LAW RESEARCH

Cite as 550 F.2d 297 (1977)                                                                                                                                      297

UNITED STATES of America, Plaintiff‑Appellee,

v.

Nicholas J. TWEEL Defendant‑Appellant.

No. 76‑2324.

United States Court of Appeals, Fifth Circuit.

April 8, 1977.

 

Defendant was convicted before the United States District Court for the Southern District of Florida, Joe Eaton, J., of conspiring to defraud the United States by obstructing lawful functions of Internal Revenue Service, tax evasion, and making false statements in tax returns, and he ap­pealed. The Court of Appeals, Fay, Circuit Judge, held that failure of Internal Reve­nue Service agent to apprise defendant of obvious criminal nature of investigation constituted deliberate deception by agent in flagrant disregard of defendant's rights and thus, since consent given by defendant was obtained by deception, microfilming of records given agent constituted unreason­able search and evidence obtained, as well a‑ # any evidence derived therefrom, should have been suppressed.

Remanded.

 

1. Searches and Seizures L 7(28)

Consent search is unreasonable under the Fourth Amendment if consent was in­duced by deceit, trickery or misrepresenta­ion of internal revenue agent. U.S.C.A. Const. Amend. 4.

 

2. Searches and Seizures L 7(29)

Burden for determining whether inter­nal revenue agent has resorted to deception in obtaining consent for search is on moving party.

 

3. Searches and Seizures L 7(28)

Failure of revenue agent, who knew that Internal Revenue Service was acting at request of organized crime and racketeering section of the Justice Department, an instrument for criminal investigation, to apprise defendant of obvious criminal na­ture of investigation constituted deliberate deception by agent in flagrant disregard of defendant's rights and his statement that no special agent was involved so misled defendant as to vitiate his consent to "search," and thus, since consent was obtained by deception, microfilming of doc­uments provided agent constituted unrea­sonable search. U.S.C.A. Const. Amend. 4.

 

4. Internal Revenue L 1761

Revenue system is based upon good faith of taxpayers and taxpayer should be able to expect same from government in its enforcement and collection activities.

 

5. Criminal Law L 394.5(4)

Burden of proving that any evidence was untainted by internal revenue agent's unreasonable search was on the government. U.S.C.A. Const. Amend. 4.

 

Harold Ungar, Edward Bennett Williams, Washington, D.C., for defendant‑appellant.

 

Robert W. Rust, U. S. Atty., Miami, Fla., Scott P. Crampton, Asst. Atty. Gen.. Gilbert E. Andrews, Chief, Appellate Section, Rob­ert E. Lindsay and Charles E. Brookhart, Attys., Tax Div., Dept. of Justice, Wash­ington, D.C., for plaintiff‑appellee.

 

298

Appeal from the United States District Court for the Southern District of Florida.

 

Before MORGAN and FAY, Circuit Judges, and HUNTER,* District Judge.

 

FAY, Circuit Judge:

Appellant, Nicholas J. Tweel, was con­victed of conspiring (with an unindicted co­conspirator, Charles Zemliak) to defraud the United States by obstructing the lawful functions of the Internal Revenue Service (IRS),1 two counts of tax evasion for 1967 and 1969,2 and two counts of making false statements in a tax return for those same years.3 Two other co‑defendants were named in one of the counts for tax evasion. Tweel was sentenced to four years on three counts and three years on each of the other two, all concurrent. He was also fined a total of $30,000.

 

The government's evidence showed to the jury's satisfaction that in the tax years, 1967 and 1969, Tweel "laundered" parts of his income to avoid paying taxes by passing sums on to persons who would owe little in taxes because they were in a lower tax bracket or had large losses which would offset the income.

 

The investigation leading up to appel­lant's indictment began on May 28, 1969. Don L. Miller, revenue agent for the inter­nal Revenue Service informed appellant and his wife by letter that he had been assigned to conduct an audit of their feder­al income tax returns for 1966 through 1968 and asked for an appointment. Appellant's accountant, Ben A. Bagby, telephoned the agent on June 10, 1969 to request a post­ponement of this audit because the IRS had just completed an audit of appellant's re­turns for 1958 through 1963. They did set an appointment for August 4, 1969.

 

* Senior District Judge of the Western District of Louisiana, sitting by designation.

 

1. 8 U.S.C. § 371.

 

2. 26 U.S.C. 7201 (Internal Revenue Code of 1954).

 

3. 26 U.S.C. 1 7206(l) (Internal Revenue Code of 1954).

 

During the earlier audit for 1958 through 1963, a special agent of the Intelligence Division of IRS became involved but even­tually withdrew, with the audit remaining civil instead of criminal. To discover whether his client was again involved in a criminal inquiry, Bagby asked Miller wheth­er a "special agent" was involved in the new investigation. Miller replied that no special agent was involved. This response led Bagby to believe that Miller was just conducting a civil audit. What Miller did not disclose was that this audit was not a routine audit to which any taxpayer may be subjected from time to time. This audit was conducted at the specific request of the Organized Crime and Racketeering Section of the Department of Justice.4

 

Bagby, who had his own records of appel­lant's tax affairs as well as some of Tweel's also allegedly obtained additional records from Tweel to voluntarily present to Miller for the new audit. Miller microfilmed all the records that were given to him.5

 

The theory on which the motion to sup­press was based is that Miller's microfilm­ing of appellant's records constituted an illegal search in violation of the Fourth Amendment because appellant's consent was obtained through deception. This court agrees that appellant was grossly de­ceived and the motion should have been granted; as a matter of procedure we re­mand this case back to the district court for a hearing to determine what evidence ad­mitted at the trial was tainted due to the government's violation of appellant's consti­tutional rights.

 

The district court findings were that the Justice Department requested the IRS to investigate the appellant, a revenue agent was assigned the task, and the accountant

 

4. The Organized Crime and Racketeering Sec­tion of the Justice Department is only involved in criminal investigations and requested this audit in its own name.

 

5. No summons of any sort was directed to appellant or his accountant by the IRS.

 

asked the agent whether or not a special agent was involved and received a negative response which was at that point a true statement. The trial judge subsequently stated:

If it is deception not to advise at the outset that you were sent there or re­quested to be there by the Justice De­partment when asked the question whether there is a special agent involved, then the Court is wrong.

 

[1] It is a well established rule that a consent search is unreasonable under the Fourth Amendment if the consent was induced by the deceit, trickery or misrepre­sentation of the Internal Revenue agent. United States v. Rothstein, 530 F.2d 1275 (5th Cir. 1976); United States v. Dawson, 486 F.2d 1326 (5th Cir. 1973); United States v. Bland, 458 F.2d 1 (5th Cir. 1972) cert. denied, 409 U.S. 843, 93 S.Ct. 43, 34 L.Ed.2d. 83 (1972); United States v. Ponder, 444 F.2d 816 (5th Cir. 1971) cert. denied, 405 U.S. 918, 92 S.Ct. 944, 30 L.Ed.2d 788 (1972); United States v. Tonahill, 430 F.2d 1042 (5th Cir. 1970), cert. denied, 400 U.S. 943, 91 S.Ct. 242, 27 L.Ed.2d 247 (1970); United States v. Prudden, 424 F.2d 1021 (5tb Cir. 1970), cart. denied, 400 U.S. 831, 91 S.Ct. 62, 27 L.Ed.2d 62 (1970).

 

[2] The burden for determining whether or not the government has resorted to a deception is on the moving party and this Court in each of the above cases set forth what that party must establish:

We conclude that the mere failure of a revenue agent (be he regular or special) to warn the taxpayer that the investigation may result in criminal charges, ab­sent any acts by the agent which materi­ally misrepresent the nature of the in­quiry, do not constitute fraud, deceit and trickery. Therefore, the record here must disclose some affirmative misrepre‑

 

299

sentation to establish the existence of fraud, and the showing must be clear and convincing. (Footnote omitted)

 

Prudden, supra, p. 1033.

 

The Prudden court also stated that:

Silence can only be equated with fraud where there is a legal or moral duty to speak or where an inquiry left unan­swered would be intentionally misleading.

 

Supra, p. 1032.

 

[3] From the facts we find that the agent's failure to apprise the appellant of the obvious criminal nature of this investi­gation was a sneaky deliberate deception by the agent under the above standard and a flagrant disregard for appellant's rights. The silent misrepresentation was both in­tentionally misleading and material. Any findings to the contrary under the facts of this case are clearly erroneous. United States v. Reynolds, 511 F.2d 603 (5th Cir. 1975); United States v. Gunn, 428 F.2d 1057 (5th Cir. 1970).6

 

Appellant showed Miller knew that the IRS was acting at the request of the Organ­ized Crime and Racketeering Section of the Justice Department which is undeniably an instrument for criminal investigation. Mil­ler obviously knew the accountant inquired whether a special agent was involved to determine whether he was conducting a criminal audit. Miller's response, although on the face of it true, misled appellant to such a degree that his consent to the "search" must be vitiated by the agent's silence concerning the origin of this investi­gation.

 

In this case, the agent testified he intend­ed, if appellant had consented to an inter­view7 to advise him of his rights. Because the IRS requires only special agents to warn taxpayers of their rights,8 by assign‑

 

6. The court below appears to have based its decision on United States v. Cleveland Trust Co., 474 F.2d 1234 (6th Cir. 1973), cert. denied sub noin. Miceli v. United States, 414 U . & 866, 94 S.Ct, 48, 38 L.Ed.2d 118 (1973). We do not agree with its applicability. Cleveland Trust was a suit for enforcement of a summons which was allegedly not issued in good faith. Deception was not the issue in that case.

 

7. Tweel did not agree to be interviewed.

 

8. Under Internal Revenue guidelines promul­gated in IRS News Release No. 897, 7 CCHI 1967 Stand. Fed.Tax Rep. T 6832, and IRS News Release IR‑949, 1968 CCH Fed.Tax Rep. ¶ 6946, a special agent must advise the taxpay­er before an interview of the following:

As a special agent, one of my functions is to investigate the possibility of criminal vio­lations of the Internal Revenue Laws, and related offenses. In connection with my in­vestigation of your tax liability (or other mat­ter) I would like to ask you some questions. However, first I advise you that under the Fifth Amendment of the Constitution of the United States I cannot compel you to answer any questions or to submit any information if such answers or information might tend to incriminate you in any way. I also advise you that anything which you say and any information which you submit may be used against you in any criminal proceeding which may be undertaken. I advise you further that you may, if you wish, seek the assist­ance of an attorney before responding. Do you understand.

 

300

ing a revenue agent the IRS still succeeded in masking the undeniable criminal nature of this investigation and materially de­ceived this appellant.

 

[4] We cannot condone this shocking conduct by the IRS. Our revenue system is based upon the good faith of the taxpayers and the taxpayers should be able to expect the same from the government in its en­forcement and collection activities.9

 

[5] Since the consent given by appellant was obtained by deception, the microfilm­ing of the documents constituted an unrea­sonable search in violation of the Fourth Amendment. Gouled v. United States, 255 U.S. 298, 41 S.Ct. 261, 65 L.Ed. 647 (1921). The evidence obtained here in violation of appellant's Fourth Amendment rights, as well as any evidence derived therefrom, should have been suppressed. Alderman v. United States, 394 U.S. 165, 171, 89 S.Ct. 961, 22 L.Ed.2d 176 (1969). The burden of proving any evidence was untainted is on the government. Nardone v. United States, 308 U.S. 338, 341, 60 S.Ct. 266, 84 L.Ed. 307 (1939). Therefore, we remand for a hearing to make that determination. If any of the evidence was tainted, it must be suppressed and appellant afforded a new trial. The other issue raised on appeal is without merit.

 

9. During oral argument counsel for the govern­ment stated that these procedures were "rou­tine". If that is the case we hope our message is clear. This sort of deception will not be tolerated and if this is the "routine" it should be corrected immediately.