Admissibility
4 Page1
7203:
Willful Failure to File Return, Supply Information, or Pay Tax:
Evidence: Admissibility
Part 4
[61-1 USTC ¶9221]
United States of America
, Plaintiff-Appellee v. Leonard M. Bernard, Charles E. Bernard and James
B. Jackson, Defendants-Appellants
(CA-7),
U. S. Court of Appeals, 7th Circuit, No. 12868, 287 F2d 715, 1/26/61,
Rev'g and aff'g an unreported District Court case
[1954 Code Sec. 7201]
Crimes: Income tax evasion: False and fraudulent returns: Automobile
dealer: Corporate officer: Failure to report "under-the-table"
payments: "Overwhelming persuasiveness" of evidence.--Evidence
lacked the "overwhelming persuasiveness" necessary for
conviction of the crime of wilfully attempting to evade and defeat a
part of the corporation income tax where it failed to show that the
defendant, a vice-president of the corporate taxpayer-automobile dealer,
had any knowledge of its books and records, or that he participated in
the preparation of the return or had any knowledge as to its filing or
contents. The crime charged arose out of the policy of selling a
substantial part of the corporation's new 1948 automobiles to used car
dealers for a cash bonus over and above the manufacturer's list. The
bonus was neither entered in the sales records nor reported in the
corporate income tax return for 1948 which, it was alleged, was
therefore false and fraudulent in that income was understated by about
$78,000. However, conviction of the president and treasurer was
affirmed, on the record.
[1954 Code Sec. 7201]
Crimes: Income tax evasion: Admissibility of evidence: Automobile
dealers' records: Testimony of "bird-dog": Admission against
all defendants: Theory of "vicarious responsibility".--No
error was committed in granting the government's motion that evidence
based on (1) the omission from the sales journal of
"under-the-table" payments, (2) records of used car dealers
which showed that each of 103 new cars had been sold to them directly or
indirectly through third parties commonly known as
"bird-dogs", and (3) testimony of the used car dealers and
these "bird-dogs", be admitted against all the defendants,
rather than limiting the evidence to a particular defendant. The
government's motion was properly grounded in the principle of
"vicarious responsibility of all joint venturers" in the
furtherance of a common plan or design.
[1954 Code Sec. 7201]
Crimes: Income tax evasion: Admissibility of evidence: Incomplete
records: Check stubs: Police records: Summaries of primary evidence.--No
error was committed in admitting (1) incomplete records of used car
dealers to contradict apparently complete records of the
taxpayer-corporation, there being no requirement that records made in
the regular course of business be correct in all respects, (2) the check
stubs of used car dealers regularly prepared in the business, (3)
"police books" regularly kept by used car dealers in
accordance with state law which required records identifying car
purchases, and (4) summaries of primary evidence prepared by a
government witness, full opportunity for cross-examination on the
summaries and method of preparation having been accorded the defendants.
[1954 Code Sec. 7201]
Crimes: Income tax evasion: Charge to the jury: Ownership of
"under-the-table" payments.--The trial court correctly
charged the jury that monies received by the officers and agents of a
corporation on the sale of property offered for sale by the corporation
were corporate income. Thus, there was no basis to the contention that
there was no proof that "under-the-table" payments received on
the sale of new cars to used car dealers were ever received by the
corporation.
[1954 Code Sec. 7201]
Crimes: Income tax evasion: Admissibility of grand jury minutes:
Impeachment of accomplice testimony.--Questions and answers read
from grand jury minutes were properly admitted where the trial judge
cautioned the jury that it was to consider them only insofar as they
tended to impeach defendants' witness, such instructions concerning
"accomplice testimony" being a correct statement of the law.
[1954 Code Sec. 7201]
Crimes: Income tax evasion: Production of records: Reports of
government agent.--Defendants were properly denied access to the
written reports made by an Internal Revenue Service agent concerning the
investigation of witnesses, even though the investigation was made
simultaneously with the investigation of defendants' affairs, where the
information obtained would have been used on cross-examination of the
agent. The Jenks Act (18
U. S.
C. §3500) requires the production only of such written statements and
reports as are related to the subject of a witness' direct testimony.
Robert Tieken, United
States Attorney, John Peter Lulinski, Charles R. Purcell, Jr., Mitchell
S. Rieger, Assistant United States Attorneys, Chicago, Ill., for
plaintiff-appellee. Maurice J. Walsh,
105 West Adams St.
,
Chicago
,
Ill.
, for defendant-appellant.
Before HASTINGS, Chief
Judge, and DUFFY, Circuit Judge, and MERCER, District Judge.
[False
and Fraudulent Corporate Income Tax Return]
MERCER, District Judge:
The defendants, Leonard M.
Bernard, Charles E. Bernard and James B. Jackson, were charged by
indictment with having wilfully attempted to evade and defeat a part of
the corporation income tax due and payable to the United States of
America for the taxable year 1948 by Bernard Bros., Inc., a corporation,
by the filing of a false and fraudulent income tax return on behalf of
that corporation. 1
The return was alleged to have been false and fraudulent, as defendants
well knew, in that the corporate income therein reported was understated
in the amount of approximately $78,000.00 and that the tax due to the
United States
was therein understated by approximately $30,000.00. After a trial
before a jury, a judgment of conviction was entered by the court upon
the jury's verdict finding all defendants guilty as charged in the
indictment. Defendants appeal from that judgment.
During 1948, Bernard Bros.,
Inc., was a franchised dealer in new DeSoto and
Plymouth
automobiles at
Evanston
,
Illinois
. Defendants, in the respective order in which they are above named,
were the president, vice-president and treasurer of that corporation.
For the taxable year 1948 an income tax return was filed on behalf of
the corporation reporting taxable income of $298,833.64, and a total tax
due of $113,556.78. That return was signed by defendants, Leonard M.
Bernard and James B. Jackson, in their respective capacities as
president and treasurer of the corporation.
[No
Guilty Knowledge]
The judgment must be
reversed as to the defendant, Charles E. Bernard. The government
concedes in its brief "that the evidence of Charles Bernard's guilt
lacks the overwhelming persuasiveness of the case against Leonard
Bernard and Jackson." We are convinced upon a review of the record
that the evidence against this defendant lacks overwhelming
persuasiveness to such extent that there is no evidence of his guilt of
the crime charged.
Viewed in the light most
favorable to the government, the evidence shows only that Charles
Bernard was the vice-president of the corporation in 1948 and that he
participated to some extent in the conduct of the corporate business in
that year. The evidence fails to show that he had any knowledge of the
books and records of the corporation, or that he participated in the
preparation of the corporate tax return for 1948 or had any knowledge as
to the filing or content of that return. His motion for acquittal made
at the close of the government's case should have been granted.
[Background
Facts]
The remaining defendants,
Leonard M. Bernard and James B. Jackson, who are hereinafter referred to
as defendants, except as the context otherwise requires, assert a number
of alleged procedural errors as a basis for reversal of the judgment. In
order that these alleged errors may be placed in focus, the following
summary of background facts and of the procedural chronology of the
trial is set forth in advance of discussion of the particular errors
alleged.
[Omission
of Bonus on
Sale
of New Cars to Used Car Dealers]
The theory of the
government's case was that defendants, as officers and agents of Bernard
Bros., adopted a policy of selling a substantial part of the
corporation's new 1948 automobiles to used car dealers for a cash bonus
over and above the manufacturer's list price; that, upon the sale of
such cars for a cash bonus, the list price only was entered in the
corporation's sales records; and that bonus payments received for such
cars were not included in the corporation's gross sales as reported in
the 1948 corporation tax return. To sustain its burden of proof upon
that theory, the government undertook to prove the receipt by defendants
and other agents of the corporation of cash bonus payments upon the sale
of 103 specific new cars sold in 1948, and the omission from the
corporation tax return of the specific items of income reflected in the
receipt of such bonus payments.
[Sales
Journal]
As the keystone of its
specific-omitted-item proof, the government introduced into evidence the
corporate records of Bernard Bros., and the key book of those records
was the sales journal, which contained entries reflecting a sales price
and a factory installed identification serial number for each new car
sold by the corporation in 1948.
The foundation for
introduction of the Bernard Bros. records was laid by the testimony of
Robert H. Sharp, an internal revenue agent. Sharp testified that he had
received the Bernard Bros. books, including the sales journal, from the
defendant Jackson, in 1950. In July, 1950, Sharp and a second agent made
a complete transcript of new car sales for the year 1948 as shown by the
entries in those books and records. From comparison of that transcript
with the Bernard Bros. sales journal, Sharp was able to testify that the
sales journal was the same book from which he had made the transcript of
new car sales in July, 1950. Sharp further testified that the net
taxable income figure of $298,833.64, reported on the Bernard Bros.
income tax return for 1948, was derived from the books which he had
examined, and that the closing journal entries of all profit and loss
accounts shown upon the corporation's books agreed, precisely, with
corresponding items reported on the return. He testified that he could
identify the books, including the Bernard Bros. sales journal, as
records kept by Bernard Bros., because they had been supplied to him at
his request by the defendant, Jackson, and had been identified to him as
the Bernard Bros. books by both Jackson and Leonard Bernard. Sharp also
testified that Leonard Bernard had stated to him in 1950 that all gross
income of Bernard Bros. for 1948 was reflected in the books supplied to
Sharp by
Jackson
and in the corporation tax return filed on behalf of the corporation for
1948.
[Used
Car Dealers' Records]
The testimony of Sharp and
the Bernard Bros. books constituted the first leg of the government's
specific-omitted-item proof. The second leg of proof was approached
through the testimony of witnesses and certain records of used car
dealers which tended to show that each of the 103 new cars had actually
been sold to a used car dealer, either directly or indirectly, and that
defendants and agents of Bernard Bros. had received a greater price for
each of those cars than that shown by the corporation's books.
[Direct
Sales]
The 103 sales fell into two
categories, direct and indirect. Adley Lorbeer, Anthony Volante and
officers of Stoltz Motors, Inc., which is hereinafter referred to as
Stoltz, testified with respect to a number of transactions in the first
category. For example, Volante testified that he had purchased new
Plymouths from Bernard Bros. in 1948 and that he had dealt with the
sales manager George Smith in these transactions. He identified 7
invoices which he had obtained from Bernard Bros. with the delivery of
new Plymouths purchased in 1948 from that corporation. Each of those
documents identified, by factory serial number, one of the new
automobiles shown by the Bernard Bros. sales journal as having been sold
in 1948. He further testified that he had paid exactly $400.00 more than
the invoice price for each of the automobiles purchased.
The other direct sale
testimony was similar, consisting of the testimony of witnesses and the
identification of invoices, checks or business records tending to show
the purchase in 1948 by a used car dealer witness of specific new
automobiles which could be identified with entries in the Bernard Bros.
sales journal. In some instances the government sought to prove the
bonus price paid for specific cars by oral testimony. In others, the
evidence of amount of bonus payments was reflected upon the car dealer's
records.
[Sales
Through "Bird-Dogs"]
The second category of
transactions, indirect sales, encompassed a majority of the specific
transactions to which the government's evidence related. In indirect
transactions, new cars were channeled to used car dealers through third
parties who were commonly known to the trade as "bird-dogs."
"Bird-dogs",
Edward Gallagher, Lawrence Fisher, Anthony Antonucci, Raymond Stoltz and
Joseph D. Kaziny, were key government witnesses relative to indirect
sales.
The testimony of Gallagher
is representative of the "bird-dog" evidence adduced by the
government. Gallagher testified that he had purchased a number of new
cars in 1948 from agents of Bernard Bros. for Nichols Motor Sales, a
used car dealer, which is hereinafter referred to as Nichols. He could
not recall the dates and auto serial numbers involved in any
transaction, but stated that, in each instance, he paid cash for the car
purchased and received a Bernard Bros. invoice for each car purchased.
He further testified that the car and invoice were delivered by him to
Nichols.
Gordon Nichols and other
Nichols' employees were then called by the government to lay the
foundation for the introduction of records kept by Nichols relative to
the purchase of cars in 1948. Those records, and the testimony relative
thereto, tended to prove that Nichols had purchased 35 new cars from
Gallagher in 1948 which were shown by the sales journal of Bernard Bros.
as having been sold by that corporation.
The evidence of other
"bird-dog" transactions followed the same sequence--the
testimony of the "bird-dog", followed by introduction of the
records of the used car dealer for whom he had purchased new cars.
["Bird-Dogs"
Testimony]
Although the testimony as
to each particular transaction differed, the transactions as to which
evidence was adduced were all similar in nature. The witnesses, whether
"bird-dogs", used car dealer or used car dealer employee,
testified as to a sequence of events substantially as follows: Each
witness approached one of the defendants, Charles Bernard or Mr. Smith
to arrange for the purchase of a new car or cars; the person with whom
he dealt would, in each instance, require that the car be paid for in
cash for a price above the manufacturer's list price thereof and that
the purchaser supply to Bernard Bros. the name of some person, either
real or fictitious, to whom the car would be invoiced and in whose name
an application for a certificate of title would be executed; an invoice
was delivered with each car which showed only the manufacturer's list
price as the sales price thereof; and that the car, and the invoice
bearing the name supplied by the purchaser, would then be delivered to
the purchaser for the agreed cash consideration. Each such car was then
offered for sale by the ultimate dealer-purchaser as a
"like-new" used car, i.e., a car showing less than 100
miles of use.
The amount of the bonus
which the witnesses testified they had paid to the corporation through
one of defendants, Mr. Smith or Adelaide Locke Adsit, Bernard Bros.
cashier and bookkeeper, varied with the different transactions. The
government's evidence with respect to the 103 identified new cars tended
to prove that cash "bonuses" therefor aggregating a minimum
amount of $34,108.06 had been paid in 1948 to agents of Bernard Bros.
Agent Sharp testified that his inspection of the Bernard Bros. books
revealed that all cash bonuses were systematically excluded from the
recorded sale price of each car.
[Summary
Containing Computation of Bonuses Received]
The government's case was
concluded by the testimony of William Ruggaber, an employee of the
Bureau of Internal Revenue. Ruggaber was present in court and heard the
testimony of the various "bird-dog" and used-car dealer
witnesses. From that testimony and the exhibits in evidence Ruggaber
prepared a summary containing his computation of the amount of the cash
bonus received by officers and employees of Bernard Bros. upon each of
the 103 transactions. Over defendants' objection, a copy of that summary
was given to each juror as Ruggaber testified as an expert witness to
his evaluation of the primary evidence and the mechanics of his
preparation of the summary. After the witness had testified, the summary
prepared by him was admitted in evidence as an exhibit and given to the
jury, over defendants' further objection, for use in their
deliberations.
The major contentions now
asserted against the judgment arise out of the summarized procedural
aspects of the trial.
[Admission
of Specific Testimony Against All Defendants]
A major contention urged by
defendants for reversal of the judgment is premised upon the asserted
error of a ruling related to the admissibility and use of evidence. As
the various "bird-dog" and used-car dealer witnesses testified
to transactions and conversations with one, or more, of defendants,
Charles Bernard or Mrs. Adsit, admission of the testimony was limited to
the particular person to whom it pertained. Near the close of its case,
the government moved that such testimony be admitted against all of the
parties named in the indictment upon the theory that the evidence tended
to prove a common scheme or design between defendants, Charles Bernard
and employees of Bernard Bros. to sell new cars for bonus prices, in the
furtherance of which each party had acted as agent for each of the other
parties. Over defendants' objection, the government's motion was
allowed, and all of the evidence, with certain specific exceptions
noted, was admitted as competent evidence against each of the defendants
named in the indictment.
[Theory
of Vicarious Responsibility]
Defendants now assert that
the trial court, by so ruling, permitted them to be convicted of
conspiracy, a crime not charged in the indictment. That premise
overlooks and misconstrues the theory upon which the government's motion
was made and allowed by the court. In moving that evidence admitted as
against the individual defendants be admitted as against all defendants,
the government relied upon the principle of vicarious responsibility of
all joint venturers for all acts done and statements made in furtherance
of the object of the joint scheme or undertaking. As a preface to its
ruling allowing the government's motion, the court said, in pertinent
part:
"But the broad terms
of the indictment would imply that there was a common design or a common
plan to defraud the government, with only one exception.
"There was very
extensive cross-examination by counsel for the defendants. They examined
into each and every area. The one exception was Mr. Walsh, as to one of
defendants in this case.
"Under the
circumstances, I feel that the motion of the Government at this time
could not be construed to be taking the defendants by surprise, so that
they did not have an adequate opportunity to cross-examine as to the
various issues in the case; and I therefore hold that the testimony and
the exhibits in each and every case, with the exception of those
outlined will apply to all defendants in the case; and the motion of the
Government is allowed."
In its charge to the jury
on this phase of the case, the court said, in pertinent part:
"When men enter into
an agreement for an unlawful end, they become agents for one another.
What one does pursuant to the common purpose, all do, and declarations,
statements or conversations by one in furtherance of the common design
and during its continuance are competent against all.
"During the course of
the trial, various testimony and exhibits were received in evidence only
as to certain defendants, and you were instructed that such evidence was
not then to be considered against any defendant to whom the evidence did
not pertain. Later, near the close of the government's case you were
instructed that such evidence, with certain exceptions, had been
admitted as to all defendants and that you might consider such evidence
as pertaining to all defendants.
"If you now find
beyond a reasonable doubt from all the evidence in this case that there
was a common plan or design to engage in a general course of corporate
business transactions of the type shown by the evidence, you may
consider all the acts [of each of the individual defendants as evidence
pertaining to all.]
"On the other hand, if
you find from all the evidence that such a common plan or design was not
shown beyond a reasonable doubt then you will consider the acts and
declarations of each defendant only as to him and not to any other
defendant."
[Existence
of Common Plan or Design Properly Submitted]
From our review of the
record, it is apparent that we are dealing in this phase of the case
with a question of the admissibility of evidence only, not one of any
amendment of the substantive charge of the indictment. The evidence
complained of was admitted by the court and submitted to the jury upon a
theory of the vicarious responsibility of all joint venturers for all
acts done and declarations made by each in furtherance of the joint
undertaking. The question whether a common plan or design was proved
beyond a reasonable doubt was properly submitted to the jury.
Authority for the ruling is
found in Reistroffer v. United States, 8 Cir., 258 F. 2d 379,
386-388; United States v. Pugliese, 2 Cir., 153 F. 2d 497, 500; United
States v. Olweiss, 2 Cir., 138 F. 2d 798, 799-800, cert. denied 321
U. S. 744. To the same effect is American Fur Co. v. United States,
2 Pet. (27
U. S.
) 358, 364-365. We find no analogy between the ruling in this case and
the case of Stirone v. United States, 361
U. S.
212, upon which defendants' principal reliance is placed. There the
indictment charged that Stirone had interfered with the movement of
certain sand in interstate commerce by an act of extortion. When the
government's evidence tended to prove that the statute of limitations
barred prosecution for interference with the movement of sand, the court
allowed the introduction of evidence tending to prove interference with
the interstate movement of steel manufactured by a steel mill
constructed from the sand alleged in the indictment. In reversing the
judgment of conviction, the Supreme Court held that the latter evidence
related only to substantive acts not charged in the indictment, and that
the admission of such evidence had the effect of permitting the
government to amend the indictment against Stirone by the use of
evidence.
We hold that the court's
ruling admitting the evidence against all defendants was proper.
[Apparently
Correct Records Contradicted by Incomplete Records]
Error is assigned upon the
admission by the court of numerous documents and books from the records
of the used-car dealer witnesses. The exact contention of defendants
upon this phase of the case, as embodied in their brief, defies
precision of statement. Their apparent contention is that it was in some
manner unjust and prejudicial to permit the Bernard Bros. books which
were compact and well arranged to be contradicted by used-car dealer
records and documents which were in some instances incomplete and, in
part, inaccurate.
From time to time as the
trial progressed, the purchase journal of Nichols, the "police
books" of Park Motor Sales, Atlas Motors and Stoltz, stock cards of
Park, envelopes kept by Atlas for each car purchased, invoices
identified as having been issued by Bernard Bros., and cancelled checks
and check stubs of several used-car dealer witnesses were admitted as
exhibits. We do not deem it necessary to set forth in detail the
description or trial history of each document. We have examined the
foundation laid for the introduction of the documents in each instance,
and we conclude that all were properly admissible as records made in the
regular course of a business, 28 U. S. C. §1732(a); Palmer v.
Hoffman, 318 U. S. 109, 112-114; United States v. Wicoff, 7
Cir., 187 F. 2d 886, 889, or as documents corroborating the oral
testimony of witnesses.
["Correct
in All Respects"]
Defendants' argument, that
some of these business record exhibits were demonstrated to be
inaccurate in certain respects goes to the weight or credibility of the
documents, not to any question of admissibility. As we observed in United
States v. Wicoff, 7 Cir., 187 F. 2d at 889 "Title 28 U. S. C.
A. §1732 provides for the admissibility of books and records made in
the regular course of business, but does not require that they be
correct in all respects." Accordingly, we will devote further
discussion of this phase of the case to only two of several specific
contentions.
[Check
Stubs of Used Car Dealers]
The court admitted the
check stub records of Nichols. Gordon Nichols identified the stubs of
checks written in the course of various transactions for the purchase of
specific cars in 1948. These stubs, variously, showed that the checks
were payable to cash or to one of the proprietors of Nichols. In
addition, each stub upon which the government's case depends bore the
written notation, "Gallagher". Mr. Nichols testified that the
name of the "bird-dog" was regularly noted upon the stub of
each check written for the purchase of an automobile from a
"bird-dog"--that the notation, "Gallagher", upon
each of the stubs introduced in evidence denoted that the check had been
issued for the purchase of a car from Gallagher.
We hold that the check
stubs and explanatory testimony were properly admitted in evidence, upon
the foundation testimony that the stubs were regularly prepared in the
conduct of Nichols' business. The circumstance of the placement of the
notation, "Gallagher", upon particular stubs, and the
necessity for explanatory testimony, affect the weight and credibility
of the evidence, not the admissibility. Bodnar v. United States
[57-2 USTC ¶9971], 6 Cir., 248 F. 2d 481, 482-483.
["Police
Books"]
We conclude that
defendants' contention against the admissibility of the "police
books" of Atlas and Stoltz also lacks merit. Each of those books
was kept pursuant to the provisions of an Illinois statute, (now I. R.
S. 1959, c. 951/2, Sec. 5-401), which required all car dealers to keep
records containing sufficient information as to the identity of cars
purchased and sold to aid law enforcement officials in the enforcement
of the motor vehicle theft laws. Both Atlas and Stoltz entered upon
their "police books" the price for which each automobile had
been purchased, in addition to the information, which the statute
required. The foundation testimony disclosed that the amount of the
purchase price of each car was customarily recorded in the "police
book" as a regular record entry. It is wholly frivolous to contend,
as defendants do, that the character of such books as a record made in
the regular course of a business is destroyed merely because more
information was recorded therein than the State statute required.
The distinction between Hartzog
v. United States [55-1 USTC ¶9128], 4 Cir., 217 F. 2d 706, and Bruce
v. McClure, 5 Cir., 220 F. 2d 330, upon which defendants principally
rely in their argument against the admissibility of these records, is
readily apparent upon reading the reported opinions in those cases.
[Admissibility
of Summary]
We have examined the
circumstances of the trial court's admission in evidence of the summary
prepared by Ruggaber, and we hold that the admission of that summary was
not error. The use of charts and summaries of voluminous records and
testimony, as secondary evidence, has been approved in United States
v. Johnson [43-1 USTC ¶9470], 319 U. S. 503; Somberg v. United
States, 7 Cir., 71 F. 2d 637; Smith v. United States [57-1
USTC ¶9242], 6 Cir., 239 F. 2d 168, cert. denied 353 U. S. 983; Corbett
v. United States [56-2 USTC ¶10,055], 9 Cir., 238 F. 2d 557, cert.
denied 352 U. S. 990; Blackwell v. United States [57-1 USTC ¶9644],
8 Cir., 244 F. 2d 423, cert. denied 355 U. S. 838, among other cases. In
Lloyd v. United States [55-2 USTC ¶9665], 5 Cir., 226 F. 2d 9,
one of the cases upon which defendants principally rely, the court
stated that admission of charts made by government agents summarizing
the basic evidentiary facts is discretionary with the trial court and
that the court's exercise of discretion in that regard can be reviewed
only upon a clear showing of abuse and resulting prejudice to the
accused person. Although the court there expressly disapproved the
inclusion of certain conclusionary statements in summaries admitted in
evidence, the reversal of the judgment was on other grounds. The court,
expressly, did not decide whether the use of the charts was prejudicial
error.
[Admissible
as Summaries of Primary Evidence]
The Ruggaber summaries were
admitted by the court as summaries of the primary evidence, only, and
not as primary evidence within themselves. Examination of the record
discloses that defendants were afforded full opportunity to
cross-examine Ruggaber with respect to the summaries and his method of
making the same. With respect to the testimony of Ruggaber, the court
instructed the jury that his testimony was entitled to weight as
evidence only to such extent as the jury should find that the primary
testimony of other witnesses and the exhibits upon which his expert
testimony was based was entitled to weight and credibility. With respect
to the Ruggaber summaries, the court stated in its charge to the jury:
"Such exhibit has no
independent value. If you choose to disregard as evidence all or a part
of the testimony of any witness in this cause or do not accept the
correctness of any document admitted into evidence, then you must
likewise disregard so much of the summary as is based upon the testimony
of such witnesses and such documents you decide so to disregard."
Those
instructions meet all of the requirements for the use of such evidence
as set forth in the cases above cited.
[Proof that "Under-the-Table" Payments Received by
Corporation]
Equally wanting in merit is
the defendants' contention that the evidence was insufficient to sustain
their conviction. Defendants' argument is premised principally upon the
contention that the evidence tended to show only that
"under-the-table" payments were received by various
individuals, including defendants, but that there is a lack of proof
that such "under-the-table" payments were ever received by the
corporation. The court correctly charged the jury that monies received
by officers and agents of a corporation in the sale of property offered
for sale by the corporation is corporate income. Burger v. United
States [59-1 USTC ¶9217], 8 Cir., 262 F. 2d 946, 955-956. It is
immaterial that all or a part of that money may have been embezzled from
the corporation by the person who received it as defendants suggest.
Assuming, arguendo, that the contention is a fact, the money received
was none the less corporate income. Burger v. United States, supra.
The cases of Rutkin v. United States [52-1 USTC ¶9260], 343
U. S.
130, Briggs v. United States [54-2 USTC ¶9551], 4 Cir., 214 F.
2d 699, and Davis v. United States [55-2 USTC ¶9685], 6 Cir.,
226 F. 2d 331, upon which defendants rely are inapposite. Each dealt
only with the question whether funds embezzled from a corporation, or
received by an individual through extortion, constituted taxable income
to the individual.
Upon the evidence the jury
could find that defendants systematically omitted cash bonus payments
from the Bernard Bros. books and from the 1948 corporation tax return in
a wilful attempt to evade a substantial part of the income tax due for
that year.
[Charge
to Jury]
Defendants contend that the
court erred in its charge to the jury and in its refusal to give certain
instructions tendered by the defendants. We have examined the court's
charge to the jury as a whole, and we conclude that the jury was
correctly instructed. The charge, as a whole, is both complete and fair
to the defendants.
That conclusion might well
dispose of the whole of defendants' many contentions against the charge
given, but we deem it advisable to mention briefly several specific
points raised.
[Grand
Jury Minutes]
During the trial of the
case the court permitted the use of grand jury minutes in questioning
the witness, Edward Gallagher. In its charge, the court cautioned the
jury that it might consider those questions and answers read from the
grand jury minutes only in so far as they tended to impeach Gallagher.
That statement was part of the charge to the jury relating to the
impeachment of witnesses. A cautionary instruction was necessary in view
of the use of the grand jury minutes and the charge given correctly
stated the law.
The charge with respect to
accomplice testimony was a correct statement of the law, United
States v. Echeles, 7 Cir., 222 F. 2d 144, cert. denied 350 U. S.
828; Delvalley v. United States, 7 Cir., 88 F. 2d 579, and was
necessary to present the testimony of George Smith to the jury in proper
perspective.
The charge given with
relation to the fact that defendants did not testify was in compliance
with the principles stated in Bruno v. United States, 308 U. S.
287, and was essentially identical to the instruction which we approved
in United States v. Fleenor, 7 Cir., 162 F. 2d 935.
The charge given with
respect to the weight to be given to character witness testimony is
essentially identical to the charge which we approved in United
States v. Echeles, 7 Cir., 222 F. 2d 144, cert. denied 350 U. S.
828. We distinguish United States v. Semeniuk, 7 Cir., 193 F. 2d
508, upon authority of the Echeles case.
In summary, upon
consideration of the court's charge to the jury as a whole, we find that
the jury was correctly instructed as to the elements of the offense
charged, as to the rules for the jury's consideration of, and weight to
be given to, the evidence, as to the respective functions of jury and
trial judge, as to the use of the evidence against the various
defendants and as to the proper respective positions of the government
and the defendants with relationship to the burden of proof and the
presumption of innocence. We find the court's charge to have been
eminently fair to the defendants and complete in every necessary
respect. We therefore reject all contentions of defendants with relation
to the propriety of the court's charge, and the rulings upon tendered
instructions.
[Access
to Agent's Reports]
Finally, defendants contend
that written reports made by agent Sharp to the government reveal that
the affairs of the witnesses, Smith, Kaziny and Gallagher, were under
investigation by the Bureau of Internal Revenue simultaneously with the
investigation of the affairs of Bernard Bros. By their supplemental
brief, defendants contend that the court's ruling denying them access to
such reports prevented them, on cross-examination of Sharp, from
exposing and developing any promise of leniency, or other relationship,
between Sharp and the government, on the one hand, and Smith, Kaziny and
Gallagher, on the other. 2
In United States v.
Killian, 7 Cir., 275 F. 2d 561, Pet. cert. pend'g, we held that the
Jencks Act, 18
U. S.
C. §3500, requires the production only of such written statements and
reports as are related to the subject of a witness' direct testimony.
The fact and the timing of any investigation of Smith, Kaziny and
Gallagher have no relevant relationship whatsoever to Sharp's direct
testimony. The demand for production of the statements in question was
properly denied.
This is not a case
comparable to United States v. Sheer, 7 Cir., 278 F. 2d 65, or United
States v. Berry, 7 Cir., 277 F. 2d 826, in which there was a failure
to produce for the court's examination statements and reports made by
government witnesses which related to the subject matter of the issues
of the trial.
We have carefully
considered the many other contentions, and subcontentions, of
defendants' shot-gun approach to their attack upon the judgment of
conviction. We have concluded that all are without merit, and that
further specification or discussion thereof would only lengthen an
already overlong opinion.
The judgment is reversed as
to Charles E. Bernard. The judgment as to the defendants, Leonard M.
Bernard and James B. Jackson is affirmed.
