THE SUPREME COURT OF THE
FEDERATED STATES OF MICRONESIA
Cite as FSM v. Edwin ,
8 FSM Intrm. 543 (Pon. 1998)
FEDERATED STATES OF MICRONESIA,
CRIMINAL CASE NO. 1998-502
Andon L. Amaraich
Hearing: September 24, 1998
Decided: October 5, 1998
Clarified: October 27, 1998
For the Plaintiff: Julia Freis, Esq.
Assistant Attorney General
Department of Justice
P.O. Box PS-105
Palikir, Pohnpei FM 96941
For the Defendant: Thomas G. Soucia, Esq.
Acting Chief Public Defender
Office of the Public Defender
P.O. Box PS-174
Palikir, Pohnpei FM 96941
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Criminal Law and Procedure ) Information
The government will be permitted to file an amended information to dismiss those counts for which the statute of limitations has expired. FSM v. Edwin, 8 FSM Intrm. 543, 545 (Pon. 1998).
Criminal Law and Procedure ) Information; Taxation
Although the government is not precluded from charging and trying, in one information, violations of two or more separate provisions of the FSM codes which arise from the same course of conduct, but when the case involves conduct specifically addressed by the tax code (which has comprehensive civil and criminal penalties established for a clearly stated purpose) the government cannot also seek to charge the defendant with alternative violations of criminal code sections providing for criminal penalties up to ten times greater than those allowed under the tax code and which were
not clearly intended to apply to tax crimes. FSM v. Edwin, 8 FSM Intrm. 543, 546 (Pon. 1998).
Criminal Law and Procedure; Taxation
The legislative history of Title 54 indicates that it was created as a system primarily aimed at recovering revenue rather than punishing wrongdoers with lengthy prison sentences and that the fines and criminal penalties adopted in it were thought to be commensurate with the specified wrongdoing. FSM v. Edwin, 8 FSM Intrm. 543, 547 (Pon. 1998).
Criminal Law and Procedure
The National Criminal Code was primarily drawn from the Model Penal Code modified to suit the particular needs of the area. FSM v. Edwin, 8 FSM Intrm. 543, 548 (Pon. 1998).
Criminal Law and Procedure; Taxation
There is no clearly expressed Congressional intent for the criminal code to be used to prosecute tax crimes. Since the FSM had existing laws with comprehensive civil and criminal penalties applicable to tax crimes at the time the criminal code was adopted, the implication is that the criminal code was not intended for the purpose of prosecuting such crimes. FSM v. Edwin, 8 FSM Intrm. 543, 549 (Pon. 1998).
Criminal Law and Procedure ) Malicious Mischief; Taxation
The penalties applicable to criminal mischief pertain to deterring the commission of the crime not for the primary purpose of raising revenue as with the tax code which has comprehensive civil and criminal penalties designed specifically for that purpose. FSM v. Edwin, 8 FSM Intrm. 543, 549 (Pon. 1998).
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ANDON L. AMARAICH, Chief Justice:
On September 24, 1998 this matter came before the Court on two motions: 1) defendant's motion to dismiss Counts I, III and IV of the criminal information and to strike out certain time barred allegations in Count II; and, 2) the government's motion to file an amended information.
The criminal information, filed on July 8, 1998, contains four counts. Count I charges the defendant with criminal mischief against the government in violation of 11 F.S.M.C. 602. Count II charges her with filing a false tax return in violation of 54 F.S.M.C. 143, 144 and 154. Counts III and IV charge the defendant with failure to maintain accurate records in violation of 54 F.S.M.C. 151 and 154 during calendar years 1995 and 1996, respectively.
On September 4, 1998 defendant Silverose Edwin filed a motion to dismiss asserting that many of the charging allegations concern conduct falling outside the applicable statute of limitations. She also argues that the charge of criminal mischief does not apply under these facts and that the government should be limited to charging her with violating provisions of Title 54 of the F.S.M.C. dealing with taxation since that Title has comprehensive civil and criminal penalties. Thus, she argues, the charges against her for violating Title 11 of the F.S.M.C. with their far more stringent criminal penalties should not be allowed to stand.
In its opposition to the defendant's motion to dismiss, the government concedes all of the statute of limitations problems raised by the defendant. It acknowledges that certain allegations set forth in
Count I go beyond the applicable three year statute of limitations set by 11 F.S.M.C. 105 and that Count II contains allegations falling within and without the time frame allowed. The government also concedes that Count III charges conduct occurring outside of the two year statute and that Count IV contains certain time barred charges as well. Accordingly, the government moves this Court for permission to file an amended information under FSM Rules of Criminal Procedure, Rule 7(e) to cure these problems. (A copy of the government's proposed amended information was filed as an attachment to its papers opposing the defendant's motion to dismiss.)
On the other hand, the government opposes the defendant's arguments regarding the applicability of alleged violations of Title 11. In fact, its proposed amended information includes a second charge arising under Title 11 (see Count II, first amended information), charging her in the alternative, for theft against the government in violation of 11 F.S.M.C. 601. As with the charge of criminal mischief against the government, the alternative theft charge carries with it a maximum penalty of ten years in prison while the tax code violations provide for a maximum prison term of one year.
The Court agrees with the defendant's position that the Counts charging her with violating Title 11 should not apply here. Therefore, the Court hereby grants the defendant's motion to dismiss Count I of the information and denies the government's motion to add an alternative charge that defendant violated 11 F.S.M.C. 601.
However, because the government's proposed amended information cures the statute of limitations problems found in the original information, the Court hereby grants the government's motion to amend the information but only with respect to the charges alleging violations of Title 54 of the F.S.M.C.
Accordingly, the Court hereby orders that the first amended information attached to the government's opposition to defendant's motion to dismiss shall be deemed served and filed and that Counts I and II of the amended information (alternatively charging defendant with violating 11 F.S.M.C. 602 and 601 respectively) are hereby stricken therefrom.
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On October 5, 1998 this Court issued an Order on two motions: 1) defendant's motion to dismiss Counts I, III and IV of the criminal information filed on July 8, 1998 and to strike out certain time barred allegations in Count II of that information; and, 2) the government's motion to file an amended information.
The Order granted each motion in part. The result was that the government was permitted to file an amended information curing many of the defects raised by the defendant's motions but dismissing the charge of criminal mischief against the government and disallowing the government's requested amendment stating an alternative charge of theft against the government.
In its Order, the Court stated that it agreed with the defendant's position that the Counts charging her with violating Title 11 (the National Criminal Code) should not apply here. This prompted the government to file a motion on October 8, 1998 asking the Court to reconsider the Order. That motion initially states that the government is unclear on the basis of the Court's ruling and requests clarification. Yet it concludes with a request that the Court defer its decision as to merger of offenses until the evidence has been presented at trial and the Court can decide which charges warrant conviction.
The Court has carefully considered the government's request and has reexamined the original
motions and the papers submitted by both parties with respect to the motion for reconsideration. The Court will not modify the conclusion stated in its Order of October 5, 1998. However, because the government's motion makes several erroneous assumptions about the Court's reasoning and infers that the Order unjustly interferes with prosecutorial discretion, clarification of the Order seems appropriate.
In its motion to reconsider, the government takes the position that the Order of October 5, 1998, "suggests that the government is precluded from charging and trying, in one information, violations of two or more separate provisions of the FSM codes which arise from the same course of conduct." This assertion is overbroad and in disregard of the facts alleged in the information. No such implication was intended by the Order.
The Order at issue must not be read as a blanket statement that a criminal information may only charge violations of one particular code. Instead, it should be viewed in the limited context in which it was issued: a case involving conduct specifically addressed by the tax code (which has comprehensive civil and criminal penalties established for a clearly stated purpose) where the government also seeks to charge the defendant with alternative violations of criminal code sections providing for criminal penalties up to ten times greater than those allowed under the tax code and which were not clearly intended to apply to tax crimes.
Under the facts and on the pleadings involved in this case, the Court finds that the government is limited to charging the defendant with violating provisions of the tax code set forth in Title 54 of the F.S.M.C. This finding is based on a conclusion that Congress intended for tax crimes to be dealt with separately and is supported by the legislative history of the code sections involved here.
The Court appreciates the government's argument that the alleged behavior seems to fit within the language of all offenses charged. However, it appears to the Court that Title 54, with its comprehensive civil and criminal penalties, was created to achieve a result which may be defeated if the penalties provided for by the National Criminal Code (Title 11 of the F.S.M.C.) were held to apply under these facts. The Court believes that the legislative history of the respective code sections supports this conclusion. Therefore, the pertinent history of these laws will be set out below.
Legislative History of the Tax and Revenue Code
Laws related to taxation have existed in Micronesia since the days of Trust Territory governance. The issue of penalties associated with collection of tax revenue was addressed by the third session of the first Congress of Micronesia. SCREP No. 13, Senate J. 407 (1967) discussing Senate Bill No. 44 entitled: "An act to amend Chapter 18, Finance: Taxation, to provide penalties for persons willfully violating the provisions of the Chapter and any license, rule or regulation issued pursuant thereto and for other purposes," states the following: "The purpose of this bill is to improve the collection and enforcement provisions of the tax laws by providing criminal and administrative penalties for failure to pay the taxes which the Congress assesses."
Senate Bill No. 44 became Public Law 3-32 and was codified as Chapter 9 of 77 TTC 201 and 202 (1970). Section 201 set forth the penalty for violating the revenue laws as follows: "Any person who willfully violates any provisions of this Part, or any license, rule or regulation issued thereunder, shall, upon conviction, be imprisoned for a period of not more than one year or fined not more than five hundred dollars, or both." (emphasis added).
Income and business gross revenue taxation1 came in to being on July 1, 1971 when Public Law No. 4C-2 went into effect as 77 TTC sections 251 through 269.
According to SCREP No. 21, House J. of 4th Cong., 1st Reg. Sess. 259 (1971), the congressional purpose of the income tax act was as follows:
The purpose of Senate Bill No. 4, SD1, is to impose and collect taxes on wages and salaries attributable to personal services performed by employees within the Trust Territory and on gross revenues of businesses operating within the Trust Territory.
Your committee has held three executive sessions and one public hearing to consider this bill. We find that it is essential for the Congress of Micronesia to pass a general revenue-raising measure in this session, not only because of the need for additional funds to finance public projects, but also because Micronesians must begin now to assume the responsibility for the financing as well as the administration of their own government. The tax bill now being considered is an important, even essential, first step toward self-government or independence. We are convinced, after studying the numerous tax bills that have been introduced since the summer of 1969, that the present bill is the best possible way to begin a general system of taxation in Micronesia.
77 TTC 264 modified the former section 201 to provide for the following criminal penalties: "Any person or business convicted under the provisions of this Chapter shall be fined not more than $1,000, or (if a natural person) imprisoned not more than one year, or both." This reflects a conscious effort by the legislature to impose a harsher penalty (an increase in the maximum fine by $500) than what existed before income and business revenues were subject to taxation.
Pub. L. No. 4C-2 (4th Cong. of Micro., 1st Reg. Sess. 1971) also included a section (previously 77 TTC 265, now 54 F.S.M.C. 155) defining separate civil penalties. The Court construes this as an indication that the Congress of Micronesia intended to create a system primarily aimed at recovering revenue rather than punishing wrongdoers with lengthy prison sentences. It also appears to the Court that the fines and criminal penalties adopted were thought to be commensurate with the specified wrongdoing, i.e. filing a false return or failing to keep adequate records, and implemented for the primary purpose of generating revenue.
When the FSM Code was adopted in 1982, the Tax and Finance provisions of the TTC were incorporated into Title 54. The former 77 TTC 264 became 54 F.S.M.C. 154. It was adopted verbatim. 54 F.S.M.C. 155, addressing civil penalties, was copied directly from the language of 77 TTC 264 as it existed after 1973 when the 1971 version was amended by Pub. L. No. 5-26 (5th Cong. of Micro., 1st Reg. Sess. 1973) adding a provision for fining an employer for failing to file a statement on employee withholdings. (The added language is now located in 54 F.S.M.C. 155(2).)
The purpose of the 1973 changes are described by SCREP No. 43, House J. of 5th Cong., 1st Reg. Sess. 389 (1973) as follows:
The purposes of this bill are, generally, to clarify certain provisions of Public Law 4C-2, as amended, and to add certain provisions that would assist in the collection of revenues thereunder. No basic changes are made to Public Law 4C-2 by this bill. . . .
Section 8 provides for a penalty of $1 each for failure to file employee wage and tax statements on time.2
This legislative history shows that Congress looked at the penalty provisions set forth in the current statute at least twice before it was adopted as part of the 1982 FSM Code. Although the civil penalties were significantly altered from what existed before the adoption of income tax laws, the criminal penalty initially addressed in 1967 only changed with an increase of the maximum fine from $500 to $1,000 between then and now.
History of Criminal Code Legislation
The FSM Criminal Code finds its origins in C.B. 1-184 the purpose of which is explained in SCREP No. 1-299, J. of 1st Cong., 4th Reg. Sess. 281-82 (1980) as follows:
The purpose of this bill is to provide a national criminal code for the Federated States of Micronesia setting out crimes against the National Government in accordance with Article VIII, Section 1 of the Constitution, and defining major crimes pursuant to the mandate of Article IX, Section 2(p) of the Constitution. The bill contains ten chapters. The national crimes are set out in Chapters 4,5,6,7, and 8, and the major crimes are defined in Chapter 9. The other chapters relate to the various general aspects of crime and criminal responsibility.
Your committee is cognizant of the pressing need for a national criminal code. The Chief Justice of the Supreme Court has been confirmed, and a crimes act is a necessary major step toward the establishment of a judicial system for the Court to administer. The act will thus help the Court complete the organization of the judicial branch, and only when that is done can the judicial functions be transferred from the Trust Territory judiciary. . . .
Your committee realizes that the bill contains some new and unfamiliar language and may at first blush seem difficult to work with by those who are accustomed to the long used Trust Territory Code. The committee is confident, however, that with time and experience that an easy familiarity with the code will develop, the wrinkles will be smoothed, and a good working body of law will result. The primary source drawn upon to compile the measure was the Model Penal Code, a draft that was years in the making by legal experts from all areas of the United States who looked at all the law and devised what they considered the best possible criminal code. It has been adopted in Hawaii and other states and was found to be the best available model for our purposes. It should be noted that our outside sources were not adopted in toto, but were in many respects modified to suit the particular needs of the area. The net result is a code that, though not perfect is workable. Perfection in any realm is impossible. As long as there are critical observers, no code in any area of the law can withstand undamaged careful and penetrating scrutiny. . . .
. . . .
. . . Society's determination of the gravity of criminal conduct is reflected in the punishment selected for that conduct. Thus, lesser criminal behavior results in lesser punishment, and more severe behavior warrants harsher treatment. The period of incarceration reflects the degree of punishment and provides a reliable index of society's judgment as to a given act's offensiveness. . . .
The Court finds it significant that when Congress adopted the criminal code, modifications were made to the Model Penal Code's definition of criminal mischief, but the punishment remained the same. According to the legislative history, Congress was cognizant of the problems likely to arise in Micronesia when applying a criminal code drafted by American scholars with a view toward American society. Congress recognized that a criminal code adopted in this way would not find universal application in the FSM. Additionally, there is no clearly expressed Congressional intent for the criminal code to be used to prosecute tax crimes. Since the FSM had existing laws with comprehensive civil and criminal penalties applicable to tax crimes at the time the criminal code was adopted, the implication is that the criminal code was not intended for the purpose of prosecuting such crimes.
The Court also finds it significant, as the defendant points out, that the Model Penal Code's treatment of criminal mischief derives from crimes against tangible property of the government. Therefore, the punishments applicable to the crime were established by "leading experts in the United States" who contemplated American society's view on how harshly one should be punished for causing damage to tangible property not for evading taxes.3 Moreover, the specific penalties for tax evasion as set forth in the tax code were not deemed inadequate by the FSM Congress when adopting the criminal code. It is also important to recognize that the penalties applicable to criminal mischief pertain to deterring the commission of the crime not for the primary purpose of raising revenue as with the tax code which has comprehensive civil and criminal penalties designed specifically for that purpose.
Based on the foregoing and keeping in mind that Micronesian culture shall be considered when interpreting the laws of the FSM, the Court reiterates its belief that the criminal code sections the government is attempting to charge the defendant with violating (criminal mischief and/or theft) were not intended to apply here. The Court also finds that applying the law as the government is suggesting here may serve to defeat the purpose of the tax code, i.e. to raise revenue, since long term incarceration may effectively prevent someone from paying any back taxes wrongfully withheld.
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1. This case involves gross business revenue taxes. Prior to 1971 the tax laws did not pertain to income or business revenue taxation.
2. Section 8 of the Bill became Section 15 of Pub. L. No. 5-26 which later became 54 F.S.M.C. 155. Pub. L. No. 5-26 received Senate approval after the $1 penalty was increased to $5. Pub. L. No. 5-26, § 15 (5th Cong. of Micro., 1st Reg. Sess. 1973) was copied verbatim in the FSM Code and the civil penalties remain the same today.
3. The Court also recognizes that even in America today the crime of willful failure to pay taxes, a felony under 26 U.S.C. § 7202, carries with it a maximum fine of $10,000, or imprisonment of not more than five years, or both, and the crime of filing a false return, a misdemeanor under 26 U.S.C. § 7204, has a maximum fine of $1,000 and up to one year imprisonment. Given how American society currently feels about the appropriate periods of incarceration for such tax crimes, the Court is persuaded that the penalties for theft and criminal mischief as set forth in the Model Penal Code at the time it was adopted in part by the FSM does not reflect what was thought by anyone, American or Micronesian, to be the appropriate penalty for what the defendant here is charged with having done.