## Facts

- Floyd Loge died in 1978, leaving an estate valued at about $8 million; his widow, Celia May Loge, and a bank served as co-executors.
- A box of securities was provided to the bank for estate administration, but multiple bearer bonds previously associated with the decedent were missing (hundreds of thousands of dollars in face value).
- The widow told the bank the bonds could not be found and represented that all assets had been turned over; the bank filed a federal estate tax return in March 1980 omitting the bonds.
- William R. Hooks, the widow’s son-in-law, took possession of the bearer bonds and arranged to store them in another person’s safe-deposit box to conceal his connection to them.
- Hooks approached a bank officer, Patrick Richter, about converting the bonds to cash and emphasized that it must be done so it could not be connected or traced to him.
- Richter arranged liquidation through another bank using money orders and checks payable to Richter and others; by 1979 the bonds had been converted to cash and proceeds were distributed among Hooks, Richter, and members of the decedent’s family.
- Hooks and Richter were indicted and convicted of (1) conspiracy to defraud the United States, and (2) aiding and assisting in the preparation or presentation of a false estate tax return.

## Issues

1. Whether 26 U.S.C. § 7206(2) is limited to taxpayers, return preparers, or direct suppliers of return information, or instead applies to a person who willfully conceals taxable assets knowing the concealment will cause a materially false return.
2. Whether the evidence was sufficient to prove Hooks aided or assisted the filing of a materially false estate tax return, even though the bank prepared and filed the return and the widow initially withheld the bonds from the bank.

## Decision

- The Seventh Circuit affirmed Hooks’ convictions.
- The court held that § 7206(2) applies broadly and is not confined to the taxpayer, the preparer, or a direct information source.
- The court found sufficient evidence that Hooks knowingly participated in a plan to conceal and liquidate estate assets so they would not be reported, thereby assisting the filing of a materially false estate tax return.
- The court also upheld the § 371 conviction, concluding the evidence showed an agreement and overt acts aimed at impairing the IRS’s lawful function of assessing and collecting estate tax.

## Legal Principles

- 26 U.S.C. § 7206(2) reaches any person who willfully aids, assists, procures, counsels, or advises the preparation or presentation of a materially false or fraudulent return; the defendant need not prepare or file the return.
- “Assistance” under § 7206(2) may be shown by conduct that causes or materially contributes to a false omission on a return, including concealment and liquidation of taxable property to prevent reporting.
- Multiple actors may be liable for the same false return; one person’s initial nondisclosure does not preclude another’s liability for further acts that help ensure the return remains false.
- A conspiracy under 18 U.S.C. § 371 includes an agreement to obstruct the IRS’s tax-assessment and collection functions through concealment of taxable assets, proved by knowing participation and overt acts in furtherance of the plan.

## Conclusion

The court held that a defendant who knowingly conceals and converts estate assets to prevent detection can be convicted both of conspiring to defraud the United States and of aiding a materially false estate tax return under § 7206(2), even without preparing, filing, or directly supplying information for the return.


United States v. Hooks, 848 F.2d 785 (7th Cir. 1988)