Defeat and Evade Income Taxes Page2

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The government also contends that §6531(4) is applicable to the alleged violations of §7202, citing United States v. Smith [80-2 USTC ¶9476], 618 F. 2d 280 (5th Cir. 1980) and United States v. Porth [70-1 USTC ¶9329], 426 F. 2d 519 (10th Cir. 1970). Smith is not germane because the defendant in that case was convicted of violations of 26 U. S. C. §§ 7203 and 7205 and it appears that he was never indicted for violations of §7202. In Porth, supra, the court said:

The indictment in counts 1 and 2 charges a "willful" failure "to truthfully account for and pay over" to the Internal Revenue Service FICA and general income taxes withheld from wages. Count 3 alleges that Porth "willfully" failed to make an individual income tax return, and counts 4 and 5 allege a willful failure to file quarterly federal returns for the FICA taxes which the statute required to be withheld. These offenses are clearly within the six-year exception to the general three-year statute of limitations of §6531. Waters v. United States [64-1 USTC ¶15,561], 328 F. 2d 739 (10th Cir. 1964) (other cites omitted). (at (521-22).

The court in Porth gave no reasoning for such a finding nor did it specify which of the several exceptions in §6531 applied to the different offenses charged in the indictment in that case. In Waters, supra, relied upon by the court in Porth, the defendant was charged with violating 26 U. S. C. §5851 and the court in Waters held that the exception found in §6531(2) is not applicable to an offense based on §5851. Therefore Waters is clearly inapplicable to this case and Porth, as a result of its reliance on Waters and its lack of reasoning or analysis in support of its finding, is of limited assistance to this Court.

The question presented is quite simply one of statutory interpretation. The question is: Does 26 U. S. C. §6531(4), which establishes a six-year period of limitations for "the offense of willfully failing to pay any tax," apply to failure to "pay over" third party taxes in violation of 26 U. S. C. §7202? Having given the matter careful consideration, the Court concludes that it does not and that accordingly the government may not rely upon that subsection to avoid the bar of the statute of limitations.

It is obvious from a reading of 26 U. S. C. §6531 that Congress had the statutory scheme of 26 U. S. C. §7201 et seq. in mind when considering what offenses should be exempted from the three-year period of limitations generally applicable. For one thing, this is obvious from the fact that specific mention is made of certain of such code sections by number (see, e.g., §6531(5) referring to §§ 7206 and 7207). In addition, there is substantial borrowing of statutory language from certain of the code sections in the §7201 et seq. series in §6531. However, the key words of §7202, "collect, account for, and pay over" are entirely absent from the subsections of §6531 which establish the longer six-year period of limitations. It seems unlikely to the Court that Congress would have used the language of so many of the §7201 et seq. code sections when drafting the subsections of §6531 but omit use of the key words of §7202 if it had intended to make failure to "pay over" third party taxes subject to the six-year statute of limitations.

Another factor which persuades the Court to adopt the interpretation urged by Defendant is that §6531(4) is directed at "the offense of willfully failing to pay any tax . . .." (emphasis added), not a class of offenses. ¹ It is quite clear that failure to "pay over" third party taxes is substantively different from failure to pay taxes. See Slodov v. United States [78-1 USTC ¶9447], 436 U. S. 238, 248-50 (1978).

The Court has considered the government's argument that the word "pay" is sufficiently general to include "pay over"; ² also the Court has noted the seeming incongruity of Congress' providing a six-year period of limitations for the misdemeanor offense under 26 U. S. C. §7203 of failure to file a return, but providing a three-year period of limitations for the felony of failing to "pay over" taxes under §7202. On the latter point, no obvious explanation presents itself. A plausible explanation might be that the more egregious cases of failure to pay over third party taxes could also be prosecuted under §7201, which makes willful attempts to evade or defeat any tax a felony, with a six-year statute of limitations per §6531(2). In this regard, it is observed that 26 U. S. C. §6672, which is a civil penalty section, provides a penalty for both failure to "collect, truthfully account for and pay over" and attempts to "evade or defeat any such tax." However, Chapter 75 "Crimes, Other Offenses and Forfeitures" of Title 26, divides the two into separate crimes.

For the foregoing reasons, the Magistrate's Report and Recommendation is ADOPTED IN PART and REJECTED IN PART.

Having found that the government may not avail itself of the six-year period of limitations on Counts 1 through 12, the Court now turns to the government's request that it be permitted to amend its response heretofore made to the Motion to Dismiss to assert that certain counts of the indictment otherwise barred by the statute may be viable because the statute of limitations was tolled. Having considered the government's request, and finding it to be in the interest of justice to permit the government to amend its response, the Court GRANTS the government's request. The Court further ORDERS that a hearing be held in this matter on Thursday, October 9, 1980, at 10:30 a.m. At that time, both the government and the Defendant may present such evidence as they deem pertinent on the issue of tolling, together with argument on the law.

Finally, the Court turns to the Defendant's request for a continuance of the trial date, made at oral argument before the Court on the Motion to Dismiss held on Cotober 6, 1980. In light of the action taken herein, a continuance is appropriate. The trial of the action is hereby reset to begin on Monday, October 20, 1980, at 9:30 a. m.

¹ For example, §6531(1) applies to ". . . offenses involving the defrauding or attempting to defraud the United States . . . ." (emphasis added).

² The Court concludes that although a lay person would probably use this approach, the drafters of §6531 more likely would have used the terms as are reflected in §§ 7201 et seq.

 

 

[77-1 USTC ¶9179] United States of America , Appellant v. Salvatore Coletta, Defendant-Appellee

(CA-2), U. S. Court of Appeals, 2nd Circuit, No. 76-1371, 11/24/76, Affirming District Court, 76-2 USTC ¶9568

[Code Secs. 7201 and 7203--result unchanged by the '76 Tax Reform Act]

Criminal penalties: Evasion of tax: Willful failure to report income: Insufficient evidence.--The Court of Appeals upheld the District Court holding that an indictment against the taxpayer on income tax evasion charges for failure to report income which he allegedly received from bribes during the years 1968-1971 be dismissed because the evidence was grossly inadequate.

William L. Aronwald, Assistant United States Attorney, for appellant. Kuh, Shapiro, Goldman, Cooperman & Levitt, 800 3rd Ave., New York City, N. Y. 10022, for defendant-appellee.

Before MOORE, FEINBERG, and MESKILL, Circuit Judges.

This cause came on to be heard on the transcript of record from the United States District Court for the Southern District of New York, and was argued by counsel.

ON CONSIDERATION WHEREOF, it is now hereby ordered, adjudged, and decreed that the judgment of said District Court be and it hereby is affirmed on the opinion of Judge Werker, dated July 7, 1976.

 

 

[76-2 USTC ¶9568] United States of America v. Salvatore Coletta, Defendant

U. S. District Court, So. Dist. N. Y., 74 Cr. 289 (HFW), 7/7/76

[Code Secs. 7201 and 7203]

Criminal penalties: Evasion of tax: Willful failure to report income: Insufficient evidence.--An indictment against the taxpayer on income tax evasion charges for failure to report income which he allegedly received from bribes during the years 1968-1971 was dismissed because the evidence was grossly inadequate.

Thomas J. Cahill, United States Attorney, New York, N. Y., Barbara S. Ambler, United States Department of Justice, Washington, D. C. 20530, for plaintiff.

[Opinion]

WERKER, District Judge:

The defendant Salvatore Coletta was indicted in 1974 on four counts of income tax evasion for failing to report income he allegedly received in the form of bribes from 1968 through 1971. The Government has stipulated that the case against this defendant is based essentially on the same evidence as that presented against George Gamaldi in a previous trial wherein the same charges as these now pending against Coletta were dismissed. Coletta has moved to dismiss this indictment pursuant to Rule 12 of the Federal Rules of Criminal Procedure.

The Government's case against Gamaldi was replete with insufficient, speculative generalities instead of specific, concrete evidence. These shortcomings have not disappeared; the facts and evidence as presented now against Coletta remain exactly the same as they were against Gamaldi--highly inadequate.

Largely on the basis of Moe Steinman's testimony, the Government claims Coletta was one of three persons receiving bribes averaging some $7,000 monthly from June 1968 until December 1971. But the Government has not been able to document the specifics of who was involved, how much was paid, and where and when payment took place of any one particular transaction.

Steinman testified that monthly payments averaging $23,000 total were given to Gamaldi and/or Coletta and/or Blase Iovino at various places in Long Island and New York City . Record at 50-51. He was unable, however, to specify exactly to whom particular payments were made, and instead could only make a general claim that he always made these payments to a least two out of the three. Record at 50. While Steinman was able to estimate that an average of $23,000 a month was paid, with a minimum of $12-14,000 and a maximum of $28-30,000, record at 51, he could not recall the exact amount of any one particular payment.

In certain instances during the Gamaldi trial, Steinman did give some specific details concerning particular alleged payments on direct examination, but on cross-examination his memories of the same incidents somehow eluded him. He recalled specifics of the alleged April 1968 and June 1968 payments, record at 45, 49-50, when questioned by the Assistant United States Attorney, but these recollections faded upon cross-examination by the defense attorney. Record at 202, 207.

The caliber of the Government's evidence is perhaps best demonstrated by quoting an excerpt from the trial transcript:

(Moe Steinman being cross-examined by the defense counsel.)

A. That was the first kickback. That's where I don't know where we met. It was one of the restaurants in Long Island . I know it was Long Island .

Q. How about the month of May?

A. May, yes. That was in Patrick's Pub on Northern Boulevard .

Q. How do you remember the month of May in Patrick's Pub?

A. Because we had a little table in the back there that I recall and we had quite a few drinks to celebrate a new venture that I had with them. That was only Sol Coletta and Blase.

Q. How do you know it was Patrick's Pub?

A. I remember because I was there.

Q. How do you remember it was the month of May?

A. It was the second time I met them. I was in a hurry or they were in a hurry. I don't remember where we met. It was Long Island .

Q. Do you recall the date of that meeting?

A. No.

Q. How about the month of June?

A. I don't recall that.

Q. Do you recall where that was?

A. In Long Island .

Q. Where, the place?

A. Well, it could have been--

Q. Not could have been. Do you have any recollection of the place specifically?

A. No, not sure.

Q. Do you have a recollection of the date specifically?

A. Only that I could tell you the first of every month or the first week or or the first ten days of every month.

(Record at 206-7).

Even in one case where Moe Steinman's testimony is corroborated in part by his brother Sol Steinman, another Government witness, there is an inconsistency. The two witnesses gave testimony concerning a meeting at Coletta's home where another payment allegedly took place, record at 60-61, 246-50, 276-77, but they could not agree as to whether the transaction took place in 1970 or 1971 nor was there any testimony as to actual receipt by Coletta of the "evened out" monies by the witnesses presented.

There is here an absolute absence of any evidence indicating unexplained expenditures by this defendant vis-a-vis the income reported or the establishment of his net worth. These are two significant circumstantial evidence areas which are subject to the inference of the receipt of money in excess of the reported income. The Government has merely presented evidence by the mastermind of the kickback scheme which is uncorroborated and upon cross-examination as to time and place nullified. From this testimony it is unreasonable to expect a jury to draw an inference beyond a reasonable doubt that in each of three taxable years the defendant received approximately $84,000 which he failed to report as income.

While the cases cited by the Government as to the precise amount, the substantial character, and the exact amount of tax evaded stand for the propositions stated, they do not apply here where the necessary circumstantial evidence from which an inference of receipt of funds is to be drawn is missing. ¹

Thus many necessary, important details in the Government's case are missing; a jury would be required to fill them in by pure conjecture and inference based upon conjecture in order to find that a particular transaction actually took place.

The law in the Second Circuit today concerning the sufficiency of evidence necessary before a case may be sent to a jury requires a trial judge to:

"determine whether upon the evidence, giving full play to the right of the jury to determine credibility, weigh the evidence, and draw justifiable inferences of fact, a reasonable mind might fairly conclude guilt beyond a reasonable doubt." United States v. Taylor, 464 F. 2d 240 (2d Cir. 1972), quoting from Curley v. United States, 160 F. 2d 229 (D. C. Cir.), cert. denied, 331 U. S. 837 (1947).

In my opinion, in this case there is no sufficient evidence upon which a reasonable person could fairly conclude beyond a reasonable doubt that the defendant Coletta is guilty of the crimes with which he is charged.

A District of Columbia Circuit case is analogous to the situation now before the court. In United States v. Bethea, 442 F. 2d 790 (D. C. Cir. 1971), the defendant was convicted on two narcotics charges. Arrest was made and conviction followed on the basis of the fact that the defendant, who was a passenger along with two other men in a parked automobile, was sitting in proximity to the drugs in question. In addition, there were also three loaded guns in the car, two of which were hidden beneath the defendant's seat. Aside from testimony verifying this set of facts, the Government utilized only one witness on direct examination, and offered no further evidence linking the defendant to the particular drugs or the use of drugs in general, nor any evidence showing that he was good friends with the other two men or even that he had spent the major part of the evening in question with them.

Recognizing the many gaps in the Government's case, the court there reversed the conviction. In so doing, the court stated, "[T]he trial judge should not allow the case to go to the jury if the evidence is such as to permit the jury to merely conjecture or to speculate as to the defendant's guilt." Id. at 792. Accord , United States v. Hill, 481 F. 2d 929, 931 (5th Cir.), cert. denied, 414 U. S. 1115 (1973); United States v. Bonham, 477 F. 2d 1137, 1138 (3rd Cir. 1973) (en banc).

The Government's evidence in this case fares no better than the evidence in Bethea. In order to find the defendant guilty beyond a reasonable doubt on the facts, one must first infer, on the basis of the Government's sketchy evidence, that Coletta did indeed receive a substantial amount of money in bribes, secondly speculate as to the specific amount of money, further conjecture as to the particular year in which the alleged bribes were accepted, and finally conclude that Coletta wilfully failed to report this income.

To send this case to the jury would be to ask a jury to build speculation upon speculation. The defendant's motion to dismiss the indictment is granted.

SO ORDERED.

¹ In its memorandum of law, the Government cites United States v. Pawlak [72-2 USTC ¶9646], 352 F. Supp. 794 (S. D. N. Y. 1972), United States v. Rischard, 471 F. 2d 105 (8th Cir. 1973), and United States v. Marcus [68-2 USTC ¶9599], 401 F. 2d 563 (2d Cir.), cert. denied, 393 U. S. 1023 (1969), in support of its contention that the exact amount of alleged understated income need not be proved. It cites United States v. Pawlak, supra, United States v. Stein [71-1 USTC ¶9209], 437 F. 2d 775 (7th Cir.), cert. denied, 403 U. S. 905 (1971), United States v. Williams [73-1 USTC ¶9134], 470 F. 2d 915 (2d Cir. 1972), and United States v. White [69-2 USTC ¶9675], 417 F. 2d 89 (2d Cir.), cert. denied, 397 U. S. 912 (1969), in reference to the elements of the crime of income tax evasion. This is essentially the extent of the authority used by the Government in its case against Coletta.

 

 

[76-2 USTC ¶9568] United States of America v. Salvatore Coletta, Defendant

U. S. District Court, So. Dist. N. Y., 74 Cr. 289 (HFW), 7/7/76

[Code Secs. 7201 and 7203]

Criminal penalties: Evasion of tax: Willful failure to report income: Insufficient evidence.--An indictment against the taxpayer on income tax evasion charges for failure to report income which he allegedly received from bribes during the years 1968-1971 was dismissed because the evidence was grossly inadequate.

Thomas J. Cahill, United States Attorney, New York, N. Y., Barbara S. Ambler, United States Department of Justice, Washington, D. C. 20530, for plaintiff.

[Opinion]

WERKER, District Judge:

The defendant Salvatore Coletta was indicted in 1974 on four counts of income tax evasion for failing to report income he allegedly received in the form of bribes from 1968 through 1971. The Government has stipulated that the case against this defendant is based essentially on the same evidence as that presented against George Gamaldi in a previous trial wherein the same charges as these now pending against Coletta were dismissed. Coletta has moved to dismiss this indictment pursuant to Rule 12 of the Federal Rules of Criminal Procedure.

The Government's case against Gamaldi was replete with insufficient, speculative generalities instead of specific, concrete evidence. These shortcomings have not disappeared; the facts and evidence as presented now against Coletta remain exactly the same as they were against Gamaldi--highly inadequate.

Largely on the basis of Moe Steinman's testimony, the Government claims Coletta was one of three persons receiving bribes averaging some $7,000 monthly from June 1968 until December 1971. But the Government has not been able to document the specifics of who was involved, how much was paid, and where and when payment took place of any one particular transaction.

Steinman testified that monthly payments averaging $23,000 total were given to Gamaldi and/or Coletta and/or Blase Iovino at various places in Long Island and New York City . Record at 50-51. He was unable, however, to specify exactly to whom particular payments were made, and instead could only make a general claim that he always made these payments to a least two out of the three. Record at 50. While Steinman was able to estimate that an average of $23,000 a month was paid, with a minimum of $12-14,000 and a maximum of $28-30,000, record at 51, he could not recall the exact amount of any one particular payment.

In certain instances during the Gamaldi trial, Steinman did give some specific details concerning particular alleged payments on direct examination, but on cross-examination his memories of the same incidents somehow eluded him. He recalled specifics of the alleged April 1968 and June 1968 payments, record at 45, 49-50, when questioned by the Assistant United States Attorney, but these recollections faded upon cross-examination by the defense attorney. Record at 202, 207.

The caliber of the Government's evidence is perhaps best demonstrated by quoting an excerpt from the trial transcript:

(Moe Steinman being cross-examined by the defense counsel.)

A. That was the first kickback. That's where I don't know where we met. It was one of the restaurants in Long Island . I know it was Long Island .

Q. How about the month of May?

A. May, yes. That was in Patrick's Pub on Northern Boulevard .

Q. How do you remember the month of May in Patrick's Pub?

A. Because we had a little table in the back there that I recall and we had quite a few drinks to celebrate a new venture that I had with them. That was only Sol Coletta and Blase.

Q. How do you know it was Patrick's Pub?

A. I remember because I was there.

Q. How do you remember it was the month of May?

A. It was the second time I met them. I was in a hurry or they were in a hurry. I don't remember where we met. It was Long Island .

Q. Do you recall the date of that meeting?

A. No.

Q. How about the month of June?

A. I don't recall that.

Q. Do you recall where that was?

A. In Long Island .

Q. Where, the place?

A. Well, it could have been--

Q. Not could have been. Do you have any recollection of the place specifically?

A. No, not sure.

Q. Do you have a recollection of the date specifically?

A. Only that I could tell you the first of every month or the first week or or the first ten days of every month.

(Record at 206-7).

Even in one case where Moe Steinman's testimony is corroborated in part by his brother Sol Steinman, another Government witness, there is an inconsistency. The two witnesses gave testimony concerning a meeting at Coletta's home where another payment allegedly took place, record at 60-61, 246-50, 276-77, but they could not agree as to whether the transaction took place in 1970 or 1971 nor was there any testimony as to actual receipt by Coletta of the "evened out" monies by the witnesses presented.

There is here an absolute absence of any evidence indicating unexplained expenditures by this defendant vis-a-vis the income reported or the establishment of his net worth. These are two significant circumstantial evidence areas which are subject to the inference of the receipt of money in excess of the reported income. The Government has merely presented evidence by the mastermind of the kickback scheme which is uncorroborated and upon cross-examination as to time and place nullified. From this testimony it is unreasonable to expect a jury to draw an inference beyond a reasonable doubt that in each of three taxable years the defendant received approximately $84,000 which he failed to report as income.

While the cases cited by the Government as to the precise amount, the substantial character, and the exact amount of tax evaded stand for the propositions stated, they do not apply here where the necessary circumstantial evidence from which an inference of receipt of funds is to be drawn is missing. ¹

Thus many necessary, important details in the Government's case are missing; a jury would be required to fill them in by pure conjecture and inference based upon conjecture in order to find that a particular transaction actually took place.

The law in the Second Circuit today concerning the sufficiency of evidence necessary before a case may be sent to a jury requires a trial judge to:

"determine whether upon the evidence, giving full play to the right of the jury to determine credibility, weigh the evidence, and draw justifiable inferences of fact, a reasonable mind might fairly conclude guilt beyond a reasonable doubt." United States v. Taylor, 464 F. 2d 240 (2d Cir. 1972), quoting from Curley v. United States, 160 F. 2d 229 (D. C. Cir.), cert. denied, 331 U. S. 837 (1947).

In my opinion, in this case there is no sufficient evidence upon which a reasonable person could fairly conclude beyond a reasonable doubt that the defendant Coletta is guilty of the crimes with which he is charged.

A District of Columbia Circuit case is analogous to the situation now before the court. In United States v. Bethea, 442 F. 2d 790 (D. C. Cir. 1971), the defendant was convicted on two narcotics charges. Arrest was made and conviction followed on the basis of the fact that the defendant, who was a passenger along with two other men in a parked automobile, was sitting in proximity to the drugs in question. In addition, there were also three loaded guns in the car, two of which were hidden beneath the defendant's seat. Aside from testimony verifying this set of facts, the Government utilized only one witness on direct examination, and offered no further evidence linking the defendant to the particular drugs or the use of drugs in general, nor any evidence showing that he was good friends with the other two men or even that he had spent the major part of the evening in question with them.

Recognizing the many gaps in the Government's case, the court there reversed the conviction. In so doing, the court stated, "[T]he trial judge should not allow the case to go to the jury if the evidence is such as to permit the jury to merely conjecture or to speculate as to the defendant's guilt." Id. at 792. Accord , United States v. Hill, 481 F. 2d 929, 931 (5th Cir.), cert. denied, 414 U. S. 1115 (1973); United States v. Bonham, 477 F. 2d 1137, 1138 (3rd Cir. 1973) (en banc).

The Government's evidence in this case fares no better than the evidence in Bethea. In order to find the defendant guilty beyond a reasonable doubt on the facts, one must first infer, on the basis of the Government's sketchy evidence, that Coletta did indeed receive a substantial amount of money in bribes, secondly speculate as to the specific amount of money, further conjecture as to the particular year in which the alleged bribes were accepted, and finally conclude that Coletta wilfully failed to report this income.

To send this case to the jury would be to ask a jury to build speculation upon speculation. The defendant's motion to dismiss the indictment is granted.

SO ORDERED.

¹ In its memorandum of law, the Government cites United States v. Pawlak [72-2 USTC ¶9646], 352 F. Supp. 794 (S. D. N. Y. 1972), United States v. Rischard, 471 F. 2d 105 (8th Cir. 1973), and United States v. Marcus [68-2 USTC ¶9599], 401 F. 2d 563 (2d Cir.), cert. denied, 393 U. S. 1023 (1969), in support of its contention that the exact amount of alleged understated income need not be proved. It cites United States v. Pawlak, supra, United States v. Stein [71-1 USTC ¶9209], 437 F. 2d 775 (7th Cir.), cert. denied, 403 U. S. 905 (1971), United States v. Williams [73-1 USTC ¶9134], 470 F. 2d 915 (2d Cir. 1972), and United States v. White [69-2 USTC ¶9675], 417 F. 2d 89 (2d Cir.), cert. denied, 397 U. S. 912 (1969), in reference to the elements of the crime of income tax evasion. This is essentially the extent of the authority used by the Government in its case against Coletta.

 

 

[69-1 USTC ¶9204] Rob ert Gordon Hayes, Appellant v. United States of America , Appellee

(CA-5), U. S. Court of Appeals, 5th Circuit, No. 23540, 407 F2d 189, 1/29/68, Aff'g unreported District Court decision

[Code Sec. 7201]

Crimes: Tax evasion: Sufficiency of indictment: Jurisdiction.--An indictment was sufficient where it contained both the statutory language and a reference to the specific section alleged to have been violated and disclosed the means by which the defendant had allegedly attempted to evade paying tax. In addition, the Southern District of Florida had jurisdiction to return the indictment although the place where the alleged criminal offenses took place (Jacksonville, Florida) was transferred to a new federal judicial district after the alleged criminal acts took place (1958, 1959 and 1960) but before the indictment was returned (1965).

[Code Secs. 446(b) and 7201]

Reconstruction of income: New worth method: Opening net worth: Evidence: Tax evasion.--In using the net worth method to reconstruct the defendant's taxable income, the Government's opening net worth figure was correct. The taxpayer failed to establish a claimed $64,000 cash hoard; a $10,000 figure for opening cash on hand, based on testimony of the taxpayer's accountant, was reasonable; and the Government's cost basis for land and partially constructed apartments was correct.

[Code Sec. 7201]

Crimes: Tax evasion: Evidence of prior crimes.--The trial court committed no error in admitting evidence relating to the defendant's prior convictions. The trial court carefully considered both the nature of the prior offenses and the length of time that had elapsed since their commission.

[Code Sec. 7201]

Crimes: Tax evasion: Trial: Cross-examination.--A question asked during cross-examination of the defendant concerning whether or not he ever escaped from prison was well within the scope of cross-examination.

[Code Sec. 7201]

Crimes: Tax evasion: Defenses: Self-incrimination: Jury trial.--The defendant's right to remain silent was not violated when Government agents and Government counsel commented on his failure to explain his substantial increase in net worth. Much of the relevant testimony and argument was either not objected to or was directly invited by defense counsel's conduct. Furthermore, any prejudicial impact from the statements was erased by trial court warnings to the jury.

One dissent.

[Code Sec. 7201]

Crimes: Tax evasion: Miscellaneous defenses.--The trial court committed no error in admitting into evidence and submitting to the jury two net worth summaries prepared by the Government; jury instructions as to wilfulness were proper; and whether or not the defendant's attempt to defeat paying tax was "wilful" was a question for the jury to decide.

Wilfred C. Varn, Rob ert M. Ervin, 305 S. Gadsden St., P. O. Box 1567 , Tallahassee , Fla. , for appellant. Mitchell Rogovin, Assistant Attorney General, Joseph M. Howard, Burton Berkley, Department of Justice, Washington, D. C. 20530, Clinton Ashmore, United States Attorney, Steward J. Carrouth, Assistant United States Attorney, Tallahassee, Fla., for appellee.

Before JONES and GODBOLD, Circuit Judges, and SCOTT, District Judge.

JONES, Circuit Judge:

The appellant, Rob ert Gordon Hayes, and his wife, Ruth, were indicted on January 11, 1965, in the Southern District of Florida for wilfully attempting to evade and defeat income taxes due the United States for the years 1958, 1959 and 1960 in violation of 26 U. S. C. A. Sec. 7201. Pursuant to a motion filed by the defendants, the cause was transferred to the Northern District of Florida. At a jury trial, appellant Hayes was convicted and his wife acquitted on each of the three counts contained in the indictment. Subsequently, a fine of $2,000 was levied and concurrent sentences of fifteen months imprisonment on each count were imposed. From this judgment and sentence, Hayes has appealed.

[Indictment Challenged]

Appellant's first specification of error challenges the jurisdiction of the Southern District of Florida to return the indictment. Hayes filed his income tax returns for the years 1958, 1959 and 1960 with the District Director in Jacksonville , Florida , which, when the returns were filed, was within the Southern District of Florida. On July 30, 1962, an area including Jacksonville was transferred into the simultaneously created Middle District of Florida. 28 U. S. C. A. Sec. 89(b). It is asserted that, because the indictment was returned after Jacksonville became a part of the Middle District, a grand jury of the Southern District had no jurisdiction to return the indictment.

In answering appellant's jurisdictional challenge, reference to 18 U. S. C. A. Sec. 3240 is particularly appropriate. This section provides:

"Whenever any new district or division is established, or any county or territory is transferred from one district or division to another district or division, prosecutions for offenses committed within such district, division, county, or territory prior to such transfer, shall be commenced and proceeded with the same as if such new district or division had not been created, or such county or territory had not been transferred, unless the court, upon the application of the defendant, shall order the case to be removed to the new district or division for trial."

Because there is no question but that the Southern District could have indicted Hayes had the Middle District not been created, Holbrook v. United States, 5th Cir. 1954, [54-2 USTC ¶9640] 216 F. 2d 238, it seems clear that the above statute permits the Southern District to do so, although the place of the alleged offenses had been transferred to a new district after the time alleged for the commission of the offenses.

Appellant asserts that Quinlan v. United States, 5th Cir. 1927, 22 F. 2d 95, requires a contrary interpretation of Section 3240. In that case, this Court expressed the view that 28 U. S. C. A. Sec. 121, which is the statutory predecessor of 28 U. S. C. A. Sec. 3240, had no effect on cases begun after the creation of a new district, and that the statute merely enabled the court in the old district "to retain jurisdiction of pending criminal cases which properly could not be begun in that court after the creation of the new district." Quinlan v. United States, supra at 98. If this interpretation of 28 U. S. C. A. Sec. 3240 is followed, appellant's contention would be upheld. However, both the plain meaning of the statute and a subsequent Supreme Court decision convince us that the above statement is not declaratory of the controlling principle.

In Lewis v. United States, 279 U. S. 63, 49 S. Ct. 257, 73 L. Ed. 615, the Supreme Court determined that the Eastern District of Oklahoma had jurisdiction to indict and try an offense committed in a county which had been transferred out of the Eastern District into the newly created Northern District after the commission of the offense but before the return of the indictment. While it is true, as is pointed out by the appellant, that this decision rested in part upon the language of the jurisdictional provisions of the act creating the new Northern District, the Supreme Court clearly stated that the result reached was also in accord with 28 U. S. C. A. Sec. 101. See Lewis v. United States , supra at 791. This interpretation of the statute is consistent with the clear import of the language used therein. Section 3240 empowers an altered district to commence prosecutions after the change by indicting for offenses committed within its prior boundaries before alteration "the same as if such new district or division had not been created . . ." Mizell v. Vickrey, 10th Cir. 1929, 36 F. 2d 327. The district court here was correct in refusing to dismiss the indictment for lack of jurisdiction.

[Sufficiency of Indictment]

Appellant contends that the indictment was defective in that it failed to state an offense. The indictment alleged that Hayes did:

"Wilfully and knowingly attempt to evade and defeat . . . income tax due . . . by filing . . . with the district director . . . a false and fraudulent income tax return . . . in violation of section 7201 . . ."

The indictment is sufficient. It discloses the means by which Hayes attempted to defeat the tax even though tax evasion indictments need not contain such an allegation. Lott v. United States, 5th Cir. 1962, [62-2 USTC ¶9731] 309 F. 2d 115; Reynolds v. United States, 5th Cir. 1955, [55-2 USTC ¶49,146] 225 F. 2d 123. Both the statutory language and a reference to the specific section alleged to have been violated are incorporated within the charge. This in itself is sufficient if all the essential elements of the offense are contained in the statute. Worthy v. United States , 5th Cir. 1964, 328 F. 2d 386. Hayes was sufficiently apprised of the nature of the offense charged so as to permit him to prepare a defense and successfully plead former jeopardy if brought to trial in the future for the same offense. No more is required. United States v. Strauss, 5th Cir. 1960, 283 F. 2d 155. Appellant's attack on the indictment must fail.

[Opening Net Worth]

At the trial the Government relied upon the net worth method to establish its case. As stated in Merritt v. United States, 5th Cir. 1964, [64-1 USTC ¶9226] 327 F. 2d 820, 821, this method of proving income tax evasion

"Proceeds on the assumption that, if in a particular year the increase (not accounted for by nontaxable items) in a taxpayer's net worth plus his nondeductible expenditures exceeds his reported net income to a substantial extent, the excess represents unreported income and permits an inference of wilfulness on the part of the taxpayer."

An essential element of the prosecution's proof in this type of case is the establishment of an opening net worth. Hayes contends that this figure was not established "with reasonable certainty" as is required. Holland v. United States [54-2 USTC ¶9714], 348 U. S. 121, 75 S. Ct. 127, 99 L. Ed. 150. In support of this contention, Hayes asserts that the Government's calculation was inaccurate with respect to three particular items used in computing appellant's opening net worth.

[Cash on Hand]

The Government allowed $10,000 as a reasonable figure for cash on hand in 1951. This amount was based upon information offered by an accountant of the appellant who had been given a power of attorney to represent him in tax matters. A Government agent testified as to the accountant's calculations. Appellant objects to the use of this figure on the ground that it was established by hearsay testimony and because the Government failed to investigate Hayes' assertion that he placed $64,000 in a safety deposit box in a Tallahassee bank in 1951. Neither objection has merit.

It is clear that appellant's accountant was acting within the scope of his employment and authority when he indicated his estimate of the extent of Hayes' cash reserves to the Government agent. Thus the accountant's statement is admissible against Hayes as an admission by an authorized agent. The hearsay objection is not tenable. Laird v. Air Carrier Engine Service, 5th Cir. 1959, 263 F. 2d 948; Cox v. Esso Shipping Co., 5th Cir. 1957, 247 F. 2d 629. It seems appropriate to note here that the accountantclient privilege under Florida Statute Sec. 473.15 (1967) is not applicable in a Federal criminal proceeding. Falsone v. United States, 5th Cir. 1953, [53-2 USTC ¶9467] 205 F. 2d 734.

[Cash Hoard]

As to appellant's claim of a $64,000 cash hoard, we agree that the Government should investigate leads furnished by the taxpayer in arriving at an opening net worth. Merritt v. United States, supra. The record here shows that the Government did all that was required of it. During the investigation of this case, the Revenue agents repeatedly requested information concerning the amount of Hayes' cash on hand, yet no indication of $64,000 cash on hand in 1951 was made. Moreover, the Government agent did not learn of the Tallahassee safety deposit box until some time in 1962 at which time the funds, according to Hayes' testimony, had been depleted. Hayes had previously told a Government agent that he generally kept no more than $1,000 to $4,000 cash on hand at any one time. Under these circumstances, sufficient investigation by the Government is apparent, and the issue raised by Hayes' cash hoard claim was properly submitted to the jury.

[Cost Basis of Land]

The appellant makes an attack upon the $2,000 cost basis allowed by the Government for five and one-half acres of land sold by Hayes in 1959. Use of this basis, which was supplied by Hayes' accountant, resulted in a higher capital gain for the tax year involved. Appellant contends that use of this $2,000 basis was improper because the Government had previously allowed him and his wife a $5,000 cost basis on their joint tax return when the property was sold in 1959. Apparently it is believed that the Government is somehow estopped by this allowance. No authority is cited in support of this position. The record fails to show that the Government entered into a statutory agreement assigning $5,000 as the basis for the land. Under these circumstances, no estoppel can be found. See Sherwin v. United States, 9th Cir. 1963, [63-2 USTC ¶9550] 320 F. 2d 137; United States v. Hardy, 4th Cir. 1962, [62-1 USTC ¶9286] 299 F. 2d 600.

[Cost Basis of Apartments]

The last net worth item challenged by Hayes is the cost value of partially constructed apartments as of January 1, 1958. Appellant testified that the apartments were seventy-five percent completed on that date, and that a value of $9,000 should have been assigned to the cost of the apartments. Instead, the Government credited the apartments with a cost value of $3,500. This figure was taken from appellant's 1957 income tax return. Apparently, no other record of construction costs had been kept. These facts presented an issue which the jury resolved with sufficient evidence to support its determination. No error was committed. It seems appropriate to say here that use of the cost value asserted by appellant would have no effect on appellant's opening net worth for the years 1959 and 1960.

[Prior Convictions]

Hayes' next specification of error states that the district court committed error by admitting into evidence testimony relating to appellant's prior convictions. It is argued that these convictions are so remote in time that they have no bearing on appellant's present credibility.

It can not be doubted that a defendant who takes the stand in his own defense may be cross-examined concerning his prior convictions. Reese v. United States , 5th Cir. 1965, 353 F. 2d 732. Such inquiry is permitted for the purpose of impeachment as to credibility. Taylor v. United States , 5th Cir. 1960, 279 F. 2d 10. However, as stated in Fire Association of Philadelphia v. Weathered, 5th Cir. 1932, 62 F. 2d 78, 79:

"The length of time that should elapse before a conviction for felony ceased to have any probative value cannot be fixed by the law, but must be left to the sound discretion of the trial court."

The record indicates that, before ruling on the admissibility of evidence of the prior convictions, the trial judge carefully considered both the nature of the prior offenses and the length of time that had elapsed since their commission. Considering these same factors, we find no abuse of discretion. If error were committed, the lack of prejudice caused thereby would prevent a reversal on this ground. See Steele v. United States, 5th Cir. 1957, [57-1 USTC ¶9607] 243 F. 2d 712.

[Cross-Examination]

Further attacking the Government's conduct during the cross-examination of Hayes, it is asserted that error was committed when the United States Attorney asked the following question: "Did you escape from prison?" To this, appellant respondent: "I did not. Yes, yes."

The question is improper and prejudicial, Hayes argues, because it sought to establish, not whether Hayes had been convicted of a crime, but whether Hayes had escaped. As noted by appellant, evidence of prior conviction is admissible; evidence of previous misconduct is not. Rob erson v. United States , 5th Cir. 1957, 249 F. 2d 737.

Hayes, unfortunately, cannot receive the benefit of the rule upon which he relies. In response to a question asked by defense counsel during direct examination, the appellant stated:

"One day I left [prison] and went back about three or four months later and they marked up an escape against me, and they still turned me outside even then. I was never locked up."

In the face of this statement, Government counsel's inquiry was not without the scope of permissive cross-examination.

[Self-Incrimination]

Appellant urges that error was committed when Government agents and Government counsel commented on appellant's failure to make any explanation for his substantial increase in net worth. A reversal of appellant's conviction would generally be required on this ground. Griffin v. California , 380 U. S. 609, 85 S. Ct. 1229, 14 L. Ed. 2d 106. Here, however, peculiar circumstances may demand a different result.

After a preliminary investigation of appellant's books and records, the Government agents, at the request of appellant, obtained all further information from appellant's accountants. One of these accountants testified at the trial that after he indicated to Mr. and Mrs. Hayes the substantial increase in their net worth, he asked them: "Do you know where it came from, or are these figures correct?" The accountant then testified that no explanation of the increase in net worth was offered. Significantly, no objection to this testimony was raised.

After this accountant's testimony, one of the Government's tax investigators was called to the stand. On cross-examination, defense counsel attempted several times to establish that the agent had made unfounded and unnecessary assumptions as to Hayes' net worth. In response to such questions, the agent stated that no one would furnish him with different figures. An example of such an exchange is the following:

"Defense counsel: Haven't I repeatedly asked you if you would let me know specifically, what specific items you wanted so we could get them for you?

"Govt Agent: Repeatedly I asked. We did that repeatedly. We told you we wanted to know how much cash he had. Repeatedly we failed to hear it. This was done on numerous occasions."

Again, no objection was raised.

Later in the trial, another Government agent testified that no explanations as to the increased net worth had been made by anyone. At this time, defense counsel objected. This objection was overruled, but during the testimony of this agent the trial judge advised the jury that Hayes had the right to remain silent. On cross-examination, testimony concerning the lack of explanation was intentionally elicited by defense counsel through the following questions:

"Do you remember indicating to us at that conference . . . that if a satisfactory explanation could be made of any unexplained increases in net worth . . . you did not feel criminal liability existed?

"Did I understand your testimony earlier today, to say that if a satisfactory explanation had been forthcoming you would have settled the case?

"The fact that Mr. and Mrs. Hayes and I remained silent and did not come forward with an explanation, that is why we are here today?"

Appellant further asserts that Government counsel improperty commented to the jury on his failure to make explanations. The United States Attorney attempted in closing argument to discredit Hayes' claim to a $64,000 cash hoard by stating that Hayes had never made such a claim prior to the trial. No objection was raised at this time. Defense counsel thereafter twice alluded to the fact that Hayes had been advised to remain silent by his attorneys. In the latter part of the Government's closing argument, the Government attorney replied to these statements by suggesting the unlikelihood of Hayes remaining silent if the cash hoard claim were true. At this time, the following objection was raised:

"Your Honor, we respectfully object to his referring to what the court may do with respect to his explanation."

This objection was overruled.

Following these arguments, the trial judge again instructed the jury that the defendant was entitled to refuse to make any statements during the investigation and that the jury should draw no inference from the fact that the defendant elected to exercise this privilege.

It does not appear that any prejudicial error resulted from the comments which the appellant contends were improper. Much of the relevant testimony and argument was either not objected to, or was directly invited by the conduct of defense counsel. Furthermore, if there were any prejudicial impact from the statements, it was erased by the trial judge's several admonitions to the jury.

[Miscellancous Defenses]

The appellant makes three additional contentions. These also are without merit. First, what this Court stated in Myers v. United States, 5th Cir. 1966 [66-1 USTC ¶9371] 356 F. 2d 469, convinces us that the trial court committed no error in admitting into evidence and submitting to the jury two net worth summaries prepared by the Government. Second, no error can be found in the following charge to the jury:

"The attempt to evade or defeat a tax must be a wilful attempt: that is, it must be done knowingly, made with the specific intent to defeat the Government, from the Government a tax, imposed by the income tax laws which was the duty of the defendant to pay the Government. In other words, attempt must be knowingly made with the specific purpose of defrauding the Government of some substantial amount of income tax wilfully due from the defendants, or one of them.

"A fraudulent tax return is one that is false and known to be false by the person making it or causing it to be made and filed with the intent to deceive."

This language adequately defines "willfulness," and no prejudicial error resulted from the trial judge's failure to include the phrase "bad purpose" within the charge. Third, whether or not Hayes' attempt to defeat income taxes due the United States was wilful constituted an issue which was properly submitted to the jury. That body's resolution of the issue is supported by substantial evidence.

The judgment and sentence of the district court should be and are hereby

AFFIRMED.

[Dissenting Opinion]

GODBOLD, Circuit Judge, Dissenting:

During the investigative stages of this case, appellant "failed to explain" to the satisfaction of the government agents his substantial increase in net worth, and at times he specifically invoked his constitutional privilege to remain silent. In his closing arguments to the jury the government counsel commented on this failure to explain and on the invocation of the privilege. The majority concedes that these remarks normally would require a reveral of the case under the rationale of Griffin v. California, 380 U. S. 609, 85 Sup. Ct. 1229, 14 L. Ed. 2d 106 (1965). But my brothers find that "peculiar circumstances" require a different result in this case. ¹

The comments of the government counsel could hardly have been more prejudicial. ² Repeated reference was made to the failure to explain an increase in net worth as shown by the government's calculations. Comment was made on the fact that Hayes "stood on his constitutional rights." The members of the jury were asked whether they would have done the same. In the first volley of the prosecution barrange, during the initial closing argument by the prosecutor, the jury was told:

This would have been a way if they had disclosed that vast amount of money they had hoarded, this would have been a way that you gentlemen would not have been sitting here four and a half days. ³ This trial would never have come up; these people would never have been indicted; nothing would have happened. All they had to do was make a truthful explanation of this increase and that would have ended the matter. That would have ended the matter.

* * *

If Mr. Hayes had that money prior to 1950, he could not have been indicted. All he had to do was to come forward and tell Mr. Snyder that he had these funds.

* * *

[T]hese were conferences set up with appointments, to find out where the difference was between the government's figures and their figures, give a reasonable explanation of it--make an explanation of it, [the governmental agents] said, give us a reasonable explanation and we will cease this investigation and that will be the end of it, Mr. and Mrs. Hayes will not have to go through this endurance of being indicted and coming to trial and taking a chance of whether or not they will have to go to jail or not, this eliminates every bit of it. Why didn't they tell it? Why didn't they disclose it? They disclosed it the first time on this witness stand here the other day. You heard it the same time I did. ⁴

To the above line of argument by the prosecution the first defense counsel to argue responded:

The evidence shows that I told him and her that they would make no statements, at first, and Members of the Jury, that is their right under our Constitution and government. And if they choose not to explain to an enforcement officer of any government, then they have that right and can reserve the right to explain to the Members of the Jury and the Court under the rules of evidence as to what their explanation might be.

Then in the middle of his argument the second defense counsel said:

First of all, I remind you again, that the defendants, and his Honor will instruct you, that the defendants have no duty to prove themselves innocent. Furthermore, they have no duty to make any disclosures to the government and, furthermore, both Mr. Varn and I follow the practice when a lawyer is employed he tries to take care of his client and his business.

In his final closing argument the prosecutor delivered the coup de grace:

[Defense counsel Varn] also knows that if he had Mr. Ervin [also defense counsel] had come forth with any explanation as to the increase in his income he is charged with in 1958, 1959 and 1960, and come up here and said, "we have $64,000 in 1950" and been able to substantiate that, there would never have been a case. And yet they have a right to stand on their Constitutional Rights and not to say anything. But would you do it? Would you do it, and wait and be indicted and come up here and go through this trial, and wonder if you were going to prison, and say nothing.

It is to these last remarks that the defense made the objection quoted by the majority. The court's response to the objection was, "The jury will be appropriately instructed as to the matter in the full Charges of the Court. Let's move on." Government counsel resumed, saying:

Mr. Varn is the one that brought that up and I think I have a right to reply to it. ⁵ I don't think that any of you would sit back and wait and be indicted before coming forth and giving a reasonable explanation. You will have to decide that. That is one of the things for you to decide. . . .

No "peculiar circumstances," no curative instructions, ⁶ no theories of waiver, invitation, or failure to object with precision (or to object at all), can make a silk purse of this sow's ear.

It is essential to distinguish between a defendant's Fifth Amendment privilege and the elements of the government's prima facie case set out in Holland v. United States [54-2 USTC ¶9714], 348 U. S. 121, 75 Sup. Ct. 127, 99 L. Ed. 150 (1954). In Holland the Supreme Court said that "once the government has established its case the defendant [in a net worth prosecution] remains quiet at his peril." Id. at 138-39, 75 Sup. Ct. at --, 99 L. Ed. at 166. This "failure to explain" relates to the proof the defendant may--or may not--adduce at the trial. It does not shrink the scope of the Fifth Amendment as it applies to pretrial investigation.

My reading of the record impels me to conclude that throughout the trial government counsel misconceived the interplay of the Holland principle and the Fifth Amendment. The government's position was not that Hayes, either personally or through his accountants or attorneys, waived his privilege against self-incrimination during the investigation. Nor was it that Hayes' testimony from the stand was so inconsistent with his prior exercise of the privilege as to permit the admission of evidence concerning that prior exercise for impeachment purposes. Compare Grunewald v. United States [57-1 USTC ¶9693], 353 U. S. 391, 77 Sup. Ct. 963, 1 L. Ed. 2d 931 (1957); United States v. Marcus [68-2 USTC ¶9599], 401 F. 2d 563 (2d Cir. 1968); petition for cert. filed, 4 Crim. Law Rep. 4140 (Jan. 8, 1969). ⁷ Rather, the government's position was that the taxpayer had a right during the investigation to stand on his privilege and not produce evidence or otherwise explain his increase in net worth, but that his exercise of the privilege coupled with his offering of an explanation for the first time at the trial was a substantive indication of guilt. ⁸ In short, the government used appellant's exercise of his Fifth Amendment privilege as an affirmative weapon to convict.

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

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

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

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

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

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

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

221 F. 2d at 341-42.

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

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

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

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

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

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

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

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

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

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

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

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

 

 

[61-1 USTC ¶9233] United States of America , Plaintiff-Appellee v. Edward J. Mesheski, Defendant-Appellant

(CA-7), U. S. Court of Appeals, 7th Circuit, No. 13087, 286 F2d 345, 1/30/61, Reversing Dist. Ct , 59-1 USTC ¶9370, 169 Fed. Supp. 372

[1954 Code Secs. 7201 and 7202 and similar 1939 Code Sec. 145(b)]

Sufficiency of indictment: Attempt to evade or defeat tax: Preparer of returns: Failure to file returns and diverting money to his own uses.--The defendant's reprehensible actions consisting of the preparation of returns; the receipt of payments from clients; the exhibition to his clients of his personal checks payable to the District Director of Internal Revenue, along with envelopes addressed to that official for the mailing of such checks; the issuance of receipts to clients; and his assurance to them that their tax obligations were discharged were all actions to hinder the detection of the strictly local crime of embezzlement and do not constitute such affirmative conduct as clearly and reasonably infers a motive to evade or defeat tax.

Edward G. Minor, Howard C. Equitz, Milwaukee , Wis. , for plaintiff. Philip G. Marshall, Milwaukee , Wis. , James E. Doyle, Madison , Wis. , for defendant.

Before KNOCH, and CASTLE, Circuit Judges, and PLATT, District Judge.

KNOCH, Circuit Judge:

Defendant was indicted in twenty counts charging him with the offense of knowingly and willfully attempting to evade and defeat the payment of taxes in violation of Section 145(b), Title 26, U. S. C., Internal Revenue Code of 1939, or of the comparable Section 7201, Title 26, U. S. C., Internal Revenue Code of 1954. ¹

The facts are not in dispute. Defendant was in the business of preparing tax returns for others and had been engaged in that business for some years. Having prepared the returns and having obtained money from the taxpayers for transmittal to the Director of Internal Revenue, he failed to file the returns and diverted the money to his own uses.

The District Court [59-1 USTC ¶9370] denied defendant's motion to dismiss the indictment on the ground that no count stated facts sufficient to constitute an offense against the United States .

The defendant waived jury trial. The District Court found him guilty. He was fined $1,000 and placed on probation for five years. Special conditions of probation were imposed. Defendant brought this appeal. He states the sole contested issue to be:

"Is a person who converts money entrusted to him by another for the payment of such other's income tax by failing to turn it over to the Internal Revenue Service guilty of a felony within the meaning of Section 145(b), Internal Revenue Code of 1939 or the comparable Section 7201, Internal Revenue Code of 1954?"

Defendant argues that the willful failure to file returns, submit information or pay taxes, is, at worst, a misdemeanor under Section 145(a) or the comparable Section 7203, but that defendant here has been improperly charged with a felony for mere passive failure to file returns and pay taxes. Thus, he contends, willful failure by the taxpayer himself would constitute a mere misdemeanor, but defendant's willful failure to file the same return is alleged to constitute a felony.

It is conceded by defendant that persons other than the taxpayer have been successfully prosecuted under the felony section. In these cases, however, the defendant had engaged in some such activity as preparing and filing fraudulent returns, or conspiring with the taxpayer by keeping fraudulent books or hiding assets. Tinkoff v. U. S., 7 Cir., 1936 [37-1 USTC ¶9057], 86 F. 2d 868; Maxfield v. U. S., 9 Cir., 1945 [46-1 USTC ¶9115], 152 F. 2d 593; U. S. v. Borgis, 7 Cir., 1950 [50-1 USTC ¶9330], 182 F. 2d 274.

Neither defendant nor the government has cited any published case directly in point. The parties are agreed that mere failure to file a return and pay a tax does not constitute a willful attempt to evade or defeat the tax. There must be something more, some affirmative positive act to attempt to defeat or evade the tax. Spies v. U. S. [43-1 USTC ¶9243], 317 U. S. 492, 500 (1943); U. S. v. Bardin, 7 Cir., 1955 [55-1 USTC ¶9488], 224 F. 2d 255, 260; Bridgeforth v. U. S., 6 Cir., 1956 [56-1 USTC ¶9530], 233 F. 2d 451, 453.

The government argues that defendant did such additional affirmative acts as must render him guilty of a felony. It is asserted that he prepared the returns and received payment from the taxpayers in cash or in checks payable to his order. He then prepared his own checks payable to the District Director of Internal Revenue, and envelopes addressed to that official, which he exhibited to the taxpayers, who were also given receipts and assured that their tax obligations were discharged. Thus defendant forestalled investigation by the taxpayers who would not thereafter be expected to receive either their cancelled checks or receipts from the District Director.

After careful and extended consideration, this Court has concluded that the defendant's reprehensible actions, designed to hinder detection of the strictly local crime of embezzlement, do not constitute such affirmative conduct as clearly and reasonably infers a motive to evade or defeat tax.

The judgment of the Court below is therefore reversed.

¹ The pertinent sections read:

"§145. Penalties.

(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.

(b) Failure to collect and pay over tax, or attempt to defeat or evade tax. Any person required under this chapter to collect, account for, and pay over any tax imposed by this chapter, who willfully fails to collect or truthfully account for and pay over such tax, and any person who willfully attempts in any manner to evade or defeat any tax imposed by this chapter or the payment thereof, shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, be fined not more than $10,000, or imprisoned for not more than five years or both, together with the costs of prosecution." I. R. C. 1939.

"§7201. Attempt to evade or defeat tax.

Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $10,000, or imprisoned not more than 5 years, or both, together with the costs of prosecution. * * *

§7203. Willful failure to file return, supply information or pay tax.

Any person required under this title to pay any estimated tax or tax, or required by this title or by regulations made under authority thereof to make a return (other than a return required under authority of section 6015 or section 6016), keep any records, or supply any information, who willfully fails to pay such estimated tax or tax, make such return, 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, shall be fined not more than $10,000, or imprisoned not more than 1 year, or both, together with the costs of prosecution." I. R. C. 1954.

 

 

[59-1 USTC ¶9370] United States of America , Plaintiff v. Edward J. Mesheski, Defendant

U. S. District Court, East. Dist. of Wis., No. 58-CR-142, 169 FSupp 372, 1/22/59

[1939 Code Sec. 145(b)--similar to 1954 Code Secs. 7201 and 7202; 1954 Code Secs. 7201 and 7202]

Sufficiency of indictment: Attempt to evade payment of taxes.--An indictment was sufficient in which it was charged that the defendant, having prepared income tax returns for others and collected money from them for payment of the taxes, did knowingly and willfully attempt to evade payment of taxes by failing to file the returns, failing to pay the taxes and wrongfully diverting the money to other uses. Motion to dismiss the indictment was denied.

Edward G. Minor, United States Attorney, Francis L. McElligott, Assistant United States Attorney, Milwaukee, Wis., for plaintiff. Philip G. Marshall, Milwaukee , Wis. , for defendant.

Decision

GRUBB, District Judge:

This case involves a twenty-count indictment charging that defendant was employed to prepare income tax returns for others and to transmit money in payment of taxes. It charges that, having prepared the returns and obtained the money for transmittal to the Director of Internal Revenue, defendant did knowingly and willfully attempt to evade and defeat the payment of taxes by failing to file the returns, by failing to pay the taxes, and by wrongfully diverting the money to other uses and purposes not authorized by the various persons, thereby defrauding the United States, in violation of Section 145(b), Internal Revenue Code of 1939 as to some counts, and Section 7201, Internal Revenue Code of 1954 as to others.

Defendant has moved that the indictment be dismissed on the ground that "Each and every count of the Indictment fails to state facts sufficient to constitute an offense against the United States ."

Defendant relies principally on three cases.

Spies v. United States , 317 U. S. 492 (1942) [43-1 USTC ¶9243]. In that case, the court, speaking through Mr. Justice Jackson, analyzes at some length the difference between Section 145(a), which makes willful failure to pay a tax or make a return a misdemeanor, and Section 145(b) which makes willful attempt to defeat or evade a tax a felony. During the course of that opinion the court points out that "Willful but passive neglect of the statutory duty may constitute the lesser offense, but to combine with it a willful and positive attempt to evade tax in any manner or to defeat it by any means lifts the offense to the degree of felony." The court illustrates that willful attempt may be inferred from conduct such as keeping a double set of books, making false entries or alterations, or false invoices or documents, destruction of books or records, concealment of assets or covering up sources of income, handling of one's affairs to avoid making the records usual in transactions of the kind, and any conduct, the likely effect of which would be to mislead or to conceal.

The Court of Appeals for the Seventh Circuit in United States v. Bardin, 224 Fed. (2d) 255 [55-1 USTC ¶9488], discusses and analyzes the problem and quotes from the Spies case:

`If the tax-evasion motive plays any part in such conduct the offense may be made out even though the conduct may also serve other purposes such as concealment of other crime.'"

In Bridgeforth v. United States , 233 Fed. (2d) 451 (C. A. 6) [56-1 USTC ¶9530], the court sets aside the conviction on one count for failure of proof.

For the purpose of this motion the court must assume that the government will have proof of the matters set forth in the indictment.

These cases deal with attempts to evade and defeat taxes and the payment thereof by concealment of income and by the filing of false and fraudulent returns. In such instances a conviction under the felony statute must be supported by proof of positive acts and cannot rest on a showing of mere failure to file a return and failure to pay the tax.

The language of the statutes does not suggest that such conduct is the only manner of violation contemplated. Failure to file a return, failure to pay over money entrusted to one for the purpose of paying another's tax, and diversion of such funds if proven would, in the court's opinion, constitute another mode of a willful attempt to evade or defeat the tax or the payment thereof.

It is the opinion of the court that if the allegations in the indictment are established, a jury could find a willful and positive attempt to violate the statutes named in the indictment.

Defendant's motion to dismiss the indictment is hereby denied.

 

 

[76-1 USTC ¶9215] United States of America , Appellee v. Franklin L. McNulty, Appellant

(CA-9), U. S. Court of Appeals, 9th Circuit, No. 75-1949, 528 F2d 1223, 1/21/76, Aff'g unreported District Court decision

[Code Sec. 7201]

Criminal penalties: Tax evasion: Failure to report income: Attempt to conceal taxable income: Sufficiency of indictment.--Taxpayer's conviction for willfully attempting to evade taxes by concealing his Irish Sweepstakes winnings of approximately $130,000 in a foreign bank account was affirmed on appeal. The indictment properly charged this as felony, not a misdemeanor, and the taxpayer made no request for a jury instruction on any misdemeanor as a lesser included offense.

Richard Sidman, United States Attorney, San Francisco , Calif. , for appellee. Stephen J. Heiser, Singer & Ousterhoudt, San Francisco , Calif. , for appellant.

Before KOELSCH and CHOY, Circuit Judges, and ANDERSON, ^* District Judge.

Opinion

ANDERSON, District Judge:

Appellant, an Irish Hospital Sweepstakes winner, set for himself and successfully navigated a firm course leading to the shoals and rocks of a guilty verdict.

Prosecution was under a single count indictment charging appellant with willfully attempting to evade and defeat a tax on income received during 1973, and the payment thereof by concealing or attempting to conceal his true income, in violation of 26 U. S. C. 7201. ¹ The conviction is affirmed.

In March of 1973 McNulty was advised of his good fortune and confided in several friends that he did not intend to pay any income tax on his winnings. On three occasions McNulty consulted I. R. S. personnel with regard to his tax liability on estimated winnings of $130,000.00. On each occasion he was advised of the approximate tax liability and that leaving the money in Ireland would not eliminate his accountability and the tax. In late May, 1973, McNulty traveled to Ireland, picked up his winnings and then stopped at St. Helier in the Channel Islands and deposited approximately $125,000.00 and brought $3,000.00 back with him to the United States. Prior to and at the time of the deposit McNulty knew that the Channel Islands had strict laws forbidding disclosure of deposits made by citizens of the United States and this included nondisclosure to the I. R. S. McNulty did not file a return or pay a tax on his winnings. The return and payment were due April 15, 1974.

In spite of warnings and advice from three lower echelon I. R. S. representatives, his own attorney, and several friends, received at varying times as his voyage progressed, McNulty devised and pursued his course of action.

McNulty attempts to raise a number of issues on appeal, none of which were presented in the district court and reserved for appellate review. We have carefully examined the entire record and find no exceptional circumstances justifying invocation of the "plain error" rule. Rule 52(b), Fed. Rules Cr. Proc. , United States v. Sheley, 447 F. 2d 455 (9th Cir. 1971), cert. denied, 404 U. S. 1022 (1972). In point of fact and law, there is no error.

The only point preserved for review in this Court is appellant's assertion that the indictment "charges basically a misdemeanor." The indictment in apt and sufficient language charges the felony proscribed by 26 U. S. C. 7201. It charges with particularity the times, the amounts, and the method and manner by which McNulty sought to "willfully and knowingly attempt to evade and defeat said income tax . . ., and the payment thereof, by failing to make such individual income tax return, . . . and by failing to pay [the tax] . . . and by concealing and attempting to conceal from . . . officers of the United States his true and correct taxable income for the calendar year 1973." McNulty relies on Spies v. United States [43-1 USTC ¶9243], 317 U. S. 492, 498-500, 63 S. Ct. 364, 87 L. Ed. 418 (1943). There is more here than in Spies. In the present case the appellant did not file a return or pay a tax and also made the foreign deposit with full knowledge of the strict non-disclosure laws. At the very least, there was a willful attempt to conceal and thus to evade. There was sufficient allegation and proof of some affirmative act rather than only the mere omission to file and to pay. United States v. Spies, supra. The jury was fully and correctly instructed in this regard. McNulty did not object to the instructions as given and made no request for an instruction on the misdemeanor as a lesser included offense, 26 U. S. C. 7203. ²

McNulty's argument that disclosure of his winnings to lower echelon I. R. S. employees completely destroys the concealment or attempted concealment is specious and totally without merit on the facts here. It goes under the guise of honest disclosure, but in truth is based on active deception.

AFFIRMED.

^* Honorable J. Blaine Anderson, United States District Judge, District of Idaho, sitting by designation.

¹ "§7201. Attempt to evade or defeat tax.

Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $10,000, or imprisoned not more than 5 years, or both, together with the costs of prosecution."

² "§7203. Willful failure to file return, supply information, or pay tax.

Any person required under this title to pay ay estimated tax or tax, or required by this or by regulations made under authority thereof to make a return (other than a return required under authority of section 6015), keep any records, or supply any information, who willfully fails to pay such estimated tax or tax, make such return, 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, shall be fined not more than $10,000, or imprisoned not more than 1 year, or both, together with the costs of prosecution."

 

 

[55-1 USTC ¶49,074]Will Parks Clay, Walter Jolly, Andrew B. Turk and Andrew Morris, Appellants v. United States of America , Appellee

(CA-5), In the United States Court of Appeals for the Fifth Circuit, No. 15060, 218 F2d 483, January 12, 1955

Appeal from the United States District Court for the Middle District of Georgia.

[1939 Code Sec. 2707(c)--corresponding to 1954 Code Sec. 7201]

Penalties: Willful attempt to evade or defeat tax: Sufficiency of indictment.--Commission of a felony requires some affirmative act. Hence, where the indictment against the appellants charged only that there was a willful failure to pay the tax (occupational tax on wagering), an offense punishable as a misdemeanor, it did not sufficiently charge the felonious offense of willfully attempted tax evasion for which appellants were convicted under 1939 Code Sec. 2707(c).

T. Reese Watkins, Macon, Ga., T. A. Jacobs, Jr., Macon, Ga., Paul M. Conaway, Macon, Ga., for appellants. Joseph H. Davis, Assistant United States Attorney, Macon, Ga., Frank O. Evans, United States Attorney, Macon, Ga., for appellee.

Before HUTCHESON, Chief Judge, and HOLMES and RUSSELL, Circuit Judges.

PER CURIAM:

The appellants were convicted of willfully attempting to evade the wagering occupational tax imposed by §3290 of the Internal Revenue Code ¹ on persons engaged in the business of accepting wagers, in violation of §2707(c) of the Code, as made applicable by §3294(c) thereof. It was stipulated that the tax was not paid, and, although appellants contend otherwise, the evidence ² was sufficient to warrant a finding by the jury that appellants were liable for the payment of the tax and willfully failed to pay it. As grounds for reversal of this conviction, appellants contend: (1) that the indictment should have been dismissed because (a) it did not sufficiently charge the felonious offense of attempted evasion and (b) the venue of the offense sought to be charged was in the Northern District of Georgia, where the tax was supposed to have been paid; (2) the court erred in overruling their motion for a bill of particulars; (3) the evidence did not authorize a conviction, and (4) the court erred in instructing the jury that if it found appellants were liable for the tax and willfully failed to pay it, verdicts of guilty would be authorized.

Reference to the applicable statutes disclose that any person who is engaged in the business of accepting wagers is liable for payment of the special occupational tax. The failure to such person to pay the tax gives rise to the penal provisions of the law, the severity of which is dependent upon the nature of the offense committed. Thus, the mere failure to pay the tax is punishable by a fine of not more than $5,000; ³ the willful failure to pay is punishable as a misdemeanor, ⁴ and the willful attempt to "in any manner" evade payment of the tax is punishable as a felony. ⁵

[Requisites of a Felony Violation]

The record evidences an attempt by appellee to test its theory that it can "make out a felony violation . . . in a 'failure to pay' situation." The government concedes, as it must, that allegation and proof of liability for the occupational tax, coupled with a failure to pay it, is not sufficient to constitute a felony violation, but, in addition, there must be some affirmative act on the part of the defendant showing an attempt to evade the imposition of the tax. Relying upon Spies v. United States, 317 U. S. 492 [43-1 USTC ¶9243], it urges that any conduct on the part of the defendant, the likely effect of which would be to mislead or conceal, is sufficient to convert what would otherwise be a misdemeanor into a felony violation. In the Spies case, the question was whether proof that a taxpayer willfully failed to file an income tax return and to pay the tax in violation of §145(a) of the Internal Revenue Code, was sufficient to sustain a conviction of attempting to evade income tax in violation of §145(b) of the Code. ⁶ The court held that the felony statute, §145(b), was not violated by willful omissions to make a return and to pay the tax. This holding was based upon consideration of the statutory scheme as a whole, which lead to the conclusion that "[w]illful but passive neglect of the statutory duty may constitute the lesser offense, but to combine it with a willful and positive attempt to evade tax in any manner or to defeat it by any means lifts the offense to the degree of a felony."

Appellee urges that this test is met by the indictment because it alleges both acts of commission and omission, in that it alleges that the business was carried on and that the tax was not paid. Aside from the fact that this contention is entirely inconsistent with the concession alluded to above, acceptance of it would render §2707(b) meaningless, since every willful failure to pay the tax would constitute a felony, there being no duty to pay the tax unless a wagering business is being conducted. In other words, under the theory espoused by appellee, the same allegations and proof necessary to sustain a misdemeanor conviction would sustain a felony conviction if the pleader alleged an attempt to evade rather than a failure to pay. This contention will not do. The teaching of the Spies case is that in order to sustain a conviction under the felony statute something more than a violation of the misdemeanor statute must be shown, some conduct, "the likely effect of which would be to mislead or conceal."

[Indictment Insufficient to Support Conviction for Willful Attempt to Evade Tax]

All that is alleged in the indictment is that appellants were engaged in the business of accepting wagers without having paid the occupational tax. In the absence of additional facts, the conclusion of the pleader that this was done as a willful attempt to evade payment of the tax adds nothing to the indictment. Alabama Packing Co. v. United States , 167 Fed. (2d) 179. An indictment, to be valid, must contain a plain, concise and definite statement of the essential facts constituting the offense intended to be charged. It is not necessary for the pleader to allege mere matters of evidence, but sufficient facts must be alleged to apprise the accused of the crime charged against him with such certainty as will enable him to make his defense and avail himself of a conviction or acquittal for protection against another prosecution for the same offense. It is fundamental that every essential ingredient of the offense must be alleged with precision and certainty. The present indictment does not meet these tests because it lacks the essential ingredient which "lifts the offense to the degree of a felony". Spies v. United States , 317 U. S. 492, 499 [43-1 USTC ¶9243]. Clearly, all that is charged by the indictment is a willful failure to pay the tax, an offense punishable as a misdemeanor. The addition of mere legal conclusions, unaided by essential allegations of fact to support them will not supply this ingredient. The trial court should have granted the motion to dismiss the indictment.

In view of this conclusion, it becomes unnecessary for us to consider the other points urged by appellants.

The judgment is reversed and the cause is remanded for further proceedings consistent with this opinion.

Judge Russell sat during the argument of this case and took part in its decision; due to illness, however, he did not participate in the preparation of the opinion.

¹ Internal Revenue Code of 1939, as amended, Title 26, U. S. C.

² The appellants were arrested on July 8, 1953, at a building known as 3760 Napier Avenue in Macon , Georgia . The building, which served Clay as a combination residence and loan office, had been under the surveillance of the arresting officers for several days. The officers had observed the various appellants paying short visits to the building between the hours of 11:00 o'clock, A. M., and 2:00 o'clock, P. M. on the several days they had kept watch. When the officers entered the building, Clay and Jolly were there. Jolly attempted to leave when the officers entered but was detained. Morris and Turk arrived and entered the building while the officers were there. When Turk saw the officers, he turned to leave, but he, too, was detained. Jolly, Morris and Tuck each had in his possession a number of "original" lottery tickets which are usually turned in to the "banker" before 2:30 o'clock, P. M. on days the lottery is being operated. Jolly and Turk admitted to the officers that they had come to "turn in." Turk admitted also that he worked for Clay and that he was in the "bug business," a term by which the lottery is sometimes called. A search of the premises disclosed 32 blank, and one partially used, lottery books in an open safe, lottery numbers written on the wall by the telephone and on scraps of paper in the waste basket, a sizeable sum of money in change and small bills and a great number of coin wrappers and money bags. Clay had four lottery tickets in his pocket. The numerical symbol on those tickets corresponded with a similar symbol contained on the lottery books found in the safe. One of the tickets taken from his pocket had the name "Turk" on it. At least three of the appellants admitted that they had been in the lottery business prior to the effective date of the statute and Clay had been informed by Revenue Agents at an earlier date that he was liable for payment of the tax if he was engaged in the gambling business.

³ 26 U. S. C. A. §3294(a).

⁴ 26 U. S. C. A. §2707(b).

⁵ 26 U. S. C. A. §2707(c).

⁶ §§ 145(a) and (b) are substantially identical to §§ 2707(b) and (c), except that they relate to offenses having to do with income tax.

 

 

[97-1 USTC ¶50,129] United States of America v. Kurt Washington, Defendant

U.S. District Court, So. Dist. N.Y., 96 Cr. 528 (JGK), 11/15/96, 947 FSupp 87, 947 FSupp 87

[Code Sec. 7203 ]

Crimes: Tax evasion: Government witnesses: Production of names and addresses: Intimidation of witnesses.--The government was not required to produce the names and addresses of its witnesses sought by a city housing police officer who was charged with tax evasion for failing to file tax returns and pay tax on his wages. The government's need to conceal the names and addresses outweighed the officer's need to know that information prior to trial. There was a risk of intimidation and harassment of the witnesses if their names or addresses were disclosed because, in the past, the officer had sent threatening letters to IRS employees. Also, the trial was expected to be relatively short, and there were only a small number of witnesses. As a result, the officer was not substantially hampered in preparing for trial by the nondisclosure.

[Code Secs. 6151 and 7203 ]

Crimes: Tax evasion: Jurisdiction: Sufficiency of indictment: Time and place for payment of tax: Notice and demand.--An indictment against a city housing police officer for tax evasion was not dismissed based on the officer's argument that Code Sec. 7201 was unenforceable in the absence of implementing regulations. Code Sec. 7201 fully defines the criminal conduct that it prohibits and does not need regulations. Furthermore, the indictment was not dismissed on the ground that the income tax is voluntary and cannot be enforced through criminal penalties. Congress specifically imposed on individuals the duty to file returns and pay taxes. The court also had jurisdiction over the officer's case, and the IRS was not required to provide the officer with notice or an assessment of the taxes due.

Rob ert J. Cramer, Assistant United States Attorney, New York, N.Y. 10007, for U.S. Jerry D. Bernstein, Gold & Wachtel, 110 E. 59th St., New York, N.Y. 10022, for defendant.

MEMORANDUM OPINION AND ORDER

KOELTL, District Judge:

Defendant Kurt Washington, a New York City Housing Police Officer, is charged with two counts of tax evasion in violation of 26 U.S.C. §7201. The Indictment alleges that the defendant failed to pay taxes on his gross income of approximately $48,819 in 1994 and $53,492 in 1995.

The defendant now moves to compel production of the names and addresses of the Government's witnesses, to strike surplusage from the Indictment, and to dismiss the Indictment. On November 8, 1996, the Court heard oral argument. For the reasons stated below, the defendant's motions are denied.

I.

The defendant first argues for production of the names and addresses of individuals the Government intends to call as witnesses at trial. A defendant is not automatically entitled as a matter of right or under the Federal Rules of Criminal Procedure to a list of the names and addresses of the Government's witnesses prior to trial. See United States v. Bejasa, 904 F.2d 137, 139 (2d Cir.), cert. denied, 498 U.S. 921 (1990); United States v. Turkish, 458 F. Supp. 874, 881 (S.D.N.Y. 1978). However, it is well-established that district courts have the discretionary authority to order pretrial disclosure of the identity of the Government's witnesses. See United States v. Cannone, 528 F.2d 296, 300 (2d Cir. 1975); see also Bejasa, 904 F.2d at 139; United States v. Shoher, 555 F. Supp. 346, 353 (S.D.N.Y. 1983). "The most potent argument for compulsory disclosure of the identity of the prosecution's witnesses is that, without the benefit of such disclosure, the defense may be substantially hampered in its preparation for trial." Cannone, 528 F.2d at 301. "[A]n abstract, conclusory claim" by a defendant that such disclosure is necessary is not sufficient. Id. at 302. Whether a defendant has made a specific showing of need is measured by the following factors:

(1) Did the offense alleged in the indictment involve a crime of violence? (2) Have the defendants been arrested or convicted for crimes involving violence? (3) Will the evidence in the case largely consist of testimony relating to documents (which by their nature are not easily altered)? (4) Is there a realistic possibility that supplying the witnesses' names prior to trial will increase the likelihood that the prosecution's witnesses will not appear at trial, or will be unwilling to testify at trial? (5) Does the indictment allege offenses occurring over an extended period of time, making preparation of the defendants' defense complex and difficult? (6) Do the defendants have limited funds with which to investigate and prepare their defense?

Turkish, 458 F. Supp. at 881. A court should balance a defendant's specific showing of need for disclosure against a specific showing of need for concealment by the Government. See Cannone, 528 F.2d at 301-02. For example, disclosure of the identity of the Government's witnesses prior to trial is not appropriate where there is a risk of intimidation of witnesses, subornation of perjury, or actual injury to witnesses. See id. at 301. In sum, there must be "a specific showing that disclosure was both material to the preparation of [the] defense and reasonable in light of the circumstances surrounding [the] case." Bejasa, 904 F.2d at 139-40 (quoting United States v. Cannone, 528 F.2d 296, 300 (2d Cir. 1975)) (alteration in original).

The defendant contends that he has made a specific showing of need for disclosure of the names and addresses of the Government's witnesses prior to trial. He argues that he is charged with the non-violent crime of tax evasion, which is unrelated to his duties as a law enforcement officer; that he has never been arrested or convicted of any crime; that the case mainly involves documentary evidence that is within the Government's control; that he is accused of committing offenses over a period of more than two years; that he has extremely limited funds to devote to his defense; and that there is no basis for the suggestion that he is likely to attempt to intimidate or harass any potential witness or that any witness will become unable or unwilling to appear at trial.

However, the Government correctly argues that the difficulties in preparing the defense in Turkish that persuaded the court to order disclosure of the Government's witnesses prior to trial are not present in this case. In Turkish, five defendants were charged with a complex conspiracy to create fraudulent losses for an oil company through rigged commodity futures transactions and to manipulate contract prices on the crude oil market. See Turkish, 458 F. Supp. at 876. There were approximately 25,000 relevant documents, and numerous potential witnesses who traded in the crude oil market. See id. at 881. In contrast, this case involves two counts of tax evasion that are based on a single defendant's failure to file tax returns and to pay taxes on his wages. The trial is expected to last no more than a few days, and there are approximately 200 relevant documents and a small number of potential witnesses. The defendant thus will not be substantially hampered in preparing for trial by the continued failure to disclose the names and addresses of the Government's witnesses. This is also a case where any necessary continuances will not work any undue hardship in view of the brief length of the trial.

Furthermore, the Government persuasively argues that there is a strong likelihood that, based on the defendant's past conduct, intimidation or harassment of potential witnesses may occur if their names or addresses are disclosed prior to trial. The defendant has sent threatening letters to employees of the Internal Revenue Service in the past, accusing them of fraud, attempted extortion, and terrorist attacks against him, claiming that civil and criminal actions had been instigated against them, and stating that they may be held personally accountable for their actions. (Gov't Exs. A & B.) The Government also explains that there is evidence that the defendant has worked with others in connection with his harassing correspondence. There is therefore further risk of harassment or intimidation of witnesses from various sources if the witnesses' names and addresses are disclosed.

The Government has, however, undertaken to provide to the defendant the name of the revenue agent from the Internal Revenue Service who will prepare a summary report and will testify as a witness at trial. The Government has not yet designated such agent, but will provide the agent's name and report to the defendant by November 15, 1996.

Accordingly, because the Government's need for concealment of the names and addresses of its witnesses (with the exception of the revenue agent witness discussed above) outweighs any need of the defendant for that information prior to trial, the defendant's motion for disclosure is denied.

II.

The defendant also moves pursuant to Fed. R. Crim. P. 7(d) to strike the words "by various means, including, among other things" from the Indictment as prejudicial surplusage. "A motion to strike surplusage will be granted only where it is clear that the allegations are not relevant to the crime charged, and are inflammatory and prejudicial." United States v. DePalma, 461 F. Supp. 778, 797 (S.D.N.Y. 1978); see also United States v. Ianniello, 621 F. Supp. 1455, 1479 (S.D.N.Y. 1985); United States v. DeFabritus [85-2 USTC ¶9844], 605 F. Supp. 1538, 1546 (S.D.N.Y. 1985); United States v. Klein [54-2 USTC ¶9604], 124 F. Supp. 476, 479-80 (S.D.N.Y. 1954), aff'd [57-2 USTC ¶9912], 247 F.2d 908 (2d Cir. 1957), cert. denied, 355 U.S. 924 (1958). When a charging paragraph of an indictment, which presents the matter upon which the grand jury based its accusations against a defendant, contains surplusage that "adds nothing to the charges, gives the defendant no further information with respect to them, and creates the danger that the prosecutor at trial may impermissibly enlarge the charges contained in the Indictment returned by the grand jury," the language must be stricken. DePalma, 461 F. Supp. at 798-99; cf. DeFabritus [85-2 USTC ¶9844], 605 F. Supp. at 1547 (striking the words "among other things" from the indictment "where they serve no useful purpose and allow the jury to draw the inference that the defendant is accused of crimes not charged in the indictment"). But when a means paragraph, which refers to the matter of proof to sustain the charges, contains surplusage, a court should not strike the language. See DePalma, 461 F. Supp. at 799 ("Accordingly, the phrase 'and other activities' or 'among the means' when contained [in the means paragraph] can be equated to allegations of overt acts in a conspiracy charge where the Government is not required to set forth all the acts relied upon to effectuate the conspiracy.").

In this case, the words "by various means, including, among other things" are clearly in the means portion of the Indictment. Moreover, they do not infer that the defendant is accused of crimes not charged in the Indictment.

In the alternative, the defendant moves to compel the Government "to set out in detail what, if anything, the additional 'means' are." However, this request is "denied because the manner or means by which a crime is carried out constitutes evidentiary matter, not ultimate facts, which the government is not required to produce...." United States v. Boneparth, 52 F.R.D. 544, 545 (S.D.N.Y. 1971); see also United States v. Cephas, 937 F.2d 816, 823 (2d Cir. 1991) ("[T]he government need not particularize all of its evidence."); United States v. Gottlieb, 493 F.2d 987, 994 (2d Cir. 1974) ("The government was not required to disclose its evidence in advance of trial."). The defendant has ample notice from the detailed indictment of the charges against him to allow him to prepare for trial, avoid surprise, and preclude double jeopardy. To the extent that this alternative request is a request for a bill particulars, it is denied because there is no showing sufficient to require such particulars. See United States v. Torres, 901 F.2d 205, 234 (2d Cir.), cert. denied, 498 U.S. 906 (1990); United States v. Gonzalez, No. 93 CR 960, 1994 WL 689065, *2 (S.D.N.Y. Dec. 8, 1994).

Accordingly, the defendant's motion to strike the words "by various means, including, among other things" is denied. The defendant's alternative request to compel the Government to set out the additional means is also denied.

III.

The defendant moves to dismiss the Indictment on five grounds. First, the defendant argues that the Indictment must be dismissed because 26 U.S.C. §7201 is unenforceable as a matter of law in the absence of implementing regulations. However, the statute at issue in this case, the Internal Revenue Code, fully defines the criminal conduct it prohibits and therefore does not contemplate that regulations will be promulgated to define further substantive obligations beyond those created by the Code. See United States v. Hicks [91-2 USTC ¶50,404; 91-2 USTC ¶50,549], 947 F.2d 1356, 1360 (9th Cir. 1991) ("It is the tax code itself, without reference to regulations, that imposes the duty to file a tax return."); United States v. Bowers [90-2 USTC ¶50,588], 920 F.2d 220, 222 (4th Cir. 1990) ("However, the [defendants] simply have evaded income taxes, and their duty to pay those taxes is manifest on the face of the statutes, without any resort to IRS rules, forms, or regulations."). The cases cited by the defendant that discuss the necessity of implementing regulations all involve statutes that do not fully define prohibited criminal acts. See, e.g., United States v. Mersky, 361 U.S. 431 (1960) (Tariff Act of 1930); California Bankers Assoc. v. Shultz [74-1 USTC ¶9318], 416 U.S. 21 (1974) (Bank Secrecy Act of 1970). Accordingly, the enforcement of 26 U.S.C. §7201 does not require implementing regulations.

Second, the defendant contends that the Indictment must be dismissed because the income tax is voluntary and cannot be enforced through criminal penalties. However, Congress specifically imposed on individuals a duty to file income tax returns and to pay taxes. See 26 U.S.C. §6012; see also Hicks [91-2 USTC ¶50,404; 91-2 USTC ¶50,549], 947 F.2d at 1360; Bowers [90-2 USTC ¶50,588], 920 F.2d at 222; United States v. Drefke [83-1 USTC ¶9354], 707 F.2d 978, 981 (8th Cir.), cert. denied sub nom. Jameson v. United States , 464 U.S. 942 (1983). "[A]lthough Treasury regulations establish voluntary compliance as the general method of income tax collection, Congress gave the Secretary of the Treasury the power to enforce the income tax laws through involuntary collection.... The IRS' efforts to obtain compliance with the tax laws are entirely proper." United States v. Tedder [86-1 USTC ¶9426], 787 F.2d 540, 542 (10th Cir. 1986), cert. denied, 500 U.S. 920 (1991); see also United States v. Hurd [77-1 USTC ¶9155], 549 F.2d 118, 120 (9th Cir. 1977) ("The court was also correct in rejecting the defendant's proffered evidence to the effect that the system of taxation was based on voluntary compliance.").

Third, the defendant asserts that the Indictment must be dismissed because the court lacks jurisdiction over this case. However, pursuant to 18 U.S.C. §3231, district courts have original jurisdiction over "all offenses against the laws of the United States ," which includes violations of the Internal Revenue Code. See United States v. Collins [91-2 USTC ¶50,554], 920 F.2d 619, 629 (10th Cir. 1990); United States v. Studley [86-1 USTC ¶9390], 783 F.2d 934, 937 (9th Cir. 1986); United States v. Koliboski [85-1 USTC ¶9251], 732 F.2d 1328, 1329-30 (7th Cir. 1985); United States v. Przybyla [85-1 USTC ¶9202], 737 F.2d 828, 829 (9th Cir. 1984), cert. denied, 471 U.S. 1099 (1985); United States v. Isenhower [85-1 USTC ¶9226], 754 F.2 489, 490 (3rd Cir. 1984); Drefke [83-1 USTC ¶9354], 707 F.2d at 981.

Fourth, the defendant argues that the Indictment must be dismissed because the IRS has failed to provide the defendant with notice or an assessment of the taxes due. However, the Internal Revenue Code imposes on the IRS no such requirement and instead requires individuals to pay taxes owed to the United States "without assessment or notice and demand from the Secretary." 26 U.S.C. §6151; see also United States v. Hogan [88-2 USTC ¶9593], 861 F.2d 312, 315-16 (1st Cir. 1988) ("In this case, where the government found a 'tax due and owing,' no formal assessment was necessary."); United States v. Latham [85-1 USTC ¶9180], 754 F.2d 747, 750 (7th Cir. 1985) (finding that the lower court did not err "in refusing to instruct the jury that an assessment under 26 U.S.C. §6201 is a legal necessity before an individual can have an income tax liability"); United States v. Voorhies [81-2 USTC ¶9710], 658 F.2d 710, 714 (9th Cir. 1981) ("The filing of an admin istrative assessment record is not required before a criminal prosecution may be instituted under 26 U.S.C. §§7201-07 (1976) for failure to report or pay income tax.").

Finally, the defendant contends that the Indictment must be dismissed because "KURT WASHINGTON," spelled out in capital letters, is a fictitious name used by the Government to tax him improperly as a business, and that the correct spelling and presentation of his name is "Kurt Washington." This contention is baseless.

Accordingly, because the defendant's arguments in support of his motion to dismiss the Indictment are without merit, the motion is denied.

CONCLUSION

For the reasons stated above, the defendant's motion to compel production of the names and addresses of Government witnesses, motion to strike surplusage from the Indictment, and motion to dismiss the Indictment are denied.

SO ORDERED.

 

 

[54-1 USTC ¶9271] United States of America v. Louis S. Bahcall

In the United States District Court for the Northern District of Illinois, 53 CR 181, 116 FSupp 869, September 14, 1953

Penalties: Defenses.--An indictment charging evasion of income taxes due and owing by a corporation was not fatally defective where it failed to (1) specify defendant's specific capacity, relationship or connection with the corporation, (2) state the means whereby the defendant attempted to evade or defeat income tax, and (3) allege the particular means employed in the attempt to evade income tax. The indictment was sufficient against a motion to dismiss if it charged, among other things, the concealment of the defendant's true gross income and net income for a specified year. Also, an indictment charging the filing of a return showing income less than that actually received was properly drawn under the statute punishing a wilful attempt to evade tax.

Rob ert J. Downing, 141 West Jackson Boulevard , Chicago 4, Ill. , for defendant. Otto Kerner, Jr., United States Attorney, United States Court House, Chicago 4, Ill., for plaintiff.

Memorandum

HOFFMAN, District Judge:

The defendant, Louis S. Bahcall, has moved to dismiss the indictment in this case, which involves alleged evasion of income taxes due and owing by the Western Supply and Furnace Company, a corporation. The motion is based principally on the omission of the Government to specify in the indictment Bahcall's specific capacity, relationship or connection with the defendant corporation. Bahcall also alleges that the indictment is defective in that it does not allege sufficient facts to constitute an indictable offense by the individual defendant and that the indictment does not set forth sufficient facts to show the existence of all the elements which under Section 145(b) are necessary to constitute an indictable offense. The defendant avers further that the indictment is defective because it does not state the means by which he attempted to defeat and evade part of the tax due.

Subsection (b) was intended to cover any person who wilfully attempts to evade a tax. The statute undoubtedly was meant to cover not only derelict officers and employees but all others who attempt to evade taxes. It is therefore not essential that the capacity of the individual defendant be alleged. Certainly the omission of the characterization does not render the indictment fatally defective. United States v. Troy, 293 U. S. 58 [35-1 USTC ¶9002]; Locke v. United States, 166 Fed. (2d) 449 [48-1 USTC ¶9200].

As to the other grounds for dismissal raised by the defendant, reference is made to the case of Guzik v. United States, 54 Fed. (2d) 618 [1931 CCH ¶9681] (certiorari denied, 285 U. S. 545), where it was held that an indictment charging the filing of a return showing income less than that actually received was properly drawn under the statute punishing a wilful attempt to evade tax; and in Capone v. United States, 56 Fed. (2d) 927 [3 USTC ¶885], it was held that an indictment need not specify the means whereby the defendant attempted to evade or defeat income tax. Again, in United States v. Miro, 60 Fed. (2d) 58 [1932 CCH ¶9396], it was held that the particular means employed in an attempt to evade income tax need not be alleged in an indictment for such an offense. Also, in the case of United States v. Mangiaracina, 92 Fed. Supp. 96 [50-2 USTC ¶9467], it was held that an indictment charging, inter alia, the concealing of the defendant's true gross and net income for a specified year was sufficient against a motion to dismiss.

The motion of the defendant, Louis S. Bahcall, to dismiss the indictment is denied.

 

 

[3 USTC ¶885]Alphonse Capone, Appellant, v. The United States of America , Appellee

(CA-7), United States Circuit Court of Appeals for the Seventh Circuit, No. 4672. October Term, 1931, January Session, 1932, 56 F2d 927, Decided February 27, 1932

Appeal from the District Court of the United States for the Northern District of Illinois, Eastern Division.District Court's conviction on three counts, charging felonies of willfully attempting to evade and defeat income tax for 1925, 1926, and 1927, in violation of section 1114(b) of the 1926 Act, and on two counts, charging misdemeanors of failing to file returns for 1928 and 1929 in violation of section 146 of the 1928 Act, is sustained. The counts in the indictment were sufficiently particularized where they stated facts from which the court, as a matter of law could say that there was an income tax due from appellant to the Government. It was not necessary that the indictment specify the means by which he attempted to evade or defeat the payment of tax, inasmuch as the statute says that every attempt to evade or defeat the payment of income tax is a violation or law. The counts as to failure to file returns were not defective because each count avers that no return was made to the proper Collector of Internal Revenue, "or any other proper officer of the United States," the fact that the Collector is the only proper officer authorized to receive the return warranting the court in considering as surplusage the words quoted. Affirming District Court decision.

Michael J. Ahern and Albert Fink, both of Chicago , Ill. , for appellant. George E. Q. Johnson, U. S. Atty., Jacob I. Grossman, Samuel G. Clawson, and Dwight H. Green, Asst. U. S. Attys., all of Chicago, Ill., and William J. Froelich, Sp. Asst. to Atty. Gen. for appellee.

Before ALSCHULER, EVANS, and SPARKS , Circuit Judges.

This appeal is from a conviction on three counts which charge felonies of willfully attempting to evade and defeat income tax for the respective years 1925, 1926, and 1927, in violation of sec. 1114(b) ¹ of the Revenue Act of 1926, 44 Stat. 116 (26 USCA 1266); and on two counts which charge misdemeanors of failing to file returns for the respective years 1928 and 1929, in violation of sec. 146 ² of the Revenue Act of 1928, 45 Stat. 835 (26 USCA 2146(a)).

There were two indictments and they were consolidated and tried at the same time. The first contained but one count and charged a felony under sec. 1114(b), supra; the second indictment contained twenty-two counts, of which counts 13 and 18 charged misdemeanors under sec. 146, supra, and the other counts charged felonies under sec. 1114(b), supra. Appellant was found guilty of the felonies charged in counts 1, 5, and 9, and of misdemeanors charged in counts 13 and 18 of the second indictment. As to all other counts of that indictment, and also as to the charge in the first indictment, appellant was found not guilty.

Appellant's demurrer to each count of each indictment was overruled; and after verdict he filed a motion in arrest of judgment, which was also overruled. With the exception of the year involved and the amounts of income and tax referred to, the felony counts are identical. This is also true as to the counts charging misdemeanors, and, with the exception of jurisdictional facts, the substance of one count of each class is set forth in the margin. ³

SPARKS, Circuit Judge:

The errors relied upon in this appeal are that the court erred in overruling the demurrer to each count of the indictment upon which appellant was found guilty, and in overruling his motion in arrest of judgment as to each of said counts.

It is first contended by appellant that the demurrer and motion in arrest should each have been sustained as to the felony counts, because, as he insists, those counts charge the alleged offense in the generic terms of the statute, without specification of particulars; that is to say, he contends that in order to render the felony counts impervious to either the demurrer or the motion in arrest, the particular attempts to evade and defeat the tax upon which the Government relied for a conviction should have been pleaded with particularity.

The rights of appellant which give rise to the questions herein raised are derived from Articles V and VI of the Amendments to the Constitution of the United States , and in so far as they are applicable read as follows:

"Article V. * * * nor shall any person be subject for the same offense to be twice put in ieopardy of life or limb; * * *"

"Article VI. In all criminal prosecutions, the accused shall enjoy the right * * * to be informed of the nature and cause of the accusation; * * *"

One of the reasons for the adoption of the clause referred to in Article VI was to furnish a means of preventing a violation of the right guaranteed by the clause referred to in Article V.

In interpreting these constitutional provisions, courts have quite generally held that where the offense is purely statutory, having no relation to the common law, it is, as a general rule, sufficient in the indictment to charge the defendant with acts coming fully within the statutory description in the substantial words of the statute, without any further expansion of the matter; but it is also true that the accused must be apprised by the indictment, with reasonable certainty, of the nature of the accusation against him, to the end that he may prepare his defense and plead the judgment as a bar to any subsequent prosecution for the same offense. United States v. Simmons, 96 U. S. 360.

The cases are legion in which indictments have been attacked by the same methods and for the same reason as are now under discussion. In many such cases the indictments have been held bad and in many they have been held good as tested by the constitutional provisions above referred to, depending in each case upon the particular facts then before the court. The facts in each case, of course, were different, but in each case the question presented was the same--were the facts pleaded with such particularity as to apprise the accused of the nature of the crime with such certainty as to enable him to prepare his defense and to plead the judgment as a bar to any subsequent prosecution for the same offense? In some instances it was held that the indictments were sufficient which merely described the crime in the language of the statute, because the language of the statute described the crime with such particularity as to guarantee the constitutional rights above referred to. In other cases it was held that the indictments were bad which merely followed the language of the statute, not because of any hard and fast rule to that effect, but because the language of the particular statute then before the court did not describe the crime with sufficient particularity as to accord the defendant his constitutional rights above referred to.

Appellant relies largely upon the principles laid down in United States v. Cruikshank, 92 U. S. 542. The indictment in that case contained sixteen counts, the first eight of which charged defendants with having banded together with the unlawful and felonious intent to injure, oppress, threaten and intimidate two colored citizens of the United States, and with the further intent of thus hindering and preventing said colored citizens in their respective free exercise and enjoyment of their rights and privileges accorded them under the Federal Constitution. The next eight counts are a repetition of the first eight, except that instead of the words "banded together," the words "combined, conspired, and confederated together" are used. The court held that all counts except 5, 8, 13, and 18 referred to rights which were guaranteed, not by the Federal Constitution, but by the constitution of Louisiana , and for that reason no federal crime was charged in any of said counts. Counts 5, 8, 13, and 18 charged, in substance, that the intent was to hinder and prevent the two colored citizens in the free exercise and enjoyment of "every, each, all and singular" of the rights granted them by the Federal Constitution. There was no specification of any particular right, but the language was broad enough to cover all. The court said:

"According to the view we take of these counts, the question is not whether it is enough, in general, to describe a statutory offence in the language of the statute, but whether the offence has here been described at all. * * * It is an elementary principle of criminal pleading, that where the definition of an offence, * * * includes generic terms, it is not sufficient that the indictment shall charge the offence in the same generic terms as in the definition; but it must state the species,--it must descend to particulars."

As illustrative of this statement the court further said:

"It is a crime to stead goods and chattels; but an indictment would be bad that did not specify with some degree of certainty the articles stolen. * * * because the accused must be advised of the essential particulars of the charge against him, and the court must be able to decide whether the property taken was such as was the subject of larceny. So too, it is in some States a crime for two or more persons to conspire to cheat and defraud another out of his property; but * * * an indictment for such an offense must contain allegations setting forth the means proposed to be used to accomplish the purpose. * * * because, to make such a purpose criminal, the conspiracy must be to cheat and defraud in a mode made criminal by statute; and as all cheating and defrauding has not been made criminal, it is necessary for the indictment to state the means proposed, in order that the court may see that they are in fact illegal. * * * So here, the crime is made to consist in the unlawful combination with an intent to prevent the enjoyment of any right granted or secured by the Constitution * * *. All rights are not so granted or secured. Whether one is so or not is a question of law, to be decided by the court, not the prosecutor."

In other words, the court held that the right about to be violated should be particularized in order that the court might say, as a matter of law, whether such right was guaranteed by the Constitution.

It will be observed in that case that the court was dealing with a certain right which was threatened with violation, which right, although not specifically designated, was alleged to be guaranteed be the Federal Constitution to certain citizens named. The controversy in that case related only to the particularization of that right and not to the specific acts of defendants by which it was alleged that defendants had attempted to interfere with that right. Indeed, no complaint was made as to those allegations, although they were made in the most general terms.

In the instant case the right alleged to be violated is that of the Government to collect an income tax from appellant. Under the ruling of the Cruikshank case it was therefore necessary that the indictment should state facts from which the court, as a matter of law, could say that there was an income tax due from appellant to the Government, for all income is not taxable. The indictment is not deficient in this respect, for it states the total amount of appellant's income for the year in controversy; it sets forth the credit to which appellant is entitled; it describes his civil condition as that of a married man with one dependent, and informs him as to the exact amount of the tax due. From these allegations, therefore, the court could say that the tax was due and owing, and the error which rendered the Cruikshank indictment invalid was thus eliminated in the instant indictment.

But it is contended by appellant that the indictment should have specified the means by which he attempted to evade or defeat the payment of the tax. Neither the Cruikshank case nor any other case which we have been able to find supports this contention. In the Cruikshank case it was stated that all rights are not guaranteed by the Federal Constitution, and that therefore, as a matter of law, a charge of conspiracy to defeat a citizen's constitutional right must show that the right threatened is one conferred by the Constitution. In other words, if a certain right is excepted in the definition of the crime, facts must be pleaded to avoid the exception.

But in the instant case there are no exceptions, for the statute says that every attempt to evade or defeat the payment of income tax is a violation of law. What was a question of law in the Cruikshank case, by reason of existing exceptions, is in the instant case a question of fact for the jury because of the absence of exceptions.

We are convinced that the allegation in relation to appellant's attempt to evade and defeat the payment of the tax in the instant case is sufficient, and that the objection thereto is one of form rather than of substance. The form used is indeed quite general, and this fact would have abundantly justified appellant in asking the court to require the district attorney to furnish a bill of particulars as to the specific attempts to evade and defeat, and we cannot presume that the request would have been refused (Rosen v. United States, 161 U. S. 29); but appellant made no such request, and he now has no reason to complain. The validity of the counts charging felonies is abundantly supported by the following cases: United States v. Gooding, 25 U. S. 292; United States v. Simmons, 96 U. S. 364; Dunbar v. United States, 156 U. S. 185; Connors v. United States, 158 U. S. 408; Durland v. United States, 161 U. S. 306; Ledbetter v. United States, 170 U. S. 606; Pounds v. United States, 171 U. S. 35; Armour Packing Co. v. United States, 209 U. S. 56; Bartell v. United States, 227 U. S. 427; Lamar v. United States, 241 U. S. 103; Konda v. United States, 166 Fed. 91; Hardesty v. United States , 168 Fed. 25; Enders v. United States , 187 Fed. 754; May v. United States , 199 Fed. 42; Marhoefer v. United States , 241 Fed. 48; Case v. United States , 6 F. (2d) 530; Graffi v. United States , 22 F. (2d) 593.

In a certain class of cases cited by appellant, where the act charged is a crime only under certain conditions, it was held that those conditions must be alleged to exist in order to render the indictment valid. Thus in Batchelor v. United States, 156 U. S. 426, an indictment was held bad which charged misapplication of bank funds but did not charge that the misapplication was unlawful; in United States v. Kelsey, 42 Fed. 882, defendant was charged with suppressing election ballots, but it was not alleged that he knowingly did so; in Kellerman v. United States, 295 Fed. 796, defendant was charged with bribery of a United States officer, but the indictment did not allege that the person bribed was a United States officer; in Boykin v. United States, 11 F. (2d) 484, defendant was charged with attempting to bribe a prohibition agent with intent to influence him as to matters and proceedings then pending, but it was not alleged that such matters related to the agent's duties as prohibition officer; in Aroniss v. United States, 13 F. (2d) 620, defendant was charged with maintaining a common nuisance at a certain place where intoxicating liquors were kept, and the court held that the facts constituting the nuisance must be alleged, because in some instances intoxicating liquor may be lawfully kept. Like rulings were made in United States v. Carll, 105 U. S. 611; Grimsley v. United States, 50 F. (2d) 509; United States v. Berger, 9 F. (2d) 167; Fontana v. United States, 262 Fed. 283; Pettibone v. United States , 148 U. S. 197. In the case last referred to it is said that when the criminality of a conspiracy consists in an unlawful agreement to compass or promote some criminal or illegal purpose, that purpose must be fully and clearly stated; while if the criminality of the offense consists in the agreement to accomplish by criminal or unlawful means a purpose not in itself criminal or unlawful, the means must be set out.

In other cases cited by appellant the indictments were held bad on account of indefiniteness as to allegations of material facts under circumstances which would have rendered it very difficult indeed for the defendant to have prepared his defense, or to have been protected against a second jeopardy for the same offense. In United States v. Simmons, supra, defendant was charged with having caused and procured a still to be used at a certain place for distilling. The court held that it was necessary to name the person or persons who were so procured by the defendant or to allege that the name or names were unknown, but that it was not necessary to set forth the special means employed. In United States v. Hess, 124 U. S. 483, defendant was charged with devising a scheme to defraud divers unknown persons (which scheme was not described) with intention to effect such schemes by inciting such unknown persons to communicate with him by and through the United States post office. In Batchelor v. United States , supra, defendant was charged with misapplying certain sums, each misapplication constituting a separate crime. There were many misapplications referred to generally, but neither the amounts for the means employed were specified, and it was quite apparent that neither constitutional right was protected. In McKenna v. United States , 127 Fed. 88, defendant was charged with conspiracy to injure certain named persons in the free exercise and enjoyment of a right, not naming the right. In Larkin v. United States , 107 Fed. 697, a charge was made of fraudulently using the United States mails to defraud definite individuals--not the public nor a class--and their names were not given, and the indictment was held bad for that reason. In Jarl v. United States, 19 F. (2d) 891, the charge was for transporting and sale of intoxicating liquor, and the allegations were so indefinite as to place, means of transportation, the person to whom the sale was made, and the kind of liquor in controversy, as to furnish no protection to defendant's constitutional rights. In United States v. Kelsey, supra, the indictment was held bad because of the absence of allegations which the statute required. In Ledbetter v. United States , supra, Armour Packing Co. v. United States , supra, and United States v. Gooding, 12 Wheaton 460, 25 U. S. 292, the crimes were charged in the language of the statute and the indictments were held sufficient. The last-named case charged the accepting of rebates prohibited by the Elkins Act, although the details of the device by which the rebates were received were not set out. In Anderson v. United States , 260 Fed. 557, the indictment charged a conspiracy to steal goods, not describing them, which were moving in interstate commerce; and in Collins v. United States, 253 Fed. 609, the charge was for making and conveying false reports with intent to interfere with military and naval operations, and the reports were not described or set forth. In Miller v. United States , 136 Fed. 581, defendant was charged with knowingly and wilfully procuring the presentation to the Commissioner of Pensions of a false and fraudulent writing, and it was not alleged whom defendant had procured to present it, nor was it alleged that such person's name was unknown. In Pierre v. United States , 275 Fed. 352, it was charged that defendant made threats to take the life of the President of the United States , but did not allege that they were made in the presence of any person. In Boykin v. United States, supra, defendant was charged with bribery of a prohibition officer; and besides other defects above referred to the court said that the crime charged involved both an act and intent, and that the indictment was not sufficiently specific, although the Government knew which act it would rely upon, but defendant did not know and was not sufficiently apprised with relation thereto.

In all the cases relied upon by appellant which we have specifically referred to, as well as other cases which he has cited, it is quite apparent that the defendant's constitutional rights were not sufficiently protected by the allegations of the indictment; but we find no such conditions existing with relation to the indictment now before us. It is not to be denied that appellant should be fully protected against a second or subsequent jeopardy for any offense involved in the instant indictment, and we think he is so protected. When the Government, without particularization, chooses to make a general charge of means employed to effect a certain criminal purpose at a given time, whether under such conditions a defendant may successfully claim protection against a subsequent jeopardy for such offense effected at such time by any means which might have been given in evidence at the former trial, we are not called upon to decide. It is quite obvious, however, that he cannot be placed in jeopardy a second time for such offense which was effectuated by any means relied upon at the final trial and which were given in evidence. To accomplish such protection the entire record of the former trial, as well as parol evidence, if necessary for that purpose is admissible in the second trial. Dunbar v. United States, supra.

While it is true that appellant tested the sufficiency of each count of the indictment by demurrer, yet if his criticism with relation to the sufficiency of the allegations be correct we think that he was neither surprised nor harmed by the court's ruling in respect thereto. We base this conclusion upon the following facts which appear of record:

The indictment was returned June 5, 1931, and after counsel appeared for appellant he pleaded guilty on June 16. The cause was first continued until June 30, and again to July 30, on which last date the court informed appellant that he would be subjected to all proper questions, whereupon, on motion of his counsel and by consent of the court, appellant withdrew his plea of guilty and entered a plea of not guilty, and the cause was continued to September 8, and on September 10 it was set for trial on October 6.

On September 25 appellant's counsel asked leave to amend the record in order that appellant might file a plea in abatement and demurrer. After some discussion relative to the nearness of the trial date the court said it would give appellant an opportunity on September 29 to argue before trial any point contended by appellant to be fatal to the case. Upon inquiry as to the points to be raised, counsel replied that he had some points that had not been presented in the O'Brien case (which had previously been tried by that court and was then pending on appeal in this court, and has since been affirmed, 51 F. (2d) 193, and certiorari denied November 30, 1931, 284 U. S. 673), and some that had been presented but which, in his opinion, had not been properly argued in that case; and that if a certain count was upheld in the O'Brien case that decision would control only as to the particular attack made on the count in that case. The trial court said that if counsel had anything new it would hear him. At that time counsel for appellant sought an order stopping any further examination of witnesses before the grand jury then sitting. The court refused, stating that as a result of the argument on demurrer the court might find the indictment invalid and it might be necessary for the district attorney to obtain another indictment. The court did not then permit amendment of the record or withdrawal of the plea of not guilty, but continued the motion to amend to September 29, so that by that time counsel would know whether he intended to file a plea in abatement.

On September 29 counsel moved to withdraw the plea of not guilty for the purpose of filing a demurrer. The court overruled the motion to correct the record, but granted motion to withdraw the plea of not guilty and permitted the quite lengthy demurrer to be filed. The court then announced that the demurrer would then be heard, but counsel for appellant stated he did not desire to make any argument on it--that he understood the court would not care to hear any point based on anything that had already been decided by the Circuit Court of Appeals; that some of the principal points of the demurrer challenged the correctness of the ruling of the Circuit Court of Appeals, and that almost every other point that occurred to counsel seemed to be either directly or inferentially overruled by that court; and, as he did not think he had any point in the demurrer which would appeal to the court, argument would be a waste of time. The court then said that upon counsel's statement that the points had been ruled upon by the Circuit Court of Appeals substantially in favor of the United States , the demurrer would be overruled. Counsel for appellant remarked that there were some new points that had not been ruled on, but he did not think they would appeal to the court and did not care to argue them then. The court asked if they were kindred points to the ones already passed on, and counsel could not say definitely, but stated there was another question which he might argue later so to the unconstitutionality of the statute, although he had not quite satisfied himself on that yet and was working on it and did not care to argue it then. The court said that question could be raised at any time, and counsel said that was all regarding the demurrer at that time. The court then overruled the demurrer and the plea of not guilty was reentered.

It does not appear that during the proceedings in the trial appellant made any contention that he had been either surprised or prejudiced by the evidence introduced under the alleged too general allegations of the indictment, or that his rights relating thereto were being injured in any manner.

Title 28, U. S. C., sec. 391 (Judicial Code, sec. 269, amended) contains the following clause:

"On the hearing of any appeal, certiorari, writ of error, or motion for a new trial, in any case, civil or criminal, the court shall give judgment after an examination of the entire record before the court, without regard to technical errors, defects, or exceptions which do not affect the substantial rights of the parties."

We are convinced that the counts complained of are not defective as contended by appellant; but, if it be conceded that appellant's contentions are correct, said alleged defects are to be considered as technical and as not affecting the substantial rights of appellant, and by reason of the statute last cited his contentions are without merit. Connors v. United States, supra; Lamar v. United States, supra.

Appellant contends that his demurrer to counts 13 and 18 and his motion in arrest of judgment as to said counts should each have been sustained separately and severally, because, as he says, neither of said counts alleges that appellant did not make any return whatever, but each alleges that he did not make a return "stating specifically the items of his gross income and the deductions and credits allowed." The language quoted is contained in each of said counts, and follows explicitly the language of the statute. The penal clause of the statute provides that any person who is required to make a return, and who willfully fails to make just such a return as is described in the above quotation, is guilty of a misdemeanor. There is no merit in this contention, for even if his theory were correct he is in error in the statement of the facts, for each of said counts alleges that he made no return whatever.