Lexis Nexis - Case Brief

Not a Lexis Advance subscriber? Try it out for free.

Law School Case Brief

United States v. Wood - 943 F.2d 1048 (9th Cir. 1991)

Rule:

Charts and summaries as evidence are governed by Fed. R. Evid. 1006, which permits the introduction of charts, summaries, or calculations of voluminous writings, recordings, or photographs which cannot conveniently be examined in court. In contrast, charts or summaries of testimony or documents already admitted into evidence are merely pedagogical devices, and are not evidence themselves. 

Facts:

Wood set up an entity known as the S-M-W Investment Group out of an office in Kalispell, Montana. At approximately the same time, Wood created entities known as Rover Resources and Norcross. Wood and his employees advertised these companies as Canadian mining exploration penny stocks that, if successfully promoted, would be listed and publicly traded on the Canadian/Vancouver Stock Exchange. The funds solicited during the promotion of Norcross and Rover Resources - totaling approximately $250,000 - were deposited into three trust accounts maintained by Wood. These funds, however, never made it to Canada. Rather, Wood converted these investors' funds to his own use and lost them playing the commodities futures market. In 1986, the State of Montana charged Wood with various securities fraud and related crimes stemming from these transactions. Wood pleaded guilty to three selected counts pursuant to a plea agreement; imposition of sentence was deferred for a period of six years on the condition, among others, that he pay restitution to the Montana residents who purchased stock in Norcross or Rover Resources. Meanwhile, the State of Montana Securities Department contacted an IRS criminal investigator concerning Wood's embezzlement of investors' funds, suggesting possible tax liability. In August 1989, a federal grand jury brought a two-count indictment against Wood, charging him with two counts of tax evasion (violations of I.R.C. § 7201) for tax years 1983 and 1984, respectively. Trial by jury commenced on April 9, 1990. On April 19, the jury found Wood guilty of the first count (tax year 1983), but acquitted him of the second count (tax year 1984). Woods appealed, arguing that his commodities-related trading losses were fully deductible as business losses, thus, his tax liability for the years 1983 and 1984 was insubstantial. He also urged that the district court erred in giving jury instructions "those who sell commodities contracts on an exchange do not have customers within the meaning of § 1221" is unnecessarily sweeping, and in admitting into evidence a summary chart prepared by the government's expert, while excluding from evidence a summary chart prepared by the defense expert.

Issue:

Is Wood liable for tax evasion?

Answer:

Yes

Conclusion:

The appellant court affirmed Wood's conviction.  Wood's losses might be fully deductible as business losses if he were a dealer but are only partially deductible as capital asset losses if he was a trader or investor. Thus, contrary to Wood's contentions, the question of whether Wood had a trade or business is not dispositive; rather, the primary issue is whether Wood sold the securities or commodity futures to customers in the ordinary course of business. As for the jury instructions, any error in therein was harmless error. Jury instructions are to be viewed as a whole, in context of the entire trial, to determine whether they were misleading or inadequate to guide the jury's determination. The only erroneous part of the instructions was the sentence regarding selling commodity futures on an exchange. The record is devoid of references to an exchange. Rather, the evidence, arguments by counsel, and instructions, as a whole, properly focused the jury on the key issue - whether Wood held the commodity futures for sale to customers in the ordinary course of business. The district court's refusal to admit the defense’s charts into evidence, was not error since the chart was not supported by proof. The said chart was prepared in the assumption that Wood is entitled to business loss deduction when he is not so entitled.  Thus, the decision fully comported with prior admonitions regarding pedagogical devices. Finally, Wood’s prior fraud convictions was appropriately admitted.

Access the full text case Not a Lexis Advance subscriber? Try it out for free.
Be Sure You're Prepared for Class