JACK MILLMAN, PETITIONER V. UNITED STATES OF AMERICA No. 89-6929 In The Supreme Court Of The United States October Term, 1989 On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Second Circuit Brief For The United States In Opposition OPINION BELOW The opinion of the court of appeals (Pet. App. 1-3) is unreported. JURISDICTION The judgment of the court of appeals was entered on November 8, 1989. A petition for rehearing was denied on January 9, 1990. The petition for a writ of certiorari was filed on March 12, 1990. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1). QUESTION PRESENTED Whether petitioner was properly convicted under 18 U.S.C. 1001 for his false statements to a federal investigator. STATEMENT Following a jury trial before the United States District Court for the Southern District of New York, petitioner was convicted on one count of conspiracy to defraud the United States, in violation of 18 U.S.C. 371, and on one count of making false statements to an agent of the Internal Revenue Service, in violation of 18 U.S.C. 1001. He was sentenced to two years' imprisonment and three years' probation. Pet. App. 17. The evidence at trial, the sufficiency of which is not in dispute, showed that petitioner devised and ran a scheme to lease master recordings (the original recordings from which records and tapes are made) as tax shelters in order to generate fraudulent investment tax credits for the lessees. Central to the scheme were appraisals provided by Robert Scherl and Sye Mitchell, who valued the master recordings at whatever inflated price petitioner requested. Petitioner sold approximately fifty master recordings that Scherl and Mitchell had appraised to Music Leasing Company in 1980 and 1981. Under the scheme, Music Leasing paid petitioner a small sum in cash and also gave him a large long-term note for each master recording; Music Leasing never intended to pay the amounts due under the notes and petitioner never intended to collect on them. Music Leasing was able to pass large investment tax credits to its lessees by relying on the inflated appraisals and the false sales prices. Gov't C.A. Br. 3-6. In March of 1985, petitioner came voluntarily to a United States Attorney's office, accompanied by two attorneys. IRS Agent Paul Cunningham interviewed petitioner, while petitioner's attorneys were present, over the course of several hours. Petitioner gave conversational, expansive answers to Agent Cunningham's questions, sometimes expounding at length. During the course of the interview, petitioner made numerous false statements to Agent Cunningham. Specifically, petitioner claimed that he had not had a business relationship with Music Leasing. He said that "he never sold any master recordings to Music Leasing, that he never discussed the master recording business with anyone from Music Leasing Company, that he never sent any lists of master recordings that he had available to Music Leasing Company, and that he never called them on the telephone and told them what masters he had available or at what prices." Tr. 1033-1034. In addition, petitioner also claimed that he had never had any business relationship with the appraisers, Mitchell and Scherl. Petitioner stated that "he never obtained any appraisals for anyone, (t)hat he never paid for any appraisals for anyone, and that he never received any money from anyone and then paid it to an appraiser on behalf of that person or company." Tr. 1035-1036. The court of appeals affirmed. Pet. App. 1-3. With respect to his false statement conviction, petitioner argued that Section 1001 did not apply because he had simply denied guilt. The court of appeals stated that there was no need for it to consider the validity of the "exculpatory no" defense or to explore its scope because, if it were to adopt the defense, "it would not extend beyond simple 'no' responses to an investigator's questions," and "(m)any of the statements here were clearly more than a simple 'no.'" Id. at 2. The court of appeals also stated that the defense would have no application "where the defendant has given false statements in the context of a voluntary, walk-in interview during which he was accompanied by counsel." Ibid. /1/ ARGUMENT By its terms, Section 1001 broadly reaches "(w)hoever, in any matter within the jurisdiction of any department or agency of the United States, knowingly and willfully * * * makes any false, fictitious or fraudulent representations." Section 1001 was designed to protect "the authorized functions of governmental departments and agencies from the perversion which might result from the deceptive practices described" in the statute. United States v. Gilliland, 312 U.S. 86, 93 (1941). Its "sweeping language * * * covers all matters confided to the authority of an agency or department," including matters related to criminal investigations. United States v. Rodgers, 466 U.S. 475, 479 (1984). /2/ As petitioner points out (Pet. 17-18), some courts have recognized an "exculpatory no" defense to Section 1001. See, e.g., Paternostro v. United States, 311 F.2d 298, 300-301 (5th Cir. 1962); United States v. Medina de Perez, 799 F.2d 540 (9th Cir. 1986); United States v. Cogdell, 844 F.2d 179 (4th Cir. 1988). Those courts have reasoned that Section 1001 does not apply to cases involving simple denials of guilt by the target of a criminal investigation. Although the statute does not expressly provide for such an exception, the courts have concluded that mere denials of guilt do not impair the basic functions of the agency to which the statement is made. United States v. Medina de Perez, 799 F.2d at 544; United States v. Cogdell, 844 F.2d at 183. The Second Circuit has never adopted the "exculpatory no" defense, and has indicated that were it to do so, the exception would be construed narrowly. United States v. Capo, 791 F.2d 1054, 1068-1069 (2d Cir. 1986), rev'd in part on other grounds, 817 F.2d 947 (2d Cir. 1987) (any statement beyond a simple 'no' would not fall within the exception); United States v. Shanks, 608 F.2d 73, 75-76 (2d Cir. 1979), cert. denied, 444 U.S. 1048 (1980) (a false statement made by a robbery suspect who attempted to shift suspicion away from himself was not a "mere" exculpatory denial because of his intent to "pervert" the operation of the Secret Service); United States v. Adler, 380 F.2d 917, 922 (2d Cir.), cert. denied, 389 U.S. 1006 (1967) ("affirmative, voluntary" false statements made by the defendant to the FBI that were "calculated to provoke an investigation by that agency" cannot be characterized as mere exculpatory denials). The Second Circuit has recognized that "'affirmative, voluntary statement(s),' which are 'readily distinguishable' from simple exculpatory denials in response to investigators' questions, would not be within the exception." United States v. Capo, 791 F.2d at 1069 (citations omitted). As the court of appeals stated (Pet. App. 2), this case offered it no opportunity to consider whether to recognize the "exculpatory no" defense because petitioner's false statements went well beyond a simple "no." Petitioner gave discursive, conversational false statements over the course of several hours. Tr. 1036. Rather than simply denying guilt, petitioner lied at length about his relationships with Music Leasing and the appraisers. His extended dialogue with Agent Cunningham can in no sense be categorized as a simple "no." Plainly, petitioner intended to divert the IRS's attention away from him, thereby frustrating the investigative mission of that agency. See United States v. Shanks, supra, 608 F.2d at 76; United States v. Adler, supra, 380 F.2d at 922. None of the other courts of appeals have held that the "exculpatory no" defense applied in a case where a defendant gave a false statement that was comparable in length and complexity to petitioner's. Furthermore, the "exculpatory no" defense (Pet. 17-18) applies only where a truthful answer would have directly incriminated the declarant. See, e.g., Cogdell, 844 F.2d at 183 (stating a five-part test for distinguishing simple denials from false statements punishable under Section 1001); Medina de Perez, 799 F.2d at 544 & n.5 (same). Petitioner's false statements were not "exculpatory," since there was nothing inherently criminal about having business relationships with Music Leasing or the appraisers. Compare United States v. Steele, No. 87-4083 (6th Cir. Feb. 14, 1990) (Pet. App. 5-16) (defendant provided false information where providing true information would have implicated him in tax violation). Finally, none of the cases cited by petitioner (Pet. 17-21) in which courts have applied the "exculpatory no" rule involved a situation where, as in this case, the defendant voluntarily came to a United States Attorney's office accompanied by attorneys and agreed to be interviewed. Compare, e.g., Steele, slip op. 10-11 (Pet. App. 9) (an uncounseled defendant provided false information on the sales price and financing of tracts of land at request of an IRS agent); Cogdell, 844 F.2d at 182-185 (federal agents confronted an uncounseled suspect in her home, questioned her, and then took her to the police station for more questioning); United States v. Bedore, 455 F.2d 1109 (9th Cir. 1972) (an FBI agent came to the defendant's home with a subpoena and asked him his name, to which defendant responded falsely); United States v. Tabor, 788 F.2d 714 (11th Cir. 1986) (an IRS agent and a deputy sheriff went to a co-defendant's home and questioned her without telling her that she was a target of a criminal investigation); United States v. Chevoor, 526 F.2d 178 (1st Cir. 1978) (two FBI agents came to the defendant's home, gave him a grand jury subpoena, told him that he had to testify and that he was not a target, and then questioned him), cert. denied, 425 U.S. 935 (1979). Concerns about unfair interrogation tactics, which appeared to influence some other courts, are inapplicable in this case. /3/ Because petitioner did more than say "no" and his answers were not "exculpatory," the court of appeals correctly rejected his claim that the "exculpatory no" defense applies. In addition, as the court of appeals alternatively held, the defense has no application with respect to voluntary statements made with the assistance of counsel; in such a situation, a person's choice is limited to telling the truth or invoking the privilege against self-incrimination. Since, in addition, the decision below does not conflict with the decision of any other court of appeals, review by this Court is not warranted. CONCLUSION The petition for a writ of certiorari should be denied. Respectfully submitted. KENNETH W. STARR Solicitor General EDWARD S.G. DENNIS, JR. Assistant Attorney General ANDREW LEVCHUK Attorney MAY 1990 /1/ The court of appeals also rejected petitioner's claim that he could not have known that his tax shelter scheme was based on an invalid interpretation of the Internal Revenue Code. Pet. App. 3. Petitioner has not renewed that claim. /2/ To prove a violation of 18 U.S.C. 1001, "the government must establish that the defendant (1) knowingly and willfully (2) made a statement (3) in relation to a matter within the jurisdiction of a department or agency or the United States, (4) with knowledge that it was false or fictitious and fraudulent." United States v. Capo, 791 F.2d 1054, 1068 (2d Cir. 1986), rev'd in part on other grounds, 817 F.2d 947 (2d Cir. 1987); United States v. Adler, 380 F.2d 917 (2d Cir.), cert. denied, 389 U.S. 1006 (1967). /3/ Petitioner's suggestion (Pet. 21) that the Fifth Amendment is implicated where a counseled suspect voluntarily consents to a noncustodial interview is manifestly frivolous.