Rehearing and Rehearing En Banc Denied October 17, 1977.
SIMPSON, Circuit Judge:
Lewis E. Johnson was convicted on three counts of making and subscribing false and fraudulent corporate income tax returns for two corporations which he controlled. Title 26 U.S.C. § 7206(1) (1970). In appealing his conviction he has raised 14 arguments in favor of reversal. We find none of them meritorious and affirm. Two of the points raised on appeal warrant comment.
Both the original indictment and a superseding indictment to which Johnson pleaded not guilty and went to trial contained seven counts charging violations of law as to income taxes. Counts I and III charged him with income tax evasion on his Individual Income Tax Returns, Forms 1040, for calendar years 1971 and 1972, in violation of Title 26, U.S.C. § 7201. Counts II and IV charged him with making false and fraudulent statements on his Individual Income Tax Returns for the same years, in violation of Title 26, U.S.C. § 7206(1). Counts V, VI and VII, on which Johnson was convicted, charged him with making and subscribing false and fraudulent corporate income tax returns, of corporations controlled by him, in violation of Title 26, U.S.C. § 7206(1). Prior to trial, on motion of the United States, the district court dismissed Counts I, II and III, thus removing the issue of tax evasion from the trial. The jury acquitted appellant as to Count IV.
Many of Johnson's objections to the fairness of his trial stem from the dismissal of the tax evasion charges because, he contends, he was thereby prevented from introducing evidence to establish that, during the period in question, he actually overpaid his taxes by neglecting to make permissible deductions. Because he was tried only for wilfully making false statements on his and his corporations' tax returns, his tax liability or overpayment was irrelevant. Johnson maintains that he was prejudiced because evidence submitted by the government led the jury to believe that he had underpaid his taxes and the trial judge would not allow him to counter this suggestion.
These precedents notwithstanding, Johnson raises two objections to the district court's refusal to allow evidence of income tax overpayment. First, Johnson contends that such evidence was relevant in his case to the issue of whether he in good faith relied on his accountants properly to compute and classify reportable items of income and expense. He argues that:
Brief for Appellant at 39.
We agree that the failure to make permissible deductions, resulting in a tax overpayment, logically tends to prove reliance on the integrity and expertise of one's accountants. Although this evidence might thus have aided the reliance aspect of Johnson's defense, it could have had no appreciable impact on the case as a whole because much of the prosecution's evidence demonstrated that Johnson withheld relevant information from his accountants. Under these circumstances, Johnson's alleged reliance on his accountants is irrelevant. Cf. United States v. Signer, 482 F.2d 394, 398 (6th Cir.1973).
Even if we assume that reliance evidence is logically relevant to any issue in the case, our inquiry cannot end there. Under Federal Rule of Evidence 403, admissibility is predicated on more than mere logical relevance:
In determining legal relevance, the trial judge has broad discretion. United States v. Moore, 522 F.2d 1068, 1079 (9th Cir.1975), cert. denied, 423 U.S. 1049, 96 S.Ct. 775, 46 L.Ed.2d 637 (1976). We may not disturb his ruling unless he has clearly abused his discretion. United States v. Dwyer, 539 F.2d 924, 927 (2d Cir.1976).
No showing of abuse of discretion has been made here. Where reliance on the accountants was relevant, the district court allowed direct evidence on that point. Because it depends on a series of inferences, however, evidence of neglected deductions is only indirectly probative of reliance. Moreover, it carries several risks against which Rule 403 was designed to protect. It could have resulted in unfair prejudice to the government's case by appealing to the emotions of the jury. Indeed, the conduct of Johnson's counsel during the trial made this no small concern of the district court.
Johnson's second contention in this regard is that the district court erred in overruling his motion for a mistrial when the prosecutor, in his closing argument, implied a tax liability on Johnson's part. Specifically, Johnson objected to the prosecutor's statements that improper business deductions were made "at the expense of the taxpayers of this country". See Tr.Pros.Arg. at 22. We do not agree that this expression implies a tax liability. But, however it is interpreted, any prejudicial effect that it might have had was cured by the district court's instruction to the jury: whether "a tax is due or owing by the defendant is immaterial to the charges before you in this case". The instruction continued:
We have carefully examined Johnson's 12 other allegations of error and find them to be without merit.
During oral argument, counsel for appellant stressed United States v. Schilleci, 545 F.2d 519 (5th Cir.1977) as his strongest point. In Schilleci we held that, on the "unique factual situation presented", the combined effect of several errors required reversal of the convictions, even though none of the errors standing alone constituted grounds for reversal. Id. at 526. Because we have found no error in the instant case, Schilleci, with its emphasis on cumulative error, is not pertinent.