Moore, Hays and Feinberg, Circuit Judges. Feinberg, Circuit Judge (concurring).
Walter P. Mackiewicz and his wife, Florence Mackiewicz, were convicted before a jury of income tax evasion on their joint returns for the years 1960, 1961, 1962 and 1963. Int. Rev. Code of 1954, § 7201. To establish unreported taxable income, the Government relied on the net worth and expenditure method. This is a technique whereby the annual increment in asset value is compared to the reported income. The Government contends that there was a discrepancy; that the Mackiewiczes understated their grocery store revenue in their receipt books by about $400 a week; and that over the period involved there was unreported income of some $20,000 a year for a total of approximately $84,000. By way of defense, Mr. Mackiewicz claimed that the excess arose from a cash hoard, black marketeering overseas, success with dice on his troop ship coming home, gambling at casinos and repayments of loans by relations and associates. The jury apparently rejected these explanations. Both Mr. and Mrs. Mackiewicz appeal. The appellate issues before us do not concern the facts as such but the methods used by Internal Revenue Agents to obtain these facts. See discussion in 274 F. Supp. 805, U.S.D.C.D. Conn. 1967.
Mr. Mackiewicz owned a small grocery store which he and his wife managed. The work was divided between them, although there was evidence that the majority of the entries in the receipt books were made by Mrs. Mackiewicz.
In November, 1964, Agent Gardner (of the Audit Division of the Internal Revenue Service) began an audit of their joint returns. To assist him, Mr. Mackiewicz retained an accountant, Mr. Minella, and he turned over his business and personal records to him. These included the grocery store account books. Moreover, in December, 1964, he asked his wife for her personal records, which she normally kept in a desk drawer. These included savings account books, personal account stubs, personal account records, and a mutual fund document. She willingly gave these papers to her husband, for he often asked for them at income tax time. In fact, Mrs. Mackiewicz never concerned herself with the preparation of their annual joint return. She left the entire matter in the hands of her husband and she merely signed whatever tax papers he presented to her. When she discovered that he had given these personal records to an accountant for the purpose of assisting Agent Gardner, she said nothing.
In the course of his investigation, Agent Gardner ascertained that the Mackiewiczes' deposits exceeded their business income. He therefore referred the case to Special Agent Harden (of the Intelligence Division of the Internal Revenue Service).
On January 12, 1965, the two agents went to the Mackiewiczes' store in order to inverview Mr. Mackiewicz. They were told that he was at a new building site, so they drove there hoping to find him. Mr. Mackiewicz was at the site, and the three arranged to have an interview that very afternoon.
At 1:30, Mr. Mackiewicz invited the agents into his home for the interview. Agent Harden displayed his badge and advised Mr. Mackiewicz that he was making an inquiry into certain tax deficiencies on his and Mrs. Mackiewicz's joint return. He further told Mr. Mackiewicz that he did not have to answer any questions or produce any documents which might incriminate him. The agent repeated this, and Mr. Mackiewicz indicated, by an affirmative nod, that he understood. The agent never mentioned that Mr. Mackiewicz could call an attorney.
Agent Harden then proceeded to ask Mr. Mackiewicz a series of questions, taken from a lengthy questionnaire supplied him by the Internal Revenue Service for use in investigating a taxpayer suspected of fraud. Many of the questions were designed to enable the agent to fashion a net worth theory of evasion. Since he was ignorant of this theory, Mr. Mackiewicz did not understand the potential import of the questions.
Mr. Mackiewicz answered, in a very responsive and cooperative manner, most of the questions. Moreover, at the request of the agents, he took them to the bank and allowed the agents to inventory the materials in the safe deposit box which he and his wife owned jointly. It included several bonds, stock certificates and some cash. Mr. Mackiewicz also instructed Mr. Minella to permit Agent Harden to examine all the family business and personal records. Mrs. Mackiewicz was not present at the interview, nor was she aware that her husband was showing their private papers to the agents.
Mr. Mackiewicz claims that his constitutional rights were violated under the Fourth [e.g., United States v. Blalock, 255 F. Supp. 268 (E.D. Pa. 1966); 67 Colum. L. Rev. 130 (1967)], Fifth [Miranda v. State of Arizona, 384 U.S. 436, 86 S. Ct. 1602, 16 L. Ed. 2d 694 (1966)], and Sixth [Escobedo v. State of Illinois, 378 U.S. 478, 84 S. Ct. 1758, 12 L. Ed. 2d 977 (1964)] Amendments for at the January 12, 1965 interview he was not told of his rights as enunciated in Miranda. However, we believe that Miranda does not apply in the circumstances of this case and that Mr. Mackiewicz unequivocally, specifically and intelligently, United States v. Smith, 308 F.2d 657, 663 (2 Cir. 1962), cert. denied, 372 U.S. 906, 83 S. Ct. 717, 9 L. Ed. 2d 716 (1963), consented to answer the questions and to the asserted search and seizure of the documents.
Mr. Mackiewicz contends that on January 12th the inquiry as to his tax deficiencies had shifted from the investigatory to the accusatory stages, Escobedo v. State of Illinois, supra, 378 U.S. at 492, 84 S. Ct. 1758, and that the conduct of the agents established an atmosphere of custodial interrogation, Miranda v. State of Arizona, supra, 384 U.S. at 444, 86 S. Ct. 1602. Reliance is placed on the following facts: (1) The civil investigator had referred the case to a Special Agent. This is done when there are "definite indications of fraud or criminal potential." Mathis v. United States, 391 U.S. 1, 88 S. Ct. 1503, 20 L. Ed. 2d 381 (1968) (dissenting opinion); Turzynski v. United States, 268 F. Supp. 847 (N.D. Ill. 1967). (2) The agents' actions established an atmosphere of urgency. Moreover, they displayed their authority in such a manner as to put Mr. Mackiewicz on the defensive. He claims that he felt it was not merely an interview, but an inquisition in which he knew that he was faced by representatives of the Government who could demand, if necessary, an inspection of his records, documents, and papers. Int. Rev. Code of 1954, § 7602. Mr. Mackiewicz claims that although not technically under arrest, he felt constrained to cooperate. (3) The asking of apparently innocuous questions was "insidious and dishonest," Turzynski v. United States, supra, at 851, for Mr. Mackiewicz claims that he had no way of knowing that these questions might later incriminate him. He didn't know of the net worth theory of proving income, and it is probable that even if he had, he would have been unable to imagine how the questions and answers could be used to build the Government's case. Thus, he was tricked into supplying the Government with the incriminating evidence. As one experienced tax attorney has said:
"The agents are understandably circumspect in their questioning of the taxpayer. Early in their careers, they have learned that it is easier to catch flies with molasses than with vinegar. They do not wish to antagonize the taxpayer or alarm him unduly * * For all these reasons they are pleasant in their relationship with the taxpayer, they do not confront him with incriminating evidence, and he is often lulled into a false sense of security." Avakian, "Rights and Remedies of Taxpayers Suspected of Fraud," 33 Taxes 878, 879-880 (1955).
We are aware that in certain circumstances administrative investigators may infringe upon a private citizen's constitutional rights. However, in this case, the circumstances were such that it was unnecessary for the agents to supply Mr. Mackiewicz with the full-blown Miranda warnings. To some extent, a taxpayer must watch out for ...