United States v. James M. Damon and Johanna E. Damon

Citations: 676 F.2d 1060; 50 A.F.T.R.2d (RIA) 5329; 1982 U.S. App. LEXIS 19002Docket: 81-1251

Court: Court of Appeals for the Fifth Circuit; May 24, 1982; Federal Appellate Court

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James M. Damon and Johanna E. Damon appeal their convictions for knowingly assisting in the preparation of false income tax returns, violating 26 U.S.C. § 7206(2). The appellants challenge the validity of their convictions on statutory and constitutional grounds, as well as alleging trial and procedural errors. The court affirms the convictions, finding the defendants willfully fabricated deductions on tax returns for 25 taxpayers who utilized their services.

The defendants argue that the statute is unconstitutional due to being overbroad and vague, claiming it punishes "pure speech." The court rejects this argument, clarifying that the conduct addressed by the statute constitutes incitement of illegal activity, which is not protected under the First Amendment. The court distinguishes between protected speech and conduct that incites imminent lawless action, citing relevant Supreme Court precedents.

Additionally, the defendants assert that the statute fails to clearly define the prohibited conduct. The court finds this claim unpersuasive, stating that the defendants do not have standing to challenge the statute's vagueness as it applies to them. Citing Supreme Court precedent, the court concludes that individuals cannot contest the constitutionality of a statute based on potential applications to others.

The Court's review centers on whether the statute in question is unconstitutionally vague as applied to the defendants. A criminal statute violates the requirement for definitiveness if it does not provide fair notice to a reasonable person that their conduct is prohibited. The indictment charged the defendants with willfully preparing false tax returns by claiming unentitled deductions, which aligns with the statute's explicit prohibitions. 

Defendants argue that the indictment does not constitute an offense under Section 7206(2) because false Schedule C's were not explicitly mandated by statute or regulation. They misinterpret the precedent set in United States v. Levy, where a specific IRS form not required by law was deemed not a basis for an offense. However, the Court distinguishes this from United States v. Taylor, which affirmed that while no explicit requirement exists for certain schedules, they are integral to the Form 1040 and must be completed honestly. Consequently, the false Schedule C's in question are deemed fraudulent under Section 7206(2), justifying the indictment and the District Court's dismissal of the motion.

Regarding the defendants' motion to suppress evidence and dismiss based on alleged selective prosecution, the Court asserts that they were not denied an evidentiary hearing. The Court allowed counsel to outline the intended evidence from IRS witnesses but found it unpersuasive regarding relevance. Additionally, the Court was willing to hear evidence related to the motion to suppress, but defense counsel opted not to present any witnesses.

Defendants claimed selective prosecution regarding their indictment but failed to meet the burden of proof required by the Berrios test, which necessitates showing that similarly situated individuals were not prosecuted and that the government's actions were invidious or in bad faith. Their bare allegations did not suffice to demonstrate that other return preparers who engaged in similar conduct were ignored by the IRS. Consequently, defendants could not prove the materiality of the IRS witnesses' testimony or establish a right to an evidentiary hearing. 

Regarding their motion to suppress, defendants needed to present more than conclusory allegations to warrant a hearing; they were required to assert deliberate falsehood or reckless disregard for the truth within the warrant affidavit, specifying what was false and providing supporting reasons. Their unsupported claim did not meet this threshold. Furthermore, all other asserted errors were found to be without merit. The court upheld the denial of a motion for severance, stating that a prosecutor's isolated comment during rebuttal, in the context of a lengthy trial, was not improper and any potential error was deemed harmless given the overwhelming evidence of guilt. The convictions were thus affirmed.