equipment, instructed him proceedings and on the goal of achieving fair, accurate and as to what to record and met with him to discuss the case individualized sentences. Although this was a matter of and collect the tapes. Accordingly, this evidence was first impression for this court, the Seventh Circuit joined sufficient to prove the witness acted at the direction of the other circuits which have looked at the issue and held the
FBI and thus, under the "color of law."
Exclusionary Rule does not bar the introduction of the fruits
of illegal searches and seizures during sentencing proceedings. Further, the detrimental effects on sentencing policy flowing from the exclusion of relevant evidence
SENTENCING
outweigh the "marginal" deterrent effect of applying the
Exclusionary Rule at sentencing. The court also pointed out
Use Of Evidence Obtained In Violation
it has previously held the Exclusionary Rule of Miranda v.
Of The Fourth Amendment
Arizona, 384 U.S. 436 (1966), was inapplicable at
sentencing.
In United States v. Brimah, 214 F.3d 854 (7th Cir. 2000),
the Seventh Circuit made clear the Fourth Amendment Courts May Not Use Departure Power To Exclusionary Rule does not apply at sentencing under the Equalize Sentence Discrepancies Caused By United States Sentencing Guidelines, to bar introduction of evidence the district court determined was seized in Differing Prosecution Policies violation of the Fourth Amendment against unreasonable searches and seizures. After Brimah sold heroin to a In United States v. Banuelos-Rodriguez, 215 F.3d 969 cooperating witness, a search warrant was executed which (9th Cir. 2000), Rodriguez re-entered the United States, in resulted in the seizure of additional heroin found in an air violation of 8 U.S.C. § 1326, after having previously been conditioner outside Brimah’s property. This evidence was deported. Rodriguez plead guilty to violating § 1326 and subsequently excluded at trial because it was seized in admitted to a previous conviction relating to the sale of rock violation of the Fourth Amendment. Brimah was convicted cocaine. Because his previous conviction was for an of distribution of heroin based upon the amount of drugs he aggravated felony, Rodriguez was subject to the sentencing sold to the cooperating witness. At sentencing, the district enhancement provided by § 1326(b)(2). At sentencing, court included the amount of heroin seized during the Rodriguez argued for a downward departure based on an execution of the search warrant as relevant conduct. alleged discrepancy between the length of sentences Brimah objected to its inclusion arguing the exclusionary received by violators of § 1326 prosecuted in the Central rule should bar the inclusion of this heroin deemed District of California and those prosecuted in the Southern
inadmissible at trial.
District of California. This discrepancy was based on a
policy choice by prosecutors in the Central District to
Brimah argued U.S.S.G. § 1B.1.4 limits a sentencing prosecute only § 1326 violators with the worst criminal courts’ otherwise broad discretion to consider all relevant histories and to seek long sentences for them, whereas and reliable evidence by providing that all such evidence prosecutors in the Southern District chose to prosecute more

§ 1326 violators but in most cases obtained pleas to offenders who have been convicted of committing the same violation of § 1326(a) which carried a shorter sentence. The offense. The Ninth Circuit found since the offenders in the court denied Rodriguez’s motion for a departure and Southern District had plead guilty of violating § 1326(a),
sentenced him under § 1326(b).
they were not convicted of the same offense as Rodriguez,
who was convicted of violating § 1326(b), even though
Rodriguez appealed the court’s failure to grant a departure, their behavior was similar to that of Rodriguez. Since citing 18 U.S.C. § 3553(b) which allows a sentencing court Rodriguez had committed a different crime, his case could to depart from an applicable guideline only when there are not be considered atypical and deserving of a departure in "mitigating circumstances" not taken into account by the comparison to cases of offenders in the Southern District. Sentencing Commission. Rodriguez argued the discrepancy between the length of sentences received by § 1326 In addition to permitting departures only in atypical cases, violators prosecuted in the Central and Southern Districts of U.S.S.G. Ch. 1, Pt. A(4)(a) also suggests a court may not California was a mitigating factor not taken into account by use its departure power to manipulate a plea agreement. A the Sentencing Commission. The Ninth Circuit defined court may only accept or reject a plea agreement unless mitigating circumstance as a circumstance lessening the there is a showing that the plea agreement or charging severity of a defendant’s conduct or making his criminal or decision rested on an impermissible bias. The Ninth Circuit personal history more sympathetic. Under this definition, interpreted this provision as promoting prosecutorial nothing about the Southern District’s different prosecution discretion and separation of powers. Since Rodriguez did policy constituted a mitigating circumstance or made not allege any impermissible bias, the court could not use Rodriguez’ otherwise lawful sentence less justified. departure to nullify the Central District’s prosecution
policies.
To determine whether a departure was otherwise warranted,
the Ninth Circuit turned to U.S.S.G., Ch. 1, Pt. A(4)(b)
which provides departures may be granted only for cases
which are "atypical" in comparison to cases of other

CRIMINAL TAX BULLETIN

TABLE OF CASES

AUGUST 2000

SUPREME COURT CASES

United States v. Hubbell, 120 S. Ct. 2037 (2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Dickerson v. United States, 120 S. Ct. 2326 (2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

TITLE 26 AND TITLE 26 RELATED CASES

Jones v. United States, 207 F.3d 508 (8th Cir. 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Swofford v. United States, No. 99-CV-4064-JPG, 2000 U.S. Dist. LEXIS 7730 (S.D. Ill., May 17, 2000) . . . . . . . . . . . . . . . 3

SEARCH AND SEIZURE

United States v. Hernandez-Zuniga, 215 F.3d 483 (5th Cir. 2000), . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

OTHER CONSTITUTIONAL ISSUES

United States v. Harrison, 213 F.3d 1206 (9th Cir. 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

EVIDENCE

Goebel v. Denver and Rio Grande Western Railroad Co.,215 F.3d 1083 (10th Cir. 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

FORFEITURE

United States v. One Toshiba Color Television (McGlory), 213 F.3d 147 (3rd Cir. 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

MONEY LAUNDERING

United States v. Prince, 214 F.3d 740 (6th Cir. 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

INVESTIGATIVE TECHNIQUES

United States v. Brooks, 215 F.3d 842 (8th Cir. 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

United States v. Andreas, 216 F.3d 645 (7th Cir. 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

SENTENCING

United States v. Brimah, 214 F.3d 854 (7th Cir. 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

United States v. Banuelos-Rodriguez, 215 F.3d 969 (9th Cir. 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Department of the Treasury
Internal Revenue Service
Document 10023 (8-2000)
Catalog Number 24304B