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UNITED STATES v. BENJAMIN

December 20, 1985

UNITED STATES OF AMERICA,
v.
DAVID BENJAMIN, et al., Defendants


Louis F. Oberdorfer


The opinion of the court was delivered by: OBERDORFER

A twenty-two count indictment returned by a Grand Jury impaneled by this Court charges nine defendants with conspiracy, obstruction of justice and perjury; *fn1" all of the nine defendants are charged in each count. Seven counts grow out of a dispute between Synanon Foundation, Inc. ("Synanon"), a California organization, and the Internal Revenue Service ("IRS") as to whether Synanon was eligible for exemption from federal income tax under section 501(c)(3) of the Internal Revenue Code. The first count charges a conspiracy to alter or destroy documents and tapes which might support a revocation of Synanon's tax exempt status and a continuing scheme of fraud and obstruction to conceal the destruction of evidence. Two of the federal counts charge that defendants, by their general counsel, Philip Bourdette, made false statements to IRS agents at a conference at IRS national headquarters in Washington, D.C., to which Synanon had appealed an adverse ruling of the IRS office in California. Four federal counts charge defendants with perjury and obstruction of justice in connection with the suit brought by Synanon against the United States pursuant to a statute which provides for judicial review in the District Court for the District of Columbia of IRS decisions denying tax exemption claims. See 26 U.S.C. § 7428. The remaining fifteen counts charge defendants with violation of the District of Columbia perjury laws in connection with a suit brought by Synanon in the Superior Court in a dispute over real estate in the District of Columbia (at issue was whether Synanon was a nonprofit corporation within the meaning of D.C. law).

 The matter is presently before the Court on defendants' motion to transfer the case to the District Court for the Eastern District of California, Fresno Division, either by operation of 18 U.S.C. § 3237(b) or Fed. R. Crim. P. 21(b). *fn2"

 The motion to transfer the federal counts invokes 18 U.S.C. § 3237(b) which provides that:

 
Where an offense is described in section 7203 of the Internal Revenue Code of 1954 . . . and prosecution is begun in a judicial district other than the judicial district in which the defendant resides, he may upon motion . . . elect to be tried in the district in which he was residing at the time the alleged offense was committed. . . .

 Section 7203 of the Internal Revenue Code provides in relevant part:

 
Any person . . . required under this title or by regulations made under authority thereof to . . . keep any records, or supply any information, who wilfully fails to . . . keep such records, or supply such information, at the time or times required by law or regulations, shall . . . be guilty of a misdemeanor . . . .

 Defendants claim that counts One, Two and Three allege willful failure to keep records or supply information required by tax statutes and regulations and that the "nature and effect" *fn3" of this conduct are the same as conduct actionable under section 7203, making those counts subject to mandatory transfer under 18 U.S.C. § 3237(b) because the offense is "described" in section 7203.

 Defendants further urge that counts Four through Seven charge acts "similar in kind to the counts subject to mandatory transfer" and that "the entire indictment charges acts which principally concerned an attempt to withhold information from the Internal Revenue Service" and would require proof of the same facts. Defendants' Reply Memorandum in Support of Motion to Transfer to Eastern District of California, Fresno Division ("Reply Memorandum") at 6-7 (filed November 5, 1985). Consequently, defendants urge, the case should be transferred as a whole even if certain of the federal counts do not fall within § 3237(b). Defendants also make a special plea with respect to counts Five and Six. These counts charge that defendants endeavored to obstruct justice in the District of Columbia by preparing and signing in California and filing in this Court materially false declarations. Defendants claim that venue for these counts is proper only in the jurisdiction where the allegedly false declarations were prepared and mailed, and that venue does not lie in this district merely because the defendants caused the declarations to be filed here. They rely on United States v. Swann, 142 U.S. App. D.C. 363, 441 F.2d 1053, 1055 (D.C. Cir. 1971), as authority for the proposition that defendants' intention to influence proceedings here does not create venue here.

 In general support of their motion, defendants point particularly to the statement in the Senate Report which made section 7203 indictments transferable: Prosecution of offenses described in that section "should be brought as close to the defendant's residence as possible in order to avoid hardship to him, his attorneys and witnesses." S. Rep. No. 1625, 89th Cong., 2d Sess. reprinted in [1966] U.S. Code Cong. & Ad. News at 3681. The defendants also quote the Senate Committee Report which originally recommended enactment of section 3237:

 
Too frequently prosecutions are not brought in the defendants' home districts but rather . . . a considerable distance from the defendant's home. The cost and inconvenience to the defendant may be substantial, especially in the case of an extended trial. The additional expense to the defendant living away from home, the problem of getting his local attorneys to leave their offices and practices for several days or weeks and the increased cost incurred thereby, the inconvenience to witnesses, these are all factors which the committee believes place a heavy burden upon the defendant which can be better borne by the Government.

 S. Rep. No. 1952, 85th Cong., 2d Sess. reprinted in [1958] U.S. Code & Ad. News at 3262 (quoting comments from the House Report). Thus, defendants contend:

 
The purpose of section 3237(b) is to entitle a citizen accused of misleading agents of the Internal Revenue Service investigating his compliance with the federal tax laws at a trial to defend these accusations in the district of his residence. That right is not altered because . . . a citizen is compelled to attend conferences in Washington, D.C., see Internal Revenue Manual §§ 4551.2(11) and.3 ("Conferences in Washington"), or because he is compelled by law to file suit in the federal courts in this city. See 26 U.S.C. § 7428(a)(2); Universal Life Church, Inc. v. Internal Revenue Service, 82-1 USTC P 9390, at p. 84,076 (1981).

 Reply Memorandum at 7-8 (footnote omitted).

 In the alternative, defendants base their motion on Fed. R. Crim P. 21(b). That rule authorizes a transfer of a case or any one or more of the counts for the convenience of parties and witnesses, and "in the interest of justice." In support of this alternative, defendants point to the fact that most of the defendants reside in California. Synanon is incorporated and operates there. The alleged documents destruction occurred there. The allegedly false written statements were prepared in California (and Arizona) and transmitted from there to the District of Columbia. Defendants claim that both they and the government will be forced to rely primarily on California witnesses to establish the truth (or falsity) of the allegedly false statements made in hearings at the IRS, Superior Court, and this Court, as well as the materiality of those statements. Alleged acts of violence and other conduct which drew the tax exemption into question occurred in California. The original IRS audit occurred in California and the original decision denying tax exemption was made there. They further claim that the principal witnesses (particularly character witnesses and those who dealt with IRS) and quantities of documentary evidence are in California. Five of the seven lawyers so far appearing for defendants practice in California. Defendants point to the logistical problems and expense which would be involved for defendants and their California counsel if they were required to establish themselves in Washington for a protracted trial, as well as the expense and difficulty involved if they attempted to commute to their homes and offices in California during the trial.

 In opposing these motions, the government emphasizes that the conspiracy count and the particularized counts all essentially charge acts committed in the District of Columbia: obstruction of justice in this Court, false statements and representations at conferences at the IRS national headquarters here in Washington, D.C., and perjury in the Superior Court of the District of Columbia. In the government's view

 
The principal matter at issue here is not the existence of a tax evasion scheme arranged and perpetrated primarily in California. Rather, . . . the key issue is whether the defendants should be held criminally response for participating in this "gross fraud . . . of the most grave and serious proportions" on both federal and local courts of the District of Columbia.

 Government's Memorandum in Opposition to Defendants' Motion to Transfer Action to the Eastern District of California, Fresno Division ("Government's Opposition") at 6 (filed October 25, 1985).

 In further answer to defendants' reliance on § 3237(b), the government argues that transfer under § 3237 in cases involving tax evasion (26 U.S.C. § 7201), false declarations (26 U.S.C. § 7206(1)), aiding and abetting false returns (26 U.S.C. § 7206(2)), and document destruction (26 U.S.C. § 7206(5)) is only authorized when venue for a prosecution of an offense described in one of those sections is based "solely on a mailing to the Internal Revenue Service." The government notes that the "mailing requirement" is not satisfied here. *fn4"

 As to transfer under section 3237(b) on the theory that the offenses charged are also "described" in 26 U.S.C. § 7203, the government concedes that under § 3237(b) no requirement that venue be based solely on mailing limits transfer of § 7203 prosecutions. The government argues, however, that, under the terms of § 3237(b), § 7201 or 7206 cases in which venue is based solely on mailing may be transferred "whether or not the offense is also described in another provision of law." The government notes that this broadening clause does not modify § 3237(b)'s reference to § 7203 cases.

 The government further argues that section 7203 covers only failure to file a return or supply information required by law, whereas the federal tax counts in this case involve misrepresentations to the IRS. In support of its contention that only failure to file cases brought under § 7203 are transferable under § 3237(b), the government argues that the 3237(b) transfer option was created to address a narrow problem. The government points to the Senate Report on the legislation:

 
For purposes of determining where a prosecution [for willful failure to file a tax return] is to occur, present case law holds that the venue is to be in the judicial district in which the return was required to be filed.
 
. . . .
 
. . . To be sure that the taxpayer has the right to be tried in the district in which he resides, the bill amends present law to provide that he may elect to remove his ...

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