Admissions
Page2
NCAA
regulations permit universities to award only thirteen basketball
scholarships per year. When Piggie's payments to these players were
discovered, the Universities became subject to NCAA penalties. Each
school lost the use of one of the thirteen scholarships and lost the
value of each player's participation due to the player's NCAA-required
suspension. The scholarships were forfeited, and the Universities lost
the opportunity to award the scholarships to other top amateur athletes,
who had actual eligibility to play intercollegiate basketball. In 1999
and 2000, UCLA lost the benefit of playing Jaron Rush, the $44,862.88
scholarship awarded to him, and also forfeited $42,339 in tournament
revenue;
Missouri
lost the benefit of playing Kareem Rush, and the $9,388.92 scholarship
awarded to him; and OSU lost the benefit of playing Williams and the
$12,180 scholarship awarded to him. Duke provided Maggette with a
$32,696 scholarship for the 1998-1999 season based upon the false
assertion that he was an eligible amateur. As a result of the ineligible
athlete's participation, the validity of Duke's entire 1998-1999 season
was called into question. 4
NCAA
regulations also required each of the four Universities involved to
conduct costly internal investigations after Piggie's scheme was
discovered. UCLA spent $59,225.36 on the NCAA-mandated investigation of
Jaron Rush, Duke spent $12,704.39 on the NCAA-mandated investigation of
Maggette, Missouri spent $10,609 on the NCAA-mandated investigation of
Kareem Rush, and OSU spent $21,877.24 on the NCAA-mandated investigation
of Williams. The total monetary loss to the Universities was
$245,882.79. The scandal following the disclosure of Piggie's scheme
caused further intangible harms to the Universities including adverse
publicity, diminished alumni support, merchandise sales losses, and
other revenue losses.
Pembroke
Hill
High School
(Pembroke), where Jaron and Kareem Rush
played high school basketball, sustained a loss of $10,733.89 in
investigative costs and forfeiture of property as a result of the
conspiracy. Pembroke was placed on probation by the State of
Missouri
after the violations of Jaron and Kareem Rush were discovered and a
mandatory investigation of the matter was concluded.
After
Piggie's guilty plea, the district court sentenced him to 37 months
imprisonment, three years supervised release, and $324,279.87 in
restitution.
II.
DISCUSSION
Piggie
contends the district court (1) miscalculated the losses, actual and
intended, in determining his Guidelines base offense level; (2) erred in
including consequential or incidental losses for restitution; and (3)
based the tax loss calculation on insufficient evidence. We will address
these issues in order.
A.
Loss Calculation
A
scheme to deprive a university of its right to the "honest
services" of college basketball players is within the definition of
mail and wire fraud, even if it results in a winning basketball program.
See United States v. Gray, 96 F.3d 769, 774-75 (5th Cir. 1996)
(finding wire and mail fraud prosecution appropriate for Baylor
University basketball coaches who schemed to obtain scholarships for
ineligible players). The coaches' scheme in Gray was fraudulent
"because Baylor did not get the quality student it expected . . .
[and Baylor] might have been able to recruit other qualified, eligible
students to play basketball."
Id.
at 775. Like the Universities and Pembroke, Baylor instead "was
forced to institute a costly investigation" and withhold players
from competition.
Id.
Piggie and his co-conspirators, the athletes, intentionally misled the
Universities into believing the athletes were amateurs. This caused each
University to be deprived of the honest services of an athlete as well
as the use of one of the basketball scholarships awarded annually. The
scheme also directly resulted in investigative costs and fines to ensure
compliance with NCAA regulations.
Piggie
argues the district court incorrectly calculated the amount of loss
attributable to him in enhancing his base offense level under the
Guidelines. See U.S.S.G. §2F1.1(b)(1) (2000). 5 We review
the district court's interpretation and application of the Guidelines de
novo.
United States
v. Oligmueller, 198 F.3d 669, 671 (8th Cir. 1999). Loss calculations
also involve factual findings, which we review for clear error and
reverse only if "we are left with the definite and firm conviction
that the district court erred."
United States
v. Whatley, 133 F.3d 601, 606 (8th Cir. 1998).
The
calculation method must be reasonable. The amount of loss "need not
be determined with precision."
Id.
The loss determination is not limited to money handled by Piggie, but
includes reasonably foreseeable losses caused by coconspirators, which
losses were part of the same conspiracy.
Id.
at 606-07.
In
calculating the amount of loss under section 2F1.1(b)(1) of the
Guidelines, the district court uses either the amount of the actual
loss suffered by the victims or the amount of loss the defendant intended
to cause the victims. U.S.S.G. §2F1.1 cmt. n.8(6); United States v.
Morris, 18 F.3d 562, 570 (8th Cir. 1994). In instances where the
actual and intended loss are not the same amount, the district court
uses whichever amount is greater.
Id.
In Piggie's case, the district court determined the greater loss for
consideration under the Guidelines was the intended loss to Pembroke and
the Universities, including forfeited scholarships, investigation costs,
and fines.
Piggie
contends on appeal that he did not intend any loss to the Universities,
because if the scheme had gone as he planned, the payments to the
players would never have been discovered and the Universities would have
incurred no loss. This self-serving argument fails in that it is
undisputed that Piggie intended to deprive the Universities, their
athletic conferences, and the NCAA of the intangible right to award
scholarships to amateur players and maintain a system of amateur
athletic competition. Even if his scheme had never been discovered, the
Universities would have been deprived of the services of honest, amateur
basketball players. We decline to accept Piggie's invitation to
calculate intended losses based upon Piggie's succeeding with his fraud
and deception. We agree with the district court that all of the losses
to Pembroke and the Universities were "intended as the natural and
probable consequences of the defendant's actions in this matter."
Piggie
argues under Oligmueller and similar cases that the full loss to
the Universities cannot be considered intended for the purpose of the
Guidelines, because Piggie never intended that the Universities would
suffer as a result of his scheme. See Oligmueller, 198 F.3d at
671; see also
United States
v.
Anderson
, 68 F.3d 1050, 1054-55 (8th Cir. 1995). In Oligmueller, when
a farmer secured a loan using fraudulent collateral, but fully intended
to pay the loan back, the intended loss calculation was zero and
the actual loss determined the sentence. Oligmueller, 198 F.3d at
671. The actual loss calculation was the entire value of the loan
reduced only by payments made from the "sale of pledged
assets."
Id.
Even though the bank received value in the form of payments made with
other assets, we refused to reduce the actual loss calculation
based upon those other payments.
Id.
Even if we were convinced Piggie's intentions were analogous to the
farmer's intentions in Oligmueller, and thus reduced the intended
loss calculation, Piggie's actions still caused the actual losses in the
amount of the full scholarships, fines, and investigative fees. The
Guidelines calculation utilizes whichever loss calculation is greater. Morris,
18 F.3d at 570. Supposing arguendo that Piggie intended the
Universities to receive some value from the athletes' participation in
intercollegiate basketball, Piggie's intent does not diminish the amount
of actual loss he caused the Universities and Pembroke.
Finally,
we agree with the district court that the greatest loss caused by
Piggie's fraud is the most difficult to appraise--the damage Piggie did
to the athletes' lives. Although Piggie's behavior does not excuse the
young athletes from the bad choices they made, these high school
students put their faith and trust in Piggie, counting on him to help
them develop their talent. Piggie took advantage of the trust these
young athletes placed in him and exploited their immaturity and
vulnerability. Instead of acting as a positive role model to the young
men in his care, Piggie led them down the path of corruption and
deception. As the district court stated, "bad decisions, wrong
decisions and career-threatening and devastating decisions were caused
to be made" and these decisions will no doubt have life-long
repercussions for each athlete involved.
We
therefore affirm the district court's loss determination.
B.
Restitution Award
The
district court ordered restitution under the Mandatory Victim's
Restitution Act of 1996 (MVRA), 18 U.S.C. §3663A. Piggie argues for the
first time on appeal that the district court committed plain error in
including incidental or consequential damages in the restitution award.
Restitution orders are reviewed for plain error when the defendant does
not preserve his challenge to the restitution order below.
United States
v. Riebold, 135 F.3d 1226, 1231 (8th Cir. 1998). Our plain error
review is "extremely narrow and is limited to those errors which
are so obvious or otherwise flawed as to seriously undermine the
fairness, integrity, or public reputation of judicial proceedings."
United States
v. Beck, 250 F.3d 1163, 1166 (8th Cir. 2001).
We
do not agree with Piggie that the district court committed plain error
in including the investigative costs and NCAA fines in the calculation
of the restitution order, because these investigative fees and fines are
not incidental or consequential damages. These losses were "caused
by the specific conduct that is the basis for the offense of
conviction." See United States v. Akbani, 151 F.3d 774, 780
(8th Cir. 1998) (citations omitted). The district court did not commit
plain error by including the investigative fees and fines in the
restitution order.
C.
Tax Loss Calculation
Piggie
argues the court clearly erred in calculating his gross unreported
income and tax due. Piggie contends on appeal the amount of tax loss
should have been $18,286, instead of $67,662.69 as determined by the
district court. Piggie argues the government had the burden of proving
the tax loss and the only documentation before the district court was
the pre-sentence report, to which Piggie had objected. On the contrary,
Piggie stipulated in the plea agreement that there was "a tax loss
of $67,662.69 for the period of 1995-1998." A defendant who
voluntarily accepts the provisions of a plea agreement cannot challenge
on appeal the punishment to which he willingly exposed himself, because
the defendant accepts both the benefit and the burden of the plea
agreement.
United States
v.
Durham
, 963 F.2d 185, 187 (8th Cir. 1992). We find the district court's
tax loss determination was not in error.
III.
CONCLUSION
For
the foregoing reasons, we affirm the opinion of the district court.
1
The Honorable Gary A. Fenner, United States District Judge for the
Western District of
Missouri
.
2
Piggie spent an unnecessary portion of his brief and oral argument
attempting to refute the allegation that a $5,000 payment he made to
Jaron Rush was a bribe for Jaron Rush to attend UCLA instead of the
University
of
Kansas
. The reason why Jaron Rush chose to attend UCLA is irrelevant to the
issues before us on appeal.
3
Young signed a contract in 1998, directly out of high school, to play
for the NBA Detroit Pistons, and did not play intercollegiate
basketball.
4
Maggette played the full 1998-1999 season for Duke before Piggie's
scheme was uncovered. At the time of the sentencing hearing, NCAA action
against Duke was still pending. Duke was subject to the forfeiture of
its second place finish in the 1999 NCAA Tournament and the loss of
$226,814.51 in tournament revenue.
5
The district court utilized the Guidelines in place at the time of
sentencing, section 2F1.1(b)(1) of the 2000 Guidelines. In November
2001, the Sentencing Commission consolidated section 2F1.1 with section
2B1.1.
[2001-1
USTC ¶50,370]
United States of America
, Plaintiff-Appellee v. Edward Louis Kotmair, Defendant-Appellant
(CA-4),
U.S.
Court of Appeals, 4th Circuit, 00-4139, 4/19/2001, 2001
U.S.
App. LEXIS 7200. Affirming an unreported District Court decision
[Code
Sec. 7203 ]
Failure to file returns: Willfulness: Evidence.--The district
court properly determined that an individual's failure to file tax
returns for three consecutive tax years was due to willfulness. He
stipulated that his income for the tax years at issue exceeded the
exemption amounts. Moreover, he failed to keep business records,
operated his business on a cash basis in amounts less than $10,000, and
was a member, and the son of the founder, of a tax protest organization.
[Code
Sec. 7203 ]
Failure to file returns: Conduct: Sophisticated means.--An
individual's sentence for failure to file tax returns was enhanced
because he failed to offer any evidence to refute information in a
presentence report indicating that he used sophisticated means to impede
discovery of the nature or extent of his offense.
Janice
McKenzie Cole, United States Attorney, Anne M. Hayes, David J. Cortes,
Assistant United States Attorneys, Raleigh, N.C., for
plaintiff-appellee. Gregory J. Ramage, Law Office of Gregory Ramage,
Raleigh
,
N.C.
, for defendant-appellant.
Before:
NIEMEYER, TRAXLER and GREGORY, Circuit Judges.
è
Caution: This court has designated this opinion as NOT FOR
PUBLICATION. Consult the Rules of the Court before citing this case.ç
Per
Curiam"
EC:
Edward Louis Kotmair was charged with willful failure to file tax
returns for the years 1990, 1991, and 1992, in violation of 26 U.S.C.A.
§7203 (West Supp. 2000). Kotmair stipulated that he did not file tax
returns for those years and that he had income in excess of the
exemption amount. The only issue at trial was whether Kotmair's failure
to file was willful. Following his convictions and sentence, Kotmair
appeals. We affirm.
Kotmair
first argues that counsel was ineffective for failing to call his father
as a defense witness and that the district court erred in denying his
motion for a new trial on this basis. Because Kotmair failed to present
argument supporting his challenge to the court's denial of his motion
for a new trial, it is waived on appeal. See Fed. R. App. P.
28(a)(6); Edwards v. City of Goldsboro, 178 F.3d 231, 241 n.6
(4th Cir. 1999).
As
for Kotmair's challenge to counsel's failure to call his father as a
witness, because the record on appeal does not conclusively demonstrate
ineffective assistance of counsel, we do not now address this issue. See
United States v. Richardson, 195 F.3d 192, 198 (4th Cir. 1999), cert.
denied, 528
U.S.
1096, 145 L.Ed.2d 704, 120 S.Ct. 837 (2000). Rather, Kotmair may raise
this claim in the district court in a 28 U.S.C.A. §2255 (West Supp.
2000) motion, if he so chooses.
Kotmair
next challenges the sufficiency of the evidence to support his
convictions. Kotmair stipulated that he did not file tax returns for
1990, 1991, and 1992, and that his income exceeded the exemption
amounts. The only issue before the jury was whether Kotmair's failure to
file was willful. See Cheek v. United States [91-1 USTC ¶50,012],
498 U.S. 192, 201-02, 112 L.Ed.2d 617, 111 S.Ct. 604 (1991). The trial
evidence, viewed in the light most favorable to the government, Glasser
v. United States, 315 U.S. 60, 80, 86 L.Ed. 680, 62 S.Ct. 457
(1942), showed that Kotmair had large amounts of income for the years in
question, he failed to keep business records, he conducted business
largely on a cash basis, he attempted to hide income and assets by
requiring payments in amounts less than $ 10,000, he belonged to a tax
protest organization, namely Save a Patriot Fellowship, he was notified
by the IRS of his duty to file a return, and his father--founder of Save
a Patriot--went to jail for his failure to file. This evidence was
sufficient for the jury to infer that Kotmair's failure to file was
willful. See Spies v. United States [43-1 USTC ¶9243], 317 U.S.
492, 499-500, 87 L.Ed. 418, 63 S.Ct. 364 (1943) (finding that inference
of willfulness may arise from attempts to conceal income or assets,
failure to keep books or records, and conducting business largely on
cash basis); United States v. Turano [86-2 USTC ¶9714], 802 F.2d
10, 12 (1st Cir. 1986) (inference of willfulness from tax protest
activities); United States v. Shivers [86-1 USTC ¶9404], 788
F.2d 1046, 1048 (5th Cir. 1986) (inference of willfulness from disregard
of notices informing of duty to file); United States v. Ostendorff
[67-1 USTC ¶9204], 371 F.2d 729, 731 (4th Cir. 1967) (allowing
inference of willfulness from pattern of failure to file). We find that,
taking the evidence in the light most favorable to the government, any
rational juror could have found Kotmair guilty beyond a reasonable
doubt. Glasser, 315 U.S. at 80; United States v. Saunders,
886 F.2d 56, 60 (4th Cir. 1989) (holding that in resolving sufficiency
of evidence, appeals court does not weigh evidence or review credibility
of witnesses).
Kotmair
next argues that the district court clearly erred in determining that
the amount of tax loss exceeded $ 350,000. He asserts that applying the
tax loss computation rules in U.S. Sentencing Guidelines Manual §2T1.2(a)
(1992), for the years 1990, 1991, and 1992, yields a tax loss of $
166,889.21. In computing the tax loss, however, Kotmair failed to
include all relevant conduct. The tax loss computation should include
losses suffered by the federal and state governments in the years of
conviction as well as other years in which the defendant's failure to
file was "part of the same course of conduct or common scheme or
plan," unless clearly unrelated. USSG §2T1.2, comment. (n.3); see
United States
v. Bove, 155 F.3d 44, 47 (2d Cir. 1998); United States v. Powell,
124 F.3d 655, 663-65 (5th Cir. 1997). We find that the district court
properly considered losses from years other than the years of conviction
and losses to the states in computing the tax loss attributable to
Kotmair, and therefore did not clearly err in adopting the
recommendation in the presentence report that the total tax loss
exceeded $ 350,000. See
United States
v. Daughtrey, 874 F.2d 213, 217 (4th Cir. 1989).
The
final issue Kotmair raises is whether the district court clearly erred
in enhancing Kotmair's offense level by two for the use of sophisticated
means to impede the discovery of the nature or extent of his offense.
"Sophisticated means" includes"conduct that is more
complex or demonstrates greater intricacy or planning than a routine tax
evasion case." USSG §2T1.2, comment. (n.2). The district court
applied the enhancement after noting that Kotmair engaged in structuring
and laundering of his income to prevent the creation of currency
transaction reports. Because Kotmair failed to offer any evidence to
refute the findings in the presentence report, there was no clear error
by the district court in adopting these findings. See
United States
v. Love, 134 F.3d 595, 606 (4th Cir. 1998);
United States
v. Terry, 916 F.2d 157, 162 (4th Cir. 1990).
In
conclusion, we affirm Kotmair's convictions and sentence. We dispense
with oral argument because the facts and legal contentions are
adequately presented in the materials before the court and argument
would not aid the decisional process.
AFFIRMED
[74-1
USTC ¶9312]
United States of America
, Plaintiff-Appellee v. Randall L. Parks, Defendant-Appellant
(CA-5),
U. S. Court of Appeals, 5th Circuit, No. 73-2786, 2/7/74, Aff'g
unreported District Court decision
[Code Sec. 7201]
Crimes: Tax evasion: Defenses.--A trailer park operator was
properly convicted of evading 1966 and 1967 income taxes. The bank
deposits method of reconstructing income adduced sufficient evidence to
support the jury's verdict. Moreover, the government's proof did not
depart impermissibly from its bill of particulars and it was not error
to admit a statement of the taxpayer's accountant that tended to show
that the taxpayer was aware of his liability.
William
H. Stafford, United States Attorney, J. Worth Owen, Assistant United
States Attorney, Pensacola, Fla., Scott P. Crampton, Assistant Attorney
General, Meyer Rothwacks, John P. Burke, Richard B. Buhrman, Department
of Justice, Washington, D. C. 20530, for plaintiff-appellee. Lacy
Mahon
,
77 Washington St.
,
Jacksonville
,
Fla.
, for defendant-appellant.
Before
GEWIN, COLEMAN and MORGAN, Circuit Judges.
PER
CURIAM:
Randall
L. Parks appeals from the district court's judgment of conviction for
evading and defeating his income tax in violation of 26 U. S. C. §7601.
Parks challenges the sufficiency of the Government's evidence which
resulted in the jury's verdict of guilty. Further, he alleges that the
Government's proof departed impermissibly from the method of proof
delineated in its bill of particulars and trial brief. Finally, Parks
contends that the trial court erred in admitting into evidence an
admission of his accountant which tended to show that he was aware of
his tax liability.
During
the years in question, 1966 and 1967, Parks operated a trailer park and
rented apartments in
Pensacola
,
Florida
. For the tax year 1966, appellant reported a negative net taxable
income of $2,036.39 and in 1967, a net taxable income of $8,555.77. For
each year, the appellant reported a tax liability of zero.
To
prove its case of tax evasion against Parks, the Government utilized the
bank deposits and cash expenditures method of proof. Under this method
the Government must demonstrate that the taxpayer has a business of a
lucrative nature and that during the tax years in question, the taxpayer
made regular periodic deposits of money in bank accounts in his own name
or in accounts over which he exercised control. Where the annual
deposits exceed exemptions and deductions, the balance represents
taxable income to the taxpayer. We have previously approved this method
of proof. See Escobar v. United States [68-1 USTC ¶9125], 388 F.
2d 661, 667 (5th Cir. 1967), cert. denied, 390 U. S. 1024, 88 S. Ct.
1141, 20 L. Ed. 2d 282 (1968); Holbrook v. United States [54-2
USTC ¶9640], 216 F. 2d 238, 240 (5th Cir.), cert. denied, 349 U. S.
915, 75 S. Ct. 605, 99 L. Ed. 1249 (1955).
Viewing
the evidence in a light most favorable to the Government, the jury
verdict is amply supported by the facts. Glasser v.
United States
, 315
U. S.
60, 62
S. Ct.
457, 86 L. Ed. 680 (1942). The Government's evidence established that
appellant's income for 1966 amounted to over $26,000.00 and in 1967 to
over $39,000.00. This resulted in a tax liability of $6,341.86 for 1966
and $5,963.92 for 1967. At trial appellant and his wife attempted to
show that they entered the tax years under scrutiny with a substantial
amount of cash on hand. This position was taken despite the fact that
appellant had inconsistently informed IRS agents during their
investigation that he had never carried over $1,000 in cash on hand at
any one time. Whether appellant's allegations were to be given credence
was a question for the jury. By its verdict, appellant's attempted
cash-on-hand defense was rejected.
Appellant's
final two contentions are equally without merit. The Government's bill
of particulars informed appellant adequately of the facts which it
intended to prove and the evidence subsequently submitted for the jury's
consideration did not vary from the essential facts delineated in the
bill of particulars or its trial brief. Furthermore, admissions of a
taxpayer's agent within the scope of his employment, here an accountant,
are admissible against the taxpayer in a tax evasion prosecution. See
Hayes v.
United States
[69-1 USTC 9204], 407 F. 2d 189, 192 (5th Cir. 1969).
Accordingly,
the judgment of conviction is affirmed.
[58-2
USTC ¶9829]
United States of America
v. Harry J. Alker, Jr., Appellant
(CA-3),
U. S. Court of Appeals, 3rd Circuit, No. 12,313, 260 F2d 135, 9/10/58,
Affirming an unreported District Court decision
[1939 Code Sec. 145(b)--similar to 1954 Code Sec. 7201]
Criminal prosecution for tax evasion: Understatement of income:
Sufficiency and admissibility of evidence: Improper question:
Instructions to jury: Expert witness: Circumstantial evidence: Motion
for continuance.--Taxpayer was convicted on charges of willful tax
evasion under 1939 Code Sec. 145(b) for failure to report substantial
amounts of income for 1947, 1948, 1949, and 1950. In denying a motion
for a new trial the Third Circuit ruled against taxpayer on all of his 5
assignments of error, as follows: (1) taxpayer contended that the
evidence was insufficient to support the verdict in that certain
documents introduced to establish the amount of professional fees earned
by taxpayer during the indictment years were admissions which were not
properly corroborated under the rule laid down in Smith v. U. S.
[348 U. S. 147, 54-2 USTC ¶9715]. The Court held that not only was the
challenged evidence properly substantiated under the Smith rule,
but the undisputed proof adduced concerning taxpayer's income from
dividends and interest was, in itself, sufficient to sustain the
government's burden of showing understatement. (2) A hypothetical
question put to one of defendant's character witnesses in
cross-examination, in which the examiner assumed unproven facts and
asked for the witness' opinion based thereon, though improper, was
non-prejudicial, harmless error. (3) The Court did not err in refusing
to give two instructions tendered by taxpayer when the points involved
were adequately covered by the Court's own instructions. (4) There was
no error in admitting the testimony of an expert witness merely because
he may not have considered all the factors suggested by a Revenue
Regulation in formulating his opinion as the value of some stock
transferred to taxpayer in payment of a legal fee; nor was it error to
allow evidence of taxpayer's failure to file any return for 1946, that
offense not having been charged, because that fact was relevant on the
question of the falsity of a statement in taxpayer's 1947 return that he
had filed for the previous year. (5) Taxpayer's motion for a
continuance, made after an initial delay of six months had already been
granted, was denied within the Court's discretion when the evidence
offered failed to establish that taxpayer was physically and emotionally
unprepared for the trial.
Raymond
J. Bradley, 2015 Land Title Bldg., Philadelphia 10, Pa., for appellant
John A. Erickson, U. S. Court House, Philadelphia 7, Pa., for appellee.
Before
BIGGS, Chief Judge, KALODNER, Circuit Judge, and WRIGHT, District Judge.
Opinion
of the Court
WRIGHT,
District Judge:
The
appellant, Harry J. Alker, Jr., an attorney, was convicted on willfully
attempting to defeat and evade the income tax by filing a false and
fraudulent return for each of the taxable years 1947, 1948, 1949 and
1950 pursuant to 26 U. S. C. A. §145(b). The several years constituted
separate counts in the indictment. Confinement for one year and a day
and imposition of a $10,000 fine were decreed on each of the first three
counts; the periods of imprisonment to run concurrently. On count four,
appellant was sentenced to three years imprisonment to run consecutively
with the sentence imposed on counts one, two and three. Execution on the
fourth count was suspended and appellant was placed on probation for
three years provided that within the first year bona fide efforts are
made to conclude all matters involving tax liabilities between himself
and the
United States
. This appeal followed.
The
grounds urged for a new trial are set forth below:
1.
The evidence was insufficient to support the verdict.
2.
Defendant's motions for the withdrawal of a juror because of the
improper cross-examination of one of his character witnesses should have
been granted.
3.
Defendant was prejudiced by the trial judge's failure to charge as
requested.
4.
Defendant was prejudiced by the trial judge's erroneous rulings on the
admission of evidence;
(a)
The trial judge erred in admitting the opinion testimony concerning the
value of the Freihofer stock.
(b)
The trial judge erred in admitting evidence concerning defendant's
failure to file an income tax return for 1946, a year prior to the years
covered by the indictment.
5.
Defendant was deprived of a fair trial because of the denial of his
motion for continuance.
The
contentions will be considered seriatim.
[Sufficiency
of the Evidence]
I.
Section 145(b) of the 1939 Internal Revenue Code in pertinent part
states: 1
"*
* * 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."
Proof
that a taxpayer had net income greater than the amount disclosed in his
return requiring the payment of a tax substantially in excess of that
reported coupled with independent evidence that the understatement was
Willful is a violation of the denominated provision. 2
The
Government sought to sustain its burden of showing that appellant had
net income greater than the amount reported by evidence of specific
items of revenue purportedly received in the examination period.
Appellant concedes, as he must, that the proof adduced would have
enabled the triers to conclude that he had significantly understated his
net income and correspondent tax liability for each of the indictment
years. 3 The question
presented is whether documents were sufficiently corroborated within the
purview of Smith v.
United States
. 4 There the
Supreme Court adopted for income tax prosecutions, the general rule that
an accused cannot be convicted on his own uncorroborated confession. The
opinion extended the doctrine to admissions at least where the statement
is made after the fact to an official charged with investigating the
possibility of wrongdoing, and the statement embraces an element vital
to the Government's case. 5 Reference to
the instant trial record is indicated to determine the exact application
of the declared principles.
[Reconstruction
of Defendant's Income]
At
the commencement of proceedings the Government introduced appellant's
returns for 1947, 1948, 1949 and 1950 which disclosed the following
data: 6
Fig.
1
Year Net Income or (Loss) Tax
1947 .... ($11,238.54) None
1948 .... ($10,204.29) None
1949 .... $14,975.77 $3,643.11
1950 .... ($27,512.02) None
The prosecution then proceeded to reconstruct appellant's true income
for the period. Income from three principal sources was revealed:
Professional fees; dividends and interest; directors' fees.
The
dividend/interest figure was substantiated by testimony from
representatives of the various corporations whose stocks and/or bonds
were registered in the name of appellant. Cancelled checks were produced
by these witnesses disclosing that the instruments were payable and
endorsed by appellant.
The
evidence concerning directors' fees consisted primarily of testimony by
duly designated officials from the corporations of which appellant was a
director coupled with production of cancelled checks payable and
endorsed by appellant. Entries transcribed from appellant's books
established the remaining fees emanating from this source.
The
largest item of unreported income involved earnings from appellant's
thriving law practice. These sums were substantiated in part by direct
testimony of clients which was documented where possible. In addition,
transcriptions from appellant's books by revenue agents were submitted.
Further, the Government relied on certain statements and schedules
prepared by appellant or his accountant compiled for purposes of audit
during
admin
istration of the Hurst and Freihofer estates. It is noted that the last
mentioned documents were rendered by appellant in his capacity as
executor of the estates. Finally, cancelled checks signed by appellant
as executor of the Hurst and Freihofer estates which were submitted by
him to Federal and State auditors of the estates were introduced.
From
the previously noted evidence the Government summarized and presented
what it deemed a fair representation of appellant's income for the
crucial period. A qualified Revenue Agent prepared and submitted this résumé
to the triers. 7 In relevant
part it disclosed the following: 8
Fig.
2
Year Reported Corrected Additional
Net Income
1947 ............ ($11,238.54) $ 79,450.88 $ 90,689.42
1948 ............ (10,204.29) 46,968.85 57,173.14
1949 ............ 14,975.77 20,171.37 5,195.60
1950 ............ (27,512.02) 161,224.77 188,736.79
Totals .......... ($33,979.08) $307,815.87 $341,794.95
Tax Liability
1947 ............ -0- $ 46,131.71 $ 46,131.71
1948 ............ -0- 20,900.71 20,900.71
1949 ............ $ 3,643.11 5,888.57 2,245.46
1950 ............ -0- 109,720.69 109,720.69
Totals .......... $ 3,643.11 $182,641.68 $187,998.57
[Evidence Claimed to be Uncorroborated Admissions]
Appellant
does not challenge the Government's proof elicited pertinent to the
dividend, interest and director fee sources. The sole contention herein
relevant is that certain documents introduced with respect to
professional fees were admissions requiring corroboration, which was
lacking. Appellant urges that if the questioned exhibits be discarded
the evidence is insufficient to sustain a finding that his net income
was understated for 1947, 1948, 1949 and 1950. 9 The
contested exhibits are Government's G-44, 71, 77, 78, 94, 95, 96, 97,
100 and 101. To properly delineate the issues the contents of these
documents will be briefly set forth:
Exhibit
G-44 consists of 24 checks drawn on the estate of Winfred S. Hurst and
payable to Harry J. Alker, Jr., (the drawer of the checks was Harry J.
Alker, Jr., Executor of the estate of Winfred S. Hurst). The earliest of
the 24 is dated January 20, 1950; the last October 12, 1950. They range
in amount from $500 to $7,000 and total $90,206.49. The checks were
submitted by appellant to the Internal Revenue Service in connection
with the audit of estate tax return in the
Hurst
estate wherein the appellant was executor and attorney. Revenue Agent
Gurbag, who received the checks testified that defendant related they
were in payment of a fee for services to the decedent during his
lifetime, his executor's commission and his fee as attorney for the
estate. These checks were furnished to substantiate particular
deductions for debts and
admin
istration expenses claimed upon the estate tax return. G-44 was admitted
without objection.
Exhibit
G-71 comprises the original notes of testimony transcribed at a hearing
on May 14, 1951 by Frank Rogers Donahue, Esq., the auditor of the estate
of William Freihofer, pursuant to the direction of the Philadelphia
Orphans' Court by whom the auditor was duly appointed. Harry J. Alker
was both executor and counsel for the Freihofer estate. At the May 14
hearing Alker submitted in his official capacity, at the auditor's
request, a list of expenses paid by him from the estate denominated
attorney's fees. The statement was prepared from the records of the
estate by Rhoads, appellant's accountant and bookkeeper. It disclosed
numerous payments to Hall, Bruce & Alker, Attorneys, aggregating
$92,100 for 1947, $32,600 for 1948 and $148,000 for 1949. Mr. Donahue
personally testified and identified G-71.
With
reference to the information set forth in the exhibit A. D. Bruce, Esq.,
testified that he was assocated with Alker during the years 1947, 1948
and 1949 and that he received for his services relating to the Freihofer
estate $5,000 in 1947 and $10,000 in 1949. He identified exhibit D-3, a
check dated July 19, 1949 for $10,000 which he stated represented the
1949 payment.
Edwin
Hall, II Esq., testified he had been associated with Alker from 1947
through 1950, and that his fees from the Freihofer estate were $5,000 in
1947, $500 in 1948 and $30,000 in 1949.
G-77
is a statement of
admin
istrative expenses for the years 1947 and 1948 in the estate of William
Freihofer voluntarily presented by Alker to auditors of the Internal
Revenue Service. It lists certain legal fees paid to Alker as counsel
and claimed by him in his executor capacity as deductions from the gross
estate. The Revenue Service representatives were interested in the
Freihofer estate tax return and the record is void of any evidence that
they were investigating the subject matter of the present prosecution.
Accompanying
G-77 was G-78 consisting of 8 cancelled checks drawn on the Freihofer
estate and payable to Alker submitted by appellant to the Federal
auditors of the estate to substantiate G-77.
G-94
and G-95 are transcripts prepared from appellant's fee ledger and cash
book by agent Segal for the years 1947 and 1948. The transcriptions were
made with appellant's consent in his law office. G-94 discloses that in
1947 Alker received fees of $97,122.44, and commissions of $4,928.84
totaling $102,051.28 less $3,585 paid to other attorneys. G-95 shows for
1948 total legal fees, directors' fees and commissions of $117,988.24,
dividends of $2,181.68 and fees paid to other lawyers of $14,397.09.
G-96
is a list prepared by appellant's accountant, Rhoads, and submitted by
defendant to former Revenue Agent, Mednick, during the course of the
latter's investigation. The list purports to contain data concerning
appellant's legal fees, directors' fees, commissions, rental income and
payments made to other lawyers for 1949. It reflects total income of
$239,457.22 and payments to other lawyers of $101,490; among which there
appears a payment of $6,000 to David Griffith.
G-97
is a schedule prepared by appellant's accountant, Rhoads, and submitted
by appellant to former agent Mednick, during the course of the latter's
investigation. The list purports to show defendant's legal fees and
payments made to other lawyers for 1950. It indicates legal fees of
$60,253.46 and payments to other lawyers of $11,811.25.
G-100
is a transcript of defendant's fee ledger prepared by former Revenue
Agent Mednick, during the course of his investigation. It lists all fees
and commissions in excess of $500 which had been entered in the fee
ledger and some fees and commissions that were less than the stated
amount. Also listed were payments to other lawyers appearing in the fee
ledger. The transcript pertains to 1947 and 1948 and discloses total
fees and commissions of $9,373.63 for 1947, less payments to other
lawyers of $2,335 and total fees and commissions of $88,433.50 for 1948,
less payments to other lawyers of $14,522.09.
G-101
consists of entries copied by agent Mednick from appellant's 1946 fee
account which divulged fees received in January, 1947 of $3,000.
The
court is unable to subscribe to appellant's view that all of the
aforementioned documents are admissions and therefore subject to the
strict legal rules pronounced by the Supreme Court. 10 The 24
cancelled checks comprising G-44 drawn on the estate of Winfred Hurst
and payable to Harry J. Alker, Jr., totaling $90,206.49 represent the
best evidence available in reconstructing appellant's 1950 income. Not
even an appropriate assertion of privilege could have foreclosed their
introduction into evidence. 11 Likewise,
G-78 consisting of 8 cancelled checks drawn on the Freihofer estate and
payable to Alker cannot properly be characterized as statements of the
accused. To deny the triers access to these instruments unless
independently substantiated could hardly be deemed more than a device
calculated to impede the efficient
admin
istration of justice. The considerations enunciated by Mr. Justice Clark
in support of the corroboration rule are manifestly inapplicable to G-44
and G-78. 12
G-71
although unable to claim the sanctity accorded G-44 and G-78 is
similarly not susceptible to appellant's characterization. The portion
of the document particularly relevant is the schedule of fees and
expenses incurred by the Freihofer estate during the course of its
admin
istration. The information submitted by Rhoads, appellant's accountant,
was prepared from the records of the estate, a distinct entity. 13 The
schedule was not limited to sums paid to appellant's law firm but
included all expenditures within the denominated classification for the
years 1932-1949. 14 Cancelled
checks of the estate formed an essential source of Rhoads' report. 15 Against
this background it would seem that the schedule restricted to payments
during the indictment years is a form of direct evidence similar to the
testimony elicited from the parade of Government witnesses concerning
payments to the appellant.
The
record is replete with materials tending to substantiate the accuracy of
G-71. The schedules are directly traceable with minor exceptions into
appellant's office bank statements and duplicate deposit slips. 16 In
addition, all but two cancelled checks comprising G-78 are accounted for
in G-71. The two not disclosed on the schedule appear on appellant's
bank statement and duplicate deposit slips under appropriate date.
Exhibit
G-77, a statement submitted by appellant to Federal auditors of the
Freihofer estate, presumably prepared from the accounts of the estate,
complements substantially the Orphans' Court report previously
discussed. All items appearing therein with few exceptions, tie directly
into appellant's bank statements and duplicate deposit slips. The
accuracy of the transcription is further supported by the cancelled
checks forming G-78.
With
respect to the remaining enumerated documents there is perhaps merit to
the contention that they should be considered statements of the accused
whether they be technically denominated an admission or not. The Smith
principle, 17 however,
does not expose all statements of an accused to corroboration. The
Supreme Court precisely stated: "We hold the rule applicable to
such statements, at least where, as in this case, the admission is made
after the fact to an official charged with investigating the possibility
of wrongdoing, and the statement embraces an element vital to the
Government's case." 18 The quoted
passage clearly attempted to confine the rule to the immediate facts. It
was neither intended to require all "admissions" submit to the
test nor to exclude from the doctrine statements made before the fact to
a party in a nonofficial capacity. For example it would be manifestly
unfair to permit unverified financial statements submitted at the
request of a merchant for credit purposes to sustain independently the
burden of tax understatement. On the other hand, footnote 3 of the
Opinion recognizes that admissions under special circumstances,
providing grounds for a strong inference of reliability may not have to
be corroborated. 19 Thus, it is
the policy the rule serves, that is paramount in deciding the need for
corroboration.
There
is no constraint in the instant case, however, to determine whether the
remaining contested documents G-94, 95, 96, 97, 100 and 101 are
admissions necessitating corroboration. For as will presently be
demonstrated, the record is replete with the requisite independent
substantiation.
The
standard pronounced in Smith may be met either by independently
establishing the crime, or corroborating the admission. At page 157 Mr.
Justice Clark states: 20
"Under
the above standard the Government may provide the necessary
corroboration by introducing substantial evidence, apart from
petitioner's admissions, tending to show that petitioner willfully
understated his taxable income. This may be accomplished by
substantiating the opening net worth directly, * * *.
"But
substantiating the opening net worth is just one method of corroborating
these extra judicial statements. Petitioner's admissions may also be
corroborated by an entirely different line of proof--by independent
evidence concerning petitioner's conduct during the prosecution period,
which tends to establish the crime of tax evasion without resort to the
net worth computations. * * *"
In
the present prosecution the extrinsic evidence was sufficient to meet
both measures.
[Testimony Concerning Professional Fees]
The
majority of the sixty witnesses called by the Government testified to
specific payments made to appellant either for legal services,
dividends, interest or directors' fees. Cancelled checks were produced
to substantiate their testimony. From the record and stipulation of
counsel, the general purport of this testimony pertinent to professional
fees is set forth:
Witness
Michie, a partner in the firm of Andrew Y. Michie & Sons of
Philadelphia
stated that Harry J. Alker, Jr., as counsel for the firm received $500
in 1947, $1,000 in 1948 and $2,000 in 1949.
Witness
Culleton, an accountant employed by Chandler Laboratories, Inc.
testified that the company in 1947 paid Harry J. Alker, Jr., $559.05 for
legal services.
Witness
Frazier, the secretary and assistant treasurer of Phillips & Jacobs,
Inc. testified that Harry J. Alker, Jr., as company's counsel received
$3,500 in 1947, $2,000 in 1948, $2,500 in 1949 and $2,500 in 1950.
Witness
Geuther, an attorney, stated that he and Alker were counsel for the
executors of the Peiffer estate and that in 1949 a check for $2,500 was
issued by the executors as attorney's fees. The witness endorsed the
check to Alker and received his check for $1,250.
Witness
Palermo
, co-executor of the Griffith Estate, testified that Alker was paid
$25,000 (1948-$9,500; 1949-$6,500; 1950-$9,000) for services performed
on behalf of the estate. The cancelled checks supporting the payments
were marked Exhibit G-11.
Witness
Lohmar, the comptroller of Mrs. Smith's Pie Co. stated that Alker was
counsel for the company. In 1949 and 1950 he was paid counsel fees of
$2,000 and $2,800 respectively.
Witness
Guth, an attorney, stated that in 1949 a fee of $6,000 was paid to
Alker, who in turn issued checks totaling $5,000 to the witness and
another attorney as their share of the fee.
Witness
Hartnett, secretary-treasurer of Penn Paper & Stock Co. testified
that Alker had been paid counsel fees of $5,000 in 1947, $5,000 in 1948,
$1,000 in 1949 and $6,000 in 1950.
Witness
Andriuzze, treasurer of Linen Thread Co. stated that Alker had been paid
$500 in counsel fees for each year covered by the indictment.
Witness
Ward, an attorney
admin
istering the estate of Lemuel B. Schofield, Esq., disclosed that the
decedent had paid appellant $3,650 in 1947 as his share of a legal fee
in connection with settling the Neville Estate and the Daniel Murphy
Trust.
Witness
Branin, a trust officer of the Girard Trust Corn Exchange Bank,
testified that the bank was fiduciary for the Reeves and Bunting Estates
which records divulged payments for legal fees to Alker of $500 in 1948
$500 in 1949 and $2,000 in 1950.
Witness
Reissinger, treasurer of Paper Corporation of
United States
, testified Alker received $750 in 1949 for legal services.
Witness
Wilkinson, a record's clerk employed by Tradesmens Bank & Trust Co.
of Philadelphia, testified that Alker was paid $5,000 in legal fees in
1948.
Witness
MacDonnell, first assistant clerk of the Philadelphia Orphans' Court,
stated that the records of various estates disclosed attorney's fees
received by Alker of $1,106.50 im 1947, and $4,443.50 in 1948.
Witness
Dorch, secretary-treasurer of Freihofer Baking Co. testified to the
following payments made to Alker for legal services: 1947-$1,100.15;
1948-$2,500; 1949-$2,500.
Witness
Sarah Freihofer, testified she sent appellant a certificate for 2,000
shares of William Freihofer stock in December, 1950 with the
understanding that appellant was to transfer to himself 200 shares as
payment for legal services. On one occasion on cross-examination,
witness Freihofer stated that the posting of the certificate might have
been in January, 1951 instead of December, 1950. 21
Witness
Lucy M. Hurley, testified that she was a companion of Mrs. Freihofer and
that under the direction of Mrs. Freihofer she sent by registered mail a
stock certificate representing ownership of 2,000 shares of William
Freihofer stock to appellant's law office in December, 1950. 22
Appellant's
letter of February 12, 1952 to Agent Mednick recites that 50 shares of
the questioned Freihofer stock were received in 1948, 100 shares in
1949, and 50 shares in 1950. 23
A
guilty verdict having been returned, the Government is entitled to the
inference that the jury found beyond a reasonable doubt the stock was
received in the indictment period. 24 The
Government alleged a $510 per share value; 25 appellant
contends the value at receipt date was $200. 26
[Gross
Income Data Tabulated]
A
tabulation of the amounts indicated by the direct testimony coupled with
receipts from the Freihofer and Hurst estates as set forth in G-44,
G-71, G-77, G-78, and the dividends, interest and directors' fees shown
on the Government's résumé G-102, which sums appellant concedes were
founded upon substantial evidence, discloses:
Fig.
3
Source 1947 1948 1949 1950
Witness testimony Legal fees ..... $ 15,915.70 $30,443.50 $ 26,750.00 $124,800.00
Freihofer Estate G-71, 77, 78 .... 91,600.00 50,083.55 148,000.00
Hurst
Estate G-44 ................ 90,206.49
Total from Profession ............ $107,515.70 $80,527.05 $174,750.00 $215,006.49
Dividends G-102 .................. 2,523.60 8,257.55 10,466.40 20,186.75
Directors' fees G-102 ............ 605.00 675.00 750.00 615.00
$110,644.30 $89,459.60 $185,966.40 $235,808.24
Comparing
the professional fees set forth in the preceding chart with the gross
receipts from profession listed in appellant's returns, reveals in each
instance substantial nonreporting and understatement:
Fig.
4
1947 1948 1949 1950
Figure 3 ... $107,515.70 $80,527.05 $174,750.00 $215,006.49
Per appellant's returns G-1, G-2, G-3,
G-4 ....................................... 68,307.79 66,808.45 137,967.22 *53,103.63
Difference ................................ $ 39,207.91 $13,718.60 $ 36,782.78 $161,902.86
Since appellant has challenged the competency of the Government's case
solely with respect to receipts from appellant's profession, and there
being no material dispute pertinent to deductions and exemptions
claimed, these charts illustrating in summary form data which the court
deems admissible without corroboration and the comparisons and
conclusions drawn therefrom are particularly significant in view of the
narrow issue under consideration. 27
In
neither appellant's 1947 nor 1948 return was any sum styled dividends or
interest reported. For 1949 and 1950 appellant included in his return as
dividends $3,005.50 and $8,143.25 respectively; in both instances the
amounts were significantly less than the proof adduced. The evidence
thus portrayed renders appellant's contention untenable and,
accordingly, demonstrates that the Government has shouldered the burden
of understatement.
[Sufficient
Independent Evidence of Understatement]
In
addition to the foregoing, the second standard pronounced in Smith v.
Commissioner is similarly met. 28
Specifically there was sufficient independent evidence to corroborate
contested documents G-94, 95, 96, 97, 100 and 101.
G-94,
95, 100 and 101 as noted were transcripts of appellant's books and
records prepared by Revenue Agents. The individual entries to a large
extent are traceable into appellant's bank statements and duplicate
deposit slips. 29 Further,
exhibits G-71, 77 and 78, and the testimony elicited from the
Government's witnesses are directly referable to the transcripts.
Considering the nature of the documents and their inherent degree of
reliability, together with the denoted substantiation, can but lead to
the singular conclusion that corroboration was present.
G-96
and G-97 having been prepared by appellant's accountant during the
course of investigation are unquestionably representative of the class
of documents termed suspect by the Supreme Court not only from the
standpoint of the accused but also from the Government's position. 30 They have
been, however, sufficiently corroborated to this court's satisfaction to
be rendered competent. Cancelled checks, produced by the appellant,
account for all but $566.25 of $11,811.25 listed on schedule G-97 as
fees paid to others. With this degree of substantiation established, the
Government, although not bound to accept the amounts denoted as fees,
should be able to employ those portions of the document it desires.
Additional verification pertinent to the fee aspect was accorded by
direct testimony. G-96 covering fees and payouts for 1948 was subjected
to similar tests and was found to be sufficiently reliable for purposes
of jury consideration.
Thus
evaluated the court concludes that the evidence adduced under any
standard was competent to sustain a finding of substantial
understatement.
[Willfulness
Adequately Proved]
Appellant
next urges that the element of willfulness was not present. The court is
keenly aware of the judicial construction requiring its independent
existence 31 which may
be proved as other factual questions by direct or circumstantial
evidence. 32 The
requisite proof may take a wider range than is normally allowed in
support of annexed issues, otherwise, there would often be no means to
disclose the purpose of the act in which the very gist of the offense
may consist. 33 Mere
understatement of tax liability, however, is insufficient to sustain the
burden. 34 The instant
record is replete with independent substantiation of the charge.
Properly
before the triers were the following factors which have been
decisionally cited as evidencing the proscribed conduct. First, the
record discloses that the appellant was an attorney specializing in
estate and tax matters. The jury was therefore entitled to infer that an
astute practitioner learned in the area of taxation is required to file
returns fairly reporting income, subject to taxation. 35 Second,
although mere understatement of tax liability cannot substantiate the
charge, consistent understatement is evidence of willfulness. 36 Third,
appellant's nonreporting of dividends or interest in 1947 and 1948 was a
factor to be considered by the jury in view of the professional
attainments of appellant. 37 Fourth, the
belated filing of returns is a determinant, especially where the
appellant knows an investigation of his tax liability for prior years
has commenced and other acts of concealment have been demonstrated. 38 Fifth,
evidence that appellant did not file a return for 1946 when, in fact, he
declared in his 1947 return he had so filed, under the present
circumstances was suitable to indicate willful conduct. 39
In
view of the foregoing appellant's contention is deemed meritless.
[Improper
Cross-examination]
II.
Appellant's second assignment of error involves the permissive bounds of
cross-examination applicable to a character witness. The examination
complained of is set forth below: 40
".
. . William J. Hamilton, Jr., a member of the Board of Revision of Taxes
of Philadelphia, . . .
"(a)
'Q. Now, you have told us that you know him and know other people who
know him as a good character, as a law-abiding citizen. Have you heard
that he was under indictment in what is known as the
Hurst
estate?
`A.
No. No.'
"(b)
'Q. Mr. Hamilton, have you heard that the defendant, Mr. Alker, is
awaiting a hearing on disbarment proceedings in Norristown,
Montgomery
County
?
`A.
No.'
"(c)
'Q. . . . Have you heard that Mr. Alker's right to practice with a
Treasury Card before the Revenue Service has been withdrawn?
`A.
No.'"
Counsel
for appellant timely objected to each of these questions and moved for
the withdrawal of a juror. The trial court overruled the motion and
objection but cautioned the jury as follows: "I say to you that
regardless of the answers of the witness or witnesses you are not to
assume that the incident asked about actually took place. All that is
happening is that the witnesses' standard of opinion of the reputation
of the defendant is being tested." 41
Both
appellant and appellee rely on Michelson v. U. S. 42 in support
of their respective positions. There the Supreme Court held the scope of
permissive cross-examination of character witnesses is a matter
peculiarly reserved for the sound judgment of the trial judge to be
reviewed solely for prejudicial abuse of discretion.
"*
* * Both propriety and abuse of hearsay reputation testimony, on both
sides, depend on numerous and subtle considerations difficult to detect
or appraise from a cold record, and therefore rarely and only on clear
showing of prejudicial abuse of discretion will Courts of Appeals
disturb rulings of trial courts on this subject.
"Wide
discretion is accompanied by heavy responsibility on trial courts to
protect the practice from misuse." 43
Mr.
Justice Jackson's commentary is therefore deemed as setting forth
certain standards that an appellate court may consider in review. They
should neither be termed minimum nor maximum measures; the peculiar
factual situation presented should govern. Appellant's brief lists four
of the indicia announced, a fifth is added by the court:
1.
The trial court should ascertain out of the presence of the jury that
the target of the question was an actual event which would probably
result in some comment among acquaintances, if not injury to defendant's
reputation. 44
2.
The inquiry must be in approved form. "Have you heard" is
correct, whereas, "do you know" is improper. 45
3.
The event inquired about must show a defect of character similar to that
which defendant's witnesses said he was reputed not to exhibit. 46
4.
The jury must be instructed concerning the limited purpose of the
inquiry. 47
5.
The question may not be hypothetical nor assume unproven facts and ask
if they would affect the conclusion. 48
The
interrogation under consideration exceeded the bounds of propriety. One
question not specifically assigned as error but covered by counsel's
trial objection was in hypothetical form manifestly violative of the
decisional law. 49 Immediately
after witness Hamilton denied any knowledge of the
Hurst
estate indictment he was asked: "If you had heard that, would it
modify your judgment some as to his law-abiding citizenship?"
Hamilton replied, "No." 50
To
permit inquiries of this nature would undermine the cautioning
instruction sanctioned by Michelson 51 and adopted
by the trial judge in the immediate prosecution to the effect that the
triers are not to assume the occurrence of the disreputed act. 52 In
addition, serious doubt is raised as to the currency and similarity of
character defects with respect to the disbarment and treasury card
incidents. 53
As
previously observed, however, an appropriate cautionary instruction was
accorded. 54 Moreover,
the examination was in approved form. Further, there was sufficient
basis for the lower court's implicit finding that the subject events had
actually occurred. 55 In areas of
discretion an appellate court should not substitute its deliberative
conclusions for those of the trial judge made under the most unfavorable
circumstances during the course of a heated trial unless the
determination is completely void of substantiation. An essential
component of the discretion concept as employed in this context is the
setting under which it is exercised.
[No
Abuse of Discretion]
Having
found, however, some trace of impropriety the issue is whether it is of
sufficient magnitude to warrant reversal. The teaching of Michelson
specifically provides that lower court rulings should only be disturbed
on clear showing of prejudicial abuse of discretion. 56 The
harmless error doctrine enunciated in Kotteakos v. U. S. is to
the same effect. 57 Reference
to the trial proceeding is therefore indicated.
Hamilton
's testimony comprised merely seven pages
of the record totaling approximately 1700 pages. Seven witnesses,
including
Hamilton
, vouched for appellant's reputation "as a law-abiding
citizen." The favorable testimony of eleven other members of the
community was stipulated; the persons when called stated their name and
address then withdrew.
Hamilton
was the sole witness interrogated concerning the discredited acts. The
government in rebuttal summoned two witnesses who stated that
appellant's character trait for honesty and integrity was "not
good." 58
Of
the three alleged incidents it would be difficult to conceive of any
having a more telling effect than the
Hurst
event. This was the only real imputation of illegal conduct. Except for
the hypothetical question following the initial inquiry whether witness
Hamilton had heard of appellant's indictment, the examination respecting
this matter was in every manner proper. In fact, appellant essentially
concedes this to be the case. 59
The
trial consumed twenty-one days encompassing four months. The record
indicates that the substantive proof overwhelmingly pointed toward
guilt. In fact, the evidence was so strong no jury could have acquitted.
It
is important to note that the visiting trial judge had inexhaustible
patience, counsel representing appellant and appellee eminently seasoned
in litigation techniques were continually taxing the full mental and
physical capacities of the court. Under these circumstances it is
remarkable that the record should be so devoid of alleged improprieties
to accord appellant only five averments of error.
In
accordance with the foregoing the court is unable to conclude that the
cross-examination of witness, Hamilton, was prejudicial under Michelson,
60 nor did it
have substantial influence upon the verdict within the purview of Kotteakos.
61
One
final observation is deemed appropriate. The reference in Michelson
to the heavy responsibility conferred on the trial court in
admin
istering receipt of character testimony seems somewhat restrictive. 62 A burden of
equal accountability must be placed upon the practitioner. It is simply
not realistic to exact high standards from the trial judge alone when he
is called upon to make prompt decisions during the course of a bitterly
contested criminal trial. A conference in chambers or at side bar prior
to embarking on this phase of the proceeding, where the issues are tried
to a jury, perhaps is one workable solution. At this meeting opposing
counsel would be expected to discuss candidly all pertinent factors. If
counsel feel examination will be restricted by exchange of this
information then it is their duty to forward the relevant data to the
judge by memoranda. There can be no valid reason, however, in a jury
case foreclosing to the judge prior to witness examination access to
this knowledge. Moreover, it is incumbent on counsel to take the
initiative for they are closer to the realities and exigencies of the
situation.
[Instructions
to the Jury]
III.
Appellant's third averment of error is that the trial court erred in
refusing to adopt appellant's points for charge Nos. 13 and 20.
Requested
instruction 20 was addressed to the element of willfulness. Appellant
urges that the court's charge was legally vulnerable because it failed
to enunciate specifically the evidence required to sustain a jury
determination. Point for charge 20 stated: 63
"20.
Willfulness is an element of the offense charged in this case separate
and apart from the element of understatement of net income. Willfulness
involves a specific intent which must be proved by the prosecution
beyond a reasonable doubt by independent evidence. You may not infer
willfulness merely because you find a substantial understatement of net
income."
It
is elementary that the trial judge is never bound to instruct a jury in
the exact language requested. 64 In the
instant proceedings, the court concludes that the trial judge's charge,
excerpts of which are set forth below, conforms to the judicial
pronouncements and substantially encompassed appellant's point for
charge 20.
"*
* * To prove this offense, the prosecution must establish two basic
propositions, and it is incumbent upon the prosecution to prove each of
these propositions by evidence which convinces you beyond a reasonable
doubt. First, the prosecution must prove beyond a reasonable doubt that
for each of the years the defendant had a net income in excess of the
amount shown in his return which required the payment of an income
substantially in excess of that shown in his return. In addition, the
prosecution must prove beyond a reasonable doubt that in signing and
filing his return for each year, the defendant did so in an attempt
willfully and knowingly to evade the tax due and owing by him." 65
*
* *
"*
* * As to each count, the government must prove beyond a reasonable
doubt that the defendant had knowledge and understanding that during the
calendar year involved (that is, 1947, 1948, 1950, respectively) he had
income which was taxable and which he was required by law to report, and
that he attempted to evade and defeat the tax thereon, or a portion
thereof, by willfully filing a false and fraudulent income tax return
for each year, wherein he purposely failed to report all the net income
which he knew he had received during the year involved and which he knew
it was his duty to state and include in his return for such year. * *
*" 66
*
* *
"Willfulness
is an essential element of the crime proscribed by the law herein
involved. It is best defined as a state of mind of the taxpayer wherein
he is fully aware of the existence of a tax obligation to the government
which he seeks to conceal. A willful evasion of the tax requires an
intentional act or omission as compared to an accidental or inadvertent
one. It also requires a specific wrongful intent to conceal an
obligation known to exist, as compared to a general misunderstanding of
what the law requires or a bona fide belief that certain receipts are
not taxable." 67
*
* *
"Even
if you are convinced beyond a reasonable doubt that the defendant owed
an income tax in any year substantially in excess of that shown by his
return, you must find him not guilty of the offense charged for that
year unless you are also convinced beyond a reasonable doubt that at the
time he signed and filed the return he did so in an attempt willfully
and knowingly to defeat or evade the income tax due and owing by him.
"If
you find that the defendant entrusted the keeping of his financial
records to employees to whom he made available all the data necessary
for the preparation of his returns for each of the years involved, that
these employees prepared each of the returns, and that the defendant
relied in good faith upon their calculations and believed that each of
the returns correctly showed his net income and the amount of tax due,
then you must find the defendant not guilty, even though you find that
all or some of the returns were incorrect and the defendant owed a tax
for any year substantially in excess of that shown to be due on the
return.
"If
you are convinced beyond a reasonable doubt that some item or items of
income should have been reported by the defendant in his return for a
particular year and were not so reported, you must also be convinced
beyond a reasonable doubt that this was done willfully. In deciding
whether or not it was done willfully, you may take into consideration,
along with all the other evidence, that the defendant reported the item
or items in a return for a subsequent year, and if this raises a
reasonable doubt about his willfulness, you must resolve that doubt in
his favor." 68
*
* *
"If
you find that the defendant acted in good faith in valuing the stock of
the Freihofer Baking Company received from Mrs. Freihofer or that he
relied in good faith upon the value placed thereon by the employees who
kept his records, you may not conclude that he acted willfully with
respect thereto, even though you find that the value of that stock was
substantially in excess of the value arrived at by the defendant or his
employees." 69
Appellant's
point for charge 13 was directed toward proper allocation of a fee
received for legal services from Mrs. Sarah Freihofer consisting of 200
shares of William Freihofer Company stock. There was some conflict in
the testimony concerning the year it was received by appellant. 70 Requested
point 13 provided: 71
"13.
The prosecution has the burden of convincing you that the fee paid to
the defendant by Mrs. Freihofer was received in a particular year. If,
after considering all the evidence, you are in doubt concerning the year
in which the fee was paid, you may not consider it in determining
defendant's income for any of the years in question."
Failure
to instruct the triers with respect to the negative aspects of the
Freihofer stock, namely, if the jury were in doubt as to the year the
fee was paid, it may not be considered in any year is the thrust of
appellant's allegation. The court holds the trial judge's instruction
noted in the margin 72 articulated
the requisite rules to properly handle the questioned item of income and
that further specification was unnecessary.
Notwithstanding
the conclusion that the charge permitted proper allocation of the
Freihofer fee, appellant's statement allegedly drawn from the Holland
case, 73 that
"unless the jury could allocate this fee to a particular tax year,
it could not consider it at all, otherwise defendant might be convicted
on counts of which he was innocent" 74 is not
entirely accurate. In United States v. Calderon, decided the same
day as
Holland
, the Supreme Court held that for corroborative purposes an item
of income need not be assignable to a particular indictment year so long
as it indicates a substantial deficiency for the overall prosecution
period. 75 Thus for
this additional reason appellant's position is untenable.
[Admissibility
of Evidence]
IV.
The fourth assignment of error questions rulings of the trial judge
relating to the admissibility of certain evidence. Appellant initially
urges that opinion testimony offered by Government witness Greenstein,
concerning the value of 200 shares of William Freihofer Company stock
transferred to appellant by Mrs. Sarah Freihofer in payment for services
was an uninformed guess and hence improperly received into evidence.
The
admissibility of expert testimony is a matter peculiarly within the
sound discretion of the trial judge. 76 In
exercising this function the trial judge must consider three factors: 77
1.
The nature of the subject matter and whether it is such that the issues
cannot be properly understood or determined without the aid of opinions
of persons of special knowledge or experience.
2.
The credentials of the person offering to testify as an expert in order
to determine whether he possesses the requisite qualifications and the
degree of expertise to accord an informed opinion.
3.
The proposed expert's acquaintance with the basic facts necessary to
form an intelligent opinion.
Appellant's
sole contention is that witness Greenstein was not sufficiently
acquainted with the facts to evaluate the worth of the stock at $510 per
share. Failure of witness Greenstein to apply revenue regulation 105, §81.10
in arriving at his determination is the basis of the averment. Section 4
of the aforementioned ruling provides: 78
"SEC.
4. FACTORS TO CONSIDER.
".01.
It is advisable to emphasize that in the valuation of the stock of
closely held corporations or the stock of corporations where market
quotations are either lacking or too scarce to be recognized, all
available financial data, as well as all relevant factors affecting the
fair market value, should be considered. The following factors, although
not all-inclusive, are fundamental and require careful analysis in each
case:
"(a)
The nature of the business and the history of the enterprise, including
the date of incorporation.
"(b)
The economic outlook in general and the condition and outcome of the
specific industry in particular.
"(c)
The book value of the stock and the financial condition of the business.
"(d)
The earning capacity of the company.
"(e)
The dividend-paying capacity.
"(f)
Goodwill.
"(g)
Sales of the stock and the size of the block of stock to be valued.
"(h)
The market price of stocks of corporations engaged in the same or a
similar line of business which are listed on an exchange."
While
adherence to Section 4 standards is certainly commendatory it would be
too exacting and unrealistic to hold as a matter of law the
nonconsideration of all these elements precludes the proffering of an
opinion. In areas concerning the value of property, real or personal,
the sufficiency of acquaintance with facts concept should be liberally
construed for the subject matter is not susceptible to measurement by
mathematical formula. Especially is this true where unlisted stock
holdings are involved. Once the proponent has elicited testimony
indicating a factual basis for the opinion and that the determination
was not the product of conjecture, a trial judge cannot be charged with
an abuse of discretion. The weight and final appraisal accorded an
expert's testimony tested by the means and extent of his information as
developed on cross-examination is an issue to be resolved by the triers.
79
Witness
Greenstein testified that in arriving at his opinion he considered:
prior sales; 80 valuation
for estate tax purposes on November 7, 1948 of five shares placed at
$510 per share; 81 listings in
the national stock summary for 1946, 1948 and 1950; 82 valuation
accorded 200 shares by the auditor of the William Freihofer estate on
March 24, 1950; 83 book
value;/84/ and capitalization of dividends over a five year period. 85 Under these
circumstances the court is unable to conclude the trial judge erred in
denominating witness Greenstein's opinion a matter for jury
deliberation.
[Prior
Acts Admissible]
It
is next urged that the trial judge erred in admitting evidence
concerning defendant's failure to file an Income Tax Return for 1946.
Appellant contends that failure to file a return and tax evasion are not
similar acts; therefore, proof of the former does not logically
eliminate the possibility that the latter occurred innocently.
In
United States v. Long this Circuit, 86 relying
upon the Spies doctrine, 87 has
unequivocally adopted appellant's position and if the immediate facts
were the same as those reported in Long the contention would
prevail. The two cases, however, are significantly distinguishable.
Alker's 1947 return, the initial period encompassed by the indictment,
contains a false declaration that he had filed in 1946. 88 No
comparable mistatement is indicated in the Long report. 89
There
is a body of case law unrelated to the tax field which allows in
evidence integral parts of the principal event (concomitant parts of the
criminal act, Wigmore, 3d Ed. Vol. I, §218, Vol. II, §306) to more or
less fill in the background surrounding the transaction in question. 90 The proof
is sanctioned irrespective of any relation to a subsidiary issue. 91
The
case at bar presents compelling reasons for the admission of such
evidence for not only was the misstatement an integral component of a
return composing a segment of the indictment but it is also relevant on
an essential element of the crime of tax evasion, namely, willfulness.
See People v. DePompeis, 410
Ill.
587, 102 N. E. 2d 813 (1952).
The
law is well settled that prior and subsequent acts whether they portray
criminality or not when substantially similar to the subject matter
forming the basis of the indictment are probative to negate the
inference that the crucial conduct was unintentional, innocent,
inadvertent or the product of mistake. 92 In a return
charging misstatements with respect to dividends, interest, professional
and directors' fees, other contemporaneous false statements substantial
in nature, 93 therefore
become significantly probative of the declarant's state of mind
especially when the mental element is a principal question in issue.
Thus
while evidence of Alker's failure to file a return in 1946 would be
improper to prove Alker willfully evaded the income tax, United
States v. Long, supra, it would be admissible to show that Alker's
statement in his 1947 return that he filed in 1946 was false. It is this
falsity rather than Alker's failure to file a return in 1946 which is
relevant upon the question of willfulness. This principle is not in
conflict with the holding in the Long case, 94 nor is it
irrelevant in that it attempts to prove Alker guilty of a crime for
which he was not indicted. 95
Accordingly, the evidence was correctly received. 96
[Motion
For Continuance]
V.
Appellant's final assignment is directed to disposition of a motion for
continuance prior to trial wherein said application was denied. Reversal
in this area is only justified on a showing of patent abuse of
discretion. 97
The
record discloses--
The
indictment forming the basis of the present prosecution was returned on
April 11, 1955 and the case was initially listed for trial on December
5, 1955. For reasons of health a continuance was granted and the trial
was set for June 4, 1956. Appellant's counsel on May 29, 1956 six days
prior to the scheduled commencement of proceedings petitioned Judge Van
Dusen for a further continuance predicated on appellant's alleged
physical infirmity and its concomitant mental and emotional anxiety.
Opposition to the application was tendered by the Government. Extended
testimony presented by lay and medical witnesses was heard by Judge Van
Dusen.
The
evidence elicited on behalf of appellant disclosed that he was 72 years
old and had a history of rather serious maladies that necessitated
hospitalization at intervals. During the week preceding the date set for
trial he had experienced a fainting attack which confined him to bed.
Evidence of compression fractures of two vertebrae was diagnosed, the
cause at the time, although not precisely known, being restricted to
osterporosis or cancer. At a subsequent date cancer as a causative
factor was eliminated. Appellant's medical witnesses testified he was
unable to withstand the rigors of a trial and the attendant efforts
necessary in preparation.
The
Government countered by demonstrating that appellant had engaged in the
practice of law within a few weeks of the trial date. Evidence,
uncontradicted, was introduced revealing that appellant had been to his
office on several occasions during the week directly preceding the
hearing before Judge Van Dusen. Extensive preparation at considerable
cost had been undertaken by the Government in contemplation of the
impending trial. Finally, Dr. T. Grier Miller, an eminent physician
whose examination both appellant and appellee on one occasion had agreed
would be acceptable and determinative, 98 testified
that the accused was physically and mentally able to stand trial.
Against
this background the petition was denied.
Trial
commenced as scheduled on June 4, 1956. After the jury had been
impaneled and the first witness sworn, the appellant voluntarily
absented himself pursuant to Federal Rule of Criminal Procedure 43. 99 Counsel for
appellant precisely stated that the term voluntary encompassed the
conditions as existed at the execution of Judge Van Dusen's order
denying the motion for continuance, thereby preserving the right to
contest the ruling.
Further,
counsel submitted that any change in appellant's state from that time
which would render appellant's absence involuntary would be promptly
brought to the court's attention. The trial judge during the
Government's presentation was apprised of no changed circumstances in
appellant's condition. 100
At
the conclusion of the prosecution's case alternative motions were
presented requesting (1) withdrawal of a juror, or (2) a continuance.
The first motion was denied but a continuance lasting approximately two
months was accorded. Immediately prior to the date set for reconvening
additional motions were proffered premised on the same medical reasons.
The motions were duly rejected.
Appellant's
case graced by his attendance was thereafter presented to the triers. It
is essential to note that appellant testified for a period encompassing
three days. No ill effects from this display were apparent.
Under
these circumstances the court deems that Judge Van Dusen's denial of
appellant's motion was in all respects proper from both legal
considerations and the realities.
The
inordinate delay between the Government's case and the accused's
presentment although not specifically urged as error has caused the
court much concern. A continuance lasting two months in a criminal
prosecution of a non-corporate defendant tried to a jury can hardly be
termed commensurate with the minimal standards required for the
efficient
admin
istration of justice. Under the particular circumstances appellant's
acts having precipitated the unfavorable situation and there being no
showing that appellant's rights were in any manner prejudiced, the
disposition of this appeal will not be altered. An observation, however,
is deemed appropriate.
Long
delays in proceedings are unquestionably inimical to our system of
justice and should not be countenanced save for compelling reasons. In
instances where a short stay will not suffice the trial judge should (1)
revoke the bail of the accused and force trial, or (2) grant a mistrial.
The
judgment of the district court will be affirmed.
1
26
U. S.
C. A. §145(b), (1939 Ed.).
2
United States
v. Lindstrom, 222 Fed. (2d) 761 (3 Cir. 1955) [55-1 USTC ¶9490],
certiorari denied 350
U. S.
841 (1955).
3
Appellant's brief at page 10 states:
"If
we assume for the moment that the prosecution's evidence was
sufficiently corroborated, it would have enabled the jury to conclude
that defendant had understated his net income and his tax liability for
each of the years involved. From this evidence the jury could have
decided that defendant had net income in addition to that declared in
his returns of approximately $90,600 in 1947, $57,000 in 1948, $5,200 in
1949 and $188,700 in 1950." (N. T. 1593-99)
4
348
U. S.
147 (1954) [54-2 USTC ¶9715]; see also United States v. Calderon,
348
U. S.
160 (1954) [54-2 USTC ¶9712]; Opper v. U. S., 348
U. S.
84 (1954).
5
Smith v.
United States
, 348
U. S.
147, 155 (1954) [54-2 USTC ¶9715].
6
Government's Exhibits G-1, 2, 3 and 4.
7
Turner v.
U. S.
, 222 Fed. (2d) 926, 932 (4 Cir. 1955) [55-1 USTC ¶9489], cert.
den. 350
U. S.
831 (1955).
8
Government Exhibits G-102, G-102-A.
9
In order to show no violation for 1950 certain evidence not encompassed
by the contested documents, namely, receipt of William Freihofer stock
would also have to be discarded. Consideration of this aspect is
reserved for discussion under appellant's fourth assignment of error.
10
Note 4, supra.
11
United States
v. Field, 190 Fed. (2d) 554 (2 Cir. 1951).
12
Smith v.
United States
, 348
U. S.
147 (1954) [54-2 USTC ¶9715].
13
The record of proceedings held before Frank Rogers Donahue, Orphans'
Court auditor of the Freihofer estate at page 1619 of the transcript
discloses the following:
"Mr.
Donahue: And this list is taken from the books of Mr. Alker or the
estate?
"Mr.
Rhoads: From the books of the estate."
14
G-71 p. 1618.
15
For purposes of foundation and clarification it would have been
expedient to have summoned Rhoads.
16
G-52 to G-56, inclusive.
17
Note 4, supra.
18
348 U. S. 147, 155 (1954) [54-2 USTC ¶9715].
19
348 U. S. 147, 155 (1954) [54-2 USTC ¶9715].
20
348 U. S. 147, 157-158 (1954) [54-2 USTC ¶9715]. It
would seem that corroboration by independent substantiation of the
charge is an illusory concept for if the crime be extrinsically
establish, there is no need for corroboration except perhaps as
cumulative evidence.
21
N. T. pp. 183-196.
22
N. T. pp. 200-204.
23
N. T. pp. 839, 1336.
24
Hoyer v.
U. S.
, 223 Fed. (2d) 134, 139 (8 Cir. 1955) [55-1 USTC ¶9518].
25
N. T. 769-770.
26
N. T. 1337-1340.
27
To complete the picture, appellant's taxable income for the subject
years computed by subtracting deductions and exemptions shown on
appellant's returns from the totals listed in Figure 3 would be:
1947 1948 1949 1950
Total Receipts Fig. 3 ................................ $110,644.30 $89,459.60 $185,966.40 $235,808.24
Less deductions per appellant's returns .............. 79,546.33 77,012.74 128,618.60 92,336.76
Net Income ........................................... $ 31,097.97 $12,446.86 $ 57,347.80 $143,471.48
Less exemptions per returns .......................... 1,500.00 1,200.00 1,200.00 1,200.00
Taxable Income ....................................... $ 29,597.97 11,246.86 $ 56,147.80 $142,271.48
Appellant's returns for the same period disclose:
Net Income or (Loss) ................................. ($ 11,238.54) ($10,204.29) $ 14,975.77 ($ 27,512.02)
Less exemptions ...................................... 1,200.00
Taxable Income ....................................... $ 13,775.77
28
Note 20, supra.
29
G-52 to G-56, inclusive.
30
Smith v.
U. S.
, 348
U. S.
147 (1954) [54-2 USTC ¶9715].
31
Holland
v.
U. S.
, 348
U. S.
121, 139 (1954) [54-2 USTC ¶9714]; Blackwell v. U. S., 244 Fed. (2d)
423, 429 (8 Cir. 1957) [57-1 USTC ¶9644].
32 Hoyer v. U. S.,
223 Fed. (2d) 134, 139 (8 Cir. 1955) [55-1 USTC ¶9518].
33
Note 32, supra.
34
Holland
v.
U. S.
, 348
U. S.
121, 129 (1954) [54-2 USTC ¶9714]; Blackwell v. U. S., 244 Fed. (2d)
423, 429 (8 Cir. 1957) [57-1 USTC ¶9644].
35 U. S. v. Joseph A. Cirillo,
251 Fed. (2d) 638 (1957)
[58-1 USTC ¶9164], cert. den. 356
U. S.
949 (1958), 26
U. S.
C. A. (I. R. C. 1939) §145(a); and 26
U. S.
C. A. (I. R. C. 1954) §7203 Prosecutions; Fisher v.
U. S.
, 212 Fed. (2d) 441 (10 Cir. 1954); Gaunt v.
U. S.
, 184 Fed. (2d) 284 (1 Cir. 1950) at page 290 [50-2 USTC ¶9412]
recognizes that the attainments of an accused are a proper consideration
on the issue of willfulness:
"*
* * His understatements of income must be viewed in their setting, and
so viewed we are convinced that the jury could well find that the
understatements were wilful, for if the jury accepted the Government's
evidence, as it was entitled to do, it could well have found that the
defendant was an intelligent, astute and successful business executive
with many years of experience who had full records of his income
available, and that the understatements in his returns for the years
involved, which he made out himself, were gross. Under these
circumstances it seems to us clear that the jury could very reasonably
have inferred that beyond a reasonable doubt the defendant's
understatements of income were made wilfully in an attempt to evade or
defeat taxes, and wholly discounted his defense that those
understatements for the most part were made stupidly or carelessly. * *
*"
36
Holland
v.
U. S.
, 348
U. S.
121, 139 (1954) [54-2 USTC ¶9714]; Smith v. U. S., 348
U. S.
147, 157 (1954) [54-2 USTC ¶9715]; Blackwell v. U. S., 244 Fed.
(2d) 423, 429 (8 Cir. 1957) [57-1 USTC ¶9644].
"There
was a sufficient showing of intent. The prosecution showed
understatement of income for several other years specificially for the
declared purpose of showing intent. This is itself enough."
United States
v. Frank, 245 Fed. (2d) 284 (3 Cir. 1957) [57-1 USTC ¶9675],
cert. den. 355
U. S.
819 (1957).
37
Hoyer v.
U. S.
, 223 Fed. (2d) 134, 139-140 (8 Cir. 1955) [55-1 USTC ¶9518].
38
Appellant's returns for 1949 and 1950 were filed February 28, 1952 (G-3)
and February 29, 1952 (G-4) respectively, long after the statutory dates
for reporting. (Filing dates required by the 1939 Code, 26 U. S. C. A.
§53(a): 1949-March 15, 1950; 1950-March 15, 1951). No extension of time
for filing was requested nor was any granted.
Revenue
Agent Segal apprised appellant that his 1947 and 1948 returns were under
investigation on May 3, 1950 (N. T. 658).
39
See court's discussion under assignment of error, IV.
40
Appellant's brief at page 16. A perusal of the appropriate portions of
the notes of testimony discloses that appellant's attribution of a
"no" answer to the question, "Mr. Hamilton, have you
heard that the defendant, Mr. Alker, is awaiting a hearing on disbarment
proceedings in Norristown,
Montgomery
County
?" is incorrect. The record reveals that this particular inquiry
was inadvertently not answered. (N. T. 1573-1579).
41
N. T. 1578-1579.
42
335
U. S.
469 (1948).
43
335
U. S.
469, 480 (1948).
44
Id.
at 481.
45
Id.
at 482.
46
Id.
at 483-484.
47
Id.
at 485.
48
Id.
at 480, f. n. 17.
49
Little v.
U. S.
, 93 Fed. (2d) 401 (8 Cir. 1937).
50
The precise examination herein pertinent is as follows:
Witness
Hamilton
:
"Q.
* * * Have you heard that he was under indictment in what is known as
the Hurst Estate?
"A.
No. No.
"Q.
If you had heard that, would it modify your judgment some as to his
law-abiding citizenship?
"A.
No.
"Mr.
Fogwell: Could we see your honor at side bar for just a minute?
"The
court: Surely.
(Discussion
at side bar, out of the hearing of the jury as follows:)
"Mr.
McBride: I want to move for the withdrawal of a juror and the
declaration of a mistrial because of the question that was asked of this
last witness.
"The
Court: Overruled." (N. T. 1573-1574.)
51
335
U. S.
469, 472-473 (1948).
52
Note 41, supra.
53 Myres v. U. S.,
174 Fed. (2d) 329, 338 (8 Cir. 1949) [49-1 USTC ¶9275].
54
Note 41, supra.
55
With respect to the status of a disbarment action as a judicial
proceeding, see Doe v. Rosenberry, 255 Fed. (2d) 118 (2 Cir. 1958).
56
Note 43, supra.
57 Kotteakos v. U. S.,
328 U. S. 750, 762, 764-765 (1946):
"In
the final analysis judgment in each case must be influenced by
conviction resulting from examination of the proceedings in their
entirety, tempered but not governed in any rigid sense of stare
decisis by what has been done in similar situations. * * *
Necessarily the character of the proceeding, what is at stake upon its
outcome, and the relation of the error asserted to casting the balance
for decision on the case as a whole, are material factors in
judgment."
*
* *
"* * * It is guilt in law, established by the judgment of laymen.
And the question is, not were they right in their judgment, regardless
of the error or its effect upon the verdict. It is rather what effect
the error had or reasonably may be taken to have had upon the jury's
decision. * * *"
* * *
"If,
when all is said and done, the conviction is sure that the error did not
influence the jury, or had but very slight effect, the verdict and the
judgment should stand, except perhaps where the departure is from a
constitutional norm or a specific command of Congress. Citing cases. But
if one cannot say, with fair assurance, after pondering all that
happened without stripping the erroneous action from the whole, that the
judgment was not substantially swayed by the error, it is impossible to
conclude that substantial rights were not affected. The inquiry cannot
be merely whether there was enough to support the result, apart from the
phase affected by the error. It is rather, even so, whether the error
itself had substantial influence. If so, or if one is left in grave
doubt, the conviction cannot stand."
See
also Federal Rules of Criminal Procedure 52(a).
58
N. T. 1618-1624.
59
Appellant's brief at page 27, f. n. 5 states:
"The
prosecution's question about defendant's indictment in the
Hurst
estate stands on somewhat better footing than do the questions we have
so far discussed. The defendant was under indictment in the District
Court for the Eastern District of Pennsylvania in connection with the
Hurst
estate (Criminal Nos. 18,730 and 18,731). In the record there is a
statement by counsel for defendant that that indictment was 'an income
tax indictment' (N. T. 1574); in fact the indictment charged an attempt
to evade the estate tax and conspiracy. Thus, that question did involve
an actual event and one which might result in comment about defendant.
But the question as put by the prosecution revealed nothing regarding
the offense with which defendant was charged; hence the question would
appear to be improper under the Gaunt case, supra.
However, even if this question was proper, defendant was no less
prejudiced by the other two questions."
For
the history and disposition of the
Hurst
estate see U. S. v. Harry J. Alker, Jr., 255 Fed. (2d) 851 (3
Cir. 1958) [58-2 USTC ¶11,801].
60
Note 43, supra; see also Little v. U. S., 93 Fed. (2d)
401, 408 (8 Cir. 1937); Reuben v.
U. S.
, 86 Fed. (2d) 464, 468 (7 Cir. 1936).
61
Note 57, supra; see also Snead v. U. S., 217 Fed. (2d) 912
(4 Cir. 1954); Saunders v.
U. S.
, 192 Fed. (2d) 409 (D. C. Cir. 1951);
U. S.
v. Broxmeyer, 192 Fed. (2d) 230 (2 Cir. 1951); Campbell v.
U. S.
, 176 Fed. (2d) 45, 47 (D. C. Cir. 1949); Clainos v.
U. S.
, 163 Fed. (2d) 593 (D. C. Cir. 1947); Kauz v.
U. S.
, 188 Fed. (2d) 9 (5 Cir. 1951); 3 Villanova Law Rev. 48 (1957).
62
Note 43, supra.
63
Appellant's brief, p. 28.
64
U. S.
v. Smith, 206 Fed. (2d) 905, 911 (3 Cir. 1953) [53-2 USTC ¶9538];
Mannix v. U. S., 140 Fed. (2d) 250 (4 Cir. 1944).
65
N. T. 1692-1693.
66
N. T. 1693.
67
N. T. 1694;
U. S.
v. Martell, 199 Fed. (2d) 670, 672 (3 Cir. 1952) [52-2 USTC ¶9541].
68
N. T. 1708-1709.
69
N. T. 1710.
70
Notes 21-23, supra.
71
Appellant's brief, p. 31.
72
"Certain of the evidence deals with the fee paid to the defendant
by Mrs. Sarah Freihofer for legal services rendered to her over a period
of many years. The fee was composed of 200 shares of stock of the
Freihofer Baking Company. One of the questions with respect to this fee
is the year in which it was received by the defendant. It is up to you
to resolve any conflicts in the evidence concerning the time of receipt.
If you find that it was received partly in 1948, partly in 1949 and
partly in 1950, you must include an appropriate part of the value of the
stock in the defendant's income for each of those years. If you find
that it was received in 1950, you must include the value of the stock in
his income for that year. If you find that it was not received by the
defendant until 1951, then for the purposes of this case you must
disregard the fee entirely.
"The
government has the burden of proving to you beyond a reasonable doubt
that the fee paid to the defendant by Mrs. Freihofer was received by the
defendant in a particular year, or in specific years involved herein,
before you may consider the same as reportable income for such year or
years by the defendant." (N. T. 1703-1704.)
*
* *
"First
the prosecution must prove beyond a reasonable doubt that for each of
the years the defendant had a net income in excess of the amount shown
in his return." (N. T. 1692.)
*
* *
"With
respect to any of these years you must be convinced beyond a reasonable
doubt that the defendant did not have any loss but instead had a
substantial amount of net income." (N. T. 1693.)
*
* *
"The
evidence in this case discloses that Mr. Alker's income tax returns
involved herein were prepared under the cash method or on a cash basis,
that is, on the basis of actual receipts and disbursements. Under this
method of making returns, only income collected each year is
taxable." (N. T. 1715.)
See
also Note 66, supra; note 68, supra, last paragraph of the
text.
73
348
U. S.
121 (1954) [54-2 USTC ¶9714].
74
Appellant's brief, p. 33.
75
348
U. S.
160, 168 (1954).
76
Trowbridge v. Abrasive Co. of Phila., 190 Fed. (2d) 825, 829 (3
Cir. 1951); Gilbert v. Gulf Oil Corp., 175 Fed. (2d) 705 (4 Cir.
1949).
77
Gilbert v. Gulf Oil Corp., 175 Fed. (2d) 705, 709 (4 Cir. 1949).
78
Rev. Rul. 54-77 [545 CCH ¶6206A], 1954-1 C. B. 187.
79
Montana
Railway Co. v.
Warren
, 137
U. S.
348 (1890).
80
N. T. 721-722.
81
N. T. 725.
82
N. T. 725.
83
N. T. 725.
84
N. T. 745.
85
N. T. 772.
86
U. S.
v. Long, -- Fed. (2d) -- (3 Cir. 1958) [58-2 USTC ¶9621].
87 Spies v. U. S.,
317 U. S. 492 (1943) [43-1 USTC ¶9243].
88
The following questions and replies appear on appellant's 1947 return
(G-1):
"If
you filed a return for a prior year, what was the latest year?
"1946.
"To
which Collector's office was it sent?
"
Phila.
,
Pa.
"To
which Collector's office did you pay amount claimed in item 8(B), above?
"
Phila.
,
Pa.
"
89
Note 86, supra.
90
See Carney v.
U. S.
, 79 Fed. (2d) 821 (6 Cir. 1935);
U. S.
v. Rubenstein, 151 Fed. (2d) 915, 919 (2 Cir. 1945); Lypp v.
U. S.
, 159 Fed. (2d) 353 (6 Cir. 1947); Schwartz v.
U. S.
, 160 Fed. (2d) 718 (9 Cir. 1947);
U. S.
v. Crowe, 188 Fed. (2d) 209 (7 Cir. 1951); Bantum v. State,
85 A. (2d) 741 (Sup. Ct. Del. 1952); State v. Ward, 85 S. W. (2d)
1 (Sup. Ct. Mo. 1935); and
Marshall
v. State, 83 N. E. (2d) 763 (Sup. Ct. Ind. 1949).
91
The principle is set out precisely in Section 218 of Wigmore on
Evidence, 3d Vol. I wherein the learned author states:
"§218.
Res Gestae and Acts a part of the Issue; Inseparable Crimes. There is,
however, an additional class of cases in which the misconduct of a
defendant may be received, irrespective of any bearing on character, and
yet not as evidential of one of the above matters (design, motive or the
like), or as relevant to any particular subsidiary proposition. That
class includes other criminal acts which are an inseparable part of
the whole deed."
92
McCormick on Evidence, pp. 328-331, 345; Wigmore on Evidence, 3d Ed.
Vol. II §§ 302, 305, 316, 321; 51 Harv. L. Rev. 988 (1938);
U. S.
v. Fawcett, 115 Fed. (2d) 764, 768 (3 Cir. 1940);
U. S.
v. Feldman, 136 Fed. (2d) 394, 399 (2 Cir. 1943); Wiess v.
U. S.
, 122 Fed. (2d) 675 (5 Cir. 1941).
93
It is quite obvious that a truthful answer to the inquiry would have
subjected Alker's returns to close scrutiny.
94
Note 86, supra.
95
Wigmore on Evidence, 3d Vol. II, §305.
96
Other courts presented with the precise issue have reached the same
conclusion but without articulation or for other reasons. See
U. S.
v. Steele, 148 Fed. Supp. 515 (D. C. W. D. Pa., 1957) [57-1 USTC
¶9416]; Harris v. U. S., 243 Fed. (2d) 74 (5 Cir. 1957) [57-1 USTC ¶9573].
97 Avery v. Alabama,
308 U. S. 444 (1940); Hardy v. U. S., 186 U. S. 224 (1902).
98
Counsel for appellant at the hearing before Judge Van Dusen stated:
"Mr.
McBride: * * *
"It
is quite true that when Your Honor selected Dr. Grier Miller to examine
Mr. Alker, I personally stated that I was absolutely satisfied that Your
Honor had picked one of the very best men Your Honor could pick, and
that I would abide by the results but in saying that I did not
understand that whatever Dr. Miller said--that is, if his opinion was
less than conclusive--we would assume it would be something that it was
not." (N. T. 6-7).
99
Diaz v.
U. S.
, 223
U. S.
442 (1912); Parker v.
U. S.
, 184 Fed. (2d) 488 (4 Cir. 1950) [50-2 USTC ¶9463].
100
At the commencement of each session the following typical colloquy
between court and counsel for appellant took place:
"The
Court: I wanted to make the same record that we have been making, if I
may. It is that the defendant is not personally present in court and
that in accordance with the present state of the record, the absence is
voluntary and that the trial will proceed; that is a correct statement?
"Bradley:
Correct, yes sir, as we have used the word voluntary." (N. T. 429.)
[54-2
USTC ¶9715]Daniel Smith, Petitioner v.
United States of America
In
the Supreme Court of the
United States
, No. 52. October Term, 1954, 348 US 147, 75 SCt 194, December 6, 1954
On Writ of Certiorari to the United States Court of Appeals for the
First Circuit.
[1939 Code Sec. 145(a)--similar to 1954 Sec. 7201]
Willful evasion of taxes: Net worth method: Taxpayer's statement of
net worth: Admissibility as evidence.--Based on the government's
theory of increases in net worth, the taxpayer was convicted by a jury
for willfully evading income taxes. Involved in the prosecution was a
statement of net worth submitted by the taxpayer, along with a check for
the amount of tax he thought was due and owing, to government agents
during the period of investigation. Taxpayer contended that his net
worth statement should not have been submitted in evidence because it
was procured pursuant to an understanding that the case would be closed
and the taxpayer granted immunity. This contention was supported by
testimony of the taxpayer's accountant but denied by the Government
agent involved. The court ruled that the trial judge's refusal to
suppress the statement and his submission of the issue to the jury with
the instruction that they were to reject the statement, and all evidence
obtained through it, if "trickery, fraud or deceit" were
practiced on taxpayer or his accountant was proper. It also held that
since the trial judge had held a hearing on the admissibility of the
statement in passing on a pretrial motion to suppress evidence, his
refusal to hold, during the course of the trial, a hearing outside the
presence of the jury to determine preliminarily the statement's
admissibility, did not deprive taxpayer of any substantial right.
[1939 Code Sec. 145(a)--similar to 1954 Sec. 7201]
Willful evasion of taxes: Extrajudicial statements: Corroboration by
independent evidence.--Taxpayer contended that his net worth
statement, as it related to his opening net worth for the period of
prosecution, was not corroborated, or was insufficiently corroborated,
by independent evidence. The court ruled that the requirement of
corroboration was applicable to the crime of tax evasion and that the
statement of opening net worth must be corroborated as well as mere
admissions, at least where the admission is made after the fact to an
official charged with investigating the possibility of wrongdoing, and
the statement embraces an element vital to the government's case. In
this case, the government did provide the necessary corroboration by
introducing substantial evidence, apart from the taxpayer's admissions,
tending to show that taxpayer willfully understated his taxable income.
Testimony of a government official and agent, corroborated by the
taxpayer's tax returns, revealed taxpayer's comparatively poor financial
history prior to the prosecution period and therefore corroborated the
opening net worth. Independent evidence also showed that taxpayer made
substantial expenditures, savings and investments far in excess of
reported income during the prosecution period, thereby corroborating the
net worth statement by tending to show that the taxpayer was
understating his income. Therefore, taxpayer's conviction was affirmed.
Richard
Maguire, W. Arthur Garrity, Jr., 31 Milk Street, Boston, Mass., Paul G.
Counihan, Maguire, Roche, Garrity & Maloney, of counsel, for
petitioner. Simon E. Sobeloff, Solicitor General, H. Brian Holland,
Assistant Attorney General, Marvin E. Frankel, Ellis N. Slack, Joseph F.
Goetten, Dudley J. Godfrey, Jr., Special Assistants to the Attorney
General, for respondent.
CLARK,
Justice:
This
is the third of the net worth cases and the first dealing with the
Government's use of extrajudicial statements made by the accused.
Petitioner and his wife were jointly tried on five counts charging them
with willful attempts to evade and defeat their income taxes for the
years 1946 through 1950. A motion for acquittal was granted as to the
wife on all five counts, and as to petitioner on the fifth count (for
the year 1950). The jury found petitioner guilty on the first four
counts, and the conviction was affirmed by the Court of Appeals, 210
Fed. (2d) 496 [54-1 USTC ¶9259]. We granted certiorari in order to pass
on the issues raised by the prosecution's use of defendant's
extrajudicial statements. 347
U. S.
1010.
[Net
Worth Theory]
The
Government's theory was that the increases in the net worth of
petitioner and his wife exceeded their reported income for each of the
prosecution years, and that these increments represented taxable income.
The evidence tended to show that petitioner and his wife were persons of
moderate means prior to 1945, and that toward the end of that year
petitioner acquired a racing-news service. In the four succeeding years,
the prosecution years here in issue, petitioner and his wife acquired a
large amount of visible wealth in the form of bank accounts, real
estate, securities, and other assets. The evidence, taken as a whole,
tended to prove that petitioner and his wife had understated their
income for the four-year period by over $190,000.
[Taxpayer's
Net Worth Statement]
The
issues in this case stem from a statement signed by the petitioner and
delivered to the Government agents along with a check, the latter
supposedly representing the amount of tax he thought due and owing. 1 The
statement, a five-page document, included tables on petitioner's
securities, prior tax returns, living expenses, and a listing of
petitioner's assets for each of the years 1945 through 1949, showing
changes in his net worth over the prosecution period. While each of the
pages was headed by the names of petitioner and his wife, the statement
was signed only by the petitioner. His signature appeared after a clause
describing the listing of assets as "my true net worth for the
period covered herein."
Admissibility
of the Statement
Petitioner
contends that his net worth statement should not have been admitted in
evidence because it was procured pursuant to an understanding between
petitioner and a Government agent that the case would be closed and the
petitioner granted immunity. See Wan v. United States, 266 U. S.
1, 14; Bram v. United States, 168 U. S. 532, 542-543; Wilson
v. United States, 162 U. S. 613, 622-623; Sparf and Hansen v.
United States, 156 U. S. 51, 55. Petitioner's accountant, who
carried on negotiations with this Government agent, testified that the
agent had promised to close the case if the net worth statement and a
check to cover the tax deficiency were forthcoming, and that he, the
accountant, would never have submitted the statement had he not believed
that the case would be closed on this basis. The Government agent
testified that he was aware of no such understanding and that he had
made no promises to close the case. After a pretrial hearing on
petitioner's motion to suppress evidence, the trial judge refused to
suppress the net worth statement. During the course of the trial, he
refused to hold a hearing outside the presence of the jury to determine
preliminarily the statement's admissibility. He submitted the issue to
the jury with the instruction that they were to reject the statement,
and all evidence obtained through it, if "trickery, fraud or
deceit" were practiced on petitioner or his accountant.
The
issue of fraud or deceit on the part of the Government agent was
properly submitted to the jury, and the jury, in arriving at its general
verdict, could have found from the conflicting evidence that no
fraudulent inducement had been offered petitioner or his accountant.
Petitioner cannot complain that he was denied a voir dire, cf. United
States v. Carignan, 342
U. S.
36, since the trial judge had already held a hearing on this issue in
passing on the pretrial motion to suppress evidence. Moreover, the only
evidence offered by petitioner in seeking this hearing during the trial
was the testimony of petitioner's accountant, evidence which had been
heard in the pretrial hearing and was narrated again to judge and jury
after the voir dire had been denied. Under these circumstances,
it cannot be said that the refusal to hold a preliminary hearing
deprived petitioner of any substantial right.
Corroboration
of Petitioner's Statement
Petitioner's
second major objection is that his net worth statement, as it related to
his opening net worth, was not corroborated--or was insufficiently
corroborated--by independent evidence. Petitioner's statement listed his
opening net worth as follows:
Bank account .... $ 1,079.60
Residence ....... 12,000.00
Automobile ...... 2,000.00
Total assets .... $15,079.60
The Government agents credited petitioner with a higher opening net
worth:
Cash in banks ............. $ 8,058.58
Drug store partnership .... 5,618.39
Real estate ............... 18,600.00
Furniture ................. 2,000.00
Automobile ................ 2,000.00
Total ..................... $36,276.97
In determining these opening net worth figures, the Government agents
relied in part on figures furnished by petitioner in his net worth
statement and in other of his extrajudicial admissions--for the autos,
the furniture, and one parcel of real estate. Any variation in these
figures would not materially affect the result. 2 But
petitioner further complains that the Government did not corroborate the
negative implications of his net worth statement, that he did not have
at the end of 1945 any substantial assets--for example, cash on
hand--which were not reflected in his or the Government's net worth
computation. The question presented, therefore, is whether there is
sufficient independent evidence to corroborate petitioner's
extrajudicial admission that he did not have sufficient assets at the
starting point to account for the increases in net worth attributed to
him in the prosecution years.
The
general rule that an accused may not be convicted on his own
uncorroborated confession has previously been recognized by this Court, Warszower
v. United States, 312 U. S. 342; Isaacs v. United States, 159
U. S. 487; cf. Miles v. United States, 103 U. S. 304, 311-312,
and has been consistently applied in the lower federal courts and in the
overwhelming majority of state courts, 127 A. L. R. 1130; 7 Wigmore,
Evidence, §§ 2070-2072. Its purpose is to prevent "errors in
convictions based upon untrue confessions alone," Warszower v.
United States, supra, at 347; its foundation lies in a long history
of judicial experience with confessions and in the realization that
sound law enforcement requires police investigations which extend beyond
the words of the accused. Confessions may be unreliable because they are
coerced or induced, and although separate doctrines exclude involuntary
confessions from consideration by the jury, Bram v.
United States
, supra;
Wilson
v.
United States
, supra, further caution is warranted because the accused may be
unable to establish the involuntary nature of his statements. Moreover,
though a statement may not be "involuntary" within the meaning
of this exclusionary rule, still its reliability may be suspect if it is
extracted from one who is under the pressure of a police
investigation--whose words may reflect the strain and confusion
attending his predicament rather than a clear reflection of his past.
Finally, the experience of the courts, the police and the medical
profession recounts a number of false confessions voluntarily made,
Note, 28 Ind. L. J. 374. These are the considerations which justify a
restriction on the power of the jury to convict, for this experience
with confessions is not shared by the average juror. Nevertheless,
because this rule does infringe on the province of the primary finder of
facts, its application should be scrutinized lest the restrictions it
imposes surpass the dangers which gave rise to them.
[Corroboration
Applies to Tax Evasion]
The
first issue is whether the requirement of corroboration may properly be
applied to the crime of tax evasion. The corroboration rule, at its
inception, served an extremely limited function. In order to convict of
serious crimes of violence, then capital offenses, independent proof was
required that someone had indeed inflicted the violence, the
so-called corpus delicti. Once the existence of the crime was
established, however, the guilt of the accused could be based on his own
otherwise uncorroborated confession. But in a crime such as tax evasion
there is no tangible injury which can be isolated as a corpus
delicti. As to this crime, it cannot be shown that the crime has
been committed without identifying the accused. Thus we are faced with
the choice either of applying the corroboration rule to this offense and
according the accused even greater protection than the rule affords to a
defendant in a homicide prosecution, Evans v. United States, 122
Fed. (2d) 461; Murray v.
United States
, 288 Fed. 1008, or of finding the rule wholly inapplicable because
of the nature of the offense, stripping the accused of this guarantee
altogether. We choose to apply the rule, with its broader guarantee, to
crimes in which there is no tangible corpus delicti, where the
corroborative evidence must implicate the accused in order to show that
a crime has been committed. See, e.g., Tobor v.
United States
, 152 Fed. (2d) 254;
United States
v. Kertess, 139 Fed. (2d) 923; Ercoli v.
United States
, 131 Fed. (2d) 354; Pines v.
United States
, 123 Fed. (2d) 825; Forte v.
United States
, 94 Fed. (2d) 236; Tingle v.
United States
, 38 Fed. (2d) 573; Wynkoop v.
United States
, 22 Fed. (2d) 799; Daeche v.
United States
, 250 Fed. 566.
[Statement
of Opening Net Worth Must Be Corroborated]
The
next problem presented is whether the statement here involved--the
opening net worth--must be corroborated. Although this statement was
part of a document which may have admitted an understatement of taxable
income, one of the elements of the crime of tax evasion, still it is
clear that the statement is not a confession admitting to all the
elements of the offense. There is some uncertainty in the lower court
opinions as to whether the corroboration requirement applies to mere
admissions, see United States v. Kertess, supra, at 929; Ercoli
v. United States, supra, at 356. But see Warszower v.
United States
, supra, at 347. We hold the rule applicable to such statements, at
least where, as in this case, the admission is made after the fact to an
official charged with investigating the possibility of wrongdoing, and
the statement embraces an element vital to the Government's case. 3 Cf. Gulotta
v.
United States
, 113 Fed. (2d) 683, assimilating admissions to confessions but
failing to distinguish between admissions before and after the fact as
required by the Warszower case. Accord, Duncan v.
United States
, 68 Fed. (2d) 136; Gordnier v.
United States
, 261 Fed. 910.
The
negative implications of petitioner's opening net worth admission formed
the cornerstone of the Government's theory of guilt. Without proof that
assets on hand at the beginning of the prosecution period did not
account for the alleged net worth increases, the Government could not
succeed. Holland v. United States, ante, p. --. An admission
which assumes this importance in the presentation of the prosecution's
case should not go uncorroborated, and this is true whether we consider
the statement an admission of one of the formal "elements" of
the crime or of a fact subsidiary to the proof of these
"elements." It is the practical relation of the statement to
the Government's case which is crucial, not its theoretical relation to
the definition of the offense.
Although
we are unable to hold on this record that petitioner's statement was
inadmissible, the evidence is sufficient to cast doubt on the accuracy
of his admissions. The unreliability of the statement is illustrated by
the great variance between its net worth calculation and the
Government's computation, although petitioner's consistent erring in his
own favor made it not unreasonable for the Government to hold him to his
word where it was to the Government's advantage. On the whole, the
statement is one which should be carefully scrutinized in the light of
the available independent evidence.
[Amount
of Corroboration Necessary]
There
has been considerable debate concerning the quantium of corroboration
necessary to substantiate the existence of the crime charged. It is
agreed that the corroborative evidence does not have to prove the
offense beyond a reasonable doubt, or even by a preponderance, as long
as there is substantial independent evidence that the offense has been
committed, and the evidence as a whole proves beyond a reasonable doubt
that defendant is guilty. Gregg v.
United States
, 113 Fed. (2d) 687; Jordan v.
United States
, 60 Fed. (2d) 4; Forte v.
United States
, supra; Daeche v.
United States
, supra. But cf.
United States
v. Fenwick, 177 Fed. (2d) 488 [49-2 USTC ¶9448]. In addition to
differing views on the substantiality of specific independent evidence,
the debate has centered largely about two questions: (1) whether
corroboration is necessary for all elements of the offense established
by admissions alone, compare Ercoli v.
United States
, supra, and Pines v.
United States
, supra, with Wynkoop v.
United States
, supra, and Pearlman v. United States, 10 Fed. (2d) 460, and
(2) whether it is sufficient if the corroboration merely fortifies the
truth of the confession, without independently establishing the crime
charged, compare Pearlman v. United States, supra, and Daeche
v. United States, supra, with Pines v. United States, supra,
and Forte v. United States, supra. We answer both in the
affirmative. All elements of the offense must be established by
independent evidence or corroborated admissions, but one available mode
of corroboration is for the independent evidence to bolster the
confession itself and thereby prove the offense "through" the
statements of the accused. Cf. Parker v. State, 228 Ind. 1, 88 N.
E. (2d) 556.
[Proof
to Establish Opening Net Worth]
Under
the above standard the Government may provide the necessary
corroboration by introducing substantial evidence, apart from
petitioner's admissions, tending to show that petitioner willfully
understated his taxable income. This may be accomplished by
substantiating the opening net worth directly, since that figure, taken
together with the remainder of the net worth computation, amply
establishes a consistent understatement by petitioner of his taxable
income; and from this the jury could infer willfulness. Two significant
items of evidence tend to show that petitioner owned no assets at the
starting point in excess of those attributed to him in the Government's
statement. First, a Government official testified that petitioner had
filed no income tax returns in the years 1936 through 1939, nontaxable
returns for 1940 and 1942, a nonassessable return for 1943, a refundable
return for 1944, and a taxable return for 1941. Second, the testimony of
a Government agent, touching upon the economic activities of the
petitioner in the years immediately preceding the prosecution period,
disclosed that prior to 1941 petitioner had been employed as a manager
of a racing news service; that from 1941 to 1945 he worked in a package
store for $40 a week; and that for a short time during this latter
period his wife worked as a hairdresser. The agent's testimony, however,
was based solely on the extrajudicial statements of the petitioner, and
under the standard we have adopted these admissions must be corroborated
by substantial independent evidence. 4 The tax
returns adequately corroborate petitioner's statements as to his
financial history, and we hold that the two together corroborate the
opening net worth. The jury could find from this evidence that
petitioner's resources prior to the prosecution years were such that he
could not have amassed a greater store of wealth than the amount
credited to him in the Government's net worth statement. This proof is
buttressed somewhat by independent evidence that petitioner had bought a
modest home in 1943 for $9,600, paying less than one-third in cash and
the balance in installments, and by the fact that petitioner's wife, who
held the bulk of the family's assets in her name, was a housewife
through almost all of the preprosecution years with no significant
independent sources of income.
[Proof
of Conduct During Period of Prosecution]
But
substantiating the opening net worth is just one method of corroborating
these extrajudicial statements. Petitioner's admissions may also be
corroborated by an entirely different line of proof--by independent
evidence concerning petitioner's conduct during the prosecution period,
which tends to establish the crime of tax evasion without resort to the
net worth computations. The Government's evidence showed that coincident
with petitioner's opening of the racing-news service, in which he kept
no records, petitioner and his wife opened 9 new bank accounts, making
their over-all total 14 accounts in 12 banks; that the money in these
accounts, which amounted to only $8,000 at the beginning of the
prosecution period, varied between $42,000 and $80,000 during the
prosecution years; that brokerage accounts, opened by petitioner and his
wife in 1947 and 1948 respectively, were worth $9,000 in 1947 and over
$41,000 in 1948 and 1949; that petitioner and his wife made new
investments in realty during the prosecution period, about $2,000 in
1946, over $14,000 in 1948, and $35,000 in 1949; that other substantial
expenditures were made during the prosecution years, $3,750 in U. S.
Savings Bonds in 1946, a total investment of $4,768 in new cars in 1947
and 1948, and a $37,000 annuity payment and $3,750 mink coat in 1949.
During these same years petitioner's declared income exceeded his living
expenses by less than $3,000. These substantial expenditures, savings
and investments might not, of themselves, suffice to support a
conviction of tax evasion without evidence of a starting point
indicating a lack of funds from which these payments might have come.
But this conduct does corroborate the net worth statement by tending
to show that the petitioner was understating his income during the
prosecution years. We cannot say that there is so little relation
between expenditures and income that the Government's proof of
expenditures far in excess of reported income, coupled with proof of a
business producing unrecorded amounts of income, fails to corroborate
the charge that petitioner's earnings during the prosecution years
exceeded his declared income.
[Conclusion]
We
hold that under either of these two lines of proof sufficient
corroboration was shown to permit the case to go to jury. The
circumstances leading up to petitioner's statement, and the failure of
the facts shown therein to mesh with the other evidence adduced by the
Government, imposed on the trial judge and the reviewing courts a duty
of careful scrutiny. Nevertheless, the independent evidence was strong
enough, we believe, to overcome these indicia of unreliability, and we
accordingly affirm.
1
Although there had previously been discussion of a civil fraud penalty,
this check was apparently meant to cover only the tax liability proper.
2
The Government also relied on petitioner's admissions in establishing
his living expenses during the prosecution years. But these do not bear
on opening net worth and are therefore not fairly within the question
presented. Moreover, the variation possible in these figures is too
slight to affect the result in any significant respect.
3
Admissions given under special circumstances, providing grounds for a
strong inference of reliability, may not have to be corroborated. Cf. Miles
v.
United States
, supra; State v. Saltzman, 241
Iowa
1373, 44 N. W. (2d) 24.
4
They were made to officials after the offense had been committed. It may
be questioned, though, whether these admissions were as basic to the
Government's case as the statements concerning opening net worth, and
whether they should therefore be exempted from the requirement of
corroboration. But where a fact is sufficiently important that the
Government adduces extrajudicial statements of the accused bearing on
its existence, and then relies on its existence to sustain the
defendant's conviction, there is need for corroboration. Cf. United
States v. Kertess, supra, at 930.
[58-1
USTC ¶9326]
United States of America
, Petitioner v. William V. Massei
Supreme
Court of the
United States
, No. 98, 355
US
595, 78 SCt 495, 3/3/58, Affirming CA-1, 57-1 USTC ¶9434, 241 Fed. (2d)
895
On writ of certiorari to the United States Court of Appeals for the
First Circuit.
[1939 Code Sec. 145(b)--similar to 1954 Code Sec. 7201]
Tax evasion: Net worth method: Proof of likely source of income.--A
District Court had found taxpayer guilty of tax evasion. The First
Circuit remanded the case for further proceedings and set aside the
verdict, basing its remand in part on the absence of "proof of
likely source," which it regarded as an indispensable element of
the net worth method. The Supreme Court affirms the judgment of the
First Circuit because a new trial is permissible under the terms of its
order. However, it makes it clear that in Holland v. U. S., 348
U. S.
121, 54-2 USTC ¶9714, the court did not intend to imply that proof of
likely source was necessary in every case. Should all possible sources
of nontaxable income be negatived, there would be no necessity for proof
of a likely source.
J.
Lee Rankin, Solicitor General, Charles K. Rice, Assistant Attorney
General, Earl E. Pollock, Assistant to Solicitor General, Joseph F.
Goetten, John J. McGarvey, Department of Justice, for petitioner.
Richard Maguire,
31 Milk Street
,
Boston
,
Mass.
(Thomas J. Carens,
Rob
ert J. Sherer, of counsel), for respondent.
[Proof
of Likely Source]
PER
CURIAM:
The
Court of Appeals [57-1 USTC ¶9434] has based its remand in part on the
absence of "proof of likely source," which it regards as an
"indispensable" element of the net worth method, citing Holland
v. United States, 348 U. S. 121 [54-2 USTC ¶9714], in support of
its conclusion. In
Holland
we held that proof of a likely source was "sufficient" to
convict in a net worth case where the Government did not negative all
the possible nontaxable sources of the alleged net worth increase. This
was not intended to imply that proof of a likely source was necessary in
every case. On the contrary, should all possible sources of nontaxable
income be negatived, there would be no necessity for proof of a likely
source. The above explanation must be taken into consideration in
applying the
Holland
doctrine to this case. A new trial being permissible under the terms of
the order of the Court of Appeals, we affirm its judgment.
JUSTICE
DOUGLAS would affirm the judgment below on the opinion of the Court of
Appeals, 241 Fed. (2d) 895, 900-901 [57-1 USTC ¶9434].