United States v. Karl L. Dahlstrom, R. Bruce Ripley, Hiram E. Conley, David J. Morris, and Gaze Durst

Appellants Dahlstrom, Ripley, Conley, Morris and Durst were convicted by a jury of conspiracy to defraud the United States, 18 U.S.C. § 371 , and of aiding and abetting the preparation and presentation of fraudulent income tax returns. 26 U.S.C. § 7206 (2). Each appellant contends the evidence was insufficient to sustain a conviction as to the crimes charged against him. We agree.

I. STANDARD OF REVIEW

In determining whether a jury verdict rests on sufficient evidence, a review *1425 ing court must view the evidence in the light most favorable to the prosecution and determine “whether any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt.” Jackson v. Virginia, 443 U.S. 307, 319 , 99 S.Ct. 2781, 2789 , 61 L.Ed.2d 560 (1979); United States v. Universal Trade and Industries, 695 F.2d 1151, 1153 (9th Cir.1983).

II. PROCEDURAL BACKGROUND

Appellants were charged in a seven-count criminal indictment brought by the United States. Count I charged all five appellants with conspiracy to defraud the government in violation of 18 U.S.C. § 371 . Counts II through VII charged one or more of the appellants with violations of section 7206(2)…

dissenting:

The majority’s opinion finds that what defendants assisted, counselled, and advised their clients to do was not clearly illegal at the time they gave the advice and assistance. The majority therefore finds a failure of “proof of a specific intent to do something which the law forbids,” U.S. v. Brooksby, 668 F.2d 1102, 1104 (9th Cir.1982). The opinion notes that Zmuda v. Commissioner, 79 T.C. No. 714 (1982) was not decided until ten months after these convictions.

The government specifically did not rely on Zmuda . It had no need to so rely. It relied on settled principles of tax law regarding sham “gifts” and transactions. Defendants advised their clients to use sham transactions to evade taxes. Such schemes have been illegal since Gregory v. Helvering, 293 U.S. 465, 469-70 , 55 S.Ct. 266, 267-68 , 79 L.Ed. 596 (1935) and Knetsch v. United States, 364 U.S. 361 , 81 S.Ct. 132 , 5 L.Ed.2d 128 (1960). See also Barnett v. C.I.R., 364 F.2d 742 (2nd Cir.1966); Lynch v. C.I.R., 273 F.2d 867 (2nd Cir.1959). There were no “gifts” here within the clear intent of the statute because the taxpayers controlled the transactions of their trusts. See Hilda M. Royce, 18 T.C. 761…

713 F.2d 1423 83-2 USTC P 9557 , 13 Fed. R. Evid. Serv. 1515 UNITED STATES of America, Plaintiff-Appellee, v. Karl L. DAHLSTROM, R. Bruce Ripley, Hiram E. Conley, David J. Morris, and Gaze Durst, Defendants-Appellants. Nos. 82-1137, 82-1141, 82-1138, 82-1142 and 82-1143. United States Court of Appeals, Ninth Circuit. Argued and Submitted March 10, 1983. Decided Aug. 24, 1983. David L. Botsford, Austin, Tex., for Dahlstrom. Joe Alfred Izen, Jr., Houston, Tex., for Ripley. Merwin D. Grant, Phoenix, Ariz., for Conley. Kenneth Kanev, Seattle, Wash., for Morris. Irwin H. Schwartz, Seattle, Wash., for Durst. Robert E. Lindsay, Alan Hechtkopf, Dept. of Justice, Washington, D.C., for plaintiff-appellee. Appeal from the United States District Court for the Western District of Washington. Before GOODWIN, ALARCON, and FERGUSON, Circuit Judges. ALARCON, Circuit Judge: 1 Appellants Dahlstrom, Ripley, Conley, Morris and Durst were convicted by a jury of conspiracy to defraud the United States, 18 U.S.C. § 371 , and of aiding and abetting the preparation and presentation of fraudulent income tax returns. 26 U.S.C. § 7206 (2). Each appellant contends the evidence was insufficient to…