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.
1
The indictment also named the former cashier and bookkeeper of Bernard
Bros., Adelaide Locke Adsit, as a defendant. The court directed her
acquittal at the close of the government's case.
2
After Sharp had testified on direct examination, defendants invoked the
Jencks Act, 18 U. S. C. §3500, and demanded that all written statements
and reports made by Sharp and related to his Bernard Bros. investigation
be produced for their inspection and use. The trial judge ordered that
all such statements and reports be produced by the government for
inspection by the court in camera. See United States v.
Killian, 7 Cir., 275 F. 2d 561, Pet. cert. pend'g. After his in
camera inspection of the reports, the trial judge ordered that
certain reports, and parts of other reports, be delivered to defendants.
The court then ordered that all other statements and reports to which
defendants had been denied access be sealed in order that they might be
available for any appeal.
Through oversight, one of
two envelopes containing such reports was not sealed when the record was
transmitted to this court. Defendants' examination of the contents of
that unsealed envelope forms the basis for their Jencks Act argument.
[55-2
USTC ¶9665]E. C. Lloyd, Appellant v.
United States of America
, Appellee
(CA-5),
In the United States Court of Appeals for the Fifth Circuit, No. 15207,
226 F2d 9,
September 30, 19
55
Appeals from the United States District Court for the Northern District
of Alabama.
[1939 Code Sec. 145(b)--similar to 1954 Code Sec. 7201]
Criminal tax evasion: Admissibility of evidence.--Taxpayer was
convicted of wilful attempts to evade and defeat his Federal income tax
for the years 1945, 1946, 1947. The following assignments of error were
overruled on appeal: (1) that there was not sufficient evidence to
support the jury's findings of wilfulness essential to the statutory
offense, (2) that the court erred in refusing to grant taxpayer's motion
to suppress, as illegally obtained evidence, his 1946 cash receipts book
and photostatic copies thereof, (3) that the court abused its discretion
in sequestering taxpayer's accountant witness and not sequestering the
Government's accountant witness, (4) that the court erred in admitting,
over taxpayer's objections, testimony of revenue agents claimed to be
inadmissible as conclusions and hearsay, (5) that the court erred in
admitting, over taxpayer's objections, testimony and records concerning
the financial circumstances of taxpayer's wife and daughter.
[1939 Code Sec. 145(b)--similar to 1954 Code Sec. 7201]
Criminal tax evasion: Evidence: Offer to compromise on prior year's
tax.--The trial court admitted, over taxpayer's objection, evidence
with respect to taxpayer's offer to compromise his tax liability for the
years 1924 to 1932, inclusive. There was held to be no logical probative
value as to taxpayer's intent in commission of later acts in addition to
the general proof of his criminal tendencies. Admission of such evidence
was held to be highly prejudicial; the judgment was accordingly reversed
and the cause remanded for a new trial.
William S. Pritchard,
Winston B. McCall,
Birmingham
,
Ala.
, for appellant. Frank M. Johnson, Jr., United States
Attorney
,
Leon
J. Hopper, Assistant United States Attorney,
Birmingham
,
Ala.
, for appellee.
Before RIVES, TUTTLE and
CAMERON, Circuit Judges.
RIVES, Circuit Judge:
Appellant was convicted
upon a jury trial under three counts of two separate indictments 1
charging him with the offense of willfully attempting to evade and
defeat his federal income tax for the calendar years 1945, 1946 and
1947, by filing false and fraudulent returns in violation of Title 26 U.
S. C. A. Section 145(b). He was sentenced by the district court to 18
months imprisonment and to pay a $2,500.00 fine.
On a hearing of the
defendant's motion for a bill of particulars, the United States Attorney
represented to the court and to counsel for the defendant "that the
method employed in computing the corrected net income was the
specific-item adjustment method," and thereupon the court ordered
the Government "to furnish the defendant with information as to the
categories in which the specific item adjustments were made in said
computations." The Government then informed the defendant that the
items upon which adjustments were made were for 1945, receipts,
merchandise purchases, and delivery expenses, and for 1946 and 1947,
receipts and merchandise purchases.
The evidence tended to show
that, on his bakery books and in his returns for the years involved,
appellant overstated the expense of merchandise purchased by
approximately $17,350.00, principally by writing five $3,000.00 checks
on his bakery account, four of which were drawn on the Commercial
National Bank at Anniston, Alabama, and charged on his bakery books as
"flour purchases", and one of which, dated July 2, 1946, was
drawn on his adopted daughter's account at that bank and shown on the
bakery books as a sugar purchase, which checks were supported by no
invoices or other records to corroborate appellant's claim that they
actually represented payment for merchandise purchases as reflected upon
his bakery books, and which actual use for such purpose was somewhat
negatived by testimony of a revenue agent, Potter, revealing that on the
date each check was drawn a corresponding amount was deposited to the
credit of appellant's personal loan account at that same bank; that four
other counter checks aggregating $1,650.00 were also drawn by appellant
during 1945 and 1946 on the Anniston Cotton Oil Company, and were
represented on his bakery books as "miscellaneous merchandise
purchases", though the owner of that Company, J. A. Stewart,
testified that he gave appellant cash for these checks and that they
were not received in payment for any merchandise or services rendered by
his Company either to appellant or his bakery establishment; that for
the year 1945 the delivery expenses of appellant's bakery were
overstated by $1,300.00, proof of which overstatement was made by
testimony that three checks drawn by appellant, dated December 7, 1945,
one of which was made payable to the Alabama Motor Company and the other
two to C. J. Alford, were not issued or received in payment of any
delivery expenses, as indicated by the books of the bakery, but were
simply cashed by appellant, the witness C. J. Alford testifying that at
the time appellant "laughed casually" and said he was
"going to the Elks Club" to "play blackjack";
further, that appellant's bookkeeper, for about two months in 1945 and
ten months in 1946, admittedly erased and altered original entries on
the cash book of the bakery so as to reduce by $300.00 per week the
record of actual cash receipts from merchandise sales, which
alterations, according to appellant's testimony, were made so that he
could use the $300.00 weekly to make necessary purchases of bakery
products on the "black market" from OPA violators. In addition
to this direct testimony by his bookkeeper and appellant's admission as
to these false understatements of cash receipts on the bakery books,
there is much circumstantial evidence of unreported cash receipts from
cash deposited by appellant during the tax years involved in bank
accounts in the name of his wife and adopted daughter, from cash
invested in United States Savings Bonds, and from purportedly nontaxable
"loans" made to appellant's bakery by his wife during the
prosecution years. 2
Appellant in brief assigns
twenty specifications of error, each of which has been carefully
considered, but we think that only those hereinafter discussed require
separate treatment.
(1) Sufficiency of the
evidence. Appellant insists that language from the recent decision of
the Supreme Court in Holland v. United States, 348 U. S. 121,
125-129, 139 [54-2 USTC ¶9714], and from several decisions of this
Court, 3
require direction of a judgment of his acquittal for insufficiency of
the evidence to warrant the jury's finding of guilt beyond a reasonable
doubt, particularly as to the element of willfulness essential to
constitute this specific statutory offense; that the Government failed
to eliminate in its computations, as available sources of funds for
appellant's proven deposits, loans and purchases, amounts which had been
accumulated by appellant and his wife in nonprosecution years, and
failed directly to trace any unreported cash receipts into the bank
accounts of either appellant, his wife or daughter, or to show that
amounts entered upon his bakery books for merchandise purchases did not
truly reflect deductible cash expenditures actually used for such
purpose; finally, that the starting point for the revenue agents' net
worth computations, under Bryan v. United States, 5 Cir., 175
Fed. (2d) 223, 227 [49-1 USTC ¶9322], was not established with the
definiteness required to support a tax fraud conviction based upon
wholly circumstantial proof. See Pollock v.
United States
, 5th Cir., 202 Fed. (2d) 281, 284 [53-1 USTC ¶9229].
It is not this Court's
function to determine guilt or innocence. That judgment is exclusively
for the jury, subject however to the decision of the district court
reviewable by this Court as to whether the evidence is legally
sufficient to sustain conviction, a matter, of course, presenting a
question of law. Kotteakos v.
United States
, 328
U. S.
750, 763. In the performance of its function, the court has no right to
invade the province of the jury by determining questions of credibility
and weight of evidence. Goldman v. United States, 245 U. S. 474,
477; Stilson v. United States, 250 U. S. 583, 588; Glasser v.
United States, 315 U. S. 60, 80; Mortensen v. United States,
322 U. S. 369, 374. "The verdict of a jury must be sustained if
there is substantial evidence, taking the view most favorable to the
Government, to support it." Glasser v.
United States
, supra. In circumstantial evidence cases, this Court has said that
the test to be applied is whether the jury might reasonably find that
the evidence excludes every reasonable hypothesis except that of guilt. Vick
v.
United States
, 216 Fed. (2d) 228, 232, and cases there cited; see also United
States v. Levy, 7th Cir., 138 Fed. (2d) 429, 430, 431.
We think a fair reading of
this record impels the conclusion that a jury question as to appellant's
guilt was presented, certainly under the prosecution's "specific
item adjustments method" of proving unreported income by means of
substantial understatements of cash receipts and overstatements of
merchandise purchases and delivery expenses for the tax years involved.
See Spies v. United States, 317
U. S.
492, 500 [43-1 USTC ¶9243]; Bostwick v. United States, 5th Cir.,
218 Fed. (2d) 790, 794 [55-1 USTC ¶9170]. The specific willful intent
and bad motive required for conviction under this statute is, of course,
inherently unsusceptible of direct proof, but as in the Bostwick
case, supra, might here have been inferred by the jury from
appellant's conduct, if the jury believed from the testimony that he
knowingly permitted the making of false book entries and alterations to
conceal cash receipts, purposely inflated his operating expenses, and
thereby depreciated his net taxable income by means of fictitious flour
and sugar purchases, delivery expenses, etc. See
United States
v. Rosenblum, 7th Cir., 176 Fed. (2d) 321, 329-330 [49-1 USTC ¶9314].
True, appellant correctly contends that "the intent to avoid
detection of price ceiling violation is not the specific intent to evade
income taxes," but by the same token, "if the tax evasion
motive plays any part in such conduct the offense may be made out even
though the conduct may also serve other purposes such as concealment of
other crime." Spies v.
United States
, supra at p. 499. That the appellant might conceivably have been
found innocent had his explanations been believed by the jury is no
tenable ground for attacking the submission of such cogent, prima facie
proof. Cf.
United States
v. Fleischman, 339
U. S.
349, 360-361; Casey v.
United States
, 276
U. S.
413, 418.
Appellant's further
reliance upon such authorities as this Court's Bryan case, supra,
for the proposition that indefinite proof of initial net worth is
sufficient to invalidate all subsequent computations of the revenue
agents, is here misplaced, for essentially this is a "specific item
adjustment" rather than a net worth tax fraud prosecution, though
in support of its prima facie case based on that theory the Government
introduced its net worth and circumstantial proof in anticipation of the
defense that appellant had available assets at the inception of the
prosecution years sufficient to account for his proven expenditures over
and above reported income. The jury might plausibly have inferred that,
if appellant and his wife had had available in 1942 the approximately
$101,000.00 cash reserve it was shown they would have needed to explain
appellant's subsequent excess expenditures over reported cash receipts
and deposited funds, they would not have found it necessary to borrow
several thousand dollars from various banks and pay interest upon such
loans during this period. Cf. Barcott v.
United States
, 9th Cir., 169 Fed. (2d) 929 [48-2 USTC ¶9377]. In any event,
proof of guilt in such cases to a mathematical certainty is neither
possible nor required. While we think a jury case was made for each of
the three tax years, the sentence imposed would be justified if the
evidence supported the jury's finding that appellant willfully attempted
to evade a substantial part of his income tax during any one of the
three tax years involved. See
Holland
v.
United States
, supra; Schuermann v.
United States
, 8th Cir., 174 Fed. (2d) 397, 399 [49-1 USTC ¶9281]; United
States v. Schenck, 2nd Cir., 126 Fed. (2d) 702, 707 [42-1 USTC ¶9363];
Norwitt v. United States, 9th Cir., 195 Fed. (2d) 127, 135 [52-1
USTC ¶9252]; Pollock v. United States, 5th Cir., 202 Fed. (2d)
281, 284 [53-1 USTC ¶9229].
(2) The motion to suppress
evidence. The appellant moved to suppress as illegally obtained evidence
the 1946 Cash Receipts Book of Lloyd's Bakery and photostatic copies of
pages therefrom. 4
The examination and investigation of appellant's income tax returns for
the years 1942 to 1947, inclusive, was commenced by Agent Smith in May,
1947, as a "routine assignment--the usual examination without any
suspicion of fraud." By
March 9, 19
48
, fraud had been suspected, and Special Agent Potter from the
Intelligence Unit was assigned to work with Agent Smith. Potter resigned
in 1951 or 1952, and another Special Agent Moorman was assigned to
complete the work with Agent Smith during 1953 and 1954. In such cases,
where many of the facts are discovered on a routine investigation before
fraud is suspected, it is not to be expected that a taxpayer will be
formally warned at the beginning of an investigation, and informed of
his constitutional rights. In any event, as we have several times held,
such circumstances do not require the exclusion of the evidence, but may
go to its weight or credibility.
Montgomery
v.
United States
, 5th Cir., 203 Fed. (2d) 887, 893 [53-1 USTC ¶9336], and cases
there cited; Vloutis v. United States, 5th Cir., 219 Fed. (2d)
782, 787 [55-1 USTC ¶9262]; White v.
United States
, 5th Cir., 194 Fed. (2d) 215, 217 [52-1 USTC ¶9204].
(3) Sequestering
appellant's accountant witness and not sequestering the Government's
accountant witness. In Bostwick v.
United States
, 5th Cir., 218 Fed. (2d) 790, 792 [55-1 USTC ¶9170], we refused to
hold that the district court had abused its discretion in sequestering
the defendant's accountant witness, and a like ruling is due here. We
deem it appropriate to state, however, that, in our opinion, ordinarily
and in the absence of unusual circumstances, the same treatment in this
respect should be accorded to the Government and to the defendant.
(4) Admission of testimony
and records concerning financial circumstances of appellant's wife and
daughter. Appellant filed both written and oral objections to the
court's admission of testimony by the revenue agents, Smith and Moorman,
relating to alleged unreported cash bakery receipts supposedly deposited
by appellant during the prosecution years in bank accounts to the credit
of his wife and daughter, the purchase of U. S. Savings Bonds in their
names, admission of their bank and tax records, income and assets, etc.
He insists there was no showing that he actually deposited such funds,
if any, to their name, or that he had any such dominion or control over
such funds as justified admission of such evidence of their separate and
independent financial estates. The wife and daughter were members of
appellant's household, and during the tax years in question were
employees in his bakery. Appellant had given a statement to Government
agents that his wife had no source of income except her salary at the
bakery and interest on loans. We think that this evidence was competent
for the purpose for which it was offered and admitted--to establish a
justifiable inference for the jury that these excess funds and
expenditures, not otherwise satisfactorily explained, were actually
derived from unreported income taxable personally to the appellant. In
view of the court's charge that "it is not up to the defendant to
assume the burden of proving that the deposits in the bank accounts of
his wife and daughter were not his income," no prejudice to
appellant's rightful presumption of innocence or unfair shift of the
burden of proof resulted from the admission of such testimony. Cf. Ford
v.
United States
, 5th Cir., 210 Fed. (2d) 313, 316-317 [54-1 USTC ¶9233].
(5) Testimony of the
revenue agents claimed to be inadmissible as conclusions and hearsay.
Appellant insists that certain testimony by the revenue agents, Smith
and Moorman, contained a series of theoretical estimates and conclusions
based on hearsay as to his unreported income and practically required
him "to prove himself innocent by assuming the burden of overcoming
the prejudicial effect of the mass of exhibits, conjectures and
conclusions which the Government has been allowed to get into the
record." See Demetree v.
United States
, 5th Cir., 207 Fed. (2d) 892, 894 [53-2 USTC ¶9646]. The order in
which both Smith and Moorman were permitted to express their conclusions
did tend, we think, to impress the jury with the idea that the
conclusionary figures were matters of original evidence rather than mere
summaries of the calculations of the witnesses from evidentiary facts.
For example, at the beginning of Smith's testimony he was permitted to
state, over the appellant's objection, that for each of the three years
he determined from his investigation that there was other taxable income
in addition to that reported by the appellant, and to state the amount
of the unreported income. He thereafter gave in some detail how those
figures were arrived at, but we think the order of proof should have
been reversed and his basic facts and figures first stated before his
conclusions were expressed. Moorman went into detail as to the records
which he had examined and other sources of his information, among other
things stating that "I interviewed several witnesses myself."
We think, however, that his subsequent testimony clearly revealed that
his computations were not based on any such objectionable hearsay, but
upon available facts and figures of record, the source of which was
adequately disclosed. Again, Moorman, after describing the records and
sources of his information, was permitted to testify, over the
appellant's objection, to his determination of what he considered to be
the appellant's correct income tax liability for each of the three tax
years based upon his investigation. That kind of conclusion should not
have been expressed until the facts and figures on which it was based
had first been adequately proved and explained to the jury. Moorman's
subsequent testimony was probably sufficient to sustain his conclusions,
and we do not say that we would base a reversal on the erroneous
admissions of his conclusionary statements when they were subsequently
connected up. We do, however, express our disapproval of permitting this
order of proof, especially in view of its tendency to divert the jury's
attention from the original and basic evidentiary facts and to emphasize
the conclusions of the witness when such conclusions were, in fact, mere
summaries of his calculations from other facts.
(6) Admission in evidence
and revenue agents' use of charts. Appellant strenuously insists that
the large scale charts summarizing the revenue agents' computations and
admitted in evidence over his objection were offered and used before the
jury as primary proof of his unreported tax liability, and that their
use should here be condemned as prejudicial because the court permitted
them to acquire "an existence of their own, independent of the
evidence which gave rise to them."
Holland
v.
United States
, supra; see Elder v. United States, 5th Cir., 213 Fed. (2d)
876. We think the general rule is that the admission of such charts is
discretionary with the trial court, and that its rulings thereon are
subject to review only upon a clear showing of abuse and resulting
prejudice to an accused. See United States v. Johnson, 319
U. S.
503, 519 [43-1 USTC ¶9470]; Noell v. United States, 9th Cir.,
183 Fed. (id) 334, 339; United States v. Bramson, 2nd Cir., 139
Fed. (2d) 298, 600;
United States
v. Weinbren, 2nd Cir., 121 Fed. (2d) 826, 829; Bomberg v.
United States
, 7th Cir., 71 Fed. (2d) 637, 640;
United States
v. Glazer, 110 Fed. Supp. 558 [53-1 USTC ¶9351]; 4 Wigmore on
Evidence, 3rd ed., Sec. 1230. While the Supreme Court's recent
admonition in the Holland case, supra, should make trial
courts mindful to guard against permitting any unrestricted acceptance
and use by a jury of such charts as a substitute for primary and
independent proof, practical problems inevitably encountered both by the
Government and by the accused in presenting this too often confusing and
complex tax fraud proof still justify the use of illustrative charts by
both sides to summarize the varying computations, and make the primary
and independent proof upon which such charts must be based more
intelligible to the jury. See United States v. Schenck, supra at
p. 709; United States v. Park Avenue Pharmacy, 2nd Cir., 56 Fed.
(2d) 753, 756. The use of this type evidence, however, has inherent
dangers to an accused, for a jury is often unfairly and unduly impressed
by the aparent authenticity of a government witness' chart computations,
as such, rather than by the truth and accuracy of the underlying facts
and figures supporting them. A trial court is charged with grave
responsibilities in such instance to insure that an accused is not
unjustly convicted in a "trial by charts," however impressive
the array produced. Ordinarily, it would be the better practice, not so
carefully observed in this instance, to require that the source of the
facts and figures upon which such a chart is based be fully disclosed
before its admission into evidence. Whenever possible, such charts
should be confined in their preparation to strictly mathematical
computations, subject to detailed explanation upon the trial by the
testimony of expert government witnesses, and they should not be
encumbered by such impressive, conclusionary captions as
"Overstatement of Merchandise Purchases", "Overstatement
of Delivery Expenses", "Unreported Cash Receipts of Lloyd's
Bakery", "Unreported and Undeposited Cash Receipts Invested in
United States Savings Bonds", "Unreported Net Income of Mr. E.
C. Lloyd", "Income Tax Unported and Unpaid by Mr. Lloyd",
such as were used on the Government charts here in dispute. While a
prosecution witness may testify as to such conclusions from his
mathematical computations, we think the danger in permitting the
unrestricted use of such phrases upon charts results from a jury's
natural tendency to accept such unsworn, conclusionary verbiage as
authentic, primary proof, instead of purely in summarization and
explanation of sworn testimony or authenticated documentary evidence.
Though we have felt it
timely and appropriate thus to elaborate upon the Supreme Court's
admonition to trial courts against permitting any unrestricted and
indiscriminate use of such charts, in view of the broad discretion
vested in the trial court in the admission of such evidence, we
pretermit a decision as to whether that discretion was abused in this
case and whether the appellant suffered such prejudice from the use of
the charts as would justify a reversal, a reversal of this case being
necessary in any event on account of the rulings next to be discussed.
(7) Evidence with respect
to appellant's offer to compromise his tax liability for the years 1924
to 1932, inclusive. Over the appellant's objections, the Government was
permitted to prove that the appellant submitted an offer of $750.00 to
compromise an income tax liability amounting to $3,107.68, which he had
incurred for the tax years 1924 to 1932, inclusive. The offer was
rejected and the Government was permitted further to prove, over the
appellant's objection, that an investigation followed in regard to
suspected fraud and misrepresentation of facts in the filing of the
offer in compromise; that the appellant had made a sworn statement that
he borrowed the $750.00 from relatives and that he afterwards admitted
that statement was untrue; and that certain other facts stated as to his
assets and liabilities were likewise untrue. The court first stated:
"Overrule the
objection and will receive the evidence or permit it to be considered by
the jury only as bearing on the possible source of funds which the
evidence may disclose were in the possession of or received by the
taxpayer Defendant for the years '45, '6 and '7."
A short
time later, the court stated:
"That evidence is
admitted, gentlemen of the jury, only for such light as it might shed in
your deliberations on the issue of intent, which is one of the elements
of the charge in this case. Your consideration is limited to that issue
only."
The
jury must have been confused as to the purpose for which they could
properly consider such testimony. In our opinion, it was not admissible
for either purpose. The earliest tax year investigated by the agents was
1942, ten years after 1932, the last year for which the settlement was
offered, and eight years after 1934, the year in which the offer in
compromise was made. Appellant's attorney very properly called to the
attention of the court "the difference in the economy and values
whatever they were in the years 1932, '3 and '4 against now, and suggest
because of the vast difference in values and the economy it couldn't
throw any light we could rely upon for the years '45, '6 and '7." A
remark of the Supreme Court in United States v. Calderon, 348
U. S.
160, 164 [54-2 USTC ¶9712], is pertinent here. "Proof that the
taxpayer was impoverished by the depression, that he was working for his
meals and $8 a week in 1935, is too remote, absent proof of the
taxpayer's financial circumstances in the intervening years."
The offer in compromise and
testimony relating thereto were equally inadmissible to show intent.
Evidence of other wrongful acts to prove intent must go further than
showing that the defendant has a generally criminal disposition or
character, and must logically tend to prove the defendant's criminal
intent at the time of the commission of the act charged. The prior acts
must be similar to the one charged and must not be so remote as to be
lacking in evidentiary value. Excellent discussions of this subject are
contained in the opinions of this Court in Weiss v. United States,
120 Fed. (2d) 472; on rehearing, 122 Fed. (2d) 675, 682-689; and in the
opinion of the District of Columbia Circuit in Boyer v. United
States, 132 Fed. (2d) 12, 13. See, also, Wolcher v. United
States, 9th Cir., 206[200] Fed. (2d) 493, 497 [52-2 USTC ¶9547]; Lambert
v. United States, 5th Cir., 101 Fed. (2d) 960, 964; 2 Wigmore on
Evidence, 3rd ed., Secs. 302ff. In the Boyer case, supra,
the time elapsed between the two transactions was "nearly two
years," and the earlier wrongful act was held inadmissible. In the
present case, more than eight years had passed and there was no logical
probative value as to the appellant's intent in the commission of the
later act in addition to the general proof of his criminal tendencies.
It seems to us that the
admission of such evidence was highly prejudicial to the appellant,
since it indicated to the jury that he had cheated on his income taxes
over a period of years theretofore and was further unworthy of belief
because he had made misstatements in his offer of compromise. We are
unwilling to say that without such inadmissible evidence the jury might
not have reached a different verdict. See Kotteakos v.
United States
, supra, 328
U. S.
at p. 764. The judgment is accordingly reversed and the cause remanded
for a new trial.
Reversed and remanded.
1
Count 2 of the original indictment mistakenly referred to the year 1945
instead of 1946, and was ordered nol prossed by the court on motion of
the United States Attorney. A separate indictment for the year 1946 was
consolidated for trial and on appeal with the indictment for 1945 and
1947.
2
According to the testimony of the revenue agents, Smith and Moorman, and
certain chart summarizations prepared by the latter witness, appellant
understated his cash receipts or sales on his bakery books and tax
returns for the years involved in the total sum of $52,072.00, which
aggregate understatement analyzed by years and disposition is as
follows:
3
Demetree v.
United States
, 207 Fed. (2d) 892, 894 [53-2 USTC ¶9646]; Ford v. United
States, 210 Fed. (2d) 313, 315 [54-1 USTC ¶9233]; Wardlaw v.
United States, 203 Fed. (2d) 884, 887 [53-1 USTC ¶9335]; Jones
v. United States, 164 Fed. (2d) 398, 400 [47-2 USTC ¶9402].
4
In his motion to suppress, "Defendant states that the Government
Agents in this case, when they first came to see him about his income
tax matters, told him that it was a routine check-up and that they would
let him know after the investigation how much taxes he owed. At no time
was it intimated to him that there might be a criminal prosecution.
Defendant was never warned and was never told by the said Agents that
the evidence here sought to be suppressed would be used in either a
civil or criminal prosecution against him. The defendant never consented
to the said Agents getting possession of or removing from his place of
business or photostating any pages contained in the said 1946 Cash
Receipts Book of Lloyd Bakery. Defendant states that said Daily Cash
Receipts Book was obtained by stealth by the said Government Agents and
secretly removed from his place of business and photostated by the said
Government Agents without his consent."
[54-2
USTC ¶9575]Dan M. White, Appellant v.
United States of America
, Appellee
(CA-5),
In the United States Court of Appeals for the Fifth Circuit, No. 14736,
216 F2d 1, September 3, 1954
Appeal from the United States District Court for the Eastern District of
Louisiana.
Period of limitation: Criminal prosecutions: Complaint filed within
statutory period.--Taxpayer was indicted for tax evasion after the
six year statute of limitations had run. The complaint had been filed
before the statute had run and the trial court considered the complaint
as part of the judicial record which stopped the tolling of the statute
even though the original record on appeal contained no statement about
the complaint. The Circuit Court held that the statute of limitations
did not bar the Commissioner, as the complaint was timely filed.
Criminal penalties: Admissibility of evidence: Testimony of lawyer as
expert witness on tax treatment.--Taxpayer was convicted of tax
evasion, and appealed on the ground that prejudicial error was committed
in the refusal of the Court to allow a lawyer to testify as an expert
witness on the treatment of certain profits as capital gains. Taxpayer
had not reported the gains either as ordinary income or as capital
gains. The Circuit Court decided that the opinion of the witness as to
the law of the case could not be substituted for that of the Court, and
therefore the inadmissibility of the lawyer's testimony was upheld.
Criminal penalties: Admissibility of evidence: Letter of taxpayer
written prior to filing of return.--Taxpayer was convicted of tax
evasion for failure to report income for the year 1945. Taxpayer did not
testify on his own behalf but offered in evidence a letter he had
written to his accountant indicating that taxpayer signed a blank return
which he authorized his accountant to fill out. The letter was objected
to as a self-serving declaration and was not admitted into evidence. The
Circuit Court held that the letter should have been admitted as evidence
of lack of taxpayer's fraudulent intent, and that it was not a
self-serving declaration as it was written before the return was filed.
The failure to admit the letter in evidence was prejudicial error.
Richard Dowling and C.
Ellis Henican,
New Orleans
,
La.
, for appellant. M. Hepburn Many, Assistant United States Attorney,
New Orleans
,
La.
, for appellee.
Before HUTCHESON, Chief
Judge, and RIVES, Circuit Judge, and RICE, District Judge.
RIVES, Circuit Judge:
The appellant was adjudged
guilty under United States Code Title 26, Sec. 145(b) 1
of having wilfully and knowingly attempted to defeat and evade a large
part of the income tax due and owing by him to the United States of
America for the calendar year 1945 by filing and causing to be filed on
or about the 15th day of March, 1946, a false and fraudulent income tax
return. Three questions are presented for review: (1) Was the
prosecution barred by the statute of limitations; (2) Did the district
court commit reversible error in refusing to admit the testimony of an
expert witness offered by the defendant; (3) Did the district court
commit reversible error in refusing to admit in evidence the letter
identified as Defendant's Exhibit 18?
[Statute
of Limitations Issue]
(1) The defendant presented
his contention that the prosecution was barred by the Statute of
Limitations in every conceivable way, e. g. by motion to dismiss prior
to the trial, by motion for a judgment of acquittal at the close of the
Government's case, and again at the close of all the evidence, and after
the jury's verdict by motions in arrest of judgment and for a new trial.
On the record as originally filed in this Court is appeared that the
information was filed on
May 7, 19
52
, more than six years after the alleged commission of the offense on
March 15, 19
46
, six years being the period of limitation prescribed by United States
Code Title 26, Sec. 3748. 2
Section 3748 further
provides that, "Where a complaint is instituted before a
commissioner of the
United States
within the period above limited, the time shall be extended until the
discharge of the grand jury at its next session within the
district." Appellant contends that that provision is applicable
only to the conspiracy cases last previously treated in the section. We
think it clear, however, that the quoted provision has general
application the same as is expressly provided as to the preceding
sentence in the section.
The ground upon which the
district court ruled that the prosecution was not barred is indicated by
the judge's statement to counsel that "The records of this Court
will show that there was a complaint filed which will take the matter
out of the Statute of Limitations"; and when defendant's counsel
protested that the complaint had not been offered in evidence, the judge
further commented, "I said the record. It hasn't been offered in
evidence."
The record, as originally
filed in this Court, showed nothing further on this issue. At the
direction of the United States Attorney, the Clerk of the District Court
certified and forwarded a supplemental transcript of record showing that
on
March 1, 19
52, fifteen days prior to the expiration of the six-year period, a
Special Agent of the Internal Revenue Department filed a complaint
before the United States Commissioner at New Orleans, Louisiana,
charging the same offense against the defendant, that on the same date a
Commissioner's summons was issued, and that on March 3, defendant
appeared before the Commissioner with his attorney, waived preliminary
examination, and was released on a cash bond of $5,000.00, conditioned
for the defendant's appearance in the district court. Thereafter the
defendant waived indictment and consented to a proceeding against him by
way of information. In that proceeding he first entered a plea of
"nolo contendere" which was later withdrawn and a plea of not
guilty entered.
The appellant moved to
strike the supplemental transcript because not designated by the United
States Attorney within ten days after he was served with appellant's
designation as permitted by Rule 75(a) of the Federal Rules of Civil
Procedure made applicable to appeals in criminal cases by Rule 39(b)(1)
of the Federal Rules of Criminal Procedure. Since the matter appears
pertinent, and since this Court, under the provisions of Rule 75(h) of
the Federal Rules of Civil Procedure, has authority to direct that such
supplemental record be certified and transmitted by the clerk of the
district court, we will not go through the useless formality of striking
the present supplemental record and then ordering it to be refiled.
Appellant insists, however,
that the proceedings before the Commissioner are not a part of the
record of the court and in support of that contention cites Rules 12, 54
and 55 of the Federal Rules of Criminal Procedure; United States v.
King, 147
U. S.
676; United States v. Taylor, 147
U. S.
695; Rosenthal v. United States, 248 Fed. 684; and ex parte
Perkins, 29 Fed. 900. The two Supreme Court cases cited hold in
effect that there is no duty on the part of the clerk of the court to
enroll the papers sent up by the Commissioner and, hence, that the clerk
is not entitled to a fee for such services, though under the case of United
States v. Van Dusee, 140 U. S. 169, 170, the clerk is entitled to a
fee for filing such papers. Professor Wigmore has noted that in inferior
courts, like that of a justice of the peace, final enrollment was never
customary at common law. "Hence the justice's docket or minutes,
with the original papers, represent in the first instance the
proceedings; and though the legal theory persevered that these courts do
not possess records at all, in the strict sense, yet the practical
features of a record are usually attributable to these books, so as to
exclude proof of oral transactions." IX Wigmore on Evidence, 3rd.
ed., Sec. 2450, pp. 161, 162. Without a further detailed discussion of
each of the authorities relied on, we think it sufficient to state that
we construe Rule 5(c) of the Federal Rules of Criminal Procedure to
permit the district court to take judicial notice of the proceedings
before the Commissioner on preliminary examination which have been
transmitted to the clerk of the district court. 3
To hold that the district court, knowing from a simple inspection of the
papers in the possession of its clerk that a complaint had been
instituted before a commissioner within the limitation period, and
having further knowledge of the sessions of the grand jury within the
district, would nevertheless be bound to rule that the prosecution was
barred by the statute of limitations is not consistent with the declared
purpose and construction of the Federal Rules of Criminal Procedure. 4
Though not so elaborately argued, this Court reached the same conclusion
on the issue in Pollock v. United States, 202 Fed. (2d) 281 [53-1
USTC ¶9229], and we see no reason to depart from the holding in that
case.
[Testimony
of Expert Witness]
(2) The district court
refused to permit the defendant's expert witness Le Blanc to testify
that income received by the defendant under a certain contract should
have been properly classified as long-term capital gain and not as
ordinary income, and hence that the defendant's tax liability would have
been substantially less than the tax claimed by the Government. The
defendant had not reported the income either as capital gain or as
ordinary income though concededly it was taxable as one or the other.
The Government has no burden to prove the exact sums alleged in the
information, and a treatment of a portion of defendant's income as
capital gain would not have affected the defendant's guilt or innocence.
Further, the defendant not having acted in accordance with the witness'
opinion and hence that opinion not being relevant on the question of
intention, we think that the opinion of the witness as to the law of the
case could not be substituted for that of the court, and that the
district court properly exercised its discretion in refusing to admit
such evidence. 5
See VII Wigmore on Evidence, 3rd. ed., Sec. 1952;
United States
v.
Caserta
, 3rd. Cir., 199 Fed. (2d) 905, 909 [52-2 USTC ¶9540]. We find
nothing in the cases relied upon by the appellant 6
to conflict with this conclusion.
[Admissibility
of Taxpayer's Letter]
(3) It was conceded that in
his return filed
March 15, 19
46
, the defendant had failed to report a considerable part of his income
for the year 1945. The defendant filed three returns for that year, one
in
Mississippi
on
January 15, 19
46
, the second in
Louisiana
on
March 15, 19
46
, upon which the prosecution was based, and a third in
Louisiana
on
May 20, 19
46
, in which the defendant admitted unreported and unpaid income taxes for
the year 1945 in excess of $30,000.00. The issue actually litigated was
one of intention, whether the defendant wilfully and knowingly attempted
to defeat and evade the income tax due and owing by him.
The defendant did not
testify in his own behalf, but offered as his principal witness one J.
O. McKinnon who was secretary of defendant's corporation and responsible
for the keeping of its books. McKinnon testified that the defendant had
mailed to him a 1945 return form entirely blank except for the
defendant's signature, which form he had used in preparing the return
filed
March 15, 19
46, upon which the prosecution was based; that the defendant had not
furnished him with any of the information appearing in the return; and
that the defendant did not see the return after the witness filled it
out and before it was actually filed. Explaining his actions, the
witness McKinnon testified:
"While Mr. White was
in
Arizona
, he wrote me a letter, asking me to prepare a complete 1945 amended
return and file the return on a community basis because he understood
that it had to be filed by March 15 in order to get the advantage of the
community basis."
The
witness identified the letter which he testified he received from the
defendant, it was marked for identification as "Defendant 18" 7
and offered in evidence. The Government objected "on the grounds
that it is a self-serving declaration and no evidence of receipt to
corroborate the witness' testimony." 8
The court sustained the Government's objection and declined to admit the
letter in evidence, stating: "The effect of the ruling of the Court
is that you may ask the witness under whose instructions he filed the
return, but you may not ask him what those instructions were."
In this ruling, we are
constrained to hold that the court committed reversible error. If the
witness' testimony was true, the letter contained the defendant's
written instructions for the preparation of the return upon which the
prosecution was based. It was competent to be considered by the jury in
passing upon the credibility of the witness and in determining the
defendant's intent. The letter was not a subsequent self-serving act. It
was written, according to the witness, before the return was filed, and
the jury might well have believed that the letter showed better than any
other evidence the defendant's state of mind and his intention in filing
the return. Cf. Crawford v.
United States
, 212
U. S.
183; Barshop v.
United States
, 5th Cir., 191 Fed. (2d) 286 [51-2 USTC ¶9425], on rehearing, 192
Fed. (2d) 699 [51-2 USTC ¶9504]; Haigler v. United States, 10th
Cir., 172 Fed. (2d) 986, 987 [49-1 USTC ¶9171]; United States v.
Matot, 2nd Cir., 146 Fed. (2d) 197, 198; McCoy v.
United States
, 9th Cir., 169 Fed. (2d) 776.
"Statements of design
or plan, as already noticed (ante, Sec. 1725), are in general
admissible, so far as the design or plan is relevant to show the doing
of the act designed. Accordingly, it has never been doubted that the threats
of an accused person are admissible to show his doing of the deed
threatened, so also the threats of the deceased, on a charge of
homicide, are by most courts admitted to show the deceased to have been
the aggressor. Upon the same principle, the expressions of plan, by the
accused, not to do the thing charged, or to do a different thing,
are equally admissible." VI Wigmore, on Evidence, 3rd. Ed., Sec.
1732, p. 99.
Appellee argues that
"the appellant wished to have his story put before the jury without
the necessity of his taking the witness stand." The defendant had a
constitutional right not to testify in his own behalf, and his exercise
of that right cannot be penalized by the exclusion of testimony
otherwise admissible.
[Failure
to Admit Letter in Evidence Prejudicial]
Appellee further argues
that in the light of McKinnon's other testimony, the exclusion of the
letter was not harmful to the defendant, relying upon Barshop v.
United States, 5th Cir., 192 Fed. (2d) 699 [51-2 USTC ¶9504]. In
that case, the check and letter were not mailed until eleven days after
the indictment was returned. Here the rejected letter caused the return
to be filed upon which the indictment was based. It was the best
evidence of its own contents and the defendant could not be restricted
to secondary evidence of what his instructions were. Further, important
parts of those instructions were not testified to by McKinnon, e.g.:
"adding all other income shown in my records there";
"Mark it as a tentative community return * * *"; "if
there are any discrepancies I will amend and pay any taxes due as soon
as I get back"; "We will finish amending all the other returns
and pay any taxes due as soon as I return." As previously stated,
the letter was admissible also as bearing upon the credibility of the
witness, or more specifically to aid the jury in testing the veracity of
McKinnon on whether he had actually received such a letter and on his
recollection of its contents. Of course, the genuineness of the letter
and whether it was actually mailed and received at the time testified to
by McKinnon were matters for the consideration of the jury. The jury in
its verdict recommended clemency. We cannot say that, if this letter had
been before the jury, it might not have returned a verdict for the
defendant. See Kotteakos v.
United States
, 328
U. S.
750, 764. The judgment is, therefore, reversed and the case remanded for
a new trial.
Reversed and remanded.
1
"Section 145. Penalties
* * *
"(b) Failure to
collect and pay over tax, or attempt to defeat or evade tax. Any
person required under this chapter to collect, account for, and pay over
any tax imposed by this chapter, who willfully fails to collect or
truthfully account for and pay over such tax, and any person who
willfully attempts in any manner to evade or defeat any tax imposed by
this chapter or the payment thereof, shall, in addition to other
penalties provided by law, be guilty of a felony and, upon conviction
thereof, be fined not more than $10,000, or imprisoned for not more than
five years, or both, together with the costs of prosecution."
2
"Section 3748. Periods of limitation
"(a) Criminal
prosecutions. No person shall be prosecuted, tried, or punished, for
any of the various offenses arising under the internal revenue laws of
the United States unless the indictment is found or the information
instituted within three years next after the commission of the offense,
except that the period of limitation shall be six years--
"(1) for offenses
involving the defrauding or attempting to defraud the
United States
or any agency thereof, whether by conspiracy or not, and in any manner.
"(2) for the offense
of willfully attempting in any manner to evade or defeat any tax or the
payment thereof, and
"(3) for the offense
of willfully aiding or assisting in, or procuring, counseling, or
advising, the preparation or presentation under, or in connection with
any matter arising under, the internal revenue laws, of a false or
fraudulent return, affidavit, claim, or document (whether or not such
falsity or fraud is with the knowledge or consent of the person
authorized or required to present such return, affidavit, claim or
document).
"For offenses arising
under section 37 of the Criminal Code,
March 4, 19
09, 35 Stat. 1096 (U. S. C., Title 18, Sec. 88), where the object of the
conspiracy is to attempt in any manner to evade or defeat any tax or the
payment thereof, the period of limitation shall also be six years. The
time during which the person committing any of the offenses above
mentioned is absent from the district wherein the same is committeed
shall not be taken as any part of the time limited by law for the
commencement of such proceedings. Where a complaint is instituted before
a commissioner of the
United States
within the period above limited, the time shall be extended until the
discharge of the grand jury at its next session within the district.
"(b) Scope of
limitations. Subsection (a) of this section shall apply to offenses
whenever committed; except that it shall not apply to offenses the
prosecution of which was barred before
June 6, 19
32
." (Italics supplied.)
3
The concluding sentence of Rule 5(c), Federal Rules of Criminal
Procedure, reads, "After concluding the proceeding the commissioner
shall transmit forthwith to the clerk of the district court all papers
in the proceeding and any bail taken by him."
4
"Rule 2. Purpose and Construction
"These rules are
intended to provide for the just determination of every criminal
proceeding. They shall be construed to secure simplicity in procedure,
fairness in administration and the elimination of unjustifiable expense
and delay."
5
"THE COURT: Mr. Henican, is the purpose of the witness to give a
legal opinion on the tax consequences of this contract?
"MR. HENICAN: Yes.
"THE COURT: Step down.
The Court will sustain an objection. The Court will instruct the jury as
to the law in this case."
6
United States v. Johnson, 319
U. S.
503 [43-1 USTC ¶9470], 87 L. Ed. 1546; Beaty v.
United States
, 4th Cir., 203 Fed. (2d) 652 [53-1 USTC ¶9329]; Banks v. United
States, 8th Cir., 204 Fed. (2d) 666 [53-1 USTC ¶9402]; Remmer v.
United States, 9th Cir., 205 Fed. (2d) 277 [53-1 USTC ¶9421]; Frankfeld
v. United States, 4th Cir., 198 Fed. (2d) 679; Graves v.
United States
, 10th Cir., 191 Fed. (2d) 579 [51-2 USTC ¶9431]; Kirsch v.
United States, 8th Cir., 174 Fed. (2d) 595 [49-1 USTC ¶9274].
7
"El Conquistador
Hotel
and Cottages--Tucson, Arizona 2/26/'46
"Dear
Mac--
Re: Community 1945 Return
"Since I now have my
executed property settlement agreement in hand, I believe I can file a
community income tax return for 1946. A fellow here tells me I would
have to elect to do this by 15th of next month. I had not planned to be
back there until about March 20th. I enclose a blank 1945 return signed
by me. I filed a partial return for 1945 in
Jackson
last January, before Laura would sign the final property settlement in
Florida
. I have been hoping she would sign in time for me to amend and file
final '45 return by March 15th. However, as you know, I had to come on
out here, and only got signed agreement just before I left. Please take
the enclosed signed blank return and fill it out as accurately as you
can, using copy there of my January Jackson return and adding all other
income shown in my records there. Mark it as a tentative community
return, or however it should be. When completed, please take it or
duplicate out to
Frances
and have her sign. If you cannot get together the exact figures, do the
best you can and if there are any great discrepancies I will amend and
pay any taxes due as soon as I get back. Be sure to file with N. O.
Collector by 3/15 since the community election is the only purpose of
this return. We will finish amending all the other returns and pay any
taxes due as soon as I return.
"You can't imagine
what a relief it is to get my marital affairs in shape to face things
again. It has been such a terrific strain for so many years now.
Actually I think this has exhausted me more than the T. B. I am
breathing better though.
"Thanks.
"C. M. W."
8
In argument to the district court, the United States Attorney further
stated:
"We feel that the
letter sought to be admitted into evidence by counsel for the defendant
comes directly under the rule set forth in Wigmore's Code of Evidence,
3rd Edition, 1942. Here is the rule:
`General Principle. Every
human assertion offering testimony, that is, as evidence of the truth of
the facts asserted, must be subject to two tests.'
"We say that doesn't
meet the first test:
`1. The person making the
assertion must be subjected to cross examination by the opponent, that
is must make it under such circumstances that the opponent has an
adequate opportunity, if desired, to test the truth of the assertion by
questions which the person can be compellable to answer.'"
[54-1 USTC ¶9105]Ernest Michael Schino and
Martin M. Hartmann, Appellants v.
United States of America
, Appellee
(CA-9),
In the United States Court of Appeals for the Ninth Circuit, No. 13,375,
209 F2d 67, December 2, 1953
Appeals from the United States District Court for the Northern District
of California, Southern Division.
Fraud: Prosecution: Sufficiency of indictment.--An indictment
charging conspiracy to defraud the
United States
is sufficient, whether or not such unlawful object was attained, where
it gives the gist of the offense of conspiracy, the agreement to commit
an unlawful act, and the means by which the agreement was to be
achieved. It is not necessary to state with particularity the time,
place, circumstances, etc., in stating the manner and means of effecting
the object of the conspiracy.
Fraud: Trial: Denial of bill of particulars.--The trial court's
action on an application for a bill of particulars is discretionary.
Hence, where the defendants at no stage in the proceedings were taken by
surprise, made no claim to the contrary, and their substantial rights
were not in any way prejudiced by the denial of a motion for bills of
particulars, there was no abuse by the court of its discretion.
Fraud: Trial: Refusal of continuance.--Where a motion to postpone
trial was based on grounds of adverse comments in newspaper articles
referred to in the briefs but not put in evidence, denial of the
continuance was not prejudicial error.
U. S.
v. Moran, (CA-2) 194 Fed. (2d) 623, followed. Delaney v.
U. S.
, (CA-1) 199 Fed. (2d) 107, distinguished.
Fraud: Prosecution: Prosecutor's argument to jury.--An argument
by the prosecuting attorney to the jury which is based upon the evidence
or upon reasonable inferences therefrom, or which, even though otherwise
improper, is in reply to such argument as made by defendant's counsel,
is proper.
Fraud: Jury trial: Sufficiency of evidence.--The evidence was
sufficient to support the verdict of guilty where it was such that a
juror could reasonably conclude that the evidence would exclude every
reasonable hypothesis but that of guilt. It is an invalid theory, at
least on motion for judgment of acquittal, that in a circumstantial
evidence case a conviction cannot be supported if the evidence is as
consistent with innocence as with guilt.
Fraud: Jury trial: Exclusion of evidence.--Certain evidence which
the jury was instructed to disregard was contended on appeal to have
been prejudicial to the defendants. However, the subject of prejudicial
effect of such exclusion was not even remotely suggested at any time
during the trial, and no motion on this account was made for a mistrial
at the close of the case. Under these circumstances, it was a case where
an error of admission of irrelevant evidence was cured by instruction to
the jury to disregard it. Objections to evidence admitted were found to
be without merit in the light of the rule that in a conspiracy case wide
latitude is allowed in presenting evidence, whereby it is within the
discretion of the trial court to admit evidence which even remotely
tends to establish the conspiracy charged.
Fraud: Trial: Instructions to jury: Definition of
"conspiracy".--There was no error of failing to properly
instruct the jury on the meaning of the term "conspiracy"
where, in essence, the jury was told by the trial court that the term as
applied in this case meant two or more persons acting pursuant to an
agreement to impair, obstruct, or defeat the lawful function of the
United States Government by dishonest means.
A. J. Zirpoli, and C.
Harold Underwood,
San Francisco
,
Calif.
, for appellant Schino. Morgan V. Spicer and H. R. Whiting,
San Francisco
,
Calif.
, for appellant Hartmann. M. Mitchell Bourquin, Special Assistant to
United States Attorney, Thomas W. Martin, Assistant United States
Attorney, San Francisco, Calif., for appellee.
Before DENMAN, Chief Judge,
and ORR and POPE, Circuit Judges.
DENMAN, Chief Judge:
This is an appeal by two of
three defendants from a judgment convicting them of conspiring to
defraud the government by impairing its process of collecting and
assessing federal taxes.
The parties have assigned
many errors of the trial court for this appeal. These may be summarized
as follows: (1) Sufficiency of the indictment; (2) denial of request for
a bill of particulars; (3) refusal of a continuance because of the
approaching pendency of hearings before the King Subcommittee which
might have bearing on many matters involved in the trial; (4) improper
remarks of prosecuting attorney in argument to jury; (5) sufficiency of
the evidence to support the verdict; (6) admissibility of evidence as to
similar transactions; and (7) instructions to the jury.
The essence of the scheme,
as developed by the government's evidence, is as follows: Gertrude
Jenkins, a convicted abortionist, was in tax difficulties. She contacted
appellant Hartmann who told her that he could get it "fixed"
for $5,000 so that she would not be criminally or civilly prosecuted.
Hartmann contacted defendant Mooney (not an appellant), Chief Field
Deputy of the Collector of Internal Revenue for the State of Nevada, and
asked him if he could "fix" appellant Schino, Chief Field
Deputy of the Collector of Internal Revenue for the First District of
California. The answer was affirmative. Mooney later took Hartmann to
meet Schino. Schino was, as he had done in other cases, to compel his
subordinates in the
San Francisco
office to tamper with and suppress the assessment and penalty against
Mrs. Jenkins. In exchange, Mrs. Jenkins was to pay $5,000, and did pay
it, for worthless shares of stock in the Mountain City Consolidated
Copper Co., a corporation controlled by Mooney. Schino and Hartmann were
to share in this $5,000. The failure of the scheme was not the fault of
the conspirators, but rather resulted because of a contemporaneous
investigation of the Internal Revenue Bureau then under way.
(A) The Indictment:
The indictment charges
appellants and one Patrick Mooney--
". . . did . . .
conspire together, and with Gertrude Jenkins, also known as Ann Scott,
and with others to said Grand Jury unknown, with the intent and purpose
to defraud the United States in the exercise of its governmental powers
by impairing, obstructing and interfering with the lawful function of a
Department of the United States, to-wit, the Bureau of Internal Revenue
of the Treasury Department, by attempting corruptly to influence and
prevent said Bureau of Internal Revenue from proceeding civilly against
said Gertrude Jenkins and prosecuting her criminally for income taxes
due, owing and unpaid by her to the United States in the sum of
$45,000.00, approximately, for the calendar tax years of 1944 and 1945;
. . ."
Appellants
admit there was an overt act but attack the indictment in that it does
not state the essential facts constituting the offense charged, but
merely the legal conclusions of the pleader. The indictment is not
defective in that regard. It charges that the appellants
"conspired" (i.e., "agreed") to defraud the
government (unlawful object) by attempting corruptly to influence and
prevent the Bureau of Internal Revenue from proceeding against Gertrude
Jenkins (the means). This indictment gives the gist of the offense of
conspiracy, the agreement to commit an unlawful act and the means by
which that agreement was to be achieved.
United States
v. Falcone, 311
U. S.
205, 210. "The particularity of time, place, circumstances, causes,
etc., in stating the manner and means of effecting the object of the
conspiracy for which [appellants] contend, is not essential to an
indictment." Glasser v.
United States
, 315
U. S.
60, 66.
Appellant Hartmann argues
that the prosecuting of either civil or criminal actions against
taxpayers is not a function of the Bureau of Internal Revenue but rather
is a function of the Department of Justice. 28 U. S. C. §502. It is
argued that since the indictment charged interference with a function
not attributable to the department indicated, no crime has been charged.
The short answer to this contention is that no suit regarding taxes can
be commenced unless the Commissioner of Internal Revenue, the head of
the Bureau, authorizes it. 26 U. S. C. §3740. Thus, if influence is
successfully brought to bear upon the Commissioner through his
underlings, a suit will be prevented.
Hartmann then argues that
even if prosecution of suits be a function of the Bureau, there is no
allegation that the Bureau intended so to prosecute or that the parties
knew of such intention if it existed, so that the indictment is
defective. This contention is also without merit. The indictment is
sufficient if it alleges that an unlawful object was sought, whether or
not such unlawful object was attained.
United States
v. Manton, 107 Fed. (2d) 834 (Cir. 2), cert. den., 309
U. S.
664.
(B) Denial of the Bill of Particulars:
Appellants moved for bills
of particulars which were denied. In testing the validity of this
denial, it must be borne in mind that the trial court's action on a bill
of particulars is discretionary and should not be disturbed, in the
absence of an abuse of that discretion. Wong Tai v.
United States
, 273
U. S.
77, 82; Himmelfarb v.
United States
, 175 Fed. (2d) 924, 935 (Cir. 9) [49-1 USTC ¶9313].
Appellant Schino's
attorney, in making an objection to the admission of evidence, stated
that he did so "partly on my understanding of what the facts will
be"; and further stated "the indictment in this case
specifically outlines the nature of the conspiracy." As stated by
the district court in its opinion below: ". . . in a trial lasting
three weeks, the defendants had ample opportunity, in the event that
they were taken by surprise, to ask for a continuance, so that they
might prepare to meet the unexpected evidence. No such continuance,
however, was requested. As a matter of fact, the defendants at no stage
of the proceedings were taken by surprise, nor do they now make such a
claim." Where the record thus shows that the defendants were not
taken by surprise in the progress of the trial or that their substantial
rights have not been prejudiced in any way by the denial of the bill of
particulars, there has been no abuse of discretion. Wong Tai v.
United States, supra.
(C) Refusal of Continuance of the Date for
Trial.
A motion was made on
January 24, 19
52
, to postpone the trial in this cause which was scheduled to commence on
February 11, 19
52
. The ground of the motion was that the Subcommittee on the
Administration of the Internal Revenue Laws of the Ways and Means
Committee of the House of Representatives of the
United States
, popularly known as the King Subcommittee, was scheduled to commence
hearings on
February 4, 19
52
, on the operations of the
San Francisco
offices of the Internal Revenue Bureau. Because two of the defendants
were officers of the Bureau and because the King Subcommittee intended
to investigate, according to newspaper reports, the Mountain City
Consolidated Copper Company of Nevada, a concern which allegedly was
controlled by Bureau officials who sold its worthless stock at high
prices to persons for whom they had done favors, appellant Schino sought
the continuance, in which motion appellant Hartmann joined. This
continuance was denied.
Appellants assert that the
denial of the continuance was highly prejudicial error. They refer not
only to the facts above asserted, but also seek to have the court take
judicial notice of widespread newspaper and radio coverage relating to
the local Bureau "scandals," not contained in the record.
Principal reliance is placed upon the case of Delaney v. United
States, 199 Fed. (2d) 107 (Cir. 1). In that case, it was held
prejudicial error for the court to proceed to trial where prior
thereto the King Subcommittee had heard evidence relating to
Delaney's affairs which ranged far beyond the scope of the indictment
and was highly damaging. These hearings resulted in widespread national
publicity adverse to Delaney which extended up to and beyond the time of
trial. The court found in detail the mass of newspaper comment and held
that by the release prior to trial of such adverse publicity by a branch
of the United States (albeit not the prosecuting branch), the United
States, as the party plaintiff, "must accept the consequences that
the judicial department, charged with the duty of assuring the defendant
a fair trial before an impartial jury, may find it necessary to postpone
the trial until by lapse of time the danger of the prejudice may
reasonably be thought to have been substantially removed." 199 Fed.
(2d) at 114.
In their argument here,
attempting to show prejudice or the lack thereof, all parties have
alleged facts concerning alleged newspaper comment outside the record.
Both appellants cited the denial of the continuance of the date of trial
as a ground for a new trial, but the argument on the motion was not
reported and the district judge did not refer to this contention in his
ruling on the motion. Appellants contend that the state of the record is
such that the affidavit of Schino's counsel, joined in by Hartmann,
being untraversed, must be accepted as true. The only report of a
newspaper comment shown by the record is an excerpt from an article
appearing in the San Francisco Examiner of
January 5, 19
52
, of which no complaint was made in appellants' briefs. Instead, the
briefs refer to several newspaper articles not put in evidence, of which
we cannot take notice.
In this state of the
record, the comment of Chief Judge Swan, writing for the court, in United
States v. Moran, 194 Fed. (2d) 623, at 625 (Cir. 2), is apropos.
"Neither the Committee's reports nor the newspapers' comments on it
are in the record, so that we cannot judge whether they supplied any
basis for counsel's apprehension." Compare Delaney v.
United States
, supra, where the motion for a continuance was based upon an
"affidavit with accompanying exhibits" showing in detail the
adverse newspaper comment. 199 Fed. (2d) at 111, 112.
(D) Prosecutor's Argument to Jury:
In his closing argument to
the jury, the prosecuting attorney made the following statement:
"Let me say this to
you on the matter: You've got to think about this, this is your business
just as much as it is mine, and I am beginning to think it is a good
deal of the business of all of us to get started sometime to get into
this mess, and the longer you put it off the worse it is going to get.
If those poor little people up in that revenue office up there that you
saw march in front of you in the court room and confess they were pushed
around by this man--
"Mr. Zirpoli: I think
that is an improper plea.
"Mr. Bourquin: I don't
think it is.
"Mr. Zirpoli: I think
it is.
"The Court: Proceed.
"Mr. Zirpoli: All
right.
"Mr. Bourquin: If
those poor people like the Christopherson girl, poor little Wulff, and
poor McGowan, and the rest of them [lower echelon employees under
Schino] will see that you ladies and gentlemen, out in the open under no
obligation to these people, not afraid of these characters, if they are
going to find you will wink at this thing and put it aside, they are
going to lose all hope, they are not going to rehabilitate themselves,
and you are not going to be fair with them to do that. This isn't your
work, but it isn't my work any more than it is yours, this work, and you
know that I never prosecuted a criminal case, I spent my time for ten
years defending the Government in cases, but I regard this as a defense
of the Government and the people and to defend those little people that
have been pushed around by bullies thinking the department is run for
themselves and for their own ends; Mooney for his stock, and Schino for
his family, or whatever he wants, and Hartmann for stock, or anything
else. You have got to make it, look at, to take notice of those things,
you've got to fight those things as you heard in this Court if you are
going to expect it to stop.
"Now, I make that--I
leave the case with you in that vein. I am very serious about it. I will
extend to you now my appreciation for the patience you have shown in
standing here talking to you longer than I assured you I would in the
first place, and I leave the case and the determination of it to your
good judgment."
Appellant Schino contends
that this impassioned appeal to public responsibility in a period of
great national and local concern was plainly unwarranted and clearly
injurious, since it denied the accused the safeguard of a fair trial and
constituted reversible error.
Appellant is again relying
upon the publicity background of the trial without having in the record
anything to bear out the alleged prejudicial publicity. The prejudicial
character of this argument to the jury must be determined from the
record itself, a court of appeals may not take cognizance of evidence
not in the record as transmitted from the district court. Pacific R.
R. v. Ketchum, 101
U. S.
289; Siano v. Helvering, 79 Fed. (2d) 444, 446 (Cir. 3); Axelrod
v. Osage Oil & Refining
Co.
, 29 Fed. (2d) 712, 716 (Cir. 8).
This criticized argument of
the government had some reference to the evidence in the case. There was
evidence tending to show that on occasions Schino had used the power of
his position to compel his subordinates to suppress the assessment of
taxes and penalties against favored taxpayers. It was made in reply to
the argument of Schino's counsel in which he tried to picture Schino as
an officer of the Bureau who was doing his duty and who was not involved
in any wrongdoing, and thus invited a rebuttal argument of this nature.
An argument to the jury which is based upon the evidence or upon
reasonable inferences therefrom, or which, even though otherwise
improper, is in reply to such an argument as made by Schino's counsel,
is proper. Ochoa v.
United States
, 167 Fed. (2d) 341, 345 (Cir. 9); Springer v.
United States
, 148 Fed. (2d) 411, 414 (Cir. 9).
(E) The Sufficiency of the Evidence:
Appellants each assert
that, as to himself, the evidence is insufficient to support the
verdict. In determining this question, we must consider the evidence in
the light most favorable to the government. Glasser v.
United States
, 315
U. S.
60, 68; Woodard Laboratories v.
United States
, 198 Fed. (2d) 995 (Cir. 9). Viewed in this light, the state of the
evidence is such that a juror's reasonable mind "could find
that the evidence excludes every reasonable hypothesis but that of
guilt." In such a situation, the case must be submitted to the
jury, and their decision is final. Remmer v.
United States
, 205 Fed. (2d) 277, 287-288 (Cir. 9), and cases cited. The theory
upon which appellants rely, that in a circumstantial evidence case a
conviction cannot be supported if the evidence is as consistent with
innocence as with guilt, has been laid to rest in this circuit by the Remmer
case, at least where, as here, the question arises on a motion for a
judgment of acquittal.
(F) The Contention That Excluded Evidence
Nevertheless So Prejudiced the Jury That the Case Should Be Reversed.
In an offer of proof, the
prosecution claimed that it intended to show by the testimony of one
Dorothy Pennington, Henry Robinson, and Lila Campbell, that appellant
Schino had bragged to Dorothy Pennington's former husband that he had
saved her a lot of money by manipulations within the Bureau. The court
permitted the prosecution to put Mrs. Pennington on the stand because
the offer of proof tended to show that her evidence would tend to prove
that Schino corruptly attempted to influence and prevent the Bureau from
proceeding civilly or criminally against another taxpayer. The evidence
which was put in showed that Dorothy Pennington had obtained a favorable
tax settlement without having been prosecuted and tended to establish
that Schino had bragged that he had done her a favor. However, the court
after colloquy with counsel found that the actions shown to have been
committed by Schino were just as compatible with innocence and fair and
proper dealing as they could be with illegal or criminal dealing.
On the morning following
this testimony when it was fresh in the jury's mind and as soon as the
jury assembled the court gave its following instruction to disregard the
testimony of these three witnesses:
"The Court: Now,
ladies and gentlemen of the Jury: There has been heretofore admitted in
evidence certain testimony of three witnesses, namely Lila Campbell,
Henry Robinson and Dorothy Pennington. And you will recall that those
witnesses testified to their acquaintance with the defendant Schino and
to the tax affairs of the Saf-T-Step Company. It is the Court's belief
and conclusion that the testimony of those three witnesses in its
entirety is of no materiality in this case, and I have granted a motion
to strike the testimony of those three witness[es]. The testimony of
Lila Campbell, Henry Robinson and Dorothy Pennington is stricken in
toto, and you ladies and gentlemen are to entirely disregard that
testimony that is stricken and you are to treat it as if you had never
heard it. It has no place and no factor in this case."
The excluded evidence came
after the bulk of the prosecution's case was in and the instruction came
after the prosecution's case was concluded. To a jury of ordinary
competence it was made clear that they were to disregard it.
Furthermore, coming at the
end of the government's case, the defendants could have moved
immediately for a mistrial on the ground that despite the granting of
the motion to exclude the testimony, its effect was so prejudicial that
the jury could not fairly consider the other evidence offered. Instead,
the defendants accepted the excluded evidence as not of a character to
warrant a mistrial and confined themselves solely to a motion for a
directed verdict on the claimed insufficiency of the evidence and
of the indictment. Thus even had the excluded evidence been thought
prejudicial, the failure to move for a new trial caused the time and
effort of the court, counsel, and witnesses of the seven days
from the presentation of this evidence to the bringing in of the
verdict.
Thereafter, no motion for a
mistrial was made at the close of the case, nor indeed was the subject
of the prejudicial effect of the excluded evidence even remotely
suggested at any time during the trial. Clearly the attorneys for
the defense when trial keen to any adverse effect did not regard the
excluded evidence as prejudicial and treating its presentation and
exclusion as within Rule 52(a), Fed. R. Crim. P.
"Rule 52. Harmless
Error and Plain Error
"(a) Harmless Error.
Any error, defect, irregularity or various which does not affect
substantial rights shall be disregarded."
Obviously,
there was no such overwhelming prejudice that it should be considered at
any stage of the proceedings as in Kotteakos v. United States,
328
U. S.
750, where in fact the court's errors were objected to at the trial.
The judge properly thought
so when with the "after look of a Monday morning quarterback"
the prejudice was first mentioned in the denied motion for a new trial.
It is a clear case where the error of admission of irrelevant evidence
is cured by an instruction to the jury to disregard it. Metzler v.
United States
, 64 Fed. (2d) 203 (Cir. 9); Cavness v.
United States
, 187 Fed. (2d) 719, 722 (Cir. 9), cert. den., 341
U. S.
719. To hold otherwise would overrule these cases to the confusion of
all the circuit's trial judges.
This conclusion is further
supported by the authorities of other circuits. The failure to move for
a mistrial and the allowance of the week's further proceeding amounts to
a waiver of the afterthought contention as was held by the Sixth Circuit
in Carter v. Tennessee, 18 Fed. (2d) 850, 853 (Cir. 6), as
follows:
"The general rule is
clearly that such 'improper argument of a prosecutor is no ground for
reversal, where the jury is explicitly directed to disregard it.' Robilio
v.
United States
, 291 Fed. 975, 986 (C. C. A. 6). See, also, Copeland v. United
States, 55 App. D. C. 106, 2 Fed. (2d) 637. And where, as here, it
must be assumed that the court did reprove counsel and properly instruct
the jury at the time, such prejudice as was not thereby removed, or
could not be removed by such instruction, was, we think, waived by the
failure of the defendant to move for a mistrial. He should not
thereafter be permitted to apparently consent to the continuance of the
trial, which could presumably be discontinued only upon his motion after
the jury had been sworn and he once placed in jeopardy, thus taking his
chance of a favorable verdict, and if the verdict be 'guilty' then
assert it was founded to a material extent upon misconduct of opposing
counsel. Cf. Levin v.
United States
, 5 Fed. (2d) 598, 602 (C. C. A. 9) [on waiver of even
constitutional rights]."
In this that court follows
this holding in Billiter v. United States, 23 Fed. (2d) 678, 679
(Cir. 6) and in
Pharr
v.
United States
, 48 Fed. (2d) 767, 770 (Cir. 6).
The Sixth Circuit did not
overrule these prior decisions in Pierce v. United States, 86
Fed. (2d) 949, (Cir. 6), 13 Fed. Supp. 301, a case of overwhelming
prejudice as in the Kotteakos case, where instead of respecting
the court's rulings the prosecution continued repeatedly to ignore it,
as stated at page 952:
"Conveying to the jury
by improper questions the suggestion that defendant Pierce had been
tried in the federal courts of Alabama; that he could not obtain credit
in his home town of Huntsville, Ala., or procure reputable witnesses who
resided there to testify to his good character; that United States
Senator Bankhead of Alabama, after interviewing Senator McKellar of
Tennessee, could not be procured as a character witness for defendant
Pierce; that Pierce had transferred property to his wife and son in
fraud of creditors; that he had been frequently detained and
investigated by law enforcement officials; and that he was under
indictment in the state courts of Mississippi and was a fugitive from
justice of that state."
Other circuits hold the
same as to the waiver of such error by failing to move for a mistrial.
See Webb v.
United States
, 191 Fed. (2d) 512, 516 (Cir. 10); McGuinn v.
United States
, 191 Fed. (2d) 477, 479 (D. C. Cir.); Jamerson v.
United States
, 66 Fed. (2d) 569, 572 (Cir. 7); Gerard v.
United States
, 61 Fed. (2d) 872, 875 (Cir. 7).
The case is entirely
different from that of United States v. Sansone, 206 Fed. (2d)
86, 88 (Cir. 2). There strenuous motions were made to exclude or strike
repeated prejudicial statements of the prosecution and the trial court
instead of granting them, as here, denied them after which, for a week,
the government's case was put in with the jury instructed the evidence
was not prejudicial. At the end of that week, the trial court
reconsidered its decision and ordered the evidence stricken from the
record and instructed the jury to disregard it. The defendants
interposed what the court of appeals termed a "motion for a new
trial" at this point. This motion, made during the course of the
trial, was in fact and effect a motion for a mistrial, and preserved the
issue for consideration by the court of appeals.
Nor is it like our case of Wolcher
v. United States, 200 Fed. (2d) 492, 499 (Cir. 9) [52-2 USTC ¶9547].
There, unlike the instant case with no error claimed in the trial, there
were six errors of the trial court stated in detail in the opinion and
other errors committed, the cumulative effect of all of which was held
sufficient to prejudice the jury.
The government introduced
evidence relating to the so-called "Par Soap Company deal."
This evidence tended to show that Schino had brought pressure to bear
upon his subordinates to juggle the Bureau's books so that it would
appear that the Par Soap Co. had paid its taxes on time. This evidence
was clearly admissible to show common intent or design on the part of
Schino, especially in view of the fact that the transaction occurred a
short time prior to the Jenkins transaction. Henderson v.
United States
, 143 Fed. (2d) 681, 683 (Cir. 9).
Appellants' other
objections to evidence admitted have been examined and found to be
without merit. It should be borne in mind that in a conspiracy case wide
latitude is allowed in presenting evidence and it is within the
discretion of the trial court to admit evidence which even remotely
tends to establish the conspiracy charged. Nye and Nissen v.
United States
, 168 Fed. (2d) 846, 857 (Cir. 9), aff'd, 336
U. S.
613.
(G) Instructions to the
Jury:
Appellant Hartmann asserts
that the court erred in failing properly to instruct the jury on the
meaning of the term "conspiracy." Although no exception was
taken to the instructions, see Rule 30, Federal Rules of Criminal
Procedure, the failure of the court to give an instruction on an
essential point of law is plain error which may be noticed under Rule
52(b), Federal Rules of Criminal Procedure. Samuel v.
United States
, 169 Fed. (2d) 787, 793 (Cir. 9).
The instruction given told
the jury, in essence, that the term "conspiracy" as applied to
this case meant two or more persons acting pursuant to an agreement to
impair, obstruct, or defeat the lawful function of the United States
Government by dishonest means. Hartmann has not pointed out in what
respect this definition is insufficient, and we can find none.
In addition to the
specifications of error discussed above, both parties have assigned the
failure of the court to grant their motions for a new trial. Inasmuch as
these motions were based on the above specifications of error, there is
nothing left to consider concerning the denial of the new trial.
The judgments are affirmed.
[55-1 USTC ¶9382]Louis Berra, Appellant v.
United States of America, Appellee Louis Berra, Appellant v. United
States of America, Appellee
(CA-8),
In the United States Court of Appeals for the Eighth Circuit, Nos.
15,214, 15,215, 221 F2d 590,
April 22, 19
55
Appeal from the United States District Court for the Eastern District of
Missouri.
[1939 Code Sec. 145--similar to 1954 Code Secs. 7201-7203]
Tax evasion: Failure to report unlawful gains: Procedure.--Taxpayer
arranged with a contractor to submit padded bills for labor to
taxpayer's employer, which taxpayer approved and paid, the contractor
then returning the amount of the overpayment to taxpayer. Such unlawful
gains were includible in taxpayer's income, not being embezzled funds.
The trial court did not abuse its discretion in refusing to permit the
chief witness for the prosecution to be cross-examined concerning the
correctness of his own income tax returns, in admitting testimony
concerning taxpayer's prior arrest, in admitting taxpayer's prior grand
jury testimony for purposes of impeaching him, or in imposing certain
conditions on probation, but it erred in refusing to acquit taxpayer on
a count charging him with attempts to influence a witness, since the
Government did not prove that the individual was in fact a witness.
Stanley M. Rosenblum (Mark
M. Hennelly was with him on the brief), for appellant. Charles H. Rehm,
Assistant United States Attorney, and William K. Stanard, II, Assistant
United States Attorney (Harry Richards, United States Attorney, was with
them on the brief), for appellee.
Before GARDNER, Chief
Judge, and WOODROUGH and THOMAS, Circuit Judges.
WOODROUGH, Circuit Judge:
Appellant was convicted on
No. 15,214, on both counts of a two-count indictment charging him with
corruptly endeavoring to influence a witness before a grand jury and
obstruct, influence and impede the due administration of justice, in
violation of Title 18, U. S. C. A., section 1503. He was also convicted
in No. 15,215 on all counts of an indictment charging income tax evasion
for the years 1951, 1952 and 1953, in violation of Title 26, U. S. C.
A., section 145(b). The two cases were consolidated for the jury trial,
a verdict of guilty resulting in both cases. Appellant was sentenced to
four years imprisonment on each of the three counts in No. 15,215, the
sentences on all counts to run concurrently. In No. 15,214, the court
suspended imposition of sentence and placed appellant on probation for
five years, said probation to begin and run consecutively with the term
of imprisonment imposed in No. 15,215, and with the special condition
that appellant shall not, during the period of probation, hold any
office in a labor union or labor organization. The motion for judgment
of acquittal or in the alternative for a new trial having been
overruled, appellant brought this appeal.
The first point urged by
appellant is that the trial court erred in overruling his motion for
judgment of acquittal on the income tax evasion counts in No. 15,215 for
the reason that the monies allegedly constituting income to appellant
were, under the government's own proof, funds embezzled from his
employer and therefore did not constitute taxable income to him.
Appellant also assigns as error the trial court's failure to give his
requested instructions to that effect.
[Padded
Labor Bills]
The evidence on the trial
below, which was not in dispute except as noted hereinafter, showed that
during the years 1951, 1952 and 1953, appellant was the business manager
1
of the St. Louis Labor Health Institute, a nonprofit organization
furnishing free medical aid to members of Teamsters' Local 688, A. F. of
L., and their families. The Labor Health Institute is operated on funds
collected from employers who maintain collective bargaining agreements
with Local 688. Appellant was anthorized, as business manager of the
Labor Health Institute, to approve payment of bills incurred by the
organization and to draw and sign checks therefor. The checks were
required to be countersigned by another employee. In 1949 the Labor
Health Institute contracted with J. Shulman and Sons Contracting Company
for extensive alteration work on its premises in
St. Louis
. The general contractor sub-contracted the painting work to one John
Schmidt. In 1950, after the original painting contract was completed,
Schmidt was called back by the Labor Health Institute for further work.
It was at this time, Schmidt testified, that appellant approached him
with a plan whereby he, Schmidt, would submit padded bills to the Labor
Health Institute by overstating his amount of labor performed, appellant
would approve the bills and issue payment to Schmidt, and then Schmidt
would return the amount of overpayment to appellant. Schmidt testified,
and the government introduced some of his checks in substantiation, that
he paid over to appellant some $5,000 under this arrangement during the
three years covered by the indictment. He testified that he deducted
these payments as commissions in computing his own income tax returns.
During these same three years he testified that he did approximately
$2,500 to $3,000 worth of painting at appellant's home which he charged
to and received payment for from the Labor Health Institute. The
evidence also showed that in 1951 a subcontractor purchased materials
for and performed labor at appellant's home for which he was paid some
$1,500 by J. Shulman and Sons Contracting Company, who in turn billed
and received payment of that amount from the Labor Health Institute.
These amounts constituted the alleged unreported income received by
appellant during the three years in question.
Appellant took the stand in
his own behalf and did not deny receiving the money Schmidt claimed to
have paid him. He insisted, however, that these payments were loans and
that he had later partially repaid Schmidt. He further testified that he
had never requested Schmidt to submit padded labor bills to the Labor
Health Institute or that there had ever been any such arrangement
between the two. With respect to the $1,500 collected by J. Shulman and
Sons Contracting Company from the Labor Health Institute for material
furnished and labor performed at appellant's home, he testified that he
never requested Labor Health Institute be billed for that, and had no
knowledge of the fact that it was so billed. Al Shulman testified that
the erroneous billing was the fault of his company, not appellant, and
that as a result of the grand jury investigation appellant paid him for
the work and materials and he repaid the Labor Health Institute.
[Taxability
of Unlawful Gains]
Appellant does not here
contend that the jury was not warranted, under the evidence presented,
in finding that the monies paid over to him by Schmidt were not loans.
His position, as previously stated, is that all of the unreported funds
received during the years in question were embezzeled from his employer
Labor Health Institute and therefore, under the decision of the Supreme
Court in Commissioner v. Wilcox, 327 U. S. 404 [46-1 USTC ¶9188],
did not constitute taxable income to him.
The Supreme Court, however,
in its later decision in Rutkin v. United States, 343
U. S.
130 [52-1 USTC ¶9260], expressly limited its holding in the Wilcox
case to the facts there existing. And we do not think the facts in the
present case bring it within the scope of the Wilcox decision.
The prosecution proved, and the appellant admitted, that the monies he
received came, not from his employer Labor Health Institute, but from
Schmidt. That this was not a case of embezzlement was recognized by the
trial court when, in ruling on appellant's motion for bail, it said:
"Under neither the
Government's theory nor that of the defendant can the receipt of the
funds by defendant be embezzlement. Generally speaking, embezzlement is
the receipt by an agent, such as defendant, of money of his principal,
and conversion of the funds to his own use. The funds must be received
in the course of the employment or defendant be rightfully in possession
of them and thereafter convert them to his own use. Admittedly, the
funds in this case went first to Schmidt. He manifestly obtained them by
fraud and deceit. He never was lawfully entitled to them. Schmidt in
some instances put the funds in his bank account. None of the funds came
into defendant's possession lawfully or in the course of his employment.
Defendant may be guilty of obtaining money of the welfare organization
by a fraudulent scheme or device, but he could not be convicted of
embezzlement."
We
agree.
From the record as a whole
we are convinced that the monies received by appellant from Schmidt
constituted taxable income under the test laid down in the Rutkin
case, supra, and followed by this court in Marienfeld v.
United States, 8 Cir., 214 Fed. (2d) 632 [54-2 USTC ¶9489]:
"An unlawful gain, as well as a lawful one, constitutes taxable
income when its recipient has such control over it that, as a practical
matter, he derives readily realizable economic value from it." That
appellant had such control over the funds received from Schmidt cannot
be doubted on this record. The trial court was not in error, therefore,
in overruling appellant's motion for judgment of acquittal or in
refusing to give his requested instructions pertaining to the
embezzlement theory.
[Limitations
on Cross-Examination]
It is next argued that the
trial court committed prejudicial error in unduly restricting
cross-examination of Schmidt, the principal witness for the government.
On direct examination Schmidt testified that at appellant's insistence
he had destroyed his check stubs, cancelled checks, and daily work
sheets reflecting his payments to appellant, but did not destroy his
cancelled checks of 1952 and 1953 reflecting such payments. The
government introduced in evidence the working papers of Schmidt's 1951
income tax return to prove his claimed pay-offs to appellant in that
year. On cross-examination appellant sought to discredit the witness by
introducing in evidence a check of the Labor Health Institute in the
amount of $1160.60, dated
February 9, 19
51, and made payable to Schmidt, which did not appear on his 1951 income
tax working papers. Appellant also introduced, without objection, a
photostatic copy of Schmidt's 1951 income tax return which also
apparently did not include the $1160.60 check. When appellant attempted
to cross-examine Schmidt on the correctness of his 1952 and 1953 income
tax returns, however, the trial court sustained the government's
objection that the matter was irrelevant and collateral to the issues
being tried. Appellant offered to prove that Schmidt had omitted certain
items of income in his 1952 and 1953 tax returns and that by reason
thereof the witness was biased, prejudiced, and interested; that he was
under income tax investigation; and that the destruction of his records
inured to his own benefit.
The scope of
cross-examination is within the judicial discretion of the trial court. Myres
v.
U. S.
, 8 Cir., 174 Fed. (2d) 329 [49-1 USTC ¶9275]; Holmes v. U. S.,
8 Cir., 134 Fed. (2d) 125; Hewitt v.
U. S.
, 8 Cir., 110 Fed. (2d) 1. We are not prepared to say the trial
court abused its discretion in this case. Schmidt had testified on
direct examination that he was not under investigation for income tax
evasion and that no promises had been made to him in respect thereto.
This was fully explored on cross-examination. Schmidt had also testified
that the payments made to appellant were credited as commissions on his
tax returns and his 1951 income tax working papers showed that they had
been so credited. In sustaining the objection to questioning concerning
the correctness of Schmidt's 1952 and 1953 income tax returns, the court
ruled:
"You may go into the
subject as to whether or not he included in his return these payments
which he claimed he put on to the bills of the Labor Health Institute
and gave the money to the defendant. Now, he said in his direct
examination that he showed on his income tax return, he showed a credit,
paying them to the defendant. That is the extent of your inquiry."
To have
permitted further questioning as to other items of Schmidt's income tax
returns would have the tendency of confusing the issue before the jury.
The appellant, not witness Schmidt, was on trial charged with evading
taxes and appellant's income tax returns were the only ones pertinent to
the issue. Further, inquiry along this line would have served to
unreasonably prolong the trial, another proper consideration before the
court in making its ruling. We hold that no abuse of discretion has been
shown on the part of the trial court in limiting cross-examination of
the witness Schmidt.
[Testimony Concerning Defendant's Character]
Appellant also complains
that the prosecution was permitted to put appellant's character in issue
in its case in chief. An excerpt from the record is set out to show how
this alleged error occurred:
"Q. (Witness Schmidt
was asked when appellant requested him to destroy his records).
"A. Well, he was
constantly after me to ask me why I kept that daily work sheet, and I
told him I kept that for my records. He constantly told me to get rid of
them or, oh, I remember very closely after Mr. Berra was arrested, why
he called me up, and that was on George Washington's Birthday, the 22nd
of February.
"Q. Now, will you tell
the jury what the conversation was with Mr. Berra on George Washington's
Birthday?
"A. He called me up
and asked me--(At this point the court called a recess.)
After recess.
"The Court: This
witness was asked to describe a conversation on the 22nd of February, is
that correct?
"A. That is right.
* * *
"The Court: Just a
moment. I juderstood you to say it was after the defendant had been
arrested. Did you say that?
"A. No. No. I did say
it, but that is not correct.
"The Court: You better
clear that up before you get through your case, because that doesn't
correspond with the indictment. It is very material.
"Q. Mr. Schmidt, you
have mentioned, I believe, before the recess, something about the
defendant's arrest, that has nothing to do with this case, or with this
indictment at all?
"A. None
whatsoever."