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United States v. Chandler

April 14, 2003

UNITED STATES OF AMERICA,
v.
LINDA LEE CHANDLER, APPELLANT.



On Appeal from the United States District Court for the Western District of Pennsylvania D.C. No. 00-CR-00169 District Judge: Honorable Donetta W. Ambrose

Before: Roth and Stapleton, Circuit Judges, and POLLAK,*fn1 District Judge

The opinion of the court was delivered by: Pollak, District Judge

As amended July 18, 2003.

UNITED STATES OF AMERICA,
v.
LINDA LEE CHANDLER, APPELLANT.

On Appeal from the United States District Court for the Western District of Pennsylvania D.C. No. 00-CR-00169 District Judge: Honorable Donetta W. Ambrose

Troy Rivetti (argued) Bonnie R. Schlueter Office of United States Attorney 633 United States Post Office & Courthouse Pittsburgh, PA 15219 Counsel for the Appellee

Warren A. Brown (argued) 200 E. Lexington Street, Suite 120 Baltimore, MD 21202

Joseph K. Williams, III 1442 Pennsylvania Avenue Pittsburgh Pa, 15233 Counsel for the Appellant

Before: Roth and Stapleton, Circuit Judges, and POLLAK,*fn1 District Judge

The opinion of the court was delivered by: Pollak, District Judge

PRECEDENTIAL

Argued May 2, 2002

OPINION OF THE COURT

Linda Lee Chandler was convicted of participation in a drug-distribution conspiracy. On appeal, she challenges several evidentiary rulings entered by the District Court. Because we agree with Chandler that the constraints placed by the District Court upon her cross-examination of two government witnesses unduly restricted her ability to defend herself at trial, we reverse and remand for a new trial.

I.

On September 13, 2000, Linda Lee Chandler ("Chandler") and three co-conspirators--Frederick White, Teodora Yearwood, and William Yearwood--were charged in a five-count indictment, the first count of which alleged that, from 1995 to 1998, all four co-conspirators had conspired, in violation of 21 U.S.C. § 846, to distribute and possess with intent to distribute more than five kilograms of cocaine. The third count of the indictment also charged Chandler with money laundering, in violation of 18 U.S.C. § 1956(a)(1)(A)(i). (The second, fourth, and fifth counts charged White, Teodora Yearwood, and William Yearwood, respectively, with money laundering.) The government alleged that, beginning in 1995, Chandler became part of a drug organization headed by a man named William Baker, and assisted Baker's organization by buying, transporting, storing, and selling cocaine.

Frederick White, Teodora Yearwood, and William Yearwood pled guilty, but Chandler proceeded to trial. A number of the government's witnesses had been members of the alleged conspiracy. They included William Baker, Sly Sylvester (a drug dealer allegedly supplied by William Baker), and Kathleen Yearwood (allegedly a supplier of cocaine to the group), together with two of the persons named as co-conspirators in Chandler's indictment--Frederick White (Chandler's boy-friend) and William Yearwood (Kathleen's father, and an alleged drug courier). *fn2 Another government witness, Annette Yearwood (Kathleen's sister), observed but did not participate in illegal activities. Through other witnesses, the government introduced testimony regarding surveillance of Chandler, her financial history, and her contacts with other members of the conspiracy. The jury convicted Chandler of the drug trafficking charge but acquitted her of the money laundering charge. She was sentenced to 121 months of imprisonment.

II.

Chandler presents three issues on appeal. The first concerns the District Court's admission into evidence of testimony and documents relating to Chandler's financial history, including her non-filing of tax returns. We review this ruling for abuse of discretion. See United States v. Casoni, 950 F.2d 893, 902 (3d Cir. 1991). For reasons explained below, we do not find that the District Court abused its discretion in admitting that evidence. The second issue concerns limitations imposed by the District Court upon the scope of cross-examination of government witnesses. We review the imposition of those limitations for abuse of discretion. See United States v. Ellis, 156 F.3d 493, 498 (3d Cir. 1998). As explained below, we find that these limitations did constitute an abuse of discretion, and that the error was not harmless. We therefore remand this case for a new trial. In light of our resolution of this second issue, we do not find it necessary to resolve the third issue Chandler has presented--namely, whether the District Court erred in refusing to grant a mistrial after a government witness disclosed to the jury information asserted to be inadmissible as evidence, and prejudicial to Chandler.

A.

Chandler contends that the District Court erred when it admitted her bank records, her 1996 tax return, and testimony regarding her failure to file tax returns for the years 1997 and 1998. When the government presented a witness who was to testify to these matters, the following sidebar took place:

THE COURT: You want to ask him about tax returns?

MR. RIVETTI: Yes, we need a Court order to disclose them even to defense counsel. They have not been turned over.

THE COURT: I know you want to show income, but are you going to be able to show expenditures through this witness?

MR. RIVETTI: This witness, part of the investigation was the subpoenaing of the Defendant's bank records, which show repeated cash deposits. There is a number of cash deposits over $500.

THE COURT: Okay. Let's hear what your objection is.

MR. SCORATOW: First of all, the high prejudicial nature, we have a witness who will come in and testify he gave her the money, it is perfectly legal, it is loans. He also is an attorney and he does taxes, he looked over her taxes and he would tell her when she earned enough and when she didn't earn enough to pay income taxes. The highly prejudicial nature she doesn't have tax returns, they can show her income coming in, they have her bank accounts to try to do that and show this is the money she had from Mr. Baker. The mere fact that she filed returns or not, if those were gifts or otherwise not properly filed, unless they can come in and they're saying this is income tax fraud, which she's not charged with, it is the nature of another crime, it proves nothing, it's speculative, especially when they know we have Mr. Massung who is going to testify to where she got the money.

MR. RIVETTI: Your Honor, the case law is clear that unexplained income is probative as to whether or not the Defendant is involved in drug trafficking.

THE COURT: Right. What he is saying is why can't you show her bank records?

MR. SCORATOW: That's right, they can't.

MR. RIVETTI: The defense has said--in fact, during his opening statement he said that she cut hair, that she had real income. I think that the tax returns rebut that inference. First of all, no tax returns--

THE COURT: I am going to allow them. I think it's relevant and I think the case law I looked at supports it. I will sign it now. The objection of Defendant is noted.

In support of Chandler's contention that the trial court committed reversible error in admitting various items of financial information, Chandler relies on the Sixth Circuit's decision in United States v. Carter, 969 F.2d 197 (6th Cir. 1992). In Carter, the court reviewed a district court's ruling admitting evidence, over the defendant's objection, that the defendant had spent three thousand dollars on home appliances over a two-year period in 1989 and 1990, and had not filed tax returns for the years 1985 through 1990. The Sixth Circuit concluded that the district court had "abused its discretion by allowing the government to use a plethora of irrelevant financial information." Neither "the fact that Carter purchased a few appliances over a two-year period," nor her failure to file tax returns, the court found, was "probative on the issue of whether Carter engaged in a cocaine transaction on December 1, 1989," the crime with which she was charged. Id. at 200, 201.

Chandler contends that her tax information, as well as bank records showing over $8,200 in cash deposits over a six-month period in 1996 and 1997, likewise were "not probative of any issue in the case." Further, she argues that the admission of the tax return evidence was "highly prejudicial," presumably because a jury might have inferred from her failure to file returns in 1997 and 1998 that she had committed tax fraud.

There exists considerable appellate support for the admission in evidence, in drug-trafficking cases, of financial information of the sort admitted in Chandler's trial. "In a narcotics prosecution, it is well established that the government may introduce evidence of cash purchases coupled with tax evidence tending to show that a defendant had no legitimate source of cash." United States v. Prix, 672 F.2d 1077, 1084 (2nd Cir. 1982). See also United States v. Mitchell, 733 F.2d 327 (4th Cir. 1984) (same); United States v. Briscoe, 896 F.2d 1476, 1500 (7th Cir. 1990) (holding that it is "well settled that in narcotics prosecutions, a defendant's possession and expenditure of large sums of money, as well as his or her failure to file tax returns, are relevant to establish that the defendant lacked a legitimate source of income and that, in all probability, the reason for the failure to report this income is due to the defendant's participation in illegal activities").

Courts of appeals consistently have upheld the admissibility of such evidence when it reasonably supports the government's assertion that the defendant possessed substantial cash not obtained through legitimate means. In United States v. Figueroa, 976 F.2d 1446, 1455 (5th Cir. 1992), the Fifth Circuit concluded that evidence that the defendant had not filed tax returns "tended to make it less likely that the large bank deposits during these tax periods derived from legitimate sources." In United States v. Trotter, 889 F.2d 153, 155 (8th Cir. 1989), the Eighth Circuit similarly found that the defendant's "failure to file any tax returns was probative of net worth and therefore relevant to [the defendant's] claim that the money [recovered from his car] was not the product of drug distribution."

Nor does this general rule apply only when very large sums of otherwise unexplained cash are involved. In Mitchell, the Fourth Circuit rejected the defendant's argument that his failure to file tax returns was inadmissible when "the government's only evidence of Bennett's sudden accession of wealth was the purchase of a $4,000 motorcycle." Mitchell, 733 F.2d at 331. This argument, the court explained, "misses the point of the evidence." Id. The touchstone of the admissibility inquiry is not the amount of money in the defendant's possession, but whether defendant's failure to account for its source tends to support the government's claim that the money was obtained through illegitimate means. In other words, to the extent that a defendant's failure to file tax returns evidences a lack of legitimate income, that evidence, in combination with evidence that the defendant possesses a significant sum of cash, generally is admissible in support of the government's contention that the defendant obtained the cash through the distribution of narcotics.

The Sixth Circuit's rejection of such tax evidence in Carter represents a relatively narrowly drawn exception to this rule. Far from questioning the general admissibility of tax evidence in narcotics prosecutions, the court held only that the defendant's modest $3,000 expenditure over a period of two years did not make it more likely that she had engaged in ...


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