## Facts

- Ronald Fern was a practicing accountant who advised clients on tax matters.
- In April 1974, Fern agreed to provide $125,000 in gifts to the New Testament Baptist Church, and a $50,000 payment was made to the church that month.
- In December 1974, Fern suggested that his client, Brumer, contribute $25,000 to the church; Brumer agreed and paid the money.
- In January 1975, Brumer decided not to claim a charitable deduction for the payment on his 1974 return and asked Fern to return the money.
- Fern later gave Brumer a $25,000 check.
- In 1976, the IRS audited Brumer’s 1974 return. Fern attended the audit interview with IRS agent Wilson.
- During the interview, after Wilson disallowed certain deductions, Fern stated Brumer had found a “previously unclaimed deduction” and provided Wilson a copy of Brumer’s canceled check to the church.
- Wilson recorded the contribution on her audit worksheet and indicated she would accept it as a charitable contribution, but her supervisor requested more documentation and later information obtained by the IRS conflicted with Fern’s account.
- An IRS agent asked Fern whether Brumer made a contribution to the church. Fern said yes, but stated Brumer was unsure whether he wanted to deduct it.
- Fern later told the IRS that Brumer decided not to claim the deduction and implied there had been a post-audit discussion with Brumer about the deduction; in fact, no such discussion occurred.
- Fern was charged and convicted of making a materially false statement in a matter within the jurisdiction of the IRS, in violation of 18 U.S.C. § 1001 (felony). He appealed.

## Issues

1. Whether 18 U.S.C. § 1001 applies to false statements made to IRS personnel during a tax audit, or whether prosecution must proceed only under the Internal Revenue Code’s more specific misdemeanor provision, 26 U.S.C. § 7207.
2. Whether applying § 1001 in this setting leads to an absurd result because similar conduct may also be prosecuted under § 7207.
3. Whether Fern’s oral statements to IRS agents were “material” under § 1001 even if no written claim for the deduction was submitted during the audit.
4. Whether the evidence was sufficient to prove Fern made the false statements and to support the conviction.

## Decision

- The Eleventh Circuit affirmed Fern’s conviction.
- The court held that § 1001 reaches knowingly false statements made to IRS agents in an audit because the audit is a matter within the jurisdiction of a federal agency.
- The court rejected Fern’s argument that § 7207 displaced § 1001, finding no repeal by implication and no bar to charging the felony statute when its elements are met.
- The court rejected the “absurd result” argument, concluding that overlap between criminal statutes does not prevent the government from selecting a statute that fits the proven conduct.
- The court held Fern’s statements were material because they were capable of affecting the IRS’s audit decisions and tax-liability determinations.
- Viewing the evidence in the light most favorable to the government, the court found sufficient proof that Fern made the statements and that the elements of § 1001 were satisfied.

## Legal Principles

- 18 U.S.C. § 1001 applies to false statements made “in any matter within the jurisdiction” of a federal department or agency; “jurisdiction” is not read in a narrow, technical way and includes agency audit activity within its authority.
- The existence of a more specific misdemeanor provision (such as 26 U.S.C. § 7207) does not automatically bar prosecution under a broader felony statute (such as § 1001) when Congress has not clearly limited the felony statute or repealed it by implication.
- Materiality under § 1001 is satisfied if a statement has a natural tendency to influence, or is capable of influencing, the agency’s decisions; actual reliance or a successful outcome is not required.
- Sufficiency of the evidence on appeal is assessed by viewing the record and reasonable inferences in the government’s favor and asking whether a rational jury could find each element beyond a reasonable doubt.

## Conclusion

United States v. Fern upheld a felony conviction under 18 U.S.C. § 1001 based on an accountant’s false statements to IRS auditors during an examination of a client’s return, holding that § 1001 applies to IRS audit matters despite overlap with a tax-code misdemeanor provision and that the statements were material because they were capable of influencing the IRS’s audit treatment of the claimed charitable contribution.


United States v. Fern, 696 F.2d 1269 (1983)