Accountant-Client
Privilege
7203: Willful Failure to File Return, Supply
Information, or Pay Tax: Evidence: Accountant-Client Privilege
[73-1 USTC ¶9228]
United States of America
, Plaintiff-Appellee v. Herbert Gurtner, Defendant-Appellant
(CA-9),
U. S. Court of Appeals, 9th Circuit, No. 72-2167, 474 F2d 297, 2/5/73,
Affirming unreported District Court decision
[Code Sec. 7203]
Crimes: Tax evasion: Failure to file returns: Attorney-client
privilege: Accountant's testimony: Instructions to jury.--Conviction
by a jury for wilful failure to file federal income tax returns was
affirmed. Testimony of an accountant was properly admissible since the
taxpayer did not show that the accountant was acting as his attorney's
agent within the scope of privileged attorney-client communications.
Also, an instruction to the jury was proper where, taken together with
related instructions, it conveyed the notion that something more than
mere negligence must be shown for an act to be wilful.
William D. Keller, United
States Attorney, David H. Anderson, Curtis B. Rappe, Eric A. Nobles,
Assistant United States Attorneys, Los Angeles, Calif., for
plaintiff-appellee.
Rob
ert H. Sanders,
Suite
1107
, 1888 Century Park East,
Los Angeles
,
Calif.
, for defendant-appellant.
Before KOELSCH, CHOY and
GOODWIN, Circuit Judges.
CHOY, Circuit Judge:
Gurtner appeals his
conviction by a jury for the wilful failure to file federal income tax
returns (26
U. S.
C. §2703) for the calendar years 1964 and 1965. We affirm.
[Admissibility
of Accountant's Testimony]
Gurtner raises two issues
on appeal. The first is that the trial court should have stricken the
testimony of John Foulk, a private accountant whom Gurtner consulted in
April, 1967, because his conversations with Foulk were privileged
attorney-client communication. We reject this contention because Gurtner
has not proven that an attorney-client relationship existed and even if
this testimony were privileged, Gurtner waived the privilege.
The burden of establishing
the existence of an attorney-client relationship rests on the claimant
of the privilege who resists disclosure of shielded communication. In
re Bonanno, 344 F. 2d 830, 833 (2nd Cir. 1965). Gurtner has not
sustained this burden. Foulk did have a working relationship with
Gurtner's attorney and the attorney advised Gurtner to consult with
Foulk, but that alone did not make the communications between Foulk and
Gurtner privileged. "What is vital to the privilege is that the
communication be made in confidence for the purpose of obtaining legal
advice from the lawyer. If what is sought is not legal advice but
only accounting service, as in Olender v. United States [54-1
USTC ¶9254], 210 F. 2d 795, 805-6 (9th Cir. 1954), [cert. denied
352
U. S.
982 (1956)], see Reisman v. Caplin, 61-2 USTC ¶9673 (1961), or
if the advice sought is the accountant's rather than the lawyer's, no
privilege exists." United States v. Kovel [62-1 USTC ¶9111],
296 F. 2d 918, 922 (2nd Cir. 1961); accord,
United States
v. Judson [63-2 USTC ¶9658], 322 F. 2d 460, 462 (9th Cir. 1963).
Gurtner did not prove that Foulk was acting as a consultant for his
attorney. Moreover, even if we assumed that Foulk was the agent of an
attorney, not all consultations with such agents are privileged.
Gurtner's consultations with Foulk for the purpose of preparing tax
returns did not fall within the privilege. Such consultations, even with
an attorney who is preparing the returns, are not privileged. Olender,
supra at 806; Canaday v. United States [66-1 USTC ¶9192],
354 F. 2d 849, 857 (8th Cir. 1966); Couch v. United States, 41
U. S.
L. W. 4107 (
January 9, 1973
).
Even if there was an
attorney-client relationship, Gurtner's failure to make a timely
objection to Foulk's testimony constituted a waiver of the privilege.
Gurtner failed to raise any objection to the testimony of Foulk when the
witness was on the stand. The issue was not raised until Gurther himself
was being cross-examined. "[T]he burden is on the defendant to take
his objection at the earliest possible opportunity when, by so doing be
can enable the trial judge to take the most efficacious action." Holden
v. United States, 388 F. 2d 240, 242 (1st Cir.), cert. denied
393
U. S.
864 (1968). The district court properly ruled that the motion to strike
was untimely.
In addition, the failure to
assert the privilege when the evidence was first presented constituted a
voluntary waiver of the right. Steen v. First National Bank, 298
F. 36, 41 (8th Cir. 1924);
United States
v. Jacobs, 322 F. Supp. 1299, 1303 (C. D. Cal. 1971). Once the
subject matter is disclosed by a knowing failure to object there is
nothing left to protect from disclosure.
[Instruction
on Wilfulness]
Gurtner's second assignment
of error attacks the following jury instruction:
The word "wilful"
as used herein means an act or omission which is voluntary and
intentional, with a bad purpose or without grounds for believing that
one's act is lawful or without reasonable cause, or capriciously or
with a careless disregard whether one has the right to so act. That
is to say, the wilfulness required for this offense here charged does
not entail the purpose to evade tax or to defraud. It entails no purpose
other than to evade the law's requirements. (emphasis supplied)
The
trial judge also instructed the jury that:
Knowingly
means an act is done knowingly if done voluntarily and intentionally and
not because of mistake or accident or other innocent reason.
The
purpose is, of course, adding the word knowingly, is to insure that no
one will be convicted because of a mistake or accident or other innocent
reason.
Gurtner
objected to the phrase "or with a careless disregard whether one
has a right to so act," and, for the first time, on appeal he also
challenges the use of the word "capricious." Gurtner notes
that the term "wilful" as used in §7203 does not include
carelessness, inadvertence or negligence. United States v. Leuschner
[64-2 USTC ¶9742], 336 F. 2d 246 (9th Cir. 1964). He contends that the
disputed phrase in the instruction permitted the jury to convict him for
mere carelessness. We disagree. We have in the past specifically upheld
this instruction. Abdul v. United States [58-1 USTC ¶9453], 254
F. 2d 292 (9th Cir.), cert. denied 364
U. S.
832 (1958). Abdul has been repeatedly reaffirmed in subsequent
cases. United States v. Fahey [69-2 USTC ¶9450], 411 F. 2d 1213
(9th Cir.), cert. denied 396
U. S.
657 (1969).
We recognize that at least
two other circuits have taken the opposite position. United States v.
Vitiello [66-2 USTC ¶9480], 363 F. 2d 240 (3rd Cir. 1966); Haner
v. United States [63-1 USTC ¶9390], 315 F. 2d 792 (5th Cir. 1963).
We, however, are of the opinion that the disputed instruction, given
together with the other instructions mentioned above, properly conveyed
the notion to the jury that something more than mere negligence must be
shown for an act to be wilful. But since the disputed clause has been
the subject of frequent appeals, we believe it advisable for the
district court in future cases under §2703 to omit from the instruction
the passage "or capriciously or with a careless disregard whether
one has the right to so act."
Affirmed.
[69-1 USTC ¶9204]
Rob
ert Gordon Hayes, Appellant v.
United States of America
, Appellee
(CA-5),
U. S. Court of Appeals, 5th Circuit, No. 23540, 407 F2d 189, 1/29/68,
Aff'g unreported District Court decision
[Code Sec. 7201]
Crimes: Tax evasion: Sufficiency of indictment: Jurisdiction.--An
indictment was sufficient where it contained both the statutory language
and a reference to the specific section alleged to have been violated
and disclosed the means by which the defendant had allegedly attempted
to evade paying tax. In addition, the Southern District of Florida had
jurisdiction to return the indictment although the place where the
alleged criminal offenses took place (Jacksonville, Florida) was
transferred to a new federal judicial district after the alleged
criminal acts took place (1958, 1959 and 1960) but before the indictment
was returned (1965).
[Code Secs. 446(b) and 7201]
Reconstruction of income: New worth method: Opening net worth:
Evidence: Tax evasion.--In using the net worth method to reconstruct
the defendant's taxable income, the Government's opening net worth
figure was correct. The taxpayer failed to establish a claimed $64,000
cash hoard; a $10,000 figure for opening cash on hand, based on
testimony of the taxpayer's accountant, was reasonable; and the
Government's cost basis for land and partially constructed apartments
was correct.
[Code Sec. 7201]
Crimes: Tax evasion: Evidence of prior crimes.--The trial court
committed no error in admitting evidence relating to the defendant's
prior convictions. The trial court carefully considered both the nature
of the prior offenses and the length of time that had elapsed since
their commission.
[Code Sec. 7201]
Crimes: Tax evasion: Trial: Cross-examination.--A question asked
during cross-examination of the defendant concerning whether or not he
ever escaped from prison was well within the scope of cross-examination.
[Code Sec. 7201]
Crimes: Tax evasion: Defenses: Self-incrimination: Jury trial.--The
defendant's right to remain silent was not violated when Government
agents and Government counsel commented on his failure to explain his
substantial increase in net worth. Much of the relevant testimony and
argument was either not objected to or was directly invited by defense
counsel's conduct. Furthermore, any prejudicial impact from the
statements was erased by trial court warnings to the jury.
One dissent.
[Code
Sec. 7201]
Crimes: Tax evasion: Miscellaneous defenses.--The trial court
committed no error in admitting into evidence and submitting to the jury
two net worth summaries prepared by the Government; jury instructions as
to wilfulness were proper; and whether or not the defendant's attempt to
defeat paying tax was "wilful" was a question for the jury to
decide.
Wilfred C. Varn,
Rob
ert M. Ervin,
305 S. Gadsden St., P. O. Box 1567
,
Tallahassee
,
Fla.
, for appellant. Mitchell Rogovin, Assistant Attorney General, Joseph M.
Howard, Burton Berkley, Department of Justice, Washington, D. C. 20530,
Clinton Ashmore, United States Attorney, Steward J. Carrouth, Assistant
United States Attorney, Tallahassee, Fla., for appellee.
Before JONES and GODBOLD,
Circuit Judges, and SCOTT, District Judge.
JONES, Circuit Judge:
The appellant,
Rob
ert Gordon Hayes, and his wife, Ruth, were indicted on January 11, 1965,
in the Southern District of Florida for wilfully attempting to evade and
defeat income taxes due the United States for the years 1958, 1959 and
1960 in violation of 26 U. S. C. A. Sec. 7201. Pursuant to a motion
filed by the defendants, the cause was transferred to the Northern
District of Florida. At a jury trial, appellant Hayes was convicted and
his wife acquitted on each of the three counts contained in the
indictment. Subsequently, a fine of $2,000 was levied and concurrent
sentences of fifteen months imprisonment on each count were imposed.
From this judgment and sentence, Hayes has appealed.
[Indictment
Challenged]
Appellant's first
specification of error challenges the jurisdiction of the Southern
District of Florida to return the indictment. Hayes filed his income tax
returns for the years 1958, 1959 and 1960 with the District Director in
Jacksonville
,
Florida
, which, when the returns were filed, was within the Southern District
of Florida. On
July 30, 1962
, an area including
Jacksonville
was transferred into the simultaneously created Middle District of
Florida. 28
U. S.
C. A. Sec. 89(b). It is asserted that, because the indictment was
returned after
Jacksonville
became a part of the Middle District, a grand jury of the Southern
District had no jurisdiction to return the indictment.
In answering appellant's
jurisdictional challenge, reference to 18
U. S.
C. A. Sec. 3240 is particularly appropriate. This section provides:
"Whenever
any new district or division is established, or any county or territory
is transferred from one district or division to another district or
division, prosecutions for offenses committed within such district,
division, county, or territory prior to such transfer, shall be
commenced and proceeded with the same as if such new district or
division had not been created, or such county or territory had not been
transferred, unless the court, upon the application of the defendant,
shall order the case to be removed to the new district or division for
trial."
Because
there is no question but that the Southern District could have indicted
Hayes had the Middle District not been created, Holbrook v. United
States, 5th Cir. 1954, [54-2 USTC ¶9640] 216 F. 2d 238, it seems
clear that the above statute permits the Southern District to do so,
although the place of the alleged offenses had been transferred to a new
district after the time alleged for the commission of the offenses.
Appellant asserts that Quinlan
v. United States, 5th Cir. 1927, 22 F. 2d 95, requires a contrary
interpretation of Section 3240. In that case, this Court expressed the
view that 28 U. S. C. A. Sec. 121, which is the statutory predecessor of
28 U. S. C. A. Sec. 3240, had no effect on cases begun after the
creation of a new district, and that the statute merely enabled the
court in the old district "to retain jurisdiction of pending
criminal cases which properly could not be begun in that court after the
creation of the new district." Quinlan v. United States, supra
at 98. If this interpretation of 28 U. S. C. A. Sec. 3240 is followed,
appellant's contention would be upheld. However, both the plain meaning
of the statute and a subsequent Supreme Court decision convince us that
the above statement is not declaratory of the controlling principle.
In Lewis v. United
States, 279 U. S. 63, 49 S. Ct. 257, 73 L. Ed. 615, the Supreme
Court determined that the Eastern District of Oklahoma had jurisdiction
to indict and try an offense committed in a county which had been
transferred out of the Eastern District into the newly created Northern
District after the commission of the offense but before the return of
the indictment. While it is true, as is pointed out by the appellant,
that this decision rested in part upon the language of the
jurisdictional provisions of the act creating the new Northern District,
the Supreme Court clearly stated that the result reached was also in
accord with 28 U. S. C. A. Sec. 101. See Lewis v.
United States
, supra at 791. This interpretation of the statute is consistent
with the clear import of the language used therein. Section 3240
empowers an altered district to commence prosecutions after the change
by indicting for offenses committed within its prior boundaries before
alteration "the same as if such new district or division had not
been created . . ." Mizell v. Vickrey, 10th Cir. 1929, 36 F.
2d 327. The district court here was correct in refusing to dismiss the
indictment for lack of jurisdiction.
[Sufficiency
of Indictment]
Appellant contends that the
indictment was defective in that it failed to state an offense. The
indictment alleged that Hayes did:
"Wilfully and
knowingly attempt to evade and defeat . . . income tax due . . . by
filing . . . with the district director . . . a false and fraudulent
income tax return . . . in violation of section 7201 . . ."
The indictment is
sufficient. It discloses the means by which Hayes attempted to defeat
the tax even though tax evasion indictments need not contain such an
allegation. Lott v. United States, 5th Cir. 1962, [62-2 USTC ¶9731]
309 F. 2d 115; Reynolds v. United States, 5th Cir. 1955, [55-2
USTC ¶49,146] 225 F. 2d 123. Both the statutory language and a
reference to the specific section alleged to have been violated are
incorporated within the charge. This in itself is sufficient if all the
essential elements of the offense are contained in the statute. Worthy
v.
United States
, 5th Cir. 1964, 328 F. 2d 386. Hayes was sufficiently apprised of
the nature of the offense charged so as to permit him to prepare a
defense and successfully plead former jeopardy if brought to trial in
the future for the same offense. No more is required.
United States
v. Strauss, 5th Cir. 1960, 283 F. 2d 155. Appellant's attack on
the indictment must fail.
[Opening
Net Worth]
At the trial the Government
relied upon the net worth method to establish its case. As stated in Merritt
v. United States, 5th Cir. 1964, [64-1 USTC ¶9226] 327 F. 2d 820,
821, this method of proving income tax evasion
"Proceeds
on the assumption that, if in a particular year the increase (not
accounted for by nontaxable items) in a taxpayer's net worth plus his
nondeductible expenditures exceeds his reported net income to a
substantial extent, the excess represents unreported income and permits
an inference of wilfulness on the part of the taxpayer."
An
essential element of the prosecution's proof in this type of case is the
establishment of an opening net worth. Hayes contends that this figure
was not established "with reasonable certainty" as is
required. Holland v. United States [54-2 USTC ¶9714], 348
U. S.
121, 75 S. Ct. 127, 99 L. Ed. 150. In support of this contention, Hayes
asserts that the Government's calculation was inaccurate with respect to
three particular items used in computing appellant's opening net worth.
[Cash on Hand]
The Government allowed
$10,000 as a reasonable figure for cash on hand in 1951. This amount was
based upon information offered by an accountant of the appellant who had
been given a power of attorney to represent him in tax matters. A
Government agent testified as to the accountant's calculations.
Appellant objects to the use of this figure on the ground that it was
established by hearsay testimony and because the Government failed to
investigate Hayes' assertion that he placed $64,000 in a safety deposit
box in a Tallahassee bank in 1951. Neither objection has merit.
It is clear that
appellant's accountant was acting within the scope of his employment and
authority when he indicated his estimate of the extent of Hayes' cash
reserves to the Government agent. Thus the accountant's statement is
admissible against Hayes as an admission by an authorized agent. The
hearsay objection is not tenable. Laird v. Air Carrier Engine
Service, 5th Cir. 1959, 263 F. 2d 948; Cox v. Esso Shipping Co.,
5th Cir. 1957, 247 F. 2d 629. It seems appropriate to note here that the
accountantclient privilege under Florida Statute Sec. 473.15 (1967) is
not applicable in a Federal criminal proceeding. Falsone v. United
States, 5th Cir. 1953, [53-2 USTC ¶9467] 205 F. 2d 734.
[Cash
Hoard]
As to appellant's claim of
a $64,000 cash hoard, we agree that the Government should investigate
leads furnished by the taxpayer in arriving at an opening net worth. Merritt
v. United States, supra. The record here shows that the Government
did all that was required of it. During the investigation of this case,
the Revenue agents repeatedly requested information concerning the
amount of Hayes' cash on hand, yet no indication of $64,000 cash on hand
in 1951 was made. Moreover, the Government agent did not learn of the
Tallahassee safety deposit box until some time in 1962 at which time the
funds, according to Hayes' testimony, had been depleted. Hayes had
previously told a Government agent that he generally kept no more than
$1,000 to $4,000 cash on hand at any one time. Under these
circumstances, sufficient investigation by the Government is apparent,
and the issue raised by Hayes' cash hoard claim was properly submitted
to the jury.
[Cost
Basis of Land]
The appellant makes an
attack upon the $2,000 cost basis allowed by the Government for five and
one-half acres of land sold by Hayes in 1959. Use of this basis, which
was supplied by Hayes' accountant, resulted in a higher capital gain for
the tax year involved. Appellant contends that use of this $2,000 basis
was improper because the Government had previously allowed him and his
wife a $5,000 cost basis on their joint tax return when the property was
sold in 1959. Apparently it is believed that the Government is somehow
estopped by this allowance. No authority is cited in support of this
position. The record fails to show that the Government entered into a
statutory agreement assigning $5,000 as the basis for the land. Under
these circumstances, no estoppel can be found. See Sherwin v. United
States, 9th Cir. 1963, [63-2 USTC ¶9550] 320 F. 2d 137; United
States v. Hardy, 4th Cir. 1962, [62-1 USTC ¶9286] 299 F. 2d 600.
[Cost
Basis of Apartments]
The last net worth item
challenged by Hayes is the cost value of partially constructed
apartments as of
January 1, 1958
. Appellant testified that the apartments were seventy-five percent
completed on that date, and that a value of $9,000 should have been
assigned to the cost of the apartments. Instead, the Government credited
the apartments with a cost value of $3,500. This figure was taken from
appellant's 1957 income tax return. Apparently, no other record of
construction costs had been kept. These facts presented an issue which
the jury resolved with sufficient evidence to support its determination.
No error was committed. It seems appropriate to say here that use of the
cost value asserted by appellant would have no effect on appellant's
opening net worth for the years 1959 and 1960.
[Prior
Convictions]
Hayes' next specification
of error states that the district court committed error by admitting
into evidence testimony relating to appellant's prior convictions. It is
argued that these convictions are so remote in time that they have no
bearing on appellant's present credibility.
It can not be doubted that
a defendant who takes the stand in his own defense may be cross-examined
concerning his prior convictions. Reese v.
United States
, 5th Cir. 1965, 353 F. 2d 732. Such inquiry is permitted for the
purpose of impeachment as to credibility.
Taylor
v.
United States
, 5th Cir. 1960, 279 F. 2d 10. However, as stated in Fire
Association of Philadelphia v. Weathered, 5th Cir. 1932, 62 F. 2d
78, 79:
"The
length of time that should elapse before a conviction for felony ceased
to have any probative value cannot be fixed by the law, but must be left
to the sound discretion of the trial court."
The
record indicates that, before ruling on the admissibility of evidence of
the prior convictions, the trial judge carefully considered both the
nature of the prior offenses and the length of time that had elapsed
since their commission. Considering these same factors, we find no abuse
of discretion. If error were committed, the lack of prejudice caused
thereby would prevent a reversal on this ground. See Steele v. United
States, 5th Cir. 1957, [57-1 USTC ¶9607] 243 F. 2d 712.
[Cross-Examination]
Further attacking the
Government's conduct during the cross-examination of Hayes, it is
asserted that error was committed when the United States Attorney asked
the following question: "Did you escape from prison?" To this,
appellant respondent: "I did not. Yes, yes."
The question is improper
and prejudicial, Hayes argues, because it sought to establish, not
whether Hayes had been convicted of a crime, but whether Hayes had
escaped. As noted by appellant, evidence of prior conviction is
admissible; evidence of previous misconduct is not.
Rob
erson v.
United States
, 5th Cir. 1957, 249 F. 2d 737.
Hayes, unfortunately,
cannot receive the benefit of the rule upon which he relies. In response
to a question asked by defense counsel during direct examination, the
appellant stated:
"One day I left
[prison] and went back about three or four months later and they marked
up an escape against me, and they still turned me outside even then. I
was never locked up."
In
the face of this statement, Government counsel's inquiry was not without
the scope of permissive cross-examination.
[Self-Incrimination]
Appellant urges that error
was committed when Government agents and Government counsel commented on
appellant's failure to make any explanation for his substantial increase
in net worth. A reversal of appellant's conviction would generally be
required on this ground.
Griffin
v.
California
, 380
U. S.
609, 85
S. Ct.
1229, 14 L. Ed. 2d 106. Here, however, peculiar circumstances may demand
a different result.
After a preliminary
investigation of appellant's books and records, the Government agents,
at the request of appellant, obtained all further information from
appellant's accountants. One of these accountants testified at the trial
that after he indicated to Mr. and Mrs. Hayes the substantial increase
in their net worth, he asked them: "Do you know where it came from,
or are these figures correct?" The accountant then testified that
no explanation of the increase in net worth was offered. Significantly,
no objection to this testimony was raised.
After this accountant's
testimony, one of the Government's tax investigators was called to the
stand. On cross-examination, defense counsel attempted several times to
establish that the agent had made unfounded and unnecessary assumptions
as to Hayes' net worth. In response to such questions, the agent stated
that no one would furnish him with different figures. An example of such
an exchange is the following:
"Defense counsel:
Haven't I repeatedly asked you if you would let me know specifically,
what specific items you wanted so we could get them for you?
"Govt Agent:
Repeatedly I asked. We did that repeatedly. We told you we wanted to
know how much cash he had. Repeatedly we failed to hear it. This was
done on numerous occasions."
Again,
no objection was raised.
Later in the trial, another
Government agent testified that no explanations as to the increased net
worth had been made by anyone. At this time, defense counsel objected.
This objection was overruled, but during the testimony of this agent the
trial judge advised the jury that Hayes had the right to remain silent.
On cross-examination, testimony concerning the lack of explanation was
intentionally elicited by defense counsel through the following
questions:
"Do you remember
indicating to us at that conference . . . that if a satisfactory
explanation could be made of any unexplained increases in net worth . .
. you did not feel criminal liability existed?
"Did I understand your
testimony earlier today, to say that if a satisfactory explanation had
been forthcoming you would have settled the case?
"The fact that Mr. and
Mrs. Hayes and I remained silent and did not come forward with an
explanation, that is why we are here today?"
Appellant further asserts
that Government counsel improperty commented to the jury on his failure
to make explanations. The United States Attorney attempted in closing
argument to discredit Hayes' claim to a $64,000 cash hoard by stating
that Hayes had never made such a claim prior to the trial. No objection
was raised at this time. Defense counsel thereafter twice alluded to the
fact that Hayes had been advised to remain silent by his attorneys. In
the latter part of the Government's closing argument, the Government
attorney replied to these statements by suggesting the unlikelihood of
Hayes remaining silent if the cash hoard claim were true. At this time,
the following objection was raised:
"Your
Honor, we respectfully object to his referring to what the court may do
with respect to his explanation."
This
objection was overruled.
Following these arguments,
the trial judge again instructed the jury that the defendant was
entitled to refuse to make any statements during the investigation and
that the jury should draw no inference from the fact that the defendant
elected to exercise this privilege.
It does not appear that any
prejudicial error resulted from the comments which the appellant
contends were improper. Much of the relevant testimony and argument was
either not objected to, or was directly invited by the conduct of
defense counsel. Furthermore, if there were any prejudicial impact from
the statements, it was erased by the trial judge's several admonitions
to the jury.
[Miscellancous
Defenses]
The appellant makes three
additional contentions. These also are without merit. First, what this
Court stated in Myers v. United States, 5th Cir. 1966 [66-1 USTC
¶9371] 356 F. 2d 469, convinces us that the trial court committed no
error in admitting into evidence and submitting to the jury two net
worth summaries prepared by the Government. Second, no error can be
found in the following charge to the jury:
"The
attempt to evade or defeat a tax must be a wilful attempt: that is, it
must be done knowingly, made with the specific intent to defeat the
Government, from the Government a tax, imposed by the income tax laws
which was the duty of the defendant to pay the Government. In other
words, attempt must be knowingly made with the specific purpose of
defrauding the Government of some substantial amount of income tax
wilfully due from the defendants, or one of them.
"A
fraudulent tax return is one that is false and known to be false by the
person making it or causing it to be made and filed with the intent to
deceive."
This
language adequately defines "willfulness," and no prejudicial
error resulted from the trial judge's failure to include the phrase
"bad purpose" within the charge. Third, whether or not Hayes'
attempt to defeat income taxes due the
United States
was wilful constituted an issue which was properly submitted to the
jury. That body's resolution of the issue is supported by substantial
evidence.
The judgment and sentence
of the district court should be and are hereby
AFFIRMED.
[Dissenting Opinion]
GODBOLD, Circuit Judge,
Dissenting:
During the investigative
stages of this case, appellant "failed to explain" to the
satisfaction of the government agents his substantial increase in net
worth, and at times he specifically invoked his constitutional privilege
to remain silent. In his closing arguments to the jury the government
counsel commented on this failure to explain and on the invocation of
the privilege. The majority concedes that these remarks normally would
require a reveral of the case under the rationale of Griffin v.
California, 380
U. S.
609, 85 Sup.
Ct.
1229, 14 L. Ed. 2d 106 (1965). But my brothers find that "peculiar
circumstances" require a different result in this case. 1
The comments of the
government counsel could hardly have been more prejudicial. 2
Repeated reference was made to the failure to explain an increase in net
worth as shown by the government's calculations. Comment was made on the
fact that Hayes "stood on his constitutional rights." The
members of the jury were asked whether they would have done the same. In
the first volley of the prosecution barrange, during the initial closing
argument by the prosecutor, the jury was told:
This would have been a way
if they had disclosed that vast amount of money they had hoarded, this
would have been a way that you gentlemen would not have been sitting
here four and a half days. 3
This trial would never have come up; these people would never have been
indicted; nothing would have happened. All they had to do was make a
truthful explanation of this increase and that would have ended the
matter. That would have ended the matter.
*
* *
If Mr.
Hayes had that money prior to 1950, he could not have been indicted. All
he had to do was to come forward and tell Mr. Snyder that he had these
funds.
*
* *
[T]hese were conferences
set up with appointments, to find out where the difference was between
the government's figures and their figures, give a reasonable
explanation of it--make an explanation of it, [the governmental agents]
said, give us a reasonable explanation and we will cease this
investigation and that will be the end of it, Mr. and Mrs. Hayes will
not have to go through this endurance of being indicted and coming to
trial and taking a chance of whether or not they will have to go to jail
or not, this eliminates every bit of it. Why didn't they tell it? Why
didn't they disclose it? They disclosed it the first time on this
witness stand here the other day. You heard it the same time I did. 4
To the above line of
argument by the prosecution the first defense counsel to argue
responded:
The evidence shows that I
told him and her that they would make no statements, at first, and
Members of the Jury, that is their right under our Constitution and
government. And if they choose not to explain to an enforcement officer
of any government, then they have that right and can reserve the right
to explain to the Members of the Jury and the Court under the rules of
evidence as to what their explanation might be.
Then
in the middle of his argument the second defense counsel said:
First of all, I remind you
again, that the defendants, and his Honor will instruct you, that the
defendants have no duty to prove themselves innocent. Furthermore, they
have no duty to make any disclosures to the government and, furthermore,
both Mr. Varn and I follow the practice when a lawyer is employed he
tries to take care of his client and his business.
In his final closing
argument the prosecutor delivered the coup de grace:
[Defense counsel Varn] also
knows that if he had Mr. Ervin [also defense counsel] had come forth
with any explanation as to the increase in his income he is charged with
in 1958, 1959 and 1960, and come up here and said, "we have $64,000
in 1950" and been able to substantiate that, there would never have
been a case. And yet they have a right to stand on their Constitutional
Rights and not to say anything. But would you do it? Would you do it,
and wait and be indicted and come up here and go through this trial, and
wonder if you were going to prison, and say nothing.
It
is to these last remarks that the defense made the objection quoted by
the majority. The court's response to the objection was, "The jury
will be appropriately instructed as to the matter in the full Charges of
the Court. Let's move on." Government counsel resumed, saying:
Mr. Varn
is the one that brought that up and I think I have a right to reply to
it. 5
I don't think that any of you would sit back and wait and be indicted
before coming forth and giving a reasonable explanation. You will have
to decide that. That is one of the things for you to decide. . . .
No "peculiar
circumstances," no curative instructions, 6
no theories of waiver, invitation, or failure to object with precision
(or to object at all), can make a silk purse of this sow's ear.
It is essential to
distinguish between a defendant's Fifth Amendment privilege and the
elements of the government's prima facie case set out in Holland v.
United States [54-2 USTC ¶9714], 348 U. S. 121, 75 Sup.
Ct.
127, 99 L. Ed. 150 (1954). In
Holland
the Supreme Court said that "once the government has established
its case the defendant [in a net worth prosecution] remains quiet at his
peril."
Id.
at 138-39, 75 Sup.
Ct.
at --, 99 L. Ed. at 166. This "failure to explain" relates to
the proof the defendant may--or may not--adduce at the trial. It does
not shrink the scope of the Fifth Amendment as it applies to pretrial
investigation.
My reading of the record
impels me to conclude that throughout the trial government counsel
misconceived the interplay of the
Holland
principle and the Fifth Amendment. The government's position was not
that Hayes, either personally or through his accountants or attorneys,
waived his privilege against self-incrimination during the
investigation. Nor was it that Hayes' testimony from the stand was so
inconsistent with his prior exercise of the privilege as to permit the
admission of evidence concerning that prior exercise for impeachment
purposes. Compare Grunewald v. United States [57-1 USTC ¶9693],
353
U. S.
391, 77 Sup. Ct. 963, 1 L. Ed. 2d 931 (1957); United States v. Marcus
[68-2 USTC ¶9599], 401 F. 2d 563 (2d Cir. 1968); petition for cert.
filed, 4 Crim. Law Rep. 4140 (
Jan. 8, 1969
).
