The opinion of the court was delivered by: GOETTEL
The Reverend Sun Myung Moon is the founder and spiritual leader of the Unification Church, a church with approximately two million members in 120 countries around the world.
Takeru Kamiyama is a member of the Unification Church and an advisor to Moon. The Holy Spirit Association for the Unification of World Christianity (HSA-UWC) is the corporate embodiment of the Unification Church in the United States. HSA-UWC was incorporated in 1961 as a California not-for-profit corporation and was granted tax exempt status by the Internal Revenue Service (IRS) in 1963. At the times relevant to the present case, the activities of the Unification Church in New York State were conducted by a separate entity, the Unification Church of New York (UCNY). UCNY began as an unincorporated association and later became incorporated as a New York not-for-profit corporation.
HSA-UWC assumed the responsibilities of UCNY in 1976.
On October 15, 1981, a federal grand jury indicted Moon on charges of making and subscribing false federal income tax returns in 1973, 1974, and 1975, conspiracy to file false returns, and conspiracy to obstruct the investigations of these tax returns being conducted by the federal grand jury and the United States Attorney. These charges revolve around checking and savings accounts at the Chase Manhattan Bank, in Moon's name, in which.$ 1.6 million was allegedly deposited from March 1973 through December 1975 and $ 50,000 of stock in Tong I1 Enterprises, a company that imports ginseng tea and other merchandise from Korea. The Government alleges that these accounts and stock were owned by Moon personally and that he failed to report the receipt of this stock and the interest earned on the bank accounts as taxable income on his tax returns. The Indictment also names Kamiyama in the conspiracy and separately charges him with aiding and abetting in the preparation and presentation of Moon's allegedly false tax returns, obstruction of justice, causing false documents to be submitted to the United States Department of Justice, and giving false testimony to the grand jury. On December 15, 1981, the grand jury returned a superseding indictment that adds an additional perjury count against Kamiyama and makes certain changes in the language of other counts.
The defendants have made a number of substantive and procedural motions, many of which have already been decided.
Several motions remain outstanding. Moon moves to dismiss the tax counts on the ground that they are legally insufficient and to dismiss all the counts on the grounds of prosecutorial misconduct and abuse of the grand jury process. Kamiyama, in addition to joining in Moon's motions, moves to dismiss the perjury counts on the grounds that his answers before the grand jury were not material, that the questioning of him was unfairly tailored to extract inaccurate answers, and that the interpreter in the grand jury proceedings failed to translate his testimony properly.
The first area of dispute concerns the tax counts of the indictment. Moon moves to dismiss counts two, three, and four, which charge Moon with knowingly and wilfully filing false income tax returns for the years 1973, 1974, and 1975, a violation of 26 U.S.C. § 7206(1) (1976), and count one insofar as it charges a conspiracy to file false tax returns. (Counts two, three, and four all allege that Moon failed to report interest income from various accounts at the Chase Manhattan Bank. Additionally, count two alleges that Moon failed to report income from the receipt of stock in Tong I1 Enterprises and that Moon gave a false source for the income declared on his 1973 tax return.) According to Moon, two grounds support dismissal: the legal insufficiency of the taxability theory stated in the indictment and the failure of the prosecutor to instruct the grand jury properly on the applicable law. Moon also moves to dismiss the false source allegation of count two on the ground that it is legally insufficient. These claims are without merit.
A. Legal Sufficiency and the Prosecutor's Instructions
Moon's argument that the tax counts of the indictment are legally insufficient has been mooted by the filing of the superseding indictment. The gist of his argument was that the indictment was invalid on its face because, rather than alleging that Moon had beneficial ownership of the bank accounts and the stock, a prerequisite for taxability, it alleged only that Moon had "dominion and control" over the accounts and that the stock was "issued" to Moon. In view of the language in the superseding indictment that Moon "owned" the accounts and the Tong I1 stock, even Moon concedes that "(counts) (o)ne through (f)our are now valid on their face." Reply Memorandum in Support of Pretrial Motions of Rev. Sun Myung Moon at 2 (footnote omitted).
The Government's decision to alter the language of the indictment, however, has not completely curtailed Moon's contention that the prosecutor's legal instructions to the grand jury on the taxability of income must be scrutinized by the Court. For example, Moon wants to know whether the reasons for changing the language in the indictment were explained to the grand jury and whether ownership was defined as something less than beneficial ownership. Although this course of action is rarely taken by federal courts (particularly where, as here, the grand jury transcripts amount to several thousand pages), the peculiar circumstances of this case, especially the filing of the superseding indictment, have prompted this Court to review the prosecutor's instructions to the grand jury that returned the superseding indictment. Having done so, however, this Court cannot grant Moon's motion to dismiss, for there is no indication that the grand jury was misled as to the applicable law.
Moon's arguments regarding the false source allegation are also unconvincing. On the 1973 joint tax return filed by Moon and his wife,
line 9 asked for "Wages, salaries, tips and other employee compensation." It also required that the taxpayer attach his W-2 forms or, if unavailable, to provide an explanation. Moon entered the amount of $ 14,458.41 on line 9. To explain the absence of an accompanying W-2 form, he also attached the following note:
Because the Unification Church was incorporated in New York only in March of 1974 the books were not clearly established and matters such as W-2's were not yet organized. This happened because in general no one in the Unification Church (receives) any compensation whatsoever, wages and salaries, and the corresponding forms (W-2's) have never been needed.
The indictment, as clarified by the Government's response to Moon's bill of particulars, charges that this statement falsely identified the Unification Church as the source of Moon's income. Moon argues that this false source allegation is legally insufficient.
The first argument proffered by Moon is that the statement amounted only to an explanation of the absence of an attached W-2 form, not a representation that the Unification Church was the source of the income reported on line 9.
This is untenable. A W-2 form indicates the amount of income received from a particular source, and it is prepared by the organization or individual that is the source of the income. The only reasonable inference that can be drawn from the statement that no W-2 forms were attached because the administrative apparatus of the Unification Church was not yet established is that the Unification Church was the source of the income.
Moon's second argument is that, even if this statement amounted to a representation of the source of the income, he cannot be prosecuted because neither the Internal Revenue Code nor the Regulations explicitly require a taxpayer to identify the source of income reported on line 9, but not reflected in a W-2 form. In support of this proposition, Moon cites United States v. Levy, 533 F.2d 969 (5th Cir. 1976), in which the Fifth Circuit held that a taxpayer could not be prosecuted under section 7206(1) for making false statements on IRS Form 433-AB because use of the form was not authorized by the Code or the Regulations. Id. at 975.
Reliance on Levy is misplaced, however, because it does not stand for the proposition that one can be prosecuted under section 7206(1) only if the false statement was made in response to a question specifically authorized by the Code or Regulations. This was made clear in United States v. Taylor, 574 F.2d 232 (5th Cir.), cert. denied, 439 U.S. 893, 99 S. Ct. 251, 58 L. Ed. 2d 239 (1978), a subsequent Fifth Circuit case ignored by Moon. Taylor involved a prosecution for false reporting on Schedules E and F of Form 1040. Distinguishing Levy, the court rejected the defendant's argument that prosecution was barred because use of the Schedules was not explicitly required by the Regulations. Id. at 237. It noted that
(section) 7206(1) pertains to willful subscription to "any return, statement, or other document" made under penalty of perjury. Levy involved the question of whether Form 433-AB was a "statement" within the meaning of the statute. We held that "statement" referred only to documents required by the Internal Revenue Code or any lawfully promulgated regulation. Since no statute or regulation authorized the use of Form 433-AB, the IRS could not lawfully require its execution under penalties of perjury.
The instant case does not involve interpretation of "statement." For each tax year in question defendant filed a Form 1040, which clearly is a "return."
While there is no explicit requirement in the regulations for the completion and filing of Schedules E and F, it is implicit in required Form 1040 that such schedules, when appropriate, become integral parts of such form and are incorporated therein by reference.
Similarly, this case involves a "return," not a "statement." Like the schedules in Taylor, a W-2 form or an explanation of its absence attached to an income tax return becomes part of the return itself. Consequently, any false statement on the form or in the explanation can, if material, form the basis of a prosecution under section 7206(1). A simple hypothetical illustrates that any other conclusion could have anomalous consequences. Assume that John Smith earned $ 10,000 while employed by X Corporation and that this information was reflected in a W-2 form. If Smith altered the form to indicate that Y Corporation was the source of the income and if he attached the form to his income tax return, there is little question that Smith could be prosecuted under section 7206(1) if the alteration was material. Under Moon's rationale, however, if Smith did not have a W-2 form and if he attached an explanation indicating that Y Corporation was the source of the income, he could not be prosecuted. Neither logic nor the authorities call for such a result.
The final argument concerns materiality. Moon contends that the statement, if a false representation of the source of income, could not possibly have misled the IRS and, thus, was not material. See 26 U.S.C. § 7206(1) (1976) (to constitute a violation of the statute, the false statement must be material). For example, he argues that the IRS could have ascertained that the source of the income reported on line 9 was the Chase accounts simply by contacting the Unification Church. Moreover, according to Moon, the IRS already knew of the accounts in Moon's name because Form 1099, which reports the interest earned on accounts in a bank, was sent to the IRS by Chase each year. This Court disagrees.
Although there is no precise definition of materiality in the context of section 7206(1), see United States v. Goldman, 439 F. Supp. 337, 344 (S.D.N.Y.1977), several cases suggest that a false statement is material if it potentially could hinder or affect the IRS in carrying out functions such as the verification of the accuracy of a tax return. See United States v. Taylor, supra, 574 F.2d at 235; United States v. Romanow, 509 F.2d 26, 28 (1st Cir. 1975); United States v. DiVarco, 484 F.2d 670, 673 (7th Cir. 1973), cert. denied, 415 U.S. 916, 94 S. Ct. 1412, 39 L. Ed. 2d 470 (1974); United States v. Goldman, supra, 439 F. Supp. at 344.
Only one case, however, United States v. DiVarco, supra, has dealt squarely with the issue raised on this motion. It is contrary to Moon's position. In DiVarco, the defendants accurately reported the commissions they earned, but falsely reported the source of the commissions.
The district court, see United States v. DiVarco, 343 F. Supp. 101 (N.D.Ill.1972), reasoning that the purpose of the statute "is to prosecute those who intentionally falsify their tax returns regardless of the precise ultimate effect that such falsification may have," id. at 103, and that the IRS would be hampered in its efforts to check the accuracy of returns if the source of income is falsely stated, id. at 103, held that misstating the source of income was a material matter for the purpose of prosecution under section 7206(1). Id. at 103-04. The Seventh Circuit affirmed and adopted this reasoning. United States v. DiVarco, supra, 484 F.2d at 673.
In light of DiVarco, this Court is not prepared to conclude so early in the case that Moon's representation, if false, was not material. Listing the Unification Church as the source of income clearly had a potential negative impact on the administrative operations of the IRS-besides the obvious problems of verification, such a statement concealed the existence of the Chase accounts and the interest they generated. (This, of course, assumes that the representation was false.) Moon's argument that the IRS could not possibly have been misled is based on the erroneous premise that materiality is determined by evaluating the actual effect of the statement on IRS operations. This rationale, if carried to its logical conclusion, would preclude prosecution for a misstatement on a tax return, even if motivated by a desire to avoid taxes illegally, as long as an investigation would have revealed the truth. Such a result would be preposterous. Consequently, it is the potential, not actual, effects that control the issue of materiality. See United States v. Romanow, supra, 509 F.2d at 28 (falsehood material even though IRS did not use the information). For example, an understatement of income is not immaterial because the IRS could have ascertained the correct amount by contacting the source of the income. Similarly, a misstatement of interest income from a bank account is not rendered immaterial by the bank's submission of Form 1099 to the IRS.
II. Prosecutorial Misconduct
The defendants make several allegations of prosecutorial misconduct.
Moon alleges that the Government improperly failed to present certain exculpatory evidence to the grand jury and abused the grand jury process because, on occasion, it used separate grand juries. Kamiyama also alleges that it was an abuse of the grand jury process to use separate grand juries, particularly where perjury is charged by a grand jury other than that which heard the testimony. In addition, he argues that the Government improperly laid a "perjury trap" by not attempting to refresh his recollection concerning the events about which he allegedly committed perjury. These motions are denied.
Moon complains about the Government's decision not to call before the grand jury certain Church leaders who had submitted affidavits to the Justice Department regarding their knowledge about the purpose of the monies deposited in the Chase accounts and the funds used to purchase ginseng tea for Tong I1 Enterprises. (In June 1981, while the investigation was in progress, defense counsel submitted a binder of nineteen affidavits from individuals who, according to Moon, would corroborate his claims. Seven of these nineteen individuals were subpoenaed to appear before the grand jury. Moon claims that nine others should also have testified.) Because of this decision, Moon argues that the indictment must be dismissed. We disagree.
The Second Circuit defined the prosecutor's obligation to present exculpatory evidence to a grand jury in United States v. Ciambrone, 601 F.2d 616 (2d Cir. 1979). Noting that " "(a) grand jury proceeding is not an adversary hearing in which the guilt or innocence of the accused is adjudicated,' " id. at 622 (quoting United States v. Calandra, 414 U.S. 338, 343, 94 S. Ct. 613, 617, 38 L. Ed. 2d 561 (1974)), the court ruled that "(despite) recent movement for revision of grand jury procedure, a prosecutor is not presently obligated to search for and submit to a grand jury evidence favorable to the defense or negating guilt, when it has not been requested by the grand jury." Id. (footnote omitted). The Second Circuit went on to note, however, that when "a prosecutor is aware of any substantial evidence negating guilt he should, in the interest of justice, make it known to the grand jury, at least where it might reasonably be expected to lead the (grand) jury not to indict." Id. 601 F.2d at 623; see United States v. Boffa, 89 F.R.D. 523, 530 (D.Del.1981) (prosecutor may have obligation to disclose evidence that "might reasonably be expected to lead the (grand) jury not to indict "); United States v. Deerfield Specialty Papers, Inc., 501 F. Supp. 796, 804-05 (E.D.Pa.1980) (prosecutor not required to present testimony that would merely present issues of credibility and could not be expected to lead the grand jury not to indict).
There is no requirement that the prosecutor disclose the allegedly exculpatory evidence in the manner preferred by the defendant. "An indictment is not defective because the defendant did not have an opportunity to present his version of the facts before the grand jury." United States v. Ciambrone, supra, 601 F.2d at 623. All that is required of the prosecutor is that he make the exculpatory evidence "known" to the grand jury. Id.; United States v. Boffa, supra, 89 F.R.D. at 530.
Moon has made no showing that the Government did not make the information contained in these affidavits known to the grand jury or, more importantly, that the testimony of these additional witnesses might reasonably have been expected to lead the grand jury not to indict. The specific individuals in question are Takeko Hose, David Kim, Hideo Oyamado, Ken Sudo, Dennis Orme, Martin Porter, Teddy Verheyen, Reiner Vincenz, and Woo Uk-man Cho. The substance of their proffered testimony is summarized in affidavits submitted with this motion. Hose and Kim state that they would have testified that, at a meeting of Church leaders in San Francisco in 1972, Mitsuharu Ishii, a founding member and Treasurer of the Unification Church of Japan, suggested that bank accounts be opened in Moon's name to facilitate fundraising. Oyamado and Sudo state that a similar suggestion was made at a meeting in Japan a few months after the San Francisco meeting. Orme, Porter, Verheyen, and Vincenz, European leaders of the Church, state that they would have testified that they gave money to Kamiyama to help finance Church activities in the United States. Cho states that, if subpoenaed, he would have testified that he received $ 200,000 in United States currency from Takahiro Shimba, Mitsuharu Ishii's assistant, and that these funds came from Church members to start a ginseng importing business in the United States.
Affidavits submitted by the Government establish that the substance of this proffered testimony had been presented to the grand jury. The Government marked the affidavits these individuals submitted to the Justice Department as a grand jury exhibit. In addition, other witnesses had testified on these matters. With respect to the meetings in 1972 in San Francisco and Japan, the Government states that four witnesses testified before the grand jury regarding these meetings. With respect to the affidavits from European leaders of the Church, the Government states that three witnesses testified regarding these same matters, including Kamiyama, the person who allegedly received this money. With respect to the testimony of Woo Uk-man Cho, the Government states that this subject was covered by the testimony of four witnesses including Mitsuharu Ishii, the person who purportedly directed Mr. Shimba to give Cho the $ 200,000.
Moon's contention that the testimony of these witnesses might reasonably have been expected to lead the grand jury not to indict is also unacceptable. The critical issue before the grand jury was whether Moon considered and treated the funds in the Chase Manhattan Bank and the Tong I1 stock as his own. The genesis and purpose of these funds bear only circumstantially on this issue. A jury could well find that Moon treated these funds as his own even though they were originally intended to be for the benefit of the Church. It is also of significance that defendant Moon refused the Government's invitation to testify before the grand jury. See United States v. Ciambrone, supra, 601 F.2d at 625; United States v. Loften, 518 F. Supp. 839, 857 n.30 (S.D.N.Y.1981); United States v. Deerfield Specialty Papers, Inc., supra, 501 F. Supp. at 805 n.10.
Finally, it should be noted that the cases cited by Moon in which indictments were dismissed for failure to present exculpatory evidence are inapplicable.
Those cases involved allegations of the prosecutor misleading the grand jury. The thrust of Moon's claim is that the additional witnesses are more credible than those who testified before the grand jury. This is not a proper ground to attack an indictment returned by a legally constituted grand jury. To require the Government to present the defendant's choice of witnesses to the grand jury would "convert a grand jury proceeding from an investigative one into a mini-trial of the merits." United States v. Ciambrone, supra, 601 F.2d at 222; see United States v. Deerfield Specialty Papers, Inc., supra, 501 F. Supp. at 805. That is not the function of the grand jury.
Relying on the debriefings of four church members who had appeared before a grand jury on several occasions, Moon contends that the Government made simultaneous use of multiple grand juries and argues that there is no assurance that the grand jury that returned the indictment heard evidence from which it could conclude that there was probable cause to believe that Moon had committed a crime. Thus, argues the defendant, the Court should dismiss the indictment or, in the alternative, direct disclosure of the grand jury minutes. This contention is without legal or factual merit.
It is elementary that "(an) indictment returned by a legally constituted and unbiased grand jury, ... if valid on its face, is enough to call for (a) trial of the charge on the merits." Costello v. United States, 350 U.S. 359, 363, 76 S. Ct. 406, 408, 100 L. Ed. 397 (1956) (footnote omitted). A court need not look behind a facially valid indictment to consider the character of the evidence upon which it is based. United States v. Calandra, supra, 414 U.S. at 344-45, 94 S. Ct. at 618; United States v. Schlesinger, 598 F.2d 722, 726 (2d Cir.), cert. denied, 444 U.S. 880, 100 S. Ct. 168, 62 L. Ed. 2d 109 (1979). Concededly, a court may dismiss an indictment under its supervisory powers over the administration of justice when, for example, "there is a high probability that the grand jury would not have indicted if presented with first-hand testimony rather than hearsay or where the prosecution has misled the grand jury as to the "shoddy merchandise they are getting.' " Id. at 726; see United States v. Estepa, 471 F.2d 1132, 1137 (2d Cir. 1972). These supervisory powers, however, are quite limited. United States v. Myers, 510 F. Supp. 323, 328 (E.D.N.Y.1980). Dismissal of an indictment is a "most drastic remedy," United States v. Fields, 592 F.2d 638, 647 (2d Cir. 1978) (emphasis in original), cert. denied, 442 U.S. 917, 99 S. Ct. 2838, 61 L. Ed. 2d 284 (1979), that should not be granted absent extraordinary circumstances. See United States v. Artuso, 618 F.2d 192, 196-97 (2d Cir.), cert. denied, 449 U.S. 861, 101 S. Ct. 164, 66 L. Ed. 2d 77 (1980); United States v. Brown, 602 F.2d 1073, 1076-77 (2d Cir.), cert. denied, 444 U.S. 952, 100 S. Ct. 427, 62 L. Ed. 2d 323 (1979); United States v. Ciambrone, supra, 601 F.2d at 623, 625 n.6; United States v. Schlesinger, supra, 598 F.2d at 726.
There is nothing in the papers to suggest that the Government relied extensively on hearsay testimony or that the grand jury might not have indicted Moon had a witness who testified before a separate grand jury testified in person. Given the length of the investigation and the number of witnesses who appeared before the grand jury, one would expect that more than one grand jury would be used. The Government states in its opposing affidavit that approximately ninety-five percent of the witnesses appeared before the grand jury that voted the indictment. Moreover, the Government states that the testimony of each witness who appeared before a separate grand jury was marked as an exhibit and read in its entirety before the grand jury that voted the indictment. In ...