Defeat and Evade Income Taxes Page4

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The District Court instructed that:

"Of course, it is not necessary for the prosecution to prove knowledge of the accused that a particular act or failure to act is a violation of law. Everyone is held to know what the law forbids and what the law requires."

This Court held such a presumed-intent instruction bad in Bloch v. United States, 221 Fed. (2d) 786 (Cir. 9, 1955).

However, where the instructions later stress that tax evasion is a specific-intent crime and clearly inform the jury about that requirement, the presumed-intent instruction does not constitute reversible error. Legatos v. United States , 222 Fed. (2d) 678 (Cir. 9, 1955) [55-1 USTC ¶9443]. Such is the case here. This was not reversible error.

In discussing the elements of the three crimes charged the District Court listed a specific intent to evade taxes only as an element of the crime charged in the third count based on the concealment of income in 1949. Elwert contends that the jury would naturally draw the inference that such an intent was not part of the crimes charged in counts one and two. However, later the District Court made it very clear in the instructions that the specific-intent requirement applied to all three counts. There was no error here.

The District Court refused the following instruction proposed by the defendant:

"The indictment does not charge that there was any falsity or fraud in the filing of the partnership information returns for the years 1947 and 1948. It only charges that defendant's individual tax returns for those years were filed to evade the payment of a part of his income tax liability."

The District Court completely and clearly spelled out to the jury the relationship between the income of a partnership and that of the individuals composing that partnership. The jury was not misled in this respect.

The District Court refused to instruct that

"the burden of proving the defendant guilty of the offenses charged in the indictment never shifts from the Government. The burden is not upon the defendant to prove his innocence. That burden rests upon the plaintiff.

However, it did instruct that the burden of proof was on the Government "to prove the accused guilty beyond a reasonable doubt of every essential element of the offense charged" and "a defendant has the right to rely upon the failure of the prosecution to establish such proof." The jury was adequately instructed as to this point.

The District Court refused the following instruction:

"You are instructed that if the defendant had no net income in the tax year of 1949, there would be no tax liability for that year and the failure to file a return for that year would not constitute an offense under Section 145(b) of the Internal Revenue Code, and your verdict must be for the defendant on Count III of the Indictment."

The District Court did instruct that the "first essential element is that there was owing to the Government of the United States by the defendant a substantial income tax for the taxable year of 1949." The court later fully instructed on how to determine whether a substantial tax was due. No more was required.

The defendant's requested instructions concerning the factors the jury might consider to determine whether Elwert had a specific intent to evade taxes were refused. The requested instructions spelled out specific factors while the instructions given only informed the jury that

"In determining the issue as to intent the jury is entitled to consider any or acts done or omitted by the accused, and all facts and circumstances in evidence which may aid the determination of the state of mind. You are entitled to consider the motive, if any, of the defendant in connection with the various transactions involved as bearing upon the existence or non-existence of the required specific intent."

It was not necessary for the trial judge to review the evidence relevant to intent as defendant's proposed instruction would have done. The jury was adequately instructed on this point.

The other refused instructions are either covered under the above analysis or do not present substantial questions.

The judgment is affirmed.

¹ SeeGoldbaum v. United States , 204 Fed. (2d) 74, 79 (Cir. 9, 1953) [53-1 USTC ¶9342], remanded, 348 U. S. 905, reaffirmed, 222 Fed. (2d) 360 (Cir. 9, 1955) [55-1 USTC ¶9434].

² "A prosecution for wilful failure to file a return may be maintained where there is no tax due. But no prosecution for wilful attempt to evade or defeat a tax is possible unless there is some tax due." 10 Mertens, Law of Federal Income Taxation §55.37. See also United States v. Schenck, 126 Fed. (2d) 702 (Cir. 2, 1942) [42-1 USTC ¶9363]; Gleckman v. United States, 80 Fed. (2d) 394 (Cir. 8, 1935) [35-1 USTC ¶9645].

³ Spies v. United States , 317 U. S. 492 (1943) [43-1 USTC ¶9243].

⁴ Bloch v. United States , 221 Fed. (2d) 786 (Cir. 9, 1955).

⁵ Charles v. United States , 215 Fed. (2d) 831, 833-834 (Cir. 9, 1954) [54-2 USTC ¶9598];Bateman v. United States, 212 Fed. (2d) 61, 70-71 (Cir. 9, 1954) [54-1 USTC ¶9341]; Schino v. United States, 209 Fed. (2d) 67, 72 (Cir. 9) [54-1 USTC ¶9105], cert. denied, 347 U. S. 937 (1954); Remmer v. United States, 205 Fed. (2d) 277, 287-288 (Cir. 9, 1953) [53-1 USTC ¶9421], reversed on other grounds, 347 U. S. 227 (1954)[54-1 USTC ¶9274]; Stoppelli v. United States, 183 Fed. (2d) 391, 393 (Cir. 9), cert. denied, 340 U. S. 864 (1950).

⁶ See cases collected in Note, Sufficiency of Circumstantial Evidence in a Criminal Case, 55 Col. L. Rev. 549, 550-551 (1955).

⁷Bender v. United States , 218 Fed. (2d) 869 (Cir. 7)[55-1 USTC ¶9142], cert. denied, 349 U. S. 920 (1955); Stayback v. United States, 212 Fed. (2d) 313 (Cir. 3, 1954) [54-1 USTC ¶9345], cert. denied, 348 U. S. 911 (1955); Clark v. United States, 211 Fed. (2d) 100 (Cir. 8, 1954) [54-1 USTC ¶9291], cert. denied, 348 U. S. 911 (1955). Cf. Gendelman v. United States , 191 Fed. (2d) 993 (Cir. 9, 1951) [51-2 USTC ¶9474].

⁸ See, e.g., United States v. Palese, 133 Fed. (2d) 600, 603 (Cir. 3, 1943); Kowalchuk v. United States , 176 Fed. (2d) 873, 876 (Cir. 6, 1949). Cf.Bridges v. United States , 199 Fed. (2d) 811, 832 (Cir. 9, 1952), reversed on other grounds, 346 U. S. 209 (1953).

⁹ The portion of the answer in brackets was stricken by the trial judge.

¹⁰ There was a conflict in the evidence as to whether Hammond knew of one of these transactions. The jury was free to resolve that conflict against Elwert.

¹¹ "If the tax-evasion motive plays any part in such conduct the offense may be made out even though the conduct may also serve other purposes such as concealment of other crime." Spies v. United States , 317 U. S. 492, 499 (1943) [43-1 USTC ¶9243].

 

 

[72-1 USTC ¶9449] United States of America , Plaintiff-Appellee v. William R. Ming, Jr., Defendant-Appellant

(CA-7), U. S. Court of Appeals, 7th Circuit, No. 71-1083, 466 F2d 1000, 5/26/72, Aff'g unreported District Court decision

[Code Sec. 7203]

Failure to file return: Sufficiency of information: Hostility of the court: Constitutionality of Code Sec. 7203: Admissibility of evidence: Jury selection: Instructions to jury: Admission of returns as evidence: Miranda-type warnings.--The taxpayer's conviction for failing to file a return was upheld by the Court. The following issues were decided against the taxpayer on appeal: (1) The words "said income tax return" used in the information, sufficiently referred to the breach of the duty to file at the time required by law. Accordingly, the District Court did not err in denying the taxpayer's motion in arrest of judgment. (2) The denial of the taxpayer's motion for substitution of judges was upheld. There was no substance to support the charge of bias and prejudice on the part of the District Judge. (3) Code Sec. 7203 was found to be constitutional. Its language met the standard of clarity required of penal statutes by the Fifth Amendment to the Constitution. (4) The District Court did not prejudicially err in denying the taxpayer's challenges to evidentiary matters. (5) The method of selecting the jury was proper. There was no error in limiting each side to three peremptory challenges. (6) The taxpayer was not denied due process under the Fifth Amendment because the Government used two of its peremptory challenges against the only two Negroes in the jury box. (7) The use of the Government's instruction to the jury on the subject of the taxpayer's good reputation, and the rejection of the taxpayer's instruction on the subject of his mental condition did not deny him a fair trial. (8) The admission into evidence of the taxpayer's returns for the years at issue did not violate his Fifth Amendment privilege against self-incrimination. (9) The taxpayer's right to Miranda warnings was not violated by admitting into evidence the testimony of IRS agents derived from audits of the taxpayer's records, obtained during conversations with the taxpayer or statements made by the taxpayer to the agents.

James R. Thompson, United States Attorney, John Peter Lulinski, Jeffrey Cole, Sheldon Davidson, Assistant United States Attorneys, Chicago, Ill., for plaintiff-appellee. R. Eugene Pincham, 840 E. 87th St., Chicago, Ill., Ellis E. Reid, 123 W. Madison St., Chicago, Ill., for defendant-appellant. Stanley A. Kaplan, University of Chicago Law School, 1111 E. 60th St., Chicago, Ill., Maurice Rosenfield, 208 S. La Salle St., Chicago, Ill., Alex Elson, 11 S. La Salle St., Chicago, Ill., Harry Kalven, Jr., 4929 S. Woodlawn, Chicago, Ill., for Maicus Curiae.

Before SWYGERT, Chief Judge, HASTINGS, Senior Circuit Judge, and KILEY, Circuit Judge.

HASTINGS, Senior Circuit Judge.

Defendant William R. Ming, Jr., was charged in four counts of an information, filed April 14, 1970, with having willfully and knowingly failed to make his federal income tax returns for the years 1963, 1964, 1965 and 1966 to the District Director of Internal Revenue, ¹ in violation of Title 26, U. S. C. A. §7203, being Section 7203 of the Internal Revenue Code of 1954. ²

[Facts]

Following the disposition of the pre-trial motions, this cause was submitted for trial to a jury in the federal district court ³ on October 26, 1970. The jury returned a verdict on November 2, 1970, finding the defendant guilty on each of the four courts as charged in the information. Judgment was entered on the verdict. Following the denial of defendant's post-trial motions in arrest of judgment and for a new trial, defendant was sentenced to serve four months imprisonment on each of the four counts of the information, the sentences to run consecutively, for a total of 16 months. Defendant was also fined in the sum of $1,250 on each of the four counts, for a total of $5,000, together with the costs of prosecution. Defendant appealed. We affirm.

The basic facts in this case are not in dispute. Defendant did not timely file his federal income tax returns for each of the four years, 1963 through 1966. Defendant did not make such returns when due, that is, on or before April 15 of the year succeeding the calendar tax year involved. Defendant was a person required by law or regulation to make a return for each of the four years in question, his adjusted gross income having exceeded $600 for each of those years. Defendant knew that he was required to make such returns on or before the respective due dates. For the purpose of establishing a pattern of conduct bearing upon the question of willfulness, over objection, the Government established that the defendant failed to timely make his federal income tax returns for the seven preceding tax years of 1956 through 1962.

Testimony introduced by defendant, including his own, was directed to the one issue of whether he had any criminal intent in failing to make his returns when due, i.e., whether he willfully and knowingly failed to do so. We shall subsequently treat the several issues raised concerning such testimony, as well as that excluded by the trial court in its evidentiary rulings.

It should be further pointed out at this juncture that defendant was charged under Section 7203, a misdemeanor statute. He was not charged under Section 7201 with willfully attempting to evade or defeat his federal income tax, a felony statute.

The Information

Defendant contends the district court prejudicially erred in denying his motion in arrest of judgment. He argues that the information is fatally defective because it does not state that he failed to make said income tax return "at the time or times required by law or regulations," the language of the statute. He says that the words used in the information, "said income tax return," do not refer to "the breach of the duty of file at the time required by law." We regard this as an unrealistic reading of the information.

Count I in the information does allege that defendant "was required by law * * * on or before April 15, 1964, to make an income tax return * * * [and that] he did wilfully and knowingly fail to make said income tax return * * *." (Emphasis added.) We are at a loss to understand how anyone reading the information could fail to understand that "said income tax return" required by law to be made on or before the specified due date could be other than a return to be made at the time required by law.

We are not persuaded by defendant's attack on this information. We find ourselves in agreement with the holding in United States v. Cotter, 1 Cir., [70-1 USTC ¶9371] 425 F. 2d 450 (1970). In Cotter, in considering the language used in an indictment charging a violation of Section 7203 for failure to make a return as "required by law" following the close of the calendar year 1962, the court said: "The fair meaning of 'said income tax return' is the return due on April 15, 1963." At 452.

Motion for Substitution of Judges

On the morning of the trial, defendant filed a motion for substitution of judges pursuant to Title 28, U. S. C. A. §144. Defendant moved that Judge Hoffman proceed no further because he had "a personal bias and prejudice in favor of plaintiffs, which personal bias and prejudice was not known to defendant until on or about October 23, 1970." The motion was accompanied by defendant's supporting affidavit and a certificate of good faith by his counsel. Disregarding the question of timeliness or lack of it, Judge Hoffman considered the motion on its merits and denied it on the ground that "[t]he motion supported by an affidavit is entirely inadequate and does not meet the requirements of the statute."

Section 144 dictates disqualification only when "the judge * * * has a personal bias or prejudice either against him [the movant] or in favor of any adverse party * * *." Our examination of the affidavit reveals in substance that defendant alleged that Judge Hoffman had a personal bias or prejudice in favor of the United States of America based on the following cited examples of his judicial conduct:

(1) Judge Hoffman refused to grant defendant a continuance in the instant case so that defendant could participate in the appeal of an election case involving the Board of Election Commissioners of the City of Chicago, entitled United States of America v. Kusper, et al., then pending in this court; and

(2) Judge Hoffman, on November 30, 1966, in defendant's presence, in the case of United States v. White, a narcotics case where a defendant had accused United States Treasury agents of perjury, had characterized the agents as "brave young Treasury agents."

We take judicial notice of the proceedings on appeal in this court in the Kusper case and find no substance there to support the charge of bias and prejudice on the part of Judge Hoffman in favor of the United States . The denial of a simple continuance hardly rises to the dignity of giving "fair support to the charge of a bent of mind that may prevent or impede impartiality of judgment." Berger v. United States , 255 U. S. 22, 33-34 (1921). See Rosen v. Sugarman, 2 Cir., 357 F. 2d 794, 797-798 (1966); Tucker v. Kerner, 7 Cir., 186 F. 2d 79, 83-85 (1950). Cf. Peacock Records, Inc. v. Checker Records, Inc., 7 Cir., 430 F. 2d 85, 88 (1970), cert. denied, 401 U. S. 975 (1971).

To the credit of defendant, we note one of his concluding statements in his supporting affidavit: "Affiant has known Judge Julius J. Hoffman for many years and has a high regard for him and as a result of comments made by the judge on occasion, believes the high personal regard to be mutual."

It was the judge's duty to inquire into the legal sufficiency of the facts stated in the affidavit. A trial judge has as much obligation not to recuse himself when there is no occasion for him to do so as there is for him to do so when the converse prevails. Rosen v. Sugarman, at 797. We conclude that defendant's supporting affidavit to his motion for substitution of judges was inadequate and does not meet the requirements of Section 144. It was not error to deny the motion.

Validity of Section 7203

Defendant contends that Section 7203 "contains vague language and myriad cross references to interrelated enactments and regulations and, as a consequence, is void because it does not meet the standard of clarity required of penal statutes by the Fifth Amendment to the Constitution."

He buttresses his contention by resorting to the well established principle "that a law forbidding or requiring conduct in terms so vague that men of common intelligence must necessarily guess at its meaning and differ as to its application violates due process of law." Baggett v. Bullitt, 377 U. S. 360, at 367 (1964). No one disputes the vitality of this constitutional pronouncement made in holding invalid two state statutes requiring state employees to subscribe to "non-subversive" oaths as a prior condition for public employment. It simply has no application to our consideration of the validity of Section 7203, either on its face or as appplied.

Defendant's argument is predicated on the assumption that the meaning of "willfully fails * * * to make such return" in Section 7203 is to be equated with the meaning of "willful" in Section 7201, the felony statute. However, by comparison, Section 7201 refers to one "who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof." The felony statute requires the affirmative act of evasion, while the misdemeanor is an omission of a duty to make a return. This distinction was clearly recognized by the Supreme Court in Sansone v. United States [65-1 USTC ¶9307], 380 U. S. 343, 350-354 (1965); Spies v. United States [43-1 USTC ¶9243], 317 U. S. 492, 497-500 (1943); and United States v. Murdock [3 USTC ¶1194], 290 U. S. 389, 396 (1933). Following Sansone and Spies is United States v. Schipani, 2 Cir., [66-2 USTC ¶9512] 362 F. 2d 825, 831 (1966), cert. denied, 385 U. S. 934; and Sansone is United States v. Fahey, 9 Cir., [69-2 USTC ¶9450], 411 F. 2d 1213, 1214 (1969), cert. denied, 396 U. S. 957.

All of these cases were correlated and cited with approval by our court in United States v. Matosky, 7 Cir., [70-1 USTC ¶9210] 421 F. 2d 410, 411-413 (1970), cert. denied, 398 U. S. 904. There the defendant was convicted of a charge of failure to file timely income tax returns for the years 1962, 1963 and 1964, in violation of Section 7203, and the only issue for trial by the jury was that of willfulness. We noted there that defendant's argument "that the test of 'willfulness' is the same under §7203, as it is under §7201" had been rejected in Sansone.

We conclude that Section 7203 is constitutional on its face. In support of defendant's contention that the statute was unconstitutionally applied to himself, he argues that the trial court erred in excluding his proffered testimony of Dr. Lawrence Freedman, a psychiatrist. This witness was asked a series of hypothetical questions by which the defendant offered to prove that his failure to make his tax returns was at least partially caused by emotional pressures and a lack of mental capacity referred to as "anti-materialistic neurosis." Defendant makes no plea of insanity. Since we hold that the meaning of willfulness is as set out in the foregoing authorities, it necessarily follows that the statute was constitionally applied to defendant and the trial court did not err in sustaining the Government's objections to the introduction of such testimony.

Challenged Evidentiary Rulings

The trial court sustained the Government's objections to a variety of questions asked by defendant's counsel both on direct and cross-examination. The record is replete with succeeding offers to prove. Further, defendant's counsel complains of the trial court's adverse rulings in certain aspects of his examination of Government witnesses. We have read the entire record pertaining to these evidentiary rulings and have noted the parade of the jury in and out of the courtroom as required in such instances.

For the most part, defendant's motions in these respects do not merit detailed consideration. The trial court ruled properly when questions were obviously improper as to form; when the evidence sought was irrelevant or immaterial; and particularly so when the answers sought were not proper under the rule relating to the issue of willfulness as we have determined it to be in this case.

A few instances will suffice. There was no dispute that defendant's income tax returns were unseasonably filed and his income taxes were paid when past due. Defendant contends the trial court erred in refusing to allow admission in evidence of his federal income tax returns for the years 1962 through 1968, inclusive, and the work copies of those returns. The trial court denied the introduction of a Xerox copy of an Illinois death certificate with respect to the death of Arthur J. Wilson, formerly defendant's accountant, who had been employed at some time to work on defendant's tax returns but had never completed them. Wilson 's death was not disputed. Defendant unsuccessfully sought to introduce a series of long-hand yellow worksheets purporting to be legal matters in which he had been professionally engaged during the years 1958 through 1970, apparently to establish that he had a busy and demanding law practice. The testimony of various witnesses was excluded where defendant attempted to show that he was more concerned with people than with making money; the detailed manner in which his secretary took care of his personal financial matters; conversations between defendant and his accountant (following Wilson's death) concerning his tax returns which this accountant eventually prepared and were executed and filed by defendant; and numerous other irrelevant personal matters.

It has been clearly established that late filing and late tax payment are immaterial on the issue of willfulness in a Section 7203 prosecution. In Sansone, supra, the Court said:

"[W]e agree that the intent to report the income and pay the tax sometime in the future does not vitiate the willfulness required by §§ 7203 and 7207 * * *." 380 U. S. at 354.

In Spies, supra, the Court said:

"Punctuality is important to the fiscal system, and these are sanctions [referring to willful failure to make a return] to assure punctual as well as faithful performance of these duties." 317 U. S. at 496.

See Fahey, 411 F. 2d at 1214; and Matosky, 421 F. 2d at 413.

It is also obvious that the proffered testimony excluded by such rulings could not serve to impeach a Government clerk who had merely testified that her search in 1968 of Internal Revenue index files did not reveal that defendant's tax returns had been filed. Accountant Wilson 's death was well known to the jury because of defendant counsel's repeated references to it during the trial. Defendant's widespread, busy, private and civil rights-related law practice, together with his distinguished record of public service in a broad range of activities, were fully disclosed to the jury in defendant's personal testimony in his own defense. He was granted wide latitude in such testimony.

Based upon our detailed examination of the entire record relating to all of the challenges of defendant to evidentiary matters, we have concluded that the trial court did not prejudicially err in such rulings and that there are no adequate grounds for a reversal resulting from the same.

Miscellany

A few of defendant's claims of prejudicial error merit only passing comment.

He charges the method of selecting the jury was improper, citing Rule 24(b), Federal Rules of Criminal Procedure, 18 U. S. C. A. ⁴ He now asserts that the trial court erred in limiting each side to three peremptory challenges because the defendant's total punishment could and did exceed one year. The short answer to this is that defendant was charged in one information with four counts of the same offense, a misdemeanor, for which the statutory penalty is not more than one year or a fine or both. He cites no supporting authority. The rule is to the contrary and the trial court properly granted only three peremptory challenges to each side. More than one count properly joined in one indictment or information does not increase the number of peremptory challenges to which a defendant is entitled. It is foreclosed by the statute itself. Nestlerode v. United States , D. C. Cir., 122 F. 2d 56, 58-59 (1941).

Defendant further asserts, without supporting authority, that he was denied due process under the Fifth Amendment because the Government used two of its peremptory challenges against the only two Negroes in the jury box. There was no showing or claim of the systematic exclusion of Negroes from federal juries in the Northern District of Illinois based on an invidious discrimination. The race of the veniremen excused by counsel does not appear in the record. Assuming that the two jurors in question were Negroes, there has never been any suggestion that the prosecution was racially biased or the trial so corrupted. The Government aptly points to the record showing that when the trial judge made his ruling the defense counsel stated in open court: "I think it can be read fairly both ways. We will abide by your Honor's ruling." Defendant later used this ruling as one of his grounds in a motion for a new trial. The trial court did not err in its ruling. See Swain v. Alabama , 380 U. S. 202, 221 (1965).

Defendant charges that he was denied a fair trial due to the trial court's charge to the jury. He asserts the court erred in rejecting his tendered instructions Nos. 6 and 14, and in giving Government's tendered instructions Nos. 3A, 3B, 4, 5, 5A, E, F, Q and T-1. We have reviewed each of such instructions and the instructions given as a whole. Government's instruction No. T was substituted for defendant's No. 6, and is a better and more complete instruction on the subject of defendant's good reputation, subsequently more fully referred to herein. His tendered instruction No. 14 on the subject of his mental condition was properly rejected as going beyond that warranted in a prior holding of this court. Those given by the court have been approved in form or substance by our court or other federal courts. It would unduly prolong this opinion to treat each one in detail. We find no error concerning any of those challenged. Based on our examination of such instructions given as a whole, we are left with the fixed conclusion that the jury was adequately and properly instructed in all respects and that defendant was not deprived of a fair trial as a result thereof. In fact, as we read the instructions as a whole we find they appear to be more favorable to the defendant than to the Government.

Defendant presented a number of eminent and distinguished persons who testified that on April 15, 1971, the date the instant information was filed, his general reputation for truth and honesty in the community wherein he worked was good. All of such witnesses had had a personal relationship with defendant in the past, either socially or professionally. These witnesses were Mahalia Jackson, gospel singer; Edward Levi, President of the University of Chicago; Ramsey Clark, former Attorney General of the United States; Monsignor John Egan, clergyman and then associated with the University of Notre Dame; Roy Wilkins, Executive Director of the National Association for the Advancement of Colored People; Martin Luther King, Sr., minister of the Ebeneezer Baptist Church, Atlanta, Georgia; R. Jess Brown, educator and Mississippi lawyer; Dominic A. Tesauro, Chicago lawyer and former Regional Administrator of General Services Administration; and Dr. Stanley Korff, Chicago dentist.

On the subject of evidence of defendant's reputation the trial court instructed the jury as follows:

"The defendant, you recall, had introduced evidence tending to establish his good reputation in his community prior to the indictment in this case. Such evidence may indicate to you that it is improbable that a person of good character would commit the crime or crimes charged. Therefore the jury should consider this evidence along with all the other evidence in the case in determining the guilt or innocence of the defendant. The circumstances may be such that evidence of good character alone may create a reasonable doubt of the defendant's guilt, although without it the other evidence would be convincing. However, evidence of good reputation should not constitute an excuse to acquit the defendant if the jury, after weighing all evidence, including the evidence of good character, is convinced beyond a reasonable doubt that the defendant is guilty of the crime or crimes charged in the information."

We consider this instruction to be proper and adequate statement of the applicable law. We must conclude that the jury considered this evidence, along with all the other evidence in the case, in determining that defendant was guilty as charged.

Defendant timely filed a pre-trial motion requesting the trial court to suppress from evidence his federal income tax returns filed for the years 1963 through 1966 and to suppress from evidence the testimony of Internal Revenue Agents derived from audits of defendant's records, obtained during conversations with defendant or statements made by defendant to the agents.

The argument against the use of the tax returns is that such use would be in violation of his Fifth Amendment privilege against self-incrimination. He predicates this argument on the premise that mere failure to make a return must be equated with an attempt to evade or defeat the tax. We have already rejected this premise in considering the validity of Section 7203, supra. To our knowledge no court has held the self-incrimination privilege to be a good defense to a Section 7203 charge of willful failure to make a return. The indication seems to be to the contrary.

The Supreme Court has held in effect that the Fifth Amendment does not protect the recipient of such income from prosecution for willful refusal to make any return under the income tax law. United States v. Sullivan [1 USTC ¶236], 274 U. S. 259, 263 (1927). In United States v. Keig, 7 Cir., [64-2 USTC ¶9563], 334 F. 2d 823, 827 (1964), a prosecution under Section 7203 for willful failure to make income tax returns, we laid down the same rule, citing Sullivan. The argument that the use of such returns as evidence of his obligation to file or as evidence of his gross income would violate his right to due process is similarly untenable.

Defendant raises the same Fifth Amendment contentions with reference to the admission of the testimony of the Internal Revenue Agents above mentioned. He appears to rely upon the alleged failure of the agents to give him the warnings required by Miranda v. Arizona, 384 U. S. 436 (1966). He claims this is the logical extension of our holding in United States v. Dickerson, 7 Cir., [69-2 USTC ¶9556] 413 F. 2d 1111 (1969), and that we should re-examine our decision "to apply our holding to interrogations taking place after the date of the decision [July 28, 1969]." Since the interrogations in the case at bar took place before our decision in Dickerson, he is not entitled to its application here. United States v. Gallagher, 7 Cir., [70-2 USTC ¶9506] 430 F. 2d 1222, 1224 (1970), cert. denied, 400 U. S. 956. It is reported that almost all other circuits have rejected our Dickerson application of the exclusionary rule in Miranda to taxpayers in criminal tax investigations. ⁵ We see no need to re-examine our limited prospective application of Dickerson.

We hold that the trial court did not err in denying defendant's motion to suppress.

Brief of Amici Curiae

We granted leave to a group of nine "concerned members" of the bar of this court to file a brief as amici curiae in support of defendant-appellant. We have carefully considered this brief. The members of the group are all eminent lawyers and legal scholars. With commendable candor they admit they "interested themselves in this case because of their regard for and concern about a distinguished colleague at the bar whose long career demonstrates courage, compassion, professionalism and commitment to pro bono publico work in the highest traditions of the bar." In this respect they acknowledge kinship to the "eminent witnesses testifying to his character, reputation and the nature of his professional work," we have hereinbefore referred to. In addition to their personal concern for defendant, they find "a basic and disturbing confusion" underlying the meaning of "willfully," the key term for the requisite state of mind as it is used in Section 7203, the misdemeanor statute. They further suggest that the Seventh Circuit appears not firmly committed to a construction of the term "willfully" in the misdemeanor statute, Section 7203, different from that used in the felony statute, Section 7201, which requires "a state of mind approaching an intent to evade taxes."

We have rejected this contention in our discussion of the validity of Section 7203. With deference to the distinguished amici, we reiterate that our holding in Matosky, 421 F. 2d at 413 following Sansone, Spies, Schipani and Fahey, supra, is fully dispositive of this question in this circuit. Further, we see no "sharp split between the Circuits as to how to handle 'willfully'" in the misdemeanor statute.

Amici, relying upon their statement that defendant's "returns were in and his taxes for the years charged were paid well prior to the time the prosecution was initiated," find that this led the trial court into fatal error. We have already passed upon the court's exclusion of the returns themselves for the years involved and evidence that the taxes were paid before the prosecution was initiated. However, further error is asserted because the trial court admitted in evidence, over objection, evidence that defendant had not timely filed his returns in the seven successive years immediately preceding the years charged, these being barred from prosecution by the statute of limitations.

It is well established in this circuit that evidence of other related offenses is clearly admissible to prove knowledge and intent of a person accused of a crime. Here, the other offenses involved were identical to those charged. There was no hiatus between the preceding seven years and the four charged. The conduct of the seven immediately preceding years was relevant to the issue of knowledge and intent as tending to show a constant pattern of conduct. This is the recent explicit holding of our court, authored by Senior Circuit Judge Duffy, in United States v. Hampton, 7 Cir., -- F. 2d -- (slip opinion No. 18422, March 3, 1972). United States v. Marine, 7 Cir., 413 F. 2d 214 (1969), and other relevant cases in this and other circuits as cited in Hampton , with comment. Suggested contrary inferences in other circuits by the amici are readily distinguishable from the case at bar.

Amici further suggests an inability to understand what it is that moves men to fail to file income tax returns; they are astonished by the disproportionate number of misdemeanor cases which involve lawyers; and have noted the uneven sentences given in a number of such cases. We do not profess to have the answers to such questions. We do know from defendant's own testimony that he did not timely make his required tax returns; that he knew he was required to do so; and that he knew he had not complied with such legal obligation. He had no "bona fide misunderstanding as to his liability for the tax, as to his duty to make a return, or as to the adequacy of the records he maintained," as required in Matosky, supra.

Misdemeanor convictions under Section 7203 are not unique insofar as eminent scholars and distiguished members of the bar are concerned. They are well known to all who have had to deal with them. With his outstanding record of service, both public and private, defendant was one of a select group who attracts the immediate sympathetic support of his peers who feel impelled to rescue him from the belated predicament in which he finds himself. This always leads to the willingness of friends of the highest standing to testify truthfully that he was a man of good reputation when he got into trouble. This, in turn, subjects a trial court and jury to great pressures, as it is properly intended to do. On conviction, as in the case before us, not infrequently similar pressures are brought to bear by lawyers who are genuinely concerned with the fate suffered by their colleague. However, on consideration of all issues presented, we cannot in good conscience hold that defendant did not receive a fair trial. In our judgment, he did.

Lurking in all appeals of this character is the inference that the trial court imposed an excessive punishment. The statutory maximum is one year's imprisonment and a fine of $10,000 on each count. The sentence imposed was four months and a fine of $1,250 on each count, the sentences to run consecutively. The sentences were one-third and the fines one-eighth of the maximum, well within the statutory limits. Whether the sentences should have been made to run concurrently or probation granted in whole or in part, is beyond our jurisdiction. Such questions lie within the reasonable discretion of the trial court. Whether or not we would have assessed such penalties is beside the point and we express no opinion on that question. The case does not come within any of the categories of "exceptional cases" concerning excessive punishment as delineated in United States v. Humphreys, 7 Cir., -- F. 2d -- (No. 71-1137, February 25, 1972, slip opinion pages 5-6), with which opinion we are in agreement.

Without further extending this opinion, we hold that the judgment of conviction and sentence appealed from are in all things affirmed.

AFFIRMED.

¹ Count I is typical of the four counts and reads:

"The UNITED STATES ATTORNEY charges:

"That during the calendar year 1963,

"WILLIAM R. MING, JR.,

defendant herein, who was a resident of the City of Chicago, State of Illinois, had and received a gross income of $17,908.81, that by reason of such income he was required by law, after the close of the calendar year 1963 and on or before April 15, 1964, to make an income tax return to the District Director of Internal Revenue for the Internal Revenue District of Chicago at Chicago, Illinois, in the Northern District of Illinois, Eastern Division, stating specifically the items of his gross income and and deductions and credits to which he was entitled; that well knowing all of the foregoing facts, he did wilfully and knowingly fail to make said income tax return to said Director of Internal Revenue, or to any other proper officer of the United States, in violation of Section 7203, Internal Revenue Code, Title 26, United States Code, Section 7203."

Count II alleges defendant received a gross income of $28,039.07 in 1964; Count III alleges $29,279.01 in 1965; and Count IV alleges $23,697.36 in 1966.

² Section 7203 reads:

"Any person required under this title to pay any estimated tax or tax, or required by this title or by regulations made under authority thereof to make a return (other than a return required under authority of section 6015 or section 6016), keep any records, or supply any information, who willfully fails to pay such estimated tax or tax, make such return, keep such records, or supply such information, at the time or times required by law or regulations, shall, in addition to other penalties provided by law, be guilty of a misdemeanor and, upon conviction thereof, shall be fined not more than $10,000, or imprisoned not more than 1 year, or both, together with the costs of prosecution." August 16, 1954, c. 736, 68A Stat. 851. (Emphasis added.)

³ Trial was had in the United States District Court for the Northern District of Illinois, Eastern, Division, the Honorable Julius J. Hoffman, Judge, presiding.

⁴ Rule 24(b), in relevant part, reads:

"(b) Peremptory Challenges. * * * If the offense charged is punishable by imprisonment for more than one year, the government is entitled to 6 peremptory challenges and the defendant or defendants jointly to 10 peremptory challenges. If the offense charged is punishable by imprisonment for not more than one year or by fine or both, each side is entitled to 3 peremptory challenges."

⁵ Merten's Law of Federal Income Taxation, §55A. 21, Note 13.26, 1972 Cumulative Supplement, Vol. 10, page 18.

 

 

[60-2 USTC ¶9580]Joseph W. Janko, Appellant v. United States of America , Appellee

(CA-8), U. S. Court of Appeals, 8th Circuit, No. 16,330, 281 F2d 156, 7/13/60, Aff'g in part and rem'g in part an unreported District Court judgment

[1954 Code Sec. 7201]

Wilful attempt to evade: Improper claims of dependency: Sufficiency of indictment.--The trial court's denial of a pre-trial motion to dismiss the indictments was not in error where the charge went directly to the validity of the claimed exemptions and the purposeful understatement of tax. The taxpayer was charged in 3 counts of wilfully and knowingly attempting to evade a large part of his taxes for tax years 1954 through 1956 because he improperly asserted and claimed his 2 minor children as dependents.

[1954 Code Sec. 7201]

Wilful attempt to evade: Motion for acquittal.--A motion for acquittal was improperly denied as to a count involving 1954 taxes where the taxpayer was charged with stating that "the amount of taxes due and owing . . . was the sum of zero dollars," and the form used did not contain such a statement nor any computation or determination of tax. Motions for acquittal on the other counts because of lack of "independent showing of wilfulness" were properly denied upon the authority of Achilli, 57-1 USTC ¶9692.

[1954 Code Secs. 7201, 7203, and 7207]

Wilful attempt to evade: Refusal of lesser offense instructions.--Lesser instructions under Code Secs. 7203 and 7207 were properly refused by the trial court. The facts removed the case from Sec. 7203, and Sec. upon the authority of Achilli, 57-1 USTC ¶9692, upon the authority of Achilli, 57-1 USTC ¶9692, and cited cases.

[1954 Code Sec. 7201]

Wilful attempt to evade: Trial: Publicity prejudice.--The record did not disclose any prejudicial error related to newspaper articles about the case.

[1954 Code Sec. 7201]

Wilful attempt to evade: Consecutive sentences.--The reasonableness of the consecutive sentences on each count was not a matter of review on appeal where each count charged a separate crime and each sentence was within the statutory limit.

Norman S. London, 705 Olive Street , and Sidney M. Glazer, 408 Olive Street , both of St. Louis , Mo. , for appellant. John A. Newton and Frederick H. Mayer, Assistant United States Attorneys, St. Louis, Mo., (William H. Webster, United States Attorney, St. Louis, Mo., with him on brief), for appellee.

Before SANFORD, MATTHES and BLACKMUN, Circuit Judges.

BLACKMUN, Circuit Judge:

The defendant-appellant, Joseph W. Janko, was found guilty by a jury on each of 3 counts of an indictment charging him with violations of §7201 of the Internal Revenue Code of 1954, 26 USCA §7201. ¹ The first count charged the defendant with a willful and knowing attempt to evade and defeat a large part of his federal income tax for the calendar year 1954. The second and third counts contained similar charges with respect to his federal income taxes for the calendar years 1955 and 1956, respectively. The court imposed sentences of imprisonment for a total of 10 years, viz., 4 years on the First Count, 3 years on the Second Count, and 3 years on the Third Count, the terms to run consecutively.

This was the defendant's second trial before the same judge on the charges under this indictment. The first trial also had ended in conviction upon all 3 counts but a motion for a new trial was granted; this was based upon the fact that 4 members of the first jury, in spite of repeated admonitions from the court, had either read or been advised prior to the verdict of prejudicial newspaper articles about the trial. Cf. Marshall v. U. S. , 1959, 360 U. S. 310.

[Facts and Evidence]

The alleged crimes here do not consist, as is usually the case, of willful understatements of gross income, but are bottomed, instead, on willful and knowing attempts by the defendant to evade and defeat his income tax for each of the 3 years by improperly asserting his own two minor children as dependents and claiming exemptions for them. The tax amounts involved are small: $134.00 for 1954, and $264.00 for each of the years 1955 and 1956. The defendant claimed in argument that this is the first case where fraud is asserted with respect to exemptions taken for a taxpayer's own existent minor children.

Much of the factual material is not disputed: The defendant's wife, Anna, obtained a default decree of divorce from him in the Circuit Court, City of St. Louis , on January 26, 1954. By that decree she was granted custody of their two minor children, the defendant was given two-hour Sunday visitation rights, and she was allowed alimony of $1 per year and support and maintenance for each of the minor children of $10 per week. During the 3 taxable years the children made their home with their mother and not with their father. The mother and the children resided with her father in his house in St. Louis ; her father died in April 1955 but she and the children continued to live in that house for the rest of 1955 and all of 1956. She did no remunerative work outside the home during the 3 years until November 18, 1956, when she accepted employment at a hospital. For 1954 and again for 1956 the defendant used the "small" and simple Form 1040A for his federal income tax return. He used the standard or "large" Form 1040 for his 1955 return. On his 1954 return he designated himself as single; on it he showed wages of $1,420 and tax withheld of $177.90 and asserted the usual personal exemption for himself. Under Item 14 of that return, entitled "Exemptions for your children and other dependents", he listed the 2 children and asserted them as exemptions. The form, however, did not, as was the case with non-children dependents, require a taxpayer to state whether each child had gross income of $600 or more, the amount spent for the child's support, and the amount spent by others, and the defendant set forth no such information. The form he used for 1954 contained no computation of tax. The $177.90 withheld was routinely refunded to the defendant in April 1955. On the 1956 small form return the defendant asserted that his wages aggregated $4,483.13, that his income taxes withheld totalled $602.70, that his proper tax (from the table) was $450 and that there was an overpayment of $152.70. Under Item 15, entitled "Exemptions for your children and other dependents" the defendant again listed the 2 children, gave their address as different from his own, and asserted 3 exemptions, one for himself and one for each of the children. The claimed overpayment of $152.70 was routinely refunded to the defendant in March 1957. The defendant's long form for 1955 was prepared by W. J. Stailey Co. of East St. Louis, Illinois . It required a taxpayer to "list names of your children who qualify as dependents." Here again the defendant named the 2 children and asserted exemptions for them together with his own. This return showed wages of $3,160, tax withheld of $398.80, other income of $1,800, and a total tax (from the table) of $549. The $150.20 excess over the withholding was paid prior to the due date. All 3 returns were duly filed and were filed on time.

There is other evidence, too. Special Agent Carl Heinz testified that in a conference he had with the defendant in September 1957, at the Internal Revenue office in East St. Louis , the defendant acknowledged the 3 returns in question. He also testified:

"Q. Mr. Heinz, did you have occasion to question the defendant at that time in regard to the exemptions on these returns? A: Yes, I did. Q: Taking the 1954 return first, do you recall your conversation with the defendant? A: Yes, I do. Q: Can you tell us what that was? A: I asked him in a general way whether he understood what was necessary to claim an exemption in a return and he said he did. I asked him whether he understood--whether he contributed more than fifty per cent toward each dependent's support and he said yes, he understood that. Q: He understood that was what the exemption required? A: Yes, sir. Q.: All right. Now did the defendant tell you how much he was contributing in the year 1954, toward the support of these two dependents listed? A: Yes, sir. Q: What did he say he was contributing? A: He said he averaged twenty dollars a week toward the support of the two children. Q: Twenty dollars a week in 1954? A: Yes, sir. Q: Did you inquire as to the later two years, 1955 and 1956? A: Yes, sir. Q: What did he say in regard to that? A: The same thing, that he contributed twenty dollars toward the support of the two children in those years. Q: Did you inquire further as to the basis of making that statement that he was contributing twenty dollars a week? A: Yes. Q: Could you tell us your conversation in that regard? A: Well, I asked him how he contributed it, and he said he contributed it in currency, he had no record of the contributions because it was currency. * * *"

Mrs. Janko, known as Mrs. Taylor after September 20, 1958, testified under subpoena that while her father lived he provided the housing and, with it and with his $152 monthly civil service pension, he supported the children in 1954 and until his death; that under her father's will she received the house; that, in substance, she contributed the major portion of the children's support in 1955 and 1956 in providing the house and the upstairs rentals; that the defendant contributed for the children's support between $50 and $60 a year plus about 5 pairs of shoes a year and a coat or two; that these monetary contributions were cash in varying amounts from $5 to $20 given on irregular occasions and usually handed to the son; that in 1954 they received about $300 from the second floor rentals; that these rentals in 1955 amounted to $100 a month when the second floor was rented; that there were weeks when the place was vacant or the tenants did not pay; that there were also rentals in 1956; that in 1955 she spent about $65 a month for food, two-thirds of which was for the children, and about $150 to $200 a year for clothing for the children and made other expenditures for gas, electricity and water; and that the 1956 expenditures on her part were much the same. She did not keep formal records of the payments the defendant made. The defendant's present wife Rosalie, whom he married in January, 1957, testified that during 1956 she drove with the defendant to Mrs. Taylor's home and, while she herself did not enter the house, saw the defendant give $20 in cash to his son on about 10 occasions. She had not known the defendant in 1954 and 1955 and thus had nothing to offer by way of evidence as to his payments in those years.

The defendant did not testify. Neither did his son Joseph. The boy was 11 years of age at the time of the trial and thus was between 6 and 8 during the years in question when the defendant's cash payments to him are said to have been made.

The case which confronts us, therefore, is one involving a small amount of tax dollars, is one which concerns no element of concealment or omission of gross income, is one which involves only a taxpayer's claim of exemptions for his own minor children whose existence is not questioned, but is one resulting, nevertheless, in a total of 10 years' incarceration for the defendant.

The defense's allegations of error are: error in denying a pretrial motion to dismiss; error in denying a motion for judgment of acquittal at the close of the entire case; error in respect to instructions; prejudice arising out of newspaper articles concerning the case; and error in the sentences. We consider these in order.

1. PRETRIAL MOTION TO DISMISS THE INDICTMENT. The defendant's argument here centers on the charge in each count. ² He points out that there is no question of incorrectness in the stated adjusted gross income and claims that the indictment does not assert that the defendant knew that the tax due was greater than the tax reported. We hold that the indictment fully withstands this attack. Its charge of willfulness goes not to adjusted gross income but to purposeful understatement of tax. The charge embraces more than a mere erroneous tax calculation unsupported by specific allegations of falsity or fraud, as was the situation in U. S. v. Demos, D. C. S. D. Fla., 291 F. 104, cited by the defendant, for it goes directly to the validity of the claimed exemptions.

2. THE MOTION FOR ACQUITTAL. The usual motion for acquittal as to each count was made at the close of the case and was denied.

We feel that there was a failure of proof under the First Count of the indictment and that, therefore, the defendant's motion for acquittal should have been granted with respect to that count. ³ The count relates to the defendant's 1954 return "wherein he stated * * * that the amount of tax due and owing thereon was the sum of zero dollars" upon his adjusted gross income. But the evidence conclusively shows that while the small form return used by the defendant for that year did name the children and claim exemptions for them, it contained, in contradistinction to the 1955 and 1956 returns, no computation or determination of tax and no statement that his tax was zero dollars. This omission was proper, and in fact was called for by that form; the computation then was for the District Director to make. §6014(a) of the 1954 Code; §1.6014-1 of the Regulations under the 1954 Code. Whether the proof adduced would have sustained a count directed specifically to the exemptions claimed is another question and is not now before us.

The position of the defense in support of the motion for acquittal on the other counts appears to be that (a) the tax forms which the government supplied and which the defendant used were misleading and invited mistake; (b) the assertion of the children as dependents was no more than a "claim" which the tax authorities were free to allow or disallow just as they would handle any routine claim for refund and was far from being a willful attempt to evade tax within the meaning of §7201; (c) the defendant had no knowledge of the extent of the contributions for the children's support from his former wife, her father, or anyone else, and no practicable means of acquiring that information; (d) there was a failure of proof in that the evidence as to the source of the children's support is vague and is without reference to specific amounts; (e) the defendant's statement to Agent Heinz that he understood what was necessary to claim dependency exemptions was made only in September 1957, after the returns had been filed, and was without corroboration or any showing as to when the defendant had acquired this information; (f) willfulness must be independently shown; and (g) the amounts of tax involved do not satisfy the requirement of substantiality said to be imposed by Heasley v. U. S., 8 Cir., 218 F. 2d 86, 90 [55-1 USTC ¶9149]; cert. den. 350 U. S. 882.

There is little question now as to the necessary components of the offense under §7201. In Spies v. U. S., 317 U. S. 492, 497 [43-1 USTC ¶9243], the section's immediate predecessor, §145(b) of the 1939 Code, 26 U. S. C. A. (IRC 1939) §145(b), is described as "the capstone of a system of sanctions" to ensure fulfillment of duty under the income tax law. It was said, p. 499, to apply to the "gravest of offenses against the revenues" and to necessitate proof of "willful commission" in addition to "willful omission" or passive neglect of statutory duty. ⁴ Fourteen years later, in Achilli v. U. S., 353 U. S. 373 [57-1 USTC ¶9692], the court held that the positive act of willfully filing a false return in an attempt to defeat the tax is an affirmative act within Spies and supports the felony charge, saying, p. 377:

"We cannot hold that the classic method of evading the income tax, the filing of a false return, did not constitute an attempt 'in any manner to defeat or evade' that tax."

This court's cases of Cave v. U. S., 159 F. 2d 464, 466-7 [47-1 USTC ¶9171], cert. den. 331 U. S. 847, and Myres v. U. S., 174 F. 2d 329, 334 [49-1 USTC ¶9275], cert. den. 338 U. S. 849, both decided prior to Achilli, were to the same effect.

By his motion for acquittal at the close of the case, the defendant laid the basis for challenging the sufficiency of the evidence. Heasley v. U. S., supra, p. 90 of 218 F. 2d. We feel, however, that the government's proof was adequate. The testimony of the defendant's former wife, although perhaps not as specific as a court or litigants might always desire, afforded proof, and such corroboration as was necessary, as to the extent of her father's and her own contributions to the support of the children, as to the extent of the defendant's contributions, and as to the fact that his contributions were less than half of the children's support. While, of course, the defendant may not have known the exact contributions by others than himself during the years in question, he was the father of the children, should and must have had some concept of the cost of a child's support, had lived in his father-in-law's house and knew the value of its shelter, and must have entertained an awareness as to whether his contributions constituted the required one-half. The reference to "substantial amount of net income tax" in the Heasley case, p. 90 of 218 F. 2d, was directed to a net worth case and necessary intent. It does not support the defense's contention that because the amount of dollars involved here is small it is not "substantial." On a percentage basis the amount involved is large.

While the 1956 Form 1040A is perhaps not as clear in its directions as to child-dependency exemptions as it might be, it is admittedly a small form of limited space and it was clear enough, we feel, for a taxpayer of defendant's intelligence not to have been misled by it and to know what he was doing when the claimed exemptions were asserted therein. The clarity of the large form which he used for 1955 is not to be disputed.

These observations answer the defendant's arguments in support of the motion for acquittal as to 1955 and 1956 and we conclude that the trial court's denial of the motion with respect to the Second and Third Counts was proper.

3. THE INSTRUCTIONS. The defense's claims here come down to:

(a) The refusal to give certain requested instructions, (Nos. 17, 18, 19, 22, 11 and 25) and the failure "to give any theory of defense instructions." We have carefully examined the items requested and the court's entire charge (including other instructions requested by the defendant and given) and we are satisfied that the proper content of those refused is embraced, and fairly so, in the charge as given and that the theory of the defense was adequately and properly presented to the jury.

(b) The instructions that the issues were whether the defendant filed income tax returns, whether he claimed the children as exemptions, whether he provided over half of their support and whether, if not, his return was false and fraudulent and he knew it to be so, etc. We find no merit in the defense's position that, because it conceded the filing of the returns and the claiming of the exemptions in its closing argument, the instructions raised issues in the case which were not made by the defense and served only to obscure. The defense further asserts that this portion of the charge did not properly allow for §152(c) of the 1954 Code under which this defendant would be entitled to the exemptions even though his support contributions were less than half and that, as a consequence, the burden of proof as to this was shifted to the defendant. We feel, however, that the court's careful comments about the burden of proof and his considered delineation of the components of willfulness and of intent to evade and defeat the tax fully answer this argument.

(c) The refusal to give lesser offense instructions as intimated by Rule 31(c), ⁵ F. R. Cr. P., directed to §7203 ⁶ and §7207 ⁷ of the 1954 Code.

The answer to this argument, so far as §7203 is concerned, is clear. §7203 came into the 1954 Code, with minor changes of no significance here, from §145(a) of the 1939 Code. It clearly relates to willful failure to pay or to file a return, etc. Mere failure, without more, is different and of less magnitude then the willful attempt "to evade or defeat" concept of §7201. Spies v. U. S. , supra. The same argument now advanced by the defense as to §7203, was presented as to §145(a) in Dillon v. U. S., 8 Cir., 218 F. 2d 97 [55-1 USTC ¶9131], cert. granted 349 U. S. 914, and dismissed 350 U. S. 906 [56-1 USTC ¶9111]. This court there said, in words peculiarly appropriate here, p. 101 of 218 F. 2d:

"The indictment did not charge, nor did the evidence show, that the defendant merely failed to pay a tax or failed to make a return. On the contrary, the evidence showed that a return was filed and a tax was paid. No evidence was offered that defendant failed to file a return or to show the willful failure to pay the tax when due, except insofar as willfulness was involved in the charged willful and felonious attempt to evade the payment of taxes owed. Hence the universal rule that it is not error to fail to instruct on an offense not presented by the evidence applies. There consequently was no error in failing to instruct that defendant might have been convicted of either of the misdemeanors defined by §145(a), of willful failure to pay a tax when due or willful failure to file a return." ⁸

We hold the same result follows here with respect to §7203 of the 1954 Code.

§7207 presents a much more complex problem, ⁹ and its resolution is affected by the Spies, Achilli and Dillon cases, supra, and by Berra v. U. S., 351 U. S. 131 [56-1 USTC ¶9480]. ¹⁰

§7207's antecedent in the 1939 Code is §3616(a). ¹¹ That section traces its origin to the Act of 1798, 1 Stat. 580, 586, which, of course, was adopted long prior to any federal income tax legislation. The Supreme Court in Achilli reviewed the history of the statute, p. 376 et seq. of 353 U. S., and concluded that, although it once had income tax application, by the time it had emerged as §3616(a) in the 1939 Code "its scope had been shrunk by a series of specific enactments (the Revenue Acts adopted following the passage of the Sixteenth Amendment) that had the potency of implied repeals" and that, therefore, "§3616(a) did not apply to evasion of the income tax." See also Mitchell v. U. S., 8 Cir., 245 F. 2d 707 [57-2 USTC ¶9761], and Hartman v. U. S., 8 Cir., 245 F. 2d 349, 351, 353 [57-2 USTC ¶9726].

Whether this same conclusion is to be reached with respect to §7207 of the 1954 Code is our present question. This court touched upon the problem in Dillon, supra, decided January 5, 1955. That case, however, concerned a conviction under §145(b) of the 1939 Code and the question there presented was whether the defendant was entitled to a lesser offense instruction under either §145(a) or §3616(a). The answer, so far as §145(a) was concerned, is set forth above. The contention as to §3616(a) was disposed of by the conclusion that the section was not applicable to the income tax. This ruling was followed four months later in Berra v. U. S., 8 Cir., 221 F. 2d 590, 598 [55-1 USTC ¶9382]. Thus, this court in 1955 twice reached the same conclusion as did the Supreme Court in Achilli in 1957. In Dillon, in support of its conclusion as to the non-application of §3616(a), the court referred to §7207. It is to be acknowledged that language in the Dillon opinion, ¹² by way of dictum, indicates that this coourt then felt that §3616(a) and §7207 were different and distinguishable. Dillon, however, was decided only a few months after the effective date of the 1954 Code and preceded both Berra and Achilli. The relationship of the two sections from different Codes must be reviewed, therefore, in the light of those subsequent cases.

§7207 differs somewhat in content from §3616(a). §7207 introduces the word "willfully" which was not present in §3616(a). It incorporates the phrase "known by him to be fraudulent or to be false as to any material matter" and omits the phrase "any false or fraudulent list, return, account or statement, with intent to defeat or evade" used in §3616(a). The positioning of the sections is also of interest. §3616(a) was among the 1939 Code's "General Administrative Provisions," and was broad in nature, whereas §145(b) was specific and was included in the Income Tax Chapter of that Code. In the 1954 Code, on the other hand. §7207, as is §7201, is a part of Chapter 75 entitled "Crimes, Other Offenses, and Forfeitures," which in turn is a part of Subtitle F, "Procedure and Administration." In the 1954 Code the income tax sections constitute Subtitle A but that Subtitle includes no sanction or penalty provisions. All of these are gathered together and comprise the aforementioned Chapter 75 which was described in the House and Senate Committee Reports on the 1954 Code as follows: "In this chapter all criminal offenses are brought together, as are all other offenses, and all provisions relating to forfeitures, except those relating to" alcohol, tobacco and certain firearms. House Report No. 1334, p. 108, and Senate Report No. 1622, p. 147, 83rd Congress, 2d Session. Each report goes on to say, "In general, uniform penalties are provided * * * instead of the varying penalties now provided for what in substance is the same offense, namely, the attempt to evade tax." The same Committee Reports in their detailed discussions of technical provisions both recite, pp. A425 and 603, respectively, in speaking specifically of §7207, "This section * * * contains no material change from existing law." 1954 Congressional Service 1111 and 3251. ¹³

Although the question is a close one, we are now unable to detect a significant difference, which would have a bearing on Congressional intent, between §3616(a) and §7207 and we regard the mere gathering of the penalty sections into one general chapter as not evincing an intent on the part of Congress to give §7207 a greater scope than §3616(a) had under the 1939 Code. Although the Committee Reports were formulated prior to Achilli, we are fortified in this conclusion by their positive statements, not referred to in Dillon, that no change from existing law was effected. It follows that §7207 is not applicable to income tax evasion.

An additional reason for this conclusion lies in the fact that if §7207 were to be regarded as applicable to income tax returns, then, with the insertion of the word "willfully," we would have a downgrading, from felony to misdemeanor, at least by way of alternative, in the willful filing of a false income tax return which, as we have noted, had been held in the Achilli, Cave and Myres cases, all supra, to constitute a felony under §145(b) of the 1939 Code. ¹⁴ This result does not seem to square with the expressions in the Committee Reports that Chapter 75 of the 1954 Code served to bring all criminal offenses together; there is no intimation there that relaxation in definition of any crime was intended or accomplished. ¹⁵

But there is still another consideration. If §7207 did operate to effect a downgrading into alternative misdemeanor status of the willful filing of a false income tax return, then, it seems to us, the reasoning employed by the Supreme Court in Berra defeats the defendant's claim. To paraphrase the language of Berra, p. 134 of 351 U. S.: Here, as there, the method of evasion charged was the filing of a false return, and it is apparent that the facts necessary to prove that petitioner "willfully" attempted to evade taxes by filing a false return (§7201) were identical with those required to prove that he "willfully" delivered a return fraudulent or false "as to any material matter" (§7207). In this instance §7201 and §7207 covered precisely the same ground. It follows then, from Berra, that when the jury resolved the factual issue against the defendant, its function was exhausted and the question whether §7207 rather than §7201 should be applied is not for the jury.

This analysis compels us to conclude that the defendant is not entitled to a lesser offense instruction with respect to either §7203 or §7207.

(d) The incorporation of an "Allen charge" among the original, as distinguished from supplemental, instructions. This appeared early in the charge and the trial court's remarks were clearly of the type approved by the Supreme Court in Allen v. U. S., 164 U. S. 492, 501-2. The defense complains that there was no need for such an instruction, and that it should have been given, if at all, only after the jury had a reasonable time to arrive at a verdict. One answer to this complaint is that the trial court's observations were themselves occasioned by comments of defendant's counsel made in his argument to the jury. ¹⁶ In any event, the charge is not uncommon and has often been the subject of appellate comment, While the Allen case itself and most others involve situations where the jury has reported its inability to agree, or has so indicated when the court, on its own motion, has called the jury in after some deliberation ¹⁷ and while there may be suggestions in some of the cases, including our own, ¹⁸ that an Allen charge is premature before some deliberation by the jury, there are instances in the reports where the charge is present in original instructions. U. S. v. Kenney, C. C. D. Del., 90 F. 257, 274; U. S. v. Reid, D. C. D. Del., 210 F. 486, 494. Such use in the original charge has been specifically approved by this court. Nick v. U. S. , 8 Cir., 122 F. 2d 660, 674, cert. den. 350 U. S. 821. Indeed it can be said, properly it seems to us, that the incorporation of an Allen charge among the original instructions might be, under most circumstances, less harmful to a defendant's cause than its use in supplemental instructions when a jury disagreement already exists. As Judge Stone said in the Nick case, p. 674 of 122 F. 2d:

"If such statement is made in the face of an existing disagreement in the jury it is quite evident that its entire force would be felt as applying to an existing situation which had developed. Language which might be innocent if uttered before submission of the case to the jury might be regarded as harmful if applied to a specific existing disagreement. Here the caution used by the court seems careful and temperate. It contains no suggestion of coercion and we cannot see how any reasonable member of the jury could believe that he was not entirely free to disagree if he felt such was his duty."

The Supreme Court in Allen, p. 501-2 of 164 U. S. , said:

"It certainly cannot be the law that each juror should not listen with deference to the arguments and with a distrust of his own judgment, if he finds a large majority of the jury taking a different view of the case from what he does himself. It cannot be that each juror should go to the jury-room with a blind determination that the verdict shall represent his opinion of the case at that moment; or, that he should close his ears to the arguments of men who are equally honest and intelligent as himself."

There is nothing in that opinion which indicates that the quoted language is not to be regarded just as effective in support of an original charge as of a supplemental one. Compare the comments of the Second Circuit in U. S. v. Tellier, 255 F. 2d 441, 449-50, cert. den. 358 U. S. 821. It is, after all, a matter for the court's discretion. We hold that the use of the charge here was not an abuse of the trial court's discretion and was not error.

4. PUBLICITY PREJUDICE. Errors alleged as to the court's failure to continue the case, as to its failure to impound the jury, as to its denial of a mistrial, and as to its methods of interrogating the jurors relative to the newspaper articles may be considered together for they all relate to trial publicity and its effect.

As has been noted, this was the second trial of the case. The former convictions were nullified by the granting of a new trial due to the awareness of some members of the first jury of prejudicial newspaper publicity. At the inception of the second trial and before the jury had been chosen, the defense requested a continuance because of the existence of a radio news report on the case. This was refused and the court suggested that counsel was entitled, if he wished, to have the panel interrogated "as to whether they have heard anything * * * whether any know anything about the defendant and whether they have formed any opinion, whether they could not sit in the jury box with an open mind * * *." The defense then asked that the jury be impounded and asserted that the ruling on this request would affect the kind of questions asked the jury. The court responded that the matter of impoundment was one which lay in the area of his discretion and that he would exercise it when the time came.

At the completion of the voir dire but before the final selection of the jury the court referred to the fact that he had had an instance before where jurors had read a newspaper article about the case they were trying and that it became necessary to have a new trial because of that. He suggested that they ought not to read newspapers during the trial. The defense renewed its request for impoundment but again the court reserved its ruling. Just before the first noon recess and the taking of any testimony, the court again instructed the jury not to read anything about the case or listen to any account of it. At this point the impoundment request was denied. At the close of that day the court again admonished the jury and told them not to read the newspapers. Prior to the resumption of testimony the following morning, which was the second and last day of trial, counsel presented to the court page 3A of the St. Louis evening newspaper for the preceding day. In the second column was an article about 7 inches in length bearing a bulletin "J. W. Janko on Trial in Income Tax Case." In the body of the article were references to the defendant as "a former of East Side rackets boss Frank (Buster) Wortman" and as "a former convict" who was found guilty in January in the same case but was granted a new trial when 4 jurors acknowledged that they had read newspaper accounts of the charges against him. It also described the defendant as a former doorman and parking lot custodian "at Wortman's Club Prevue on the East Side ." In the fifth column on the same page, bearing the headline "Six Facing Trial on Gambling Tax Charges by U. S." was a longer article relative to the commencement in Federal Court in East St. Louis of a trial of 6 men including "a relative of East Side gang boss Frank (Buster) Wortman" on "charges growing out of their alleged gambling operations" and directed to "making false statements under oath to Internal Revenue Service agents and attempting or conspiring to evade payment of federal wagering taxes." The defense then moved for a mistrial. The court made observations as to the differences between the January and the May publicity. In respense to the court's question as to whether it wished him to inquire of the jury whether they had read any article or listened to any broadcast, the defense took the position that the article's statement as to the setting aside of the verdict in the first trial would suggest to a juror to make no mention of his reading the article because then the verdict here would also be set aside. At the noon recess on that second day, the evidence having just been concluded, the jury was impounded.

In his instructions the court reminded the jury of his cautioning them about reading newspaper articles or listening to broadcasts. He referred specifically to the preceding evening's newspaper article and admonished them that if they had had occasion to read any newspaper account or listen to any broadcast they should disregard it. After the jury had returned its verdict and had been polled, the defense, with respect to its motion for a mistrial, asked the court to determine whether any juror had read or heard any of the news articles appearing in the paper or broadcasts. The court indicated that the burden was on the defense to show influence, and pointed out that he had brought all this repeatedly to the attention of the jury during the trial. Counsel indicated unwillingness to make the specific inquiry himself, but stated "I do think the Court should". The court then asked whether any of the jurors was "influenced or moved to your verdict in this case by anything that happened or transpired outside the courtroom." He repeated: "Were any of you persuaded or influenced by anything other than the testimony you heard in the courtroom during the trial of this case and based upon the testimony of this case alone." No juror responded affirmatively to either of these questions.

We feel that upon this record no prejudice to the defendant could possibly have resulted from the presence of the news articles in question. We realize that publicity, in this day of ready and current communications, often presents a vexatious problem to the courts. See Marshall v. U. S. , supra, and the opinion of concurrence in Shepherd v. Florida, 341 U. S. 50. But the facts of Marshall and Shepherd are far different from those presented here. Some element of practicality and realism in matters of this kind is still indicated. It is yet the law that the determination of the issue of publicity prejudice remains primarily a matter for the trial court's discretion, Marshall v. U. S., supra; Rowley v. U. S., 8 Cir., 185 F. 2d 523, and that the defense has the burden of showing abuse of discretion and resulting prejudice, Gicinto v. U. S., 8 Cir., 212 F. 2d 8, 10-1, cert. den. 348 U. S. 884; Franano v. U. S. , 8 Cir., 277 F. 2d 511, 515. So also is the question whether a jury should be impounded. Holt v. U. S., 218 U. S. 245, 250-1; Kleven v. U. S., 8 Cir., 240 F. 2d 270, 273 (footnote) and cases cited. Failure to warn a jury not to read or listen to publicity has been held in itself not to be prejudicial in the absence of an indication that any juror had seen or heard the stories mentioned. Ferrari v. U. S. , 9 Cir., 244 F. 2d 132, 139, cert. den. sub nomine Cherpakov v. U. S., 355 U. S. 873; U. S. v. Griffin, 3 Cir., 176 F. 2d 727, 731, cert. den. 338 U. S. 952. Failure, after polling, to ask the same question under the same prevailing circumstances certainly cannot then be prejudicial. ¹⁹ The trial court here gave repeated and adequate admonitions and it might even be said that he grasped every occasion to do so and to protect the case against possible prejudice to the defendant. Counsel also was given ample opportunity to question the jury directly on these matters but, for reasons sufficient in his good judgment, declined so to do.

We, therefore, find no abuse of discretion by the trial court in connection with any of these points bearing upon alleged publicity prejudice. The cases afford ample precedent for this conclusion. ²⁰ Mr. Justice Holmes' comment of a half century ago, in Holt v. U. S., supra, p. 251 of 218 U. S., as has so often been noted (see, for example, the Ferrari and Griffin cases, supra), is still appropriate: "If the mere opportunity for prejudice or corruption is to raise a presumption that they exist, it will be hard to maintain jury trials under the conditions of the present day."

5. THE SENTENCES. The defense argument about the sentences divides into claims that (a) they are cruel and unusual and their imposition was an abuse of discretion, and (b) if each count of the indictment charged an offense, it was one under §7207 which authorizes only a much narrowed range of punishment than does §7201. In view of our conclusion above with respect to the First Count of the indictment, we are concerned here only with the sentences under the Second and Third Counts.

The first contention embraces the assertion that the evidence, at most, shows only a single course of conduct which is subject to a single punishment and cannot justify consecutive sentences. This is fully answered by reference to the well settled principle that each count charges a separate crime and that a like offense committed for each taxable year constitutes a separate and distinct crime. Blockburger v. U. S., 284 U. S. 299, 305; see Turner v. U. S., 8 Cir., 271 F. 2d 855, 856. Furthermore, this court has repeatedly said that so long as sentences pronounced are within the allowable limits prescribed by the governing statute, the reasonableness of the sentence is not a matter for review here. Holmes v. U. S., 8 Cir., 115 F. 2d 528, 529; Affronti v. U. S., 8 Cir., 145 F. 2d 3, 10; Jacobsen v. U. S., 8 Cir., 260 F. 2d 122, 123; see Carlson v. U. S., 8 Cir., 274 F. 2d 694, 695.

The second contention rests upon the same arguments advanced relative to the defense's claim for a lesser offense instruction. What we have said above on that issue has full and conclusive application here.

We have reviewed all other claims of error asserted by the defense and conclude that they are without merit.

The case is, therefore, remanded with directions to grant the motion for acquittal under the First Court and to vacate the sentence on that court. In all other respects the judgment below is affirmed.

¹ "§7201. Attempt to Evade or Defeat Tax. Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $10,000, or imprisoned not more than 5 years, or both, together with the costs of prosecution."

² The counts are identical except for the year stated and the figures employed and read, "That * * * (the defendant) did wilfully and knowingly attempt to evade and defeat a large part of the income tax due and owing by him * * * by filing * * * a false and fraudulent income tax return wherein he stated that his adjusted gross income for the said calendar year was the sum of * * * and that the amount of tax due and owning thereon was the sum of * * * whereas, as he then and there well knew, his adjusted gross income for the said calendar year was the sum of * * * upon which said adjusted gross income he owed to the United States of America, an income tax of * * *. In violation of Section 7201, Internal Revenue Code of 1954."

³ While the motion for acquittal might have been directed to this point more specifically, we deem it sufficient and in any event we have no hesitancy in considering the issue. Rule 52(b), F. R. Cr. P.; U. S. v. Atkinson, 297 U. S. 157, 160; Hormel v. Helvering, 312 U. S. 552, 557 [41-1 USTC ¶9322] affirming Helvering v. Hormel, 8 Cir., 111 F. 2d 1 [40-1 USTC ¶9431]; Ayers v. U. S., 8 Cir., 58 F. 2d 607, 609; U. S. v. 353 Cases, 8 Cir., 247 F. 2d 473, 477; See Wiborg v. U. S., 163 U. S. 632, 658, and Blasfield v. U. S., 272 U. S. 448, 450.

⁴ In commenting upon the difference between the felony section, §145(b), and the misdemeanor section, §145(a) (the predecessor of §7203 of 1954 Code), the Supreme Court said, pp. 496-9 of 317 U. S. :

"* * * It is not the purpose of the law to penalize frank difference of opinion or innocent errors made despite the exercise of reasonable care. Such errors are corrected by the assessment of the deficiency of tax and its collection with interest for the delay. * * * Willful failure to pay the tax when due is punishable as a misdemeanor. §145(a) * * *

"A felony may, and frequently does, include lesser offenses in combination either with each other or with other elements. We think it clear that this felony may include one or several of the other offenses against the revenue laws. But it would be unusual and we would not readily assume that Congress by the felony defined in §145(b) meant no more than the same derelictions it had just defined in §145(a) as a misdemeanor.

"The difference between the two offenses, it seems to us, is found in the affirmative action implied from the term 'attempt', as used in the felony subsection. * * *

"Congress did not define or limit the methods by which a willful attempt to defeat and evade might be accomplished and perhaps did not define lest its effort to do so result in some unexpected limitation. Nor would we by definition constrict the scope of the Congressional provision that it may be accomplished 'in any manner.' * * * If the tax-evasion motive plays any part in such conduct the offense may be made out even though the conduct may also serve other purposes such as concealment of other crime."

⁵ "Rule 31(c). Conviction of Less Offense. The defendant may be found guilty of an offense necessarily included in the offense charged or of an attempt to commit either the offense charged or an offense necessarily included therein if the attempt is an offense."

⁶ "§7203. Willful Failure to File Return, Supply Information, or Pay Tax. Any person required under this title to pay and estimated tax or tax, or required * * * to make a return * * *, keep any records, or supply any information, who willfully fails to pay such estimated tax or tax, make such return, keep such records, or supply such information, at the time or times required by law or regulations, shall, in addition to other penalties provided by law, be guilty of a misdemeanor and, upon conviction thereof, shall be fined not more than $10,000, or imprisoned not more than 1 year, or both, together with the costs of prosecution."

⁷ "§7207. Fraudulent Returns, Statements, or Other Documents. Any person who willfully delivers or discloses to the Secretary or his delegate any list, return, account, statement, or other document, known by him to be fraudulent or to be false as to any material matter, shall be fined not more than $1,000, or imprisoned not more than 1 year, or both."

⁸ United States v. McCue, D. C. D. Conn., 160 F. Supp. 595 [58-2 USTC ¶9714] does not appear to be to the contrary. See the distinction drawn with the Dillon case on p. 601.

⁹ We could avoid this consideration of §7207 because the instruction tendered to the trial court was directed, apparently by inadvertence, to the language of §3616(a) rather than to §7207, but we shall not decide this issue on that technical ground.

¹⁰ In brief, Spies holds that §145(a) of the 1939 Code (§7203's predecessor) applies only to willful failure to pay a tax or to file a return, etc.; that §145(b) (§7201's predecessor) demands, for conviction thereunder, something more than such willful failure; that a jury could find that other factors, together with willful failure to file and to pay, could support an inference of willful attempt to evade or defeat tax under §145(b); and that the defendant there was entitled to a charge pointing out the necessity for such an inference beyond what was necessary to make out the misdemeanors. Berra holds that, assuming that §3616(a) of the 1939 Code is applicable to income tax returns (this assumption being proper there because the parties so agreed), the facts necessary to prove a willful attempt to evade taxes by filing a false return under §145(b) were identical with those required to prove the delivery of a false return with intent to evade taxes under §3616(a); that the two sections covered precisely the same ground; that, this being so, it was not for the jury to decide which section was to be applied; and that a lesser offense instruction was not in order. Achilli holds flatly that §3616(a) was not applicable to evasion of the income tax.

¹¹ "§3616. Whenever any person--(a) Delivers or discloses to the collector or deputy any false or fraudulent list, return, account, or statement, with intent to defeat or evade the valuation, enumeration, or assessment intended to be made; * * * he shall be fined not exceeding $1,000, or be imprisoned not exceeding one year, or both, at the discretion of the court, with costs of prosecution."

¹² This court said, p. 103 of 218 F. 2d:

"Section 7207 appears in the statutory context with other offenses relating to income tax offenses. It is sufficiently broad to apply to both income tax derelictions as well as to those subjects other than income taxes with which §3616 was in juxtaposition. The only substantive portion of §3616 which was retained and carried forward in the 1954 revision was placed with income tax derelictions. And then the element of willfulness, absent in §3616 but previously consistently present in offenses relating to income tax violations, was inserted * * *. We conclude that Congress did not intend by §3616(a) that a nonwillful inaccurate and ipso facto false statement in an income tax return, frequently very complicated, should constitute a crime. It only made such a false statement a misdemeanor when, by §7207, it required that the statement be willfully made and known to be fraudulent or false as to a material matter. §3616(a) not being applicable, there was no error in failing to instruct concerning it."

¹³ The Supreme Court has noted the changes in verbiage between §7207 and §3616(a). See Footnote 5 in Berra, p. 134 of 351 U. S., and the dissenting opinion in Achilli, p. 381 of 353 U. S. Compare Footnote 1 in Berra, p. 132 of 351 U. S.

¹⁴ The only possible way of avoiding this result is to regard §7207 as somehow applicable to a situation where, although willful and known to be false, the filing of the return is not with intent to "evade or defeat". This seems too fine a distinction to draw with the content of §7201 and, in addition, would mean that a new crime was created by §7207, a result which seems to have no support in the 1954 Committee Reports.

¹⁵ It is to be noted that the House version of H. R. 8300, 83rd Congress, 2d Session, the bill which emerged as the 1954 Code, would have had Section 7201 broadened and made applicable to mere failure to pay or file a return and thus would have upgraded that offense to felony status. The Senate version, on the other hand, was drawn "so as to continue in effect the existing law with respect to the nature of, and the punishment for, the offense of a willful failure to make a tax return." In conference, the House receded. See House and Senate Reports, supra, pp. A424 and 601, respectively, and Conference Report No. 2543 for the same Session, p. 82, concerning Senate Amendments Nos. 506 and 507.

¹⁶ "* * * when you retire to your juryroom to deliberate, you are going to have to reach a verdict individually and unanimously.

"You will want to listen to what each of your fellow jurors has to say. You want to hear their opinions. Listen, maybe they picked up something that you missed, but in the final analysis the decision that you reach must be a decision that you reach as an individual and not merely because the majority feels one way and you want to go along with the majority. That is the reason we have twelve people because we feel if all twelve people individually can agree that the chance of making a mistake is minimized and you don't want to make a mistake. The defendant doesn't want you to make a mistake. The government doesn't want you to make a mistake."

¹⁷ The cases are numerous but see, for example, Lias v. U. S., 4 Cir., 51 F. 2d 215, 218, affirmed 284 U. S. 584; U. S. v. Allis, C. C. E. D. Ark., 73 F. 165, 182-3 (by Judge Walter H. Sanborn) affirmed, Allis v. U. S., 155 U. S. 117, 123; Culp v. U. S., 8 Cir., 131 F. 2d 93, 101; Wright v. U. S., 8 Cir., 175 F. 2d 384, 388, cert. den. 338 U. S. 873; Kleven v. U. S. , 8 Cir., 240 F. 2d 270, 273.

¹⁸ In Hill v. Wabash Ry. Co., 8 Cir., 1 F. 2d 626, 632-3, this Court said:

"Of course, the court must wait a reasonable time before giving such instruction; but we think the mere matter of time is not of controlling importance. * * * It will not be presumed that the trial court is sacrificing justice to speed. The question of when such instruction shall be given is a matter resting within its sound discretion, and unless there is abuse thereof, it is not the subject of review. While the time here was less than in any of the cases reviewed, where such instruction has been given, and while it may have been slightly premature, we are not prepared to say that it was an abuse of discretion."

¹⁹ As in Gicinto v. U. S., supra, p. 10 of 212 F. 2d, we do not read Marson v. U. S., 6 Cir., 203 F. 2d 504, urged by the defendant, as compelling a contrary conclusion.

²⁰ Stumz v. U. S., 8 Cir., 27 F. 2d 575, 578; Smith v. U. S., 8 Cir., 236 F. 2d 260, 269-70 [56-2 USTC ¶9830], cert. den. 352 U. S. 909; Franano v. U. S., supra; Dillon v. U. S., supra, p. 103 of 218 F. 2d; U. S. v. Griffin, supra; Ferrari v. U. S., supra; U. S. v. Carruthers, 7 Cir., 152 F. 2d 512, 519, cert. den. 327 U. S. 787. Coppedge v. U. S., D. C. Cir., 272 F. 2d 504, like Marshall and Shepherd, supra, is to be distinguished upon its facts.

[Dissenting Opinion]

MATTHES, Circuit Judge, Dissenting:

I find myself unable to agree with the majority view insofar as it holds that §7207 of the Internal Revenue Code of 1954 is not applicable to income tax derelictions.

Apparently, this conclusion was reached by the majority upon a consideration of the history of §3616(a), as the antecedent of §7207; the holding in Achilli v. United States, 353 U. S. 373 [57-1 USTC ¶9692], that §3616(a) of the 1939 Code does not apply to income tax evasions; and the "legislative intent" expressed by Congress in enacting the 1954 section of the Code. From these factors, the majority concludes that it is "unable to detect a significant difference, which would have a bearing on Congressional intent, between §3616(a) and §7207," observing that "the mere gathering of the penalty sections into one general chapter" did not evince an intent on the part of Congress "to give §7207 a greater scope than §3616(a) had under the 1939 Code."

The stated legislative intent in enacting §7207 was expressed by Congress in a single sentence: "This section contains no material change from existing law." No reference was made to §3616 or to any other section of the 1939 Code. It is of importance that at the time the 1954 Code was enacted, the Supreme Court had not yet ruled that §3616(a) did not apply to evasion of the income tax and, as noted by Mr. Justice Douglas, ¹ it appears that the government was regularly prosecuting minor income tax violations under §3616(a) at the time §7207 was enacted. As late as Berra v. United States, 351 U. S. 131, 133, decided April 30, 1956 [56-1 USTC ¶9480], the government agreed that "§3616(a) was applicable to income tax returns * * *."

In this situation, the presumption is certainly warranted that when Congress enacted §7207, it recognized that it predecessor had been interpreted as applying to income tax returns, and the statement appearing in the legislative history, above quoted, properly may be regarded as evincing congressional intent to carry forward "existing law," whereby income tax violations were being prosecuted as misdemeanors under §3616(a), and certainly not as evidence of an intent to the contrary, to-wit, that income tax violations were to be removed from the scope of §7207.

The next question then, apart from congressional intent in 1954, is whether §7207 is so identical to §3616(a) that the ruling of the Supreme Court in the Achilli case as to that section must necessarily determine the application of §7207. Whether or not Congress actually recognized the objectionable features and deficiencies of §3616(a), as brought to the fore in Achilli, the fact remains that a very decided change is found in the language of §7207 when it is compared with the language of §3616(a). Section 3616(a) provided: "Whenever any person . . . delivers or discloses to the collector . . . any false or fraudulent list, return, account, or statement, with intent to defeat or evade the valuation, enumeration, or assessment intended to be made . . . he shall be fined . . ." (Italics supplied). Section 7207 provides: "Any person who willfully delivers or discloses to the Secretary . . . any list, return, account, statement, or other document, known by him to be fraudulent or to be false as to any material matter, shall be fined . . ." (Italics supplied).

The deletion of the phrase "with intent to defeat or evade . . ." gains added significance in my mind upon a consideration that this was the very language which gave rise to the overlapping with §145(b) of the 1939 Code, a factor inducing the ultimate conclusion in Achilli that §3616(a) was not applicable to income tax evasions. Furthermore, by adding the proviso that the delivery must be willful, §7207 is not vulnerable to the attach made upon this deficiency in §3616(a). See Dillon v. United States, 8 Cir., 218 F. 2d 97 at p. 103 [55-1 USTC ¶9131], cert. granted 349 U. S. 914, and dismissed, 350 U. S. 906 [56-1 USTC ¶9111].

This Court, and members of the Supreme Court, while occupied with the problem of applying §3616(a) of the 1939 Code, have remarked upon the new language found in §7207. The majority opinion concedes that in Dillon this circuit "touched upon the problem" and that "(i)t is to be acknowledged that language in the Dillon opinion, by way of dictum, indicates that this court then felt that §3616(a) and §7207 were different and distinguishable." It is my view that the expressions in Dillon bearing upon §7207 were, and are, sound and relevant, and should not be entirely disregarded as dictum on the basis that the Court there was concerned with the problem of applying the provisions of the 1939 Code. In demonstrating the inapplicability of §3616(a) to income tax evasion, this Court recognized and commented upon the change found in §7207, stating, at p. 103:

"§7207 is entirely different from §3616. * * * Section 7207 appears in the statutory context with other offenses relating to income tax offenses. It is sufficiently broad to apply to both income tax derelictions as well as to those subject other than income taxes with which §3616 was in juxtaposition. The only substantive portion of §3616 which was retained and carried forward in the 1954 revision was placed with income tax derelictions. And then the element of willfulness, absent in §3616 but previously consistently present in offenses relating to income tax violations, was inserted.

* * *

"We conclude that Congress did not intend by §3616(a) that a nonwillful inaccurate and ipso facto false statement in an income tax return, frequently very complicated, should constitute a crime. It only made such a false statement a misdemeanor when, by §7207, it required that the statement be willfully made and known to be fraudulent or false as to a material matter." (Italics supplied).

In Berra v. United States, 351 U. S. 131, 134 (1956) [56-1 USTC ¶9480], Mr. Justice Harlan, in speaking for the majority, ruled that §145(b) and §3616(a) covered precisely the same ground, and then, by footnote, observed: "Compare §7207 of the Internal Revenue Code of 1954, under which the willful filing of a false return no longer requires the element of an 'intent to defeat or evade' taxes, as was so under the former §3616(a)."

While the majority opinion in Achilli v. United States, 353 U. S. 373 [57-1 USTC ¶9692], was confined to a discussion of the applicability of §3616(a) to income tax evasion, Mr. Justice Douglas, in dissenting in part upon the ground that through admin istrative construction of the section, numerous income tax convictions had been obtained under §3616, observed, at p. 381:

"I would adhere to the admin istrative construction that §3616(a) applied to the income tax. Congress apparently was of that view. For when it came to the Internal Revenue Code of 1954, it reenacted §3616(a) as §7207, eliminating the words 'with intent to defeat or evade' which had caused the overlap with §145(b). Congress acted, of course, prospectively.

"The fact that Congress acted in 1954 to remove the ambiguity with which we deal today indicates that what we do is not within the judicial competence."

Whether or not it can be said that Congress recognized the overlapping of §3616(a) and §145(b), and intended to correct the objectionable features of §3616(a) at the time the 1954 Code was enacted, the fact remains that §7207 is distinguished by the absence of features which were accorded great weight by the courts in their conclusions that §3616(a) was not applicable to income tax matters.

It is the willful attempt "to evade or defeat" a tax which calls for a felony penalty under §7201. As observed in Spies v. United States, 317 U. S. 492, 495, 496 [43-1 USTC ¶9243], various sanctions are required to insure collection of all taxes due the government, and various duties properly may be required of all taxpayers, "without regard to existence of a tax liability."

In my view, it is the failure to consider this precise factor which tends to confuse, for under §7207 the proscribed conduct is not limited to acts done for the purpose of evading taxes. Certainly the government has the right to insist that no person may willfully deliver a fraudulent or false list, return, account, or statement, regardless of whether or not an income tax is actually due, and regardless of whether that person intended to evade a tax. I can visualize that the majority's view may well work to the detriment of the government in its attempt to admin ister the income tax laws of the United States, for in any case where the taxpayer has actually filed a return or document which is false or fraudulent in some material respect, the government may often find itself in a position where it has no alternative but to seek a felony conviction, with its corresponding burden of establishing an intent to evade taxes. The 1954 return filed by defendant here presents "a case in point," so to speak. For that year defendant did not falsely understate his income, he did not falsely state amounts withheld, he did not falsely claim nonexistent children, he did not falsely compute or state the tax due and owing. But under the evidence, and with proper instructions, the jury could have found that the listing of his children as "dependents," within the meaning of the Internal Revenue Code, was a false statement as to a material matter. Of course, the government could choose to allege that such false statement was a willful attempt to evade a tax, and so seek a felony conviction under §7201, but if the prosecution so elected, the defendant would, under proper evidence, be entitled to have the lesser offense of §7207 submitted to the jury.

If Congress intended to except income tax violations from §7207, such intent is not manifest to me, and if §7207 is to be so interpreted, I feel that, in view of the statutory change of language, the comment of the court in Berra v. United States, supra, and the absence of comment in Achilli v. United States, supra, the Supreme Court should, in the first instance, make that pronouncement.

¹ The majority opinion in Achilli v. United States, supra, recognized that cases involving the filing of false returns had been prosecuted as misdemeanors under §3616(a). Mr. Justice Douglas, in his dissent, 353 U. S. at p. 380, pointed out that between October, 1952 and March, 1957, the government prosecuted 175 cases of alleged income tax evasion under §3616(a).

 

 

[54-1 USTC ¶9379] United States of America v. Nick Manno, Sam Manno, Fred Manno and Thomas Manno United States of America v. Samuel Pardy and Thomas Manno

In the United States District Court for the Northern District of Illinois, 53 CR 421, 422, 118 FSupp 511, January 13, 1954

Criminal prosecution: Sufficiency of indictment.--Motion to dismiss was denied on the ground that the indictment charging that defendants attempted to evade income taxes for certain years by filing false returns and understating net income sufficiently charged violation of statute against attempted income tax evasion.

Criminal prosecution: Sufficiency of indictment: Joinder of counts.--As a ground for motion to dismiss, defendants claimed that there was a misjoinder of counts in that the indictments concerned different persons, different tax years, with no allegation that the alleged offenses arose out of the same act or transactions or constituted part of a criminal scheme. There was no merit in the contention, because those defendants who were partners in the same firms for similar periods of time were joined in the indictments and the counts concerned the individual returns of the partners for the years involved in the duration of the respective firms' existence. All the partners' returns would be directly affected by any misstatement in their firm's return.

Criminal prosecution: Defenses: Reason for prosecution.--It was contended that the Internal Revenue officials discriminated against so-called "racketeers," singling their cases out for prosecution and not utilizing the statutory authority of compromise under Code Sec. 3761 and that said Code Section is unconstitutional since it contains no standard of admin istrative action. The contention was overruled on the ground that the admin istration of such matter lies in the discretion of the prosecuting attorney.

Criminal prosecution: Evidence: Defendants' signatures procured "by ruse."--Defendants argued that the Government by a ruse procured their signatures by requesting them to call in person for registered mail. The Court was of the opinion that there could be no objection to the manner in which the Government procured the signatures on registered letters.

Criminal prosecution: Evidence: Motion to suppress.--As the ground for their motion to suppress, defendants asserted that they were prevailed upon to deliver their books and records to the Government with the understanding that the purpose of the investigation was civil and not with a view to criminal prosecution. Since there was controversy as to the circumstances surrounding the examination of the books and their relinquishment to the Government, this controversy needs to be resolved by evidentiary proof and defendants are entitled to a hearing in order to determine the precise facts surrounding the investigation.

Criminal prosecution: Incrimination before Grand Jury.--Since defendants had been subpoenaed to appear before the grand jury merely as witnesses, there was no violation of their constitutional rights against self-incrimination, even though they were later indicted by the same Grand Jury.

Crawford & Healy, One North La Salle Street, Chicago 2, Ill., for defendants Nick Manno, Sam Manno and Fred Manno. George F. Callaghan, 105 West Adams Street , Chicago 3, Ill. , for defendants Samuel Pardy and Thomas Manno. Otto Kerner, Jr. , United States Attorney, 450 United States Courthouse, Chicago 4, Ill. , for plaintiff.

Memorandum and Order

HOFFMAN, District Judge:

The defendant Thomas Manno has moved to dismiss indictment 53 CR 421. The defendants Thomas Manno and Samuel Pardy, by motion and amended motion, have moved to dismiss indictment 53 CR 422.

The defendants Nick Manno, Sam Manno and Fred Manno have moved to dismiss indictment 53 CR 421 and to suppress and order the return of evidence.

The indictment in 53 CR 421 is against Nick, Sam, Fred and Thomas Manno, containing 16 counts charging violation of Section 145(b), 26 U. S. C. This indictment was returned June 22, 1953. The indictment in general charges wilful and fraudulent evasion of income tax liability by understating net income and resultant tax. The first three counts relate to Nick Manno and cover the years 1947-1949. The second three counts relate to Sam Manno for the same period. The third three counts pertain to Fred Manno for the same period. The tenth count concerns Thomas Manno for the year 1947. The eleventh count covers all four Mannos in connection with the return of one Tremont for the year 1947. The twelfth count concerns all Mannos in connection with the return of one Manning for the year 1947. The thirteenth and fifteenth counts concern Nick, Sam and Fred Manno in connection with the returns of Tremont for the years 1948 and 1949. The fourteenth and sixteenth counts concern Nick, Sam and Fred Manno in connection with the return of Manning for the years 1948 and 1949.

The indictment in 53 CR 422, also returned on June 22, 1953, charges a similar offense of income tax evasion in the first three counts by Sam Pardy for the years 1948-1950, and in the second three counts by Thomas Manno for the same three years.

The motion to dismiss, filed on behalf of Thomas Manno in 53 CR 421, urges (1) insufficiency of Counts 10, 11 and 12 for the following reasons: (a) uncertainty of allegation of accusation; (b) failure to state an offense; (c) insufficient averment of the elements of a crime, thereby making it impossible for the defendant to prepare a defense; and (d) vagueness of charge such as to violate the Sixth Amendment to the Constitution; (2) improper joinder and consolidation of charges against Thomas Manno in Counts 10 to 12, with charges against others in Counts 1 to 9, in that the various offenses charged are distinct and separate offenses committed by others than Thomas Manno; (3) the large number of counts containing misjoinder of parties and offenses results in the confusion of the Court and the defendant, to his prejudice; (4) the indictment violates the provisions of Rule 8 of the Federal Criminal Rules.

The motions to dismiss, on behalf of the four Mannos, and the motion to suppress concern these issues:

1. The Treasury officials have arbitrarily selected persons they deem to be of the "racketeer" type to be prosecuted, and have therefore unconstitutionally discriminated against them and refused to use the authority to compromise given by Section 3761 of the Internal Revenue Code. It is claimed also by the four Mannos that the Section itself is unconstitutional inasmuch as it contains no standard of admin istrative action.

2. The evidence--certain books and records of the defendants--should be suppressed and the indictments based on them quashed because they were obtained from the defendants by the trickery of the Government officials, who stated their investigation was for the determination of civil liability of the defendants. The defendants therefore contend that the evidence was obtained by unreasonable search and seizure.

The defendants also argue that the Government by a ruse procured the defendants' signatures by requesting them to call in person for registered mail. The defendants also complain that they were subpoenaed before the Grand Jury and forced to appear and that their claim of privilege inevitably resulted in their testifying against themselves.

3. It is claimed further that there is a misjoinder of counts in the indictment inasmuch as the indictment concerns different persons, different tax years, with no allegation that the alleged offenses arise out of the same act or transactions or constituting part of a criminal scheme.

A separate motion to dismiss and an amendment thereto have been filed on behalf of the defendants Samuel Pardy and Thomas Manno in 53 CR 422, which raise substantially the same points above outlined.

The Government has filed answers to the motions to dismiss based on misjoinder, alleging that as to indictment 53 CR 421 the tax evasions charged were predicated upon unreported partnership income for various firms in which the several defendants or some of them were partners.

Extensive briefs have been filed by the respective defendants and by the Government in support of their positions. Inasmuch as the motions to dismiss and to suppress raise related issues, they will be considered together.

Sufficiency of Form of Allegations of Indictments

As above indicated, the defendants challenge the phraseology and form of the indictments in many respects. There can be no quarrel with the defendants' abstract statement of the rule of law that the "defendant is entitled to such facts in the indictment as will enable him to understand the accusation against him and to prepare for his defense" or with the rulings of the cases aptly cited in support thereof. However, indictments in phraseology paralleling the instant indictments have been held sufficient against such an attack. Reference is made to the case of Himmelfarb v. United States, 175 Fed. (2d) 924 [49-1 USTC ¶9313], where the Court said at page 925:

"Indictment charging that defendants attempted to defeat and evade federal income taxes for certain years by filing false tax returns and understating net income and income tax sufficiently charged violation of statute against attempted income tax evasion."

To the same effect are the holdings in Cave v. United States, 159 Fed. (2d) 464 [47-1 USTC ¶9171]; Potson v. United States, 171 Fed. (2d) 495 [49-1 USTC ¶9119]; United States v. Yeoman-Henderson, Inc., 193 Fed. (2d) 867 [52-1 USTC ¶9155]; Guzik v. United States, 54 Fed. (2d) 618 [1931 CCH ¶9681]; and United States v. Skidmore, 123 Fed. (2d) 604 [41-2 USTC ¶9716].

Misjoinder of Offenses and Misjoinder of Defendants

In answer to the defendants' assertions of misjoinder of offenses and defendants, the Government states that if relief on that ground be grantable at all it must be effected by severance of offenses or defendants under Rule 14 and that a dismissal on the ground of misjoinder is reversible error under the decision of the United States Court of Appeals for the Fifth Circuit in the case of United States v. Northeast Texas Chapter, National Electrical Contractors Association, et al, 181 Fed. (2d) 30, and the case of Finnegan v. United States, 204 Fed. (2d) 105, decided by the United States Court of Appeals for the Eighth Circuit. In the latter case the Court said at page 109:

"The motion to dismiss for misjoinder need only be given passing notice. Defendant was not in any event entitled to a dismissal of the indictment because of misjoinder. (Citing cases)" (Italics supplied)

The Government's answer sets forth the factual bases for the joinder of the defendants and offenses and makes it sufficiently clear that there is a logical reason for their joinder. These various defendants were partners in different firms for varying periods of time. Those who were partners in the same firms for similar periods of time were joined in the respective indictments. The counts, though numerous, concern the individual returns of the respective partners for the years involved in the duration of the respective firm's existence. Since the gist of the indictments is the understatements of the partners' individual returns by the amounts unreported in the respective firm's income tax returns, there is a definite and unifying core around which revolve the numerous offenses and defendants charged in the indictments. It is obvious that all the individual partners' returns will be directly affected by any misstatement in their firm's return.

Rule 8 of the Federal Rules of Criminal Procedure provides the criteria for joinder to be "whether the offenses charged 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" and defendants may be joined who 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 a connection seems evident in this case.

In the case of Morris v. United States, 12 Fed. (2d) 727 [1926 CCH ¶7126], the Court of Appeals for the Ninth Circuit sanctioned consolidation for trial of six indictments charging partners with making false partnership and individual returns. In the Skidmore case, 123 Fed. (2d) 604, an indictment covered charges of tax evasion for the years 1933 to 1937 inclusive. The Court of Appeals for the Seventh Circuit said at page 607:

"The general form of this indictment has been approved by this court many times." (Citing Capone v. United States , 56 Fed. (2d) 927 [3 USTC ¶885]; Guzik v. United States, 54 Fed. (2d) 618 [1931 CCH ¶9681]; and O'Brien v. United States, 51 Fed. (2d) 193 [1931 CCH ¶9474].)

As to joinder in one indictment of counts covering tax evasion for several years, the Court of Appeals for the Second Circuit said in the case of United States v. Sullivan, 98 Fed. (2d) 79 [38-2 USTC ¶9429], at page 80:

"Although the attempt to evade the tax for a given year is a separate offense from an attempt to evade the tax for a different year; they are clearly crimes 'of the same class.' Moreover, the evidence of intent to evade the tax in one year is competent evidence of intent to evade the tax in a later year. * * * Indeed, the crimes charged in the indictment describe one course of conduct extending over several years, which results in separate offenses simply because the duty to file a return and pay the tax is one that recurs every twelve months. Under these circumstances we think it very clear that joinder of the charges was proper."

The same evidential showing, that is to say, an understatement of partnership income for a particular year will automatically affect each partner's income for the year involved.

Constitutional Attack on Ground That Statute Relating to Compromise Is Discriminatorially Used Against "Racketeers"

It is the defendant's contention that the Internal Revenue officials have discriminated against so-called "racketeers", singling their cases out for prosecution and not utilizing the statutory power of compromise. In support of their position the defendants have cited cases outlining the proper admin istration of Government, but none of them touches closely to the instant case. These decisions may be summed up by saying that citizens are entitled to equal protection of the law but these decisions do not hold that citizens are entitled to equal protection from the laws. The fact that not all criminals are prosecuted is no valid defense to the one prosecuted. As the Government points out, and many cases support its position, the admin istration of such matter lies in the discretion of the prosecuting attorney. The Government also calls attention to the fact that the designation of "racketeer" type is unrelated to the return of indictments by grand juries who have no knowledge of the Treasury Department's characterization of the case.

Long ago the Supreme Court, in the "Confiscation Cases", 74 U. S. 454, took this position:

"Public prosecutions, until they come before the court to which they are returnable, are within the exclusive direction of the district attorney. * * *"

In a suit where the United States sought forfeiture of an automobile, Judge Sparks stated ( United States v. One 1940 Oldsmobile, 167 Fed. (2d) 404, at page 406) that:

"There is quite a large discretion vested in the District Attorney to resubmit a presentment to the Grand Jury, or to subsequent grand juries, and this is not subject to the control of the District Court."

Obtaining Signatures of Defendants in Registry Postal Office Through Trickery

Defendants complain about the postal authorities requiring defendants to pick up mail at the post office and signing therefor after identifying themselves, instead of delivering the mail to their known addresses as was customary, in order to obtain accurate signatures for use by handwriting experts. The Government's reply is that, conceding for the purpose of the motion the facts to have been as stated, they are immaterial in connection with the question of a motion to dismiss, inasmuch as it is not known whether they were introduced as evidence before the Grand Jury, or whether the indictments were procured upon other evidence legally introduced. In this connection the Government cites Shushan v. United States, 117 Fed. (2d) 110; Friscia v. United States , 63 Fed. (2d) 977. The Court can find no fault with the Government's procuring the signatures on registered letters. This is a duty performed pursuant to regulation, although the Government may have had an ulterior motive in requiring the defendants to pick up the letters in person so that they might be certain to have the signature of the defendants in person. The purpose of requiring signatures to registered letters is to make absolutely certain that the addressee receives the letter. The Government had that duty to the sender.

Motion to Suppress

The defendants assert in their argument on their motion to suppress that initially the Government agents made arrangements to have their usual investigation of the books of the firms of which the defendants were partners, as they had done in previous years, and permission was granted to make the investigation. A subsequent investigation was made some months later, and the circumstances surrounding that later investigation gave rise to the instant motion. The defendants contend that the Government agents by stealth and misrepresentation obtained permission to make further examination of the books. The defendants assert that they were "prevailed upon to deliver their records to Government officials with the understanding that the purpose of the investigation was civil and not with a view to criminal prosecution."

The Government in its brief replies in substance that the defendants voluntarily made their records available for the inspection of the revenue agents at the time the investigation commenced, and that at that time there was no evidence that criminal prosecution was contemplated; that the facts show that the defendants had been investigated in the past and that there had been no evidence uncovered by the investigating agents of criminal fraud. The Government avers that there was no occasion or necessity for warning the defendants that any statements they might make or documents they might produce would be used against them in a criminal prosecution. The Government asserts further that when the revenue agent uncovered circumstances that indicated the possibility of criminal fraud, the defendants were advised of these facts and told that the matter would be turned over to the Intelligence Division. It is evident that there is a factual controversy as to the circumstances surrounding the examination of the books and their relinquishment to the Government. In the opinion of the Court, this controversy needs to be resolved by evidentiary proof. The principles of law relative to the legality of investigations of books and the evidence procured therefrom seem well settled. Evidence obtained by stealth is subject to a motion to suppress. Gouled v. United States , 255 U. S. 298, at 305. On the other hand, evidence voluntarily furnished is admissible inasmuch as the privilege against self incrimination may be waived. Nicola v. United States , 72 Fed. (2d) 780 [4 USTC ¶1331]; Hanson v. United States, 186 Fed. (2d) 61 [51-1 USTC ¶9118].

The Court is of the opinion that the defendants are entitled to a hearing in order to determine the precise facts surrounding the investigation.

Violation of Fifth Amendment by Forcing Defendants to Appear Before Grand Jury and Claim Privilege Against Self Incrimination

The defendants assert that the law condemns the calling of defendants before the Grand Jury where they thereafter claim privilege against self incrimination to their resultant detriment, and cite in support of this position the cases of United States v. Lawn, 53-1 USTC ¶9288, and United States v. Housing Foundation of America, 176 Fed. (2d) 665. The Government distinguishes these cases on the ground that they involve persons against whom criminal proceedins had already been brought and had resulted in information or indictments, whereas the defendants here were merely witnesses when they were called before the Grand Jury, and the Government insists that the law 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 rights against self-incrimination even though the witness is later indicted by the same Grand Jury. Many cases are cited by the Government to support its contention.

The Fifth Amendment, guarantee against self incrimination, is applicable to investigations by a Grand Jury (United States v. Monia, 317 U. S. 424, 427) but as there said:

"The Amendment speaks of compulsion. It does not preclude a witness from testifying voluntarily in matters which may incriminate him. If, therefore, he desires the protection of the privilege, he must must claim it or he will not be considered to have been 'compelled' within the meaning of the Amendment."

The protection afforded by the Fifth Amendment is to permit a person to claim the privilege against self-incrimination if he wishes so to do, but the Amendment does not prevent his being called to testify where he makes his election to testify or not to testify. As was said in O'Connell v. United States, 40 Fed. (2d) 201, at page 205:

"The final contention of the appellant is that regardless of the details of his examination, it was a violation of his rights under the Fifth Amendment to require him to be sworn and examined before the grand jury, because its investigation, though ostensibly general, was in reality an attempt to secure from his own mouth evidence upon which to indict him. Some judicial support may be found for such a view. * * * But it has not prevailed generally. * * * The mere summoning of a witness before the grand jury gives no basis for the assumption that his constitutional privilege will be impaired. * * *"

The respective motions of the defendants in cases 53 CR 421 and 53 CR 422 for the dismissal of the indictments are denied.

 

 

[55-1 USTC ¶9443]Tony Legatos (True Name Antonio Legatos) and John Glynn, Appellants v. United States of America , Appellee

(CA-9), In the United States Court of Appeals for the Ninth Circuit, No. 14094, 222 F2d 678, May 12, 1955

Appeals from the United States District Court, for the Northern District of California, Southern Division.

[All issues: 1939 Code Sec. 145(b)--substantially unchanged in 1954 Code Sec. 7201]

Criminal prosecution: Sufficiency of indictment.--The count in the indictment sufficiently stated the essential facts constituting the crime charged, since it alleged that defendant attempted to defeat and evade a large part of his income tax for the year 1944 by understating his partnership and business receipts and by filing a false and fraudulent tax return wherein he stated his net income to be $40,449.26, and that the amount of tax due and owing thereon was the sum of $20,903.47, whereas, as he well knew, his net income for that year, computed on the community property basis, was the sum of $71,607.75, upon which net income he owed the United States an income tax of $45,150.51.

Criminal prosecution: Bill of particulars.--Since the counts adopted the figures in the amended tax returns which were based upon the recomputations made by an accountant employed by defendant after the investigation had begun, defendant could easily have learned, by making inquiry of his own accountant, the nature of the charges and the character of the evidence which the Government would use. Therefore, there was no abuse of discretion in the denial of a motion for a bill of particulars.

Criminal prosecution: Voluntary disclosure.--The voluntary disclosure was too late to afford defendant immunity from prosecution, where the letter making the disclosure was sent to the Bureau of Internal Revenue after the examination of defendant's books by a revenue agent and investigations by a special agent had begun. The fact that defendant instructed his office manager and bookkeeper to furnish the revenue agent all books and records the agent might request and that defendant's accountant fully cooperated with the agent could not bring defendant within the Treasury Department's voluntary disclosure policy (which policy has since been abandoned).

Criminal prosecution: Evidence: Constitutionality.--There was no violation of defendant's constitutional rights under the Fourth and Fifth Amendments where the documentary evidence used in the trial had been given to the Government agent during the investigation and before an effective voluntary disclosure was made.

Criminal prosecution: Admissibility of evidence.--It was proper for the Government to show that defendant Legatos personally participated in the operation of the establishment by the testimony of defendant's partner that he and defendant discussed how they could get rid of the brandy and rum and that defendant warned the witness not to refill too many bottles at a time.

Criminal prosecution: Instructions to jury.--Appellant Legatos' contention that the trial court did not make it sufficiently clear to the jury that the special agent's testimony was to be considered only against appellant Glynn was without merit, because the trial judge had on two occasions cautioned the jury that they should consider against each defendant only the evidence admitted as to that defendant.

Criminal prosecution: Use of net worth method: Evidence of books being incomplete.--There was sufficient basis for the use of the net worth method since a reasonable inference could be drawn from the testimony of defendant's accountant that defendant's books were incomplete and that substantial items of cash income were not entered in the books. The accountant had testified that it was not feasible to calculate defendant's income from his books and that it was advisable to use the net worth method. Further, the trial court did not err in refusing to give the requested instruction that, in using the net worth method the Government had the burden of proving beyond a reasonable doubt defendant's wealth at the starting point of the net worth period, since the court in its instructions explained the net worth method and stated the circumstances in which it properly could be employed and also since the beginning net worth used by the Government was in accordance with the amendment returns filed by defendant.

Criminal prosecution: Presumption of intent: Instructions to jury.--Appellant complained of the instruction given to the jury stating that "the presumption is that a person intends the natural consequences of his acts, and with respect to the defendant Legatos, the natural presumption would be that if a person consciously, knowingly, and intentionally, with evil motive or bad purpose did not set up his full income and thereby the Government was cheated or defrauded of taxes, he intended to defeat the tax." Since the jury was also told that the intent was an essential element of the crime and that it was to be determined by the jury from consideration of all the facts and circumstances in evidence, the court's instructions, considered as a whole, stated the law correctly.

Criminal prosecution: Sufficiency of evidence.--Since most of the evidence was admitted against Legatos and not against Glynn, there was not sufficient evidence to convict appellant Glynn of having wilfully attempted to defeat and evade a large part of the income tax due and owing by Legatos.

Harold C. Faulkner, Allan L. Fink, Melvin, Faulkner, Sheehan & Wiseman, San Francisco, Calif., Grant G. Galhoun, Carlson, Collins, Gordon & Bold, F. Walter French, Richmond, Calif., for appellants. Lloyd H. Burke, United States Attorney, Rob ert H. Schnacke, Assistant United States Attorney, Macklin Fleming, Special Assistant to Attorney General, San Francisco, Calif., for appellee.

Before DENMAN, Chief Judge, ORR, Circuit Judge, and DRIVER, District Judge.

DRIVER, District Judge:

Tony Legatos and John Glynn were indicted April 4, 1951. The first count of the indictment charged that defendants attempted to defeat and evade a large part of Legatos' income tax for the year 1944 by understating the partnership and business receipts of Legatos and, in the case of Legatos, by filing a false and fraudulent income tax return in which the amount of his net income was substantially understated, all in violation of Title 26, U. S. C. §145(b). The second and third counts were similar to the first count in all respects except that, they charged attempted evasion of Legatos' income taxes for the years 1945 and 1946, respectively.

The trial began May 18, 1953, and was concluded June 27, of the same year. ¹ At the close of the Government's case, Glynn moved for judgment of acquittal and rested. He offered no evidence and did not cross-examine any witness subsequently called. Legatos put on a defense. The jury by its verdicts found each defendant guilty on each count. Thereafter the Court granted Glynn's motion for judgment of acquittal as to count one and denied it as to counts two and three. From judgments and sentences on the verdicts Legatos and Glynn appealed.

During the period covered by the indictment, appellant Legatos, a resident of Sacramento , owned numerous restaurants, bars and taverns in that city and elsewhere in Northern California . In Vallejo, one of them, Hambers Cafe, was managed by Appellant Glynn, and two others--the Casa Blanca and the States Club--were operated by a partnership consisting of Legatos, Glynn, and one John Blanas, who testified in the trial as a witness for the Government. During the war, Legatos' enterprises were very profitable, the gross receipts mounting to between $1,500,000.00 and $1,750,000.00 annually for 1944, 1945, and 1946. In the Vallejo establishments substantial portions of the gross income were not rung up on the cash registers but were kept in the safe at Hambers Cafe and distributed monthly to the partners in currency in separate envelopes for each establishment. Such income consisted of monies from the juke boxes and coin machines, certain miscellaneous items, and receipts from private parties at the Casa Blanca on Wednesdays when it was closed to the general public. There was also evidence that part of the gross receipts of the Casa Blanca and States Club was concealed by "cutting" or manipulation of the tapes on the cash register machines. Tax returns of Legatos for the years 1942 through 1946 fell far short of disclosing his true income in those years. Amended returns, prepared by an accountant employed by him and filed in 1948, showed unreported income in the original returns amounting in the aggregate to approximately $244,000.00.

Appellant Legatos asserts nine specifications of error. We group and rephrase them as follows:

1) The sufficiency of the indictment;

2) Voluntary disclosure of tax liability by Legatos;

3) Admission of testimony of the witness Blanas;

4) Testimony of the witness Hubbard;

5) Sufficiency of the evidence to make a net worth case;

6) The instructions to the jury.

Appellant Glynn adopts all of Legatos' specifications of error and advances several of his own. They present, principally, the contention that the evidence is not sufficient to support the verdict as to Glynn. We shall first discuss Legatos' specifications and then consider the contention urged by Glynn.

(1) The Indictment

Prior to trial, Legatos moved to dismiss the indictment, and for a bill of particulars, and the motions were denied. He complains that he was not reasonably and fairly informed of the nature of the charges, or of the methods which the Government proposed to use to establish them. The indictment was in the form commonly used in tax prosecutions. The first count, which we take as typical, alleged that Legatos attempted to defeat and evade a large part of his income tax for the year 1944 by understating his partnership and business receipts and by filing a false and fraudulent tax return wherein he stated his net income to be $40,449.26, and that the amount of tax due and owing thereon was the sum of $20,903.47, whereas, as he well knew, his net income for that year, computed on the community property basis, was the sum of $71,607.75, upon which net income he owed the United States an income tax of $45,150.51. The count sufficiently stated the essential facts constituting the offense charged. ² And we find no abuse of discretion in the denial of the motion for a bill of particulars. ³ After the Government started to investigate Legatos' tax returns, he employed an expert accountant who worked on his books and records for many months in cooperation and collaboration with an agent of the Bureau of Internal Revenue. The accountant recomputed his income for the years in controversy on the net worth basis, and prepared amended income tax returns which were filed in 1948. Count one adopted the figures in the amended tax return as the correct net income and income tax of Legatos for the year 1944. The same is true of counts two and three as to the years 1945 and 1946. Legatos knew, or could easily have learned by making inquiry of his own accountant, the nature of the charges against him and, in general, the character of the evidence which the Government would use.

(2) Voluntary Disclosure

Legatos contends that he was immune from prosecution because of his voluntary disclosure of the understatement of his income and tax liability in compliance with an announced policy of the United States Treasury Department, which had not at that time been withdrawn. ⁴ Closely allied to that contention is the additional one that, documentary evidence used in his trial was procured from him by Government agents after he had been misled into believing that no criminal action against him was contemplated, in violation of his rights under the Fourth and Fifth Amendments to the Federal Constitution. A taxpayer's rights upon a claimed acceptance of the Treasury Department's offer (considering it as such for the purpose of this discussion) can be no broader than the plain, express terms of the offer. Such terms were that the taxpayer make "a voluntary disclosure of omission or other misstatement in his tax return . . . before an investigation is under way . . ." Legatos, with the assistance of an attorney, made a formal voluntary disclosure in the form of a letter to the Bureau of Internal Revenue on July 9, 1947. Briefly and chronologically listed, the events leading up to that disclosure were as follows: November 20, 1946, the Bureau of Internal Revenue wrote to Legatos requesting an extension of time for the examination of tax returns, and consent to the extension was received November 24, 1946. On March 5, 1947, Internal Revenue Agent Bakkan, in the course of his investigation of Legatos' tax returns, called at Legatos' Sacramento office to examine his books. The examination was continued on March 7, and March 11, but on none of those days was Legatos present. On April 15, 1947, Bakkan again visited the Sacramento office and was introduced to Legatos by the latter's office manager as "the Revenue Agent that was working making the examination." Bakkan was then inspecting some books which were spread out on a desk before him and he told Legatos that he was making an examination of his income tax returns. Bakkan continued his work on the books in Legatos' office on April 16 and 17, 1947, and Legatos came in and out of the office from time to time.

On May 2, 1947, Special Agent Hubbard of the Bureau of Internal Revenue was assigned to investigate the Legatos case. On May 6, he interviewed Blanas (partner of Legatos and Glynn in Vallejo enterprises as stated above) and took a sworn statement from him on May 14. June 5, Legatos, on advice of an attorney, employed accountant Swigard, and on June 9, Swigard called on Bakkan and offered to cooperate with him fully and to furnish him detailed information of Legatos' financial affairs. June 13, Hubbard asked Glynn for books and records of the Vallejo establishments and Glynn gave him some of them on June 16, and more within two weeks thereafter.

From the foregoing recital, it is apparent that the voluntary disclosure made by Legatos on July 9, came long after investigation was under way, and was insufficient to afford him immunity from prosecution. ⁵ Legatos calls attention to his directions to his office manager and bookkeeper to furnish agent Bakkan any and all books and records he might request, and the conduct of his accountant Swigard in working in full cooperation with agent Bakkan; but aiding and facilitating a government tax investigation after it has been started manifestly does not bring the taxpayer within the Treasury Department's voluntary disclosure policy. Legatos further complains that he was misled into believing that only a routine, civil liability investigation was being made of his tax returns and that he was not informed until after his voluntary disclosure that criminal prosecution was contemplated. No case has been called to our attention which holds that a taxpayer may obtain immunity by making voluntary disclosure of error or omission in his tax return at any time before a criminal investigation, as distinguished from a civil one, has been instituted. Usually, when an investigation is started, it is not possible to predict where it will lead or whether or not evidence of fraud sufficient to justify prosecution will be uncovered. In Bateman v. United States, supra, (footnote 5) this Court held that, after the collector had forwarded tax returns to a deputy collector with directions to initiate an investigation, a request by government agents that the taxpayers sign a waiver of statute of limitations upon assessment of income taxes (a civil liability), was sufficient to put them on notice that they were under investigation. It is our conclusion that Legatos' disclosure came too late. He did not go to the Government. The Government came to him. No government agent made any promise of immunity from prosecution to appellants, or gave them any good reason to believe that prosecution would not be instituted. And since appellant Glynn gave the challenged documentary evidence to a government agent before any effective voluntary disclosure had been made, no constitutional rights of appellants were violated. Bateman v. United States, United States v. Lustig, and United States v. Weisman, cited above in footnote 5.

(3) Testimony of Witness Blanas

Legatos, in partnership with Glynn and Blanas, operated the States Club in Vallejo . Blanas, a witness for the Government, testified, over objection, regarding a conversation with Legatos in that establishment sometime during the year 1945. Blanas testified they discussed how they could get rid of the brandy and rum "that wasn't moving fast"; that Blanas said he would refill the bottles a few at a time and get rid of them; and that Legatos told him to be very careful and not to fill too many. The Court admitted the testimony for the limited purpose of showing "the connection of Mr. Legatos with the Club." It is now argued that, since it was not disputed that Legatos, as one of three partners, was part owner of the club, the testimony was not material to any contested issue and was prejudicial in that it tended to show commission by Legatos of an offense not charged in the indictment. Legatos did not question his being a partner in the States Club, it is true, but he did strenuously contend that he was not criminally liable for his partners' acts in connection with its operation in the absence of a showing of personal participation or knowledge on his part. Legatos' residence and main office were in Sacramento . There was evidence that he did not take an active part in the management or operation of the States Club and that he was seldom seen there. It was material and proper for the Government to show by the challenged testimony that Legatos personally participated in the operation of the establishment to the extent of aiding in the solution of the problem of disposing of slow-moving liquor stocks. Relevant evidence is admissible even though it incidentally shows commission by the accused of another crime. ⁶

(4) Testimony of Witness Hubbard

Beltran C. Hubbard, an agent of the Bureau of Internal Revenue, testified at length as an expert witness for the Government concerning the books and records which Glynn had given him, and with reference to numerous tapes from the adding machines in Hambers Cafe, the Casa Blanca, and the States Club. The purport of his testimony was that the tapes had been cut and manipulated so that they did not show all of the receipts taken in through the machines. He voiced the conclusion that other receipts had been withheld from the books. It was the position of the Government that, since Legatos was a partner of Glynn and Blanas and they were shown to have been acting in concert, Hubbard's testimony was admissible against both Legatos and Glynn. The Court, however, rejected that theory and in the presence of the jury ruled that the testimony would be admitted only against Glynn, but remarked that the Government could again offer it against Legatos or move to have it apply to him later on in the trial. With some few exceptions, all of the evidence, both oral and documentary, offered by Hubbard was admitted on that basis. A considerable volume of other evidence was admitted as to Legatos only and, after both sides had rested, Government counsel moved that all of the evidence be considered admitted against both defendants. The Court heard the argument of counsel and denied the motion in the absence of the jury. Legatos now complains that the Court did not make it sufficiently clear to the jury that Hubbard's testimony for the most part was to be considered only against Glynn. In view of the large number of instances throughout the protracted trial in which evidence was admitted against one defendant and not against the others, and the number of documents and the volume of testimony involved, it would have been a Herculean, if not an impossible task, for the trial judge to give the jury detailed instructions as to just what evidence was to be considered against which defendant. During argument to the jury by Government counsel, when Legatos' attorney made the objection that testimony of Blanas admitted only as to Glynn was being improperly applied to Legatos, the Court interrupted the argument to give the jurors a cautionary instruction to the effect that they should consider against each defendant only the evidence admitted as to that defendant. ⁷ The same instruction was again given to the jury in the Court's final charge. In the circumstances presented, that was about all the Court could do. Perhaps too much was expected of the jury, but the same may be said of almost every protracted jury trial involving complex issues and more than one defendant.

(5) Sufficiency of Evidence on Net Worth Basis

In his brief, Legatos argues that the evidence was not sufficient to warrant submission of a net worth case to the jury for the reason that there was no showing that the taxpayer's books were incomplete or inadequate. On oral argument, Legatos' counsel announced that he was abandoning the contention. He could well do so without detriment to his client's interests. Both the Government agent, Bakkan, and Legatos' accountant, Swigard, concluded that it was not feasible to calculate Legatos' income from his books and that it was advisable to use the net worth method. Swigard testified that it would take "a matter of maybe years" to completely audit Legatos' books for income tax purposes. A reasonable inference could be drawn that the books were incomplete and that substantial items of cash income were not entered therein. There was sufficient basis for employment of the net worth method of computation of Legatos' income. ⁸

(6) The Court's Instructions to the Jury

Legatos specifies as error the Court's omission to give his requested instruction that, in using the net worth method the Government had the burden of proving beyond a reasonable doubt the wealth of Legatos at the starting point of the net worth period. The Court in its instructions explained the net worth method and stated the circumstances in which it properly could be employed. The Court further fully and correctly instructed the jury as to the elements constituting the crime charged and informed the jury that the Government had the burden of proving every element of the crime beyond a reasonable doubt. It was not necessary for the Court to repeat his instructions as to the Government's burden of proof in explaining the methods of proof open to the Government. Here, particularly, there was no call for such emphasis in view of the fact that the wealth of Legatos at the starting point which the Government used was in accordance with the amended tax returns filed by Legatos and sworn to be correct both by him and by his accountant.

Legatos also complains of the following instruction which the Court gave to the jury:

"The attempt to evade and defeat the tax must be a willful attempt. That is to say, it must be made with the intent to keep from the Government a tax imposed by the income tax laws which it was the duty of the defendant Legatos to pay to the Government. The attempt must be willful, that is, intentionally done with the intent that the Government should be defrauded of the income tax due from the defendant Legatos. The presumption is that a person intends the natural consequences of his acts, and with respect to the defendant Legatos, the natural presumption would be that if a person consciously, knowingly, and intentionally, with evil motive or bad purpose did not set up his full income and thereby the Government was cheated or defrauded of taxes, he intended to defeat the tax."

The contention that the instruction was prejudicially erroneous is based principally upon Morissette v. United States, 342 U. S. 246, and Wardlaw v. United States, 5 Cir., 203 Fed. (2d) 884 [53-1 USTC ¶9335]. The instruction held to be erroneous in the latter case was as follows:

"The presumption is that a person intends the natural consequences of his acts, and the natural presumption would be if a person consciously, knowingly, or intentionally did not set up his income and thereby the government was cheated or defrauded of taxes, that he intended to defeat the tax." (p. 887)

The Court reasoned that the intent, which is an element of the offense, is not inherent in the act itself but is a specific intent involving "bad purpose and evil motive." Wardlaw v. United States had been called to the District Court's attention in the course of the trial in this case, and it seems likely that in order to meet what he regarded as its requirements, he fashioned the instruction quoted above to read that, the jury might presume the intent if the accused consciously, knowingly, and intentionally, with "evil motive or bad purpose," did not set up his full income and thereby the government was cheated or defrauded of the taxes. Legatos argues that the addition of the language from the Wardlaw case did not cure the error, since the vice of the instruction is not the language with which it may be clothed, but its submission to the jury of the presumption of guilt, condemned by the Supreme Court in Morissette v. United States, supra.

In the Morissette case the defendant picked up some spent bomb casings on a government practice bombing range and was convicted of theft of government property. His defense was that he believed the casings had been abandoned and that he did not intend to steal them. The trial court in effect rejected the proffered defense and instructed the jury:

"That if this young man took this property (and he says he did), without any permission (he says he did), that was on the property of the United States Government (he says it was), that it was of the value of one cent or more (and evidently it was), that he is guilty of the offense charged here. If you believe the government, he is guilty. . . . The question on intent is whether or not he intended to take the property. He says he did. Therefore, if you believe either side, he is guilty."

Defendant's counsel contended that the taking must have been with a felonious intent, but the trial court ruled, "That is presumed by his own act". A considerable portion of the Supreme Court's opinion is taken up with a discussion of the question whether specific intent was an essential element of the offense charged. Having reached the conclusion that it was, the Court observed that the case was tried on the theory that "if criminal intent were essential its presence (a) should be decided by the court (b) as a presumption of law, apparently conclusive, (c) predicated upon the isolated act of taking rather than upon all the circumstances." The Court regarded each of the three assumptions, (a), (b), and (c), as erroneous. Where intent of the accused is an ingredient of the crime charged, it said, its existence is a question of fact which must be submitted to the jury, and the question may not be withdrawn or prejudged by instruction that the law raises a presumption of intent from an act. And a presumption which would permit but not require the jury to assume intent from an isolated fact, would prejudge a conclusion which the jury should reach of its own volition. The essence of the Morissetti case, then, is that, the existence of criminal intent is a question of fact to be determined by the jury from all the attendant circumstances, and the jury should not be instructed that such intent must or may be presumed as a matter of law from an isolated fact.

On April 11, 1955, after the instant case was submitted, this Court decided Bloch v. United States, No. 14,266, 221 Fed. (2d) 786 [55-1 USTC ¶9364]. Based upon the authority of the Wardlaw and Morissette cases, it held that the giving of the following instruction constituted plain error which the court should notice on its own motion under Rule 52(b) of the Federal Rules of Criminal Procedure:

"The presumption is that a person intends the natural consequences of his acts, and the natural inference would be if a person consciously, knowingly and intentionally did not set up his income, and thereby the government was cheated or defrauded of taxes, that he intended to defeat the tax."

There the instruction in which the trial court defined the term "wilfully" for the jury also was held to be erroneous. ⁹

On the other hand, in Bateman v. United States, 212 Fed. (2d) 61 (decided April 15, 1954) [54-1 USTC ¶9341], this Court came to the conclusion that an instruction in a tax evasion case that "the law presumes that every man intends the natural and probable consequences of his own voluntary acts" was not prejudicially erroneous for the reason that, considered as a whole the trial court's instructions on intent "correctly stated the law, were plain and understandable, and left no room for doubt in the minds of the jurors."

We think the same reasoning may be applied to the instant case. In the first place, directly contrary to the trial court's position in the Morissette case, here the judge instructed the jury that, "The question whether, under the indictment, there existed an intent to defraud the government of the United States is solely a question of fact to be determined by the jury." The jury was also told that intent was an essential element of the crime; that it was to be determined by the jury from consideration of all the facts and circumstances in evidence; and that guilty knowledge and specific wrongful intent on the part of the taxpayer to evade payment of the tax must be established. ¹⁰

It is our conclusion that, considered as a whole the Court's instructions on intent and wilfulness clearly and correctly stated the law and were not such as to mislead the jury. We conclude, therefore, that the present case is governed by Bateman v. United States , supra, and is distinguishable from Wardlaw v. United States , supra, and Bloch v. United States , supra, where the effect of the court's instructions considered as a whole was not discussed. ¹¹

Sufficiency of the Evidence as to Glynn

No conspiracy between the defendants was charged in the indictment and the District Court consistently ruled that concert of action between them was not established by the evidence. During the protracted trial, evidence was admitted on a separate, individual basis, and only evidence with which a defendant was shown to be connected was admitted against that defendant. Glynn rested at the conclusion of the Government's case in chief and the Court ruled that all evidence thereafter introduced, including the testimony of Legatos and his other witnesses was not admitted as to Glynn. The only evidence received against Glynn was the testimony of Blanas and Hubbard, which covered the operation and disposition of the receipts of the Vallejo establishments, and the partnership tax returns. The original and amended tax returns of Legatos, the net worth evidence, and other evidence that Legatos understated his income in his income tax returns, are not in evidence at all so far as Glynn is concerned. He is accused and convicted of wilfully attempting to defeat and evade a large part of the income tax due and owing by Legatos to the United States for the calendar years 1945 (second count) and 1946 (third count), but there is no supporting evidence which properly may be considered against him that Legatos had any taxable net income in 1945 or 1946; or that Legatos in either of those years owed any Federal income tax. So far as the evidence against Glynn is concerned, Legatos may have filed returns in 1945 and 1946 in which he correctly reported his income and made timely payment of all of his tax due and owing to the United States . Glynn's conviction cannot stand without substantial evidence that he had the specific intent stressed as essential in the Wardlaw and Bloch cases, to evade or defeat the payment of income tax which Legatos was obligated to pay the United States . The Government had the burden of proving that some income tax was due from Legatos for the years involved. ¹² It did not carry that burden as to Glynn.

Appellee argues that the evidence is sufficient to support Glynn's conviction as an aider and abettor of an attempt to evade Legatos' income tax. That may have been the theory on which Glynn's case was submitted to the jury as the trial court gave an instruction to the effect that, persons who knowingly and with criminal intent aid and abet in the commission of an act constituting an offense, or who advise and encourage its commission, are regarded in law as principals and are equally guilty with those who directly and actively commit the offense. The evidence was not sufficient, however, to support conviction of Glynn as an aider and abettor. To justify conviction on that basis, it must appear that the offense charged was committed by someone other than Glynn. If no crime has been committed, no one can be convicted as an aider and abettor. ¹³

There is no evidence admitted against Glynn that Legatos attempted to evade payment of his income tax.

Affirmed as to Legatos and reversed as to Glynn.

¹ The record on appeal consists of 8 volumes, aggregating 3580 printed pages.

² Fed. Rules Cr. Proc. rule 7(c), 18 U. S. C. A.

³ Wong Tai v. United States , 273 U. S. 77; United States v. Skidmore, 7 Cir., 123 Fed. (2d) 604 [41-2 USTC ¶9716]; Maxfield v. United States, 9 Cir., 152 Fed. (2d) 593 [46-1 USTC ¶9115]; Himmelfarb v. United States, 9 Cir., 175 Fed. (2d) 924 [49-1 USTC ¶9313].

⁴ The voluntary disclosure policy relied upon was stated by then Secretary of the Treasury, Fred Vinson in the Washington Post, August 21, 1945, as follows: "The Commissioner of Internal Revenue does not recommend criminal prosecution in the case of any taxpayer who makes a voluntary disclosure of omission or other misstatement in his tax return. Monetary penalties may be imposed for delinquency, for negligence, and for fraud, but the man who makes a disclosure before an investigation is under way protects himself and his family from the stigma of a felony conviction. And there is nothing complicated about going to a Collector or other revenue officer and simply saying 'there is something wrong with my return and I want to straighten it out.'"

⁵ United States v. Lustig, 2 Cir., 163 Fed. (2d) 85 [47-2 USTC ¶9325]; Bateman v. United States, 9 Cir., 212 Fed. (2d) 61 [54-1 USTC ¶9341]; Lapides v. United States, 2 Cir., 215 Fed. (2d) 253 [54-2 USTC ¶9497]; United States v. Weisman, 78 Fed. Supp. 979 [49-2 USTC ¶9404]; In re White, 98 Fed. Supp. 895 [51-2 USTC ¶9382]; United States v. Levy, 99 Fed. Supp. 529 [51-2 USTC ¶9388].

⁶ Wharton's Criminal Evidence (11th ed.), Vol. 1, p. 486, §343; United States v. Sebo, 7 Cir., 101 Fed. (2d) 889; Weiss v. United States , 5 Cir., 122 Fed. (2d) 675; Bracey v. United States , D. C. Cir., 142 Fed. (2d) 85.

⁷ The Court's instruction was as follows: "It may be difficult for you, when considering the case for or against any one certain defendant, to disregard completely any evidence that was admitted only as to another, but that is your plain duty with respect to evidence not admitted by the Court as against a certain defendant, you must try conscientiously to so treat such a situation."

⁸ 26 U. S. C. A. §41; Remmer v. United States , 9 Cir., 205 Fed. (2d) 277, 286 [53-1 USTC ¶9421].

⁹ The instruction was as follows: "Willfully in the statute, which makes a willful attempt to evade taxes a crime, refers to the state of mind in which the act of evasion was done. It includes several states of mind, any one of which may be the willfulness to make up the crime.

"Willfulness includes doing an act with a bad purpose. It includes doing an act without a justifiable excuse. It includes doing an act without ground for believing that the act is lawful. It also includes doing an act with a careless disregard for whether or not one has the right so to act."

¹⁰ As to intent and knowledge, and the meaning of "wilful", the trial court instructed:

"Intent is an essential element in the perpetration of the offenses charged against the defendants in the indictment. Intent may be shown by proof of facts and circumstances from which it may be reasonably and satisfactorily inferred. In determining whether a defendant had such intent, you should take into consideration all the facts and circumstances in evidence, the acts and conduct of such defendant, and his motives, if any, disclosed by the testimony, for doing or not doing the act or acts charged in the indictment as shown by the evidence; and if from all the facts and circumstances in the evidence there is no other reasonable conclusion than that he is guilty, you should so find.

"One of the essential elements of the proof of attempt to evade income tax or the payment thereof is knowledge on the part of the taxpayer of the existence of the obligation; that is, of the tax due and a specific wrongful intent to evade the payment thereof. If you find from all the evidence that the defendant Legatos did not have actual knowledge of the existence of an obligation on his part to pay any income tax in addition to the income tax reported by him in his original income tax returns, and that said defendant did not have a specific wrongful intent to evade such obligation, then you should find the defendant Legatos not guilty.

"Fraud is an actual intentional wrong-doing and the intent required is a specific mental determination or purpose to evade a tax known or believed to be owing. Before you can convict the defendant Legatos, you must find from the evidence beyond a reasonable doubt that any income tax return involved in this indictment was not only false and fraudulent, but that by such false and fraudulent return said defendant committed an actual, intentional wrong-doing and that the filing of said return was with the intent on his part to evade a tax owing or believed to be owing to the United States.

"The word 'wilful' when used in a criminal statute generally means an act done with a bad purpose, but the word is also employed to characterize a thing done without ground for believing it is lawful, or conduct marked by disregard whether one has the right so to act.

"The word 'wilfully,' as used in this Statute, means more then [sic] intentionally or voluntarily, and includes an evil motive or bad purpose, so that evidence of an actual bona fide misconception of the law, such as would negative knowledge of the existence of the obligation would, if believed by the jury, justify a verdict for a defendant. It is for the jury to say whether a defendant had the requisite criminal intent, that is whether he wilfully and knowingly attempted to defeat and evade the income tax."

¹¹ The Bateman case was not mentioned nor cited in Bloch v. United States .

¹² Gleckman v. United States , 8 Cir., 80 Fed. (2d) 394, 399 [35-2 USTC ¶9645]; United States v. Schenck, 2 Cir., 126 Fed. (2d) 702, 704 [42-1 USTC ¶9363]; Rose v. United States , 10 Cir., 128 Fed. (2d) 622, 626 [42-2 USTC ¶9500]; United States v. Rosenblum, 7 Cir., 176 Fed. (2d) 321, 329 [49-1 USTC ¶9314].

¹³ 14 Am. Jur. 832, §93; 22 C. J. S. Criminal Law, §100, p. 171; Yenkichi Ito v. United States , 9 Cir., 64 Fed. (2d) 73; Morgan v. United States , 10 Cir., 159 Fed. (2d) 85; United States v. Horton, 7 Cir., 180 Fed. (2d) 427; United States v. Zerbst, 111 Fed. Supp. 807.

 

 

[55-1 USTC ¶9149]Fay Heasley, Appellant v. United States of America , Appellee

(CA-8), In the United States Court of Appeals for the Eighth Circuit, No. 15,091, 218 F2d 86, January 13, 1955

Appeal from the United States District Court for the District of North Dakota.

[1939 Code Sec. 145(b)--similar to 1954 Code Sec. 7201]

Criminal prosecution: Sufficiency of indictment.--Defendant, a farmer, was convicted of filing false and fraudulent income tax returns. There was no error in denying defendant's motion to dismiss the indictment on the ground of insufficiency of the indictment, since the indictment had charged defendant with attempt to evade income tax by understating his adjusted gross income.

[1939 Code Sec. 145(b)--similar to 1954 Code Sec. 7201]

Criminal prosecution: Sufficiency of evidence: Net worth method.--There was no error in denying defendant's motion for acquittal on the ground of the insufficiency of evidence, since the net worth summarization prepared by the Government was based upon the net worth statement signed and sworn to by defendant.

[1939 Code Sec. 22(n)--similar to 1954 Code Sec. 62; 1939 Code Sec. 145(b)--similar to 1954 Code Sec. 7201]

Criminal prosecution: Instructions to jury.--There was no error in instructing the jury that taxable income was to be computed on the basis of adjusted gross income which generally represented the profit from business operations and that the burden was upon the Government to establish the amount of defendant's taxable income as well as defendant's failure to make a true report for the purpose of evading tax.

Submitted on brief (Francis Murphy was on the brief), for appellant. Ralph B. Maxwell, Assistant United States Attorney ( Rob ert Vogel, United States Attorney, was with him on the brief), for appellee.

Before GARDNER , Chief Judge, and JOHNSEN and COLLET, Circuit Judges.

GARDNER, Chief Judge:

Appellant was convicted on three counts of an indictment which charged him with willfully and knowingly attempting to defeat and evade a large part of his Federal income taxes for the years 1946, 1947 and 1948 respectively. He was acquitted on Court IV of the indictment which charged him with a similar offense for the year 1949. We shall refer to appellant as defendant. During the times here involved defendant was a farmer and carried on extensive farming operations in North Dakota . He claims to have kept no books of account or record of his farming operations or financial transactions. In his income tax return for the year 1946 he reported $317.00 as tax due and owing; for the year 1947 he reported $150.50 as tax due and owing; and for the year 1948 he reported $240.00 as tax due and owing. It was charged in the indictment that there was in fact justly due and owing for the year 1946 the sum of $12,007.45; for the year 1947 the sum of $19,093.14; and for the year 1948 the sum of $27,518.36. In the absence of any books of account the government attempted to prove the allegations of the indictment by the receipts and disbursements method and by the so-called net worth method. It was the contention of defendant that he had only a grade school education, that he had no knowledge of methods or systems of accounting or of the requirements of the revenue laws, that for the various years involved he had turned over all the records he had covering each year's business to John Schoonover, an expert accountant, and that he had relied upon Schoonover to prepare his tax returns and that the returns which he signed were prepared by Schoonover and believed by defendant at the time they were made to be substantially correct. As Mr. Schoonover had prior to the time of trial died it was not possible to secure his testimony.

The counts of the indictment are identical except as to the period involved and amounts of income and tax designated therein. Count I may be taken as typical. It reads as follows:

"That on or about the 10th day of February, 1947, at Fargo, in the District of North Dakota, one Fay Heasley, late of Eldridge, North Dakota, did willfully and knowingly attempt to defeat and evade a large part of the income tax due and owing by him to the United States of America for the calendar year 1946, by filing and causing to be filed with the Collector of Internal Revenue for the Internal Revenue Collection District of North Dakota, at Fargo, North Dakota, a false and fraudulent income tax return wherein he stated that his adjusted gross income for said calendar year was the sum of $4,071.03 and that the amount of tax due and owing thereon was the sum of $317.00, whereas, as he then and there well knew, his adjusted gross income for the said calendar year was the sum of $31,563.58, upon which said adjusted gross income he owed to the United States of America an income tax of $12,007.45."

In due course defendant interposed a motion to dismiss the indictment on the grounds that "the said Indictment and each and every count thereof fails to set forth or describe a public offense as defined by the laws of the United States, in that the Internal Revenue Act in force at the times set forth in the various counts in said. Indictment required the payment of tax only upon net incomes of individuals and that said Indictment and each and every count thereof wholly fails to allege that the said defendant did not during the times mentioned in each of said counts actually return and pay a proper amount upon his net income for each of the years involved." The motion was denied. At the close of the government's testimony and again at the close of the entire case defendant interposed a motion for judgment of acquittal on the grounds that "there is a variance between the Indictment and the proof offered in that the Government's Indictment charges an evasion of adjusted gross income tax for the four years involved and for the further reason that the testimony offered in behalf of the Government is based in substantial measure upon opinion or conjecture and asked this jury to arrive at a conclusion in a substantial measure based upon such opinion or conjecture on the part of the Government's witnesses." Both motions were denied and the case was sent to the jury by the court on instructions to which the defendant saved certain exceptions to be hereinafter noted. The jury as hereinbefore observed found the defendant guilty on Counts I, II and III and not guilty on Count IV. On the verdict thus returned the court entered judgment and sentence of imprisonment for a period of three years on each count, the sentences to run concurrently.

Defendant seeks reversal of the judgment and sentence thus imposed on substantially the following grounds:

1. The trial court erred in refusing to dismiss the indictment.

2. The trial court erred in receiving in evidence government's exhibit 82--net worth summarization.

3. The trial court erred in denying the motion for judgment of acquittal at the close of the government's case and at the close of the entire case.

4. The trial court erred in instructing the jury in effect that the charge of fraudulent report of adjusted gross income was a sufficient basis for determining whether or not an attempt had been made to evade a tax.

[Sufficiency of Indictment]

The sufficiency of the indictment is challenged because it includes a charge that the defendant in his income tax returns willfully and knowingly understated the amount of his adjusted gross income, it being argued that the amount of taxes due from a taxpayer is not dependent upon the amount of his adjusted gross income but such tax is levied upon his net income.

The indictment embodies the words of the statute and ordinarily an indictment for a statutory offense is sufficient where the charge is made in the words of the statute. The defendant is charged with a willful and fraudulent attempt to defeat and evade a large part of his income tax by understating his adjusted gross income. The indictment would have been good had it not embodied the additional charge or information as to the manner in which the evasion was attempted. Rule 7(c) of the Federal Rules of Criminal Procedure provides that:

"The indictment or the information shall be a plain, concise and definite written statement of the essential facts constituting the offense charged. It shall be signed by the attorney for the government. It need not contain a formal commencement, a formal conclusion or any other matter not necessary to such statement. Allegations made in one count may be incorporated by reference in another count. It may be alleged in a single count that the means by which the defendant committed the offense are unknown or that he committed it by one or more specified means. The indictment or information shall state for each count the official or customary citation of the statute, rule, regulation or other provision of law which the defendant is alleged therein to have violated. Error in the citation or its omission shall not be ground for dismissal of the indictment or information or for reversal of a conviction if the error or omission did not mislead the defendant to his prejudice."

This indictment specifically informed the defendant of the time of the commission of the alleged offense, of the place of its commission, of the method by which he was alleged to have committed it, and it informed him as to what amount he paid and the amount which he should have paid. Had defendant desired further information he could have asked for a bill of particulars and the fact that the indictment informed him of the amount reported by him as his adjusted gross income and the amount of his actual adjusted gross income did not, we think, impair its validity nor make it vulnerable to the charge of indefiniteness and uncertainty. From the facts stated the court could say that there was an income tax due from the defendant to the government and the defendant was definitely advised as to the amount of income tax unpaid. We think the allegations of the indictment fully satisfied the requirements of Rule 7(c) of the Federal Rules of Criminal Procedure and informed defendant of the nature and cause of the accusation against him within the meaning of all Constitutional provisions. Cochran and Sayre v. United States , 157 U. S. 286; Risken v. United States , 8 Cir., 197 Fed. (2d) 959; Cave v. United States , 8 Cir., 159 Fed. (2d) 464[47-1 USTC ¶9171]; Hewitt v. United States, 8 Cir., 110 Fed. (2d) 1; Capone v. United States , 7 Cir., 56 Fed. (2d) 927 [3 USTC ¶885]; Guzik v. United States, 7 Cir., 54 Fed. (2d) 618 [1931 CCH ¶9681];United States v. Rosenblum, 7 Cir., 176 Fed. (2d) 321[49-1 USTC ¶9314]; Himmelfarb v. United States, 9 Cir., 175 Fed. (2d) 924 [49-1 USTC ¶9313]. InHewitt v. United States , supra, quoting from Hagner v. United States, 285 U. S. 427, the requisites of an indictment are thus stated:

`The true test of the sufficiency of an indictment is not whether it could have been made more definite and certain, but whether it contains the elements of the offense intended to be charged, "and sufficiently apprises the defendant of what he must be prepared to meet, and, in case any other proceedings are taken against him for a similar offense, whether the record shows with accuracy to what extent he may plead a former acquittal or conviction.'""

We think this indictment clearly advised the defendant of the facts constituting the offense with which he was charged and a conviction or acquittal would be a bar to a further prosecution for the same offense.

[Net Worth Summarization]

As the defendant produced no books or records reflecting his farming operations or financial transactions government accountants attempted to ascertain the extent of his income by the so-called net worth method. The results of their computation were embodied in what is referred to as a summarization identified as exhibit 82. When the exhibit was offered in evidence it was objected to on the ground that proper foundation had not been laid and that it was incompetent and immaterial because it purported to show the adjusted gross income of defendant for the years in question. Defendant signed and swore to a statement identified as exhibit 11 which reflected his net worth as of January 1, 1944. As to this statement he said in part as follows:

"I, Fay Heasley, hereby certify that the above list of assets and liabilities constitutes a true and complete list of my holdings and of my debts as at January 1, 1944. I certify that at that date I had no other assets and no other liabilities. The above figure regarding cash represents the amount on deposit at the National Bank of Jamestown in my checking account and I certify that I had no other cash in any bank, at home, or at any other place. Again, the above list is a true and complete picture of my financial standing as at January 1, 1944."

This definitely fixed a starting point from which the government accountants prepared exhibit 82 showing defendant's net worth for the years 1946, 1947, 1948 and 1949. It is argued that the corpus delicti may not be proven alone by extra judicial statements. This contention is doubtless correct but the weakness of this argument is that it goes to the weight or sufficiency of the evidence and not to its competency. In the cases relied upon by defendant the question was not as to the admissibility of the testimony but as to its sufficiency to prove the corpus delicti. The government in the instant case does not rely on this testimony alone as proof of the corpus delicti. It is relied upon as corroborative of the facts sought to be established by the testimony as to defendant's receipts and disbursements for the years in question. Whether or not the testimony standing alone would be sufficient to establish the guilt of the defendant is not the test of its admissibility. We have consistently approved the use of the so-called net worth method of determining taxable income in conjunction with the receipts and disbursements method.Schuermann v. United States , 8 Cir., 174 Fed. (2d) 397[49-1 USTC ¶9281]; Hanson v. United States, 8 Cir., 186 Fed. (2d) 61 [51-1 USTC ¶9118]; Olson v. United States, 8 Cir., 191 Fed. (2d) 985 [51-2 USTC ¶9468]; Leeby v. United States, 8 Cir., 192 Fed. (2d) 331 [51-2 USTC ¶9497]. There was no error in admitting exhibit 82.

By his motion for acquittal interposed at the close of the case defendant laid the basis for challenging the sufficiency of the evidence. As the jury found the defendant guilty the evidence must be viewed in a light most favorable to the government. The government's proof of receipts and disbursements by the defendant for the years involved showed the amount of taxes due and evaded as charged in the indictment. If this evidence was competent it abundantly sustained the verdict returned. The probative value and admissibility of this character of testimony cannot well be questioned. As we have pointed out in Leeby v. United States , supra, and Hanson v. United States , supra, the offense here is not one requiring exact proof as to the amount of net income evaded but whether or not the defendant attempted to evade a substantial amount of net income tax. Thus inLeeby v. United States , supra, we said:

"It must be borne in mind that this was not an action to recover the amount of income taxes alleged to be due, nor an action in which it was necessary to determine the exact amount of defendant's income for the years in question. On this phase of the case all that it was necessary to show was that there was omitted from the reported income a substantial amount."

We conclude that there was no error in denying defendant's motion for acquittal on the ground of the insufficiency of the evidence.

[Instructions to Jury]

It remains to consider the contention of defendant that the court erred in its instructions to the jury particularly in its instruction with reference to the adjusted gross income. It is somewhat difficult to gather from the objections made just what counsel had in mind but apparently he did not wish to be in the position of having waived his objection to the indictment. This is manifest from the following part of his objection:

"What I am objecting to is the Court's approval of the method of drawing the indictment."

We have already considered the question of the sufficiency of the indictment. What the court said in its instructions with reference to the adjusted gross income is followed by a clear statement as to what are the essential elements of the offense as charged. The instruction reads in part as follows:

"The computation of an adjusted gross income is an essential step toward arriving at a net taxable income upon which the tax which the defendant should pay is computed. Consequently, if the adjusted gross income is incorrectly stated, it then follows that the net income which is derived therefrom would also be incorrect. Adjusted gross income is, roughly speaking, the defendant's profit from his business operations. It is arrived at through deducting from his entire income the cost of doing business. When that figure is arrived at, that is, the adjusted gross income, then the net income is ascertained by subtracting therefrom certain deductions allowed by law. The tax which the defendant must pay is computed from the net taxable income, which must be arrived at through subtracting the exemptions from the net income. Therefore, if the net income is wrong, any subsequent figure based thereon must be wrong. The law requires the defendant to pay an income tax on his net taxable income only, so it follows that in this case the burden is upon the Government to establish to your satisfaction beyond a reasonable doubt the amount of the defendant's net taxable income in each of the years involved in the indictment, and that the defendant has willfully and knowingly substantially failed to make a true report and that he has done so for the purpose of defeating or evading payment of the correct tax."

We think the jury was correctly instructed and that the defendant was accorded a fair trial. The judgment appealed from is therefore affirmed.

 

 

[59-2 USTC ¶9713] United States of America v. Rob ert Carpenter

U. S. District Court, No. Dist. Ga., Atlanta Div., No. 21,947, 175 FSupp 362, 7/20/59

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

Criminal prosecution: Tax evasion: Sufficiency of indictment: Motion to dismiss.--The court denied the defendant's motion to dismiss a four-count tax evasion indictment, which allegedly did not "state facts sufficient to constitute an offense against the United States." In income tax cases it is not necessary that the indictment specify the means by which the defendant attempted to evade the tax. Furthermore, the defendant has been furnished with this information in a bill of particulars.

Charles D. Read, Jr., United States Attorney, P. O. Box 912 , Atlanta 1, Ga. , for plaintiff. James M. Rob erts, 610 Fulton National Bank Building, Stonewall H. Dyer, 1095 Wm.-Oliver Building, Atlanta, Ga., Henry Payton, Newnan, Ga., for defendant.

Criminal

SLOAN, District Judge:

The indictment in the above stated case is in four counts, each count being in practically identical language except as to the years involved and amounts. The first two counts of the indictment relate to alleged violations of §145(b) of the Internal Revenue Code of 1939, and the last two counts relate to alleged violations of §7201 of the Internal Revenue Code of 1954, and each of the two sections relate to the willful attempt to evade or defeat the payment of any tax imposed by such Chapter of the Internal Revenue Code.

It is charged in each count that the defendant having filed and caused to be filed with the Director of Internal Revenue individual income tax returns for the respective calendar years stated in each count, wherein his net income and the amount of tax due thereon was stated for the calendar year involved, "willfully and knowingly attempted to evade and defeat the payment of the tax due and owing by him to the United States" for the calendar year stated in each respective count "by concealing and attempting to conceal his assets" in violation of such stated sections of the Internal Revenue Code.

[Defendant's Motion]

The defendant has moved that the indictment be dismissed for the reason that it does not, nor do any of the counts thereof, "state facts sufficient to constitute an offense against the United States," and this motion to dismiss is now properly before the Court for determination under the Local Rules of this Court.

From the brief of defendant filed in support of the motion, it appears that the motion is based upon two grounds:

1. That the indictment does not allege that the tax has not been paid, and

2. That the indictment does not sufficiently allege all of the essential ingredients necessary to be alleged in that it fails to allege "any affirmative act on the part of defendant which amount to an attempt to evade or defeat the tax or the payment thereof."

The indictment here pleads the offense substantially in the language of the statutes alleged to have been violated, and in addition, each count alleges that the attempt to evade and defeat the payment of the tax due and owing by defendant was "by concealing and attempting to conceal his assets," and this is an approved method of pleading except where the words of the statute do not contain all the essential elements of the offense. See Reynolds v. United States, 5 Cir., 225 F. 2d 123, 126 [55-2 USTC ¶49,146], and citations in footnote 3.

In income tax cases it is not necessary that the indictment specify the means whereby the defendant attempted to evade and defeat the tax. United States v. Miro, 2 Cir., 60 F. 2d 58 [1932 CCH ¶9396]; Capone v. United States, 7 Cir., 56 F. 2d 927 [3 USTC ¶885]; Reynolds v. United States , supra. However, it might be stated that the defendant has been furnished with this information in a bill of particulars filed in response to defendant's motion therefor.

[Decision]

The Court being of the opinion that the indictment here involved is sufficient and that there is no merit in defendant's motion to dismiss, such motion is hereby overruled and denied.