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United States v. Squeri

decided: July 24, 1968.


Lumbard, Chief Judge, Friendly, Circuit Judge and Clarie,*fn* District Judge.

Author: Lumbard

LUMBARD, Chief Judge:

This appeal by Enrico Squeri from a judgment of conviction, after a non-jury trial before Judge Murphy in the Southern District in August 1967, on four counts of wilfully attempting to evade income taxes of over $100,000 extending over four tax years, presents the sole question whether the court below erred in denying appellant's motion to suppress certain records which he had delivered to the Internal Revenue Service during an audit of his returns. Appellant moved before trial to suppress the records, contending that they were obtained in violation of his constitutional rights because the IRS agents had misrepresented the nature and purpose of the investigation and because the agents had not informed him of his right to counsel. After a lengthy pre-trial hearing before Judge Cooper, the motion was denied, the court finding that there had been no misrepresentation by the IRS agents and that the requirements of Miranda v. State of Arizona, 384 U.S. 436, 86 S. Ct. 1602, 16 L. Ed. 2d 694 (1966), were not applicable to this case. Objection to this evidence was renewed at trial and overruled by Judge Murphy. We agree with the ruling of the district court and affirm the judgment of conviction and sentence of two years, suspended, with probation for one year, and a fine of $40,000.

The circumstances relating to the production of the records are somewhat unusual; the audit of appellant's returns was originally undertaken in connection with an investigation which was directed not at the appellant, but at the possible criminal activities of another person wholly unrelated to the tax evasion involved in the present prosecution.

In 1962 the IRS commenced an investigation of Peter J. Riordan, a former Internal Revenue Agent, suspected of improper dealings with various taxpayers, including the preparation of tax returns. A group of agents, consisting of both Internal Revenue Agents and Special Agents, was assigned to investigate some 50 to 75 taxpayers thought to have dealt with Riordan, including Squeri who owned and ran a restaurant which Riordan was known to frequent. According to the government, the Internal Revenue Agents were to conduct regular audits of the taxpayers' returns for the years 1959 to 1961; the Special Agents were to determine if Riordan had prepared any of the returns and, if so, whether he was responsible for any false entries which the audits might reveal.

In April 1963 two Special Agents visited Squeri to obtain a waiver of the civil statute of limitations on the 1959 returns, which was about to expire. Squeri consulted Hugo Poltronieri, the accountant who prepared his tax returns, who informed Squeri that Special Agents were usually called in criminal cases. Poltronieri advised Squeri to get a lawyer if he was involved in any trouble. Squeri said he had nothing to hide and apparently did not consult a lawyer at that time. He then signed and returned the waiver.

On October 8, 1963, the IRS wrote Squeri requesting him to come for an interview and to bring any records used in preparing his returns, including any savings bank books. On October 16 Squeri, accompanied by Poltronieri, arrived at the IRS office at 50 Church Street, where he was met by Internal Revenue Agent Frank Rojek and Special Agent Robert G. Ganley. Ganley explained to Squeri that he was investigating Riordan and that he wanted to question Squeri as to his relationship with Riordan. Ganley warned Squeri that he had a right not to answer any question or to make any statement which would tend to incriminate him; he added that Rojek would later conduct an audit of Squeri's books and records.

Ganley then questioned Squeri about Riordan. Squeri's answers revealed that he had never had any connection with Riordan with regard to any tax matters, and Squeri then signed an affidavit to this effect. During Ganley's questioning, Rojek asked Squeri if he had brought the documents requested in the letter. Squeri then handed over 13 savings passbooks, which Poltronieri had not known of when preparing the returns and which were subsequently found to reflect income not included in the returns. At the end of the meeting Rojek told Squeri that he wanted to continue the audit, to which Squeri consented.

As a result of Ganley's questioning, Squeri was cleared of any improper connection with Riordan and was dropped from the Riordan investigation. However, Rojek proceeded with the audit. On October 30, Rojek went to Squeri's home to examine his records for 1959-1961. Squeri showed Rojek the records and said that they were at his disposal. Rojek returned the following day and on three further occasions -- November 14 and December 13, 1963; and April 15, 1964. Squeri permitted Rojek to examine the records and himself produced some further records, including those for the additional year 1962, requested by Rojek. In June 1964, Rojek concluded that there was an indication of fraud, and Special Agent Howard English was then assigned to determine if criminal charges were warranted. With Squeri's knowledge, Poltronieri turned over to English certain of the records for 1959 to 1962 which Rojek had previously examined. Subsequently, Poltronieri turned over at Rojek's request other records, for the years 1955-1958; these records do not relate to the present criminal case, which involves only the years 1959-1962.

In October 1964 English decided that there was enough evidence to give serious consideration to prosecution, and a letter was sent to Squeri informing him of this and proposing a conference on the subject. At this point, apparently, Squeri retained a lawyer. The conference with Squeri and his counsel, Mr. Halperin, was held on December 1, 1964, and in February 1965 the IRS recommended prosecution.

Upon this evidence the district court rejected Squeri's claim that the IRS had obtained the records by resort to deceit and misrepresentation. The court found that, while criminal proceedings were contemplated from the outset with respect to Riordan, the audit of Squeri's returns was routine and civil; that the IRS had put Squeri on notice as to the nature and scope of its inquiry; that Squeri had comprehended every phase of the matter; and that he had cooperated with the IRS and had voluntarily turned over the records, with full knowledge of the purposes of the investigation. The court stated that while the routine audit of defendant's returns eventually revealed information which formed the basis upon which the indictment rested, when that time arrived no impermissible advantage was practiced, directly or indirectly, by the IRS upon the defendant. These findings are amply supported by the record.

Squeri was admittedly advised that his returns were being audited and that the IRS was investigating Riordan's activities. This gave Squeri full and accurate information as to the extent of the IRS inquiry. The failure to advise Squeri of possible criminal proceedings against himself was not misleading, since the district court found, on sufficient evidence, that no such proceedings against Squeri were contemplated at that time.

Furthermore, even if the IRS had contemplated criminal proceedings against Squeri, there would be no merit to the claim of deception; the information that a taxpayer's returns are under audit gives sufficient notice of the possibility of criminal prosecution regardless of whether the agents contemplate civil or criminal action when they speak to him. E. g., United States v. Sclafani, 265 F.2d 408, 414-415 (2d Cir.), cert. denied, 360 U.S. 918, 79 S. Ct. 1436, 3 L. Ed. 2d 1534 (1959); Russo v. United States, 241 F.2d 285 (2d Cir. 1957). Moreover, Squeri was warned of his right not to incriminate himself, and there is no force to his contention that this warning could have been taken as applying only to the questions asked by Ganley and not those asked by Rojek.

Appellant also argues that his constitutional rights were violated when he was not informed of his right to counsel at the first meeting with ...

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