Assisting in Preparation of Fraudulent Return

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7203: Willful Failure to File Return, Supply Information, or Pay Tax: Sufficiency of Indictment or Information: Assisting in Preparation of Fraudulent Return

 

[67-2 USTC ¶9521] United States of America , Plaintiff-Appellee v. Abraham Maius, Defendant-Appellant

(CA-6), U. S. Court of Appeals, 6th Circuit, No. 16981, 378 F2d 716, 6/15/67, Aff'g unreported District Court decision

[1954 Code Secs. 7201 and 7206]

Crimes: Tax evasion: Assisting in filing fraudulent corporate returns: Prejudicial coercion by district court: Sufficiency of evidence: Right to counsel warning.--The Court sustained the defendant's conviction for willfully attempting to evade income taxes, and for willfully and knowingly aiding and assisting in preparing fraudulent income taxes of a corporation in which he held stock and acted as manager. In sustaining this conviction, the Court held that the district court did not use prejudicial coercion on the jury in forcing it to find on three extra counts after it had indicated a finding on one count. Moreover, the Court held that the evidence was sufficient to support the jury's conclusion that the defendant was a party in a scheme to conceal corporate income, which fact was the basis of the criminal actions. The fact that the defendant did not sign or file the corporate return was not material. The Court further held that Internal Revenue Agents did not have to warn the defendant of his right to counsel, and that statements made by the defendant were properly admissible as evidence. The defendant was not under arrest or duress when he made the statements in question.

Donald A. Hansen, Mitchell Rogovin, Assistant Attorney General, Lee A. Jackson, Richard B. Buhrman, Department of Justice, Washington, D. C. 20530, Ernest W. Rivers, United States Attorney, Federal Bldg., Louisville, Ky., for plaintiff-appellee. William J. Dammarell, 1304 Tri-State Bldg., Cincinnati , Ohio , for defendant-appellant.

Before CELEBREZZE and MCCREE, Circuit Judges, and MCALLISTER, Senior Circuit Judge.

MCALLISTER, Senior Circuit Judge:

The Glen Corporation of Newport, Kentucky, operated a gambling place, as well as the Glen Rendezvous and Tropicana, consisting of a hotel, restaurant, bar and night club.

When, in August 1962 and October 1963, Internal Revenue agents investigated the income tax returns of the Glen Corporation, appellant Maius, who, among other positions he held in the organization, was one of the managers, explained to the agents the accounting procedures of the corporation. He stated that he prepared a daily sheet, which was used by one of the defendants in this case, Tito Carinci, in making entries in a book, which he identified as the record of "casino net wins and losses" for the years 1959 and 1960.

"Gambling loss collection," as the phrase is used in this case, are collections made by banks for the benefit of the Glen Corporation, on checks given by gamblers in payment of their gambling losses. The Government showed that these gambling loss collections paid by the bank to the Glen Corporation amounted to $207,342.67 for 1959, and $144,435.21 for 1960. However, the amount of these same collections was set forth in the Glen Corporation's income tax returns as $73,900 for 1959, and $46,968 for 1960.

As a result, the corporate income was understated on the income tax returns by $133,442.67 for 1959, and by $97,467.21 for 1960.

The additional tax due on the above unreported income was $69,309.14 for 1959, and $46,585.72 for 1960.

Appellant, before being employed by the Glen Corporation, had considerable experience as a restaurant manager. He was hired by the corporation to manage the bar and the restaurant. He also helped to manage the company and to do a large amount of its banking business. He was issued 415 shares of Glen Corporation stock on March 4, 1959 , and this certificate was later canceled, and a new certificate was issued to him for 115 shares.

As a result of the investigation of the corporation by the Internal Revenue Service, eight persons were indicted, including the appellant. On July 26, 1965, appellant and Tito Carinci were tried for willfully attempting to evade income taxes of the Glen Corporation for the years 1959 and 1960, in violation of Section 7201 of the Internal Revenue Code of 1954, and for willfully and knowingly aiding and assisting in preparing fraudulent income tax returns of the Glen Corporation for the years 1959 and 1960 in violation of Section 7206(2) of the Internal Revenue Code of 1954. The jury found appellant guilty on four counts of the indictment and he was thereafter sentenced to concurrent prison terms of three years and fined a total of $15,000.

The main issues as stated by appellant are: (1) Did the district court use prejudicial coercion on the jury in forcing it to find on three extra counts after it had indicated a finding on one count? (2) Was there sufficient evidence to sustain the verdict? (3) Were statements which appellant made to Internal Revenue agents properly admitted in evidence when the agents, who had advised appellant of his rights under the Fifth Amendment, did not inform him that he could have an attorney present during the interviews?

The first contention of appellant that the district court used prejudicial coercion in forcing the jury to find on three counts after it had indicated a finding on another count, is based upon the court's having given a so-called Allen charge ^* in the following language:

"Let me say this to you, members of the jury. The chances are that without a finding on these other counts that this defendant would have to be retried on the counts upon which this jury has not yet agreed. Of course, you realize that--the time required and the costs, not only to the Government but to the parties, of a trial of this nature. You realize further that these same facts substantially would have to be given to another jury, another four days in a trial, perhaps more, would result, and certainly the next jury that would consider this case is no more able to determine it than you ladies and gentlemen are, having--knowing that they will hear substantially the same evidence. And certainly they would be no more intelligent than you ladies and gentlemen are.

"Now, it is true that, and the Court does not desire that any juror should surrender his own conscientious convictions, but, on the other hand each juror in order to perform his duty must perform it conscientiously and honestly and, of course, according to the law and the evidence and, although the verdict, and each verdict, to which a jury agrees must be his own verdict and the results of his own convictions and not a mere acquiescence in the conclusions of his fellow jurors, yet, as I told you when you were first qualified as jurors, it's often difficult to bring twelve minds to a unanimous result. And in order to do so, of course, you are required and must examine the questions presented with candor, and certainly with a proper regard and deference to the opinions of each other.

"Now, I--do you think there is an opportunity or a chance that you might be able to reach a verdict on these other counts? I'd appreciate it very much if you would undertake to consider them further and see whether or not you can reach a verdict."

The charge as given would be proper in an attempt to secure some kind of a verdict as to innocence or guilt. Appellant says that the jury had already reported its view as to innocence or guilt on one count--Count 4. But this is not the case. The jury rather stated that it had found on Count 4, but that it was hopelessly deadlocked on Counts 2, 3, and 5. It did not, however, state whether it had found appellant guilty or not guilty on Count 4. If its verdict had been not guilty on Count 4, the trial court was correct in stating that the case would have to be retried on the other counts. Counts 2 and 3 charged at attempt to evade and defeat income taxes. Counts 4 and 5 charged willfully and knowingly aiding and assisting in preparing a false income tax return. We see no violation of appellant's rights in the court's giving the so-called Allen charge. This is not a refusal of the trial court to receive a verdict on a lesser charge, and sending the jury back to attempt to reach a verdict on a higher charge. There is no evidence that the court applied pressure to increase a verdict which it had already agreed upon. No specific finding or verdict had been announced by the jury--only a statement by the jury of a finding, without a statement what that finding was; and there was no knowledge on the part of the court or anyone else--except the jury as to what the finding was. We find no error in the charge of the trial court.

Appellant contends that there was not sufficient evidence to sustain the verdict. An examination of the record shows that there was evidence from which the jury could find that appellant was involved in conduct to conceal the actual receipt of the corporate income, and in accounting for it. As mentioned, he did most of the banking business for the corporation. He was the bookkeeper in respect to the customer checks, and maintained a list of the checks taken to the bank for collection. He also kept track of the collections and posted them on the records which were used in the preparation of the corporate tax returns.

The testimony further disclosed that appellant had examined the 1959 and 1960 income tax returns before they were filed. The fact that appellant did not sign or file the tax returns is not material. There was sufficient evidence to support the conclusion of the jury that appellant was a party to the scheme of concealing the receipt of income and not reporting it on the corporate records, and that his knowledge of the use of such records in preparing the tax returns is sufficient, under all of these circumstances, to sustain the charge that he willfully and knowingly aided, assisted, and counseled in the preparation and presentation to the Internal Revenue Service of the false returns.

With regard to the contention that statements made by appellant to the Internal Revenue agents were improperly admitted in evidence, when the agent, who had advised him of his rights under the Fifth Amendment, did not inform him that he could have an attorney present during the interview, we find no error. Appellant was not under arrest or under duress in the legal sense of the term when he made the statements in question. A doubt may well assail us as to whether it is fair to a citizen to be summoned before the Internal Revenue agents to be informed that anything he says may be used against him, and then for the agents of the Internal Revenue Service, personifying the authority and punitive nature inherent in the law enforcement, to subject a man to questioning and to extract possibly by threats, insinuations, or subtle forms of suggestive coercion, the only evidence on which he can be sent to prison, and to use this evidence to send him to prison. It would seem, in all fairness, that before he answers such questions and thereby directly incriminates himself, he should be advised of his right to have his lawyer present. The Internal Revenue Service has lately been subjected to widespread criticism, because of trickery of some of its agents in unconstitutional invasion of a citizen's rights by the use of tapped telephone wires, or "bugging"; and the Commissioner has repudiated and castigated such conduct. No one would believe, however, that a man would appear before government agents, and answer their questions, if he knew that the effect of his answers would be to send him straight to the penitentiary. But whether fair or not, no court has held that a man who is not advised of his right to have his attorney present when questioned by an Internal Revenue agent, is thereby deprived of his constitutional rights. A citizen summoned before such federal agents has the option to refuse to answer their questions; but there are few who have the toughness of fibre and the technical knowledge of their rights, who would decline to answer questions put to them in these circumstances. Until we are told by superior authority that a citizen's constitutional rights are imperiled by such procedure, we are constrained to hold that the evidence thereby obtained is admissible in the ensuing criminal trial.

In accordance with the foregoing, the judgment of the district court is affirmed.

^* Allen v. United States , 164 U. S. 492.

 

 

[53-2 USTC ¶9450]Lester E. Butzman, Sr., Appellant v. United States of America, Appellee Gilbert M. Craig, Appellant v. United States of America, Appellee

(CA-6), In the United States Court of Appeals for the Sixth Circuit, Nos. 11704, 11705, 205 F2d 343, June 22, 1953

Appeals from the United States District Court for the Northern District of Ohio, Eastern Division.

Penalties: Conviction on criminal charge: Adjudication on appeal of alleged procedural errors.--The two appellants were found guilty in the District Court and each received a prison sentence for falsely and fraudulently executing an application for "tentative adjustment with respect to amortization deduction", in which it was represented that taxpayer was entitled to tax refunds. Although separate indictments were returned, the appellants were represented by the same attorney, and, upon motion of the Government, the cases were consolidated for trial, which was without a jury. Errors assigned by the defendants were disposed of as follows:

Validity of indictment.--Allegations in the indictment were sufficient although facts upon which the charge was based were not set forth in detail, especially in view of the fact that defendants went to trial on the indictment without asking for a bill of particulars or making a motion to dismiss the indictment. The indictment met the requirements of alleging basic facts covering the essential elements of the crime with enough particularity to apprise each defendant of the nature of the charge and to enable him to protect himself from a subsequent prosecution on the same charge. Furthermore, the indictment did not fail to charge defendant with a crime, since he was charged with falsely executing a particular type of document which contained representations which were not true.

Sufficiency of evidence.--Under the circumstances of the case, the District Judge was justified in finding that the Government officials who passed upon the amortization application had the right to rely upon representations therein without making an independent investigation of Government records, and the evidence sustained his finding that the application was executed and filed with intent to defraud. Evidence was also sufficient to sustain the finding that the second defendant aided, assisted, or counseled the preparation of the document in question.

Determination of credibility of witnesses.--The credibility of witnesses is a question for the trial judge, and hence there was no reversible error in his conclusion that testimony of three Government witnesses proved defendant had certain knowledge, notwithstanding the latter's testimony to the contrary.

Denial of motion for charge of venue.--The District Court did not err in refusal to sustain defendants' motion for a change of venue where the motion alleged a fair and impartial trial could not be obtained in the district in which the indictment was returned, trial by jury was waived, and no complaint is made of failure to receive a fair and impartial trial by the judge who tried the case.

Statute of limitations.--The statute of limitations on the indictment started to run when the application for adjustment of tax liability was filed, not at an earlier date when such document was completed.

Right of co-defendant to separate counsel.--Where two defendants are represented by the same counsel and a conflict of interest between them develops, the aggrieved party is entitled, unless the right was waived, to separate counsel of his own choosing. Such conflict here arose over waiver of trial by jury. Ruling on the appeal of such defendant is suspended for presentation of the issue to the trial court, since the issue was raised for the first time on appeal.

Daniel H. Wasserman, Cleveland, Ohio (Michael Leo Looney, Cleveland, Ohio, was with him on the brief), for appellant Lester E. Butzman, St. Paul P. Cohen, Niagara Falls, N. Y. (Cohen, Fleischmann, Augspurger, Henderson & Campbell, Niagara Falls, N. Y., of counsel), for appellant Gilbert M. Craig. Frank E. Steel, Cleveland , Ohio (John J. Kane, Jr., Cleveland , Ohio , was with him on the brief), for appellee.

Before SIMONS, Chief Judge, and ALLEN and MILLER, Circuit Judges.

MILLER, Circuit Judge:

The appellant, Lester E. Butzman, Sr., was found guilty in the District Court had received a sentence of three years for falsely and fraudulently executing a document required by the provisions of the Internal Revenue laws, §3793(a)(1), Title 26, U. S. Code. Appellant, Gilbert M. Craig, was also found guilty in the same trial and received a sentence of one and one-half years for wilfully aiding and advising the preparation and presentation to the Collector of Internal Revenue of a false and fraudulent document executed by the appellant Butzman, §3793(b)(1), Title 26, U. S. Code. Although separate indictments were returned, the appellants were represented by the same attorney, and, upon motion by the Government, the cases were consolidated for trial. They were heard by the Court without a jury. The appeals come to us on a single record. The appeals will be disposed of separately.

In case No. 11704, the indictment charged that on January 14, 1946, Butzman "did wilfully and knowingly, falsely and fraudulently, with intent to defraud, execute a document required by the provisions of the Internal Revenue laws and regulations, to-wit: Application for Tentative Adjustment with Respect to Amortization Deduction, which document was filed with the Collector of Internal Revenue . . ., in which document it is represented that the said Lester E. Butzman, Sr., was entitled under the provisions of the Internal Revenue laws to claim a credit for the years 1941, 1942 and 1944 of refunds totaling $56,078.61, whereas as the said defendant then and there well knew the information contained in the application aforesaid was false and untrue, in that the Necessity Certificates which formed the basis of the claim for the refund in said Application had not been granted and the said defendant was not entitled to the refund as claimed; . . ."

[Facts as to First Defendant]

There was evidence showing the following facts: The appellant started his employment with the Ohio Tool Company in 1922 at which time the Company was a partnership operating a small specialty machine shop. During the 1930s he became the sole owner of the business. The business underwent a tremendous expansion in its operations after the start of the War in 1939. About the end of 1937, William J. Franz was employed to do the accounting work for the company. In 1941, at the suggestion of Franz, the business was made a family partnership consisting of the appellant, his son Lester E. Butzman, Jr., and his daughter Betty Jane Downs.

On October 8, 1940 , §124, Internal Revenue Code was enacted as part of the defense mobilization program. It provided for an accelerated amortization deduction of emergency facilities installed by the taxpayer, based on a period of sixty months, upon an election by the taxpayer to do so, made by filing a statement of such election with the Commissioner. §124(d)(4), Internal Revenue Code. The procedure was for the taxpayer to file an application with the War Department, upon which, after being processed, a certificate would be issued certifying the facility as necessary in the interest of national defense during the emergency period. Such a certificate would entitle the applicant to write off the cost of the facility over a five-year period. This was in lieu of the deduction with respect to such facility provided by §23(l), Internal Revenue Code, relating to exhaustion, wear and tear, and obsolescence. Sometime in 1942, Franz discussed with appellant about making application to take advantage of this amortization deduction, and appellant gave Franz a power of attorney for the purpose of making such applications. On April 23, 1943 , an informal application was filed with the War Department, Tax Amortization Branch, followed by a formal application dated May 21, 1943 , in the amount of $853,840.78, which was given the number WD-N-22024. Another application for the amount of $67,994.02 was also filed on June 26, 1943 , which was given the number WD-N-23426.

On September 11, 1943 , a preliminary notice of rejection was mailed to the Ohio Tool Company which stated that application No. WD-N-22024 was untimely and that there were adequate facilities in existence. This was followed by an official letter of rejection mailed on October 9, 1943 . Application No. WD-N-23426 was officially rejected by letter of October 8, 1943 on the ground that there was insufficient evidence of shortage of capacity in the industry. These letters, after being received by the Company, were turned over to Franz.

Differences arose between Butzman and Franz, and about November 1, 1943 , appellant Craig was employed by the Company as Comtroller on a full-time basis, for the purpose of taking over Franz's work and to generally supervise the office. The Company's own accounting staff did not take over the entire accounting work until the Spring of 1944. At approximately that time Franz turned over to Craig the greater part, but not all, of his files with respect to the Ohio Tool Company. One of the files retained by Franz contained the letter of October 9, 1943 from the War Department denying the Company's application WD-N-22024. The other letter of rejection was not located, either in Franz's files or the Company's files.

On July 31, 1945 , Congress enacted the "Tax Adjustment Act of 1945" which permitted war production facilities which became substantially worthless at the close of the War to be amortized retroactively over the period from 1940 to 1945. §7 of the Act, (§124(j) and (k), Internal Revenue Code), provided for the filing of an application by a taxpayer who had elected to take the amortization deduction under §124(d)(4) for tentative adjustment with respect to the taxes for taxable years prior to the taxable year in which the application was filed. In September, 1945, the President proclaimed the ending of the emergency period as defined in §124(e)(2) of the Internal Revenue Code. Smith, an employee in the Company's accounting department, having become advised of the Tax Adjustment Act, recommended that applications be filed for adjustment of the tax liabilities for 1941-1944 and for refunds payable pursuant to such adjustments. He discussed the matter with Craig and with Internal Revenue agent Coleman, who was working at the Ohio Tool Company plant. On December 20, 1945 , Craig wrote the Commissioner of Internal Revenue that the Ohio Tool Company elected to amortize the Emergency Facilities covered by Certificates of Necessity within the period covered by the President's proclamation to September 30, 1945 . This letter stated: "The following Certificates of Necessity are affected: WD-N-22024, WD-N-23426." By letter of December 29, 1945, the Commissioner acknowledged receipt of this election, advising that the election did not constitute a claim for credit or refund, and that if a tentative adjustment with respect to amortization deduction under section 7 of the Tax Adjustment Act of 1945 was desired, application should be filed with the Collector for its district on Form 1046, which could be obtained from the Collector. Smith obtained the forms from the local Internal Revenue office, and prepared and filed an application for each of the three partners. Butzman's application, signed by him, was filed with the Internal Revenue office by Smith on January 14, 1946 . It is this application which is the basis of the present proceedings.

The application specifically referred to Necessity Certificates Nos. WD-N-22024 and WD-N-23426, the election by the Company on December 20, 1945 to terminate the amortization period under the authority of the President's Proclamation, and the termination of the amortization period by reason thereof on September 30, 1945 . It was supported by detailed amortization schedules and copies of original income tax returns for 1941-1944 of both the partnership and Butzman individually, together with recomputed tax returns for the partnership and Butzman individually for the same years on the basis of the accelerated amortization.

Internal Revenue Agent Coleman was working at the plant of the Company in connection with an audit of the returns of the partnership and its members. Shortly prior to May 3, 1946 , he asked Craig to show him Certificates of Necessity WD-N-22024 and WD-N-23426. They were not located in the Company's files, and at a conference on May 3, 1947 , in Franz's office, Franz found in his files one of the two letters, but not both, which denied the applications for the two Certificates of Necessity. The Company's attorney, thinking that possibly a reapplication had been made and approved, promptly thereafter wrote to the Commissioner requesting certified copies of the two Certificates and was advised by the Tax Amortization Branch, Civilian Production Administration, by letter of July 1, 1946, that the files indicated that the two applications were never approved but were denied by letters of October 8th and 9th, 1943.

In the meantime, the three partners received checks from the Treasurer of the United States for refunds totaling approximately $109,000, dated June 11th and 13th, 1946. Smith checked the amounts, which totaled $1,000 more than they were entitled to, and upon instructions from Craig refunded that amount to the Government. The proceeds of the checks were deposited in the account of the Ohio Tool Company. The Bureau made no demand for a return of the money. The money was not repaid to the Government after the partners were advised that the Certificates of Necessity had not been issued, Craig taking the position that the partners were entitled to refunds in accordance with general accounting principles of obsolescence and amortization. Coleman made a report dated August 2, 1946 , recommending that the application be reassessed, and that the resulting taxes be assessed back to the taxpayer for each of the years involved. At the time of the trial there had been no final determination of what refund, if any, the partners were entitled to in accordance with general accounting principles of obsolescence and amortization.

[Sufficiency of Allegations in Indictment]

Appellant's first contention is that the indictment is invalid because it charges the appellant in general terms with having committed a crime, instead of charging him with commission of specific acts which would constitute a commission of the alleged crime. We recognize the general rule that an indictment is insufficient if it states conclusions rather than the facts upon which the conclusions are based. Johnson v. United States , 294 Fed. 753, 755, C. A. 9th; Boykin v. United States , 11 Fed. (2d) 484, 485, C. A. 5th; Alabama Packing Co. v. United States , 167 Fed. (2d) 179, 181-182, C. A. 5th. However, such facts need not be stated in detail. Rule 7(c) of the Federal Rules of Criminal Procedure provides "The indictment or the information shall be a plain, concise and definite written statement of the essential facts constituting the offense charged." An indictment is sufficient to meet modern requirements if it alleges basic facts covering the essential elements of the crime against the United States with enough particularity to fairly apprise the defendant of the nature of the charge and to enable him to protect himself from a subsequent prosecution for the same offense. Todorow v. United States , 173 Fed. (2d) 439, 446-447, C. A. 9th; Ross v. United States , 180 Fed. (2d) 160, 164, C. A. 6th. Appellant bases his contention upon that part of the indictment which alleges that the document represented that Butzman "was entitled under the provisions of the Internal Revenue laws to claim a credit for the years 1941, 1942 and 1944 of refunds totaling $56,078.61," which he claims is a representation of law. However, before that allegation is made the indictment alleges, using the words of the statute, that the appellant did on January 14, 1946 , in the Eastern Division of the Northern District of Ohio, falsely execute a document required by the provisions of the Internal Revenue laws. This is an allegation of fact rather than a conclusion of guilt. The remainder of the indictment gives additional facts which identify the particular document referred to. Appellant did not make a motion to dismiss the indictment, nor did he ask for a bill of particulars, but went to trial on the indictment. In our opinion, the allegations are sufficient. Leonard v. United States , 18 Fed. (2d) 208, 211-212, C. A. 6th; Koa Gora v. Territory of Hawaii , 152 Fed. (2d) 933, 935, C. A. 9th. Upon a proceeding after judgment, no prejudice being shown, it is enough that the necessary facts appear in any form or by fair consideration can be found within the terms of the indictment. Hagner v. United States , 285 U. S. 427, 433; Gariepy v. United States , 189 Fed. (2d) 459, 461, C. A. 6th [51-1 USTC ¶9318]; Keys v. United States, 126 Fed. (2d) 181, 185, C. A. 8th.

[Issue as to Whether Indictment Made a Criminal Charge]

Of a similar nature is the appellant's contention that the indictment does not charge him with a crime in alleging that the appellant represented that he was entitled under the provisions of the Internal Revenue laws to a credit for the taxable years in question, in that such a representation was not false, due to the fact that appellant was actually entitled to a credit under the general accounting principles of obsolescence and amortization provided by Sec. 23(l), Internal Revenue Code. The charge in the indictment is not limited to such a representation. It charges the appellant with falsely executing a document described as an Application for Tentative Adjustment with Respect to Amortization Deduction, which document represented, on the basis of facts which the appellant knew to be untrue, that the appellant was entitled to an income tax credit. The indictment must be considered in its entirety. So considered, we are of the opinion that the indictment does not charge him with falsely claiming a refund but charges him with falsely executing a particular type of document which contained facts which were not true. Appellant's argument on this point fails to meet the issue.

[Evidence as to Intent to Defraud]

Appellant also contends that as a matter of law there was no intent on his part to defraud the Government, because the Government knew through its own files that the Certificates of Necessity had not been issued, and that any representation by the appellant to the country was not calculated to deceive, because it was made to the party who had actual knowledge of its falsity. In order to defraud the Government, pecuniary loss to the Government is not necessary. Any impairment of the admin istration of its governmental functions is sufficient. United States v. Goldsmith, 68 Fed. (2d) 5, 7, C. A. 2nd; Johnson v. Warden, 134 Fed. (2d) 166, 167, C. A. 9th; United States v. Tynan, 6 Fed. (2d) 668, 669, S. D. N. Y. The commission of the crime is not dependent upon the success of the fraudulent intent. Thacher v. United States , Fed. case, No. 13851, affirmed, 103 U. S. 679. See United States v. Kapp, 302 U. S. 214, 217-218. Nevertheless, in the present case the Government acted upon the misrepresentations, was actually deceived by them, and paid money which it would not have paid except for such misrepresentations. Under the circumstances of this case, we think that the District Judge was justified in finding that the Government officials charged with the duty of passing upon the Application, had the right to rely upon the representations without making an independent investigation of Government records, and that the evidence sustains his finding that the Application was executed and filed with the intent to defraud. Buckley v. Buckley, 230 Mich. 504, 509; Western Mfg. Co. v. Cotton & Long, 126 Ky. 749, 755-757; Morrison v. Bank of Mount Hope, (W. Va.) 20 S. E. (2nd) 790; Strand v. Griffith, 97 Fed. 854, C. A. 8th.

[No Reversible Error in Trial Judge's Judgment as to Credibility of Witnesses]

Appellant also contends that the evidence was insufficient to justify a finding of guilt, in that it failed to show beyond a reasonable doubt that he had knowledge that the Certificates of Necessity had not been issued. His contention is that although the letters of rejection were received by the Company, the matter was handled by Franz and the auditing department, and such information was not brought to his attention. Although three witnesses, Franz, Figley, who was an employee of Franz, and Voos, a civilian employee in the Ordnance Department at Cleveland , testified that appellant knew that the Certificates of Necessity had not been issued, appellant claims that these witnesses were biased and prejudiced, and that the Court should have accepted his own testimony to the contrary. The trial judge, in his oral opinion, discussed the credibility of these witnesses at considerable length, and concluded that there was sufficient credible testimony from them to prove knowledge on the part of the appellant. It is well settled that the credibility of witnesses is a question for the trial judge. Goldman v. United States, 245 U. S. 474, 477; Hawk v. Olson, 326 U. S. 271, 279; Wilson v. United States, 149 Fed. (2d) 780, 782, C. A. 6th.

[Issue of Change of Venue Waived by Election to Be Tried by the Court]

Appellant contends that the Court erred in overruling his motion for a change of venue. The motion was based upon several news articles and a cartoon appearing in different editions of the Cleveland Press, which depicted appellant as a war profiteer and a tax dodger, and as one, who although having gone through bankruptcy, was nevertheless able to own a big Florida ranch on which he lived in ease and comfort. The motion claimed that the publication of these articles had created so great a prejudice against the appellant that he could not obtain a fair and impartial trial in the district where the indictment was returned. The District Judge was of the opinion that the circulation of the Cleveland Press was largely restricted to Cuyahoga County , in which County Cleveland is located, and pointed out that 28 of the 52 prospective jurors were from outside Cuyahoga County . Being of the opinion that a fair and impartial jury could be obtained from jurors who had not read the articles in question, he overruled the motion. No jurors were questioned. Appellant thereafter waived a trial by jury. He now contends that this was not a voluntary waiver on his part, in that he was forced to do so by the trial court's refusal to sustain his motion for a change of venue. The argument is unsound. A different question would be presented if appellant had carried through with his motion, interrogated the prospective jurors, and shown that a fair and impartial jury could not have been obtained. From the facts disclosed by the present record, it seems entirely possible that such a jury could have been impaneled. Under the circumstances, it was not an abuse of the trial court's discretion in overruling the motion. United States v. Beadon, 49 Fed. (2d) 164, 166, C. A. 2nd, cert. denied, 284 U. S. 625; Kersten v. United States, 161 Fed. (2d) 337, 339, C. A. 10th, cert. denied, 331 U. S. 851. In any event, the question was waived by appellant's election to be tried by the Court. No complaint is made that he failed to receive a fair and impartial trial by the District Judge who tried the case. The way to have preserved the alleged error was to have proceeded with a trial by jury under protest and let the record show whether the jury as so impaneled provided the appellant with the fair and impartial trial to which he was entitled. Jones v. Williamsburg City Fire Inc. Co. ( Kansas ), 116 Pac. 484; Grogan-Cochran Lumber Co. v. McWhorter ( Texas Civil Appeals), 15 S. W. (2d) 126. In electing to pursue the course which he took, appellant was attempting to obtain whatever advantage might result from the trial without a jury, and if unsuccessful still maintain that the result was not binding upon him. Under such circumstances, the election is clearly binding upon the appellant. Compare Metcalf v. United States , 195 Fed. (2d) 213, 217, C. A. 6th; Marx v. United States , 86 Fed. (2d) 245, 251, C. A. 8th; Hagner v. United States , 54 Fed. (2d) 446, 449, C. A. D. C.; Levine v. United States , 182 Fed. (2d) 556, 558, C. A. 8th.

The appellant Craig, in addition to advancing the same arguments on his own behalf as were advanced by Butzman in his appeal, contends that the evidence was insufficient to show that he participated in the preparation or filing of the document on which the indictment was based, that the six-year statute of limitations barred the proceeding against him, and that he was deprived of the "assistance of counsel" guaranteed by the Sixth Amendment of the Constitution.

[Evidence Sufficient to Establish Second Defendant as Party to False Document]

As shown by the foregoing statement of facts, appellant Craig wrote and signed the letter of December 20, 1945 in which he notified the Commissioner of the Company's election to amortize the Emergency Facilities covered by the two Certificates of Necessity. Although the Application itself was prepared by his assistant, Smith, signed by Butzman, and filed by Smith, the evidence shows that Smith conferred with Craig about making the Application before this letter was written. In our opinion, this evidence was sufficient to sustain a finding that Craig aided, assisted or counseled the preparation of the document in question.

[Statute of Limitations Did Not Start Until False Document Was Filed]

Appellant Craig's reliance upon the Statute of Limitations is based on a computation of time starting with the completion of the Application and appendices on or about December 31, 1945, which was more than six years prior to the date of the indictment, January 10, 1952. However, if the time began to run with the filing of the Application fourteen days later on January 14, 1946 , the indictment was not barred by limitations. No crime was committed by Butzman until the Application was filed. No crime would have been committed by Craig if the Application had not been filed. We are of the opinion that the statute did not start to run until the Application was filed on January 14, 1946 .

[Issue as to Second Defendant's Right of Representation by Separate Counsel Matter for Trial Court Decision]

The attorney who represented appellant Butzman was the regularly employed attorney of the Ohio Tool Company. He also undertook to represent the appellant Craig. Craig contends that although no conflict of interest might have shown itself when this dual representation was undertaken, a review of the record as a whole shows that such a conflict developed. Reference is made to the fact that it was to the interest of Butzman to shift responsibility for the alleged false document to one or more of his employees, and that it may have been to Butzman's interest, when faced with unfavorable newspaper publicity, to have waived a jury trial, but there was no such reason for waiving such a trial on the part of Craig. Such a conflict of interest deprives an accused of the effective "assistance of counsel" as defined by Supreme Court decisions. Glasser v. United States , 315 U. S. 60, 70; United States v. Hayman, 342 U. S. 205, 208. See also Powell v. Alabama, 287 U. S. 45. This right is too fundamental to permit a Court to indulge in nice calculations as to the amount of prejudice arising from its denial. Glasser v. United States , supra, at p. 76.

It is well settled that the right to the assistance of counsel can be waived. Johnson v. Zerbst, 304 U. S. 458, 469; United States v. Hayman, supra, at pp. 208-209. However, every reasonable presumption will be indulged against the waiver of such a fundamental right, Glasser v. United States , supra, at p. 70, and the Court should "not presume acquiescence in the loss of fundamental rights." Johnson v. Zerbst, supra, at p. 464. The Supreme Court also said in Johnson v. Zerbst, supra, at p. 464, that an intelligent waiver of the right to counsel depends upon the particular facts and circumstances in each case, and, at p. 465, "whether there is a proper waiver should be clearly determined by the trial court, and it would be fitting and appropriate for that determination to appear upon the record."

Representation by a particular attorney may be under such circumstances as not to meet the constitutional requirement. Glasser v. United States , supra; United States v. Hayman, supra. The issue was not raised in the trial court, and the present record does not show under what circumstances Craig consented to the dual representation. Apparently Craig's present contention is that he did not intelligently and voluntarily waive his right of representation by separate counsel of his own choosing. The Government's contention that such contentions can not be substantiated does not deny appellant the opportunity of supporting them by evidence. Walker v. Johnston , 312 U. S. 275, 287. The issue is one which should properly be presented to the trial court instead of being raised for the first time in this Court on an incomplete record. Sec. 2255, Title 28, U. S. Code, provides for such a hearing. United States v. Hayman, supra. The ruling on the appeal of Craig will be suspended for a reasonable period of time, during which the appellant may present this issue to the trial court, if he so desires, following which the matter may be again brought to us for a final ruling.

The judgment in Lester E. Butzman, Sr. v. United States is affirmed.

The case of Gilbert M. Craig v. United States is remanded to the District Court for further proceedings consistent with the views expressed herein.

 

 

[47-2 USTC ¶9353]J. Mills Newton , Appellant v. United States of America , Appellee

(CA-4), United States Circuit Court of Appeals, Fourth Circuit, No. 5593, 162 F2d 795, Argued June 16, 1947. Decided July 28, 1947

Appeal from the District Court of the United States for the Western District of Virginia, at Danville.

Criminal action: Proper venue.--In a criminal action brought under Code Sec. 3793(b)(1) charging assistance in preparation of a fraudulent return, it was held that the defendant was properly tried in the Western District of Virginia, although the returns in question were filed at Richmond in the Eastern District of Virginia, since the activities described in the offense charged against him took place in the Western District of Virginia.

Criminal action: Sufficiency of indictment.--An indictment under Code Sec. 3793(b)(1) charging that the defendant "unlawfully and feloniously did wilfully aid in * * * the preparation * * * of a false and fraudulent claim" was deemed sufficient since it followed nearly the language of the statute. Other objections to the indictment were held purely modal, and in no way prejudiced any of the defendant's rights.

Criminal action: Denial of a continuance of trial.--Where the trial judge in a criminal action under Code Sec. 3793(b)(1) (charging assistance in preparation of a fraudulent return) denied the defendant's motion for a second continuance on the ground of the physical condition of himself and a witness, it was held that such denial was not an abuse of discretion, in view of the evidence heard on the motion.

Criminal action: Charge to the jury.--In the trial of a criminal action brought under Code Sec. 3793(b)(1), for assisting in the preparation of a fraudulent return, the judge's charge to the jury was held to be fair to the accused. His comments to the jury on the evidence was a proper function of a federal judge. Affirming the decision of the District Court, reported at 68 Fed. Supp. 952.

J. Mills Newton, pro se, on brief; and Howard C. Gilmer, Jr., Acting U. S. Attorney, (Henry T. Clement, Assistant U. S. Attorney, on brief) for appellee.

Before PARKER, SOPER and DOBIE, Circuit Judges.

DOBIE, Circuit Judge:

J. Mills Newton was tried, convicted and sentenced in the United States District Court for the Western District of Virginia (sitting at Danville, the residence of Newton), under an indictment in twenty counts, charging violations of 26 U. S. C. A. §3793(b)(1). The pertinent part of that section reads:

"Any person who willfully aids or assists in, or procures, counsels, or advises the preparation or presentation under, or in connection with any matter arising under, the internal revenue laws, of a false or fraudulent return, affidavit, claim, or document, shall (whether or not such falsity or fraud is with the knowledge or consent of the person authorized or required to present such return, affidavit, claim or document) be guilty of a felony, * * *."

The first count of the indictment, which is altogether typical, charges in part:

"That on or about the 24th day of May, 1945, in the City of Danville, in the Western District of Virginia, J. Mills Newton unlawfully and feloniously did wilfully aid and assist in, and procure, counsel and advise the preparation under, and in connection with a matter arising under, the Internal Revenue laws, of a false and fraudulent claim in the sum of $79.61, based upon amended income tax returns for the years 1942 and 1943, of Cooper T. Garner and Lizzie Garner * * *, and which claim was filed with the Collector of Internal Revenue for the District of Virginia."

Of the multitudinous points made by Newton , we think only four need be considered and discussed by us: (1) Improper venue; (2) Insufficiency of the indictment; (3) Denial of a continuance; (4) Charge to the jury.

Venue

This point was discussed ably and at great length by Judge Barksdale below. 68 Fed. Supp. 952. We deem it necessary to add little to what Judge Barksdale has there written. Newton's contention here is that since the returns were filed at Richmond, as was required by law, in the Eastern District of Virginia, if he has committed any federal crime, this crime was therefore committed in the Eastern District of Virginia, and he could not be tried therefor (as he was tried) in the Western District of Virginia.

Any expressions in the opinion of Judge Learned Hand in U. S. v. Kelley, 105 Fed. (2d) 912, 916 [39-2 USTC ¶9621], relied upon by Newton, which seem to be inconsistent with our view here, are not controlling for the reasons stated in the opinion of Judge Barksdale, 68 Fed. Supp. at pages 955, 956. And we regard as particularly significant in this connection, the provisions of §42 of the Judicial Code, 28 U. S. C. A. 103, which provide that an offense begun in one District and completed in another, may be tried in either District.

In Dobie on Federal Procedure, §127, page 511, it is stated:

"All federal crimes are statutory, and these crimes are often defined, hidden away amid pompous verbosity, in terms of a single verb. That essential verb usually contains the key to the solution of the question: In what district was the crime committed? Without the exact language of the statute, particularly this verb, paraphrases and loose citations in this field are more than inaccurate; they are positively misleading. When, as is so often the case, the statute enumerates several such verbs, only scrupulous, even meticulous, nicety in exact quotation can prevent these statutes, as well as the decisions under them, from proving a snare and a delusion to the unwary."

In the instant case, the key verbs in the statute (set out above) are "aids," "assists in," "procures," "counsels" or "advises" the preparation or presentation of a false or fraudulent return, affidavit, claim or document. Certainly all the activities of Newton connoted by these statutory key verbs took place in the Western District of Virginia. In addition to the cases cited in the opinion below, see Burton v. United States, 196 U. S. 283, 202 U. S. 344; Horner v. United States, 143 U. S. 207; n re Palliser, 136 U. S. 257; United States v. Andrade, 16 Fed. (2d) 776; Hart v. United States , 11 Fed. (2d) 499.

Insufficiency of the Indictment

Newton attacks the validity of the indictment on numerous grounds. One ground is the failure of the indictment to charge "that the accused knew that the claims and returns were false and fraudulent." The indictment does, however, charge that Newton "unlawfully and feloniously did wilfully aid in * * * the preparation * * * of a false and fraudulent claim." This follows quite closely the language of the statute and is utterly inconsistent with a lack of guilty knowledge on Newton 's part.

The contention of duplicity, we find utterly lacking in merit. The only count in the indictment to which this objection might fairly be made was the seventh count, and, on this count the Government formally entered a nolle prosequi. While the indictment could hardly serve as a model, Newton 's objections to it are purely modal, and the indictment in no way prejudiced any of his substantial rights.

Although we think that the indictment does meet all essential requirements, it would have been desirable to state in the indictment, with greater particularity, the facts and circumstances, disclosing particularly wherein the claim of $79.61 was false and fraudulent. It may be noted, too, that Newton , though he moved for a dismissal of the indictment, did not ask for a bill of particulars. As was said by Judge Rose, speaking for our Court in Martin v. U. S., 299 Fed. 287:

"The sufficiency of a criminal pleading should be determined by practical, as distinguished from purely technical, considerations. Does it, under all the circumstances of the case, tell the defendant all that he needs to know for his defense, and does it so specify that with which he is charged that he will be in no danger of being a second time put in jeopardy? If so, it should be held good."

Denial of a Continuance

Newton further complains of the conduct of the trial judge in denying him a further continuance. The grounds on which this continuance was sought were the physical condition of Newton himself and the physical condition of his daughter, Mrs. Coyle, who was unable to travel to Danville , and who, according to Newton 's claim, was an important witness on his behalf.

One continuance had already been granted to Newton on account of the inability of Mrs. Coyle to testify. There was no clear showing as to when she would be able to testify and the first indictment against Newton had been handed down nearly a year before the instant trial. At the trial, too, it appeared that the evidence of Mrs. Coyle would have been of very little, if any, benefit to Newton .

Judge Barksdale heard testimony, on the motion for a continuance, as to the physical condition of Newton and Mrs. Coyle and as to the likelihood of the attendance of Mrs. Coyle in case a continuance should be granted. The Government opposed the continuance and noted certain dilatory tactics on the part of Newton to postpone his trial as long as possible.

The granting of continuances in a federal criminal trial is peculiarly a matter vested in the sound discretion of the trial judge. We certainly cannot say here that Judge Barksdale abused his discretion in denying a second continuance.

The Charge to the Jury

Several complaints are made by Newton as to the judge's charge to the jury. A careful reading of this charge has convinced us that it clearly stated the applicable law and accurately covered every essential element of the offenses charged. It was eminently fair, in every way, to the accused.

The trial judge's comments to the jury on the evidence were given for the purpose of clarifying the numerous issues involved and aiding the jury to arrive at a just verdict. This is a proper function of a federal judge.

Judge Barksdale went out of his way more than once to tell the jury that these comments were not binding on the jury and that the jury was the sole judge of the credibility of the witnesses and the weight to be given to their evidence.

We are convinced that Newton was convicted in a trial that was fairly conducted, without prejudice to any of his rights. The judgment of the District Court is accordingly affirmed.

Affirmed.

 

 

[54-1 USTC ¶9106]Marvin Kobey, Philip Cobert, Harry Kogus and Albert Kogus, Appellants v. United States of America , Appellee

(CA-9), In the United States Court of Appeals for the Ninth Circuit, No. 13,257, 208 F2d 583, November 30, 1953

Appeal from the United States District Court, Southern District of California, Central Division.

Withholding taxes: Penalties: Code provisions made applicable by reference.--The penalties provided in Code Sec. 2707(c) were applicable under an indictment for conspiracy (18 USC) 371) to evade income and other withholding or employment taxes.

Criminal penalties: Failure to file returns, submit information, etc.--As to Counts 11 to 20, laid under Code Sec. 145(b) relating to failure to collect and pay over tax, each appellant was found guilty of failure to supply information under Sec. 145(a).

Criminal penalties: Appeals: Specification of errors: "Package" specification.--The appellants' specification of errors did not conform to Rule 18(2)(d) of this Court, because each "error" intended to be urged was not set out separately and the Court would not consider such "package" specification. Moreover, since refusal of certain requested instructions was assigned as error, the grounds of the objections urged at the trial should have been set forth.

Criminal penalties: No error in refusing bill of particulars.--The appellants assigned as error the denial of the motion for a bill of particulars. It was held that the denial was proper, since the appellants were furnished with photostatic copies of most of the documents which the appellee planned to use at the trial.

Criminal penalties: Trial: Motion for continuance.--The appellants also complained of the denial of their motion for a continuance of the trial to a date not earlier than September 1951. The Court pointed out that the case was recessed to September 4th and the taking of testimony was completed on September 19th.

Criminal penalties: Sufficiency of indictment: Allegation of "duty" or "requirement."--The appellants assigned as error the denial of their motion to dismiss the indictment on the ground that the indictment did not allege any requirement to divulge the amounts paid, to keep accurate records, etc. It was held that under the charge of conspiring to "defraud" or attempting to "defeat or evade" in connection with taxes no averment of "duty" or "requirement" is necessary.

Criminal penalties: Indictment: The "course of conduct" or "single impulse" rule.--The appellants complained that by breaking down the "one course of conduct" into 18 counts, the prosecution exacted penalties far in excess of the maximum. It was held that the "one course of conduct" or "single impulse" rule was not applicable.

Criminal penalties: Appeals: Argument of the U. S. Attorney.--It was held that neither the details of the appellants' illegal gambling operations nor the argument of the U. S. Attorney formed the basis of reversible error.

Criminal penalties: Appeals: Severity of sentence.--It was held that the asserted "severity" of the sentence was not reviewable error.

Cannon & Callister, David H. Cannon, Los Angeles, Calif., Minsky & Garber, Ernest R. Utley, J. B. Beckenstein, Los Angeles, Calif., for appellant. Laughlin E. Waters, United States Attorney, Ray H. Kinnison, Assistant United States Attorney, Chief, Criminal Division, Arline Martin, Assistant United States Attorney, Los Angeles, Calif., for appellee.

Before: MATHEWS and ORR, Circuit Judges, and LEMMON, District Judge.

LEMMON, District Judge:

"Hair-raising" and "horrendous" are the adjectives sued by two of the appellants to denounce the sentences that they are here seeking to overturn.

All four appellants are admitted lawbreakers. Yet now they are loudly invoking a "concept of ethics, social natural justice and fair play"--a concept in which the record shows that they themselves have been conspicuously lacking.

The appellants were bookmakers. Each was convicted on one count of conspiracy to defraud the United States and on eighteen counts of violations of the income and excise tax laws.

All four appellants admit that, in carrying out their illegal practices, they "nicknamed God's creatures", ¹ although, as we shall see, they do not agree upon their reasons for doing so.

Another protective device resorted to by the quartet was to counsel their "agents"--i.e., employees--to destroy records and "have no bookmaking paraphernalia around where it could be found".

All in all, the tale told by this 1536-page record and the bales of exhibits is not a pretty one.

[20 Counts]

1. The Indictment

The indictment, filed on June 12, 1951 , named 68 defendants, and consisted of 20 counts. The four appellants were the only defendants named in every count. The appellant Harry Kogus was indicted as Harry Rockwell.

Count One, laid under 18 USCA Sections 88 (1946 Ed.) and 371, charges that all the defendants and "other persons to the grand jury unknown" conspired to defraud the appellee by impairing, defeating, and obstructing the lawful functions of internal revenue officials in "ascertaining, computing, levying, assessing, and collecting taxes" for the appellee. The conspiracy is alleged to have commenced on or about August 1, 1945 , and to have continued until the date of the return of the indictment.

The Court recites that the object--not the overt acts--of the conspiracy was to be accomplished as follows:

By concealing the identities of persons dealing with the defendants in connection with horse race betting and other gambling conducted by the defendants and others; concealing the amounts of money paid by such persons to the defendants and vice versa; concealing the identities and the compensation of the defendants' employees in such activities; destroying records that would indicate such data; and by maintaining records of the said activities that were "false, fictitious, and misleading as to the names used for the defendants and the persons dealing with them and the transactions recorded".

Thirteen overt acts are set out in connection with Count One. Since no question has been raised regarding these items, they need not be set out here.

Similarly, since the 44 defendants charged therein were acquitted on Count Two, which alleged a conspiracy to commit offenses against the appellee by attempting to defeat and evade income and excise taxes and by willfully failing to collect and account for income taxes required to be withheld, that Count will not be summarized.

Counts Three to Ten, inclusive, were brought under 26 USCA Section 2707(c). Counts Three to Six, inclusive, allege that the four appellants attempted to defeat and evade income taxes required to be withheld from wages, by willfully failing to "collect and truthfully account for, and pay over" to the appellee such taxes for the four quarters of 1948.

Counts Seven to Ten, inclusive, charge that the appellants attempted to defeat and evade "a large part" of the excise taxes on employers and employees owed to the appellee for the same periods by filing "false and fraudulent" Employers' Tax Returns.

Counts Eleven to Twenty, inclusive, allege violations of 26 USCA Section 145(b). The appellants and another defendant--a different one in each of these last ten counts--are charged with "willfully and knowingly" attempting to "defeat and evade a large part" of the income tax due by each said fifth named defendant for the calendar year 1948.

In each of the 18 substantive counts, the indictment specifies the amount of tax that should have been withheld, paid, or reported due, and the sum actually withheld, reported, or paid by the various named defendants. Since the appellants do not attack the mathematical accuracy of these counts but urge their legal insufficiency, the figures need not be set out here.

[Convicted on Count 1 and Counts 3-20]

2. The Verdicts and the Sentences

Each appellant was found guilty as charged on Count One and on Counts Three to Ten, inclusive, and was found guilty of the lesser offenses of willful failure to supply information for the computation, assessment, and collection of the tax, which lesser offenses are embraced in the offenses charged in Counts Eleven to Twenty, inclusive. The sentence pronounced upon each appellant was as follows:

Imprisonment for five years on Count One and on each of Counts Three to Ten, inclusive, the periods of imprisonment to run concurrently.

Fines of $10,000 on Count One and on each of Counts Three to Ten, inclusive, or a total of $90,000.

Suspension of the imposition of sentence for the lesser offenses included in Counts Eleven to Twenty, inclusive, with five years' probation commencing on the appellant's release from custody following execution of the concurrent sentences under Count One and Counts Three to Ten, inclusive. One of the conditions of probation is that the appellant, during the probationary period, shall pay a fine of $10,000 under each of Counts Eleven to Twenty, inclusive, or a total of $100,000. This latter figure and the $90,000 on Count One and Counts Three to Ten, inclusive, amount to a grand total of $190,000 that must be paid by each appellant.

[Each Error Asserted to Be Set Out Separately]

3. The Specifications of Errors

The Kobey brief contains a specification of eight numbered errors. "Specification No. 6", however, contains four lettered subdivisions, each dealing with the Court's instructions. Of these four subdivisions, two deal with instructions, given or refused, on at least four separate subjects--presumption of innocence, general and specific intent, lack of notification to produce books, and willfulness and good faith. The entire specification of errors covers nine printed pages, and complains of at least fourteen separate and distinct errors.

The Kogus brief has a specification ten pages long, consisting of two numbered errors. Error No. 1, however, is broken into fifteen subdivisions, each dealing with a separate and distinct instruction, given or refused, usually relating to a separate and distinct subject. In many respects, the Kogus specification and the Kobey specification duplicate each other.

Neither specification conforms to Rule 18(2)(d) of this Court, which requires that an appellant's brief shall contain, in the order there stated--

"In all cases, a specification of errors relied upon which shall be numbered and shall set out separately and particularly each error intended to be urged. * * * When the error alleged is to the charge of the court, the specifications shall set out the part referred to totidem verbis, whether it be in instructions given or in instructions refused, together with the grounds of the objections urged at the trial." (Italics supplied)

If the use of lettered subdivisions of numbered specified errors was intended to blur the multiplicity of the objections, it has failed of its purpose. This Court has repeatedly declared itself not bound to consider such "package" specifications. In Mutual Life Ins. Co. v. Wells Fargo Bank & Union Trust Co., 1936, 9 Cir., 86 Fed. (2d) 585, 587, we said of a far less objectionable assignment of error:

"Assignment 6 is that the trial court erred in failing and refusing to give the jury six instructions said to have been requested by appellant. This assignment is invalid, in that it attempts to cover six alleged errors, thereby violating our rule 11, which provides that an assignment of errors 'shall set out separately and particularly each error asserted and intended to be urged.' (Many cases cited)" ²

[No Grounds of Objections Were Set Out]

Furthermore, it should be noted that Specification 6B of the Kobey brief complains that Defendants' Requested Instructions Nos. 33, 37, and 38 were not given, but no "grounds of the objections urged at the trial" are set out in the specification, as required by Rule 18(2)(d), supra. Similarly, Specification No. 1 d, e, f, g, h, i, j, k, l, m of the Kogus brief, relating to Defendants' Requested Instructions Nos. 26, 27, 28, 30, 31, 32, 35, 37, 38, and "-", sets forth in each instance that "objection was seasonably made", citing the transcript of record. Such a reference clearly does not meet the requirement of Rule 18(2)(d), that the grounds of the objections urged at the trial shall be "set out" in the specification.

Finally, the record shows that after the Court had instructed the jury and counsel for the appellants had made certain objections and requests, the attorney for the defense added:

". . . and I assign as error the failure to give the instructions we have requested on the grounds stated."

The cryptic and sweeping phrase, "on the grounds stated", may have referred to some "suggestions" made by counsel for the appellants during a "conference on instructions" or perhaps the "discussion re include (sic) lesser offenses". Both of these running debates commenced on the day preceding the giving of the instructions and continued up to a few minutes before counsel resumed their summations. Immediately afterward, the District Judge delivered his charge.

In our view, such a procedure does not meet the requirement of Rule 30 of the Federal Rules of Criminal Procedure, to the effect that "No party may assign as error any portion of the charge or omission therefrom unless he objects thereto before the jury retires to consider its verdict, stating distinctly the matter to which he objects and the grounds of his objection." ³ Reliance upon "the grounds stated"--if any grounds were stated--the day before is palpably inadequate.

Despite the fact, however, that both the specifications of errors and the objections to the Court's failure to give certain requested instructions were improperly presented, we are considering all the substantial points raised by the appellants.

[The Conspiracy Statute]

4. The Applicable Statutes

Count One is based upon the conspiracy statute, 18 USCA Section 371, which reads as follows:

"If two or more persons conspire either to commit any offense against the United States, or to defraud the United States, or any agency thereof in any manner or for any purpose, and one or more of such persons do any act to effect the object of the conspiracy, each shall be fined not more than $10,000 or imprisoned not more than five years, or both.

"If, however, the offense, the commission of which is the object of the conspiracy, is a misdemeanor only, the punishment for such conspiracy shall not exceed the maximum punishment provided for such misdemeanor."

[Sec. 2707(c)]

Counts Three to Ten, inclusive, have as their applicable statute 26 USCA Section 2707(c), the text of which follows:

"(c) Any person required under this subchapter to collect, account for and pay over any tax imposed by this subchapter, who willfully fails to collect or truthfully account for and pay over such tax, and any person who willfully attempts in any manner to evade or defeat any tax imposed by this subchapter 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."

The "subchapter" referred to in the above subsection (c) is "Subchapter A--Pistols and Revolvers", which is part of Chapter 25 of Title 26 of the United States Code--a chapter that deals with "Firearms". Since the present indictment, despite its allegedly "hair-raising" and "horrendous" results, does not deal with weapons of war, we must look elsewhere for its ultimate penal source.

It will be recalled that Counts Three to Six, inclusive, allege that the appellants attempted to defeat and evade income taxes required to be withheld from wages. This necessitates recourse to Subchapter D of Chapter 9 of 26 USCA--a subchapter dealing with "Collection of Income Tax at Source on Wages". Chapter 9 embraces the subject of "Employment Taxes". Section 1627, in Subchapter D, reads as follows:

"Section 1627. Other laws applicable

"All provisions of law, including penalties, applicable with respect to the tax imposed by Section 1400 shall, insofar as applicable and not inconsistent with the provisions of this subchapter, be applicable with respect to the tax under this subchapter."

We must refer therefore to Section 1400, which is part of Subchapter A, "Employment by Other Than Carriers". That subchapter, which relates to the Social Security tax, is cited as the "Federal Insurance Contributions Act". Like Subchapter D, supra, it is part of Chapter 9, supra. But since Section 1400 merely gives the "Rate of Tax" on employees that come under Subchapter A, we must look to some other section in the same subchapter for the final link in the statutory chain that is to bind the appellants to Section 2707(c), cited in Counts Three to Ten, inclusive, of the present indictment.

[Sec. 1430--The Vital Link]

That vital link is Section 1430, which is as follows:

"Other laws applicable

"All provisions of law, including penalties, applicable with respect to any tax imposed by section 2700 or section 1800, and the provisions of section 3661, shall, insofar as applicable and not inconsistent with the provisions of this subchapter, be applicable with respect to the taxes imposed by this subchapter."

Section 2700, supra, is part of Subchapter A of Chapter 25, "Firearms", of which the crucial Section 2707(c) is also a part. Section 2700 itself deals only with "Rate", "Exemptions", and "Computation in special cases".

Counts Seven to Ten, inclusive, charge the appellants with attempting to defeat and evade "a large part" of the excise taxes for 1948. Here again 26 USCA Section 2707(c) is given as the violated statute, and here again we must have recourse to Section 1430, supra, which, so far as employees are concerned, links the Social Security tax to the penal provisions of the "Pistols and Revolvers" subchapter.

Subchapter C, "Tax on Employers of Eight or More", is applicable to these four counts, insofar as they relate to "the excise taxes on employers". Like Subchapter A, Subchapter C contains a section linking it with Section 2707(c), through Section 2700, as explained above:

"Section 1610. Other laws applicable

"All provisions of law (including penalties) applicable in respect of the taxes imposed by section 2700, shall, insofar as not inconsistent with this subchapter, be applicable in respect of the tax imposed by this subchapter."

[Sec. 145(a) and (b)]

We come finally to the last ten counts of the indictment, Counts Eleven to Twenty, inclusive. Each of these counts cites 26 USCA Section 145(b), the text of which follows:

"Failure to collect and pay over tax, or attempt to defeat or evade tax. Any person required under this chapter to collect, account for, and pay over any tax imposed by this chapter, who willfully fails to collect or truthfully account for and pay over such tax, and any person who willfully attempts in any manner to evade or defeat any tax imposed by this chapter or the payment thereof, shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, be fined not more than $10,000, or imprisoned for not more than five years, or both, together with the costs of prosecution."

It will be recalled that, as to these Counts Eleven to Twenty, inclusive, each appellant was found guilty of the lesser offenses of willful failure to supply information, etc. The "lesser offenses" referred to are defined in 26 USCA Section 145(a), which reads as follows:

"(a) Failure to file returns, submit information, or pay tax. Any person required under this chapter to pay any estimated tax or tax, or required by law or regulations made under authority thereof to make a return or declaration, keep any records, or supply any information, for the purposes of the computation, assessment, or collection of any estimated tax or tax imposed by this chapter, who willfully fails to pay such estimated tax or tax, make such return or declaration, keep such records, or supply such information, at the time or times required by law or regulations, shall, in addition to other penalties provided by law, be guilty of a misdemeanor and, upon conviction thereof, be fined not more than $10,000, or imprisoned for not more than one year, or both, together with the costs of prosecution."

[Appellants' Bookmaking Activities]

5. The Admitted Facts

The record is long, and the machinations of the appellants were intricate and devious. It would unduly burden an already overlong opinion to give all the details of the concealments and evasions revealed by the voluminous transcript. From the admissions contained in their own briefs, however, we can gather what manner of men these appellants are.

There is very little conflict in the evidence. The four appellants were engaged in illegal bookmaking activities in Los Angeles County , California , as co-partners. Even the firm name is shrouded in murk. In the record, the partnership is shown to have been variously called "Colby Collection Agency", "Colby Collection Service", "Cobert Collection Agency", and "Cobert Collection Service".

This bookmaking establishment was maintained on premises also occupied by the Guarantee Finance Company, which was owned by the four appellants. The bookmaking activities were maintained as a clearinghouse for the use of other bookmakers, who conducted their own betting operations in the same county, and had their own individual gambling customers.

These "other bookmakers" are the occasion for some more of that "double talk" with which this record is replete. "These independent bookmakers," Kobey and Cobert, two of the appellants, say in their opening brief, "are referred to in the record occasionally as 'agents', but they were in no sense agents of the appellants, as the use of the word might imply."

The other two appellants, Harry and Albert Kogus, however, who are brothers, freely refer to these "individual bookmakers" as their "agents", adding that "the terms 'agent' and 'bookmaker' (are) used interchangeably throughout the transcript and throughout this brief." It is the view of this Court that these so-called "independent" bookmakers were, in fact and in law, the actual agents and employees of the appellants, and the jury, by its verdict, must have so found.

[Records Destroyed on Advice of Appellants]

It is admitted that some of the betting "markers" and "weekly top sheets" were in fact destroyed by the "bookmakers" on the advice of the appellants. The appellant Harry Kogus, for example, testified that he told the "agents":

"If I were them I would have no bookmaking paraphernalia around where it could be found.

* * *

". . . we told them . . . if I were they, I would have nothing around that would incriminate them."

The appellants have attempted to explain this destruction of records by asserting that it was "to avoid detection by state, county, and city authorities but in no circumstance for the purpose of evading taxes due the Federal Government."

The jury apparently disbelieved--as it was entitled to disbelieve--this pious disclaimer of any intention to deceive the United States .

On January 27, 1949 , B. E. Burchfiel, chief investigator for the Division of Corporations of the State of California , seized certain books and records at 1749 East Florence Avenue , the partnership's headquarters. The appellants assert that all the information in the destroyed betting markers had been transferred into the seized records "and were available to the Federal authorities".

Be that as it may, the fact remains that the appellants' criminal intent in counseling the destruction of the "markers" and "weekly top sheets" might well have been inferred by the jury from the entire record.

[First Names, Nicknames, or Symbols Used]

Finally, the appellants admit that "the procedure employed was to designate the bookmakers and their betting customers and their wages on various sheets upon which the bettors and the bookmakers with whom the bettors made their wagers were identified by first names, nicknames, or by symbols."

Here again counsel for the two pairs of appellants disagree in their explanations. The Kogus brief asserts that "This use of code names was to protect the individual bookmakers who did not want anyone to know their clients, for that was their stock in trade".

Through counsel for the Kogus brothers were referring to the use of code names "for the various bookmakers or agents", they may have had in mind the reason for the use of such noms de books to designate the customers of the bookmakers. Harry Kogus testified that no "agent" wanted "anybody to know who his customers were".

The Kobey-Cobert attorneys, on the other hand, explain that the subterfuge was resorted to so as--

"To make it difficult for the enforcement agencies of the State of California to discover the identities and names of the independent bookmakers and of their betting customers."

In his testimony, Harry Kogus gave three explanations. We have already quoted one of them. In addition, he offered two others--each one different from that offered by his own counsel:

". . . if these markers or statements were ever confiscated by the local authorities, why, the agent didn't want his full name on there or true name on those markers."

So far, Harry Kogus agreed with the theory advanced by counsel for Kobey and Cobert. But he also had a third theory of his own:

"It helped the clerks a lot because in so many cases they were long names, and names that were hard to understand over the telephone, and we tried to keep these down to as many three-letter names as possible, or four, and used numbers as much as possible. Well, we kept it down in most cases below six letters so it wouldn't be too hard for the clerk."

In any event, these varied explanations are quite confusing. These appellants have woven a tangled web indeed!

[Bill of Particulars Denied]

6. The Denial Of The Motion For A Bill Of Particulars Was Proper.

In connection with the first Kobey-Cobert specification of error, we find that on June 29, 1951 , the appellants filed a motion for a bill of particulars with regard to Count One. They complained that nowhere could "it be determined from the indictment the persons whose names or identities are referred to, nor the amounts paid, nor the persons to whom any money was paid by the defendants, nor what memoranda, accounts, records and books were destroyed, nor the nature of such memoranda, etc., or what memoranda and records were false, fictitious and misleading, or in what particulars the prosecution contends they were false," etc.

In the first place, the argument made below in support of this motion--"That the books and records had been taken from the possession of the appellants by the California state authorities"--was not a cogent one. The record shows that the appellants were furnished with photostatic copies of most of the documents that the appellee planned to use at the trial, and that, furthermore, the District Judge's law clerk was deputized as a duputy county clerk so that other documents would be available to the appellants. These latter documents were those that had been seized by Mr. Burchfiel, supra.

Secondly, it is well settled that a motion for a bill of particulars is addressed to the sound discretion of the District Court. ⁴ The record shows that this discretion was not abused. As we have just seen, the District Judge was careful to guard the rights of the appellants.

As part of this same specification of error, Kobey and Cobert Complain that denial of their motion for a continuance of the trial to a date not earlier than in September, 1951, forced them to go to trial on August 6, 1951 . They assert that because of "the shortness of the time between the return of the indictment (June 12, 1951), and the trial date (August 6, 1951) appellants had no reasonable opportunity to have these books and records audited and analyzed by appellants' new auditor Manning," etc. As we shall see hereafter, however, the case was recessed to September 4, 1951 , and the taking of testimony was completed on September 19, 1951 .

It should be borne in mind, moreover, that the case was tried in the afternoons, so that counsel would have time to prepare their work in the mornings. This gave them additional time to study the records with their auditor.

This first specification is without merit.

[Assistance of Counsel of Their Choosing Not Denied]

7. The Appellants Were Not Denied The Assistance of Counsel Of Their Own Choosing.

Specification of Error No. 2, urged by the appellants Kobey and Cobert, complains that the "denial of (their) motion for the continuance of the trial after (their) chief counsel, Mr. (David H.) Cannon, had been stricken seriously ill, and unable to proceed, compelled the appellants to proceed with the trial and thus be deprived of the effective aid . . . of counsel of their own choosing, in violation of the Fifth and Sixth Amendments to the United States Constitution".

This serious charge requires a careful scrutiny of the record, with particular regard to the chronology of events.

Mr. Cannon and William B. Beirne were the attorneys for the four appellants from the dawn of the present record to a time beyond the critical events that are about to be narrated. Both these gentlemen have denied that Mr. Beirne represented all the appellants. Mr. Beirne himself told the lower court that he represented "solely . . . one of the Koguses", but "By a mistake . . . (he) was listed as attorney for all of the defendants."

In their closing brief, Mr. Cannon and his present associate go even farther. They deny that Mr. Bierne was appellants' counsel at all! They later qualify this denial by saying that he "was not appellants' counsel of their own choice".

All these denials, whether qualified or unqualified, are flatly contrary to the record. For example, on June 29, 1951 , there was filed a group of motions, including the one for a bill of particulars, supra, which was signed by both Mr. Cannon and Mr. Beirne, as attorneys for the four appellants. On July 25, 1951 , they both signed an affidavit describing themselves the same way. The same is true of a motion "for further continuance" filed on behalf of the appellants, and making the affidavit of July 25, 1951, supra, a part thereof. In addition, in the various orders and in the minutes, we find constant references to both gentlemen as being attorneys for all the appellants.

[Mr. Cannon Not Chief Counsel]

We now proceed to the crucial chronology.

The 68 defendants were tried in groups. The trial of the four appellants and seven other defendants commenced on August 6, 1951 . During the first few days thereafter, Mr. Beirne took an active part in the conduct of the defense, equally with Mr. Cannon. Up to that time, there was no suggestion that Mr. Cannon was "chief counsel" or that "Mr. Beirne's association with Mr. Cannon was primarily for the purpose of assisting Mr. Cannon on certain phases of the case." To all intents and purposes, Mr. Beirne's authority as counsel was co-ordinate with that of Mr. Cannon, who, at that time at least, gave no indication that he had "supervision of the trial".

On the afternoon of Friday, August 10, 1951 , Mr. Cannon suddenly addressed the Court thus:

"Mr. Cannon. If the court please, may I be excused? I have been here this morning, but I cannot stay longer. Mr. Beirne will carry on in my absence, but I simply can't stay here. It would be against the advice of my doctor."

The Court of course excused Mr. Cannon. Mr. Beirne stated that he was not prepared to examine witnesses "here on out", but that if he had to, he would. (Mr. Beirne had been doing very nicely up to that point.) He suggested a recess until the following Monday. The trial was resumed for the rest of that Friday afternoon, but the case was recessed progressively to August 21, 1951, August 27, 1951, and finally to September 4, 1951, when Mr. Beirne asked for a still further continuance, "for the last time", until Monday, September 10, 1951. Mr. Beirne promised that on the latter date Mr. Cannon, then "home from the hospital", would be available. As a matter of fact, according to the Kobey brief itself, "Mr. Cannon was not able to return again to the trial of the case, and was physically unable to take further part in the proceedings." In other words, Mr. Beirne, though a good lawyer, was a poor prognasticator!

In support of his plea for a further continuance, Mr. Beirne modestly stated that he "would feel safer . . . if Mr. Cannon were present to represent these defendants", and, in a surge of self-immolation, added:

"I haven't the slightest conception of the difference between a debit and a credit and I think it will be proved here in my cross-examination of the witnesses. No accountant and no certified public accountant, no auditor, has been able to hammer that into my head during this period."

Neither the Court nor the prosecution shared Mr. Beirne's low estimate of his own capabilities. When Mr. Cannon first became sick, the Court had told Mr. Beirne, "I am sure you will do well." Counsel for the appellee stated:

"Of course, I think Mr. Beirne is the type of counsel, and we all know his reputation, that there aren't any better prepared attorneys in Los Angeles or more able."

At any rate, counsel for the appellee and for some of the appellants' co-defendants opposed a continuance.

The Court ruled:

"You are equally divided--the defendants' attorneys are equally divided on the subject and the motion for further continuance will be denied."

In the light of the entire record, it is this Court's opinion that the judge below did not abuse his discretion in refusing to grant the appellants any further continuances. Mr. Beirne, an attorney of their own choice, conducted the remainder of the case in a workmanlike manner.

[No Duty to Divulge Need Be Alleged]

8. The Indictment Did Not Need To Allege That The Appellants Were Required To Divulge The Amounts Paid, To Keep Accurate Records, Etc.

Specification of Error No. 3, filed by the appellants Kobey and Cobert, asserts that "The Court erred in denying appellants' motions to dismiss the indictment and to acquit the appellants, made by them before trial on the ground that the indictment did not state an offense."

In their briefs, these two appellants launch a manifold attack upon the indictment. Each objection will hereinafter be considered separately.

The gravamen of the first criticism of the indictment is that "Nowhere is there any allegation of any requirement to divulge, and if so to whom, the amounts of money transferred or paid, nor is there any allegation as for (sic) what purpose such information should be divulged", etc. This emphasis upon the indictment's failure to allege certain legal requirements imposed upon the appellants, is expressed in several pages of the brief.

It will be recalled that every one of the nineteen counts of the indictment on which conviction was had, charges the appellants either with conspiring to "defraud" or with attempting to "defeat and evade" in connection with taxes. Under such allegations, no averment of "duty" or "requirement" is necessary.

In United States v. Troy, 1934, 293 U. S. 53 [58], 61-62 [35-1 USTC ¶9002], the Court emphasized that under a "defeating" allegation, no averment of "duty" is required:

"If the charge against appellee had been failure to make return, or pay over the tax for the corporation it might have been necessary to allege and show some duty in respect thereto; but when charged with wilful effort to defeat the tax by presenting a false return no allegation of duty to make the return was necessary. The alleged act sufficiently indicated appellee's criminal intent."

[The "Course of Conduct" Rule]

9. The Eighteen Substantive Counts Are Not Vulnerable To Attack Under The "Course Of Conduct" Or "Single Impulse" Attack.

Still under their Specification No. 3, Kobey and Cobert complain that "by breaking down this one 'course of conduct' or at most two 'course of conduct' into eighteen counts, the prosecution has exacted penalties far in excess of the maximum," etc.

[The Universal Case Distinguished]

In support of their theory, the appellants quote from United States v. Universal C. I. T. Credit Corporation, 1952, 344 U. S. 218, 224:

"The offense made punishable under the Fair Labor Standards Act is a course of conduct. Such a reading of the statute compendiously treats as one offense all violations that arise from that singleness of thought, purpose or action, which may be deemed a single 'impulse', a conception recognized by this Court in the Blockburger case (Blockburger v. United States, 1932, 284 U. S. 299), supra, at 302, quoting Wharton's Criminal Law (11th ed.) Section 34."

The Universal case, however, can be distinguished from the one at bar, both on the facts and on the law. In that case, thirty-two counts were laid: six for failure under Section 6 of the Act to pay minimum wages, twenty for violation of the overtime provisions of Section 7, and six for failure to comply with the requirements for record-keeping under Section 11.

The Supreme Court was careful to point out that it was deciding the Universal C. I. T. case in accordance with the mandate of the particular statute then before it, and was not attempting to lay down a general rule:

"Instead of balancing the various generalized axioms of experience in construing legislation, regard for the specific history of the legislative process that culminated in the Act now before us affords more solid ground for giving it appropriate meaning." (Page 222)

Emphasizing the closeness of the case and the narrowness of the problem there presented, the Court continued:

"It would be self-deceptive to claim that only one answer is possible to our problem. But the history of this legislation and the explicitness of its language weigh against the Government's construction of a statute that cannot be said to be decisively clear on its face one way or the other. Because of the history and language of this legislation, the case is not attracted by the respective authority of two cases pressed upon us. In re Snow, 120 U. S. 274, and Blockburger v. United States , 284 U. S. 299." (Italics supplied) (Page 224)

[The "Single Impulse" Rule]

In the Blockburger case, supra, cited in United States v. Universal C. I. T. Credit Corporation, supra, the Supreme Court quoted with approval the following sentence from Wharton, supra:

"If successive impulses are separately given, even though all united in swelling a common stream of action, separate indictments will lie." (Page 302)

In Norwitt v. United States , 9 Cir., 1952, 195 Fed. (2d) 127 [52-1 USTC ¶9252], 133-134, certiorari denied, 1952, 344 U. S. 817, this Court disposed of what amounted to this same "course of conduct" argument. ⁵

Plainly related to this "single impulse" argument of the Kobey-Cobert brief is the Kogus contention that "The conspiracy count was merged in the substantive counts and, therefore, appellants were convicted of the same crime when found guilty of the conspiracy count and the substantive counts".

The short answer to this objection is found in United States v. Bayer, 1947, 331 U. S. 532, 542:

"The indictment is for conspiring and we have but recently reviewed the nature of that offense. Pinkerton v. United States , 328 U. S. 640. Its essence is in the agreement or confederation to commit a crime, and that is what is punishable as a conspiracy, if any overt act is taken in pursuit of it. The agreement is punishable whether or not the contemplated crime is consummated. But the same overt acts charged in a conspiracy count may also be charged and proved as substantive offenses for the agreement to do the act is distinct from the act itself." (Italics supplied)

[Verdict Supported by Substantial Evidence]

10. There Was Substantial Evidence To Support The Verdict And Judgment.

Kobey-Cobert Specification No. 4 complains that "There was no substantial evidence to sustain the charges in the indictment," etc.

In our discussion of "The Admitted Facts", supra, we have adverted to several subterfuges practiced by the appellants, such as the destruction of records and the use of nicknames. It would unduly lengthen this opinion to unfold the "intricacies" of the appellants' admitted "complicated" and "complex" "double entry bookkeeping". Suffice it to say that, after considering the entire evidence, the jury may well have come to the conclusion that the appellants' accounting system was not merely that of "double entry", but also that of "double pay rolls", "double dealing", "double talk"--and "double cross"!

Similarly, the jury was entitled to infer from all the facts that the appellants did not construct watertight bulkhead compartments in dealing with the state and the federal tax authorities--cramming one compartment with nicknames and torn betting markers, and packing the other compartment with pure virgin snow!

[Expansive Ambit of the Social Security Act]

As part of their argument in support of Specification No. 4, the appellants Kobey and Cobert assert that "Illegal businesses are not within the purview of the Social Security Act".

So far as the conspiracy count is concerned, the appellants concede that "This is a question of first impression as far as we know". And the burden is upon them to show that the Court below erred either as to the law or as to the facts.

In Rutkin v. United States, 1952, 343 U. S. 130, 137 [52-1 USTC ¶9260], footnote 8, which seems to have escaped the attention of counsel, Mr. Justice Burton has collected an impressive list of decisions to support his statement that "There has been a widespread and settled admin istrative and judicial recognition of the taxability of unlawful gains of many kinds under Section 22(a) (of the Internal Revenue Code, defining 'gross income')." Among the types of income held to be taxable has been that derived from "race track bookmaking". ⁶

Furthermore, the Supreme Court has held that the ambit of the Social Security Act is expansive rather than limited. In United States v. Silk, 1947, 331 U. S. 704, 711-712, the Court used the following language:

"Since Congress has made clear by its many exemptions, such as, for example, the broad categories of agricultural labor and domestic service, 53 Stat. 1384, 1393, that it was not its purpose to make the Act cover the whole field of service to every business enterprise, the sections in question are to be read with the exemptions in mind. The very specificity of the exemptions, however, and the generality of the employment definitions indicates that the terms 'employment' and 'employee' are to be construed to accomplish the purposes of the legislation. As the federal social security legislation is an attack on recognized evils in our national economy, a constricted interpretation of the phrasing by the courts would not comport with its purpose. Such an interpretation would only make for a continuance, to a considerable degree, of the difficulties for which the remedy was devised and would invite adroit schemes by some employers and employees to avoid the immediate burdens at the expense of the benefits sought by the legislation. These considerations have heretofore guided our construction of the Act. (Cases cited.)" (Italics supplied)

[Employees of Illegitimate Business Included]

The appellants Kobey and Cobert assert that under Section 1426 of the Internal Revenue Code, which is part of Chapter 9, Subchapter A, supra, "an employee is one who is engaged in a legitimate business". This is an incorrect paraphrase of Section 1426(d), the full text of which follows:

"(d) Employee. The term 'employee' includes an officer of a corporation, but such term does not include (1) any individual who, under the usual common-law rules applicable in determining the employer-employee relationship, has the status of an independent contractor or (2) any individual (except an officer of a corporation) who is not an employee under such common-law rules."

There is no suggestion here that the employment must be lawful. As we have seen, to be taxable, wages need not be derived from legitimate employment.

It is asserted also that under California law, contracts of bookmakers with their employees are "illegal, void and unenforceable". It is unquestionable that the validity of California contracts should be tested under California law; but the Federal taxability of the proceeds from such contracts is a matter of Federal law.

It is the holding of this Court that illegal businesses come within the ambit of the Social Security Act.

[Double Pay Rolls]

Finally, we come to the problem of the appellants' double pay rolls, which Kobey and Cobert describe as relating to "the basic tenet of the prosecution".

Cameron L. Handley, a certified public accountant employed by the four appellants, identified their two pay rolls, hereinafter referred to as Exhibits 31 and 33. Exhibit 31 was described as "a record of the pay roll of the Colby Collection Agency for the period" probably commencing on August 30, 1948 , and extending to January 22, probably of the year 1949. With certain exceptions it was entirely in Handley's own handwriting. It is agreed that Exhibit 31 was used as the basis for making the income tax returns and social security deductions.

Exhibit 33 was a "subsidiary pay roll, which was not to be paid in currency". On that pay roll, no social security deductions or withholding deductions were made by Handley on the basis of the figures indicated after the names of the employees. The appellee points out that the failure to file quarterly returns showing "withholding", old age benefits and unemployment insurance, required in Exhibit 33, caused the discrepancies charged in Counts Three to Ten, inclusive, and that the failure to report the additional salaries reflected in Exhibit 33 forms the basis of Counts Eleven to Twenty, inclusive.

A careful study of the record convinces us that in this respect, too, there was substantial evidence to support the jury's verdict.

[Asserted Omissions in the Charge Not Objected To]

11. This Court Need Not Consider Asserted Ommissions In The Charge That Were Not Made The Subjects Either Of Requests Or Of Objections.

Specification No. 5 of the Kobey-Cobert brief complains that the Court "erred in failing to charge the jury on all of the elements of the offenses charged in the indictment, such as what constituted an employer-employee relationship; . . . what constituted wages . . ., net income and gross income"; and what constitutes the essential elements of conspiracy.

These appellants admit, however, that "Such omissions in the instructions were not specifically excepted (sic) to by the appellants," but they assert that such omissions "constitute such serious and plain error that the appellate court should take notice thereof even in the absence of specific exceptions (sic)". (The term used in Rule 30 is "objection".)

Furthermore, a glance at the appellants' requested instructions reveals that not only was the ommission of the instructions now being considered, not the subject of any objections on the part of the appellants, but that except as to conspiracy, they did not request such instructions in the first place.

As to conspiracy, it is true that the four appellants requested instructions dealing with what they regarded as "all of the essential elements" of that crime "as charged in the first count of the indictment as applicable to the alleged violations under the Internal Revenue Code". But even as to these instructions, as the Kobey brief admits, there were no objections to the Court's failure to give them. In any event, the trial judge adequately instructed the jury on the law of conspiracy.

It will be noted that the other alleged omissions now complained of were not of instructions of a "stock" nature, but referred to subjects specially related to the facts at bar. In such a situation, adherence to Rule 30 is particularly necessary.

In this connection, we may take a passing glance at part of Specification 6A of the Kobey-Cobert brief and at Specification 1(o) of the Kogus brief. Kogus concedes that the instruction complained of was not "seasonably objected to, as required by Rule 30 . . .", but contends that "An appellate court may notice error even though not seasonably objected to," etc.

The instruction complained of was as follows:

"It is not necessary for the prosecution to prove knowledge of the accused that a particular act or failure to act is a violation of law. Nor is ignorance of the law available as a defense to a person who has committed a crime. Everyone is presumed to have knowledge of what the law forbids and what the law commands. However, evidence that the accused acted or failed to act because of ignorance of the law, is to be considered in determining whether or not the accused acted or failed to act with specific intent as charged."

The error complained of was the giving of "an instruction that ignorance of the law is no excuse when the gist of the crime involved is 'knowledge'." This type of instruction, likewise, closely related as it is to the facts of the case, comes peculiarly within the sweep of Rule 30.

Nevertheless we may observe that, read as a whole--as it must be read--the instruction is substantially correct. Despite its inartificial phrasing, the giving of it does not constitute reversible error.

[Motive Only Material for Determining Intent]

Finally, all four appellants object to the following instruction given by the Court below:

"Good motive is never a defense where the act done is a crime. If a person does intentionally an act which the law denounces as a crime, motive is immaterial except insofar as it may aid determination of the issue as to intent."

After the charge to the jury had been given, Mr. Beirne engaged in a considerable colloquy with the Court on the subject of the above instruction. Counsel's final words on the subject were as follows:

"I am not criticizing your Honor's instruction. I am objecting from the general standpoint of the difference between motive and intent."

This clearly was not a compliance with Rule 30. It was not a "distinct" statement of the "matter" to which counsel was objecting. Indeed, it wound up with a "distinct" disavowal of criticism of the instruction.

Furthermore, the specification in neither brief conforms to the requirement of Rule 18(2)(d) of this Court, supra; namely, it does not state particularly "the grounds of the objections urged at the trial".

The Kobey-Cobert brief quotes two paragraphs of the colloquy between Court and counsel, but significantly omits the upshot of it all; namely, that counsel was not really criticizing the instruction. The Kogus brief does even less: it quotes no part of the colloquy at all, but merely says that "The ground for objection stated at the time of trial was that appellants' entire defense is good faith, and that this instruction vitiates that defense". Here again, the "lame and impotent conclusion" of the dialogue is sedulously omitted.

In addition to all this, this Court does not believe that the instruction as given was erroneous. The role that motive plays as an element of crime, as stated by the Court below, conforms to hornbook law, as thus expressed in 22 C. J. S. Criminal Law, Section 31a, Page 88, 89:

"Motive is not an essential element of a crime. The most laudable motive is no defense where the act committed is a crime in contemplation of law, . . . Proof as to motive may be of assistance in throwing light on the intent with which the act was committed, . . ."

The Court's charge was full and comprehensive, consisting of 94 separate instructions and covering 54 pages of the printed transcript. Read as a whole, the charge of the learned Judge below fairly and adequately instructed the jury on the applicable law.

[Details of Gambling Operation No Reversible Error]

12. Neither The Details Of The Appellants' Illegal Gambling Operations Nor The Argument Of The United States Attorney Formed The Basis Of Reversible Error.

In their Specification No. 7, Kobey and Cobert complain that they "did not have a fair trial within the concept of the Fifth and Sixth Amendments to United States Constitution in that the illegal gambling operations were accentuated (a) by unnecessary details of the gambling operations, same being irrelevant to the charges made in the indictment; and (b) by the improper argument of the United States Attorney, in which he injected false issues and misrepresented the evidence".

In their discussion of this specification, these two appellants also intimate that they were denied due process because their sentences were too severe. Since this latter complaint is made a part of the basis of Specification No. 8, infra, we will defer consideration of it.

We need not spend much time on this seventh specification. The "details of the gambling operations" of the appellants were necessary to acquaint the jury with the full scope and magnitude of the illicit enterprise.

As for the argument of the United States Attorney, we have read every word of it that is reproduced in the record. The appellants have "underscored" three pages of it, but have failed to point out in what respect those three pages, or any other pages, constituted "improper argument" or "injected false issues" or "misrepresented the evidence".

There is absolutely no merit to this Specification.

["Severity" Not Reviewable]

13. The Asserted "Severity" Of The Sentence Is Not Reviewable Here.

Specification No. 8 in the Kobey-Cobert brief complains that the sentence imposed upon the appellants was "unusual and cruel in violation of Amendment Three (sic) to the United States Constitution." The appellants no doubt had in mind Amendment Eight.

This Constitutional attack upon the sentence is twofold:

First, "the eighteen substantive counts all collectively charged but one single offense, which should not have been split up in 18 separate offenses so as to permit of the imposition of an 18 times multiplied punishment".

This point has already been discussed in Section 9 of this opinion, dealing with the "course of conduct" or "single impulse" principle.

Second. Kobey and Cobert attack the "severity" of the sentence as constituting a denial of due process of law. In support of this contention, these appellants twice cite Townsend v. Burke, 1948, 334 U. S. 736, as holding "that the defendant was denied due process on the ground that his sentence was too severe".

This is an astounding misrepresentation of the Supreme Court's holding in that case, as may be seen from the following language on page 741 of the opinion--a passage much stronger than that pointed out by the appellee:

"We would make clear that we are NOT reaching this result because of petitioner's allegation that his sentence was unduly severe. The sentence being within the limits set by the statute, its severity would not be grounds for relief here even on direct review of the conviction, much less on review of the state court's denial of habeas corpus. It is not the duration or severity of this sentence that renders it constitutionally invalid; it is the careless or designed pronouncement of sentence on a foundation so extensively and materially false, which the prisoner had no opportunity to correct by the services which counsel would provide, that renders the proceedings lacking in due process." (Italics supplied)

14. Conclusion

Despite the multipronged assault made upon them by two batteries of astute and resourceful counsel, these convictions must stand. The lengthy record unfolds a sordid tale of tax evasion, concealment, and manipulation.

The trial court was careful to safeguard the appellants' substantial rights. The evidence of guilt was strong. The judgments are affirmed.

¹ Hamlet III i 151-152.

² See also Gila Valley Irr. Dist. v. United States , 9 Cir., 1941, 118 Fed. (2d) 507, 510 (six errors enumerated in one specification).

³ See also Palmer v. Hoffman, 1943, 318 U. S. 109, 119; Goldstein v. United States, 9 Cir., 1934, 73 Fed. (2d) 804, 806; Brown v. United States , 9 Cir., 1953, 201 Fed. (2d) 767, 770; United States v. Furlong, 7 Cir., 1952, 194 Fed. (2d) 1, 3, certiorari denied, 1952, 343 U. S. 950; Enriquez v. United States, 9 Cir., 1951, 188 Fed. (2d) 313, 316.

⁴ Nye & Nissen v. United States , 9 Cir., 1948, 168 Fed. (2d) 846, 851, affirmed, 1949, 336 U. S. 613; Stillman v. United States, 9 Cir., 1949, 177 Fed. (2d) 607, 615.

⁵ See Judge Sawtelle's exhaustive discussion of the somewhat cognate contract between "transaction" and "cause of action" in equity, in United States v. Pan-American Petroleum Co., 9 Cir., 1932, 55 Fed. (2d) 753, 776-778, certiorari denied, 1932, 287 U. S. 612.

⁶ See also Goldbaum v. United States, 9 Cir., 1953, 204 Fed. (2d) 74, 77 [53-1 USTC ¶9342].

 

 

[88-1 USTC ¶9195] United States of America , Plaintiff/Appellee v. Kenneth Charles Causey, Defendant/Appellant

(CA-9), U.S. Court of Appeals, 9th Circuit, 87-1734, 12/31/87, 835 F2d 1289, Affirming an unreported District Court decision

[18 U.S.C. §§2(b) and 287; Code Sec. 7203 --Results unchanged by the Tax Reform Act of 1986 ]

Crimes: Sufficiency of indictment or information: Assisting in preparation of fraudulent return.--A tax protester's conviction of aiding, abetting, and causing the making of false and fictitious claims against the government was upheld. The individual, who counseled groups of taxpayers on how to submit a tax return claiming a complete refund of all sums withheld from wages, maintained that his indictment was insufficient because it failed to allege that the persons actually submitting the returns knew they were false, and therefore, it failed to allege the essential fact that there were principal perpetrators. In rejecting his argument, the court found that it was immaterial to his conviction whether or not the taxpayers were shown to have intended to file false returns. In a section 2 prosecution for violation of section 287, aiding and abetting or causing the presentation of a false claim, the government need not allege or prove that the person actually submitting the false claim knew the claim to be false.

Ruth L. Cohen, Assistant United States Attorney, Las Vegas , Nev. 89101 , for plaintiff/appellee. John G. Watkins, 333 N. Rancho Dr. , Las Vegas , Nev. , for defendant/appellant.

Before ANDERSON, BOOCHEVER and NOONAN, JR., Circuit Judges.

OPINION

BOOCHEVER, Circuit Judge:

The principal issue in this appeal is whether a person may be convicted of aiding and abetting in or causing the submission of false income tax returns absent proof that those filing the returns knew they were false. Kenneth Causey appeals the district court's denial of his motion under 28 U.S.C. §2255 to vacate, set aside, or correct his sentence for aiding, abetting, and causing the making of false and fictitious claims against the government, 18 U.S.C. §§2 and 287. He claims insufficiency of the indictment and evidence on eighteeen counts, and that he was denied his right to counsel and/or received ineffective assistance of counsel at trial. We affirm.

FACTS

Causey is a tax protester who counseled groups of taxpayers on how to submit tax returns claiming a complete refund of all sums withheld from wages. To accomplish this objective he provided, for a fee, forms with instructions for filing. He was charged by indictment on April 7, 1982, with eighteen counts of aiding, abetting, and causing individuals to file false tax returns, 18 U.S.C. §§2 and 287 (1982), and with two counts of failure to file a federal tax return, 26 U.S.C. §7203 (1982). At trial, Causey proceeded pro se with a local attorney as advisory counsel. A jury convicted Causey on all counts. Causey filed a motion to vacate, set aside, or correct his sentence on the false tax return counts under 28 U.S.C. §2255 (1982). The district court denied the motion and Causey timely appeals under 28 U.S.C. §1291 (1982).

STANDARD OF REVIEW

We review de novo the district court's decision regarding a petition to vacate, set aside, or correct a sentence. United States v. Quan, 789 F.2d 711, 713 (9th Cir. 1986).

ANALYSIS

I. Insufficiency of the Indictment

Causey contends that Counts I-XVIII of his indictment for aiding, abetting, and causing individuals to file false tax returns, are insufficient because they fail to allege that the persons actually submitting the returns knew they were false, and therefore fail to allege the essential fact that there were principal perpetrators.

Causey's attack on the sufficiency of the indictment is not properly raised in this section 2255 proceeding to vacate his sentence. Generally, this court allows a collateral attack on the validity of an indictment only where an appellant can show cause why the claim was not raised before trial. Baumann v. United States , 692 F.2d 565, 572 (9th Cir. 1982); United States v. Zazzara, 626 F.2d 135, 137 (9th Cir. 1980). Such a "cause" arises if the appellant asserts that the indictment went unchallenged at trial because of ineffective assistance by his or her counsel. Baumann, 692 F.2d at 572. Causey makes a general allegation of ineffective assistance, but he does not allege that a failure to challenge the indictment resulted in ineffective assistance. Causey does not otherwise show cause why his claim of indictment insufficiency was not raised before trial and therefore cannot raise the issue under section 2255. In any event, as discussed below, Causey's argument fails.

II. Insufficient Evidence

Causey claims the evidence presented at trial on the eighteen aiding and abetting counts was insufficient to support the guilty verdicts because the government failed to allege and prove that the persons actually submitting the false returns knew they were false, and therefore failed to prove the existence of knowing principals. This argument fails because it is immaterial to Causey's conviction whether or not the taxpayers were shown to have intended to file false returns.

Title 18 U.S.C. §287 (1982) applies to one who "makes or presents" a claim against the United States "knowing such claim to be false, fictitious, or fraudulent" (emphasis added). Causey claims the government had to prove that the taxpayers who submitted the returns knew that the returns were false. He relies on the common law rule that an essential element of an aiding and abetting charge is the existence of a principal perpetrator. He fails to consider, and the government, in its briefs and in oral argument, failed to address, the purpose and effect of 18 U.S.C. §2 , the other section under which Causey is charged in all the eighteen counts.

Title 18 U.S.C. §2 provides:

§2 . Principals

(a) Whoever commits an offense against the United States or aids, abets, counsels, commands, induces or procures its commission, is punishable as a principal.

(b) Whoever willfully causes an act to be done which if directly performed by him or another would be an offense against the United States , is punishable as a principal.

Under section 2 , aiding and abetting is not a separate offense; instead, the section "makes punishable as a principal one who aids or abets another in the commission of a substantive offense." Londono-Gomez v. INS, 699 F.2d 475, 476 (9th Cir. 1983). Under section 2(a) , the government must prove that someone committed the substantive crime, although the failure to prosecute or to obtain a prior conviction of that individual does not preclude the conviction of the aider and abettor. United States v. Ruffin, 613 F.2d 408, 412 (2d Cir. 1979). In effect, section 2(a) makes the person whose acts constitute aiding and abetting but who falls short of performing the proscribed act a coprincipal with the person who takes the final step and violates a criminal statute.

Under section 2(b) , however, the government need not prove that someone other than the defendant was guilty of the substantive crime. A person who causes the commission of an offense is punishable as a principal even though the person who completes the wrongful act violates no criminal statute because of lack of criminal intent or capacity. Section 2(b) punishes the individual who causes a criminal act, because no crime would take place without his or her participation.

In this case, the elements of the offense created by 18 U.S.C. §287 are (1) presenting a claim against the United States , and (2) knowing such claim to be false. Here, there is no dispute that claims for tax refunds were submitted to the United States . The jury found that Causey caused those claims to be presented and that he knew they were false. He thus caused the claims to be presented with the requisite intent. Whether the taxpayers had guilty knowledge in submitting the claims becomes irrelevant under section 2(b) .

The reviser's note to section 2 indicates that subsection (b) was added in 1948 to "remove[ ] all doubt that one who puts in motion or assists in the illegal enterprise but causes the commission of an indispensable element of the offense by an innocent agent or instrumentality, is guilty as a principal . . . ." (emphasis added). This was not a new concept; section 2(b) is in accord with decisions such as United States v. Giles, 300 U.S. 41 (1937). In Giles, a bank teller covered cash shortages by withholding deposit tickets from the bookkeeping department, causing the department to make false entries. The Supreme Court upheld the teller's conviction for violation of a statute prohibiting a national bank employee from making intentionally false entries, even though the teller himself made no entries and those actually making the entries were innocent of the intent required by the statute. 300 U.S. at 48-49.

This court recently applied section 2(b) to uphold the conviction of a lawyer who prepared a lease agreement with statements he knew to be false under a statute prohibiting the intentional making of material false representations to a government agency, even though the person submitting the document (i.e., "making" the representations) did not know the statements were false. United States v. Vaughn, 797 F.2d 1485, 1490-91 (9th Cir. 1986). Decisions in other circuits affirming under section 2(b) the convictions of those who cause innocent intermediaries to perform acts which are prohibited if committed with intent are legion. See, e.g., United States v. Cook, 745 F.2d 1311, 1315 (10th Cir. 1984), cert. denied, 469 U.S. 1220 (1985); United States v. Tobon-Builes, 706 F.2d 1092, 1100 (11th Cir. 1983); Ruffin, 613 F.2d at 412-13; Pereira v. United States, 202 F.2d 830, 836-37 (5th Cir. 1953), aff'd, 347 U.S. 1 (1954). The Third Circuit has applied section 2(b) to the statute at issue here: "under the combination of the present version of §287 and the present §2(b) a person may be guilty of causing a false claim to be presented to the United States even though he uses an innocent intermediary . . . to actually pass on the claims to the United States." United States v. Catena, 500 F.2d 1319, 1323 (3d Cir.), cert. denied, 419 U.S. 1047 (1974).

Causey's indictment charged a violation of section 2 , and both sections 2(a) and 2(b) were included in the instructions to the jury. The taxpayers Causey counseled testified at trial. Under section 2(b) , the government did not need to show knowledge of the falsity on the part of the taxpayers.

We conclude that in a section 2 prosecution for violation of section 287 for aiding and abetting or causing the presentation of a false claim, the government need not allege nor prove that the person actually submitting the false claim knew the claim to be false. Causey's challenge to the sufficiency of the evidence is without merit.

III. Right to Counsel and Ineffective Assistance

At trial, Causey represented himself with a local appointed attorney as "merely an advisor," and he alleges that this denied him his right to counsel. There was no denial of his right to counsel, as Causey knowingly and competently waived that right. Causey expressed his desire to participate in his own defense on the first day of trial. His attorney agreed to act as an advisor. In a long conversation, the judge discussed with Causey, his attorney, and the government attorney the disadvantages and difficulties of self-representation, the charges, the maximum fines and sentences, the elements of the crimes, and Causey's education and training. The colloquy more than met the court's duty to ensure that Causey's waiver of his right to counsel was made knowingly and intelligently, with full awareness of the risk involved. See United States v. Harris, 683 F.2d 322, 324 (9th Cir. 1982) (defendant must know the nature of the charges, the possible penalties, and the dangers of self-representation; discussion in open court is the preferable procedure). The court's appointment of advisory counsel to aid Causey was appropriate under the circumstances, particularly given the judge's concern for the orderly conduct of trial and Causey's reputation as an unruly tax protester. See Faretta v. California , 422 U.S. 806, 834 n. 46 (1975) (trial judge may terminate self-representation if defendant misbehaves, and may appoint standby counsel to aid the pro se defendant).

Causey further claims that his attorney provided ineffective assistance because after some pretrial representation, the attorney advised Causey that he should represent himself, and offered to act as Causey's advisor. Causey's account conflicts with the record. The magistrate who appointed Causey's counsel did so because Causey refused otherwise to accede to the jurisdiction of the court, and the magistrate thought Causey needed some kind of legal guidance. Causey very much wanted to represent himself. The appointed counsel's agreement to proceed as Causey's "representative" does not remotely approach satisfaction of the two-part test for ineffective assistance of counsel: deficient performance by counsel and a reasonable probability that without counsel's errors, the result would have been different. Strickland v. Washington , 466 U.S. 668, 687, 694 (1984). Even if Causey's attorney did advise Causey to proceed pro se with the attorney's assistance, such advice under the circumstances of this case involving an articulate tax protestor does not constitute deficient performance of counsel.

CONCLUSION

The trial court's denial of Causey's 28 U.S.C. §2255 motion to vacate, set aside, or correct his sentence is AFFIRMED.

 

 

[50-1 USTC ¶9330]The United States of America , Plaintiff-Appellee v. Tony Borgis, Defendant-Appellant

(CA-7), In the United States Court of Appeals for the Seventh Circuit, No. 10074. October Term, 1949, April Session, 1950, 182 F2d 274, June 5, 1950

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division.

Penalties: Assisting in preparation of fraudulent returns: Refund under false return.--The defendant, in preparing and filing income tax returns for other persons, improperly increased their exemptions by naming as dependents certain relatives, or others, who were not in fact dependents, and in one instance improperly increased church contributions. The court, upon reviewing the government's evidence, consisting of testimony by persons whose returns were made by the defendant, found that it was sufficient to establish the fact that the defendant did wilfully and knowingly prepare and file false and fraudulent income tax returns for persons named in the indictment. Although the fraud involved was without the knowledge and consent of the person required to make the return, and no refund was made by the government on the basis of the false return, such facts did not destroy the criminality of defendant's attempt to evade the tax.

Otto Kerner, Jr. , United States Attorney, Chicago , Illinois , for plaintiff. John De Grazia, 188 W. Randolph and James F. Lyons, 54 W. Randolph, both of Chicago , Illinois , for defendant.

Before MAJOR, Chief Judge, FINNEGAN and SWAIM, Circuit Judges.

FINNEGAN, Circuit Judge:

Tony Borgis, defendant-appellant, seeks by this appeal to reverse a judgment entered by the District Court after a trial without jury, by which he was sentenced to be committed for the term of one year and one day.

He contends that the findings and judgment of the court are contrary to the facts, and that the judgment is contrary to the law.

The indictment upon which he was prosecuted contained 38 counts. In the odd-numbered counts the defendant was charged with aiding, assisting and advising in the preparation of false and fraudulent income tax returns for individuals named in such odd-numbered counts. These returns, it was charged, were prepared for and filed with the Collector of Internal Revenue for the first district of Chicago. His acts were charged to be a violation of section 3793(b)(1) of the Internal Revenue Code of the United States . (26 U. S. C. 3793(b)(1) 1940 Ed.)

Said section of the Code makes it a felony for anyone to aid, assist, cause or advise in the preparation of, or in the presentation of a false return, affidavit, claim, return or document in connection with any matter arising under the Internal Revenue Code.

The even-numbered counts in the indictment charged the defendant with a wilful attempt to defeat and evade taxes imposed by the Internal Revenue Code upon individuals named in such even-numbered counts. His acts were charged to be in violation of section 145 of the Code.

This section makes it a felony for any person wilfully to attempt in any manner to evade or defeat any tax imposed by the Code, or the payment thereof. (26 U. S. C. sec. 145.)

Evidence was adduced by the Government in regard to six income tax returns of persons named in the various counts of the indictment. All were prepared by the defendant. In five instances, exemptions, which the taxpayer was allowed to claim under the law, were improperly increased by naming as dependents of the taxpayer certain relatives, or others, who were not in fact dependents.

One of the taxpayers named, Harry Hall, testified that his tax return for 1946 was prepared by the defendant; that he was entitled to dependency exemptions for himself and his wife; that defendant asked him whether or not there was anybody else he could claim as a dependent; that after some conversation the defendant added to the return the names of two persons, Russell, as a son, and Christina, a grandchild; that such persons were not in fact dependents of taxpayer; and that defendant was so informed.

Joseph Martinez, another taxpayer, whose wife also appeared as a witness, testified that defendant prepared his income tax return for 1946; that the names of his mother and his aunt were placed therein as dependents; that he did not tell the defendant that he supported them, that he did not tell him to name them as dependents in his return; and that he merely sent them whatever he could once in awhile. His wife testified she was present when the return was prepared; that she told defendant he could not claim her mother-in-law as a dependent, that the mother-in-law was being supported by her own husband; and that defendant said to her: "I am writing this."

A third taxpayer, Josephine Rivera, testified that defendant prepared the 1946 income tax return for her husband and herself; that they told defendant the only dependent they had was the father of her husband; that the defendant named as dependents the people who lived with the husband's father and said that as long as these people lived with the father they were sharing the money sent to him; defendant told them the Government had plenty of money; and that they did not tell the defendant they were supporting the people named.

Another taxpayer, Harry Burke, testified that the defendant prepared his income tax return; that he was separated from his wife and not supporting her; that his only dependents were his mother and father; that he told defendant he had other relatives but only sent them small sums during the holidays; that the defendant mailed his tax return to the Internal Revenue Office, Chicago, Illinois.

Armando Alvera testified that defendant prepared his income tax return for 1946; that he told defendant he had no family or dependents; that he told him he had a brother and a niece; that he did not tell him to name the brother and niece as dependents.

Taxpayer Luis Medina testified that defendant prepared his income tax return for 1946; that defendant asked him if he had any brothers or sisters; that he gave their names but told defendant he did not support them; that defendant asked for more names, that he had no more; that when he objected to paying $7.00 for filling out the return, the defendant said: "I have saved you $200."

In the case of the last taxpayers about whom testimony was offered, their daughter testified that she procured defendant to fill out the tax return of her parents Pedro and Elina Martinez, that defendant asked her about contributions; that she gave him an estimate of their amount; that defendant put $150 for church contributions which she thought was too much; that defendant said: "You don't have to worry about that, leave it to me." That defendant also prepared an income tax return for her parents in February 1947; that defendant added the name of her aunt in Mexico as a dependent.

It appears that all income tax returns, about which testimony was offered, directed that any refund of monies withheld from taxes, wages or salary due taxpayer should be remitted to the taxpayer by the Collector.

A tax accountant from the Internal Revenue Department testified that the accounts of the taxpayers, named in the Government's evidence, were varied in the following amounts when the false claims for deductions were eliminated:

Hall's return showed four dependents and $80 due; the corrected return showed two dependents and a tax of $270.

The return of Joseph Martinez showed no tax and six dependents; the corrected return showed four dependents and a tax of $171.59. The audit of the return of Pedro and Elina Martinez reduced the amount of contributions claimed and increased the tax due from $24.33 to $61.94.

On the Rivera return eight dependents were claimed and no tax due. As corrected there were two dependents and a tax due of $318.

The return of Harry Burke showed five dependents and a tax of $145; as corrected with three dependents the tax due would be $350.

In the case of Armando Olivia three dependents were claimed and $102 shown due. There should have been one dependent and a tax due of $292.

The return of Luis Medina showed four dependents and no tax. As corrected there would be only one dependent and the tax due would amount to $266.

The defendant testified that he did not tell the Government witnesses to put in their income tax returns the names of dependents they did not have. He claimed that for those without money he prepared income tax returns for nothing, that in most cases he gets two or three dollars for preparing a return. That he was president of an organization to assist people to get relief and to train them for citizenship. Many character witnesses appeared on his behalf and testified that he bore an excellent reputation.

It appears to us that the evidence produced by the Government is amply sufficient to establish the fact that the defendant did wilfully and knowingly prepare and file with the Collector of Internal Revenue false and fraudulent income tax returns for persons named in various counts of the indictment at bar. There is no merit in the contention that the finding and judgment of guilty is against the weight of the evidence.

In support of his proposition that the findings of the court are against the law, the defendant-appellant urges: All the witnesses who appeared for the Government in the case owed nothing to the Government because taxes had been withheld by their respective employers. He further urges that there was no loss to the Government because there is no evidence that any taxpayer involved received a refund. In support, he cited the case of Gleckman v. United States, 80 Fed. (2d) 394 [35-2 USTC ¶9645], and Battjes v. United States, 172 Fed. (2d) 1 [49-1 USTC ¶9149].

In examining these contentions, it must be borne in mind that the defendant in the case at bar is not charged with making a false return of his own income but with falsifying the income tax returns of other persons. The applicable statute in such charge is section 3793(b)(1) of the Internal Revenue Code, which provides that the filing or assistance in filing such false returns shall be a crime whether or not such falsity or fraud is with the knowledge or consent of the person required to make such return.

The Court of Appeals in and for the Second Circuit said in United States v. Kelley, 105 Fed. (2d) 912 [39-2 USTC ¶9621], on page 917:

"* * * The purpose or object (of the Statute) was very plainly to reach the advisers of taxpayers who got up their returns, and who might wish to keep down the taxes because of the credit they would get with their principals, who might be altogether innocent."

In our own Circuit it was said in a somewhat similar situation:

"Nor is it any defect (in the indictment) that the tax attempted to be evaded was that of another. The statute is so framed as to make liable any person who attempts willfully and unlawfully to evade the tax of himself or of any other person." Tinkoff v. United States , 86 Fed. (2d) 868-876 [37-1 USTC ¶9057].

Neither of the cases cited by defendant-appellant is at all comparable to the case here under review. Appellant merely cites the cases, he does not discuss their holdings or show their applicability to the case before us.

It is true that in the case of each taxpayer here involved, the United States Government had in its possession or control certain sums of money which had been withheld from wages or salaries due the various taxpayers by their employers. But it is also true that, until each individual had made some return, the Government could not compute his or her tax. Under such circumstances the filing of a false return, or an untrue claim for exemption, is an attempt to evade a tax due the United States . The fact that the attempt was unsuccessful, that no refund was actually shown to have been made by the Government, does not destroy the criminality of the attempt.

There is one other matter requiring notice. It appears that the defendant was found guilty on May 27, 1949 . The case was then referred to the Probation Office for a presentence investigation.

On October, 17, 1949 , a hearing was had on defendant's application for probation. The motion was denied and the defendant sentenced for one year and one day. The report of the proceedings on the application for probation is incorporated in the record filed in this court, and various errors are assigned to the admission of evidence therein.

"The suspension of sentence in a criminal case and the placing of the defendant on probation is a privilege which the District Court may in the exercise of its discretion accord to a defendant but which cannot be demanded as a right. The action of the court in refusing to grant the privilege is accordingly not reviewable on appeal except possibly for arbitrary or capricious action on the part of the District Judge which amounts to an abuse of discretion. United States v. White, 147 Fed. (2d) 603; United States v. Burns, 287 U. S. 216."

We see no necessity for reviewing the proceedings on application for probation in the case at bar.

The judgment of the District Court is affirmed.

 

 

[39-2 USTC ¶9621] United States of America , Appellee, v. John M. Kelley, Nathaniel F. Rabner and Charles D. M. Greer, Appellants

(CA-2), United States Circuit Court of Appeals for the Second Circuit, 105 F2d 912, Decided July 17, 1939

Appeal from the United States District Court, Southern District of New York.

Prosecution for internal revenue offenses.--The Court in affirming convictions under indictments for assisting in the preparation and presentation of fraudulent income tax returns for the years 1929 to 1932 holds that the District Court did not err in consolidating indictments, in giving instructions, or in admission of evidence except as to one item and its ruling on this was not prejudicial error.

Assisting in preparation of fraudulent return: Proof.--In order to sustain an indictment for assisting in the preparation of fraudulent income tax returns it is not necessary to show that the persons for whom the returns were prepared were guilty of fraud.

Internal revenue offenses: Jurisdiction.--The District Court in New York had jurisdiction under an indictment for assisting in the preparation of fraudulent income tax returns although the defendant was never in that district where letters relating to the preparation of the returns were sent into the district by him.

Internal revenue offenses: Return of seized papers.--The District Court is sustained in denying a motion to return to defendant papers seized by revenue agents. Affirming District Court 36-2 USTC ¶9496 and dismissing appeal from order denying redelivery of papers.

Nathaniel Probst, Jr., Irving M. Radin, Julian J. Lubasch for appellants. Earl C. Crouter and Joseph W. Burns for appellee.

Before L. HAND, SWAN and CLARK , Circuit Judges.

L. HAND, Circuit Judge:

The chief appeals are from a judgment of conviction of the three accused under two indictments, consolidated for trial, for assisting in the preparation and presentation of fraudulent income tax returns for the years 1929 to 1932, inclusive. One indictment concerned the partnership returns of Ringling Bros.-Barnum & Bailey Combined Shows; the other those of the estate of Charles E. Ringling, who died December 3, 1926 . During the years in question the partners and the executors of some who were dead were the owners of this well-known circus, and Kelley was, and for many years had been, their legal adviser; to him was entrusted the preparation of the firm income tax returns from at least 1917 forward. In or about 1923 he employed as an assistant one, Rabner, at one time a Treasury agent; and in 1929 Greer, another Treasury agent. The frauds consisted of deductions taken from the gross income. They were of several kinds; one was for the depreciation or abandonment of the circus property; another was the write-off as a bad debt of a claim against one, Rickard; there were others which we shall not discuss. With the two indictments upon which the accused were convicted, the government consolidated two conspiracy indictments, charging, not only the three accused now before us, but five others in all, against whom the prosecution was severed at the beginning of the trial. The jury acquitted the accused upon the conspiracy indictments. The issues raised upon the appeals from the conviction are (1) that it was an error to consolidate the four indictments; (2) that the taxpayers (the representative of the partners, and the "estate" of Charles Ringling) were not proved to have been guilty of any fraud, without which the accused could not have been themselves found guilty; (3) that incompetent documents were admitted and the incompetent opinion of revenue agents received; (4) that the admission of the partners' books against Kelley was erroneous, and (5) that the evidence did not support the verdict.

[Return of Papers]

The minor appeal is by Kelley alone from an order denying a motion for the return of papers seized before trial. During the preparation of the case two Treasury agents obtained possession of papers in the cellar of a building leased by a corporation which had succeeded to the partners' circus business. Kelley asserted that some of these were his personal property and that he had never lost possession of them, and he moved before trial to compel their redelivery. This motion was denied, but when the documents were offered in evidence at the trial, he again objected, and the issues were once more heard, this time by the trial judge, who also ruled against him. The first order was not independently appealable, being an interlocutory step in the prosecution. The motion was made after all the indictments had been found but one, and that one superseded another which was itself earlier than the motion. Thus "the main purpose" was the "suppression of evidence at the forthcoming trial" and "in essence the motion" resembled "others made before or during a trial to suppress evidence." Cogen v. United States , 278 U. S. 221, 223. However, though not independently appealable, Kelley may bring up the ruling as an incident to this appeal, just as he may bring up the same ruling made upon the trial itself. We must therefore consider the merits. The cellar where the papers in question were stored, contained a number of boxes filled with papers to which the two Treasury agents were given access by one, Wadsworth , then in charge of the corporation's books. According to the testimony of Ducker, the survivor of the two agents, no box was marked so as to distinguish it from another; and all were indiscriminately filled with papers, of which they took possession, and from which they sorted out those they thought material. Kelley's story was that with the consent of the corporation he had left in the cellar a box of private papers, marked on the cover, "John M. Kelley," that this remained in his possession and the agents invaded it without his consent. He was corroborated as to the box by one, Griffin , an employee of the corporation whom Wadsworth had sent down into the cellar along with the Treasury agents. Wadsworth had never heard of such a box, although he had had occasion from time to time to go to the cellar and examine the records kept there. Upon this testimony both the judge at the preliminary hearing and the judge at the trial, who had each heard the witnesses, found that there was no such box; and that finding is conclusive, quite aside from the exceedingly dubious question whether Kelley would have remained in possession of a box so stored, even if it had been marked as he says.

[The Facts]

In order to understand the points of law on which the main appeal turns, it is necessary to state the facts at a little length. The returns took deductions for depreciation yearly from 1929 to 1932, based upon an inventory--Ex. 89--made by Kelley, either during or before the year 1923, but calculated as of 1918. He admitted to one of the Treasury officials in charge of the inquiry that this inventory had been made up from three others, found in a loft at Sarasota , Florida ; two of which were made in 1913, and one, in 1911. Most of the items upon these three were contained in Ex. 89. The prosecution proved in a number of ways that this inventory (Ex. 89) was fabricated; one, by comparing it with the three inventories just mentioned; another, by comparing it with inventories of the estates of four dead partners, which had been filed in the probate proceedings, one in March 1911, another in January 1916, a third in October 1918, and the fourth in October 1919. The padding was both in the number of items contained--e.g. cars, wagons and animals--and in their value. Several witnesses, including some who had formerly been employed by the circus, testified to the number of animals and wagons which it had had while they were with it, and to their cost. The accused answer that this did not take into account the money used to repair the wagons and to train the animals, which should be added. But these were, or at least it was fair to argue that they were, expenses of the business, and were taken out of the gross in the year in which they were incurred. Certainly it was improper, having once been so taken, that they should be taken again as depreciation. Again, there had originally been an item of "Autos and trucks" of about $51,000, which by the end of 1928 had been substantially all written off through depreciation. Rabner wrote to Kelley in June and July of that year that it would be necessary that additional purchases should be shown in the inventory for 1927, in order to get proper depreciation charges. This was done. Again, Wadsworth , who became auditor at the beginning of 1930, prepared the depreciation schedule for that year (Ex. 380) based upon a similar schedule in 1929 which had been given him by either Kelley or Greer. This showed a total depreciation of about $49,000. Greer, raised this by exactly $100,000 and upon the witness stand, could not explain why this was done. In the same year Kelley instructed Greer to raise the gross of this inventory by $200,000 or $300,000, and Greer fabricated plausible items to fetch it up by about that much.

In 1929 one, Rickard, who owed the partners a debt of $50,000, died, and his estate was known to be insolvent. Kelley and Greer deducted the whole debt twice by elaborate concealment. One, DeWolfe, had prepared a statement of the net income for the year, charging the partners with a total gross of about $4,000,000, and taking deductions which included accounts receivable of about $103,000. The accounts were obviously not proper deductions for income tax purposes and had to be deleted, but only $21,000 was subtracted instead of the full figure, $103,000. This resulted in taking as deductions the Rickard debt and an item of about $32,000, known as "J. M. K. Expense Account." From the income so computed the Rickard debt was a second time expressly deducted as a bad debt. In the year 1931, the Rickard estate paid half the debt, and, in the return for that year also, the difference, $25,000, was deducted as a bad debt. It is true that the deduction on the 1929 return of $50,000 as a bad debt was disallowed on July 15, 1930 , because the debt had not been written off the books, but the attempted fraud was as great as though it had been successful. Moreover, the full amount of the debt having been deducted in that year in making up the net income, it was a second fraud to deduct one half of it again in 1931. By this chicanery a fraudulent credit was thus secured of $50,000.

[Actions of Defendants]

There was other evidence that the returns were fraudulent, but it is not necessary to set it forth, because it is apparent from the foregoing recital that there was ample to justify a jury in so finding. There was also ample to connect the accused with their preparation and presentation. Greer was in charge of the books during the years in question and his complicity is too plain to justify any discussion; indeed his own testimony fastened his guilt upon him. It would be absurd to suppose that he should have originated the fraud himself; Kelley was in charge of all such matters for the partners and their estates, and was the only person at once capable of dealing with them, and having any motive to rig the returns. Moreover, Greer repeatedly said that he got figures from Kelley with instructions as to how to use them. As to Rabner, his letters to Kelley in June and July, 1928, about the necessity of fabricating a new item of $50,000 for autos and motor trucks to replace that which had been exhausted by previous depreciation, showed his complicity in the fraud. This was to swell the inventory which he knew was to be used in future years until by depreciation the new item should be exhausted as the old had been. Moreover in 1932 he was still concerned with the preparation of the returns as his letter--Ex. 234--disclosed, in which he advised Kelley how to make up the depreciation schedule from the 1926 purchases. Add to this his attendance at conferences in Washington in 1931 and 1932, when the Treasury officials were induced to pass some of the items, and it plainly appears that he was working with Kelley throughout the whole period. The point is made that he was never in the Southern District of New York, and could not therefore have assisted in the preparation of the returns as alleged. It would be enough answer to this to recall that the letters were sent to New York , and that they were themselves an act of assistance. But we do not distinguish in this respect between the crime of aiding in the preparation and presentation of a return, and that of preparing and presenting the return. If Rabner had been indicted for preparing and presenting the return, it would have been no answer to say that he abetted that result from outside the district. Horner v. United States , 143 U. S. 307; Burton v. United States , 202 U. S. 344, 387-389. He could have been tried wherever his acts resulted. When the preliminary steps are made themselves an independent crime, it is possible logically to distinguish and say that the indictment must be found where those steps occurred, and if so, that each participant is chargeable only where his part is performed. But the practical result would be to subject the two crimes which are essentially the same, to different rules of venue, and that is an absurd intent to ascribe to Congress. We think the same rule applies as though the crime charged were the very preparation and presentation of the return.

[Consolidation of Indictments]

Since therefore there was enough to connect all the accused with the fraudulent returns, we may turn to the supposed errors in the conduct of the trial. The first of these is the consolidation of the four indictments. One of these was for a conspiracy to defraud the United States of income taxes due from the partners and from the estates of those who were dead. The period covered was 1918-1932, and there were six defendants, of whom three were the accused at bar. The other conspiracy indictment was of the same kind except that it was confined to the return for the estate of Charles Ringling for 1929. The defendants in this were the accused at bar and two others not made defendants in the first conspiracy indictment. The two substantive indictments we have already described. The only defendants in one were the three accused at bar; those in the other were those three and a fourth. At the beginning of the trial when the indictments were consolidated, the prosecution was severed as to all but the accused at bar; and the question is whether they were prejudiced by this procedure. Had the conspiracy indictments covered only the years 1929-1932, there could not have been the slightest ground for saying so. In that event the substantive crimes would have been merely steps in a crime--defrauding the Treasury out of taxes--and any evidence which was admissible to prove the conspiracies, would have been admissible to prove the substantive crimes. The fact that there would have been other defendants in the conspiracy indictments would not have prejudiced the accused, so far as we can see. The declarations of a fellow conspirator are competent only when made in pursuance of the common object; they are admitted because they are a part of the execution of the plan, and have been impliedly authorized by the others. Wigmore §1079. The fact that declarant is indicted adds nothing to the competence of his declaration. Besides, the record at bar contains substantially no declarations of any persons indicted in the conspiracy indictments who had been severed out at the trial. Such prejudice as there was, was therefore due to the fact that the conspiracy indictments included eleven years before 1929. But the fraudulent returns for 1929-1932 were a continuation of practices that had been in continuous operation since 1918, and the principal fraud was in the padding of the original inventory--Ex. 89. Had the substantial indictments alone been tried, this padding must have been proved, and could legally have been proved, as a preliminary to showing the continued use of it thereafter. It is difficult to see what could not have been proved that was material to the conspiracy indictments; but if there was any such evidence, it was certainly competent under the doctrine that where intent is in issue, other instances of the same kind may be adduced.

No prejudice to the accused being therefore involved, the question comes down to whether there is any peremptory rule which forbade such a consolidation. We think not. We will assume for argument that the consolidation statute (§557, Title 18, U. S. Code) does not allow the joinder of two indictments, in one of which the accused include some who are not accused in the other. Even so, the severance did away with that objection, so far as the statute gave any practical protection to the accused. It is true that the opposite has been held. DeLuca v. United States , 299 Fed. Rep. 24 (C. C. A. 2); Castellini v. United States , 64 Fed. (2d) 636, (C. C. A. 6). However, both these cases depended chiefly upon McElroy v. United States, 164 U. S. 76, and that decision does not bear them out. The court had there before it the consolidation of four indictments in which not only were the accused different, but which concerned quite separate crimes. There was no severance, and the court thought the crimes so disparate that justice could not be done, if they were tried together. Nowhere did it suggest that if only the accused common to all the indictments had been tried, and if the crimes were closely interwoven, the conviction would not have stood. We can discover no basis for any peremptory rule forbidding such a joinder, and so far as DeLuca v. United States , supra, so holds, we overrule it. For the same reason we cannot follow Castellini v. United States , supra, in that regard. Moreover, even if the consolidation had been technically an error, it would not have been ground for reversal (§391, Title 28, U. S. Code).

[Necessity of Showing That Taxpayer Was Guilty of Fraud]

The next point is that the crime of assisting in the preparation of a fraudulent tax return presupposes that the taxpayer himself is a party to the fraud, and that this was not proved. Whatever embarrassment that might have caused, had the accused been charged as abettors of the partners and their executors, it is quite immaterial here, because the statute (§1114(c) of the Revenue Act of 1926) expressly provides that the assistance shall be a crime "whether or not such falsity or fraud is with the knowledge or consent of the person authorized to present such return." The purpose was very plainly to reach the advisers of taxpayers who got up their returns, and who might wish to keep down the taxes because of the credit they would get with their principals, who might be altogether innocent.

[Evidence]

The trial, which occupied eight weeks, was an almost continuous barrage of objections to the admissibility of evidence, oral and written, generally preceded by preparatory cross-examination of the prosecution's witnesses to ascertain their qualifications to testify. It is quite impossible to deal with even a small part of these objections; we must content ourselves with the only one in which we think that error was committed--Ex. 85. That was an inventory, prepared in 1935 by Treasury accountant, purporting to contain a correct statement of the property of the corporation as of that time. The items entered upon it appear to have been noted down by the two accountants from personal knowledge, gained on the ground, and we can see no reason why the document was not pro tanto competent. However, the values set opposite the items, though likewise gathered on the spot, were, in part at any rate, gleaned by inquiry from unascertained persons, who may or may not have been qualified, and who certainly were not called. So far it was incompetent, and the values should have been excluded. However, it is inconceivable that this error should have controlled the verdict. The inventory referred to a time three years after the last return in controversy, and the use made of it does not appear. At worst it would have done no more than show discrepancies between the inventory of 1935 and the earlier years, and there was so much evidence of specific fabrication as would make a reversal for this reason a travesty of justice. Objection was made to the partners' books on the ground that they had not been properly proved. They were shown to have been kept in due course, and were clearly competent, if §695 of Title 28, U. S. Code covered them. It did unless subdivision (h) prevented, which says that the section as a whole shall not be "retroactive." Valli v. United States , 94 Fed. (2d) 687, 693 (C. C. A. 1); and Greenbaum v. United States , 98 Fed. (2d) 574, 577 (C. C. A. 9) hold that this subdivision requires the documents themselves to have been made after the section was enacted; but in Hass v. United States, 93 Fed. (2d) 427, 437 (C. C. A. 8) the opposite opinion was expressed obiter, and with that opinion we agree. Surely Congress could not have supposed that the time at which the records were made was important; the section contained nothing which insured their accuracy; it merely provided that they must be kept in the regular course of the business, and that assurance was as good before the statute was passed as after. Nor is it in the least necessary so to read it; it may mean--and we think it does mean--that the section shall not serve to correct a mistake made at trial in the exclusion of records, which were kept in regular course, but were not competent as the law then stood. This is the natural and almost necessary meaning, for otherwise no records actually made before June 20, 1936, will ever have the benefit of the relaxation of the former strict requirements. Strictly the question does not, however, arise because the books were not used as evidence of the truth of what they recorded. The accused themselves accepted them as correct and made use of them in preparing the returns. It was the disparity between them and what was prepared from them that made up a substantial part of the frauds charged. Their objective verity could be material only on the very refined theory that they might have so far overstated the income of the circus that the returns, though fraudulently compiled, turned out not to be too low. Even so, the returns would be fraudulent, for they would be deliberately incorrect, though the tax shown was not too small.

The prosecution's accountants were allowed to present their calculations from the books and returns in evidence. This kind of evidence when based upon documents themselves competent and accessible, is always admissible; a jury without such guidance would be totally unable to cope with complicated accounts. Burton v. Driggs, 20 Wall. 125, 135; Rollins v. Board of Commissioners, 90 Fed. Rep. 575, 583 (C. C. A. 8); United States v. Miller, 61 Fed. (2) 947 (C. C. A. 2); Wigmore §1230.

[Instructions to Jury]

Complaint is also made of the charge, or rather of the judge's refusal to give certain requested instructions, for no exception was taken to the charge itself. About 100 such requests were made which even in so long a case was an inordinate number; we should not therefore in any case be disposed to hold down the judge too closely. One was the conventional request regarding the testimony of witnesses to the reputation of the accused, drawn from Edgington v. United States, 164 U. S. 361, 366. Perhaps the judge forgot this request; perhaps he deliberately refused it; at least he said nothing about it. He was right in any event, for he was not required to give it. All that that decision held was that if a judge undertakes to say anything to the jury about such testimony, he must not tell them to use it only in case the scales are already in balance. If he chooses not to speak of it at all, he is free not to do so, for it is like any other testimony; and whether he shall comment upon it lies wholly within his discretion. LeMore v. United States , 254 Fed. Rep. 887, 894, (C. C. A. 5); Grace v. United States , 4 Fed. (2) 658, 662, (C. C. A. 5); Allen v. United States , 4 Fed. (2) 688, 695, (C. C. A. 7); Kreiner v. United States , 11 Fed. (2) 722, 725 (C. C. A. 2); Nash v. United States , 54 Fed. (2) 1006, 1007 (C. C. A. 2).

The only other matter in the charge that needs comment arose from a fact to which we have as yet only alluded. The returns included among the deductions taken, losses due to the abandonment of some of the circus property at Baraboo , Wisconsin and Bridgeport , Connecticut ; and also due to the "abandonment" of certain "spectacles," so called. Although the statute does not expressly allow such deductions, the regulations have done so for a long time; i. e., when property has been "permanently abandoned or permanently devoted to a radically different use." (Reg. 68, Art. 23(e)(3)). The prosecution asserted that the putative abandonments were fraudulent, and the judge in dealing with the matter told the jury that effect must be given to the regulations and that `abandonment' is an absolute relinquishment or renunciation of property, or a right therein;" later, that "if the use of any property in the business is permanently discontinued although no sale or disposition of the property has taken place" a deduction might be allowed, "for the loss of useful value * * * when such property is permanently discarded due to some unforeseen cause. This applies to the buildings only when they are permanently abandoned or permanently devoted to a radically different use." So far the charge was correct and adequate. In the next paragraph, however, apparently forgetting what he had just said, he added that "relinquishment of title is a necessary condition precedent to deduction of losses on abandonment of real estate"; and that was obviously an error. He would probably have corrected it if it had been called to his attention, but it was not. Instead, the accused, apparently preferring to leave with the jury the impression that the judge favored them in all respects, did not except, but relied upon a request, which did indeed state the law correctly, but added an unwarranted instruction about the effect of some evidence touching the value of the property at Baraboo. Because of this addition the judge was right to refuse this request; and he was right anyway, because his charge had already covered it. If the accused had any grievance at all, it was in what the judge had said about title; and the proper remedy for that was to call his attention to the inconsistency, and except if he refused to correct it.

Convictions affirmed. Appeal from order denying redelivery dismissed.