Accountant-Client Privilege

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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 ). ⁷ Rather, the government's position was that the taxpayer had a right during the investigation to stand on his privilege and not produce evidence or otherwise explain his increase in net worth, but that his exercise of the privilege coupled with his offering of an explanation for the first time at the trial was a substantive indication of guilt. ⁸ In short, the government used appellant's exercise of his Fifth Amendment privilege as an affirmative weapon to convict.

An accused cannot be penalized for exercising his constitutional privilege against self-incrimination either through comment on his failure to take the stand, Griffin v. California, 380 U. S. 609, 85 Sup. Ct. 1229, 14 L. Ed. 2d 106 (1965); Anderson v. Nelson, -- U. S. --, -- Sup. Ct. --, 20 L. Ed. 2d 81 (1968), or by testimony at trial of a pretrial exercise of the privilege, Grunewald v. United States [57-1 USTC ¶9693], 353 U. S. 391, 77 Sup. Ct. 963, 1 L. Ed. 2d 931 (1957); Walker v. United States , 5 Cir. 1968, -- F. 2d -- [No. 25572, Dec. 11, 1968 ]; Helton v. United States , 221 F. 2d 338 (5th Cir. 1955). In like manner he is protected from prosecutorial comment at trial on his pretrial exercise of the privilege.

Only a few weeks ago in Walker v. United States , supra, this court said:

We would be naive if we failed to recognize that most laymen view an assertion of the Fifth Amendment privilege as a badge of guilt. As said by Mr. Justice Frankfurter, speaking for the Court:

"This constitutional protection must not be interpreted in a hostile or niggardly spirit. Too many, even those who should be better advised, view this privilege as a shelter for wrongdoers. They too readily assume that those who invoke it are either guilty of crime or commit perjury in claiming the privilege. Such a view does scant honor to the patriots who sponsored the Bill of Rights as a condition to acceptance of the Constitution by the ratifying States."

Ullmann v. United States , 1956, 350 U. S. 422, 426, 427. -- F. 2d at --. In Walker the government was allowed to elicit from one of its witnesses, the owner of credit cards used by the accused in a Dyer Act case, that in a pretrial conversation he asked the accused, "Just how did you get my credit cards?" and the defendant responded, "I refuse to answer on the ground it might incriminate me." This was held error. Prosecutorial comment on this matter in argument to the jury, though without objection, was held so improper and prejudicial as to constitute plain error.

Nearly 15 years ago this court said in Helton v. United States , supra:

The constitutional protection against self-incrimination does not begin with a trial of a defendant on the charges against him. History tells us that it was the preliminary inquisition, prior to trial on the merits, which gave rise to the abuses, which resulted in the recognition of the privilege against self-incrimination. Under our law it is not the function of police officers to determine for the benefit of the jury whether or not a person under arrest on suspicion of crime has given a sufficient explanation, or any explanation at all, and the fact that the accused here remained silent rather than risk unwitting distortion of his statement by a police officer at a later date does not give in law, and should not give in fact, rise to an inference of guilt.

221 F. 2d at 341-42.

The language of Mr. Justice Black in his concurring opinion in Grunewald also is pertinent:

I can think of no special circumstances that would justify use of a constitutional privilege to discredit or convict a person who asserts it. The value of constitutional privileges is largely destroyed if persons can be penalized for relying on them. It seems peculiarly incongruous and indefensible for courts which exist and act only under the Constitution to draw inferences of lack of honesty from invocation of a privilege deemed worthy of enshrinement in the Constitution.

353 U. S. at 425-26, 1 L. Ed. 2d at 955.

For these egregious errors of constitutional dimensions, this case should be reversed and appellant granted a new trial.

¹ Implied in the majority discussion is the view that the Fifth Amendment privilege against self-incrimination extended to the Internal Revenue investigation of the income tax affairs of the appellant and his wife. I am in accord with that view; therefore, I do not discuss the availability of the privilege. See generally, McKay, Self-Incrimination and the New Privacy, 1967 Supreme Court Review 193.

² As to whether a prosecutor's comment on a defendant's pretrial assertion of the Fifth Amendment is, in the words of the majority, "prejudicial error." cf. Anderson v. Nelson, -- U. S. --, -- Sup. Ct. --, 20 L. Ed. 2d 81, 83 (1968): "[C]omment on a defendant's failure to testify cannot be labeled harmless error in a case where such comment is extensive, where an inference of guilt from silence is stressed to the jury as a basis of conviction, and where there is evidence that would have supported acquittal." In Chapman v. California , 386 U. S. 18, 87 Sup. Ct. 824, 17 L. Ed 2d 705 (1967), the Supreme Court held that before a comment on an assertion of the Fifth Amendment can be found harmless the court must be able to declare its belief that it is harmless beyond a reasonable doubt.

³ This remark, standing alone and not objected to, is so fraught with prejudice and appeal to improper motives that it should reverse this case.

⁴ These comments establish that, contrary to the majority's contention, the further prejudicial remarks made by the government counsel in his final argument were not "invited" by defense counsel.

⁵ This not only added to the prejudice but was factually incorrect as well. The initial comment on the pretrial failure to explain was made by the prosecutor. See text at note 4, supra.

⁶ The court's charge was not as all-curative as the majority say. The judge charged that under the Fifth Amendment one is not required to speak against himself or give a statement and that no inference was to be drawn from the fact tnat during the investigation the accused refused to make any statement. However, immediately prior to that the trial judge had instructed that if the defendant offered an explanation as to the source of funds the government could not disregard it and the jury could consider failure of the government to check out an explanation if made, and then the judge said: "And if the defendants failed to supply information in that regard you may consider such failure, . . ."

⁷ Marcus presented a different question than is before us. The agent there testified to admissions made to him by the defendant during the investigation. Defense counsel argued to the jury that on other and later occasions the defendant had refused to answer the agent's questions, and that from this fact the jury should conclude that the agent's testimony of earlier admissions actually made was not to be believed. The court held it was not ground for mistrial that in response to this defense attack on the credibility of a key government witness the prosecutor argued that the accused, once it became clear to him he was under investigation, was unwilling to submit to question and answer under oath.

⁸ Professor Steven Duke points out the practical effects of the taxpayer's pretrial claim of privilege, one of which is the consequence here occurring of the exercise being treated as evidence of guilt. See Duke, Prosecutions for Attempts to Evade Income Tax: A Discordant View of a Procedural Hybrid, 76 Yale L. J. 1 (1966). In the instant case the prosecution's approach is exemplified by the fact that in response to appellant's motion for a bill of particulars seeking details of the government's calculations, the government stated, and reiterated, that the defendants had been afforded opportunities to explain their tax deficiencies but "no explanation has been forthcoming."

 

 

[70-2 USTC ¶9649] United States of America , Appellee v. David J. O'Connor, Defendant, Appellant

(CA-1), U. S. Court of Appeals, 1st Circuit, No. 7629, 433 F2d 752, 10/16/70, Affirming unreported district court

[Code Sec. 7203--Result unchanged by '69 Tax Reform Act]

Crimes: Failure to file return: Evidence: Attorney's testimony: Circumstantial evidence: Copies of records.--The taxpayer's conviction for wilful failure to file income tax returns for the years 1962 and 1963 was supported by substantial proof and was sustained. Where the taxpayer's primary contention at trial was his lack of wilfulness and that the returns had been filed, it was proper for the trial court to admit the following evidence: (1) an interview between the taxpayer and a special agent in which the taxpayer claimed that he had filed returns for the years; (2) a political flier issued by taxpayer to his constituents indicating that he had paid his 1962 income tax; (3) a letter from the taxpayer's accountant stating that he had not authorized the use of his name in the taxpayer's flier; (4) the testimony of an attorney, who represented the taxpayer under a power of attorney, outside the presence of the taxpayer that contradicted the taxpayer's statements in an IRS meeting; and (5) a statement made by the taxpayer to IRS officials that his father had been convicted of tax evasion and, because of what his father had gone through, he certainly would have filed. As to (4) above, the court indicated that it would have suppressed the evidence if the taxpayer had told the attorney not to make the statements or to confine himself to the position adopted by the taxpayer. The trial court's instructions to the jury were proper. Finally, the court held that the taxpayer was not entitled to a warning of his constitutional rights by special agents.

Herbert F. Travers, Jr., United States Attorney, Wayne B. Hollingsworth, Assistant United States Attorney, Boston , Mass. , for appellee. Thomas C. Cameron, Francis J. DiMento, DiMento & Sullivan, 100 State St., Boston, Mass., for defendant, appellant.

Before ALDRICH, Chief Judge, MCENTEE and COFFIN, Circuit Judges.

MCENTEE, Circuit Judge:

Defendant was convicted of wilful failure to file income tax returns for the years 1962 and 1963, in violation of 26 U. S. C. §7203 (1964).

His primary contention at trial was that his alleged violations were not wilful. But the government's evidence against him on this point was plentiful. Defendant did not take the stand in his own defense, nor did he present any witnesses on his own behalf. He insisted to special agents of the Internal Revenue Service on several occasions that he had filed his returns. He gave the special agents a carbon copy of a letter allegedly sent to the Internal Revenue Service indicating that he had mailed his 1962 return on time. He also gave them a carbon of the allegedly mailed return. At conferences with Internal Revenue in Boston , New York , and Washington , defendant clung steadfastly to his story that he had filed the returns. ¹ The government showed further that defendant, a state representative, had sent a political flier to his constituents indicating that he had paid his 1962 income tax. The government showed that he had also claimed by inference to have filed on time. These showings, along with proof that he had not filed, made a strong case against him.

[Special Agent]

Defendant was asked by a special agent, "Did you file your Federal Individual Income Tax Return for 1962?" He replied in the affirmative. Defendant objected to the admission of this question and his response. He would have us analogize this colloquy to the one in Flaherty v. United States, 355 F. 2d 924 (1st Cir. 1966), vacated on other grounds, Piccioli v. United States [68-1 USTC ¶15,820], 390 U. S. 202 (1968). The question asked the defendant in that case was: "If you were in the wagering business, would you have registered and purchased a federal stamp?" Only a lawyer could have realized what that question meant, for it was so phrased that "the incriminatory answer was precisely the one that would appear to be exculpatory." 355 F. 2d at 926. Flaherty could not have realized that it was in his best interest to remain silent. In the instant case, the question was entirely straightforward; it was not a trick. Defendant could readily understand that to answer in the negative would be an admission of guilt and to answer in the affirmative would be a lie. He could very well have said nothing, as he was under no compulsion to speak. Instead, he lied, and the jury had a right to consider the lie along with other evidence as to his state of mind.

Defendant also objected to admission of copies of documents he gave to the special agents. He claims a violation of the best evidence rule because the documents admitted were not the ones he gave, but only copies thereof. Under Fed. R. Crim. P. 26 we must apply the common law best evidence rule. Defendant argues that, where an original document is allegedly lost, production of the original may be excused only if the trial court finds that it has become unavailable without the fault of the proponent. Old Colony Trust Co. v. Shaw, 348 Mass. 212, 219, 202 N. E. 2d 785, 791 (1964), upon which he relies, does not support that proposition. It holds that if the trial judge finds the originals are unavailable without the serious fault of the proponent and that reasonable search was made, copies are admissible. Cf. McDonald v. United States , 89 F. 2d 128, 136 (8th Cir.), cert. denied, 301 U. S. 697 (1937); see generally McCormick, Law of Evidence §201 (1954). That being the rule, Sylvania Electric Products, Inc. v. Flanagan, 352 F. 2d 1005, 1008 (1st Cir. 1965), the copies were admissible.

[Flier]

As stated above, the court admitted into evidence, over defendant's objection of irrelevance, a political flier which demonstrated to defendant's constituents that his 1962 federal income tax had been paid in full. It also showed that his state tax returns for 1962 and 1963 were on file by August 9, 1964 . We think that this evidence was relevant to prove defendant's state of mind when he failed to file his tax returns. United States v. Taylor [62-2 USTC ¶9590], 305 F. 2d 183 (4th Cir.), cert. denied, 371 U. S. 894 (1962), supports this holding. Taylor involved a jury conviction for filing a false income tax return. The defendant admitted at trial that he had been audited by state tax agents. He then admitted that he had paid additional state income taxes after the audit. The latter admission was objected to. Defendant also objected to questions asked about filing returns reporting the social security and withholding taxes of his secretary. In holding the questions to be proper, the court said:

"It is well established that evidence of collateral facts, circumstances and other acts of a defendant of a character kindred to that for which he is on trial, whether occurring prior or subsequent to the alleged offense, may be admitted with proper explanation to the jury as to the limits within which it may be included and for what purposes. (Citations omitted). The information elicited from the defendant over objection might well bear upon his attitude toward the reporting and payment of taxes generally and thus may have been helpful to the jury in ascertaining his intent in preparing and filing his 1955 tax return."

305 F. 2d at 185-86. Accord, United States v. Magnus [66-2 USTC ¶9660], 365 F. 2d 1007, 1011 (2d Cir. 1966), cert. denied, 386 U. S. 909 (1967); Morrison v. United States [59-2 USTC ¶9657], 270 F. 2d 1 (4th Cir.), cert. denied, 361 U. S. 894 (1959); Emmich v. United States [1924 CCH ¶3481], 298 F. 5 (6th Cir.), cert. denied, 266 U. S. 608 (1924).

The case of United States v. Long [58-2 USTC ¶9621], 257 F. 2d 340 (3d Cir. 1958), held that the failure to file could not be used to help prove intentional misrepresentation on a later return. The Long court relied on Spies v. United States [43-1 USTC ¶9243], 317 U. S. 492 (1943). But Spies only rejected the "contention that a willful failure to file a return, together with a willful failure to pay the tax may, without more, constitute an attempt to defeat or evade a tax. . . ." 317 U. S. at 494-495. (Emphasis added). It did not say that a jury could not consider that failure. In fact, the Supreme Court said that the jury could consider the failures to file and to pay the tax along with other acts to find criminal tax evasion. 317 U. S. at 500. To the extent that Long is contra to our holding here, we prefer to follow Taylor and Magnus, supra. We think the same reasoning applies to the evidence of defendant's past history of delinquent payments. ²

[Accountant-Attorney]

Defendant also objected to testimony by his accountant, Katz, relating to a conversation with the defendant about the flier. He also objected to receipt into evidence of a letter written by Katz about the flier in which the accountant's name prominently appeared. The evidence in question stated that Katz had not authorized the use of his name in the flier and that defendant knew of Katz's objections. We think that both the testimony and the letter were relevant once the flier was in evidence. The government was entitled to show that the accountant did not stand behind the flier, or else the jury could have inferred that defendant's statements in the flier followed good accounting procedures and that the accountant stood behind defendant in the presentation of the return to his constituents.

Also, defendant objected to an admission made by his attorney which was allowed into evidence. The attorney was acting under a power of attorney from defendant, which had been sent to the Internal Revenue Service. At a meeting with Internal Revenue, held in Washington , the defendant repeated his assertion that he had filed the tax returns in question. Shortly thereafter, he left the meeting but his attorney remained in the conference. The attorney then told the Internal Revenue officials that defendant had lied to them when he told them that his accountant, Katz, had mailed the returns to him for signing and filing. According to the attorney, defendant said this to protect Katz because "Katz was a C. P. A. and had a license." The attorney's story obviously contradicted defendant's statements. Defendant's attorney had "in all matters pertaining to any Federal Taxes for the calendar years ended 1962 and 1963 . . . full power and authority to do and perform all and every act or thing whatsoever required and necessary." The power of attorney was in evidence. We think this point is controlled by United States v. Dolleris [69-1 USTC ¶9289], 408 F. 2d 918 (6th Cir.), cert. denied, 395 U. S. 943 (1969). In Dolleris, a prosecution for tax evasion, the attorney representing the defendant under a similar power of attorney made certain admissions when his client was not present. The court held that these admissions were properly received in evidence against the defendant. Cf. Hayes v. United States [69-1 USTC ¶9204], 407 F. 2d 189 (5th Cir.), cert. denied, 395 U. S. 972 (1969); Harris v. United States [66-1 USTC ¶9251], 356 F. 2d 582 (5th Cir. 1966); see also American Fur Co. v. United States , 27 U. S. 358 (1829); United States v. Gooding, 25 U. S. 460 (1827). We might rule otherwise had defendant told his attorney not to make the statements or to confine himself to the position adopted by defendant. That would have been a case where the attorney exceeded the scope of his actual authority. But in the instant case no such defense was raised. The attorney may well have thought that an explanation for the motive for his client's misconduct would constitute, over all, a net gain in the eyes of the Service, which already appeared to believe that the misconduct had occurred. It was clearly within the power and duty of the attorney to do what he could, in his own best judgment, to dispel the suspicions of the Internal Revenue Service and avoid indictment. ³

Over objection, a government witness was permitted to relate one of defendant's statements made at the New York conference with Internal Revenue officials that his father had been convicted of tax evasion and, because he had seen what his father had gone through, he certainly would have filed. Defendant argues that there was inherent prejudice in the admission of this testimony since its only effect was to lead the jury to a "like-father, like-son" conclusion. The statement may have had some such tendency; however, the admission was entirely relevant to the questions of knowledge and intent. Defendant, having offered his explanation himself, cannot object to its use.

Defendant contends that the trial court, in instructing the jury, withdrew from its consideration the issue of his duty to file. After carefully reading the charge in its entirety, we are convinced that this allegation is without merit. The court stated several times that the three elements of the crime had to be proved. Twice, in mentioning the requirement that the prosecution must prove that defendant had to make a return, the judge said, "I think there is no dispute about that at all." (Emphasis added). However, on each occasion, the court quite clearly said, "Those three elements must be proved beyond a reasonable doubt before you would be warranted in returning a verdict of guilty." Defendant relies on DeCecco v. United States [65-1 USTC ¶15,640], 338 F. 2d 797 (1st Cir. 1964). There, the trial court disregarded a requested instruction that the mere fact that the government's evidence on one element was uncontradicted did not require the jury to accept it. Instead, the court removed that element from jury consideration. It said that only the second element need be proved because there was no dispute over the first. In the instant case, the district court never intimated that only two elements need be proved. Nor was it clear in DeCecco, as it is here, that the instructions reiterated the fact that there were three elements for decision by the jury.

Defendant objected to the trial court's instruction on "reasonable doubt." We have examined the charge in its entirety and find no merit in this objection.

Defendant also complains that the district court erred in allowing special agents to testify about statements he made to them before he was advised of his constitutional rights. We have considered this question several times, most recently in United States v. Mitchell [70-2 USTC ¶9637], No. 7614 (1st Cir., Oct. 7, 1970 ). Suffice it to say that the warnings referred to were not required here.

In all respects, we believe that the defendant had a fair trial and was fairly convicted.

Affirmed.

¹ On July 29, 1964 , the 1963 return was filed and on August 13, 1964 , the 1962 return was filed. These late filings, of course, do not prevent the prosecution for wilful failure to file.

² Defendant does not urge that the court failed to instruct the jury as to the effect of the evidence and did not request any such instructions, Fed. R. Crim. P. 30, relying instead on his arguments of irrelevancy.

³ Pickert v. Hair, 146 Mass. 1, 15 N. E. 79 (1888), cited by defendant, does say that an attorney's conversation relating to a fact in controversy, but not to an agreement relating to the management and trial of a suit, or an admission intended to influence procedure, was inadmissible. But even the Massachusetts court later recognized, Loomis v. New York, N. H. & H. R. Co., 159 Mass. 39, 34 N. E. 82 (1893), that an attorney retained to present and collect a claim may make admissions while acting within that authority. See generally Wigmore, Evidence, §1063 (1940).

 

 

[68-2 USTC ¶9641] United States of America , Plaintiff-Appellee v. Frank Peter Balistrieri, Defendant-Appellant

(CA-7), U. S. Court of Appeals, 7th Circuit, No. 16639, 403 F2d 472, 11/7/68, Affirming unreported District Court opinion

[1954 Code Sec. 7201]

Crimes: Evasion: False and fraudulent returns: Suppression of evidence.--Evidence sufficient to support the taxpayer's conviction for tax evasion was not so closely connected with other evidence (or leads obtained therefrom) which had been obtained through illegal search or seizure as to render it inadmissible. The illegal evidence was properly suppressed and the taxpayer was not entitled to a reversal of his conviction based upon other, properly admitted, evidence.

[1954 Code Sec. 7201]

Crimes: Evasion: False and fraudulent returns: Net worth reconstruction of income.--The government properly established a prima facie case against a taxpayer convicted of evasion by use of the net worth theory. The taxpayer's attacks upon the government's use, including (1) a failure to show a net worth starting point, (2) a failure to account for borrowings, (3) an impropriety in including in income amounts deposited in a joint account, (4) a failure to prove that net worth increases were attributable to taxable sources, and (5) that defense evidence had rebutted the government's evidence, were rejected.

[1954 Code Sec. 7201]

Crimes: Evasion: False and fraudulent returns: Trial: Cross-examination: Statements to jury: Jury instructions.--There was no prejudicial error, requiring a reversal of the taxpayer's conviction, in denying a motion for mistrial based on improper cross-examination of defense witnesses. Defense objections were sustained and the jury was explicitly instructed to disregard the questions. Thus, the error was not prejudicial. Further, a statement made by the prosecutor in his summation to the jury did not require that the motion for mistrial be sustained; the statement, relating to the possible source of unreported income, was permissible since the taxpayer's connection with such source had been shown. Further, there was no error on the part of the trial judge in sending the jury back for further deliberation when it expressed some confusion regarding the instructions. The jury was advised that any problem could be submitted to the court in writing; no objection was made to such instruction.

[1954 Code Sec. 7201]

Crimes: Evasion: False and fraudulent returns: Evidence: Accountant-client privilege.--There is no accountant-client privilege, barring an accountant's testimony, in a federal criminal tax prosecution. Thus, there was no error in allowing the taxpayer's accountant to testify for the government.

Richard B. Buhrman, Charles A. McNelis, James B. Brennan, Mitchell Rogovin, Joseph M. Howard, Lee A. Jackson, Department of Justice, Washington, D. C. 20530, for plaintiff-appellee. Maurice J. Walsh, 29 S. LaSalle St. , Chicago Ill. , Carl M. Walsh, Chicago , Ill. , for defendant-appellant.

Before CASTLE, Chief Judge, KNOCH, Senior Circuit Judge, and FAIRCHILD, Circuit Judge.

CASTLE, Chief Judge:

Defendant appeals from his conviction on Counts II and III of a three-count indictment charging him with crimes against the revenue. Count I charged defendant and Jennie Alioto with conspiring to defraud the Government by impeding the lawful functions of the Internal Revenue Service in the assessment and collection of income taxes. Counts II and III charged defendant with income tax evasion for the years 1959 and 1960 by filing false and fraudulent tax returns, in violation of 26 U. S. C. §7201.

Defendant and Miss Alioto, as co-defendants, filed motions for relief from prejudicial joinder, to dismiss Count I of the indictment, for a Bill of Particulars on Counts II and III, and to suppress certain evidence, copies thereof, leads derived therefrom, and information secured thereby resulting from a search and seizure of Miss Alioto's apartment, conducted under an illegal search warrant. ¹ After the Government filed a Bill of Particulars, defendant's motion for a further Bill of Particulars was denied. The trial was then transferred from the Eastern District of Wisconsin to the Southern District of Illinois, Southern Division, for trial as to Balistrieri only. An amended Bill of Particulars was filed shortly after the trial began, reducing the alleged beginning and end net worth figures, and thus the increases in the net worth of defendant and his wife during the relevant period by over 50%.

[Net Worth Theory]

The Government's case was presented on the "net worth theory" whereby income for the relevant period is proved by showing that the defendant's net worth increased during the period. Thus, rather than having to prove the exact source or sources of the income, the defendant may be convicted of income tax evasion upon a showing that his net worth was unaccountably higher at the end than at the beginning of the tax period, and that the increase was not due to nontaxable sources, such as gifts, loans, or inheritance. In the instant case, the Government sought to bolster its net worth evidence with evidence of the likely sources of income.

Shortly before trial, defendant moved to suppress evidence obtained by electronic eavesdropping of defendant's office, after defendant had discovered a hidden microphone installed behind his office paneling. On the date when the trial was scheduled to begin, the Government attorneys disclosed to the trial judge that the Government had three categories of F. B. I. reports obtained by admittedly illegal electronic eavesdropping. These reports concerned conversations overheard from devices placed in Miss Alioto's apartment from October 3, 1961 through June 8, 1962 , in defendant's office from March 9, 1964 through June 3, 1965 , and in the office of Dominic Frinzi, one of defendant's attorneys, from April 22, 1963 through October 2, 1963 .

A substantial amount of testimony on this matter was heard by the court outside the presence of the jury. Defendant moved to dismiss the indictment on the ground that it was obtained through use of the information acquired by means of the illegal electronic eavesdropping, and this motion was denied. The court also denied motions for acquittal and motions that the eavesdropping information was inflammatory and deprived defendant of a fair grand jury. The court did, however, compel election by the Government to proceed on Counts II and III, and not on Count I, apparently in recognition of tainted evidence used in the first count.

Upon a verdict of guilty of Counts II and III, defendant was sentenced to two years imprisonment and fined $5000 on each count, the prison terms to run concurrently.

On appeal, defendant attacks the adequacy of the Government's evidence in meeting its burden of proving that the trial evidence was free from taint, the sufficiency of the evidence used to prove the "net worth theory" of tax evasion, the trial court's denial of defendant's motion for mistrial based upon the prosecutor's improper cross-examination of a witness, the trial court's refusal to answer the request of the jury for clarification of instructions, alleged improper arguments to the jury by the prosecutor, and an alleged breach of the attorney-client and accountant-client privilege.

[Tainted Evidence]

I. The main contested issue concerns the Government's proof that its evidence was free from taint of the illegal searches and seizures and electronic eavesdropping.

During 1961, in the initial stages of the Internal Revenue Service investigation of defendant, the I. R. S. had, through the Postal Inspector in Milwaukee, requested that "mail covers" ² be conducted on defendant's address and on various corporations which the I. R. S. believed were connected with defendant. Among these were the Downtowner (a tavern) and Gallagher's Steak House (a restaurant). On July 7, 1961 , the I. R. S. received a mail cover report which disclosed that a first class letter addressed to Midwest Scrap Metal Company at the address of the Downtowner was delivered. The return address--Post Office Box 1205--was later determined to be the First Wisconsin National Bank of Milwaukee . On August 7, 1961 , another mail cover report showed that a letter from Altex Corporation, a scrap metal dealer, was sent to Gallagher's Steak House. Lead cards were made and filed for each of these leads.

Contrary to the findings made by the district court at the close of the testimony regarding the alleged tainted evidence, defendant contends that the evidence relating to Midwest Scrap Metal Company, upon which the Government relied as establishing a source of unreported income, was discovered only as the result of information extracted from the records illegally seized in Miss Alioto's apartment and as the result of the subsequent search by the F. B. I., and not by the independent leads obtained by the exploitation of the information extracted from the mail covers and lead cards by the I. R. S. On all issues regarding the alleged tainted evidence, the Government conceded that it had the burden of proving that its evidence was free from taint. ³

[Independent Leads]

With respect to the Midwest Scrap Metal Company evidence, the Government sought to meet his burden by demonstrating that the lead was discovered independently of and prior to the searches, as the result of the mail covers conducted in the summer of 1961. In following up the mail cover leads, the Government contends that it was led to the Altex Corporation. From the records of Altex followed other leads and evidence regarding Midwest and its connection with defendant. We find that the district court did not err in holding that the Midwest leads were obtained independently of the searches. The two lead cards disclosed that the address of Midwest , a dealer in scrap metal, was the same as the address of a business in which defendant was known to have an interest (the Downtowner), and that Altex, a seller of scrap metal, sent a letter to another business in which defendant had an interest (Gallagher's). It is reasonable to conclude that these two leads were logically tied together by the revenue agents, before the searches took place, to link Altex with Midwest and thus provide an important step in the investigation. Therefore, although the evidence obtained in the illegal searches would have led to the same link between Altex and Midwest which in turn led to the other evidence, some of which was admitted into evidence at trial, the initial lead was obtained independently of and prior to the search.

In Silverthorne Lumber Co. v. United States, 251 U. S. 385, 392 (1920), Mr. Justice Holmes, speaking for the Court, stated the policy behind the Fourth Amendment:

"The essence of a provision forbidding the acquisition of evidence in a certain way is that not merely evidence so acquired shall not be used before the court but that it shall not be used at all. Of course this does not mean that the facts thus obtained become sacred and inaccessible. If knowledge of them is gained from an independent source they may be proved like any others, but the knowledge gained by the Government's own wrong cannot be used by it. . . ." 251 U. S. at 372.

In Wong Sun v. United States, 371 U. S. 471, 487-488 (1963), the Supreme Court cogently held:

"We need not hold that all evidence is 'fruit of the poisonous tree' simply because it would not have come to light but for the illegal actions of the police. Rather, the more apt question in such a case is 'whether, granting establishment of the primary illegality, the evidence to which instant objection is made has been come at by exploitation of that illegality or instead by means sufficiently distinguishable to be purged of the primary taint.' Maguire, Evidence of Guilt, 221 (1959)."

We hold that the evidence relating to Midwest was not "come at by exploitation" of the information obtained in the illegal searches and seizures, but "by means sufficiently distinguishable to be purged of the primary taint."

We reach the same conclusion regarding the evidence allegedly obtained by the illegal electronic eavesdropping. The Government met its burden in proving that its evidence was free from this taint by disclosing to the court and the defendant all information in the Government's possession, including summaries of the tapes which had been erased in the ordinary course of re-use, ⁴ undestroyed tapes, and by making available the agents who participated in the eavesdropping. The district court ordered suppressed all the information obtained as the result of the electronic surveillances and the searches and seizures and all leads developed therefrom. Defendant contends, however, that the Government failed to meet its burden since it had destroyed the best evidence of what had been heard through erasure of the recordings on some of the tapes by their re-use. However, the Government tendered proof to the district court showing independent sources for the leads to each of the items of evidence introduced at trial. The trial judge displayed a high degree of prudence and deliberation in hearing extensive testimony from each side before concluding that the evidence offered by the Government was free from taint. We agree with his conclusion.

Mr. Justice Frankfurter, speaking for the Supreme Court in Nardone v. United States, 308 U. S. 338 (1939), stated the guidelines to be used by federal courts in determining issues of tainted evidence. After stating the quotation from Silverthorne, cited above by us, he said:

"In practice this generalized statement may conceal concrete complexities. Sophisticated argument may prove a causal connection between information obtained through illicit wire-tapping and the Government's proof. As a matter of good sense, however, such connection may have become so attenuated as to dissipate the taint." 308 U. S. at 341.

Therefore, although some causal connection could, by sophisticated argument, be shown between the electronic eavesdropping and the Government's proof, we find that "such connection has become so attenuated" in the instant case as to dissipate the taint. The trial judge gave defendant the opportunity to show that a substantial portion of the case against him was the fruit of the poisonous tree, and we conclude that the decision of the district court that the Government met its burden of proving its evidence free from taint is supported by substantial evidence and not erroneous.

Judge Learned Hand's comment in United States v. Nardone, 127 F. 2d 521, 523 (1942) cert. den. 316 U. S. 698, is particularly appropriate to the issues discussed above:

The question therefore comes down to this: whether a prosecution must show, not only that it has not used any information illicitly obtained, either as evidence, or as the means of procuring evidence; but that the information has not itself spurred the authorities to press an investigation which they might otherwise have dropped. We do not believe that the Supreme Court meant to involve the prosecution of crime in such a tenebrous and uncertain inquiry, or to make such a fetich of the statute [47 U. S. C. §605] as so extreme an application of it would demand. On the last appeal the court made it abundantly clear that it did not contemplate a chase after will-O'-wisps. "Tenuous claims" are not "sufficient to justify the trial court's indulgence of inquiry into the legitimacy of evidence." The "claims * * * must satisfy the trial court with their solidity." We are not "to subordinate the need for rigorous admin istration of justice to undue solicitude for potential and, it is to be hoped, abnormal disobedience of the law." [308 U. S. 338, 60 S. Ct. 269, 84 L. Ed. 307.] Such expressions indicate no disposition towards the refinements inevitable in deciding how far the illicit information may have encouraged and sustained the pursuit. We hold that, having proved to the satisfaction of the trial judge that the [electronic surveillance and searches and seizures] did not, directly or indirectly, lead to the discovery of any of the evidence used upon the trial, . . ., the prosecution had purged itself of its unlawful conduct.

Defendant's contention that the eavesdropping evidence used to obtain Count I of the indictment was prejudicial as to him affords no basis for reversal since he was never prosecuted on the first count. An illegal search and seizure "does not serve to immunize" the defendant from prosecution. United States v. Ruffin, 389 F. 2d 76, 79 (7th Cir. 1968); United States v. Hoffman, 385 F. 2d 501, 503-504 (7th Cir. 1967).

Defendant further contends that the eavesdropping conducted on the law office of Mr. Frinzi constituted an intentional interference by the Government with defendant's Sixth Amendment right to counsel. As with the other electronic eavesdropping, the Government proved its evidence was free from any taint as the result of this illegal surveillance. Defendant's Sixth Amendment claim is no more than speculation. We find nothing in the record supporting the allegation that the purpose of conducting the surveillance was to interfere with defendant's right to counsel, nor does it appear that such right was infringed as the result of the Government's conduct.

Defendant also contends that the overhearing of his telephone conversation with Mr. Walsh, who represented the defendant both below and on appeal, was a purposeful denial of his right to counsel. Again, there appears in the record no indication that the Government obtained any evidence from the overhearing of this call, or that it interfered with defendnt's right to counsel.

Defendant relies heavily on O'Brien v. United States, 386 U. S. 345 (1967), in his Sixth Amendment claims. That case is quite distinguishable, however, in that, unlike the instant case, the eavesdropping was not disclosed until after the defendant's conviction. It was this fact which required reversal, since the undisclosed intrustion on the attorney-client relationship deprived defendant of his right to an adversary proceeding.

Defendant argues that, even though we hold that the above violations were sufficiently divorced from the evidence presented at trial to free them of taint, we should reverse in the exercise of our supervisory power "because the indictment was procured by use of inflammatory and grossly illegal evidence." The argument is based on the allegation that so many violations occurred in the investigation that the only remedy is reversal. Such is not the law.

The decisions of the Supreme Court have consistently held that the remedy for illegally obtained evidence is suppression of such evidence and all leads derived therefrom. ⁵ This remedy was fully accorded to defendant by the district court, and we find no authority for the proposition that the defendant is further entitled to reversal, after the illegally obtained evidence was suppressed and the jury returned a verdict of conviction upon the other evidence which had been properly admitted.

[Net Worth Evidence]

II. The next general contention by defendant is that the evidence used to prove the net worth theory of tax evasion was legally insufficient, and therefore that his motions for acquittal at the close of the Government's case and at the close of all the evidence should have been granted. Defendant cites Holland v. United States, 348 U. S. (1954), as the leading case on the "net worth method." That case held that this method of proving income tax deficiency "is so fraught with danger for the innocent, that the courts must closely scrutinize its use." 348 U. S. at 125. The Court went on to say:

"While we cannot say that these pitfalls inherent in the net worth method foreclose its use, they do require the exercise of great care and restraint. The complexity of the problem is such that it cannot be met merely by the application of general rules. Cf. Universal Camera Corp. v. Labor Board, 340 U. S. 474, 489. Trial courts should approach these cases in the full realization that the taxpayer may be ensnared in a system which, though difficult for the prosecution to utilize, is equally hard for the defendant to refute. Charges should be especially clear, including, in addition to the formal instructions, a summary of the nature of the net worth method, the assumptions on which it rests, and the inferences available both for and against the accused. Appellate courts should review the cases, bearing constantly in mind the difficulties that arise when circumstantial evidence as to guilt is the chief weapon of a method that is itself only an approximation." 348 U. S. at 129. Cf. United States v. Tolbert, 367 F. 2d 778 (7th Cir. 1966).

With these words of the Supreme Court fully in mind, we nevertheless find no error below which would justify reversal. In dealing with this general contention, we find that careful scrutiny leads us to the conclusion that the Government established a prima facie case against defendant, and that defendant's five-pronged attack on the Government's case is without merit.

[Defense Position]

(1) Defendant first contends that the Government failed to show a solid net worth starting point. However, the starting point in defendant's net worth, as used by the Government and placed before the jury for its decision, was based upon a net worth statement which was signed by defendant and his wife and submitted to the Wisconsin Department of Taxation in 1954. This statement included cash on hand as of December 31, 1953 , in the amount of $1,000. The propriety of including this figure in the net worth starting point was upheld by this Court in United States v. Mackey [65-1 USTC ¶9328], 345 F. 2d 499, 506 (7th Cir. 1965), cert. den. 382 U. S. 824, where the Government's case did not have the advantage of a signed statement concerning the defendant's cash on hand.

Added to the amount claimed by the statement were certain visible assets belonging to defendant which had been disclosed by the Government's investigation, and which were not included in the statement. ⁶ After arriving at a net worth of $73,780.62 as of December 31, 1953, the Government traced defendant's net worth at the end of each year, through the prosecution years of 1959 and 1960, proving that defendant's reported income could not account for any increases in cash on hand significantly larger than the $1,000 for which he was given credit. Certain accrued liabilities were properly eliminated in the Government's computations since defendant reported income on the cash basis. Thus, as the Government points out in its brief (at p. 33), "the gap between the starting point and the beginning of the first prosecution year, 1959, was bridged by carefully reconstructing appellant's net worth as of the end of each intervening year, adding non-deductible expenditures, and demonstrating that no additional cash on hand could have been accumulated from income reported in the intervening years."

(2) Defendant further argues that the Government failed to account for borrowings in arriving at its net worth figures. After carefully scrutinizing the record, however, we find that the loans were taken into account as liabilities and that defendant was given proper credit for them.

(3) Defendant also attacks the propriety of including in his net worth as of December 31, 1959 , $10,000 of cash on hand which had been deposited in the Marshall and Ilsley Bank in the name of Joseph Balistrieri or Frank Balistrieri, the defendant, on January 25, 1960 . Joseph is defendant's son, who was a 19-year-old minor and was claimed as a dependent by defendant, at the time the joint account was opened. The jury had ample grounds to believe that this money was in fact the defendant's since the Government proved that defendant controlled the account and withdrew a substantial amount from it on March 23, 1961 . We therefore find that the evidence was sufficient to support such a conclusion.

(4) As a final attack on the denial of the motion for acquittal at the close of the Government's evidence, defendant contends that the prosecution failed to prove that the increases in net worth arose from taxable sources. However, the Government fulfilled its burden under the net worth method by: (a) giving defendant credit for all loans and for the proceeds of a life insurance policy received in 1958; (b) proving that the increases did not arise from gifts or inheritance; and proving three "likely" sources of taxable income--Hotel Roosevelt, Inc., Ben-Kay, Inc., ⁷ and Midwest Scrap Metal Company. In Holland v. United States [54-2 USTC ¶9714], 348 U. S. 121, 138 (1954), the Court held that "[i]ncreases in net worth, standing alone, cannot be assumed to be attributable to current taxable income. But proof of a likely source, from which the jury could reasonably find that the net worth increases sprang, is sufficient." Cf. United States v. Mackey [65-1 USTC ¶9328], 345 F. 2d 499, 507 (7th Cir. 1965). The record, therefore, clearly indicates that the evidence presented to the jury was sufficient to support its verdict.

(5) Defendant contends that the evidence produced by the defense conclusively rebutted the Government's case and required the granting of the motion for acquittal at the close of all the evidence. However, defendant's evidence consisted of testimony which the jury was justified in disbelieving as the result of their view of the demeanor of the witnesses and the cross-examination. Surely we can neither place ourselves in the unique position of the jury nor can we hold that they were compelled to believe the testimony of the defense witnesses they viewed, especially when much of the testimony conflicted with the evidence properly introduced by the Government.

For the foregoing reasons, we hold that both motions for acquittal were properly denied.

[Improper Cross-Examination]

III. Defendant contends that the trial court's denial of his motion for mistrial based upon the prosecutor's improper cross-examination of defense witness Klein constitutes reversible error. The Government agrees that the two questions complained of constituted improper cross-examination, but contends that it was not prejudicial. Our review of the facts present in the instant case leads us to the same conclusion, that the error here was not prejudicial and does not call for reversal. First, the objections made by defense counsel were sustained and the jury was explicitly instructed to disregard the questions.

Moreover, the fact that witness Klein's testimony concerned only one of the indictment years and involved only a relatively small amount further demonstrates the lack of prejudicial effect of the improper cross-examination. It does not follow, as contended by the defendant, that improper impeachment of the first defense witness destroys the testimony of later witnesses called by the defense. To so hold, in view of the trial court's sustaining defendant's objections and the immediate instruction to disregard the improper questions, would involve an unwarranted assumption denying to the jury any degree of intelligence or discretion. Consequently, we do not view the denial of the motions for mistrial as erroneous.

[Improper Summation]

IV. Defendant contends that the trial court committed error in overruling his objection and denying his motion for mistrial, based on the prosecutor's statement, in his summation to the jury, that there were possible sources of income other than Midwest Scrap Metal Company, and his naming a number of such possible sources with which defendant was connected. Defendant seems to ignore the fact that this statement by the prosecutor was made in reply to defense counsel's statement in his summation that Midwest was the only proven source and that that source was not nearly large enough to account for the unreported income shown by the Government's proof. Moreover, in a net worth case the Government need not prove a specific source of income to account for the increases in net worth, but need only show some "likely" source. Holland v. United States [54-2 USTC ¶9714], 348 U. S. 121, 138 (1954); Armstrong v. United States [64-1 USTC ¶9216], 327 F. 2d 189, 194 (9th Cir. 1964); United States v. Mackey [65-1 USTC ¶9328], 345 F. 2d 499, 506-507 (7th Cir. 1965). Defendant's connection with the companies mentioned having been shown, the prosecution was allowed to argue the possibility of these companies as a possible source of income.

[Jury Instructions]

V. Defendant further contends that the trial court committed error when it sent the jury back for further deliberations after the jury expressed some confusion regarding the instructions. We hold that no error was committed. When the jurors failed to make clear their problem, the trial judge advised them that if they had a problem they could submit it to the court in writing. Neither counsel objected, and defense counsel initiated the suggestion regarding the written inquiry. The jury then retired and later returned a verdict of guilty. To hold that these events compel reversal in this case would be entertaining the vaguest of speculations as to what was in the minds of the jurors. Rather than engage in such speculation himself, the judge refused to put words into the jurors' mouths and instead, upon suggestion of defense counsel, asked them to submit any problems they had in writing. Such conduct was correct and does not constitute error.

[Accountant-Client Privilege]

VI. Defendant's last contention posits a violation of the attorney-client and accountant-client privilege in the trial court's allowing defendant's accountant to testify for the Government over defendant's objection. This contention is without merit for three reasons: (a) the accountant was not an attorney at law and thus no attorney-client privilege is involved; (b) the Illinois statute creating an accountant-client privilege--Chap. 1101/2, §51, Ill. Rev. Stat.--may be invoked only by the accountant, not the client. Dorfman v. Rombs [63-2 USTC ¶9629], 218 F. Supp. 905, 907 (N. D. Ill. 1963); and (c) in a federal criminal tax prosecution, federal law applies, Colton v. United States [62-2 USTC ¶9658], 306 F. 2d 633, 636 (2d Cir. 1962), cert. den. 347 U. S. 960, and there is no accountant-client privilege in the federal system. Petition of Borden Co., 75 F. Supp. 857, 859-860 (N. D. Ill. 1948); United States v. Culver, 224 F. Supp. 419, 434 (D. Md. 1963) and cases cited. Palmer v. Fisher, 228 F. 2d 603 (7th Cir. 1955), cited by defendant, was a diversity case in which the Government was not a party, and is therefore inapplicable.

For the foregoing reasons, the judgment of conviction is affirmed.

AFFIRMED.

¹ The search warrant obtained by the Internal Revenue Service was quashed in an action brought by Miss Alioto and the owners of the materials seized in the search. Alioto, et al. v. United States [63-2 USTC ¶9552], 216 F. Supp. 48 (E. D. Wis. 1963). It also appears that the F. B. I., subsequent to the above search, unlawfully searched Miss Alioto's apartment and photographed certain documents belonging to defendant which were kept therein.

² A "mail cover" is conducted by furnishing the Government with the information appearing on the face of the envelope addressed to the particular address: i.e., addressee, postmark, name and address of sender (if it appears), and class of mail. The actual mail is delivered to the addressee and only the letter-carrier's notation reaches the Government agency which requests the mail cover.

³ See United States v. Wade, 388 U. S. 218, 240 (1967); Murphy v. Waterfront Commission, 378 U. S. 52, 79 (1964); United States v. Coplon, 185 F. 2d 629, 636 (2d Cir. 1950), cert. den. 342 U. S. 920.

⁴ The recent Omnibus Crime Control and Safe Streets Act of 1968, 18 U. S. C. §2518, which requires all recordings made pursuant to it to be kept for ten years, has no application to the instant case in which the investigation took place prior to its passage.

⁵ E.g., Hoffa v. United States , 387 U. S. 231 (1967); United States v. Wade, 388 U. S. 218 (1967); Gilbert v. California , 388 U. S. 263 (1967); Hoffa v. United States , 385 U. S. 293 (1966); Silverthorne Lumber Company v. United States , 251 U. S. 385 (1920).

⁶ The largest item in this category included the stock of Tower Tavern, Inc., amounting to $31,062.67, which defendant claimed was bought in large part through a loan from his mother.

⁷ There was evidence that defendant operated and served as president of these two companies.