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Appellant further insists that counts 13 and 18 are each insufficient because it is not alleged directly and positively in either count that no return was made, but only that no return was made to a proper officer. On the contrary, each of said counts directly and positively avers that no return whatever was made to the proper Collector of Internal Revenue, or any other proper officer of the United States . The fact that the Collector of Internal Revenue is the only proper officer authorized by the statute to receive and file the return fully warrants us in considering as surplusage the words "or to any other proper officer of the United States ." There was no error in overruling appellant's demurrer and motion in arrest of judgment as to counts 13 and 18. Rosen v. United States, supra; Dunbar v. United States, supra; Evans v. United States, 153 U. S. 584; Collins v. United States, 20 F. (2d) 574.

Each count of the indictment upon which appellant was convicted being sufficient to repel the demurrer, they are also sufficient to withstand the motion in arrest.

Judgment affirmed.

¹ "* * * any person who willfully attempts in any manner to evade or defeat any tax imposed by this Act or the payment thereof, shall * * * be guilty of a felony * * *"

² "Any person required under this title to pay any tax, or required by law or regulations made under authority thereof to make a return * * * for the purposes of the computation, assessment, or collection of any tax imposed by this title, who willfully fails to pay such tax, make such return * * * at the time or times required by law or regulations, shall, in addition to other penalties provided by law, be guilty of a misdemeanor * * *"

³ "Count 1. * * * Alphonse Capone * * * hereinafter in this indictment sometimes called the defendant, on, to wit, the 15th day of March, 1926, * * * unlawfully and fraudulently did then and there willfully attempt to evade and defeat an income tax in the sum of, to wit, $55,365.25, imposed by an Act of Congress approved February 26, 1926, * * * known as the Revenue Act of 1926, upon his net income had and derived during the calendar year ended December 31, 1925, that is to say, his gross income had and derived during said calendar year less the deductions allowed under Title II (Income Tax) of said Act of Congress; that said willful and fraudulent attempt to evade and defeat said income tax was by the means and in the manner following, that is to say:

"That the said Alphonse Capone, * * * during the calendar year 1925 was an individual who was married and living with his wife and who on December 31, 1925, had one dependent, and whose annual accounting period was on the basis of the calendar year and not on the basis of a fiscal year, and whose legal residence and principal place of business during said calendar year and until and including March 15, 1926, were within the Eastern Division of the Northern District of Illinois and within the said First Internal Revenue Collection District of Illinois, and who had and derived during the calendar year ended December 31, 1925, a gross income for said calendar year of over $5,000.00, to wit, $257,286.98, and who was after the 31st day of December, 1925, and on or before the 15th day of March, 1926, required by the Act of Congress aforesaid to make to the Collector of Internal Revenue for the Internal Revenue Collection District aforesaid, under oath, a return stating specifically the items of his gross income and the deductions and credits allowed under Title II of the Act of Congress aforesaid for the purposes of computation, assessment and collection of any tax imposed by Title II of said Act of Congress.

"That the said defendant was further required by the Act of Congress aforesaid to pay to the Collector of Internal Revenue for the Internal Revenue Collection District aforesaid for the calendar year ended December 31, 1925, an income tax upon his net income * * * by reason of the fact, which the said grand jurors charge on their oath to be a fact, that said defendant had and derived and received during said calendar year a gross income of, to wit, $257,286.98, from which said gross income he, the said defendant, was entitled to deductions for said calendar year 1925 in the sum of, to wit, $1.00, and no more, and had and derived and received a net income during said calendar year 1925 of, to wit, $257,286.98, upon which said net income for the calendar year last aforesaid there became due on March 15, 1926, to the United States of America, after the allowance of all credits, a tax of, to wit, $55,365.25, of which said tax at least one-fourth should have been paid then and there by the said defendant to the Collector of Internal Revenue aforesaid.

"That the said defendant, * * * on, to wit, March 15, 1926, well knowing all the premises, unlawfully and fraudulently did then and there willfully attempt to evade and defeat the income tax aforesaid upon his said net income for the calendar year 1925; * * *"

"Count 13. * * * That on, to wit, the 15th day of March, 1929, * * * the said Alphonse Capone * * * unlawfully did willfully and knowingly fail to make a return of income required by an Act of Congress approved May 29, 1928, * * * which said Act of Congress is known as the Revenue Act of 1928, that is to say, a return stating specifically the items of his gross income had and derived during the calendar year 1928 and the deductions and credits allowed under Title I (Income Tax) of said Act of Congress; that said willful failure to make the return aforesaid was under the circumstances following, that is to say:

"That said defendant during the calendar year 1928 was an individual who was married and living with his wife and who on December 31, 1928, had one dependent, and whose annual accounting period was on the basis of the calendar year and not on the basis of a fiscal year, and whose legal residence and principal place of business during said calendar year and until and including March 15, 1929, were within the Eastern Division of the Northern District of Illinois and within said First Internal Revenue Collection District of Illinois, and who had and derived during the calendar year ended December 31, 1928, a gross income for said calendar year of over $5,000.00, to wit, $140,536.93, and who was after the close of the calendar year 1928 and on or before the 15th day of March, 1929, required by the Act of Congress aforesaid to make to the Collector of Internal Revenue for the Internal Revenue Collection District aforesaid, under oath, a return stating specifically the items of his gross income and the deductions and credits allowed under Title I of the Act of Congress aforesaid for the purposes of computation, assessment and collection of any tax imposed by said Title I of said Act of Congress; that the said defendant, having between the close of the calendar year 1928 and the 15th day of March, 1929, failed to make the return aforesaid, unlawfully did, on said 15th day of March, 1929, within the judicial division and district aforesaid, and within the collection district aforesaid, and within the jurisdiction of this court, then and there willfully fail to make the return aforesaid stating specifically the items of his gross income and the deductions and credits allowed under Title I of the said Act of Congress, or any return whatsoever, to the Collector of Internal Revenue for the Internal Revenue Collection District aforesaid as required by the Act of Congress aforesaid or to any other proper officer of the United States; * * *"

 

 

[86-2 USTC ¶9543] United States of America , Plaintiff-Appellee v. James L. Harrold, Sr., Defendant-Appellant

(CA-10), U.S. Court of Appeals, 10th Circuit, 84-2612, 7/14/86, 796 F2d 1275, Affirming and remanding unreported District Court decision

[Code Sec. 7201 ]

Criminal penalties: Evasion or avoidance of tax: Sufficiency of indictment: Jury instructions: Improper question.--The taxpayer's conviction for income tax evasion, resulting from his use of trusts to conceal his income, was affirmed and remanded to the district court to determine if the jury panel had been selected properly. There was no prejudice to him from any lack of specificity in the indictment. The government did not violate his due process rights when a witness was questioned about the taxpayer's invocation of the Fifth Amendment. This error was harmless in light of the overwhelming evidence of guilt and the fact that it was an isolated remark. The taxpayer was not entitled to a jury instruction that his good-faith disagreement with the tax laws constituted a defense.

Layn R. Phillips, United States Attorney, John S. Morgan, Assistant United States Attorney, Tulsa, Okla., for plaintiff-appellee. John E. Dowdell, Norman , Wohlgemuth & Thompson, 909 Kennedy Bldg., Tulsa , Okla. 74103 , for defendant-appellant.

Before LOGAN, MOORE, and BALDOCK, Circuit Judges.

LOGAN, Circuit Judge:

Defendant, James L. Harrold, Sr., appeals his conviction for income tax evasion, in violation of 26 U.S.C. §7201 .

On appeal defendant claims that: (1) his indictment was insufficient; (2) the government and its witnesses improperly referred at trial to his assertion during pretrial investigations of his Fifth Amendment right to silence; (3) the court inadequately instructed the jury on his good-faith defense; (4) the court wrongly excluded evidence relevant to his good-faith defense; and (5) he was denied his right under 28 U.S.C. §1867(f) to inspect the jury records. We reject all these claims except the last. On that issue we remand on a limited basis.

Defendant was indicted for income tax evasion for the years 1979 through 1981. During this time, defendant worked as an engineer for Consultants and Designers, Inc. His earnings from this company were as follows: 1979--$31,762.37; 1980--$35,208.42; 1981--$36,687.91. After filing his 1975 return, defendant decided to stop paying income taxes because, he contends, he had determined from his own research that wages did not constitute taxable income. Defendant consequently filed W-4 withholding forms declaring himself exempt from income taxes and paid no income taxes during any of the years at issue.

Defendant created the Zident Educational Trust (Zident) on February 6, 1980. The alleged purpose of this trust was to create an "educational facility that could pass on Christian beliefs and patriotic themes." R. X, 679. The evidence suggested, however, that defendant placed most of his personal property in the trust and used it as a vehicle for his personal investments. Although defendant was not a trustee of Zident, he was its executive secretary, exercised substantial control over its investments, and had signatory power for the trust.

Extensive evidence was presented concerning the Zibiz Research Trust (Zibiz), which was created by the Zident trustees and whose beneficiary was Zident. Defendant was manager of Zibiz and in that capacity offered advice on investments. He also had signatory power for Zibiz. There was evidence that Zibiz purchased items such as a waterbed and a motorboat and occasionally "traded" them to Zident. Defendant lived in a trailer that Zibiz owned.

Both of these trusts had assets worth several thousand dollars and were active in the stock market. They paid a negligible amount of income taxes in 1980 and 1981. Zibiz, for example, paid $1449.08 in taxes in 1981. Zident paid no taxes in 1980 and 1981. An expert government witness testified that all of the income of these trusts should be attributed to defendant because of the control he exercised over them. That expert concluded the trusts had been used to conceal defendant's income.

I

 

Defendant asserts that his indictment was insufficient. He argues that "there are no factual allegations as to the amount of taxable income received or tax liability due" and that it is not "clear what the alleged evasion may be." Brief of Appellant at 15.

In United States v. Radetsky, 535 F.2d 556 (10th Cir.), cert. denied, 429 U.S. 820 (1976), we set out the requirements of an indictment:

"First, the indictment must contain the elements of the offense and sufficiently apprise the defendant of what he must be prepared to meet; second, it must be such as to show to what extent he may plead a former acquittal or conviction as a bar to further prosecution for the same cause."

Id. at 562; see also United States v. Salazar, 720 F.2d 1482, 1486 (10th Cir. 1983), cert. denied, 105 S.Ct. 789 (1985); Rose v. United States [42-2 USTC ¶9500 ], 128 F.2d 622, 624 (10th Cir. 1942).

The indictment here meets those requirements. ¹ The focus of the government's case was on defendant's filing of fraudulent W-4 withholding forms and his creation of fraudulent trusts to hide his income and assets. The indictment specifically referred to the W-4 forms and to attempts to "conceal" ownership of assets. Although it would have been better for the indictment to have referred to the challenged trusts with greater specificity, if the government had detailed knowledge then of the precise methods defendant used to conceal his income, the reference to the concealment of asset ownership gave defendant notice that the trusts were likely to be questioned at trial. See Salazar, 720 F.2d at 1487 ("sufficiency of an indictment, however, 'is not a question of whether it could have been more definite and certain' ") (quoting United States v. Debrow, 346 U.S. 374, 378 (1953)).

In addition, inadequacy of an indictment requires reversal only if it prejudiced the defendant. See United States v. Fitzgibbon, 576 F.2d 279, 283 (10th Cir.), cert. denied, 439 U.S. 910 (1978). Here defendant presented detailed evidence concerning the challenged trusts and seemed prepared to meet the government's case. Accordingly, there was no prejudice to him from any lack of specificity in the indictment.

Defendant's claim that the indictment should have included the amount of taxes owed is meritless. In a §7201 prosecution the government is not obligated to prove the precise amount owed. See Graves v. United States [51-2 USTC ¶9431 ], 191 F.2d 579, 582 (10th Cir. 1951); United States v. Newman [72-2 USTC ¶9719 ], 468 F.2d 791, 795 (5th Cir. 1972); United States v. Stein [71-1 USTC ¶9209 ], 437 F.2d 775, 779 (7th Cir. 1971). Thus there is no requirement that an indictment under §7201 specify the exact amount owed.

Defendant claims that the indictment is too vague to protect him from subsequent prosecutions for the same offenses. But in Radetsky we noted that "the record evidence of exhibits and testimony" is available to protect against a defendant being placed twice in jeopardy. Radetsky, 535 F.2d at 563; see also United States v. Smith, 692 F.2d 693, 696-97 (10th Cir. 1982). The trial record clearly indicates that this prosecution involved violations concerning the Zident and Zibiz trusts from 1979 through 1981. There is little danger that defendant will be prosecuted again for the same trust violations.

II

Defendant next claims that the government violated his due process rights by intentionally eliciting testimony from two IRS officers that defendant refused to answer certain questions during pre-indictment investigations in reliance on his Fifth Amendment privilege against self-incrimination.

First, IRS Officer Rob ert Randolph testified that defendant invoked his right to remain silent at a meeting with IRS officers on November 13, 1979. The second incident arose during the testimony of IRS officer Larry Garner. Garner, who was conducting a criminal investigation of defendant, testified that defendant refused to reply to certain questions after receiving a Miranda warning. ²

The government states in its brief that it regrets this questioning of both IRS officers with respect to defendant's silence but asserts that "such error was harmless." Brief of Appellee at 14. We are surprised that the government in effect concedes that reference to defendant's silence by Officer Randolph was error. Officer Randolph was conducting a civil investigation and there is no indication in the record that he gave defendant a Miranda warning. In United States v. Massey, 687 F.2d 1348 (10th Cir. 1982), we stated that a comment on a defendant's silence is error only when the defendant remained silent in reliance on government action, i.e., a Miranda warning. Id. at 1353; see also Wainwright v. Greenfield , 54 U.S.L.W. 4077, 4078 (U.S. Jan. 14, 1986); Fletcher v. Weir, 455 U.S. 603, 605-07 (1982); Jenkins v. Anderson, 447 U.S. 231, 240 (1980); Doyle v. Ohio, 426 U.S. 610, 618 (1976); United States v. Davis, 780 F.2d 838, 844-45 (10th Cir. 1985). Because defendant's refusal to respond to certain of Randolph 's questions was not based on a Miranda warning or any other government action, the testimony concerning defendant's pre-Miranda reliance on the Fifth Amendment was proper and will not be considered in determining if defendant was prejudiced. ³

We agree that the government's questioning of Officer Garner about defendant's invocation of the Fifth Amendment was error. Nevertheless, if we find beyond a reasonable doubt that defendant was not prejudiced by the error, his conviction will stand. ⁴ See United States v. Schmitt, No. 85-2525, slip op. at 2-3 (10th Cir. June 18, 1986); Massey, 687 F.2d at 1353. In Massey we considered the following factors relevant in determining whether an error was harmless:

"1. The use to which the prosecution puts the post-arrest silence.

2. Who elected to pursue the line of questioning.

3.The quantum of other evidence indicative of guilt.

4. The intensity and frequency of the reference.

5. The availability to the trial judge of an opportunity to grant a motion for mistrial or to give curative instructions."

Id. (quoting Williams v. Zadradnick, 632 F.2d 353, 361-62 (4th Cir. 1980)); see also Schmitt, slip op. at 8; United States v. Remigio, 767 F.2d 730, 735 (10th Cir.), cert. denied, 106 S. Ct. 535 (1985).

In determining whether defendant was prejudiced, the key factors often will be the purpose for which the government used defendant's silence and the quantum of other evidence of defendant's guilt. The government admits here that the purpose of its questioning was "to establish defendant's knowledge of his obligation to file a tax return." Brief of Appellee at 12. This was a clear violation of Anderson v. Charles, 447 U.S. 404 (1980), which forbade the government from drawing meaning from a defendant's silence. Id. at 409. The error is particularly serious here because defendant's knowledge of his tax liability was the central issue in this case; his defense was that he did not know he owed taxes. In addition, the government used defendant's silence to impeach his testimony that he was unaware that he had violated the tax laws. ⁵

Although the error in this case was egregious, it still can be deemed harmless if the defendant's theory was "transparently frivolous" and the evidence of guilt was overwhelming. See United States v. Meneses-Davila, 580 F.2d 888, 894 (5th Cir. 1978); Chapman v. United States, 547 F.2d 1240, 1248 (5th Cir.), cert. denied, 431 U.S. 908 (1977). In light of the quantum and nature of other evidence at trial indicative of defendant's knowledge of his tax obligations, we are convinced that the jury would have found defendant's good-faith defense frivolous even without the government's impermissible questions.

The government demonstrated that defendant was involved in the tax protester movement. An undercover special agent for the IRS testified that in 1979, at the National Tax Freedom forum in Oklahoma City (a tax protester convention), defendant stated to him that he did not file tax returns in 1976 or 1977 as a way of protesting the income tax. The agent also testified that defendant stated he would play "dumb" if the IRS contacted him, that he would send out certified letters to the IRS concerning his tax questions, and that he believed that these letters could then be used as evidence of his "good faith." The IRS agent further testified that defendant stated he would use these letters to establish his ignorance of the tax laws. At trial, defendant acknowledged that such methods were discussed expressly at the National Tax Freedom forum. The evidence at trial showed that this plan was precisely the course defendant later adopted and now submits to us. From this evidence a reasonable jury could only have concluded that defendant was well aware of his tax obligations, and that he chose to mask such knowledge through a careful scheme.

Moreover, defendant testified he filed income tax returns from 1948 to 1975. By 1976, however, he stated he had come "to the conclusion that the wages [he] was receiving were not taxable income as defined by the Supreme Court, . . . ." R. X, 641. Defendant then ceased paying income tax. From this testimony we believe the jury had before it overwhelming evidence that defendant had full knowledge of his tax liability, but determined, for reasons known only to him, to drop out of the system. It would have been absurd for the jury to find that, although defendant had paid income tax on his wages for twenty-seven years, he suddenly no longer "knew" that this was his obligation. Cf. United States v. Weninger [80-2 USTC ¶9560 ], 624 F.2d 163, 167-68 (10th Cir.), cert. denied, 449 U.S. 1012 (1980). The evidence demonstrated only that defendant disagreed with the law, not that he was unaware of it. See infra at 15-17 (discussing state of mind necessary for criminal tax evasion). Thus, in light of the evidence at trial, defendant's good-faith defense was indeed transparent.

Further, the prosecution did not highlight the evidence of defendant's taking the Fifth Amendment. It did not ask him, when he took the stand, why he refused to answer particular questions. And it did not refer to this issue in closing argument. Although we recognize that curative instructions do not always cure, we note also that the trial court did instruct the jury at the close of evidence that defendant had the right to decline to answer questions and no adverse inference could be drawn from his exercise of his constitutional right. Finally, these were only isolated remarks during a two-week trial, which mitigates the danger of prejudice. See Remigio, 767 F.2d at 735 (curative instruction, isolated reference, and overwhelming evidence of guilt result in harmless error despite intentional reference to defendant's silence); Velarde v. Shulsen, 757 F.2d 1093, 1096 (10th Cir. 1985) (chance of prejudice greater when comment on silence occurs in one-day trial, with no curative instruction); United States v. De La Luz Gallegos, 738 F.2d 378, 383 (10th Cir. 1984) (comment on silence harmless when made only in opening argument, evidence substantial, and comment not fresh in jurors' minds); United States v. Bridwell, 583 F.2d 1135, 1139 (10th Cir. 1978) (isolated remark, immediate curative instruction, and overwhelming evidence render comment harmless).

Accordingly, we find the government's reference to defendant's post-Miranda silence harmless. ⁶

III

Defendant alleges that the district court erred in failing to instruct the jury specifically that, if he had a good-faith belief that he owed no income tax, he could not be found guilty of tax evasion. ⁷

In United States v. Phillips, 775 F.2d 262 (10th Cir. 1985), we held that a defendant in a tax evasion case was entitled to an instruction that a subjective good-faith misunderstanding of tax liability is a defense. ⁸ Id. at 264; accord United States v. Wells, No. 84-2573, slip op. at 4-5 (10th Cir. May 9, 1986). For example, if a defendant proved that he honestly believed that lottery winnings did not constitute taxable income, he would not be guilty of criminal tax evasion if he failed to declare his winnings. A defendant, however, is not entitled to an instruction that his good-faith disagreement with the tax laws constitutes a defense. Id.; see also United States v. Weninger, 624 F.2d at 167. Thus, if the winner of a lottery knew that his winnings consistently were held taxable by the IRS, but he did not declare them as income because he believed such winnings should not be taxable, he could be found guilty of criminal tax evasion. This distinction is crucial and has been recognized by several courts. See, e.g., United States v. Mueller, 778 F.2d 539, 541 (9th Cir. 1985); United States v. Aitken [85-1 USTC ¶9209 ], 755 F.2d 188, 191 (1st Cir. 1985); United States v. Burton [84-2 USTC ¶9689 ], 737 F.2d 439, 441-42 (5th Cir. 1984); United States v. Kraeger [83-2 USTC ¶9453 ], 711 F.2d 6, 7 (2d Cir. 1983).

In United States v. Hopkins, 744 F.2d 716 (10th Cir. 1984) (en banc), we held that a good-faith instruction must be given in mail fraud cases as "a separate subject" if there is sufficient evidence to support the theory. Id. at 718. Instructions simply defining willfulness are in this circumstance insufficient. Id.; accord United States v. Casperson, 773 F.2d 216, 223 (8th Cir. 1985). Instead "[t]here must be a full and clear submission of the good faith defense to the jury." Hopkins , 744 F.2d at 718 (citations omitted). ⁹

We do not see any significant difference between the good-faith defense tendered in Hopkins and that raised here. In each case the key question is whether defendant had a good-faith belief in the propriety of his conduct. See id. Thus defendant here was entitled to a good-faith instruction if there was evidence from which the jury could have found that defendant in good faith misunderstood the income tax laws. ¹⁰ Cf. Mueller, 778 F.2d at 541 (approving instruction despite absence of explicit good-faith wording).

On the amount of evidence necessary, in United States v. Swallow [75-1 USTC ¶9267 ], 511 F.2d 514 (10th Cir.), cert. denied, 423 U.S. 845 (1975), we stated that "[e]ven though the evidence may be weak, insufficient, inconsistent or of doubtful credibility, its presence requires an instruction on a theory of defense." Id. at 523; accord United States v. Curry, 681 F.2d 406, 413 (5th Cir. 1982); United States v. Garner, 529 F.2d 962, 970 (6th Cir.), cert. denied, 426 U.S. 922 (1976). In Hopkins , however, we suggested that a defendant is entitled to a good-faith instruction only if there is a quantum of evidence from which the jury "reasonably" could find that the defendant acted in good faith. Hopkins , 744 F.2d at 718 (emphasis added); accord United States v. Jackson , 726 F.2d 1466, 1468 (9th Cir. 1984). We need not resolve whether our en banc holding in Hopkins was intended to state a stricter rule than that recited in Swallow, because the giving of an erroneous instruction does not warrant reversal when, in light of all the evidence, it is clear that the error was harmless. See, e.g., United States v. Herbert, 698 F.2d 981, 986 (9th Cir.) ("erroneous instruction requires reversal only if there is "reasonable probability" that error materially affected verdict") (quoting United States v. Valle-Valdez, 554 F.2d 911, 916 (9th Cir. 1977)), cert. denied, 464 U.S. 821 (1983); see also United States v. Carouthers, 669 F.2d 635, 640 (10th Cir. 1982).

The only evidence at trial of defendant's good-faith misunderstanding of the law consisted of his own statements. On the other hand, there was unchallenged evidence that defendant paid income taxes on his wages for twenty-seven years, that he was a sophisticated investor, and that he attended tax protester conventions at which he expressly discussed how to fabricate, for the purposes of a trial, evidence that he misunderstood the tax laws. Therefore this is not a case in which a defendant has simply presented minimal evidence supporting his theory as in Swallow. Here the evidence at trial demonstrated that defendant acted in bad faith. Thus, even if a good-faith instruction had been given, we are confident the result of the trial would have been the same.

IV

Defendant claims that, in addition to instructing the jury inadequately on his good-faith defense, the district court prevented him from presenting this defense by excluding letters he had written regarding his interpretation of the tax laws and Supreme Court opinions on which he had relied to reach his conclusion that wages are not income.

The court allowed defendant to introduce some letters he sent and all letters he received from IRS officials in response to his inquiries, and to testify on the basis for his beliefs. The district court excluded as irrelevant, however, several letters defendant wrote to senators and congressmen regarding the definition of income and the responses he received to these letters. Defendant contends that these letters were highly probative of his state of mind.

We believe that these letters may have been relevant as evidence that defendant misunderstood his tax liability. See Fed. R. Evid. 401 (relevant evidence is that which has "any tendency to make . . . [a] fact . . . more probable or less probable") (emphasis added). Their exclusion, however, does not warrant reversal of defendant's conviction. Defendant was permitted to testify at length concerning his beliefs about the tax system and the basis for his beliefs. He detailed how he had been studying tax issues for more than ten years and has studied Supreme Court opinions construing the tax laws. He was allowed to read letters he had written to the IRS and to Senator David Boren. We have no reason to believe that the excluded letters would have differed from or added significantly to the evidence previously introduced. Accordingly, we hold that, despite the exclusion of those letters, defendant was able to submit the substance of his good-faith theory to the jury, and any error was harmless. See United States v. Thiel [80-1 USTC ¶9373 ], 619 F.2d 778, 781 (8th Cir. 1980) (wrongful exclusion of letters written to IRS not reversable error because defendant had opportunity to articulate his good-faith defense); United States v. Rothbart, 723 F.2d 752, 755 (10th Cir. 1983); United States v. Hayes, 477 F.2d 868, 873-74 (10th Cir. 1973).

Defendant's assertion that the trial court wrongly excluded various Supreme Court opinions on which he relied also is unavailing. A trial court's decision to exclude evidence will be overturned only if it was clearly erroneous or an abuse of discretion. See, e.g., United States v. Rothbart, 723 F.2d at 755; United States v. Neal, 718 F.2d 1505, 1509-10 (10th Cir. 1983), cert. denied, 105 S. Ct. 87 (1984). Several courts have held that Supreme Court opinions or other evidence on which a defendant relied to reach an erroneous conclusion on tax obligations properly are excluded. See Mueller, 778 F.2d at 540 (exclusion of Supreme Court opinions); United States v. Burton, 737 F.2d 439, 443 (5th Cir. 1984) (exclusion of expert testimony concerning plausibility of theory that wages are not income); United States v. Kraeger, 711 F.2d at 7-8 (exclusion of federal court opinions); Cooley v. United States [74-2 USTC ¶9718 ], 501 F.2d 1249, 1253 (9th Cir. 1974) (exclusion of letter appearing in Congressional Record, IRS Training Manual, and Supreme Court opinions), cert. denied, 419 U.S. 1123 (1975). These courts have found, and we agree, that admission of such evidence would confuse the jury with respect to the requirements of the law. It is the role of the court to control such submissions and to instruct the jury on the law itself. See Fed. R. Evid. 403.

As noted, we have adopted a subjective standard in tax evasion cases, and thus the basis on which defendant reached his opinions is of little relevance. The proper inquiry is whether defendant actually misunderstood his tax obligations, not whether he had a reasonable basis for his beliefs.

Accordingly, we find the district court's exclusion of Supreme Court opinions appropriate.

V

Defendant's final contention is that the district court erred in denying his motion to inspect and copy jury records pursuant to 28 U.S.C. §1867(f). The district court refused to allow defendant to inspect the jury records because he apparently had failed to apply for an order to do so. The court, however, did permit defendant to inspect the records following his conviction. On the basis of this subsequent inspection, defendant filed a motion for a mistrial and submitted briefs to the district court. The district court ordered that the motion be held in abeyance pending disposition of this appeal. The government concedes that a limited remand to the district court to determine if the jury panel was selected properly is appropriate. Brief of Appellee at 4. We agree. Therefore the district court is directed to consider defendant's contentions on remand and to set aside his conviction if he establishes that the jury panel was chosen improperly. See United States v. Lawson [82-1 USTC ¶9197 ], 670 F.2d 923, 926 (10th Cir. 1982). ¹¹

AFFIRMED and REMANDED.

¹ The indictment stated as follows:

"During the calendar year 1979, defendant JAMES L. HARROLD, SR., a resident of Tulsa County within the Northern District of Oklahoma, had and received taxable income upon which there was a substantial tax liability due and owing; that said defendant was required by law following the close of the taxable year 1979 and on or before April 15, 1980, to file with the Internal Revenue Service a federal income tax return reporting such income; that said defendant willfully and knowingly attempted to evade and defeat the income tax due and owing to the United States of America by failing to make and file an income tax return as required, by failing to pay the Internal Revenue Service the income tax due and owing for the calendar year 1979, and by concealing and attempting to conceal from all proper officers of the United States of America his true and correct taxable income by conducting his affairs so as to avoid the maintenance of normal business records, by attempting to conceal his ownership of assets, by conducting financial transactions through the use of cash, cashier's checks or money orders, the likely effect of which would be to mislead or conceal, and by providing his employer with fraudulent W-4 tax withholding form, in violation of Title 26, United States Code, Section 7201 ."

R. I, 24. This language was repeated for the charges relating to 1980 and 1981.

² The following testimony of Garner is challenged:

"Q. [Government] All right. What, if anything, did you talk to Mr. Harrold about?

A. [Garner] Whether or not he had filed an income tax return for the years 1979, 1980 and 1981.

Q. All right. Did you advise him of anything?

A. Prior to actually getting into discussions, I did advise him of his Fifth Amendment rights as required by our procedures.

Q. And would you tell us exactly what it was you advised him of?

A. His Constitutional rights, Fifth Amendment Constitutional rights.

Q. What were those? Can you read them to us, please?

. . .

Q. What did Mr. Harrold respond, if anything?

A. That he did understand the rights.

Q. What happened next? Did you talk about anything? Did you visit with him?

A. Yes, we did, I did, pardon me.

Q. Go ahead.

A. I asked him questions pertaining to the fact that he had actually filed a 1979 or 1980 or 1981 income tax return, and he responded that you had to have approximately thirty-three hundred dollars with which to file the tax return, and that if he made that amount of money that he would have more than likely filed a tax return.

Q. All right. Did he say anything else?

A. Okay, he indicated that if he had filed the tax returns for those years, it would have been with the Austin Service Center in Austin , Texas .

. . .

Q. All right. Can you tell us everything that Mr. Harrold told you on this particular occasion?

. . .

A. Okay. Essentially, when we got into the discussion about whether he had filed a return or not, and also when I had asked him if he had any income, he indicated that he would have filed a return, like I said before, if he had had at least thirty-three hundred dollars in income. I asked him if he had any income, and his response was that he had some dividends and he had earned some moneys [sic] primarily from odd types of jobs that he had actually worked. He--okay, he indicated that his stocks that he actually had--he did own some stocks. He had bought stock by the name of President Steyn. He had bought it through Merrill Lynch brokerage firm, and he had earned, as I mentioned, some dividends from that. Other than principally the fact that he had dividends, there was no income per se. We got into the discussion about how was he existing at this particular point in time, and during that time he indicated that he was doing primarily odd jobs and did repair work as needed, and, of course, as requested by various individuals. I asked him if this location was his, and he indicated that he was more or less a caretaker for the area where I found him, which was the Route 2, Box 134-A area, and also encompassing the mobile home. He was being allowed to stay there by friends, and he was caretaking the property for those friends. Let's see, okay, we got into repeating for the most part some questions, and primarily what I'm speaking of is the employment aspect of it, who was he actually employed by, to which, as I mentioned earlier, he never actually really gave me the answers to those questions. He just avoided it. And to some degree he would plead the Fifth Amendment as though he would not respond to the question.

. . .

Q. Did he, at any time, ever assert the Fifth Amendment in response to any questions you asked him?

A. He did assert the Fifth Amendment to various questions I asked him after I had read him his rights.

Q. Do you recall how many times?

MR. DOWDELL: I object, Your Honor.

THE COURT: Sustained.

MR. MORGAN: I believe that is all."

R. IV, 77-81, 88.

³ Defendant, in his later conversation with Officer Garner, answered some questions and refused to answer others. We believe that this partial silence does not preclude him from arguing that a violation of Doyle v. Ohio, 426 U.S. 610 (1976), occurred. To the extent that a defendant clearly relies on a Miranda warning to refuse to answer specific questions, he has been induced by the government to do so and his silence may not be used against him. See Hockenbury v. Sowders, 718 F.2d 155, 159 (6th Cir. 1983), cert. denied, 466 U.S. 975 (1984); Note, Protecting Doyle Rights After Anderson v. Charles: The Problem of Partial Silence, 69 Va. L. Rev. 155, 166-67 (1983).

Phelps v. Duckworth, 772 F.2d 1410 (7th Cir.) (en banc), cert. denied, 106 S. Ct. 541 (1985), can be read to indicate that Doyle only applies if a defendant remains almost completely silent following a Miranda warning. Id. at 1413. In Phelps, however, the defendant never asserted his Miranda rights at all; instead, he offered an exculpatory story at the time of arrest. Id. at 1412. In contrast, defendant here specifically invoked his Miranda rights as to particular questions. Therefore, he relied on governmental action and is entitled to the protections of Doyle. See id. at 1422 (Posner, J., concurring) (basis of Doyle is that defendants should not be "bushwacked" if they rely on right to silence). Furthermore, the Seventh Circuit relied on Hockenbury for its conclusion that Doyle only applies in cases of near complete silence. Id. at 1413. In Hockenbury, however, the Sixth Circuit specifically stated that Doyle protects a defendant"who has refused to answer specific questions after Miranda warnings have been given, . . . ." Hockenbury, 718 F.2d at 159. Therefore, we do not read Phelps as inconsistent with the rule we are applying here.

⁴ Defendant did not object to references to his silence until the government asked how many times defendant invoked the Fifth Amendment. Although defendant erred in not objecting at the prosecution's initial reference to his silence, reference to a defendant's silence following a Miranda warning is "plain error" implicating substantial rights and thus is still subject to review. See Fed. R. Crim. P. 52(b); United States v. Barton, 731 F.2d 669, 675 (10th Cir. 1984) (citing cases).

⁵ This case is distinguishable from Charles, where the Supreme Court permitted the prosecution to use defendant's post-Miranda statements to impeach the defendant's statements at trial. Charles, 447 U.S. at 408. Here, by its own admission, the government used defendant's silence to impeach him, not his statements made following the Miranda warning. Thus we are not engaging in the "formalistic" understanding of silence that the Court condemned in Charles. See id. at 409.

⁶ Because the government erred in commenting on defendant's silence, it has the burden of proving that the error was harmless. See Chapman v. California , 386 U.S. 18, 24 (1967); see also Brooks v. Kemp, 762 F.2d 1383, 1436-37 (11th Cir. 1985) (Clark, J., concurring in part, dissenting in part) (en banc). Yet the government in its brief does little more than recite that the evidence was "overwhelming" and note that a curative instruction was given. We deplore such practice on the part of the government. The doctrine of harmless error has not yet reached the point where the government can avoid the impact of its own miscues merely be intoning that "the evidence was overwhelming." Were this a closer case, the government's limited effort would result in reversal.

⁷ The district court instructed the jury as follows on the disobedience of known tax laws:

"Also, you're instructed that if you should find the defendant acted voluntarily, purposely, deliberately and intentionally in the handling or nonhandling of his income tax affairs for the year or years in question, as distinguished from accidental, [sic] inadvertently or negligently, then you're instructed it's no defense for the defendant that he claims a good purpose for doing so.

If it is shown that the defendant intentionally violated his known legal duty to file a return, his reasons for doing so are irrelevant. It's the duty of all citizens to obey the law, whether they agree with it or not."

R. Supp. III, 14. The court also instructed the jury that:

"to attempt to evade or defeat a tax involves two things. One, an intent to evade or defeat the tax, and secondly, some act by the defendant in the furtherance of such an attempt. The word attempt contemplates that the defendant had knowledge and understanding that during the particular tax years involved that he income in such years which was taxable and which he was required by law to report, but that he nevertheless attempted to evade or defeat the taxes thereon, . . ., by willfully failing to report income which he knew he had during that year and which he knew should have been reported."

Id. at 10-11. Finally, in explaining to the jury the inferences that it was permitted to draw from defendant's previous acts, the court stated that the jury must find that "the accused acted willfully and with specific intent and not because of mistake, or accident or any other innocent reason." Id. at 13-14. It also instructed: "To establish specific intent, the government must prove that the defendant knowingly did an act which the law forbids or knowingly failed to do an act which the law requires, purposely intending to violate the law." Id. at 15.

⁸ Defendant's proposed instruction in the instant case was as follows:

"If a person, in good faith, believes that he has paid all the taxes he owes, he cannot be guilty of criminal intent to evade the tax. The reasonableness of his belief is for the jury to decide and this belief is based on whether he acted in good faith or whether he willfully intended to evade taxes. This issue of intent is one which the jury must determine from a consideration of all the evidence in the case bearing on the defendant's state of mind.

Such a good faith belief goes to the essential elements of willfullness, and a failure to understand the law or a misrepresentation of the law if honestly held would entitle the defendant to an acquittal of the charges made against him."

Brief of Appellant at 30 n.14 (emphasis added).

Defendant's proposed instruction improperly stated the standard as objective. Under the proposed instruction, the jury would have had to decide whether defendant's belief was "reasonable." The proper standard is subjective. See Phillips, 775 F.2d at 264. Ordinarily, when a proposed instruction is a misstatement of the law, it need not be given. See United States v. Stoddart, 574 F.2d 1050, 1053 (10th Cir. 1978). If, however, the instruction concerns a particularly important matter, the court should instruct the jury properly. See United States v. Leach, 427 F.2d 1107, 1112-13 (1st Cir.), cert. denied, 400 U.S. 829 (1970). Because this instruction concerned defendant's sole defense, we will consider whether it was error not to give the instruction in its proper form.

⁹ The apparent reason courts have trouble giving an appropriate separate instruction on the good-faith defense is that the concept is so closely interwoven with "willfulness," on which the courts almost always will instruct. Because instructions should be tailored to the facts of the case, we are reluctant to suggest the form of any instruction. Nevertheless, because of the difficulties in these failure-to-file cases, we set forth here instructions similar to ones we have recently approved. These instructions are only models and should be modified to fit the facts of a specific case.

"Willfulness is an essential element of the crime of failing to file a return and the crime of supplying false or fraudulent information. You are instructed that an act is done 'willfully' if it is done voluntarily and intentionally with specific intent to do that which the law forbids or to not do that which it requires.

The word 'willfully' used in connection with the offense charged in this case means a voluntary, intentional violation of a known legal duty--that is, the defendant voluntarily and intentionally did not file an income tax return, which he was required by law to file and which he knew he was required to file.

The government need not prove that the defendant intended to defraud it or to evade the payment of any taxes to make the defendant's failure to file qualify as willful under this provision of the law.

Defendant's conduct is not 'willful' if he acted through negligence, inadvertence, mistake, or good-faith misunderstanding of the requirements of the law.

Good faith. Defendant asserts a defense of good-faith misunderstanding. You are instructed that if defendant had a good-faith misunderstanding of the law's requirements to report the income at issue here he is not guilty of the offense. It should be pointed out, however, that neither defendant's disagreement with the law nor his own belief that the law is unconstitutional--no matter how earnestly held--constitutes a defense of good-faith misunderstanding or mistake. It is the duty of all citizens to obey the law regardless of whether they agree with it.

As an example, if the evidence shows that a defendant honestly believed that lottery winnings did not constitute taxable income, he would not be guilty of criminal tax evasion if he failed to declare his winnings. But if that individual knew his winnings consistently were held taxable, but he did not declare them as income because he believed they should not be taxable, he would be guilty."

¹⁰ In United States v. Rothbart [84-1 USTC ¶9104 ], 723 F.2d 752 (10th Cir. 1983), this court addressed a trial court's refusal to give specific instructions on a good-faith defense in a tax evasion case. In Rothbart the defendant was convicted of failure to file timely tax returns. Id. at 753. The defendant requested the trial court to instruct the jury that a good-faith "misunderstanding of the law" is a defense. Id. at 755. Instead the trial court, like that here, instructed the jury that a failure to file was not willful if "due to accident, inadvertence, negligence, or mistake." Id. In affirming we found that this instruction on intent sufficiently presented the defendant's theory to the jury. Id.

Hopkins did not explicitly overrule the decision in Rothbart. It did, however, overrule one of the decisions on which the Rothbart court relied for its conclusion that a specific good-faith instruction need not be given. See Hopkins , 744 F.2d at 718 (overruling United States v. Westbo, 576 F.2d 285 (10th Cir. 1978)). Thus the precedential value of Rothbart is tenuous, and we believe the Hopkins rationale applies to the instant case.

¹¹ Because the government agrees that remand is proper, we do not reach the question of whether defendant's failure to request an order from the court or otherwise pursue his request diligently constitutes a waiver of his right to inspect jury records. A district court should, as a matter of course, avoid confusion by issuing an order granting a proper §1867(f) request. See Government of the Canal Zone v. Davis , 592 F.2d 887, 889 (5th Cir. 1979).

 

 

[64-2 USTC ¶9629] United States of America , Plaintiff v. William B. England, a/k/a William Benjamin England, and William Bernard England, a/k/a William B. England, Jr., Defendants

U. S. District Court, East. Dist. Ill., Criminal No. 19548, 229 FSupp 493, 5/12/64

[1954 Code Sec. 7201]

Criminal proceedings: Evasion of income tax by concealment of real property subject to levy: Motions for acquittal, new trial and in arrest of judgment.--Upon conviction under an indictment charging attempted evasion of income tax by concealment of real property to avoid tax levy, the defendants, members of one family, filed separate motions for acquittal, new trial and a combined motion in arrest of judgment. The grounds for the several motions filed by the various defendants were numerous and varied as to each of them. The present criminal proceeding resulted from assessments made with respect to returns filed which had been determined to have been false and fraudulent. The court determined the original assessment, which had been also attacked in the motions filed on diverse grounds, to be valid and, denying the various motions made, held that the evasion of income taxes by the attempted concealment of assets subject to levy was an indictable offense within the meaning of Code Sec. 7201, which embraces attempts to evade payment of tax.

Carl W. Feickert, United States Attorney, East St. Louis, Ill., for plaintiff. Wayne H. Bigler, Jr., 7 N. 7th St., St. Louis, Mo., John J. Hoban, 120 N. Main St., East St. Louis, Ill., for defendants.

JUERGENS, Judge:

A one-count indictment was retunred by the grand jury against the defendants, William B. England, a/k/a William Benjamin England, and William Bernard England, a/k/a William B. England, Jr. The indictment, generally stated, charges that commencing on or about the 27th day of June, 1955, and continuing to the date of the return of the indictment, the defendants, William B. England, a/k/a William Benjamin England, and William Bernard England, a/k/a William B. England, Jr., did wilfully and knowingly attempt to evade and defeat the payment of income taxes, then due and owing by defendant William B. England and Mary England to the United States of America for the year 1944, in the amount of $9,849.78, more or less, and by William B. England for the years 1945 and 1946, in the amount of $17,182.19, more or less, duly assessed against William B. England and Mary England on February 4, 1955, the said William B. England then having and owning real property subject to levy by the United States of America for the collection of such taxes, by concealing and attempting to conceal from the Director of Internal Revenue the nature and extent of real property owned by said William B. England and the location thereof and by wilfully and knowingly making false statements as to the ownership and interest in said real property owned by William B. England and located at 1118-1120 North Ninth Street and at 803-805 Exchange Avenue in the City of East St. Louis, Illinois, in violation of Title 26 United States Code, Section 7201, and Title 18 United States Code, Section 2.

A jury found both defendants guilty.

Separate motions of the defendants for acquittal, for new trial, and their combined motion in arrest of judgment are for disposition.

In support of their motion in arrest of judgment, the defendants assert that the indictment does not state facts sufficient to constitute an offense against the United States .

The indictment charges the defendants not with the evasion of income tax but rather with wilfully and knowingly attempting to evade and defeat the payment of income tax by concealing and attempting to conceal assets belonging to William B. England and by making false statements as to the ownership of certain properties. A person or persons can evade and defeat tax by a combination of such things as failing to file a return, filing a false return, failing to keep records, concealing income, or other means. These things can provide the means of evading or defeating the tax in the first instance by preventing an assessment of it either by the taxpayer or by the Commissioner, Cohen v. United States, 9th Cir., 1962, [62-1 USTC ¶9202] 297 F. 2d 760. The two defendants here are charged with attempting to evade the payment of income taxes due and owing which were assessed against William B. and Mary England on February 4, 1955. The statute under consideration defines at least two separate crimes; namely, the attempt to evade or defeat tax and the attempt to evade or defeat payment of tax. Here the defendants are charged with the latter. The indictment states sufficient facts to constitute an offense against the United States ; namely, wilfully and knowingly attempting to evade and defeat the payment of income tax.

The defendants' motion in arrest of judgment is without merit and will be denied.

In support of his motion for acquittal, defendant William Bernard England (hereinafter referred to as "England, Jr.") asserts that the evidence affirmatively showed there was no valid assessment of the taxes alleged to be due in the indictment within the statutory period for making such assessment; that there was no evidence of an assessment or of taxes due and owing by defendant William B. England admitted or admissible against this defendant; that there was no evidence of any actions or words by this defendant indicating a purpose to evade collection of back taxes allegedly owed by defendant William B. England by reason of the actions and false statements charged in the indictment; that there was no evidence of any action by this defendant to evade taxes which were not outlawed by the Statute of Limitations; that there was no evidence that this defendant ever intentionally acted to conceal properties or make false statements concerning them to evade William Benjamin England's alleged back taxes; that the evidence affirmatively showed that the only knowledge about the interest or ownership of properties referred to in the indictment was obtained by this defendant from William B. England and not on the basis of personal knowledge; that the evidence affirmatively showed that any taxes owed by defendant William B. England and properly assessed for 1944, 1945 and 1946 were collected long before February 4, 1955 and that it was impossible for this defendant to attempt to evade payment of any such taxes; that there was no corroborative evidence of the falsity of any statements attributed to this defendant; and that the indictment alleged more than one crime in the only count and was duplicitous.

In support of his motion for new trial, defendant England, Jr., asserts that the Court erred in denying his motion for acquittal made at the conclusion of the plaintiff's case and his motion for acquittal made at the conclusion of the evidence; that the verdict is contrary to the weight of the evidence; that the verdict is not supported by substantial evidence admitted or admissible against this defendant on all elements of the case; that the verdict is contrary to the statutes of the United States relating to the assessment and collection of taxes; that the Court erred in admitting testimony against this defendant of witnesses Curtis Matthes, John Kassly, Norman Mueller, Leo McCarthy, Margaret Dougherty and Paul Mueller as well as exhibits identified by them or by other means, over this defendant's objections; that the Court erred in charging the jury and refusing to charge the jury as requested; that this defendant was substantially prejudiced and deprived of a fair trial by reason of a statement made by the attorney for the government, wherein he referred to this defendant as "an ambulance chaser"; that the Court erred in denying this defendant's motion for a mistrial; that the Court erred in admitting testimony and exhibits reflecting penalties and interest charged to defendant William Benjamin England by the government but not alleged in the indictment and by admitting testimony and exhibits setting out amounts of taxes, interest and penalties allegedly owed which were far in excess of the amounts charged in the indictment, over defendants' objections; that the Court erred in admitting testimony and exhibits designed to show actions done by this defendant which were outlawed by the Statute of Limitations, over defendants' objection; that the Court erred in admitting testimony and evidence against both defendants which was admissible, if at all, only against defendant William Benjamin England, over this defendant's objections.

In support of his motion for acquittal, defendant William Benjamin England (hereinafter referred to as "England, Sr.") asserts that the evidence affirmatively showed there was no valid assessment of the taxes alleged to be due in the indictment within the stautory period for making such assessment; that there was no evidence of taxes due and owing by this defendant as alleged in the indictment; that there was no evidence of any actions or words by this defendant indicating a purpose to evade collection of back taxes allegedly owed by this defendant by reason of the actions or false statements charged in the indictment; that there was no evidence of any action by this defendant to evade taxes which was not outlawed by the Statute of Limitations; that there was no corroborative evidence, aside from this defendant's alleged admissions that any false statements were made or actions done to conceal properties to evade taxes; that the evidence affirmatively showed that any taxes owed by this defendant and properly assessed for 1944, 1945 and 1946 were collected long before February 4, 1955, and that it was impossible for this defendant to attempt to evade payment of any such taxes; that the indictment and the evidence affirmatively showed that this defendant was placed in jeopardy twice for the same offense; and that the indictment alleged more than one crime in the only count and was duplicitous.

In support of his motion for new trial, defendant England, Sr., asserts that the Court erred in denying this defendant's motion for acquittal made at the conclusion of the plaintiff's case and at the conclusion of the evidence; that the verdict is contrary to the weight of the evidence and is not supported by substantial evidence on all elements of the case; that the verdict is contrary to statutes of the United States relating to assessment and collection of taxes; that the Court erred in admitting testimony of witnesses Curtis Matthes, Norman Mueller and Paul Mueller as well as exhibits identified by them or by other means, over this defendant's objections; that the Court erred in charging the jury and refusing to charge the jury as requested; that this defendant was substantially prejudiced and deprived of a fair trial by reason of a statement made by the attorney for the government during cross-examination of William B. England, Jr., an attorney, when the attorney for the government referred to the co-defendant as "an ambulance chaser," said defendant being this defendant's son; that the Court erred in denying defendant's motion for a mistrial and in admitting testimony and exhibits reflecting penalties and interest charged to this defendant by the government but not alleged in the indictment and by admitting testimony and exhibits setting out amounts of taxes, interest and penalties allegedly owed which were far in excess in the amounts charged in the indictment, over this defendant's objections; that the Court erred in admitting testimony and exhibits designed to show actions done by this defendant which were outlawed by the Statute of Limitations and in admitting testimony and evidence against both defendants which was admissible, if at all, only against defendant William B. England, Jr., over this defendant's objections.

Section 6501 of the Internal Revenue Code of 1954 provides in pertinent parts as follows:

"§6501. Limitations on assessment and collection

"(a) General rule.--Except as otherwise provided in this section, the amount of any tax imposed by this title shall be assessed within 3 years after the return was filed * * *

* * *

"(c) Exceptions.--

(1) False return.--In the case of a false or fraudulent return with the intent to evade tax, the tax may be assessed, or a proceeding in court for collection of such tax may be begun without assessment, at any time.

* * *

(4) Extension by agreement.--Where, before the expiration of the time prescribed in this section for the assessment of any tax imposed by this title, * * *, both the Secretary or his delegate and the taxpayer have consented in writing to its assessment after such time, the tax may be assessed at any time prior to the expiration of the period agreed upon. The period so agreed upon may be extended by subsequent agreements in writing made before the expiration of the period previously agreed upon."

The evidence established that defendant England , Sr., filed 1944, 1945 and 1946 income tax returns. The evidence further established that these returns were later determined to be false and fraudulent and filed with intent to evade or defeat the income taxes and that defendant England , Sr., pleaded guilty to filing false and fraudulent income tax returns for the years 1945 and 1946. The evidence also established that defendant England , Sr., executed waivers of restrictions as to the assessment of the tax for the years 1944, 1945 and 1946. These waivers contained fraud penalty provisions, and by signing the waivers William B. England and his wife, Mary England, agreed to the tax deficiency and fraud penalty. Assessment of a tax can be made at any time when a false or fraudulent return is filed with intent to evade tax, and where there is fraud with intent to evade tax the Statute of Limitations is tolled. Kalil v. C. I. R., 5th Cir., 1959, [59-2 USTC ¶9750] 271 F. 2d 550.

If it is contended that the 1939 Internal Revenue Code applies, the assessment was equally proper since the Statute of Limitations does not apply since Section 276(a) provides in pertinent parts as follows:

"In the case of a false or fraudulent return with intent to evade tax or of a failure to file a return, the tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment at any time."

Regardless of whether the 1939 Code or the 1954 Code is applicable to the assessment here in question, the Statute of Limitations does not apply since the situation presented here comes clearly within the exceptions provided therein.

The defendants contend that the Court erred in giving government's suggested instruction No. 10 and especially the second paragraph thereof, which provides as follows:

"I now charge you as a matter of law that the assessments made against the defendant William B. England on February 5, 1955, in the amount of $9,849.78 as to the years 1944, and in the amount of $17,182.19 as to the years 1945 and 1946, have been valid obligations of the taxpayer to the United States Government since the dates on which the respective assessments were made until the date, November 27, 1962, on which the present indictment was returned and in the amounts, to the extent that all or any portion of these amounts have not been paid, which I have just enumerated."

Prior to the giving of the latter part of the instruction hereinabove set out, the Court in the same instruction instructed the jury that evidence, both documentary and oral, relating to the assessments was admitted and explained the manner in which an assessment comes into existence and further instructed that the assessment was prima facie correct for all purposes and that once assessed became a valid obligation of a taxpayer and that it became the duty of the Internal Revenue Service to collect the amount assessed and that if the taxpayer neglects or refuses to pay the assessment within 10 days after notice and demand, it is lawful for the Revenue Service to make collection by levy on the taxpayer's property.

The question of the validity of the assessment was argued by the defendants, based on the failure to make the assessment within the limitation period. This contention has hereinabove been disposed of and will not again be considered.

There was some argument by the counsel for the government and counsel for the defense as to whether Section 6501(c)(1) or 6501(c)(2) applied. Section 6501(c)(1) provides exceptions for the limitation period when a false or fraudulent return has been filed with intent to evade tax and (c)(2) applies to wilful attempt to evade or defeat payment and makes no reference to the filing of a return. There was evidence admitted which established that fraudulent returns had been filed for the years 1944-46 as well as evidence to show that a valid assessment had been made against England, Sr., for the years in question. Defendants argue that the crime with which they have been charged deals with attempting to defeat and evade the payment of income taxes by a different method than by filing false or fraudulent returns and, therefore, argue that this is not a case of false or fraudulent return with intent to evade tax. A wilful intent to evade taxes is not here charged. Rather the charge is that the defendants attempted to defeat and evade the payment of taxes which had previously been assessed. The assessment was based upon a case of a false or fraudulent return with the intent to evade taxes. All of the evidence bearing on the validity or invalidity of the assessment substantiated its validity. There was no evidence whatever to show that the assessment was invalid. It appears that the sole contention of the defendants as concerns the validity of the assessment dealt with whether Section 6501(c)(2) or 6501(c)(1) applies. Under these circumstances the question was wholly a matter of law to be decided by the Court rather than a factual question which should have been submitted to the jury.

In United States v. Cohen, 9th Cir., 1962, [62-1 USTC ¶9202] 297 F. 2d 760, the Court of Appeals for the Ninth Circuit held that a comparable instruction, wherein the Court ruled that taxes had been duly assessed against Cohen for certain specified years, was proper and instructed the jury that the assessments were valid. In the Cohen case there was some question as to whether there had been proper notice given of the assessments. Here there is no such question. All of the evidence substantiates the fact that the assessment was proper, leaving for determination by the Court only the question as to which section of the statute was applicable. Such being a question of law, the instruction was properly given.

Even assuming that whether or not there was a valid assessment was a question of fact, it is not reversible error for the court in its instructions to assume the existence of facts, the existence of which is undisputed or proved beyond controversy. United States v. Jonikas, 7th Cir., 1952, 197 F. 2d 675. And when a fact is not made an issue by defendant and it is shown without controversy by the evidence, the trial judge does not commit reversible error in stating that fact to the jury. Malone v. United States , 6th Cir., 1956, 238 F. 2d 851.

Defendant England, Jr., asserts that there was no evidence admitted against him that there had been a valid assessment made against his father for the taxes involved and that since this was an essential element of the case, he was entitled to acquittal. He argues that the evidence in the case relating to the assessment of the taxes was admitted only as to the father and not as to him. It is true that the certificates of assessment were admitted against England , Sr., and were not admitted against England , Jr. The evidence, however, substantially established that England , Jr., had knowledge that his father owed taxes, both by his own admission and by documentary evidence and by testimony of other witnesses.

Defendants assert that reversible error was committed when the government's attorney referred to England , Jr., as "an ambulance chaser."

During the course of cross-examination the following resulted:

"Q. Now, I don't believe you stated any reason in your testimony with Mr. Bigler that one of your reasons was to get law business out of it?

"A. No, I don't believe I gave that as a reason.

"Q. No, I don't believe you did.

"A. It being such an incidental thing that--

"Q. Do you know what is known as an ambulance chaser in law practice?"

Attorney for the defense at this point objected; the Court sustained the objection, ordered that the remark be stricken and instructed the jury to disregard it. Whereupon, the attorney for the defense asked the Court to declare a mistrial, asserting that the remark was unjustified completely on the evidence and that it was prejudicial to the extent that the defendant could not get a fair trial before the jury that had heard the remark. The Court overruled the motion for mistrial.

While the question was ill-advised, the Court promptly struck the remark and advised the jury to disregard it. Under the circumstances the question asked was not sufficient that this Court should have declared a mistrial and was not so prejudicial that it affected either of the defendants' receiving a fair and impartial trial by the jury. Had the remark been repeated, a different ruling might be in order. However, under the circumstances there has been no showing of prejudice sufficient to justify this Court in granting a mistrial or granting a new trial.

The defendants also contend that the admission of testimony and exhibits reflecting penalties and interest charged to defendant William Benjamin England by the government but not alleged in the indictment and the admission of testimony and exhibits setting out amounts of taxes, interest and penalties allegedly owed, which were far in excess of the amounts charged in the indictment, was erroneous.

In United States v. Ford, 2nd Cir., 1956, [56-2 USTC ¶9823] 237 F. 2d 57, the government had admitted items of net worth which purported to show additional unreported net income. The Court held that the evidence was highly relevant both as to the issue of defendant's intent and to refute defendant's claim as to a substantial cash hoard on hand at the opening indictment date, consisting of receipts from Clarence or Aunt Mary prior to 1942, and held that the evidence was properly admitted. And in United States v. Iacullo, 7th Cir., 1955, 266 F. 2d 788, the Court had the following to say:

"As a general rule, upon the trial of an accused person, evidence of another offense, wholly independent of the one charged, is inadmissible. As was said in Bracey v. United States, 79 U. S. App. D. C. 23, 142 F. 2d 85, at page 87, this rule is subject to some well established exceptions. For instance, such evidence is admissible if it is so related to or connected with the crime charged as to establish a common scheme or purpose so associated that proof of one tends to prove the other, or if both are connected with a single purpose and in pursuant of a single object; as well as to establish identity, guilty knowledge, intent and motive."

The admission of the objected testimony and exhibits was proper to prove the legality of the assessments against William B. England and Mary England.

The defendants' assertions that the motions for acquittal should have been allowed at the conclusion of plaintiff's case and at the conclusion of all the evidence and that the verdict is contrary to the weight of the evidence and is not supported by substantial evidence and is contrary to the statutes of the United States are without merit. The evidence against both of the defendants was overwhelming. The evidence established the guilt of the defendants as charged in the indictment against both of the defendants.

Both defendants assert that the indictment alleged more than one crime in the only count and was duplicitous. The defendants do not specify what crimes they believe are charged; however, the Court will assume that the defendants refer to the fact that more than one year's taxes are involved in the attempt to evade and defeat the payment thereof. Here only one offense is charged; namely, that of attempting to evade and defeat the payment of income taxes, and the fact that more than one year's taxes are involved does not result in charging more than one crime in the indictment.

England , Sr., asserts that he was placed in jeopardy twice for the same offense. He apparently refers to his prior conviction upon a plea of guilty to an attempt to evade and defeat the assessment of taxes. The attempt to evade and defeat assessment of a tax and the attempt to evade and defeat the payment of a tax are two separate and distinct offenses. Cohen v. United States, supra.

The motion of William Bernard England for acquittal should be denied; the motion of William Benjamin England for acquittal should be denied; the motion for new trial of William Bernard England should be denied; and the motion for new trial of William B. England should be denied.

 

 

[63-1 USTC ¶9245] United States of America v. William A. Mousley, Mae E. Mousley, Appellants

(CA-3), U. S. Court of Appeals, 3rd Circuit, Nos. 13,969, 13,970, 311 F2d 795, 1/22/63, Affirming District Court, 61-2 USTC ¶9515, 194 F. Supp. 119, 62-1 USTC ¶9380, 201 F. Supp. 510

[1954 Code Secs. 6531 and 7201]

Statute of limitations: Criminal prosecutions: Beginning of period: Tax evasion.--The Court of Appeals affirmed per curiam the conviction and sentence of the defendants for evasion of taxes. The District Court had held that the statute of limitations on criminal prosecutions began to run from the time allegedly false statements were made as a part of either a compromise offer of prior years' taxes or an application for discharge of tax liens and not from the tax return years, since the question was one of making a false statement to evade payment of assessed taxes, not one of filing a false return.

[1954 Code Sec. 7201]

Crimes: Tax evasion: Motion in arrest of judgment: Sufficiency of indictment.--Conviction for tax evasion was affirmed. The District Court had denied the defendants' motion in arrest of judgment on the grounds that the indictment was sufficient since it contained facts sufficient to constitute an offense against the United States .

[1954 Code Sec. 7201]

Crimes: Tax evasion: Motions for acquittal or a new trial: Sufficiency of evidence.--Conviction for tax evasion was affirmed. The District Court had denied motions for acquittal or a new trial since there was sufficient evidence to support the jury's verdict on seven of nine counts. Motion for acquittal was granted on two counts where the evidence was not sufficient to support the verdict of guilty.

Lester J. Schaffer, Zink, Shinehouse & Holmes, 1610 Two Penn Center Plaza, Philadelphia 2, Pa., for appellants. J. Shane Creamer, First Assistant United States Attorney, 4042 U. S. Court House, Philadelphia 7, Pa., for appellee.

Before KALODNER, HASTIE and GANEY, Circuit Judges.

Opinion of the Court

PER CURIAM:

Upon review of the record we find no error. The judgment of sentence dated February 26, 1962 will be affirmed.

 

 

[61-1 USTC ¶9289] United States of America , Plaintiff v. Frank Leonard Wortman, Elmer Sylvester Dowling, Edward Wortman, George Frank, Gregory Moore, and Sam Magin, Defendants

U. S. District Court, East. Dist. Ill., Criminal No. 19199, 10/28/60

[1954 Code Secs. 7201, 7206(2) and 1939 Code Sec. 145(b)]

Criminal procedure: Pretrial motions: Motions to dismiss: Change of venue: Improper Grand Jury: Inspection and discovery: Pretrial production and inspection: Severance: Bill of particulars: Testimony before Grand Jury: Inspection of Grand Jury minutes.--In criminal proceedings involving a nine-count indictment, including a conspiracy count, the court ruled on various motions: (1) Denied defense motions to dismiss indictments which charged that the government engaged in prejudicial publicity efforts, that indictments failed to state sufficient facts, and that overt acts were alleged in the disjunctive rather than the conjunctive; (2) Granted elections of defendants to be tried in the districts of their residence at the time of the alleged commission of the offenses charged, but retained jurisdiction of the conspiracy count; (3) Denied motions to dismiss which charged the improper and illegal selection of the Grand Jury; (4) Denied motions for inspection and discovery because of lack of showing of materiality of items requested and of reasonableness of request; (5) Denied motions for severance because of insufficiency of reasons for request; (6) Denied certain motions for bills of particulars because of sufficiency of indictment and transferred another motion for a bill of particulars to another district because of election granted under (2) above; (7) Denied motions to dismiss and suppress indictments which charged violation of constitutional rights because of Grand Jury subpoenas and procurement of testimony before Grand Jury; (8) Denied motions to inspect and copy Grand Jury minutes; and (9) Denied motions of inspection and pre-trial production of documents and evidence under Rule 17(c) of the Federal Rules of Criminal Procedure and quashed subpoenas served thereunder upon the U. S. Attorney.

C. M. Raemer, United States Attorney, Room 327, Post Office Bldg., East St. Louis, Ill., for plaintiff. Morris A. Shenker, 408 Olive St. , St. Louis , Mo. , for Frank Leonard Wortman and Elmer Sylvester Dowling. Saul E. Cohn, 601 Murphy Bldg., East St. Louis, Ill., for Edward Wortman. Rob ert J. O'Hanlon, 7 North 7th St. , St. Louis 1, Mo. , for George Frank. Norman London, 705 Olive St. , St. Louis 1, Mo. , for Gregory Moore. Ray M. Foreman, 708 Baum Bldg., Danville , Ill. , for Sam Magin.

JUERGENS, District Judge:

A nine count indictment was returned against the defendants, Frank Leonard Wortman, Elmer Sylvester Dowling, Edward Wortman, George Frank Gregory Moore and Sam Magin.

Counts I, II and V of the indictment charge that the defendant Frank Leonard Wortman did wilfully and knowingly attempt to evade and defeat a large part of income tax due and owing by him and his wife to the United States of America for the years 1953, 1954 and 1955.

Counts III, IV and VI charge the defendant Elmer Sylvester Dowling with having wilfully and knowingly attempted to evade and defeat a large part of the income tax due and owing by him and his wife to the United States of America for the years 1953, 1954 and 1955.

Counts VII and VIII charge that the defendant Gregory Moore did wilfully and knowingly aid and assist in and produced, concealed and advised the preparation and presentation to the District Director of Internal Revenue at Springfield , Illinois , of false and fraudulent partnership returns of income.

Count IX is a conspiracy count and charges that all six of the defendants did unlawfully, wilfully and knowingly combine, conspire, confederate and agree together to violate certain enumerated laws of the United States.

[Motions Filed]

All of the defendants have filed their motion to dismiss the indictment based on the allegation that the Government has engaged in such efforts at publicity which will result in prejudice to the defendants and also on the grounds that the indictment is insufficient.

The defendants, Dowling, Magin, Moore and Frank, have filed their separate motions electing to be tried in the districts of their residence at the time of the alleged commission of the offenses and their further motions requesting that the motions filed herein be transferred to the districts of their residence.

Each of the defendants has filed his separate motion to secure the names of the grand jurors who served on the grand jury drawn on June 15, 1959.

Each defendant filed his separate motion to dismiss the indictment based on an alleged improper grand jury.

Each of the defendants filed his separate motion for inspection and discovery under Rule 16.

Each defendant filed his motion for production and inspection under Rule 17(c). Subpoenas were issued pursuant to the motion. The United States has filed its motion to quash the subpoenas.

The defendants have each filed a separate motion for severance.

The defendants, Frank Leonard Wortman and Elmer Sylvester Dowling, filed their joint motion for bill of particulars. Defendant Gregory Moore filed his separate motion for bill of particulars. All defendants filed their motions for bill of particulars as to Count IX of the indictment.

The defendants, Magin, Frank, Moore and Edward Wortman, filed their separate motions to dismiss the indictment because they had been called as witnesses before the grand jury and also filed their separate motions to suppress because of testimony given before the grand jury.

The defendants, Magin, Moore, Frank and Edward Wortman, filed their motion to inspect the grand jury minutes.

[Joint Motions to Dismiss]

In support of their joint motion to dismiss the indictment, the defendants alleged that (1) the Government, by and through its officers, has engaged in such efforts at publicity, calculatedly prejudicial to the defendants, that it has made it impossible for them to secure a fair trial; (2) each count of the indictment fails to state facts sufficient to constitute an offense against the laws of the United States; (3) it appears upon the face of each count of the indictment that no offense was committed by any of these defendants against the laws of the United States; (4) the indictment fails to state facts with sufficient certainty and definiteness to enable the defendants to plead the judgment of this Court in bar of further prosecution; (5) the indictment is in other respects insufficient. By supplement to the joint motion to dismiss the indictment, the defendants assert that the overt acts in the substantive counts of the indictment, alleging an attempt to evade taxes, are alleged in the disjunctive rather than the conjunctive and that consequently the indictment is insufficient in that it is in this respect uncertain and indefinite.

Supplementing their motion to dismiss the indictment for the reason that the Government has engaged in causing the publication of publicity adverse to the defendants, the defendants have filed a number of photostatic copies of news articles appearing in the St. Louis Post-Dispatch, the St. Louis Globe-Democrat and the East St. Louis Journal.

At the oral argument on the motions, newspaper reporters from the various newspapers testified concerning the source of the information which appeared in the various news articles in their respective newspapers. Examination of these witnesses utterly failed to support the defendants' contention that the news articles, which they allege are prejudicial, were inspired by the Government or any of its agents. Some small part of the information published was obtained by reporters through discussions with various investigating officers over a period of years.

Information concerning the length of time that the Internal Revenue Service had been investigating the conduct of the defendants was obtained from an official of the Internal Revenue Service. This was, however, the only direct information which the reporters testified was received directly from agents of the Government. Such release of information can hardly be deemed to have been an engagement at publicity which would be calculated to prejudice the defendants at the trial and to attempt to deny them a fair trial.

The Court has examined the publications and finds that the conduct of the defendants has been discussed in the various newspapers printed in this area. Many of these articles have been other than flattering. However, the Court finds that the publications do not have a sufficient bearing on the charge here as would result in causing a prejudice to the rights of these defendants.

Generally in items 2, 3, 4 and 5 in support of their motion to dismiss, the defendants allege that the indictment fails to state sufficient facts to constitute an offense against the United States; that the indictment fails to show that an offense was committed by any of the defendants; that the indictment fails to state facts with sufficient certainty which would enable the defendants to plead the judgment of this Court in bar of further prosecution; and that the indictment is otherwise insufficient.

Rule 7(c) of the Federal Rules of Criminal Procedure, Title 18, U. S. C. A., provides in pertinent parts as follows:

". . . The indictment or the information shall be a plain, concise and definite written statement of the essential facts constituting the offense charged . . ."

This rule is designed to simplify indictments by eliminating unnecessary phraseology. Nevertheless, it does not, nor was it intended, that this rule should alter or modify the formal functions and requirements of an indictment. Every essential element of the offense sought to be charged in an indictment must still be alleged. Wilson v. United States , 158 F. 2d 65. It is not necessary for the indictment to allege mere matters of evidence; however, sufficient facts must be alleged to apprize the accused of the crime charged against him with sufficient certainty as will enable him to make his defense and avail himself of a conviction or acquittal for protection against a subsequent prosecution for the same offense. Every essential ingredient of the offense must be alleged with precision and certainty. Spies v. United States [43-1 USTC ¶9243], 317 U. S. 492. An examination of the indictment in the light of the sections of the statute alleged to have been violated discloses that the charges made in the indictment substantially follow the statute, which embodies all of the elements of the crime. The indictment further sets out the alleged acts constituting the offense. Each count states facts sufficient to give notice to the defendants of the crime against which they are to defend. The facts alleged are sufficient to give this Court jurisdiction, and sufficient facts are alleged to enable the defendants to plead the judgment in this cause as a defense to a further prosecution for the same offense.

The defendants further assert in their supplement to the joint motion to dismiss the indictment that the event acts in the substantive counts of the indictment are alleged in the disjunctive rather than in the conjunctive and are, therefore, insufficient.

It is true that where a count states two or more separate offenses, it is duplicitious and faulty. According to the authorities, when a statute denounces several things joined disjunctively with "or," as a crime, the pleader, in drawing an indictment, should connect them by the conjunctive "and," and under such an indictment guilt may be established by proof of any one of the things conjunctively charged. The Court has examined the indictment and the statutory provisions upon which the indictment is based and finds that the indictment does not join two prohibited purposes alleged in the statute by a disjunctive. The substantive counts of the indictment charge that the defendants named in Counts I, II, III, IV, V and VI did "wilfully and knowingly attempt to evade and defeat a large part of the income tax due and owing." Counts VII and VIII charge that the defendant named therein "did wilfully and knowingly aid and assist in, and procure, counsel and advise the preparation and presentation to the District Director of Internal Revenue at Springfield, Illinois, of a false and fraudulent partnership return of income . . ." Only one crime is charged in each of the substantive counts. The argument of the defendants that there is more than one crime charged in the indictment, which are joined by the disjunctive, is without merit.

The defendants' joint motion to dismiss the indictment must be denied.

[Elections for Change of Venue]

The defendants, Gregory Moore, George Frank, Sam Magin and Elmer Sylvester Dowling, have filed their election to be tried in the district of their residence at the time of the alleged commission of the offenses with which they are charged in the indictment.

This election is based on the provisions of Section 3237, Title 18, U. S. C. A., which provides in pertinent parts as follows:

"§3237. Offenses begun in one district and completed in another

"(a) Except as otherwise expressly provided by enactment of Congress, any offense against the United States begun in one district and completed in another, or committed in more than one district, may be inquired of and prosecuted in any district in which such offense was begun, continued, or completed.

"Any offense involving the use of the mails, or transportation in interstate or foreign commerce, is a continuing offense and, except as otherwise expressly provided by enactment of Congress, may be inquired of and prosecuted in any district from, through, or into which such commerce or mail matter moves.

"(b) Notwithstanding subsection (a), where an offense involves use of the mails and is an offense described in section 7201 or 7206(1), (2), or (5) of the Internal Revenue Code of 1954 (whether or not the offense is also described in another provision of law), and prosecution is begun in a judicial district other than the judicial district in which the defendant resides, he may upon motion filed in the district in which the prosecution is begun, elect to be tried in the district in which he was residing at the time the alleged offense was committed: . . ."

The evidence established that the defendant Gregory Moore resides in the Eastern District of Missouri and was residing in the Eastern District of Missouri at the time the alleged offenses were committed; that the defendant George Frank resides in the Eastern District of Missouri and was residing in the Eastern District of Missouri at the time the alleged offenses were committed; that the defendant Sam Magin resides in the Southern District of Illinois and was residing in the Southern District of Illinois at the time the alleged offenses were committed; that the defendant Elmer Sylvester Dowling resides in the Southern District of Illinois and was residing in the Southern District of Illinois at the time the alleged offenses were committed.

Count III of the indictment charges the defendant Elmer Sylvester Dowling with having violated Section 145(b), Title 26, United States Code (Internal Revenue Code of 1939). Counts IV and VI charge the defendant Elmer Sylvester Dowling with violations of Section 7201, Title 26, United States Code (Internal Revenue Code of 1954).

Section 145(b), Title 26, United States Code (Internal Revenue Code of 1939), although not specifically enumerated in Section 3237, above set out, would appear to be included therein. The offense set out in Section 145(b) is also contained in Section 7201; and, therefore, the violation of Section 145(b) of the 1939 Code would also be included in the provisions of Section 3237 pertaining to the election to be tried in the district of residence. The violation charged in Count III of the indictment against Elmer Sylvester Dowling should be treated in the same manner as the violation charged against the defendant Dowling in Counts IV and VI.

Counts VII and VIII charge the defendant Gregory Moore with violations of Section 7206(2), Title 28, United States Code.

Count IX of the indictment is a general conspiracy count and alleges violation of Section 371, Title 18, U. S. C. A.

The obvious intent of Congress in passing paragraph (b) of Section 3237 was to permit a defendant to be tried in the district of his residence, thus avoiding the necessity of a defendant, who is charged with a violation of the Internal Revenue laws, having to travel great distance to defend a charge under these sections. The Congress apparently did not provide the courts with discretion in determining the facts or circumstances under which a transfer would be justified; rather, Congress intended that defendants be given the absolute right to be tried for alleged violation of the sections enumerated in paragraph (b) of Section 3237 in the district of their residence regardless of the distance involved.

The situs of the trial in the Southern District of Illinois is approximately one hundred miles from the residence of the defendant Elmer Sylvester Dowling. The situs of the trial in the Eastern District of Illinois is approximately nine miles from the defendant's residence. The distance from the United States District Court for the Eastern District of Missouri ( St. Louis ) is but a few miles distance from the place of holding court in East St. Louis in the Eastern District of Illinois. However, inasmuch as the courts do not have any discretion in the matter, the Court has no alternative but must transfer for trial those counts of the indictment charging violation of the sections enumerated in paragraph (b) of Section 3237.

Section 3237(b), Title 18, is limited to violations of the sections enumerated therein and does not require transfer of a cause involving the violation of Section 371, Title 18, United States Code. Section 3237(b), Title 18, does not require the conspiracy charge to be transferred even though the conspiracy may have been in furtherance of a violation of the offenses enumerated therein. If Congress had intended that conspiracies to violate the enumerated sections be also transferred to the district of residence upon request of the persons so charged, it could have said so.

The defendants have also filed their motions requesting that the motions directed against the indictment be transferred to the districts of their residence.

The defendants being entitled to be tried in the districts of their residence at the time of the commission of the alleged offenses, the motions directed against the counts of the indictment which have been transferred should also be transferred to the respective districts for trial.

In accordance with, and because of, the foregoing, this Court did at the time of the oral arguments enter its order transferring Counts III, IV and VI and the motions pertaining thereto for hearing and trial to the Southern District of Illinois, Counts VII and VIII and the motions pertaining thereto for hearing and trial to the Eastern District of Missouri, and retained jurisdiction of Count IX of the indictment and all motions relating thereto.

[Request for Grand Juror's Names]

Each of the six defendants filed a separate motion requesting the Clerk of the United States District Court for the Eastern District of Illinois to furnish to the defendants a complete list of names of all grand jurors and their addresses, drawn under order of June 15, 1959, for service at East St. Louis, Illinois, July 13, 1959, and further requested the names and addresses of those jurors who served on that grand jury.

The defendants ordinarily would not be entitled to this information. The Government in its answer to the motion took a passive attitude to the request and made no objection to supplying the information. The defendants were supplied with the requested information by the United States Attorney at the hearing on the motions.

[Attacking Grand Jury]

The defendants have each filed separate motions to dismiss the indictment and each count thereof, alleging as grounds therefor the following:

"1. The indictment was not returned by a legally constituted grand jury.

"2. The Grand Jury which returned the indictment was an illegal body.

(a) The names of the persons serving as jurors, who returned the indictment, were not publicly drawn from a jury box into which the Jury Commissioner and the Clerk or his deputy, had previously and alternately placed one name in the jury box without reference to party affiliation until the box contained at least Three Hundred (300) names, or such larger number of names as determined by the Court, as required by law.

(b) The names of the persons serving as jurors, who returned the indictment, were not publicly drawn from a box as to which, the Jury Commission determined that at the time of the drawing of the Grand Jury there were at least Three Hundred (300) names in the box of qualified jurors, as required by law.

(c) The names of the persons serving as jurors, who returned the indictment, were not publicly drawn from a box containing the names of not less than Three Hundred (300) qualified persons at the time of such drawing, as required by law.

(d) The names of the persons serving as jurors, who returned the indictment, were not publicly drawn from a box of qualified jurors so as to insure the selection of Grand Jurors without the exercise of discretion, power of choice or arbitrary acts by anyone, as required by law.

(e) The names of the persons serving as jurors were arbitrarily and capriciously selected by the Clerk and Jury Commissioner.

(f) The names of the persons serving as jurors were selected by the Clerk and Jury Commission from a small undefined territorial portion of the Eastern District of Illinois, without any legal authority to make such selection.

(g) The names of the persons contained in the jury box were not qualified jurors chosen by the Jury Commission consisting of the Clerk and the Jury Commissioner, but were all chosen by the Clerk only.

"3. The Jury Commission failed to follow the prescribed statutory requirements in the selection of persons from which the Grand Jury would be chosen.

"4. Such defects in the institution of the prosecution resulted directly from the acts of the Jury Commission, the particulars of which are set out in the affidavit attached hereto and made a part hereof.

"5. The defendant has been denied his lawful and statutory right to challenge grand jurors as drawn or empaneled, by fiat or order of the United States District Court for the Eastern District of Illinois, and by action of the Clerk of said court, by refusing to reveal such names after having returned an indictment against this defendant."

The defendants seek to fortify the motions by an affidavit of Bohlen J. Carter, the jury commissioner, which they allege shows the means and method by which the grand jurors were selected and that the method of selection was not in conformity with the requirements specified in the statute for the selection of jurors and, therefore, the grand jury was improperly drawn. The affidavit referred to and relied on by the defendants was executed on the 7th day of May, 1959, and filed with the Clerk of this Court on the 8th day of May, 1959. The grand jury which returned the indictment here under attack was drawn pursuant to an order of Court on the 15th day of June, 1959. The affidavit could have little bearing on the method of selection followed by the Jury Commissioners in selecting the grand jury which returned this indictment.

Douglas H. Reed, Clerk of this Court, and Bohlen J. Carter, Jury Commissioner, the Jury Commission at the time the grand jury was drawn, testified regarding their actions in selecting the grand jury which returned this indictment.

Douglas H. Reed testified he was the Clerk of the United States District Court for the Eastern District of Illinois and a member of the Jury Commission at the time the grand jury here under attack was selected; that the names of the prospective jurors were secured by the Jury Commission by sending out requests to various persons whose names and reputations were known to the witness or the Jury Commissioner; that generally a form letter was attached, setting forth the standards required of jurors; that on occasion names were given by close acquaintances of the witness without the questionnaire first having been sent and that these names were received from persons whom the witness knew to be qualified to submit names and who were familiar with the requirements of jurors; that when it appeared from the answered questionnaire that an individual was infirm or had some physical or mental deficiency or there was some cause which would render him or her unfit as a juror, such name was not placed in the jury box; that upon receiving the names of qualified jurors, this witness and the Jury Commissioner placed the names received in the jury box; that he never excluded anyone as a juror; that there was no restriction contained in the order pursuant to which this grand jury was drawn and that the grand jurors were drawn from the entire district; that there were more than three hundred (300) names in the jury box; that he always insisted that the Jury Commissioner be present when the names for a jury were drawn; that four years ago all new names were placed in the jury box in order to insure that the box was current.

Bohlen J. Carter, Jury Commissioner, testified that he had served as Jury Commissioner until Douglas H. Reed had left office and that he was serving as Jury Commissioner at the time the grand jury here under attack was drawn; that he became a jury Commissioner in 1946; that he did not check the names in the jury box upon taking office but that he had checked the names contained in the box prior to June 12, 1959; that there were never less than three hundred (300) names in the box at any time; that he had sent out letters to various people, asking for juror names; that these names were received and added to the box from time to time and on occasion he had supplied names personally. This witness further testified that the affidavit, which he had executed and which was referred to by the defendants, had been prepared by Ray Foreman, attorney for the defendant Sam Magin, and had been presented to him for his signature; that he had read the affidavit but at the time was in a hurry and had not read it as closely as he should; that he had signed the affidavit too hastily; that subsequent to executing the affidavit, he had checked more closely and found that statements concerning the distances and number of cards contained in the box were incorrect. He further testified that the affidavit was made prior to the date that the jury here under consideration was drawn and did not relate to the method or the means by which this jury was drawn.

The manner of drawing the names of grand jurors is prescribed by Section 1864, Title 28, U. S. C. A., which provides in pertinent parts as follows:

"The names of grand and petit jurors shall be publicly drawn from a box containing the names of not less than three hundred qualified persons at the time of each drawing.

"The jury box shall from time to time be refilled by the clerk of court, or his deputy, and a jury commissioner, appointed by the court.

* * *

"The jury commissioner and the clerk, or his deputy, shall alternately place one name in the jury box without reference to party affiliations, until the box shall contain at least 300 names or such larger number as the court determines."

Contrary to the defendants' assertions, the evidence was conclusive that the jury box contained at least three hundred (300) names of qualified jurors at the time this grand jury was drawn; that the names of the persons serving as jurors were properly drawn; that the persons serving as jurors were not in any way arbitrarily and capriciously selected by the Clerk and the Jury Commissioner; that the jurors were selected from the entire district and not from a small undefined territorial portion of the district as the defendants charge; that the names of the persons contained in the jury box were chosen by the Jury Commission; that in selecting the grand jury the Jury Commission followed the statutory requirements in making the jury selection.

In these motions the burden to establish that the jury officials were derelict in the performance of their duty rests with the defendants. United States v. Brandt, 139 F. Supp. 362. Not only have the defendants failed to support this burden, but they have failed to show by any evidence that the Jury Commission did not, in fact, comply with the requirements of the statute. Accordingly, the motion to dismiss, premised on the illegality and insufficiency of the grand jury, will be denied.

[Discovery and Inspection]

The defendants have filed separate but identical motions for discovery and inspection pursuant to Rule 16, Title 18, U. S. C. A.

In these motions they request that the Government be ordered to produce and to permit the inspection and copying, before trial of this cause, all books, papers, documents and objects, obtained from or belonging to the defendants or obtained from others by seizure or by process, stating as reason therefor that the materials requested are material to the preparation of the respective defendants' defense.

The Government has no objection to the Court setting a time and place so that all defendants may examine for a reasonable time all books, papers, documents and objects, belonging to the defendants, which have been obtained by seizure or process. But the Government objects to the motions insofar as they pertain to all books, papers, documents and objects obtained from third parties by seizure or by process.

The Government's objection is based on the ground that the motions are so broad that they cover all evidence that it has in its possession and do not designate documents requested; that the motions are blanket requests and amount to nothing more than a fishing expedition whereby the defendants seek to obtain, prior to trial, all evidence the Government has concerning the case.

Rule 16 of the Federal Rules of Criminal Procedure, Title 18, U. S. C. A., provides:

"Upon motion of a defendant at any time after the filing of the indictment or information, the court may order the attorney for the government to permit the defendant to inspect and copy or photograph designated books, papers, documents or tangible objects, obtained from or belonging to the defendant or obtained from others by seizure or by process, upon a showing that the items sought may be material to the preparation of his defense and that the request is reasonable."

The Advisory Notes of the Committee on the Rules point out that it is very doubtful under the existing criminal law that discovery is possible. However, courts have granted a defendant the opportunity to inspect impounded documents belonging to him. The Rule is a restatement of this procedure.

"In addition, it permits the procedure to be invoked in cases of objects and documents obtained from others by seizure or by process, on the theory that such evidential matter would probably have been accessible to the defendant if it had not previously been seized by the prosecution. The entire matter is left within the discretion of the court."

Rule 16 provides for the discovery of documents or tangible objects, obtained from or belonging to the defendant or obtained from others by seizure or by process, after a showing that the request is reasonable and that the items sought may be material to the preparation of the defendant's case. United States v. Louie Gim Hall, 18 F. R. D. 384.

Before the defendants are entitled to inspection and copying or photographing of designated books, papers, documents, etc., there must first be a showing that the items requested are material and that the request is reasonable; and in order to make such a showing something more is required under the rules than the mere allegations on the part of the defendants. The motions do not designate any documents or things but are naked requests for all documents. The defendants have made no showing that their requests are reasonable as is required by the rules.

Further, as indicated by the Rules Committee, documents or things obtained from others by seizure or process are made available on the theory that such evidential matter would probably be accessible to the defendants if it had not previously been seized by the prosecution. Here the documents seized from third parties have been returned to them, so that the request does not come within the theory of the rule as disclosed by the Rules Committee.

The defendants seek to have the door opened in order to discover the Government's evidence and the details of the Government's case. They are not entitled to such evidence except upon a showing that the ends of justice cannot otherwise be served. There has been no such showing. United States v. Taylor , 25 F. R. D. 225.

The Government does not object to producing for inspection and copying those documents obtained by seizure or process, belonging to the defendants, and the motions will be granted as to those items because of such consent.

As to those books, papers, documents and objects obtained from or belonging to others, the motions will be denied for the reasons above stated.

[Severance Motions]

Each of the defendants has filed his separate motion for severance, alleging in support thereof the following grounds:

1. The jury will have insurmountable difficulty in distinguishing the alleged acts of this defendant from the alleged acts of his co-defendants.

2. Evidence in this cause may be introduced by the Government which may be inadmissible against this defendant, but which may be admissible against one or more of his co-defendants, all to the prejudice of this defendant.

3. Evidence may be introduced by his co-defendants, which would be inadmissible against this defendant in separate trial, to the prejudice of this defendant.

4. This defendant, as well as his co-defendants, will obtain a fair and more impartial trial if he is tried alone.

5. There is a misjoinder of defendants and offenses in the indictment.

All of the defendants, except the defendant Frank Leonard Wortman, have alleged additional grounds in support of their motions as follows:

6. Defendant Frank Leonard Wortman has been convicted of a felony, and for this reason this defendant could not obtain a fair and impartial trial unless his trial is separate from Frank Leonard Wortman's trial.

7. A continued mass of publicity, some of which has been inspired by the plaintiff's prosecuting officials as to the charges in his indictment, the investigation connected with this indictment and the criminal connections and activities of Frank Leonard Wortman, make it impossible for this defendant to obtain a fair and impartial trial while joined with Frank Leonard Wortman.

Rule 14 of the Federal Rules of Criminal Procedure, Title 18, U. S. C. A., provides:

"If it appears that a defendant or the government is prejudiced by a joinder of offenses or of defendants in an indictment or information or by such joinder for trial together, the court may order an election or separate trials of counts, grant a severance of defendants or provide whatever other relief justice requires."

When an application for a severance is made by a defendant under Rule 14, it is address to the discretion of the court. Opper v. United States , 348 U. S. 84.

In deciding such application the court must determine whether the alleged prejudice to the defendants in being joined and tried with other defendants overbalances possible prejudice to the Government which might result from a separate trial. United States v. Dioguardi, 20 F. R. D. 10.

Where proof of the charges against all the defendants is largely dependent upon the same evidence and the alleged acts are of the same or similar character, severance should not be granted except for the most cogent reasons. A trial of many defendants can be conducted with care and decorum so that the court can place whatever safeguards commend themselves in its effort to afford each defendant a separate and impartial consideration of his case. By exercising care in charging and marshalling evidence at the end of the trial, the judge can materially aid the jury in successfully considering each defendant separately. United States v. Bonanno, 177 F. Supp. 106. The fact that one defendant has a prior felony conviction is not grounds for a severance as to his co-defendants. United States v. Dioguardi, 20 F. R. D. 10.

Joinder of offenses and of defendants is prescribed by Rule 8 of the Federal Rules of Criminal Procedure, Title 18, U. S. C. A., which provides as follows:

"Rule 8. Joinder of Offenses and of Defendants

"(a) Joinder of Offenses. Two or more offenses may be charged in the same indictment or information in a separate count for each offense if the offenses charged, whether felonies or misdemeanors or both, are of the same or similar character or are based on the same act or transaction or on two or more acts or transactions connected together or constituting parts of a common scheme or plan.

"(b) Joinder of Defendants. Two or more defendants may be charged in the same indictment or information if they are alleged to have participated in the same act or transaction or in the same series of acts or transactions constituting an offense or offenses. Such defendants may be charged in one or more counts together or separately and all of the defendants need not be charged in each count."

Where two or more defendants are indicted for a joint transaction, it is inadvisable to split up the case into many parts for separate trials, in the absence of very strong and cogent reason therefor. This is especially true in conspiracy charges from the very nature of the case. Davenport v. United States , 260 F. 2d 591 (9 Cir. 1958).

The Court has meticulously examined the defendants' reasons in support of their motions for severance and finds that the reasons are insufficient under the circumstances of the case to justify a severance. A severance is unnecessary to avoid prejudice of the defendants. At the trial of the cause the trial judge may adequately guard against the charges made by these defendants, if in fact they are true, by properly instructing the jury concerning the evidence as it is admitted. Dircretion must be exercised in sucy matters so that over-all justice may be done, and in the exercise of that discretion the Court must in the interest of justice deny the motions of severance of defendants as requested.

[Bills of Particulars]

The defendants, Frank Leonard Wortman and Elmer Sylvester Dowling, filed their motion for bill of particulars as to Counts I, II, III, IV, V, VI and IX. Since Counts III, IV and VI have been transferred to the United States District Court for the Southern District of Illinois, the bill of particulars requested as to Counts III, IV and VI will not be considered by the Court because the motions pertaining to these counts have also been transferred.

The defendant Gregory Moore filed his motion for bill of particulars as to Counts VII, VIII and IX. This motion for bill of particulars pertaining to Counts VII and VIII will be transferred to the United States District Court for the Eastern District of Missouri for consideration and will not be considered by this Court.

The remaining defendants filed motions for bill of particulars, asking that Count IX of the indictment be made more definite and certain.

The motion for bill of particulars as pertains to Counts I, II and V asks as follows:

"The movants pray that the charges and allegations in Counts I, II, III, IV, V and VI of the indictment be ordered made more specific and certain by setting forth in the bill of particulars for each count:

(a) The books and records which the plaintiff alleges that each defendant caused to be maintained in a false and misleading manner.

(b) In what respects such books and records are allegedly false and misleading.

(c) The assets which the plaintiff alleges were concealed by each defendant.

(d) How these assets were allegedly concealed.

(e) The sources of income alleged to be covered up and amount and nature.

(f) How the amounts, nature and sources of income were allegedly covered up.

(g) The items on the tax return for the year involved alleged to be false and misleading.

(h) If the plaintiff is computing net income under Section 41 of the Internal Revenue Code, state the means of computation, that is, whether the computation is based on net worth, unexplained bank deposits, expenditures, or by another method, for each year and each defendant.

(i) The type and amount of each deduction against claimed total gross income allowed and disallowed in computing the alleged net income.

(j) The nature and kind of each item, together with its source, which is alleged by plaintiff to constitute the total gross income of these defendants.

(k) The nature of the records or documents which will be relied on to show the defendants' total gross income as alleged by the plaintiff.

(1) How the filing of income tax returns at Springfield , Illinois , within the Southern District of Illinois, was done or accomplished with the Eastern District of Illinois.

(m) Whether any portion of the alleged total gross income consisted of other than cash received during the year involved, and if so, what portion, and

(n) Who received each of the various items of income making up the total alleged gross income for each year involved.

"The movants further pray that the charges and allegations in Counts II and IV of the indictment be ordered made more specific and certain by setting forth in the bill of particulars for each count:

(o) The method or means of computation of the alleged income for the Peerless Club.

(p) A list of the specific items which make up the gross or net receipts of the Peerless Club and the expenses allowed against claimed total gross income in computing the alleged net income of the Peerless Club.

(q) The documents relied on to indicate the gross or net receipts and the expenses allowed for the Peerless Club.

(r) The percentage of net income of the Peerless Club alleged to constitute income to these defendants.

(s) The method or means of computation of the alleged income for the Paramount Club.

(t) A list of the specific items which make up the gross or net receipts of the Paramount Club and the expenses allowed against claimed total gross income in computing the alleged net income of the Paramount Club.

(u) The documents relied on to indicate the gross or net receipts and the expenses allowed for the Paramount Club.

(v) The percentage of net income of the Paramount Club alleged to constitute income to these defendants."

The motions of all of the defendants for bill of particulars directed to Count IX of the indictment are in all pertinent parts identical. The motion of defendant Sam Magin provides as follows:

"The movant prays that the charges and allegations in Count IX of the indictment be ordered made more specific and certain by setting forth in the bill of particulars:

(a) How, and in what manner, the alleged purpose of the alleged conspiracy, 'wilfully to defraud the United States of America of income taxes due and owing for the calendar years 1944 to date from defendant Frank Leonard Wortman,' was to be accomplished; what factual thing, transaction, state of affairs or condition was to be brought about as the fruition of the alleged conspiracy which would effect the defrauding of the United States of America of income taxes due and owing by the defendant Frank Leonard Wortman for the calendar years 1944 to the date of the indictment; what, as a matter of fact and not naked legal conclusion, the alleged conspirators, and each of them, did (or failed to do) in furtherance of the alleged conspiracy; and whether the United States of America was, as a matter of fact, defrauded of any income tax due and owing by or from the defendant Frank Leonard Wortman for any calendar year following the year 1943 and, if so, the amount thereof for each such year.

(b) How, and in what manner, the alleged purpose of the alleged conspiracy, 'wilfully to defraud the United States of and concerning the exercise of its governmental function and right of ascertaining, computing, levying, assessing, and collecting income taxes due and owing to the United States of America for the calendar years 1944 to date by defendant Frank Leonard Wortman,' was to be accomplished; what factual thing, transaction, state of affairs or condition was to be brought about as the fruition of the alleged conspiracy which would effect the defrauding of the United States of and concerning its governmental function and right of ascertaining, computing, levying, assessing, and collecting income taxes due and owing to the United States of America for the calendar years 1944 to date by the defendant Frank Leonard Wortman; what, as a matter of fact and not naked legal conclusion, the alleged conspirators, and each of them, did (or failed to do) in furtherance of the alleged conspiracy; and whether the United States of America was, as a matter of fact, defrauded of and concerning the exercise of its governmental function and right of ascertaining, computing, levying, assessing, and collecting income taxes due and owing by or from the defendant Frank Leonard Wortman for any calendar year following the year 1943 and, if so, for what year or years.

(c) How, and in what manner, the alleged purpose of the alleged conspiracy, 'to commit the crime of wilfully attempting to evade and defeat a large part of the income taxes to be due and owing to the United States of America by the defendant Frank Leonard Wortman, for the calendar years 1944 to date' of the indictment, was to be accomplished; what fact or facts were to be brought about as the fruition of the alleged conspiracy which would constitute the said crime; what, as a matter of fact and not naked legal conclusion, the alleged conspirators, and each of them, did (or failed to do) in furtherance of the alleged conspiracy; and whether the crime of wilfully attempting to evade and defeat any part of income taxes due and owing to the United States of America by the defendant Frank Leonard Wortman for any calendar year following the year 1943 and, if so, in respect of what years or years it was committed.

(d) How, and in what manner, the alleged purpose of the alleged conspiracy, 'to commit the crime of knowingly and wilfully falsifying, concealing and covering up by trick, scheme and device, material facts in matters within the jurisdiction of an agency of the United States, viz., the Internal Revenue Service of the United States Treasury Department, during the period from 1944 to' the date of the indictment, was to be accomplished; what trick, scheme and device was to be employed as the fruit of the conspiracy; what material facts were to be falsified, concealed and covered up; what, as a matter of fact and not naked legal conclusion, the alleged conspirators, and each of them, did (or failed to do) in furtherance of the alleged conspiracy.

(e) The nature and extent of the proprietary and financial interest of the defendant Frank Leonard Wortman sought to be concealed by the alleged conspiracy, and the names of the partnerships, associations and corporations in which such interest was owned and held, and the years in which it was owned or held; and how, and in what manner, the alleged conspiracy sought to effect the concealment thereof.

(f) What false and misleading entries the alleged conspiracy and conspirators sought to cause to be made in books and records of the partnership known as Gregory Moore, et al, the partnership known as Plaza Amusement Company, and the proprietorship known as Paddock Liquor Company, and the names (or identifying descriptions) of the books and records in which the alleged conspiracy sought to cause them to be made.

(g) What proper books and records the defendants failed to keep; what certain partnership returns of income the defendants failed to file; how, and in what manner, and to what extent, in detail, any partnership return filed by the defendants was inadequate or incomplete; what books and records caused to be kept by the defendants were false and fraudulent, and how in what respect, in detail, they were false and fraudulent, and what partnership returns of income, caused by them to be prepared, were false and fraudulent, and how and in what manner, in detail, they were false and fraudulent.

(h) What property and interests in business were caused by the defendants to be concealed in the names of persons other than Frank Leonard Wortman; when they were so concealed; who actually owned such property and interests; and the nature and extent of the interests of Frank Leonard Wortman therein.

(i) What false and misleading entries were caused by the defendants to be made in the books and records of Jack Langer's Mounds Club, Inc., and Plaza Amusement Company, Inc.; the names of the books and records (or identifying descriptions thereof) in which such entries were made; the true ownership of such companies thereby allegedly concealed; and the capital investment therein by Frank Leonard Wortman, and

(j) The date of each allegedly false and fraudulent income tax return of Frank Leonard Wortman caused to be prepared and filed by the defendants, and the income year covered thereby; and the manner in which each of such returns was false and fraudulent."

At the outset it must be pointed out that the function of a bill of particulars is to inform the accused of the nature of the charge with sufficient clarity to enable him to prepare for trial and to prevent surprise and to enable him to plead his acquittal or conviction in bar of any further prosecution for the same offense. United States v. Stein, 18 F. R. D. 17.

The rule is that if a defendant is not sufficiently informed by an indictment of the nature and cause of the accusations made against him and is fearful that upon trial he will be surprised by the evidence of the government, he can apply for a bill of particulars which the trial court, in the exercise of a sound legal discretion, may grant or refuse, as the ends of justice require. Mellos v. United States , 160 F. 2d 757.

The indictment here reveals that the nature of the charge is pleaded in detail. The details pleaded are sufficient to give the defendants notice of the charges against which they are to defend and are sufficient to enable the defendant, or defendants, to plead acquittal or conviction in bar of any future prosecution for the same offense. The indictment is of the form commonly used in tax prosecutions. The first count alleges that the defendant Frank Leonard Wortman did wilfully and knowingly attempt to evade and defeat income tax for the year 1953 by maintaining or causing to be maintained false and misleading books and records, by concealing assets and covering up the amounts, nature and sources of income, by preparing or causing to be prepared a false and fraudulent joint income tax return on behalf of himself and his wife, and by filing or causing to be filed with the District Director of Internal Revenue at Springfield, Illinois, a false and fraudulent joint income tax return on behalf of himself and his wife, wherein he stated that their net income for the calendar year was the sum of $50,200.94 and that the amount of tax due and owing thereon was the sum of $20,824.62, whereas he then and there well knew the joint net income for the said calendar year was the sum of $92,209.78 or more, upon which said taxable income there was owing to the United States of America an income tax of $49,739.34 or more. Counts II and V are set out in the same detail as Count I. Court IX is a conspiracy count against all of the defendants and charges a conspiracy to violate specific sections of the Internal Revenue Code and the Criminal Code, each of which are set forth in the indictment, and further sets out the method and means whereby the conspiracy is charged to have been accomplished. In addition, this count charges overt acts which are alleged to have been performed in the furtherance of the conspiracy. The dates involved in the overt acts are set out and the tax returns involved are also identified.

The indictment is sufficient and a bill of particulars is not warranted and will be denied.

[Grand Jury Procedure]

The defendants, Edward Wortman, George Frank, Sam Magin and Gregory Moore, have each filed separate motions to dismiss the indictment and have also filed their separate motions to suppress and their separate amendments to their motions to suppress.

The defendants, Edward Wortman, George Frank and Sam Magin, have filed identical motions to dismiss and to suppress, and all four of the above-named defendants have filed identical amendments to their separate motions to suppress.

The motions of the defendants, George Frank, Edward Wortman and Sam Magin, to dismiss are bottomed on the reasons (1) that the defendants were subpoenaed and compelled to testify before the grand jury and were interrogated before the grand jury in the matters and things charged in the indictment; (2) that the grand jury was at the time of the defendants' appearances conducting an investigation regarding the activities of the defendants in order to determine whether the defendants had violated any of the laws of the United States; (3) that the defendants were not at any time advised or warned by the grand jury or by the United States Attorney or Assistant United States Attorney conducting the inquiry that they were under investigation by the grand jury or that they could not be compelled to testify against themselves; (4) that the use of the testimony before the grand jury and all evidence obtained directly and indirectly therefrom would constitute a violation of defendants' privilege against self-incrimination.

The motion of the defendant Gregory Moore to dismiss asserts as grounds therefor that the defendant was subpoenaed on certain dates set out in the motion and compelled to appear before the grand jury while the United States Attorney and the grand jury were investigating the defendant's conduct for alleged offenses against the laws of the United States, including the statutes cited in the indictment; that the defendant filed a motion to quash the subpoena, which motion was overruled, and the defendant compelled to appear; that while appearing before the grand jury, the defendant refused to answer on the grounds of possible self-incrimination and was subsequently brought before the Court and ordered to answer certain of the questions and ordered back to the grand jury room to comply; that the defendant returned to the grand jury room and complied with the Court's order and that the defendant was not warned of his rights under the Fifth Amendment; that the defendant was subpoenaed and compelled to appear before a special agent of the Internal Revenue Service while the Internal Revenue Service was investigating the defendant's conduct for alleged offenses against the laws of the United States pertaining to Internal Revenue, including the offenses cited in the indictment; that the subpoena ordered the defendant to produce certain books, memoranda and papers and that the defendant was not advised or warned that he was being investigated and that the evidence obtained directly or indirectly from this appearance violated defendant's privilege under the Fifth Amendment; and that the interrogation was isolated from the observation of the public in violation of his right to a public trial, contrary to the Sixth Amendment to the United States Constitution.

The defendants, Edward Wortman, George Frank and Sam Magin, assert in support of their motions to suppress that they were subpoenaed to appear and testify before the grand jury of the Eastern District of Illinois; that they did appear and were interrogated relative to the matters upon which they were subsequently indicted and did testify with regard to the matters; that the grand jury was at the time of the defendants' appearances conducting an investigation regarding the activities of the defendants and that the defendants were not warned of their rights; that the use of the testimony before the grand jury would constitute a violation of defendants' privilege against self-incrimination under the Fifth Amendment to the United States Constitution.

The defendant Gregory Moore asserts in support of his motion to suppress in general the same grounds which he asserts in support of his motion to dismiss the indictment.

All four defendants in their separate amendments to their separate motions to suppress further assert as grounds therefor that the defendants were isolated from counsel and from observation of the public during the interrogation, which deprived each of the defendants of the right to a public trial as guaranteed by the Sixth Amendment to the United States Constitution.

At the outset it must be pointed out that each of the defendants was at all times, prior to being called before the grand jury, represented by counsel, and at the hearing on the motions there was testimony that the various counsel for the defendants were permitted to be present and were present in areas adjacent to the grand jury room in which the investigations were made and that one or more did consult with his attorney during the course of the investigations. Thus, it would appear that the defendants of their own knowledge, and that of counsel, were certainly aware of their rights guaranteed to them by the Fifth Amendment to the United States Constitution.

The motion of the defendant Gregory Moore belies any lack of information concerning his constitutional guarantees inasmuch as the defendant asserted to the utmost those rights.

The interrogation of the defendants before the grand jury without assistance of counsel in the grand jury room and away from the observation of the public is not grounds for dismissing the indictment. Under the provisions of Rule 6 of the Federal Rules of Criminal Procedure, Title 18 U. S. C. A., proceedings before a grand jury, when in session, may be conducted in the presence of the grand jury, the attorney for the government, interpreter when needed, a stenographer, and the witness himself. The presence of an attorney for the witness is not permitted.

An appearance before a grand jury is not a trial in the manner in which the term "trial" is used in the Sixth Amendment. A grand jury is an investigative body, whose purpose it is to investigate and determine whether or not there is a reasonable belief that a crime has been committed. If they reasonably believe that a crime has been committed, they then return an indictment against the person or persons they believe committed the crime. The fact that a grand jury has returned an indictment does not mean that those charged therein are guilty of the offense. Innocence or guilt must then be determined by a court and jury. It is this latter process which is properly used to mean a trial as that term is used in the Sixth Amendment.

It is well settled that the appearance of a witness before a grand jury in response to a subpoena does not constitute a violation of his constitutional right against self-incrimination even though the witness is later indicted by the same grand jury. United States v. Wilson , 42 F. Supp. 721.

The mere possibility that the witness may later be indicted furnishes no basis for requiring that he be advised of his rights under the Fifth Amendment when summoned to give testimony before a grand jury. United States v. Scully, 225 F. 2d 113 (2 Cir. 1955). United States v. Wilson , 42 F. Supp. 721.

At the time of the appearances of these defendants before the grand jury, they were at most merely potential defendants; and in fact no indictment was returned by the grand juries before which these defendants appeared. Each defendant was subject to call as a witness before the grand jury and had only the right of any witness to decline to answer when interrogated concerning matters which might tend to incriminate him. As stated by Professor Wigmore, the privilege is "an option of refusal and not a prohibition of inquiry." United States v. Keenan [59-1 USTC ¶9349], 267 F. 2d 118 (7 Cir. 1959). The mere summoning of a witness before a grand jury gives no basis for the assumption that his constitutional privilege will be impaired. His duty is to answer frankly until some question is propounded, the answer to which might tend to self-incrimination. United States v. Mangiaracina [50-2 USTC ¶9467], 92 F. Supp. 96 (U. S. D. C. W. D. Mo. 1950).

Response to a grand jury subpoena does not constitute coercion. The grand jury is authorized to call witnesses in the course of its deliberation, and witnesses are required as a public duty to testify. If a witness is asked questions which tend to incriminate him, it is his duty to claim the privilege and to refuse to testify. In this case it is not shown nor claimed that any of the defendants were indicted by any of the grand juries before which they testified. Rather, the indictment here under consideration was returned by a completely different grand jury than that grand jury before which these defendants appeared. In general, the testimony of a witness before the grand jury, later indicted, is admissible at his trial. Stanley v. United States , 245 F. 2d 427 (6 Cir. 1957).

Obviously, there was no violation of the Fifth Amendment in the examination of the defendants before the grand jury.

The assertion of the defendant Gregory Moore that his compelled appearance before a special agent of the Internal Revenue Service violated his constitutional right against self-incrimination, for failure to advise or warn him of his right under the Fifth Amendment, is without merit. This appearance occurred during the year 1959, and to say that the defendant was aware of his constitutional privilege long before this time would be an understatement since he had on previous occasions availed himself of the full protection accorded by the Fifth Amendment in various hearings which he was required to attend.

After full consideration of the defendants' motions in the light of the authorities and precedence, the Court finds that the motions of the defendants, Gregory Moore, Edward Worman, Sam Magin and George Frank, to dismiss the indictment should be denied and that the defendants' motions to suppress should be denied.

The Government filed its motion to strike and dismiss the motions of the defendants, Edward Wortman, Sam Magin, Gregory Moore and George Frank, to dismiss the indictment and their respective motions to suppress the testimony given by the defendants, Edward Wortman, Sam Magin, Gregory Moore and George Frank. The motions referred to in the Government's motion to strike have been disposed of on the merits; therefore, the Government's motion to strike is no longer material.

[Inspection of Grand Jury Minutes]

The defendants, Sam Magin, Gregory Moore, Edward Wortman and George Frank, filed their separate motions to inspect the grand jury minutes and move the Court for an order authorizing each of the defendants to inspect and copy the minutes and transcripts of their respective testimony before the grand jury and to inspect and copy the minutes and transcripts of the grand jury testimony of all witnesses who testified prior to the defendants' appearances before the grand jury.

The defendants each assert that a copy of the minutes and transcripts requested is necessary for the preparation of his defense in order that he may be fully informed as to the matters to which he testified before the grand jury and in order that he might show that he himself was under investigation at the time he was subpoenaed by the grand jury for the purpose on indicting him on the offenses charged in the indictment.

The grand jury is charged to investigate the facts presented to it and to return an indictment only if there is legal and competent evidence that an offense has been committed and reasonable ground to believe that those charged are guilty. There is a strong presumption that the grand jury has faithfully discharged its duty. Cox v. Vaught, 52 F. 2d 562 (10 Cir. 1931). The testimony before the grand jury is not a matter to be displayed before the public generally and should not be disclosed except upon good cause shown, and such cause should be reasonably founded upon facts. Only in such circumstances should the secrecy of the proceedings before the grand jury be violated.

Under Rule 6(e) of the Federal Rules of Criminal Procedure, Title 18, U. S. C. A., under no circumstances has the court authority to grant a petition for a copy of the proceedings before the grand jury; however, by way of interpretation the federal courts have extended their jurisdiction so that they may remove the seal of privacy from grand jury proceedings when in the court's discretion the furtherance of justice requires it. These courts have further stated, however, that granting inspection of grand jury records and proceedings is a power to be sparingly exercised.

Secrecy has characterized grand jury proceedings from earliest times, and secrecy of proceedings before a grand jury is fundamental to our crminal proceedings. Exceptions are made only for such purposes as impeachment of a witness or prosecution for perjury by a witness. In re Bullock, 103 F. Supp. 639.

The reasons for secrecy of proceedings before a grand jury at common law were:

1. To prevent the escape of those indicted;

2. To insure the grand jury freedom in its deliberations;

3. To prevent any person from annoying the grand jurors;

4. To prevent subornation of perjury with witnesses who may testify before a grand jury and later appear at the trial of those indicted by it;

5. To encourage free and untrammeled disclosure by persons who have some information with respect to the commission of crimes; and

6. To protect the innocent person who is accused but exonerated from disclosure of the fact that he has been under investigation.

Proceedings before a grand jury must in the interest of justice be held in the utmost secrecy, and such secrecy may be waived only upon a showing that injustice will otherwise result. Proceedings of a grand jury may be removed in part from the cloak of secrecy in prosecution for perjury. This Court has previously supplied to one of the defendants herein (namely, Sam Magin) a transcript of his testimony before the grand jury. The veil of secrecy was lifted to permit the defendant access to pertinent portions of the proceedings before a United States grand jury for the Eastern District of Illinois for the reason that the defendant was charged with having committed perjury before that grand jury; and, accordingly, the testimony of the defendant Sam Magin before that grand jury was provided to him. However, in order to permit a further removal of the secrecy of grand jury proceedings, the defendants must establish good cause and show the Court that failure to do so would result in an injustice. This these defendants have not done. In fact, they have failed to show any cause why the Court should grant their motions to inspect proceedings before the grand jury or to be supplied with a copy of their statements before the grand jury, other than their mere assertion that it is needed to prepare their defense. In order for this Court to exercise the discretion granted to it in removing the secrecy of the grand jury proceedings, something more must be shown.

Accordingly, the Court cannot say that in the exercise of its discretion he would be justified in providing the defendants with disclosure of the grand jury proceedings. Their motions to inspect and copy the grand jury proceedings will be denied.

The Government filed its motion to quash or modify the subpoena served on J. G. Philpott, District Director of Internal Revenue.

At the hearing on this matter the Court entered an order modifying the subpoena complained of. That motion need not be further considered in this opinion.

[Pretrial Production of Evidence]

Each of the defendants filed his separate motion for production of documentary evidence and objects under Rule 17(c) of the Federal Rules of Criminal Procedure, Title 18, U. S. C. A., and has attached thereto a subpoena which was served on the United States Attorney for the Eastern District of Illinois, asking that he produce the following documents:

(1) All documents, books, papers and objects (except memoranda prepared by government counsel, documents or papers solicited by or volunteered to government counsel which consist of narrative statements of persons or memoranda of interviews), obtained by government counsel in any manner other than by seizure or process,

(a) in the course of the investigation by the Grand Jury which resulted in the return of the indictment herein, and

(b) in the course of the government preparation for trial of this cause, such books, papers, documents and objects (aa) which have been presented to the Grand Jury, or (bb) which are to be offered as evidence in the trial of these defendants.

(2) All documents, books, papers and objects (except memoranda prepared by government counsel and documents or papers solicited by or volunteered to government counsel, which consist of narrative statements of persons or memoranda of interviews), obtained by government counsel in any manner other than by seizure or process, in the course of the investigation by agents of the Federal Bureau of Investigation and other governmental agents and police officers, if such books, papers, documents and objects are to be offered as evidence in the trial of the defendants.

(3) All documents, books, papers and objects obtained by the government counsel in any manner other than by seizure or process, in the course of the investigation by governmental agents in the course of ghe government's preparation for trial of this cause, if such books, papers, documents and objects tend to impeach the testimony of any prospective prosecution witness.

(4) All memoranda of any kind and all statements allegedly given by the defendant to governmental agents.

(5) All memoranda and other writings in possession of the government which are going to be used for the purpose of refreshing the memory of any witness at the time of the trial of the defendants.

(6) All books, papers, documents and objects obtained from or belonging to defendants or obtained from others by seizure or by process.

(7) All photostats of books, papers, documents and objects heretofore mentioned in paragraphs 1 through 5 of this subpoena.

The United States Attorney filed his motion to quash the subpoenas of all the defendants or in the alternative to modify said subpoenas.

Rule 17(c) is not a pre-trial discovery vehicle but is designed as an aid in obtaining evidence which defendants can use at the trial. Only where it appears that the defendant may use his statements for evidentiary purposes, may its production be compelled pursuant to Rule 17(c). In allowing inspection, however, the trial judge has much discretion, and the rule has been construed as sanctioning inspection only when good cause is shown. United States v. Malisia, 154 F. Supp. 511 (U. S. D. C. S. D. N. Y. 1957).

The fact that subpoenaed material may be evidentiary and subject to production at the trial under a subpoena duces tecum obtained by a defendant does not mean that the defendant is entitled as a matter of right to pre-trial production and inspection under Rule 17(c). Whether a pre-trial production and inspection will be required is discretionary.

In determining whether in a given case discretion should be exercised in favor of or against pre-trial production and discovery under Rule 17(c), it is necessary to keep in mind that although 17(c) and 16 have related purposes, they have different functions and applications. One of the practical objectives of 17(c) is to provide a means for sifting, in advance of trial, documents to be offered in evidence, where they are multitudinous. It is necessary to guard against action under Rule 17(c) which, contrary to its spirit and purpose, is aimed at obtaining discovery. The purpose of a subpoena duces tecum is to enable a party to obtain evidence at the trial to use in support of his case and not to pry into the case of his adversary. A court should be liberal in a criminal action in holding documents to be evidentiary for the purpose of permitted a party to obtain their production at the trial by subpoena; however, pre-trial production any inspection is a different matter. It should be conditioned on some showing by the defendant that the subpoenaed documents have evidentiary, as distinct from discovery, value to him.

In the instant case the defendants have failed to show affirmatively that the materials sought under the subpoenas are evidentiary in nature and have not set forth in their motions any reasonable grounds why the materials subpoenaed should be produced and consequently have presented no showing of good cause which is necessary and indispensable in a request for pre-trial production of documents under Rule 17(c). An examination of the subpoenas clearly shows that the defendants are on a fishing expedition which is contrary to the purpose of Rule 17(c). Accordingly, the Court in its discretion grants the motion of the United States Attorney to quash the subpoenas as they pertain to pre-trial discovery and the subpoenas requesting pre-trial discovery will be quawhed.

[Disposition of Motions]

For the above and foregoing reasons the Court does hereby ORDER, ADJUDGE and DECREE:

That the defendants' joint motion to dismiss the indictment, premised on the grounds that the Government engaged in such efforts as publicity, calculatedly prejudicial to the defendants; that the indictment is insufficient; and that the overt acts in the substantive counts of the indictments are alleged in the disjunctive rather than the conjunctive, be and the same is hereby denied.

That the separate motions of the defendants to dismiss the indictment, based on the alleged illegality of the grand jury, be and the same are hereby denied.

That the defendants' separate motions for inspection and copying, pursuant to Rule 16, of those documents obtained by seizure or process belonging to the defendants, be and the same are hereby allowed, and as to those books, papers, documents and objects obtained from or belonging to others, the motions be and the same are hereby denied.

That the separate motions of the defendants for severance be and the same are hereby denied.

That the joint motion of the defendants, Frank Leonard Wortman and Elmer Sylvester Dowling, for bill of particulars be and the same is hereby denied.

That the motion of defendant Gregory Moore for bill of particulars be and the same is hereby denied.

That the motions for bill of particulars of the defendants, Edward Wortman, Sam Magin and George Frank, be and the same are hereby denied.

That the motions of the defendants, Edward Wortman, George Frank, Sam Magin and Gregory Moore, to dismiss the indictment, based on the grounds that they were compelled to appear before the grand jury, be and the same are hereby denied.

That the motions of the defendants Edward Wortman, George Frank, Sam Magin and Gregory Moore, to suppress the testimony of the defendants before the grand jury and further to suppress all evidence obtained directly or indirectly from such testimony be and the same are hereby denied.

That the motions of the defendants, Sam Magin, Gregory Moore, Edward Wortman and George Frank, to inspect the grand jury minutes be and the same are hereby denied.

That the motion of the United States to quash the subpoenas issued pursuant to Rule 17(c) be and the same is hereby allowed and the subpoenas are hereby quashed.

 

 

[56-1 USTC ¶9423]Leo Elwert, Appellant v. United States of America , Appellee

(CA-9), In the United States Court of Appeals for the Ninth Circuit, No. 14,846, 231 F2d 928, March 22, 1956

Appeal from the United States District Court for the District of Oregon.

[1939 Code Sec. 145--corresponding to 1954 Code Sec. 7201]

Criminal prosecution for tax evasion: Sufficiency of indictment and of evidence: Variance.--An indictment in three counts charging willful attempt to defeat and evade the income tax for the years 1947-1949 was sufficient to charge the taxpayer with a crime, though it failed to allege that he acted with a "specific intent" to defraud the Government. The taxpayer did not show that he was prejudiced by this failure or by the failure to allege any affirmative acts. Allegations of many affirmative acts of concealment were furnished him in a bill of particulars well in advance of the trial. The fact that the indictment and bills of particulars charged the taxpayer with understating his taxable income while most of the evidence showed an understatement of income of the partnership operated by himself and his wife was not a fatal variance, since an understatement of the partnership income was an understatement of his own. Although the taxpayer claimed deductions for cash wages which were not shown on his return, he did not show that the cash receipts from which he made these payments were reported as income. The substantial omissions of income from cash transactions and the failure of taxpayer to disclose them to his tax accountants justified the jury's finding of an intent to evade tax even though the fact that bank accounts were maintained by him under fictitious names may have been for the purpose of concealment from taxpayer's estranged wife rather than from the Treasury Department. The instructions to the jury, though not a model for future tax evasion cases, fairly informed the jury of the standards to apply to the evidence.

S. J. Bischoff, George W. Mead, Portland , Ore. , for appellant. H. Brian Holland, Assistant Attorney General, Joseph M. Howard, Dickinson Thatcher, Department of Justice, Washington, D. C., C. E. Luckey, United States Attorney, John G. Guise, Jr., Assistant United States Attorney, Portland, Ore., for appellee.

Before DENMAN, Chief Judge, and STEPHENS and CHAMBERS, Circuit Judges.

[Tax Evasion]

DENMAN, Chief Judge:

Elwert appeals from his conviction of tax evasion in the United States District Court for the District of Oregon. He contends that the indictment failed to charge him with a crime, that there is a variance between the indictment and the evidence, that the evidence does not support the conviction and that the District Court erred in giving certain instructions to the jury and in denying others.

Section 145(b) of 26 U. S. C. [now 26 U. S. C. §7201] provided so far as relevant:

". . . any person who willfully attempts in any manner to evade or defeat any tax imposed by this chapter or the payment thereof, shall . . . 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."

Elwert was sentenced to 18 months imprisonment on each of the three counts, the sentences to run concurrently, and fined $1,000 on the first count, $1,000 on the second count and $500 on the third count.

I. The Indictment

Elwert contends that the indictment failed to charge him with a crime in any of its three counts. So far as relevant, the indictment charged the crime in the language of Section 145(b). Count One charged that appellant

"willfully and knowingly attempt[ed] to defeat and evade a large part of the income tax owing by him to the United States of America for the calendar year 1947, by filing and causing to be filed . . . a false and fraudulent income tax return . . ."

Count Two made a similar charge for the year 1948. Count Three charged that appellant

"willfully and knowingly attempt[ed] to evade and defeat the said income tax by . . . failing to make such income tax return . . . and by failing to pay . . . said income tax and by concealing and attempting to conceal from all proper officers of the United States of America his true and correct gross and net income for said calendar year 1949 . . ."

An indictment meets the requirements of the Fifth Amendment and Rule 7 of the Federal Rules of Criminal Procedure if it charges all the essential elements of the crime clearly enough to enable the defendant to prepare his defense and to plead the judgment in bar to a future prosecution for the same offense. Todorow v. United States , 173 Fed. (2d) 439, 446-447 (Cir. 9, 1949). The sufficiency of an indictment is tested by practical considerations, and defects not affecting substantial rights are disregarded. See, e.g., Hopper v. United States, 142 Fed. (2d) 181 (Cir. 9, 1943).

Here Elwert asserts that the indictment was defective in that it failed to allege that he acted with a "specific intent" to defraud the Government. The requirement of such a specific intent resulted from an interpretation of the word "willfully" in Section 145(b) and imposed on the United States a more difficult burden of proof than is normally required in a criminal case. See Bloch v. United States , 221 Fed. (2d) 786 (Cir. 9, 1955) [55-1 USTC ¶9364]. A number of cases have been decided holding that it is sufficient to indict in the language in Section 145(b). See, e.g., Himmelfarb v. United States, 175 Fed. (2d) 924 (Cir. 9) [49-1 USTC ¶9313], cert. denied, 338 U. S. 860 (1949); Capone v. United States, 56 Fed. (2d) 927 (Cir. 7) [3 USTC ¶885], cert. denied, 286 U. S. 553 (1932). However, Elwert points out that they did not specifically consider the question of whether specific intent had to be alleged since this requirement has crystalized only in recent years.

Elwert's contention may have merit, but it need not be here decided since he has failed to show that he was prejudiced by the failure of the indictment to charge he acted with a specific intent to defraud the United States . At least a week before the trial his attorneys knew that the Government was required to prove that he acted with a specific intent to defraud the United States . If this discovery upset their plan of defense, they were free to move for a continuance. They failed to do so. It is difficult to believe that had the indictment alleged Elwert had acted with such a specific intent the defense would have been aided in any way. One of the major arguments presented at the trial by Elwert was that the underpayment of tax was due to his carelessness and that his actions could be explained by difficulties with his wife rather than a specific intention to evade taxes. This does not constitute reversible error.

Elwert next contends that Count Three of the indictment is defective in that it failed to allege any "willful commission" or "affirmative action" constituting the felony of tax evasion as distinguished from the misdemeanor of failing to observe statutory duties as a taxpayer. Spies v. United States , 317 U. S. 492 (1943) [43-1 USTC ¶9243]. He argues that the charge of "concealing and attempting to conceal . . . his true gross and net income for . . . 1949 . . ." was insufficient. Concealing one's true income could be "mere passive inaction" and only a misdemeanor.

However, this court has held that it is sufficient to charge one with attempting to defeat and evade taxes without specifying the means since Section 145(b) condemns evasion "in any manner." Himmelfarb v. United States , 175 Fed. (2d) 924, 936 (Cir. 9) [49-1 USTC ¶9313], cert. denied, 338 U. S. 860 (1949). Here allegations of many affirmative acts of concealment were furnished Elwert in a bill of particulars well in advance of trial. There is no reversible error here.

II. Variance

The indictment and bills of particulars all charged that Elwert had understated his taxable income and attempted to evade his taxes while most of the evidence introduced showed an understatement of partnership income. Elwert claims this constitutes a variance calling for a reversal of his conviction.

However, an understatement of partnership income was an understatement of Elwert's income. Such evidence was highly relevant to prove Elwert's evasion of the taxes due. One might conceive a case where the failure of the Government to specify whether they were speaking of partnership income or individual income would prejudice a defendant. However, the record makes it clear that the defense attorneys here were in no way surprised by the failure to denominate items as partnership or individual. ¹ The objection is one going only to form.

III. The Sufficiency of the Evidence

Elwert next argues that the trial court erred in denying his motions for acquittal under F. R. Crim. P. 29 as to each of the counts of the indictment. He claims that the evidence was insufficient to warrant submission of the case to the jury.

To convict one of violating Section 145(b) the Government must prove that there was a tax owed to it by the defendant, ² and that he has done acts of evasion ³ with a specific intent to defraud the United States. ⁴ Here there is no question that acts of evasion were done. The issue is whether Elwert owed a tax to the United States and whether he acted for the purpose of evading that tax.

Here, as in most tax evasion cases, must of the Government's evidence is circumstantial. The trial judge must grant a motion for acquittal where the evidence of guilt is circumstantial only if, as a matter of law, reasonable minds as triers of fact must be in agreement that reasonable hypotheses other than guilt could be drawn from the evidence. ⁵ If, under this test, the case was properly submitted to the jury, its decision will be final. Unlike the practice in some circuits, ⁶ this court applies no special rule to review circumstantial evidence on appeal; as to circumstantial proof of intent, see this court's in banc decision in McCoy v. United States, 169 Fed. (2d) 776 (Cir. 9), cert. denied 335 U. S. 898 (1948).

(A) Was Any Tax Owed to the United States in 1947, 1948 and 1949?

Elwert contends that if the overstatement of his income in 1949 and the deductions to which he was entitled, but did not claim, in the years in question were taken into account, there would be no tax liability for 1947, 1948 and 1949. However, it must be remembered that in a tax evasion case the burden is on the defendant to prove that he had allowable deductions which were not shown in his return once the Government establishes unreported income and allows the deductions claimed by the defendant in his return and others that it can calculate without his assistance. ⁷

Elwert urges that the United States ' computation of his income for 1949 overstated it by approximately $19,000. If this were true, the unreported income for 1949 could be wiped out, and, because of the carry-back provisions of 26 U. S. C. §122, the amount of taxable income for 1947 and 1948 could be affected.

Elwert and his wife operated a nursery and a farming business as a partnership. The partnership filed no informational return in 1949 although one was made out for it by its accountant. Elwert filed no individual return for that year either. The United States used the unfiled and unsigned partnership return as a starting point to prove Elwert's unreported individual income for 1949.

Hammond, the accountant who prepared the informational return, testified that he had prepared it from six books listing the receipts of the business. The return stated that the gross receipts of the partnership were $173,319.76 and after deductions the net income was $1,833.32. On cross-examination Hammond conceded that the gross income was overstated by over $19,000 and he could not explain the reason for this.

Elwert argues that the jury could not believe that part of Hammond 's testimony which helped the Government's case and fail to credit that part favorable to him. We do not agree. The jury may conclude a witness is not telling the truth as to the point, is mistaken as to another, but is truthful and accurate as to a third. ⁸

The jury could have given Hammond's statement that the partnership gross receipts indicated on the informational return was over $19,000 more than the total of the six receipt books little credit or disbelieved it entirely. Although called as a Government witness, Hammond was employed as the partnership accountant at the time of the trial. On redirect examination he conceded that he had never attempted personally to reconcile the tax return with the receipt books but had been told it could not be done by an auditor hired by Elwert for the purposes of this trial. Elwert's attorneys failed to call the auditor. Moreover, Hammond also conceded that the items of expense deducted in the 1949 partnership return were probably excessive. The jury did not have to give effect to this $19,000 item.

[Deductible Items Paid in Cash]

In each of the three years in question no deduction was taken for payments made in cash to itinerant laborers who worked in the harvest of various crops and in the nursery business. From the testimony of prosecution and defense witnesses, Elwert's attorneys have compiled the following as a minimum deduction which should have been taken:

Nursery Workers (Spring Work and

Harvesting):

65 days x 25 men at $5.00 per

day ....................................         $ 8,125.00

Nut Harvest:

30 days x 50 men at $5.00 per

day ....................................           7,500.00

Cherry Harvest:

20 daysx 20 men at $5.00 per

day ....................................           2,000.00

Prune Harvest:

30 days x 25 men at $5.00 per

day ....................................           3,750.00

Total annual minimum expenditure in

cash for itinerant labor ...............         $21,375.00

 

For this deduction to reduce or eliminate the unreported income for the years in question Elwert's attorneys must identify the source of the cash used to pay the itinerant workers. The United States showed that two types of gross receipts were not reported by the partnership. Certain checks were deposited in bank accounts or cashed by Elwert and not disclosed to the accountants preparing the tax returns. The Government introduced the particular checks so treated and thereby established an amount of unreported income. However, the Government also established that there were substantial sums of cash received in the course of the business which were also unreported. Naturally, if the payments to the itinerant laborers were made from the cash receipts only, the deduction would not affect the understatement of income from the unreported checks.

One of Elwert's friends, A. D. Schmidt, testified that he had cashed a number of the checks in question during 1947, and Elwert used the cash to pay itinerant help. Assuming that the jury believed Schmidt, although there is no showing how he knew for what purpose Elwert used the cash, this testimony connects only part of the payments to itinerant laborers with the checks for the year 1947. With the burden of establishing deductions on the defendant, the jury was free to infer that the payments to laborers, or at least a large part of them, came from the unreported cash receipts or disbelieve Elwert's witnesses as to the number of men, the days worked or the amount of their compensation.

The jury, for the same reasons, was likewise free to give no effect to the other deductions asserted to have been business expenses paid in cash.

The consideration of these particular deductions makes it unnecessary to consider the evidence concerning the other asserted deductions. Even allowing them, there would remain substantial unreported income and unpaid tax owing to the United States .

This issue was properly submitted to the jury.

[Intent to Evade Taxes]

(B) Did Elwert Specifically Intend to Evade His Taxes?

It is asserted that there was insufficient evidence tending to show that Elwert specifically intended to defeat or evade the payments of his taxes to justify the submission of the case to the jury. Evidence of intent necessarily must be circumstantial. The question is whether this Court can say that reasonable minds as triers of fact must have been in agreement that reasonable hypotheses other than that of an intent to evade taxes could have been drawn from the evidence in the case.

The United States offered the following evidence to show that Elwert intended to evade his income taxes: He was running a large business but kept no records of cash transactions. In 1947 he opened and closed two bank accounts in such a manner as to conceal their existence. His banking was done by a friend while he waited a block away at a brokerage house. The unreported income treated in this fashion exceeded $20,000.

Cook, the accountant who prepared the income tax returns for the partnership and for Elwert from 1943 until 1948, was furnished only the bank statements and checks from the two main partnership accounts at the Sherwood and Tigard banks. There were no transfers between these accounts and the two concealed accounts to put Cook on notice of their existence, and Elwert did not inform Cook of the $20,000 in partnership income channeled through them.

Cook had spoken to Elwert many times about keeping adequate records for tax purposes. In 1946 Elwert and the Bureau of Internal Revenue settled a tax deficiency of some size. Cook further testified as follows:

"Q. You didn't mean to say, then, that you did not get any other information from Leo Elwert with regard to income other than the bank statements?

"A. That is right. In other words, Mr. Mead, after I would accumulate all this information I would call Leo in and I would say, 'Now what else? What other transactions have you had for the year?' [And it was just like pulling teeth to get the information,] but finally I would get it . . ." ⁹ [Italics added.]

In 1948 Elwert continued to keep no records of cash transactions. He also failed to notify his newly hired tax accountant, Hammond, of at least two transactions of over $25,000. ¹⁰

Elwert opened and closed six bank accounts in 1949, three of which were held under assumed names. Over $15,000 of partnership receipts were involved. Hammond, the accountant, was not notified of these transactions. Elwert failed to file either the partnership informational return or the individual return Hammond had prepared in 1949.

Elwert's defense attempted to show that his failure to keep records was motivated by a farmer's dislike of bookkeeping details. The business had grown rapidly after World War II, but Elwert continued the practices which had been adequate before the expansion.

In 1946 and 1947 Elwert was threatened with an alienation of affections suit which was finally settled. Elwert's wife closed the partnership bank account on which both partners could draw checks and opened a new account with the partnership funds on which only she could write checks. The relationship between the Elwerts was very strained, and it was necessary for appellant to adopt the methods of concealment in order that he might transact business as he desired. The concealment was from his wife rather than the Treasury Department.

While Elwert may not have established the amount of deductions he failed to take or that they offset the unreported income, it is clear that there were large items of business expense which were not taken as deductions during the years in question. This indicates that Elwert was not "tax conscious," and tends to negate any intention to evade taxes.

In 1948, Elwert filed a suit for divorce in Idaho against his wife, and the decree became final in 1949. The relationship between the Elwerts during this period became more distant, and Elwert was afraid that his wife would seek to attach his personal bank account as part of a proceeding for a property settlement in Oregon . A bank official suggested the use of accounts in fictitious names to keep a source of funds available for business operations.

Reasonable hypotheses other than that of an intent to evade taxes can be drawn from the acts of concealment of bank accounts and the failure to keep records. However, a reasonable jury could have concluded that the failure to disclose large cash transactions to the tax accountants after being asked "what other transactions have you had for the year" excluded every reasonable hypothesis but that of an intent to evade taxes. If this was the motive for Elwert's actions, or even part of the motive, ¹¹ in 1947 or 1948, it was reasonable to infer it was at least a partial motive for the conduct in 1949.

The motion to acquit was properly denied.

IV. The Jury Instructions

Elwert contends that the District Court erred in giving certain jury instructions and refusing to give others. The instructions given certainly were not a model for future tax evasion cases, but the question is whether, taken as a whole, they fairly informed the jury of the standards to apply to the evidence.

The first objection concerns the inferences which the jury was allowed to draw from Elwert's failure to keep records of his business transactions. The District Court instructed that

"Every person subject to income tax, except persons whose gross incomes consist solely of salaries or wages for personal services, or arise solely from farming, is required to keep such permanent books of account or records, including inventories, as are sufficient to establish the amount of the gross income and the deductions, credits, and other matters required to be shown in any income tax returns."

The District Court refused to give the following instruction:

"Evidence has been introduced to the effect that the books and records maintained by the Tualatin Valley Nursery partnership, were incomplete, inadequate, and defective.

"You are instructed that the defendant cannot be convicted of the offenses charged in the indictment merely because the books and records were kept in that manner.

"If you find that the books and records were incomplete and inaccurate and the records were so maintained through carelessness, mistake, or ignorance, and that the defendant was unaware of the fact that they were so kept, an understatement of the net income in the income tax returns, if any there be, would not constitute a willful attempt to evade the payment of tax, and your verdict must be for the defendant."

Elwert argues that the instructions given erroneously informed the jury that they might predicate a finding of an intent to evade tax upon the mere failure to keep records. However, throughout the instructions the District Court stressed that "negligence, carelessness or mistake of a taxpayer in the handling of his accounts or in providing information to be used in preparing an income tax return . . . is not in itself equivalent to the concealment of income or fraud with intent to evade tax." ". . . [W]illful tax evasion requires an intentional affirmative act as compared to an accidental, inadvertent and passive one."

The instruction asked for was adequately covered in the trial judge's charge, and the instructions taken as a whole negate the objectionable inference which might be drawn from the paragraph quoted from the instructions given.