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UNITED STATES v. SMITH

October 17, 1988

UNITED STATES OF AMERICA
v.
TIMOTHY SMITH



The opinion of the court was delivered by: BRODERICK

 RAYMOND J. BRODERICK, UNITED STATES DISTRICT JUDGE

 Defendant Timothy Smith was charged with four counts of income tax evasion, in violation of 26 U.S.C. § 7201, and two counts of holding a prohibited position (hereinafter "labor counts"), in violation of 29 U.S.C. § 1111. Following a jury trial that began on July 25, 1988, and ended with a jury verdict on July 28, 1988, defendant Smith was found guilty on all six counts. Presently pending before this Court are defendant's motions for judgment of acquittal pursuant to Fed.R.Crim.P. 29(c) and for a new trial pursuant to Fed.R.Crim.P. 33. For the reasons stated below, this Court will deny defendant's motions.

 In support of his post-trial motions, defendant Smith alleges the following four grounds: (1) that the Court erred in denying defendant's motion to have Counts 1-4 (the income tax evasion counts) severed from Counts 5-6 (the labor counts); (2) that the Court erred in admitting evidence that the defendant failed to file income tax returns for the years 1978, 1979, and 1980; (3) that the evidence was insufficient to support a guilty verdict on Counts 1-2 (the 1981 and 1982 income tax evasion counts); and (4) that the evidence was insufficient to support a guilty verdict on Counts 5-6 (the labor counts).

 1. Severance of Counts

 Defendant Smith alleges that as a result of this Court's refusal to sever Counts 1-4 (the tax counts) from Counts 5-6 (the labor counts), he was prejudiced in two ways. First, the government was able to introduce evidence of defendant's prior conviction for embezzlement as an element of Counts 5-6 even though the evidence of that conviction would not have been admissible at a trial of just Counts 1-4. Second, defendant would have testified in his own defense at a separate trial of Counts 5-6 while exercising his right not to testify at a separate trial of Counts 1-4.

 Rule 8 of the Federal Rules of Criminal Procedure provides:

 
(a) Joinder of Offenses. Two or more offenses may be charged in the same indictment or information in a separate count for each offense if the offenses charged, whether felonies or misdemeanors or both, are of the same or similar character or are based on the same act or transaction or on two or more acts or transactions connected together or constituting parts of a common scheme or plan.

 As the language makes clear, joinder under Rule 8(a) is permissive. To the extent that it is consistent with a fair trial, Rule 8 is to be construed liberally to promote the goals of trial convenience and judicial efficiency. See Bruton v. United States, 391 U.S. 123, 131, 88 S. Ct. 1620, 1625, 20 L. Ed. 2d 476 (1968); United States v. Wirsing, 719 F.2d 859, 862 (6th Cir. 1983). Under the law of the Third Circuit, charges may be joined if they are "sufficiently connected temporally or logically to support the conclusion that the two crimes are part of the same transaction or plan." United States v. Gorecki, 813 F.2d 40, 42 (3d Cir. 1987).

 In applying this standard, courts have consistently held that joinder of tax counts with non-tax counts is proper when the unreported income constitutes the proceeds of the charged illegal acts. See e.g., United States v. Vignola, 464 F. Supp. 1091, 1103-1104 (E.D.Pa. 1979), aff'd, 605 F.2d 1199 (3d Cir. 1979), United States v. Serubo, 460 F. Supp. 689, 693 (E.D.Pa. 1978), vacated on other grounds, 604 F.2d 807 (3d Cir. 1979); United States v. Borish, 452 F. Supp. 518, 525-26 (E.D.Pa. 1978); United States v. Cohen, 444 F. Supp. 1314, 1317 (E.D. Pa. 1978). In the instant case, the government alleged and adduced evidence that the defendant evaded his taxes in order to prevent the government from discovering that defendant was in violation of 29 U.S.C. § 1111. Accordingly, the tax evasion charges arose directly out of unreported income flowing from the underlying substantive count, to wit, illegal labor activities. See United States v. Kenny, 645 F.2d 1323, 1344-45 (9th Cir. 1981). Moreover, the evidence that was used to establish 29 U.S.C. § 1111 (the labor violation) was essentially the same as that used to establish 26 U.S.C. § 7201 (tax evasion). Accordingly, the joinder of Counts 1-4 and 5-6 was proper.

 Defendant further argues, however, that this Court should have exercised its discretion to sever the tax counts in accordance with Fed.R.Crim.P. 14 and that failure to do so was an abuse of discretion. Rule 14 states:

 
If it appears that a defendant . . . is prejudiced by a joinder of offenses . . . in an indictment . . . or by such joinder for trial together, the court may order an election or separate trials of counts . . . or provide whatever other relief justice requires.

 Such a determination is a matter within this Court's discretion and the proper standard of review is abuse of discretion. United States v. Sebetich, 776 F.2d 412, 427 (3d Cir. 1985). The Third Circuit has recently held that a claim of improper joinder under Rule 14 must demonstrate "clear and substantial prejudice" in order to result in severance. United States v. Gorecki, 813 F.2d at 43. We conclude that the defendant has failed to make the requisite showing of clear and substantial prejudice necessary to require severance.

 Defendant's claim of clear and substantial prejudice due to the introduction of his prior embezzlement conviction is without merit. As previously discussed, joinder of tax counts, as a matter of law, is proper when those counts charge the defendant with a failure to pay income tax on the proceeds of the illegal undertaking. See generally United States v. Kenny, 645 F.2d at 1344; United States v. Shelton, 669 F.2d 446 (7th Cir. 1982); United States v. Brashier, 548 F.2d 1315 (9th Cir. 1976). Thus, inasmuch as defendant's evasion of taxes was alleged to have been motivated by his desire to prevent the government from learning of his prohibited labor activities, defendant's claim of prejudice must fail. We note that ...


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