7203 - Bank Records and Net Worth Increases 2 Page 3

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Articles by Alvin Brown
Tax Preparation
Offer In Compromise
State Offers in Compromise
Levy
IRS Tax Liens
IRS Tax Liens - continued
IRS Tax Liens - continued 2
Levy - continued
IRS Audits
Audit Techniques Guide
Congressional Contacts
Criminal Investigation
D.O.J Criminal Tax Manual
Tax Litigation
Penalty
Installment Agreements
Statute of Limitations
Frivolous Tax Argument
Interest Abatement
IRS Misconduct
IRS Abuses
Tax Fraud
Fraud Statutes
Bankruptcy
Tax Reform Legislation
Tax Shelters
Tax Court
Trust Fund Penalty
Legislation
Innocent Spouse Relief
Important Links


Fraud Statutes 

Additional Information:

 

7203 - Accountant-Client Privilege
7203 - Accrual Basis
7203 - Admissibility 1 p1
7203 - Admissibility 1 p2
7203 - Admissibility 1 p3
7203 - Admissibility 1 p4
7203 - Admissibility 1 p5
7203 - Admissibility 1 p6
7203 - Admissibility 2 p1
7203 - Admissibility 2 p2
7203 - Admissibility 2 p3
7203 - Admissibility 2 p4
7203 - Admissibility 2 p5
7203 - Admissibility 3 p1
7203 - Admissibility 3 p2
7203 - Admissibility 3 p3
7203 - Admissibility 3 p4
7203 - Admissibility 3 p5
7203 - Admissibility 4 p1
7203 - Admissibility 4 p2
7203 - Admissions p1
7203 - Admissions p2
7203 - Advice of Counsel p1
7203 - Advice of Counsel p2
7203 - Amendment
7203 - Appeal Right to
7203 - Appeal Timeliness
7203 - Appeal Waiver
7203 - Appeal without merit
7203 - Arrest
7203 - Fraudulent Return
7203 - Defeat & Evade Income Taxes p1
7203 - Defeat & Evade Income Taxes p2
7203 - Defeat & Evade Income Taxes p3
7203 - Defeat &  Evade Income Taxes p4
7203 - Attorney Disqualified
7203 - Attorney's Testimony p1
7203 - Attorney's Testimony p2
7203 - Attorney's Testimony p3
7203 - Attorney's Testimony p4
7203 - Bail
7203 - Bank Records &  Net Worth Increases 1 p1
7203 - Bank Records &  Net Worth Increases 1 p2
7203 - Bank Records &  Net Worth Increases 1 p3
7203 - Bank Records &  Net Worth Increases 1 p4
7203 - Bank Records &  Net Worth Increases 1 p5
7203 - Bank Records &  Net Worth Increases 1 p6
7203 - Bank Records &  Net Worth Increases 2 p1
7203 - Bank Records &  Net Worth Increases 2 p2
7203 - Bank Records &  Net Worth Increases 2 p3
7203 - Bank Records &  Net Worth Increases 2 p4
7203 - Bank Records &  Net Worth Increases 2 p5
7203 - Bank Records &  Net Worth Increases 3 p1
7203 - Bank Records &  Net Worth Increases 3 p2
7203 - Bank Records &  Net Worth Increases 3 p3
7203 - Bank Records &  Net Worth Increases 3 p4
7203 - Bank Records &  Net Worth Increases 3 p5
7203 - Bank Records &  Net Worth Increases 4 p1
7203 - Bank Records &  Net Worth Increases 4 p2
7203 - Bank Records &  Net Worth Increases 4 p3
7203 - Bank Records &  Net Worth Increases 4 p4
7203 - Bank Records &  Net Worth Increases 4 p5
7203 - Bank Records &  Net Worth Increases 5 p1
7203 - Bank Records & Net Worth Increases 5 p2
7203 - Bank Records & Net Worth Increases 5 p3
7203 - Bank Records & Net Worth Increases 5 p4
7203 - Bank Records & Net Worth Increases 5 p5
7203 - Base Sentence p1
7203 - Base Sentence p2
7203 - Base Sentence p3
7203 - Base Sentence p4
I7203 - Bill of Particluar Conspiracy
7203 - Bill of Particulars
7203 - Books and Records
7203 - Burden of going forward with evidence
7203 - Burden of Proof
7203 - Carryback Offset
7203 - Changing Plea
7203 - Character witness p1
7203 - Character witness p2
7203 - Circumstanial Evidence p1
7203 - Circumstanial Evidence p2
7203 - Circumstanial Evidence p3
7203 - Circumstanial Evidence p4
7203 - Collateral Estoppel
7203 - Collection
7203 - Commitment by U.S. Commissioner
7203 - Communication to Jury
7203 - Compromise
7203 - Consolidation
7203 - Conspiracy p1
7203 - Conspiracy p2
7203 - Conspiracy 1 p1
7203 - Conspiracy 1 p2
7203 - Conspiracy 1 p3
7203 - Conspiracy 1 p4
7203 - Conspiracy 1 p5
7203 - Conspiracy 1 p6
7203 - Conspiracy 1 p7
7203 - Conspiracy 1 p8
7203 - Conspiracy 2 p1
7203 - Conspiracy 2 p2
7203 - Conspiracy 2 p3
7203 - Constitutional Grounds 1 p1
7203 - Constitutional Grounds 1 p2
7203 - Constitutional Grounds 1 p3
7203 - Constitutional Grounds 1 p4
7203 - Constitutional Grounds 1 p5
7203 - Constitutional Grounds 2 p1
7203 - Constitutional Grounds 2 p2
7203 - Constitutional Grounds 2 p3
7203 - Constitutional Grounds 2 p4
7203 - Constitutional Grounds 2 p5
7203 - Constitutional Grounds 3 p1
7203 - Constitutional Grounds 3 p2
7203 - Constitutional Grounds 3 p3
7203 - Constitutional Grounds 3 p4
7203 - Constitutional Grounds 3 p5
7203 - Constitutional Grounds 4 p1
7203 - Constitutional Grounds 4 p2
7203 - Constitutional Grounds 4 p3
7203 - Constitutional Grounds 4 p4
7203 - Constitutional Grounds 5 p1
7203 - Constitutional Grounds 5 p2
7203 - Constitutional Grounds 5 p3
7203 - Constitutional Grounds 5 p4
7203 - Constitutional Grounds 5 p5
7203 - Constitutional Grounds 6
7203 - Contempt Finding Ag. Defendant's Counsel
7203 - Continuance p1
7203 - Continuance p2
7203 - Continuance p3
7203 - Conviction Required
7203 - Copies of Records p1
7203 - Copies of Records p2
7203 - Corporation Officer
7203 - Costs
7203 - Credit for Time Served
7203 - Criminal Contempt
7203 - Cross-Examination PART 1 p1
7203 - Cross-Examination PART 1 p2
7203 - Cross-Examination PART 1 p3
7203 - Cross-Examination PART 1 p4
7203 - Cross-Examination PART 1 p5
7203 - Cross-Examination PART 2
7203 - DefendantHaving Facts Available p1
7203 - DefendantHaving Facts Available p2
7203 - DefendantHaving Facts Available p3
7203 - Degree of Proof p1
7203 - Degree of Proof p2
7203 - Depositions
7203 - Different Statute Cited
7203 - Discovery, Scope Of
7203 - Documentary Evidence in Jury Room
7203 - Double Jeopardy 1 p1
7203 - Double Jeopardy 1 p2
7203 - Double Jeopardy 1 p3
7203 - Double Jeopardy 1 p4
7203 - Double Jeopardy 1 p5
7203 - Double Jeopardy 2 p1
7203 - Double Jeopardy 2 p2
7203 - Double Jeopardy 2 p3
7203 - Double Jeopardy 2 p4
7203 - Enhanced Sentence Sophisticated Means p1
7203 - Enhanced Sentence Sophisticated Means p2
7203 - Enhanced Sentence p1
7203 - Enhanced Sentence p2
7203 - Entrapment
7203 - Erroneous calculation of tax
7203 - Exclusion of Oral Testimony
7203 - Exercise Privilege-Exclusion from Courtroom
7203 - Expert Witness p1
7203 - Expert Witness p2
7203 - Expert Witness p3
7203 - Expert Witness p4
7203 - Extenuating Circumstances
7203 - Fact Finding p1
7203 - Fact Finding p2
7203 - Fact Finding p3
7203 - Fact Finding p4
7203 - Fact Finding p5
7203 - Failure of IRS to File Return
7203 - Failure to Assess Tax
7203 - Failure to Prosecute p1
7203 - Failure to Prosecute p2
7203 - Failure to Prosecute p3
7203 - Failure to Prosecute p4
7203 - Failure to Prosecute p5
7203 - Failure to Report Income 1 p1
7203 - Failure to Report Income 1 p2
7203 - Failure to Report Income 1 p3
7203 - Failure to Report Income 1 p4
7203 - Failure to Report Income 1 p5
7203 - Failure to Report Income 1 p6
7203 - Failure to Report Income 2 p1
7203 - Failure to Report Income 2 p2
7203 - Failure to Supply Information
7203 - False Return
7203 - Fictitious names
7203 - Fraud Case Procedures p1
7203 - Fraud Case Procedures p2
7203 - Fraud Case Procedures p3
7203 - Fraud Case Procedures p4
7203 - General Exception
7203 - Good Faith p1
7203 - Good Faith p2
7203 - Good Faith p3
7203 - Good Faith p4
7203 - Government Agent Prosecuting Claim
7203 - Grand Jury 1 p1
7203 - Grand Jury 1 p2
7203 - Grand Jury 1 p3
7203 - Grand Jury 1 p4
7203 - Grand Jury 1 p5
7203 - Grand Jury 2 p1
7203 - Grand Jury 2 p2
7203 - Hearsay Evidence p1
7203 - Hearsay Evidence p2
7203 - Hearsay Evidence p3
7203 - Hearsay Evidence p4
7203 - Hearsay Evidence p5
7203 - Hostility of the Court p1
7203 - Hostility of the Court p2
7203 - Hostility of the Court p3
7203 - Hypnosis
7203 - Identification
7203 - Ignorance of Law
7203 - Immunity p1
7203 - Immunity p2
7203 - Immunity p3
7203 - Impeachment p1
7203 - Impeachment p2
7203 - Improper Comment PART 1 p1
7203 - Improper Comment PART 1 p2
7203 - Improper Comment PART 1 p3
7203 - Improper Comment PART 1 p4
7203 - Improper Comment PART 1 p5
7203 - Improper Comment PART 2 p1
7203 - Improper Comment PART 2 p2
7203 - Improper Comment PART 2 p3
7203 - Improper Comment PART 2 p4
7203 - Improper Comment PART 2 p5
7203 - Improper Comment PART 3
7203 - Improper Question
7203 - Incrimination 1 p1
7203 - Incrimination 1 p2
7203 - Incrimination 1 p3
7203 - Incrimination 1 p4
7203 - Incrimination 1 p5
7203 - Incrimination 2 p1
7203 - Incrimination 2 p2
7203 - Incrimination 2 p3
7203 - Incrimination 2 p4
7203 - Incrimination 2 p5
7203 - Incriminaton Before Grand Jury p1
7203 - Incriminaton Before Grand Jury p2
7203 - Instructions to Jury 1 p1
7203 - Instructions to Jury 1 p2
7203 - Instructions to Jury 1 p3
7203 - Instructions to Jury 1 p4
7203 - Instructions to Jury 1 p5
7203 - Instructions to Jury 2 p1
7203 - Instructions to Jury 2 p2
7203 - Instructions to Jury 2 p3
7203 - Instructions to Jury 2 p4
7203 - Instructions to Jury 2 p5
7203 - Instructions to Jury 3 p1
7203 - Instructions to Jury 3 p2
7203 - Instructions to Jury 3 p3
7203 - Instructions to Jury 3 p4
7203 - Instructions to Jury 3 p5
7203 - Instructions to Jury 4 p1
7203 - Instructions to Jury 4 p2
7203 - Instructions to Jury 4 p3
7203 - Instructions to Jury 4 p4
7203 - Instructions to Jury 4 p5
7203 - Instructions to Jury 5 p1
7203 - Instructions to Jury 5 p2
7203 - Instructions to Jury 5 p3
7203 - Instructions to Jury 5 p4
7203 - Instructions to Jury 5 p5
7203 - Instructions to Jury 6 p1
7203 - Instructions to Jury 6 p2
7203 - Instructions to Jury 6 p3
7203 - Instructions to Jury 6 p4
7203 - Instructions to Jury 6 p5
7203 - Instructions to Jury 7 p1
7203 - Instructions to Jury 7 p2
7203 - Instructions to Jury 7 p3
7203 - Instructions to Jury 7 p4
7203 - Instructions to Jury 7 p5
7205 Convictions p1
7205 Convictions p2
7205 Convictions p3
7205 Convictions p4
7205 Convictions p5
7205 Double Jeopardy
7205 Exemption Certificates
7205 Hostility of the Court
7205 Indictment
7205 Information
7205 Intent to Deceive Lacking
7205 Right to Counsel
7205 Trial, Timeliness
7205 Variance
7205 Venue
7205 Willfulness
7206 False Returns 1 p1
7206 False Returns 1 p2
7206 False Returns 1 p3
7206 False Returns 1 p4
7206 False Returns 1 p5
7206 False Returns 2 p1
7206 False Returns 2 p2
7206 False Returns 2 p3
7206 False Returns 2 p4
7206 False Returns 2 p5
7206 False Returns 3 p1
7206 False Returns 3 p2
7206 False Returns 3 p3
7206 False Returns 3 p4
7206 Basis for Allegation of Fraud
7206 Concealment of Assets p1
7206 Concealment of Assets p2
7206 Conspiracy 1 p1
7206 Conspiracy 1 p2
7206 Conspiracy 1 p3
7206 Conspiracy 1 p4
7206 Conspiracy 2 p1
7206 Conspiracy 2 p2
7206 Constitutionality p1
7206 Constitutionality p2
7206 Constitutionality p3
7206 Costs
7206 Disclosure of Returns
7206 Estoppel p1
7206 Estoppel p2
7206 Estoppel p3
7206 Evidence 1 p1
7206 Evidence 1 p2
7206 Evidence 1 p3
7206 Evidence 1 p4
7206 Evidence 1 p5
7206 Evidence 2 p1
7206 Evidence 2 p2
7206 Evidence 2 p3
7206 Evidence 2 p4
7206 Evidence 2 p5
7206 Evidence 3 p1
7206 Evidence 3 p2
7206 Evidence 3 p3
7206 Evidence 3 p4
7206 Evidence 3 p5
7206 Evidence 4 p1
7206 Evidence 4 p2
7206 Evidence 4 p3
7206 False Claims Against U.S.
7206 False Documents p1
7206 False Documents p2
7206 False Statements in Return 1 p1
7206 False Statements in Return 1 p2
7206 False Statements in Return 1 p3
7206 False Statements in Return 1 p4
7206 False Statements in Return 1 p5
7206 False Statements in Return 2 p1
7206 False Statements in Return 2 p2
7206 False Statements in Return 2 p3
7206 False Statements in Return 2 p4
7206 False Statements in Return 3 p1
7206 False Statements in Return 3 p2
7206 False Statements in Return 3 p3
7206 False Statements in Return 3 p4
7206 False Statements in Return 3 p5
7206 False Statements in Return 4 p1
7206 False Statements in Return 4 p2
7206 False Statements in Return 4 p3
7206 False Statements in Return 4 p4
7206 False Statements in Return 4 p5
7206 False Statements in Return 5 p1
7206 False Statements in Return 5 p2
7206 False Statements in Return 5 p3
7206 False Statements in Return 5 p4
7206 False Statements to IRS Agents p1
7206 False Statements to IRS Agents p2
7206 False Statements to IRS Agents p3
7206 Forgery
7206 Grand Jury
7206 Guilty Plea p1
7206 Guilty Plea p2
7206 Immunity
7206 Indictment 1 p1
7206 Indictment 1 p2
7206 Indictment 1 p3
7206 Indictment 1 p4
7206 Indictment 1 p5
7206 Indictment 2 p1
7206 Indictment 2 p2
7206 Instructions to Jury 1 p1
7206 Instructions to Jury 1 p2
7206 Instructions to Jury 1 p3
7206 Instructions to Jury 1 p4
7206 Instructions to Jury 1 p5
7206 Instructions to Jury 2 p1
7206 Instructions to Jury 2 p2
7206 Instructions to Jury 2 p3
7206 Instructions to Jury 2 p4
7206 Instructions to Jury 2 p5
7206 Instructions to Jury 3 p1
7206 Instructions to Jury 3 p2
7206 Instructions to Jury 3 p3
7206 Instructions to Jury 3 p4
7206 Instructions to Jury 3 p5
7206 Jury Verdict Disregarded
7206 Jury p1
7206 Jury p2
7206 Jury p3
7206 Lesser Included Offense p1
7206 Lesser Included Offense p2
7206 Motion For Continuance
7206 Motion to Sever
7206 Motion to Transfer
7206 Motion to Vacate Sentence
7206 Net Worth Statement
7206 Offer in Compromise
7206 Perjury
7206 False or Fraudulent Returns p1
7206 False or Fraudulent Returns p2
7206 False or Fraudulent Returns p3
7206 False or Fraudulent Returns p4
7206 False or Fraudulent Returns p5
7206 Prior Convictions
7206 Prior Law
7206 Probation
7206 Prosecutor's Comment p1
7206 Prosecutor's Comment p2
7206 Restitution
7206 Right to Counsel p1
7206 Right to Counsel p2
7206 Sentence p1
7206 Sentence p2
7206 Sentence p3
7206 Sentence p4
7206 Sentencing Guidelines 1 p1
7206 Sentencing Guidelines 1 p2
7206 Sentencing Guidelines 1 p3
7206 Sentencing Guidelines 1 p4
7206 Sentencing Guidelines 1 p5
7206 Sentencing Guidelines 2 p1
7206 Sentencing Guidelines 2 p2
7206 Sentencing Guidelines 2 p3
7206 Statute of Limitations p1
7206 Statute of Limitations p2
7206 Venue
7206 Willfulness Defined p1
7206 Willfulness Defined p2
7206 Willfulness Defined p3
7206 Willfulness Defined p4
7207 Conviction
7207 Defenses
7207 Motion to Dismiss
7207 Sentencing
7207 Willfully Defined
7210 Willful Failure to Obey Summons
7212 Assault
7212 Bribery
7212 Constiutionality
7212 Indictment
7212 Interference p1
7212 Interference p2
7212 Interference p3
7212 Interference p4
7212 Jury Instructions
7212 Rescue of Seized, Levied Property p1
7212 Rescue of Seized, Levied Property p2
7212 Sentence p1
7212 Sentence p2
7212 Statute of Limitations
7212 Suppresion of Evidence
7215 Constitutionality
7215 Conviction
7215 Corporation
7215 Defenses
7215 Evidence
7215 Intent
7215 Speedy Trial
7216 Consent
7216 Preparer Defined
7216 Scope of Statute
7217 IRS Employees

 

Bank Records and Net Worth Increases 2 Page3

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We have carefully read that transcript. At no time did DeLucia make any statement, sworn or otherwise. Though there are several references to a $300,000 cache, which the Government claims is non-existent, such references can not be considered averments. Actually this meeting amounted to little more than verbal fencing between DeLucia's attorneys and the Internal Revenue Agents. It is highly improbable that a layman such as DeLucia would understand half of what transpired. We quote the following relevant portion from the transcript which illustrates the inefficacy of the conference:

"Mr. Smith: I don't want to be in the position where you gentlemen bring this witness in and you are going to sit here and testify for him.

"Mr. Stewart: He is not bound by what we say here. That goes both ways. Mr. DeLucia is not bound by what you gentlemen say here either. We are not testifying for him. We are trying to straighten matters out and arrive at some understanding in this conference."

Thus there is a total failure to prove that DeLucia made or caused to be made any false statement on September 1, 19 54 as alleged in Counts I and II of the indictment.

[Hearsay]

The second alleged false statement was supposedly made when Bulger, together with Bernstein, DeLucia's tax attorney, appeared before Revenue Agent King on November 19, 19 54 and testified that he had counted $300,010 in the possession of DeLucia shortly prior to the prosecution years. DeLucia was not present when Bulger so testified. DeLucia contends that in the absence of competent evidence that he procured, knew of, or ratified Bulger's testimony it can not be attributed to him for the purpose of sustaining Counts I and II.

The Government in order to establish a connection between Bulger's testimony and DeLucia's intent to defraud relies on two points. The first is that at the Grand Jury hearing on DeLucia Bulger testified that he had given the testimony before King at the request of DeLucia. DeLucia was not present at this hearing. A transcript of this was read into evidence in the trial below. DeLucia's counsel objected to the admission of this evidence in that it was not competent as to DeLucia. With this we agree. This evidence was perfectly proper as to Bulger under Count IV but as to DeLucia under Counts I and II it was nothing more than hearsay.

Therefore, ignoring all that took place at the Grand Jury hearing we turn to the Government's second point. Here it is argued that inasmuch as Bernstein had Power of Attorney to do all things in relation to DeLucia's tax matters that DeLucia could himself do when Bernstein brought Bulger before Agent King it had the same legal import as if DeLucia himself had done so. This argument fails in several respects. There is no showing that Bernstein was aware that Bulger would tell a false story, as we assume he did. Hence Bernstein was not culpable in any manner and there is nothing of an illegal nature that we may import to DeLucia.

Secondly while it is probable DeLucia would have known Bulger's story to be false there is absolutely no competent evidence showing that DeLucia knew Bulger was to testify or had testified before Agent King. While it is true that Bernstein had been DeLucia's tax attorney for a number of years this does not prove that DeLucia was informed of all that Bernstein did in relation to the former's tax matters. As to whether DeLucia told Bulger what to say and whether he intended that the story should be related to Agent King or at any other time is, from the competent evidence in the record, mere speculation.

[Attorney's Act as Act of Client]

The Government cites several cases to sustain its argument that the action of an attorney may be chargeable to the client. However, in the first case cited, Banks v. United States, 8 Cir., 1953, 204 Fed. (2d) 666 [53-1 USTC ¶9402], the attorney there did nothing more than relay to the Government agents written answers furnished by his client to specific questions tendered by the agents.

In the second case, United States v. Bender, 7 Cir., 1955, 218 Fed. (2d) 869 [55-1 USTC ¶9142], this court merely held that where an attorney submitted an auditor's work sheet to explain discrepancies in his client's tax return, the Government had not obtained the work sheet improperly and it could be admitted in evidence.

In Gariepy v. United States , 6 Cir., 1955, 220 Fed. (2d) 252 [55-1 USTC ¶9267], the defendant at the trial identified the income tax return, supposedly submitted by others, as his own. In addition the court charged the jury that it could not find the defendant guilty unless it found beyond a reasonable doubt that he had knowledge of the falsity of the returns filed.

The defendant in the case of United States v. Albanese, 2 Cir., 1955, 224 Fed. (2d) 879 [55-1 USTC ¶9494], had admitted that the returns submitted were his and that he had given permission to others to sign them for him.

Therefore, in three out of the four cases there was substantial proof, through admissions, or otherwise, that defendant was aware of the relevant act committed by others in his name. In the Bender case, while it was not directly shown that the defendant knew his attorney was submitting the auditor's work sheet, the submission thereof did not constitute the gravamen of the offense complained of, as it does here.

This Court is not now holding that circumstantial evidence could not supply the connection between Bulger's testimony and DeLucia's intent. Such undoubtedly could be done, Canton v. United States, 8 Cir., 1955, 226 Fed. (2d) 313 [55-2 USTC ¶9705]. What we do say is that where, as here, an attorney acting in good faith offers a witness who gives false testimony before Internal Revenue agents and there is no showing, circumstantial or otherwise, that the client knew that such testimony was given, the attorney's act can not be imputed to the client to constitute willful fraud.

We, therefore, hold that there was a total failure to prove a necessary element of the offense charged in both Count I and Count II; that the evidence is clearly insufficient to support the verdict of guilty as to those two counts; and the District Court erred in denying DeLucia's motion for judgment of acquittal on Counts I and II.

[Statute of Limitations]

DeLucia next contends that the offense charged in Count III was barred by the six year statute of limitations. The indictment was returned and filed on March 4, 19 57 charging in Count III that DeLucia had filed a false and fraudulent return on or about March 5, 19 51. Government's Exhibit No. 22 is a photostatic copy of DeLucia's 1950 return. There is on the face of the return a stamp bearing the legend: "Received Mar. 5, 19 51 Coll. Int. Rev. 1st Dist. Ill. No. 8."

Moreover, when counsel for the Government offered Government's Exhibit No. 22 in evidence pursuant to agreement and stipulation of the parties it was stated to the jury and for the record that it was "filed with the Collector of Internal Revenue in the First District of Illinois on March 5, 19 51." DeLucia first raised the question as to whether the date on the stamp was correct on his motion for a new trial. He offered no evidence to prove the date was not affixed when the return was received by the Internal Revenue Department. His objection now is not well taken.

[Refusal to Furnish Data]

DeLucia also objects to the refusal of the trial court to direct the submission to him of certain memoranda in the possession of the Government. The Court reviewed the memoranda in camera and correctly decided only one had any relation to the testimony of Agent Smith, the author of the memoranda. This one was turned over to the defendants. It is now contended that such refusal was in violation of the mandate laid down in Jencks v. United States, 1957, 353 U. S. 657.

The District Court was, however, following the provisions of 18 U. S. C. A. §3500 and as was said in United States v. Spangelet, 2 Cir., 1958, -- Fed. (2d) --:

"However, the defendant argues that the mandate in the Jencks case is a constitutional edict and that Sec. 3500, if it narrows the holding of the Jencks decision in any regard, is unconstitutional. We cannot agree. As we read the Jencks case, its rule is an exercise by the Supreme Court of its supervisory power over the ' admin istration of criminal justice in the federal courts'. See McNabb v. United States , 318 U. S. 332, 340-42. We find no indication in Jencks that the standards it set forth were constitutionally required. It follows that once Congress has entered the field its determination of proper federal criminal procedure is controlling. We conclude that Sec. 3500 in that it fails to apply the Jencks procedure * * * is not unconstitutional."

We agree with the Second Circuit and hold that DeLucia's contention that 18 U. S. C. A. §3500 is unconstitutional is without merit.

As DeLucia's complaint concerning instructions relates solely to Counts I and II of the indictment what we have heretofore held dispenses with necessity for any comment thereon.

[Net Worth Method]

DeLucia also contends that where he himself kept a set of books and records the District Court erred in permitting use of the net worth method of proof. This would mean that simply because taxpayer has kept a set of books, the veracity of which is in question, the Government is estopped from going beyond those books to prove their falsity or inaccuracy. This is absurd. Holland v. United States, 1954, 348 U. S. 121, 131-132 [54-2 USTC ¶9714].

DeLucia's main thrust is delivered at the Government's evidence sustaining the net worth method of proof. He claims that the Government not only changed its position from time to time but in failing to prove his net worth at any particular date it left it to the jury to speculate and guess as to his guilt. With this we can not agree.

The Government undertook to prove what assets defendant had on hand at the beginning of 1948 by means of showing his entire preceding financial history. Much of this evidence was admitted by stipulation. The first step was to show what income DeLucia had received from all sources from 1920 to December 31, 19 47. The Government then proceeded to introduce evidence of all known expenditures during this same period.

The Government also checked the income tax filing record of DeLucia's wife, Nancy, under both her maiden and married names for all prior years. A check was made of Internal Revenue Gift and Estate tax records, probate records, bank accounts, brokerage houses and insurance company records. As a result of this investigation the Government contended that DeLucia could not have had more than $48,697.01 at the beginning of 1948.

The cash on hand at that date was the central issue in the case, the defense position being that there was at least $300,000 on hand and the Government's position that there was no more than $48,697.01. The jury resolved the issue against DeLucia and we can not say that in doing so the verdict is not adequately supported by the evidence. In Holland v. United States, 1954, 348 U. S. 121, 133-134 [54-2 USTC ¶9714], the Court said:

"The Government also negatived the possibility of petitioners' accumulating such a sum by checking Mr. Holland's income tax returns as far back as 1913, showing that the income declared in previous years was insufficient to enable defendants to save any appreciable amount of money. The jury resolved this question of the existence of a cache of cash against the Hollands , and we believe the verdict was fully supported."

With this as a starting point the Government went on to show that DeLucia had made large expenditures that far exceeded any reported income.

It was stipulated at trial that during the years 1948, 1949 and 1950 and until March 1954 DeLucia was on parole as a result of a previous conviction. Parole reports filed by him during the prosecution years were admitted into evidence by stipulation. These reports show personal and farm expenditures in the amounts of $217,107.37 for 1948; $120,933.14 for 1949 and $118,770.76 for 1950. These amounts are in substantial agreement with the expenditures shown on DeLucia's books also in evidence. The defendant's income tax returns for the same years showed no net income and, in fact, reported losses as follows: 1948, --18,944.71; 1949, --2,282.95; 1950, --9,838.82.

In addition to the proof of expenditures exceeding the reported income the Government also shows a possible likely source of this unreported income.

During the period 1944 to March 1954 DeLucia was either imprisoned or on parole and his returns for that period disclosed no income that can not be readily accounted for upon the face of the returns. However, his return for the year 1954, which was the first year he was free of parole, reported $76,512 from "Personal wagering at tracks, etc." His 1955 return reported $86,050.92 from the same source and his 1956 return reported $78,460 from "miscellaneous". We think the jury could very easily have believed that DeLucia simply did not report his income from such illicit activities during the period that he was on parole, but did continue to receive such income out of which he made the large expenditures during the years in question. In United States v. Frank, 3 Cir., 1957, 245 Fed. (2d) 284, 287 [57-1 USTC ¶9675], the Court said:

"It was also shown that the defendant on several of his income tax returns had reported a gain from 'sporting enterprises,' an euphemistic term for gambling profits. He did not return any for 1948 and it is suggested that this form of activity was another possible source of income. This point was quite thoroughly developed and the defendant's method of bookkeeping, or lack of bookkeeping, for his sporting enterprises was shown. This was all relevant and its weight for the jury."

We hold that the above evidence, in so far as it relates to Count III, was sufficient for the jury to find that DeLucia had failed to report income during the taxable year 1950.

[Separation of Counts]

DeLucia originally asserted in his briefs herein that there was inconsistency between the verdicts of guilty and of not guilty and quoted from the dissenting opinion in Dunn v. United States, 1932, 284 U. S. 390. However, the majority opinion in that case said on page 393:

"Consistency in the verdict is not necessary. Each count in an indictment is regarded as if it was a separate indictment. Latham v. The Queen, 5 Best & Smith 635, 642, 643. Selvester v. United States , 170 U. S. 262."

This Court said in United States v. Bazzell, 7 Cir., 1951, 187 Fed. (2d) 878, 884:

"As to the argument that the verdict is inconsistent, it will be enough to say that where a defendant is charged by two or more counts in an indictment, consistency between the verdicts on the several counts is not necessary. Dunn v. United States , 284 U. S. 390, 52 S. Ct. 189, 76 L. Ed. 356; United States v. Denny, 7 Cir., 165 Fed. (2d) 668; and United States v. Coplon, 2 Cir., 185 Fed. (2d) 629, 633. A verdict of acquittal on one count does not invalidate a verdict of guilty on another count, although the same evidence is offered in support of each. Garrison v. Hunter, 10 Cir., 149 Fed. (2d) 844, 845. See also United States v. Pandolfi, 2 Cir., 110 Fed. (2d) 736."

Moreover, counsel for DeLucia conceded in oral argument in this Court, and correctly so, that there is no inconsistency between the verdicts of not guilty on Count IV and of guilty on Count III. As we are now concerned only with Count III what has been said is completely dispositive of any vestige of inconsistency.

[Source of Income]

DeLucia also contends that the Government switched its positions in regard to the alleged hoard of money that he had. However, with this we cannot agree inasmuch as it appears from the record that the Government has always contended that DeLucia did receive a large sum through extortion and that it has been taken into account in the itemization of DeLucia's income. If anybody is changing positions it is the defendant who has at times denied that he received the money and on other occasions claims by innuendo that this constituted the sum from which he made the various expenditures in the years in question.

Defendant's last objection goes to the supplemental instruction given to the jury on the second day of deliberation. Counsel for both the Government and defendant presented instructions to the Court based on the holding of the United States Supreme Court in Allen v. United States, 1896, 164 U. S. 492. Defense counsel made certain objections to the version of the Allen charge submitted by the Government and the Court acceded to some of these objections and refused others. The supplemental instruction as thereafter given by the Court has been approved by this Court almost in haec verba. United States v. Furlong, 7 Cir., 1952, 194 Fed. (2d) 1.

We, therefore, hold that the Court did not err in giving the supplemental instruction.

[Conclusions]

The portion of the judgment based upon Counts I and II is reversed and cause remanded with instructions to grant the motion of the defendant for judgment of acquittal thereon.

The portion of the judgment based upon Count III is Affirmed.

 

 

[59-1 USTC ¶9327]Frank David, Appellant v. United States of America , Appellee

(CA-6), U. S. Court of Appeals, 6th Circuit, No. 13,605, 264 F2d 248, 2/2/59, Aff'g the District Court, 59-1 USTC ¶9326, 168 F. Supp. 269

[1939 Code Sec. 41--similar to 1954 Code Sec. 446(b); 1939 Code Sec. 145(b)--similar to 1954 Code Sec. 7201]

Reconstruction of income: Net worth increase: Cash on hand at year's beginning.--A trial court should be and is affirmed where a case was fairly tried and correctly submitted to the jury.

James C. Herndon, Sam D. Bartle, Sheck & Herndon, Akron, Ohio, for appellant. Sumner Canary, James C. Sennett, United States Attorney, Cleveland , Ohio , for appellee.

Before ALLEN, Chief Judge, SIMONS, Circuit Judge, and KENT, District Judge.

Order

ALLEN, Chief Judge:

The judgment of the District Court is hereby affirmed upon the grounds and for the reasons stated in the memorandum opinion of the United States District Court upon motion for acquittal or, in the alternative, for new trial. 168 Fed. Supp. 269 [59-1 USTC ¶9326].

 

 

 

 

[59-1 USTC ¶9326]Frank David, Appellant v. United States of America , Appellee

U. S. District Court, No. Dist. Ohio, No. 21511, 168 FSupp 269, 2/7/58

Reconstruction of income: Net worth increase: Cash on hand at year's beginning.--Where, in the course of reconstructing taxpayer's net income, the Government allowed year-beginning cash balances in excess of amounts submitted by the taxpayer in financial statements, and calculated cash accumulations upon the basis of reported income, the reconstruction was proper.

Sam Bartlo, James C. Herndon, 430 Second National Bldg., Akron , Ohio , for appellant. Russell E. Ake, United States Attorney, James C. Sennett, Assistant United States Attorney, 400 Federal Bldg., Cleveland 14, Ohio, for appellee.

WEICK, Judge:

The defendant stands convicted on two counts of an indictment charging him with wilful evasion of income taxes for the years 1948 and 1949.

He has filed his motion for judgment of acquittal, or in the alternative, for a new trial.

[Three Evidentiary Questions]

Complaint is first made that during the trial the Court permitted the Government attorney to distribute to the jury photostatic copies of stipulated net worth computations for the years 1947, 1948 and 1949, the original of which, except as to items of cash in dispute, had already been received in evidence as Joint Exhibit "1A." The purpose was to permit the jury to intelligently follow the testimony of the witness Keller as to his computations without being confused over a lot of figures.

No objection to this procedure was made at the time by defendant's counsel. After the photostats had been handed the jury defendant's counsel then objected and the Court instructed the jury that they were merely photostats of an exhibit already received in evidence by stipulation of the parties, except as to said cash items which represented what the Government contended. The Court further instructed the jury that the photostats were for explanatory and illustrative purposes.

The jury could not see the figures on the admitted Exhibit "1A." It is not understandable how defendant could be prejudiced by permitting the jury to follow the witnesses' testimony by permitting them to use a photostatic copy of the exhibit which the parties had jointly offered in evidence, particularly since the Court explained the purpose and that the cash items represented only what the Government contended he had on hand. Holland v. United States, 348 U. S. 121 [54-2 USTC ¶9714]. During the course of Mr. Keller's testimony the figures were explained in detail and the exhibit was later received in evidence as Gov't. Ex. 17 for explanatory and illustrative purposes.

It is next contended that the Court erred in refusing to order the Government to produce a transcribed unsigned statement of the defendant, Frank David, when the witness Keller was on the stand.

Jencks v. United States, 353 U. S. 657 (1957) and Title 18 U. S. C. A. §3500 are cited as authority.

The statute (Title 18 U. S. C. A. §3500) was in force at the time of trial and, therefore, governs. Lohman, Jr. v. United States , No. 13189 (CA 6, 1958).

Under this statute, the Government would be required to produce the statement of the witness Keller at the end of his direct examination. Defendant was granted permission to interrogate the witness Keller and he established that the witness had made a written report of his investigation of the case which report the Government produced and handed to defense counsel for their examination and inspection. Defendant did not offer this report in evidence.

Defendant claims that, under this statute, the Court should, in addition, have ordered production of the transcribed unsigned statement of the defendant David taken on September 25, 19 50.

The statute will bear no such interpretation as it requires only the production of the statement of a witness of the Government who has completed his direct examination. It does not require production of the statement of any other person.

The Court would have no right to extend the operation of the statute beyond what its plain language requires.

In any event, the point is without merit because the statement was later given to defendant's attorney during the cross-examination of defendant and it was received in evidence as Gov't. Exhibit 21.

On page 28 of defendant's brief is contained the following:

"The statement was admitted as Gov't. Exhibit 21 over the objection of defendant's counsel."

The record does not support this claim, but on the contrary shows that defense counsel consented to the admission of the exhibit in evidence.

In his reply brief, defendant further charges as error the admission in evidence, over his objection, of the statement of the witness Spilker. The record does not support this claim, but shows that the statement originally was received in evidence as a Joint Exhibit "1-c," without objection, and the numbering was later changed to Gov't. Exhibit "1-c."

When it was offered by the Government attorney, he addressed defense counsel, "if you have no objection."

Defense counsel made no objection. Later when the exhibit was remarked Gov't. Exhibit "1-c" defense counsel stated: "other than that, we don't object to it." This referred to some pencil marks on the exhibit which were removed.

It is further contended that the Court erred in not admitting testimony of the witnesses Spilker and Correll concerning their conversations with the defendant.

These conversations were hearsay evidence and, therefore, inadmissible, but notwithstanding this fact the record will show that most of the conversations related to defendant's alleged recovery of about $12,300 from Mae Wise and were in fact admitted in evidence without objection.

Furthermore, defendant took the witness stand and gave direct testimony on this subject.

[Main Issue: Reconstruction of Net Worth]

We now come to the consideration of defendant's motion for judgment of acquittal.

The rule applicable in this case was laid down by the Court of Appeals in Ross v. United States, 197 Fed. (2d) 660 (CA 6, 1952) and requires the Court to consider the evidence in the most favorable light to the Government. There must, however, be substantial evidence to support the verdict of the jury.

The Government's case was based solely on the "net woth" method of computation to prove the claimed understatements for the years 1948 and 1949.

The parties agreed to all the items on the defendant's net worth statements for the years 1943 to 1949, inclusive, except cash on hand and living expenses for the years 1943 to 1947, inclusive.

There were substantial increases in defendant's net worth during the indictment years not reflected in the income shown on his income tax returns.

The question for determination by the jury was whether these increases in net worth resulted from taxable income received by the defendant during the years in question as claimed by the Government or from use of cash on hand which he had accumulated prior thereto.

As is usual in cases involving net worth computations, defendant claimed he had a large amount of cash on hand which the Government did not take into account.

It was the contention of the Government that defendant had cash on hand as of December 31, 19 47 in the amount of $17,500, $18,634.72 on December 31, 19 48 and $15,957 on December 31, 19 49.

Defendant, on the other hand, claimed that he had cash on hand of $28,000 to $30,000 on December 31, 19 47.

After the tax investigation started in this case, defendant's attorney Chas. K. Correll on December 21, 19 50 sent to the Government, seven financial statements of defendant as of December 31st for the years 1943 to 1949, inclusive. Each of the statements showed cash in safe deposit box of $12,500. These statements had been prepared by defendant's auditor Spilker.

The Government in its net worth computations as of December 31, 19 47, gave defendant credit for $5,000 more cash than was shown in his statement as of the same date which he had furnished to the Government. This inured to his benefit, as without this credit, his increase in net worth for 1948 would have been much larger.

In his statement, which was given to Agents Keller and Kaufman on September 25, 19 50, defendant stated that the largest amount of cash which he had on hand since 1942 was $16,000 to $18,000 in 1949. Agents Keller and Kaufman actually counted the money in defendant's safe deposit box on August 11, 19 50 in the amount of $15,957.00.

Furthermore, in November 1948 defendant furnished George D. Harter National Bank of Canton a financial statement, for use in connection with a loan, which showed cash on hand of $18,634.22.

The Government used the figure of $18,634.22 shown as cash on hand in the Harter Bank statement of November 1948 to establish the beginning cash on hand December 31, 19 48, which was very close in point of time. Also the actual cash in the amount of $15,957.00 counted on August 11, 19 50 was used by the Government to establish the amount of the cash on hand on December 31, 19 49.

Defendant's auditor Lawrence testified that the only accurate way to establish cash on hand on a given date is to count it.

If this were required under the law, there never could be a conviction for income tax evasion where the net worth method of calculation is used, because only the defendant is in a position to count the money and the jury would have to believe whatever he said.

In my judgment, there was substantial evidence to justify the verdict of the jury with respect to Count Number two of the indictment.

In order to establish the beginning cash figure of $17,500 as of December 31, 19 47, involved in the first count of the indictment, the Government subtracted from the cash of $18,634.22 shown on the Harter Bank statement of November 1948 the amount of $12,500 cash on hand shown on the statements defendant furnished to the Government for the years 1943 to 1947, inclusive, and obtained the figure of $6,134 which it distributed prorata as additional income to defendant over those years.

It also calculated that from defendant's reported income over those years he had a possible cash accumulation of $5,362. It added this amount of $5,362 to the amount of $12,300 which defendant, in his written statement made on June 25, 19 42, admitted he had on hand, to obtain the approximate beginning figure of $17,500 for December 31, 19 47.

The jury was carefully instructed as to the law applicable to the case in accordance with the cases of Holland , Friedberg, Smith and Calderon reported in 348 U. S. at pages 121, 142, 147 and 160 respectively. No claim is made here that the charge was erroneous in any respect.

The jury was not compelled to believe the testimony of the defendant that he had $28,000 to $30,000 cash on hand on December 31, 19 47, but could, in determining his credibility, take into account his previous plea of guilty, in this Court, to the charge of income tax evasion for the years 1941 and 1942, and the fact that each year thereafter he understated his income except the year 1947.

[Proper Matters for Jury]

The jury also had a right to consider, in determining his guilt or innocence, his admission that he had $12,300 in cash in 1942; the seven financial statements which he furnished the Government for the years 1943 to 1949, inclusive, each showing cash on hand in the amount of $12,500; his admission in 1950 that the largest amount of cash he had on hand since the year 1942 was $16,000 to $18,000 in 1949; the actual count of the cash on August 11, 19 50 in the amount of $15,957; his financial statement to George D. Harter Bank in November 1948 showing $18,634.22 on hand; the testimony of Mae Wise that defendant did not report all of his sales; that he threw away a portion of the cash register tape on which his daily sales were recorded and told her to mind her own business, when she remonstrated; the stipulation of assets and liabilities which included all items except cash on hand on the critical dates and living expenses for some of the years.

Under all the evidence in this case the jury court find that the beginning cash of $17,500 for the year 1948 was reasonably accurate.

Defendant complains that the Government computations did not reflect any credit for his understatements during the pre-indictment years. The testimony of Mr. Keller is to the contrary as he testified that the difference in cash amounting to over $6,000 was prorated as additional income over those years. Defendant had paid taxes on $3,269 additional income, and the Government also took into account his living expenses during those years.

Nor was the jury bound to believe defendant's story about the alleged theft of $12,300 of his money by Mrs. Mae Wise. He sued Mrs. Wise to recover this money and lost the case. He claims that later, at different times, he found the money in Mrs. Wise's home, but did not tell her about it. During part of this time he was either rooming or visiting at the Wise home and had a garden there and Mrs. Wise worked on occasions at his restaurant.

When Mrs. Wise testified against him in this trial he did not ask her a single question about the alleged theft of his money or its recovery.

The verdict of the jury is supported by substantial evidence.

The motion for judgment of acquittal or in the alternative for a new trial is overruled.

 

 

[56-2 USTC ¶9810]T. C. Risinger, Appellant v. United States of America , Appellee

(CA-5), U. S. Court of Appeals, 5th Circuit, No. 15901, 236 F2d 96, 8/3/56, Affirming District Court

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

Criminal tax evasion: Admissibility of evidence.--In upholding a conviction of willful tax evasion, based upon a net worth analysis, the Court refused to consider on appeal, for the first time, taxpayer's objections to testimony of the Government witness as to theory and content of a net worth analysis. It found that the District Court's instructions as to weight and sufficiency of evidence were substantially proper, containing no prejudicial error; and determined, finally, that there was insufficient evidence in the record considered as a whole to substantiate the claim that taxpayer did not have a fair trial.

Mack Taylor, Frank B. Potter, Fort Worth , Tex. , for appellant. Heard L. Floore, United States Attorney, Fort Worth , Tex. , for appellee.

Before TUTTLE, CAMERON and JONES, Circuit Judges.

CAMERON, Circuit Judge:

This is an appeal from a conviction on a jury verdict finding appellant Risinger guilty on all five counts of an indictment charging wilful evasion of income taxes for the years 1948, 1949 and 1950 based upon appellant's action in filing false and fraudulent tax returns for himself and his wife in violation of 26 U. S. C. A. (1939) §145(b). Appellant claims that the Court below committed certain errors in admitting testimony, in failing to charge the jury accurately and adequately, and in failing to acquit appellant because of insufficiency of the evidence to sustain the verdict. Appellant is laboring under the handicap of having failed to take the steps in the Court below which are necessary to permit reliance upon most of the errors charged.

[One Set of Books for Two Enterprises]

During the years 1948, 1949 and 1950 appellant was engaged primarily in the hotel business. The income tax returns filed by him were made from the books and records kept in connection with this business, but did not include income received from any other business or activity. A large amount of testimony was introduced by the Government from which the jury could determine that the porters and bellboys working in appellant's hotels had, by prior agreement with appellant, split the income received by them from the illicit businesses of prostitution and sale of intoxicating liquors carried on by them as an adjunct to the hotel business.

[Net Worth Analysis]

This direct proof of receipt of unreported income was supplemented by a large volume of proof establishing, under the net worth method, that appellant had made expenditures during the years in question considerably in excess of the income available to him from all legitimate sources. The Government used a large number of witnesses whose testimony, when recapitulated by the Government's experts, showed that, during 1948, appellant's expenditures exceeded his available income by $7,522.67; in 1949 by $12,273.00; and in 1950 by $8,347.20.

In connection with developing this character of proof the Government followed the usual custom of having one of its experts analyze the testimony of the large number of witnesses with whom appellant had had dealings and placing the expert on the stand to gather together the various fragments of testimony and present to the jury the picture resulting therefrom in an understandable and convincing manner.

[Three Claims of Error]

The specifications of error chiefly argued by appellant relate to the evidence given by the porters of money received from the illicit businesses, it being claimed that said evidence was inadmissible and highly prejudicial; and that appellant's motion for mistrial based upon its receiption should have been sustained; and to the claim that the Court below committed error in failing to charge the jury with respect to the rule that the unsupported testimony of an accomplice is insufficient to sustain a conviction.

[Answer to First Claim]

The testimony of the porters was not hearsay and was clearly admissible to show that appellant received from them large amounts of money which were not reported as income. Cf. Ford v. United States , 5 Cir., 1956, 233 Fed. (2d) 56 [56-1 USTC ¶9473]. There was sufficient direct proof, backed up by circumstantial evidence, that this split was made under prior arrangement with appellant. The Court below was careful to limit the effect of this evidence by charging the jury that it should be considered only as it tended to establish that appellant had received income and that the jury should not consider the illicit or immoral character of its source. 1

[Answer to Second Claim]

Appellant requested orally, after the Court's charge had been completed, that if the jury should believe that the porters and bellboys were accomplices of appellant, his conviction could not be sustained upon the uncorroborated testimony of these accomplices. The Court refused to give that instruction and the refusal was, in our opinion, proper. Appellant was indicted and tried for the crime of wilfully filing false and fraudulent income tax returns. There was no proof or hint that the porters were his accomplices in the crime charged against him. In order for one to be an accomplice he must be concerned in the commission of the specific crime with which the defendant is charged, he must be an associate in guilt of that crime, a participant in that offense as principal or accessory. 2 We conclude, therefore, that the Court did not commit error in connection with the various rulings relating to the testimony of the porters, in overruling the motion for mistrial based thereon or in refusing to give the requested charge predicated upon the assumption that they were accomplices in connection with the crime upon which appellant was convicted.

[Answer to Third Claim]

Appellant next argues that the Court below erred in permitting the Government experts, particularly the witness Haskins, the enter into a detailed explanation of the theory and content of the net worth method of developing income tax violations, and in permitting said witness too much latitude in explaining the various items entering into his computations, and in the effort to advance arguments to sustain the charges of the indictment. We have recently reversed a conviction of violation of the income tax laws, basing our decision in part upon what we found to be prejudicial actions and improper evidence by such government experts. Lloyd v. United States , 1955, 226 Fed. (2d) 9 [55-2 USTC ¶9665]. We referred to decisions of the Supreme Court and of this Court wherein words of admonition had been written in connection with the reception of such evidence. 3 A careful reading of the testimony complained of by appellant reveals that quite a few of the questions asked by the Government's attorney were leading and argumentative, and the answers in some instances exceeded the limitations by which the introduction of such evidence is bounded. But we are not able to say that this evidence was clearly prejudicial or that its reception was "plain error."

[Appellant Too Late in Claims]

Appellant is not in position to stand upon the error asserted in connection with this evidence for the reason that he did not object to it when offered or at any other time. During the extended examination of the government witness Haskins, occupying more than fifty pages of the record, appellant objected only once or twice, and then to the form of the question; and in each instance the Court required that the question be reframed as so to "avoid any argument in connection with your questions." Doubtless the Court would have kept the examination completely within legal bounds if called upon by seasonable objection to rule on specific questions and answers. But appellant chose to permit the evidence to go in without objection, thus reaping the benefit which is thought normally to attend such a procedure. Having followed that course, he cannot put the Court below in error for permitting the examination which he did not attempt to halt. 4

Finally, appellant argues that the charge to the jury was not adequate or fair, and that the verdict was not supported by the evidence. Here again appellant elected to take his chances with the jury, not excepting to the charge as given nor requesting any written charges; no motion was made for judgment of acquittal, and no motion for new trial was filed. Appellant is, therefore, not in a position to insist on the errors thus asserted. 5

[Trial Was Fair]

But we are earnestly importuned to set the judgment aside on the assertion that appellant was not given a fair trial, and that he was convicted on insufficient evidence. Of course, we have the right to notice plain errors affecting the substantial rights of appellant, Rule 52(b), Federal Rules of Criminal Procedure. But a careful reading of this record does not impel us to give serious consideration to granting such relief here. Indeed, the evidence amply supports the jury's verdict and reflects that the Court below was punctilious in observing every right to which appellant was entitled.

Finding no error and being convinced that a just result was reached, the judgment is AFFIRMED.

1 In ruling on appellant's verbal motion for mistrial the Court stated in part:

"The case, as we understand it now, is more or less analagous to a case that a man makes money and owes tax on it; if he made it in a criminal enterprise or a gambling enterprise, or in some unlawful transaction, if he got the money and it came to him so that it was his, he should pay the tax on it . . .

"I am going to instruct the jury at this point, since it is raised in this motion, I will instruct the jury that while a man must pay taxes on the money which comes into his hands, which is his, which he keeps and is his, he may receive it from an immoral or some unlawful source, still he owes the tax. And when he is tried upon a charge of concealing his income so as to evade the payment of a tax, and doing it wilfully and intentionally, he should not be charged with any wrongdoing because of the manner in which he got the money. You are trying him only for not paying the tax, and you will not try him for any immoral conduct, if you believe he was guilty of such. . . . In considering the question of guilt or innocence, don't turn in your mind to the fact that he was doing something unlawful or immoral. The only question is, did he have the money, or did he pay the tax . . ."

2 "The general accepted test as to whether a witness is an accomplice is whether he himself could have been indicted for the offense either as principal or accessory. If he could not, then he is not an accomplice." 14 Am. Jur. 840-1, Criminal Law, §110. And see Emmanuel v. United States, 5 Cir., 1928, 24 Fed. (2d) 905, Cert. den. 278 U. S. 643; Campbell v. United States , 5 Cir., 1931, 47 Fed. (2d) 70; United States v. Balodimas, 7 Cir., 1949, 177 Fed. (2d) 485 [49-2 USTC ¶9434]; and 22 C. J. S. Criminal Law, §786.

3 Holland v. United States, 348 U. S. 121 [54-2 USTC ¶9714]; United States v. Johnson, 319 U. S. 503 [43-1 USTC ¶9470]; Demetree v. United States, 5 Cir., 1953, 207 Fed. (2d) 892 [53-2 USTC ¶9646]; and Elder v. United States , 5 Cir., 1954, 213 Fed. (2d) 876.

4 Allen v. United States , 5 Cir., 1951, 192 Fed. (2d) 570; Durden v. United States , 5 Cir., 1950, 181 Fed. (2d) 496; Medlin v. United States , 5 Cir., 1928, 28 Fed. (2d) 663; Metcalf v. United States , 6 Cir., 1952, 195 Fed. (2d) 213; United States v. Bender, 7 Cir., 1955, 218 Fed. (2d) 869 [55-1 USTC ¶9142].

5 Rules 30 and 51, Federal Rules of Criminal Procedure: Feutralle et al. v. United States , 5 Cir., 1954, 209 Fed. (2d) 159; Williams v. United States , 208 Fed. (2d) 447; McDonald v. United States , 5 Cir., 1952, 200 Fed. (2d) 502, and Contreras v. United States , 5 Cir., 1954, 213 Fed. (2d) 96 [54-1 USTC ¶49,039].

 

 

[57-2 USTC ¶10,011]Bryan E. Ford, Petitioner v. United States of America

Supreme Court of the United States , No. 82. October Term, 1957, 355 US 38, 78 SCt 114, 11/12/57, Vacating and remanding Second Circuit, 56-2 USTC ¶9823, 237 F. 2d 57

[1939 Code Secs. 41 and 145(b)--similar to 1954 Code Secs. 446(b) and 7202]

Tax evasion: Source of net worth increase: Graft payments.--A conviction of tax evasion, after a trial in which the Government based its reconstruction of income under the net worth increase method on a showing that the taxpayer, a policeman on the vice squad, could have accepted graft payments, was ordered vacated on the ground that the issue was moot, the taxpayer having died.

Sydney R. Rubin, Wilder Bldg., Rochester , N. Y. for petitioner. J. Lee Rankin, the Solicitor General, for respondent.

PER CURIAM:

Upon the suggestion of mootness the judgment of the United States Court of Appeals for the Second Circuit is vacated and the case is remanded to the United States District Court with directions to vacate the judgment of conviction and to dismiss the indictment.

 

 

[56-2 USTC ¶9823] United States of America , Appellee v. Bryan E. Ford, Defendant-Appellant

(CA-2), U. S. Court of Appeals, 2nd Circuit, Docket No. 23754, 237 F2d 57, 8/6/56, Affirming District Court, New York

[1939 Code Sec. 145(b)--similar to 1954 Code Sec. 7202: 1939 Code Sec. 41--similar to 1954 Code Sec. 446(b)]

Tax evasion: Criminal prosecution: Proof by net increase method.--Where taxpayer's savings during the taxable years and general mode of living were shown to have been considerably more than his policeman's pay could have supported, and where the taxpayer's statements in explanation of the increases were fully discredited, the use of the net worth method of reconstructing taxable income was proper. The fact that the evidence may not have sustained a finding that the income was from graft, inasmuch as the taxpayer's service in a district where gambling and vice were rampant, and taxpayer's acquaintence with a known gambling leader were the only facts shown, does not mean the receipt of taxable income from some undisclosed source was not adequately proved, through the net worth analysis.

Donald F. Potter, Assistant United States Attorney, John O. Henderson, United States Attorney, Western District of N. Y., Rochester, N. Y., for appellee.

Sydney R. Rubin, Lomenzo, Salzman & Witt, Rochester , N. Y., for defendant-appellant.

Before CLARK, Chief Judge, FRANK and HINCKS, Circuit Judges.

HINCKS, Circuit Judge:

This is an appeal from a judgment of conviction of income tax evasion on three counts of a five-count indictment which charged the defendant with evasion of his income tax for the calendar years 1947 through 1951, respectively. After a trial, in which the Government relied upon the so-called "net worth" theory of proof, he was convicted on the counts for the years 1948, 1949 and 1950, and acquitted on the count for 1951. The jury was unable to agree upon a verdict on the first count, for 1947, and following its stalemate the trial judge directed a verdict of acquittal on that count. Subsequently, on the defendant's motion for acquittal on all counts or, in the alternative, for a new trial, but prior to any imposition of sentence, the judge vacated his previous directed verdict of acquittal as to Count 1.

[Taxpayer's Police Service Record]

The defendant was a Rochester policeman who had joined the Police Department in 1921 as a patrolman and was thereafter continually employed on the force throughout the pre-indictment and indictment years. His annual gross salary ranged from a low of $1125 in 1921 to a high of $4400 in 1951. The defendant was assigned to special duty investigating vice at various times beginning about 1934. He was so assigned throughout 1947 and thereafter until about July 16, 19 48 . On the latter date he was transferred to the detective bureau where he remained until about May 1949 when he was returned to the vice squad. There was no evidence that he was engaged specifically in vice investigation during 1950 but he was restored to his vice investigation duties on about December 15, 19 51 .

[Extent of Net Worth Analysis]

Prior to trial the Government conducted a thorough investigation of the defendant's financial status and manner of life from the close of the calendar year 1941 through the close of the final indictment year 1951. The Government's investigation was exhaustive. Every bank in Rochester was checked for accounts of the defendant. The Surrogate's records in Monroe County were checked for possible legacies from relatives of the defendant and his wife, and a claimed legacy from the defendant's sister was negated; the United States Treasury records pertaining to the issuance of United States Savings Bonds were checked for bond purchases year by year; the various contractors who worked on the defendant's residence were interviewed to verify the cost figures given by the defendant; the department stores in Rochester were checked for purchases; the automobile dealers where the defendant had purchased cars were checked for the date of the purchase and the amount involved; the Rochester Gas and Electric Company was checked for payments by the defendant; the Clerk's office of the Monroe County Court House was checked for the date that his old house was sold, the amount for which it was sold, and the date he purchased the property on which his new house was located. This list is by no means inclusive. It is set forth here only as some indication of the meticulousness of the Government's investigation and to show that the specific items reflected in its net worth chart were based on undisputedly sufficient evidence.

In addition, Government agents questioned the defendant concerning his sources of income, inheritances, gifts, borrowed funds and the sources of his wife's income and funds. The Government treated the defendant and his family as an economic unit and calculated the defendant's assets, liabilities and expenditures on that basis. The Government purported to show the net worth (assets minus liabilities) of the defendant at the close of each calendar year beginning with 1941. Exhibit 80. 1 It credited the defendant with an opening net worth of $57,490.40 as of January 1, 19 47, which figure included no allowance for cash on hand. To the increase (or decrease) in the defendant's net worth for each subsequent year in the indictment period, it added the defendant's personal (nondeductible) expenditures for that year thus determining his gross income. It calculated the defendant's taxable income for each year by subtracting from his gross income all known nontaxable income receipts and allowable nonbusiness deductions during that year. By subtracting his reported income from his taxable income figures thus arrived at, the Government calculated unreported taxable income during the indictment years 1947 through 1950 of $15,455.61, $7,892.20, $2,976.17, and $1,103.22, respectively. For 1951 the Government calculated an overestimation of taxable income of $180.62.

For the pre-indictment years 1942 through 1946 the Government, through the same basic scheme, calculated unreported taxable income of $4,996.32, $6,167.55, $5,648.68, $9,009.12, and $17,122.00, respectively. These figures were included in the net worth chart, Exhibit 80, which went to the jury.

[Government's Contentions]

It was the Government's theory that the unreported taxable income as indicated by its net worth chart was graft received by the defendant for nonperformance of his duties as a policeman and as a member of the vice squad. Although there was no direct evidence that the defendant ever received a bribe, the evidence did disclose that he had "opportunities" flowing from his position in charge of the investigation of vice. There was evidence that there was wide open gambling in Rochester during the spring and early summer of 1948 when the defendant was on the vice squad; that on three or four occasions between April and June 1948 the defendant had been told by Officer Stanton about the sale of policy slips by one Passorelli, but no action was taken until Officers Faulkner and Van Auker were notified of similar sales and thereupon made an arrest; that statistics of gambling cases disposed of in the City Court of Rochester indicated an upswing in prosecution of gambling from 1948 to 1951 after other officers had been assigned to the squad; and that the defendant was on friendly terms with a professional gambler, Thomas L. O'Brien, whose restaurant he and his wife patronized and whose house he had visited on two occasions. There was evidence that O'Brien had called the defendant by telephone two or three times in 1954 to inquire about rumors that the defendant was going back to the police force, and that at an unidentified date the defendant and his wife had briefly visited O'Brien at his summer cottage. Police Lieutenant Irish testified that while he, Irish, was on the vice squad he had been offered bribes on several occasions. This evidence was first admitted and subsequently stricken out by the court with instructions to the jury to disregard it.

[Inconsistencies in Taxpayer's Story]

The Government introduced proof of inconsistencies and fabrications in the defendant's extrajudicial explanations of his finances. When the defendant was questioned by a superior in 1947 about the expensive home he was building on Gregory Hill Road , he claimed he could sell his Linden Street House for $10,000 and get a mortgage for the rest. Actually, the sale of the Linden Street residence netted him about $4800, and the new house, costing $37,800, with the land and all improvements, was not mortgaged. In April of 1952, when interrogated by Revenue Agents, the defendant stated that the construction of his new home cost him only $19,400. He claimed to have received in 1943 an inheritance from his brother, Clarence, of $500, with which the Government credited him, and a gift of $8800 from Clarence in 1937 which went into bond purchases in later years. 2 He stated that he had no source of income from any other source than his salary. When asked how he could deposit over $13,000 in banks during 1946 and 1947 on his salary of about $3,000, the defendant replied, "That is a lot of money. It looks bad, doesn't it?" At a conference with the Revenue Agents in July 1952 he stated that the house cost "around $25,000" and when confronted with his prior statement said, "I might have lied about that unwittingly. I have nothing to conceal." At that time the defendant claimed the $500 inheritance and a gift of $8900 from Clarence in 1939 as his only gifts and inheritance. He stated that he used the gift from Clarence to make bank deposits in 1946 or 1947 and explained his bond purchases and other bank deposits by systematic savings and accumulations, 3 an explanation which was completely destroyed by his wife's testimony at the trial. 4 In November 1952, at a meeting with Police Department officials, the defendant claimed for the first time that in 1940 he and Clarence had pooled some money for a joint business venture and that when the venture failed to materialize Clarence before his death in 1941 turned over the pooled funds to the defendant. He also mentioned then for the first time a legacy of his wife's from a Great Aunt Mary from the West which will be discussed later. The Government also presented evidence that the defendant had concealed bond purchases, expenditures, and bank accounts, and made misrepresentations relating to the purchase of a car for his daughter, Nancy, in his preindictment extrajudicial statements. In short, the evidence of fabrication, misrepresentation and concealment was strong and the jury may well have concluded that his constantly shifting explanations were incredible.

[Evidence on Behalf of Taxpayer]

The defendant did not take the stand. The defense called several witnesses who were superiors and associates of the defendant on the police force. These witnesses testified to the defendant's reputation for being an efficient policeman and to his activities in suppression of vice. Irma Ford, his wife, testified on his behalf and claimed the existence of a substantial cash hoard on hand at the opening date (January 1, 1947) derived principally as gifts from Mrs. Ford's relatives, particularly a Great Aunt Mary of California, and from the defendant's brother Clarence. Mrs. Ford testified that she had $2000 when she married the defendant. She claimed to have received $2000 from Great Aunt Mary in 1922 and another $6000 over a subsequent period of five or six years, before Mary died. Out of a sizeable estate which, she testified, Mary bequeathed to Mrs. Ford's mother, she claimed to have further received approximately $5800 as gifts in three installments during 1937, 1938 and 1939. She also claimed gifts of $2400 from her daughter Jean in 1948 before Jean entered a convent. Mrs. Ford testified to the claimed gift of $8800 or $8900 from Clarence in about 1937 and also testified to finding a thick envelope containing money in the defendant's dresser drawer in the summer of 1941, a few months before Clarance's death, which contained the substantial sum (in an unspecified amount) allegedly left with the defendant by Clarence after their alleged business venture failed of consummation.

[Government's Rebuttal Evidence]

The Government introduced independent evidence tending to negate the claim of a substantial cash hoard on hand in 1947 and deriving from acquisitions in the 1920's and 1930's and to prove that its alleged existence was a fabrication. There was considerable evidence of small loans and debts throughout the 1930's. As late as 1940 the defendant borrowed $100 from the Central Trust Company. He made a payment thereon of $25 on June 24, 19 40, and renewed the note in the amount of $75 on August 8, 19 40. On November 8, 19 40, it was renewed again in the amount of $55, and was paid in full on February 8, 19 41. In addition, the Government introduced evidence tending to show that even if the defendant's explanations as to the accumulation of the hoard were true the hoard had been dissipated by the acquisition of non-cash assets prior to January 1, 19 47. According to the pre-trial statements of the defendant and the trial testimony of his wife as to the alleged sources of the hoard is had been fully accumulated in an amount in excess of $24,700 prior to the death of Clarence in November 1941. During the period from January 1, 19 42 until the opening date, January 1, 19 47, the Government's evidence purported to show approximately $43,000 of visible net worth increases and personal expenditures in excess of reported earnings. Therefore, even if the jury had believed the defendant's explanation, there would have been ample evidence to indicate an exhaustion of the hoard before January 1, 19 47.

                                                                      Accumulation                 Dissipation

                                                                     of Cash Hoard                of Cash Hoard

                                                                  (per Defendant's              (per Government's

                                                                         evidence)                  evidence)

1919            Irma Ford's assets at marriage ..........       $ 2,000                    1942                $ 4,996.32

1922-28         Gifts from Aunt Mary ....................       8,000                      1943                  6,167.55

                Gifts from Irma Ford's mother out of

1937-39         Aunt Mary's bequest .....................       5,800                      1945                  9,008.12

1937-41         Gifts from Clarence5 ....................       8,900 plus6                1946                 17,122.00

                Total ...................................       $24,700 plus                                  7$42,942.67


5 The $500 bequest from Clarence is not included in this chart since the Government credited the defendant with exempt income in that amount for 1943.

6 The additional amount was the sum alleged to have been contributed by Clarence to the joint venture with the defendant which Irma Ford testified was left with the defendant in 1941.

7 The jury by failing to reach a verdict on the 1947 count in effect gave the defendant the benefit of the doubt as to an additional $15,455.61 in funds possibly accumulated prior to the indictment years.

[Taxpayer Challenges Opening Net Worth]

The defendant does not challenge any of the specific items included in the net worth chart. Rather, he attacks the reliability of the opening net worth figure (January 1, 1947), claiming omission therefrom of a substantial cash hoard in currency then on hand. The Government credited the defendant with an opening net worth of $57,490.40. This figure included a credit for $36,303.33 deposited in seven bank accounts which the Government's investigation had uncovered. It did not, however, include any credit for currency on hand. The defendant asserts that this omission renders the Government's evidence of net worth so unrealiable as to lack probity as a foundation for its purported calculation of unreported net income.

[Fact Question]

We think that was a question for the jury. Our function in passing on the sufficiency of the evidence is complete upon a determination that the opening net worth figure is supported by an adequate investigation, including the tracking down of leads furnished by the defendant, and is corroborated by some independent proof tending to negative the existence of a cash hoard on hand at the opening date.

Here, the opening figure was supported by an exhaustive investigation by the Government and was independently corroborated by evidence of the defendant's precarious financial condition during the period when, according to the defense, he had a substantial cash hoard on hand. 5 There was further evidence that even if the defendant had accumulated such a hoard as and when contended by the defense it would have been absorbed by his proved expenditures prior to the opening date. 6 Finally, there was evidence of the defendant's inconsistent, false and misleading extrajudicial statements which the jury might well have concluded were intentionally fabricated. 7

[Government's Calculations Justified]

In the context of this case, it is not necessary for us to decide whether any one of these lines of corroborative proof was sufficient. Their cumulative effect was to produce firm ground to infer the accuracy of the Government's opening net worth figure. To reduce the totality of proofs to its component parts and examine each part for its independent probative efficacy would be to distort the overwhelming substantiality of the proofs as a whole into a congeries of irrelevant abstractions.

[Income Must Have Been Taxable]

Since the Government thus furnished adequate evidence of the substantial accuracy of its opening net worth figure and since the other figures on its chart were independently supported and were never challenged, it follows that there was adequate support for a finding by the jury of unreported income during the indictment years from some source. The fact that the Government thoroughly investigated the defendant's affairs and financial condition and yet failed to uncover any substantial nontaxable receipts beyond that shown on its chart, was sufficient, at least for purposes of its prima facie case, 8 to negative an inference that the receipts thus demonstrated may have derived from a nontaxable source.

[Government Carried Burden]

Somewhat overlapping the contention just above dealt with, the defendant claims that the Government's proofs were insufficient because of its failure to track down leads furnished in his extrajudicial explanations as to the source of his net income and expenditures. We do not agree. His claim as to the low cost of his new house the Government did track down--and found substantially exaggerated. His claim of a legacy from his sister was checked and found untrue. His statement that he kept a large sum of cash derived from his brother in the Police Department safe was apparently tracked down as far as possible with a result by no means favorable to the defendant's contention. His claims as to the receipt in pre-indictment years and his disposition of various cash gifts received from his brother Clarence and of gifts to his wife through her Great Aunt Mary were so vague that they were not susceptible of further investigation. The burden on the Government in this respect was only to provide "effective negation of reasonable explanations by the taxpayer inconsistent with guilt. Such refutation might fail when the Government does not track down relevant leads furnished by the taxpayer--leads reasonably susceptible of being checked, which, if true, would establish the taxpayer's innocence." Holland , pp. 135, 136. Here the explanations were neither "reasonable" nor "susceptible of being checked."

Moreover, here as in Holland, even if the defendant's leads were assumed to be true, "the incidents relied on by the petitioner [the defendant here] were so remote in time and in their connection with subsequent events proved by the Government that" whatever the defendant's net worth was in 1941 (when the last contribution from Clarence was allegedly received) it "appears by convincing evidence that" on January 1, 19 47, he had only such assets as the Government credited to him in its opening net worth figure. Here, even if all the preindictment gifts claimed had been received as and when claimed, they did not prove cash on hand on January 1, 19 47. At most, they would explain only part of the $43,000 by which his combined increase in visible net worth and personal expenditures, as shown by the Government's chart, exceeded his aggregate income as reported for the years 1941 through 1946.

Nor do we agree with the contention made that in the circumstances of this case the Government, to prevail, was required to interview the defendant's wife about her own assets, sources of exempt income and the receipt of the gifts said to have been received from her Aunt Mary. It is true that the financial status and history of Mrs. Ford was clearly relevant to the prosecution of the defendant, especially since the family was treated as a unit for purposes of calculating net worth increases and expenditures. But we think the Government adequately exhausted investigation of that possible source of income by its questioning of the defendant in July 1952 as to his wife's assets and sources of income. He stated then that his wife did not work except occasionally in a hospital, that she had no stocks or securities, but that she "had a little money that her folks left her." Moreover, it may not be assumed that a pre-trial interview with Mrs. Ford would have added anything to the case not contributed by her testimony on trial. And that testimony, even if true, did not impugn the Government's opening net worth statement, as we have noted in the preceding paragraph.

In short, we think the amplitude of the investigation actually made, summarized elsewhere in this opinion, fully satisfies the investigatory burden on the Government and justified all the inferences, affirmative and negative, which the jury apparently based thereon.

[Government's Proof Was Adequate]

The defendant also contends that the net worth proofs were not corroborated by proof of a likely source of additional income and hence were insufficient to support the verdict. The argument would have pertinence, we think, only if there were a lack of other evidence to prove that the defendant had unreported current receipts. Here, however, without proof of a likely source the Government's proofs were fully adequate to support a finding that the defendant had substantial unreported receipts during the indictment years from some source. For the proofs, as we have seen, negatived the defendant's claim of a cash hoard on hand during the indictment period and supported the accuracy of the Government's opening net worth figure. The other figures in the Government's net worth chart were affirmatively supported by the Government's investigation and indeed were not challenged. The Government having thus established unreported current receipts from some source, all that was needed to complete a prima facie case was enough proof to negative the possibility that the unreported current receipts thus established were nontaxable.

Merely to supply this necessary link in the Government's case, it was not necessary to prove directly the receipt of graft or that graft was a "likely source" in the sense that it was a source which the defendant had actually drawn upon. "Likely source" is but one method to negative all the possible nontaxable sources of the alleged net worth increases: it is not always an indispensable element in a net worth case. United States v. Adonis, 3 Cir., 221 Fed. (2d) 717 [55-1 USTC ¶9310]. This conclusion, we think, is supported by passages in Smith v. United States, 348 U. S. 147, 158 [54-2 USTC ¶9715], and United States v. Calderon, 348 U. S. 160, 164 and 165 [54-2 USTC ¶9712], and is wholly consistent with Holland v. United States, 348 U. S. 121, 137 and 138 [54-2 USTC ¶9714]. Direct proof of a likely source here was unnecessary because the Government sufficiently proved unreported current receipts by directly substantiating its opening net worth figure by independent evidence and because the results of its exhaustive investigation of the defendant's affairs warranted an inference that he had no nontaxable income during the indictment years not credited to him on the Government's net worth chart. 9

The defendant urges that the evidence relating to graft opportunities should have been excluded as prejudicial to the defendant since the Government failed to link him directly with graft. We do not agree. The evidence showing the possibility of graft, although not sufficient in itself to prove unreported current receipts, was relevant and material for its tendency to show that the unreported receipts, independently established, derived from a taxable source. The evidence therefore was properly received as corroborative. It added strength to the inference that the unreported receipts were taxable.

[Willfulness Amply Shown]

The finding of the defendant's willfulness was supported by an abundance of evidence. Here, as in Holland , p. 139, there was evidence of a consistent pattern of underreporting comparatively substantial amounts of income both within and before the indictment years. And the use of fabrications to deny the underreporting of income, rather than a defense of non-willful negligence in failing to report it, provides some additional evidence of a willful attempt to evade income taxes through concealment of taxable sources. Gariepy v. United States , 6 Cir., 189 Fed. (2d) 459 [51-1 USTC ¶9318], 463; Sasser v. United States, 5 Cir., 208 Fed. (2d) 535, 539 [54-1 USTC ¶9118].

On appeal, it has been suggested in behalf of the defendant that despite the absence of admissions or other proof that he received graft, it is possible that he did do so prior to the indictment years and thereby built up a cash hoard sufficient to account for the apparent unreported income in the indictment years. On this theory the defendant's fabrications are explained as an effort to conceal guilt in receiving graft rather than guilt of tax evasion. In consequence, it is argued, the fabrications may not be treated as corroborative of the Government's opening net worth figure. Although this contention runs counter to the defendant's pre-trial assertions and the theory of the defense at the trial, it has some plausibility and deserves consideration to the extent that it may have bearing on the prima facie sufficiency of the Government's proof.

But we cannot indulge in the assumption that the defendant took graft in large amounts prior to the opening indictment date and shut our eyes to the likelihood that, if so, he continued to do so during the indictment years when the source remained available. If we assume, as we are now asked to do, that prior to 1947 the defendant actually profited through graft, by the defendant's own hypothesis accompanied by proof of opportunities for graft there existed a likely source of unreported taxable income during the indictment years which constituted adequate corroboration of the Government's proofs of additional taxable income, under the Holland doctrine.

In addition to the major contentions already discussed, the defendant presses several other claims of erorr all of which we find without merit. He suggests the possibility that some of his excess funds might have come from his son, James Ford. Not only was such a claim not made prior to or at the trial, but James Ford testified that prior to the indictment years he was successively at college, in the army, and at law school, and during the indictment years until April 1949 he was successively employed by a law firm for approximately $25 a week, and as a Post Office clerk for about $60 a week. Thereafter, he was employed as a claims examiner with the State Labor Department. On the evidence the jury might reasonably have concluded that none of the defendant's expenditures derived from James. Moreover, the Government need not negate every possible source of nontaxable income where leads are not forthcoming. Holland v. United States, supra, at 138; Rossi v. United States, 289 U. S. 89, 91-92; Warring v. United States, 4 Cir., 222 Fed. (2d) 906, 911-912 [55-1 USTC ¶9473].

[Hung Jury as to One Year No Bar]

The defendant contends that the conviction must be reversed because the entire case rests on the accuracy of the Government's opening net worth figure and that the jury's inability to reach a verdict for 1947 imports a finding that the figure was inaccurate. That argument is specious. On appeal we are concerned not with the impact of the evidence on the jury but with its legal sufficiency. We think the evidence sufficiently supported the Government's opening net worth figure for 1947 even though the jury for some reason failed to convict on the 1947 count. Even if the jury had acquitted the defendant on the 1947 count that acquittal would not destroy the validity of its verdict for subsequent years. United States v. Costello, 2 Cir., 221 Fed. (2d) 668, 673 [55-1 USTC ¶9342]; United States v. Coplon, 2 Cir., 185 Fed. (2d) 629, 633; Horne v. United States , 5 Cir., 193 Fed. (2d) 175. That is so quite apart from the fact that in this case the opening figure for 1948, although calculated by the scheme of that for 1947, was based on independent data.

It is urged by the defendant that the evidence of opportunities from graft went beyond the limits of the order of preclusion entered by the judge before trial which precluded the Government "from introducing evidence at the trial as to the claimed possible or probable sources of the defendant's alleged undisclosed income, except to show that the defendant was employed as a police officer, the nature of his duties as such * * * and that the defendant's increase in net worth did not come from a non-taxable source or sources." This order substantially followed the language used by the Government in its bill of particulars stating what it intended to prove. We think the proofs properly fell within the confines of the order. In addition there is no claim that the defendant was surprised by the evidence.

[Technical Error]

Error is assigned for failure of the trial court to inform defense counsel as to its rulings on the defendant's requests to charge in advance of summation. Rule 30 of the Federal Rules of Criminal Procedure provides that, "The court shall inform counsel of its proposed action upon the requests prior to their arguments to the jury * * *." We think that in the setting of this case strict compliance with the Rule was waived when counsel, without request or objection, proceeded with his summation. But even if there were technical error it was harmless. The judge charged in substantial compliance with all the defendant's requests save one and there is neither assertion nor showing of harm resulting from noncompliance with the Rule.

The defendant also assigns as error the admission of the items on the net worth chart purporting to show Additional Unreported Net Income for the pre-indictment years 1942 through 1946. This evidence was highly relevant both on the issue of the defendant's intent 10 and to refute the defendant's claim as to a substantial cash hoard on hand at the opening indictment date consisting of receipts from Clarence or Aunt Mary prior to 1942. We hold that this evidence was properly admitted.

[Harmless, If Erroneously Admitted, Evidence]

The defendant claims prejudice from the admission of Irish's testimony that on occasions he had been approached with offers of graft money. Subsequent to its admission this testimony was stricken on the authority of Ford v. United States, 5 Cir., 210 Fed. (2d) 313 [54-1 USTC ¶9233], and in the charge the jury was admonished to disregard it. If its admission was erroneous, we think the subsequent action taken must be deemed to have sufficiently safeguarded the defendant from resulting prejudice. We incline to think, however, that in view of the independent evidence of unreported income during the indictment period the testimony was relevant and admissible for its bearing on the source of that income. It tended to show that Rochester police officials had opportunities to obtain taxable income in the nature of graft and thus reinforced an inference, permissible on other evidence, that the defendant's unreported income was taxable. We hold that nothing connected with this item is cause for reversal.

Finally, there is a claim that the trial court erred in vacating its directed verdict of acquittal on Count 1 of the indictment. The argument is that if the defendant is retried on that count he will be placed in double jeopardy. Since the order is interlocutory and the defendant has not yet been placed in jeopardy thereunder, the issue is not currently appealable and the pending appeal as to Count 1 must accordingly be dismissed. Lewis v. United States , 216 U. S. 611; United States v. Swidler, 3 Cir., 207 Fed. (2d) 47 [53-2 USTC ¶9588], cert. denied 346 U. S. 915. Cf. Berman v. United States , 302 U. S. 211.

Affirmed on Counts 2, 3, and 4. Appeal dismissed on Count 1.

Net Worth and Expenditure Statement

BRYAN E. FORD 71 Gregory Hill Rd. Rochester , N. Y.

 

1 Copy of Exhibit 80 will be appended to this opinion.

2 In this April explanation, the defendant claimed that he kept this sum in an envelope in the Police Benevolent Association safe until 1944, that he thereafter kept it at home until he deposited it in 1946 or 1947. Arthur J. Doyle, Treasurer of the Association, testified at the trial that he turned over to the defendant on March 1, 19 38 a thin envelope from the safe. Mrs. Ford, also at the trial, testified on direct examination that this envelope was an inch thick and was placed in the defendant's dresser drawer.

3 The following is an except from the testimony of Special Agent Nunn as to the July 1952 interview with the defendant.

"I told him during the year 1944 he had deposited $10,688.89. In that same year his salary was $2825.00. I asked him where the money came from, he said 'That was savings, also savings we had accumulated over a period of 30 years.' I told him in the year 1947 he deposited $17,198.50, and that during the same year his salary was $3073.38. He said 'Same procedure.' I told him in 1947 he deposited $18,734.00 and his salary was $3149.96. His answer was 'Same procedure.' Then I told him in each of the years, 1947 through 1951, 'Your deposits are greatly in excess of your salary.' He said 'My answer is the same for those years.' Then I told him that he had told us he had not received any other income in addition to his salary and the money from his brother. His answer was 'That is right.' I asked him 'Could you please explain how you accumulate this amount of money?' His answer was 'I can only tell you through savings.'"

The information included in this testimony had previously been reduced to writing in a signed statement by the defendant.

4 The following is an excerpt from the cross-examination of Irma Ford, the defendant's wife, at the trial.

"Q. Now, did you manage to live wholly on Mr. Ford's salary? A. I tried to.

* * *

"Q. All during the time he was employed on the Police Department? A. I tried to.

Q. Were you able to? A. Yes.

Q. Did you live, in fact, under his salary? A. No.

Q. You spent from his salary just about the amount that he earned? A. That is right.

Q. You were not able to save anything from his salary? A. No."

5 The corroborative sufficiency of this type of evidence was approved by the Supreme Court in Holland v. United States, 348 U. S. 121 [54-2 USTC ¶9714], 132-6; in Friedberg v. United States, 348 U. S. 142, 143-5 [54-2 USTC ¶9713]; and in Smith v. United States, 348 U. S. 147, 157-8 [54-2 USTC ¶9715].

6 With regard to similar evidence in United States v. Calderon, 348 U. S. 160, 167 [54-2 USTC ¶9712], the Supreme Court stated, "There could hardly be more conclusive independent evidence of the crime."

7 Proof of fabrication of an alibi is itself some affirmative evidence of guilt. United States v. Simone, 2 Cir., 205 Fed. (2d) 480, 482-3; 3 Wigmore on Evidence §§ 278, 279 (3rd Ed. 1940). Of course, standing alone, such evidence would not be sufficient to support a conviction. But when coupled with extensive affirmative proof of tax evasion under the net worth method, it may suffice. United States v. Adonis, 3 Cir., 221 Fed. (2d) 717 [55-1 USTC ¶9310].

8 Cf. Rossi v. United States , 289 U. S. 89.

9 We do not overlook the fact that the Judge charged that, to convict, the jury must find that the defendant actually received graft. In this respect, we think the charge was too favorable to the defendant. It overlooked the availability of inferences based on other independent evidence.

10 Bateman v. United States , 9 Cir., 212 Fed. (2d) 61, 66, 68 [54-1 USTC ¶9341]; Hanson v. United States, 8 Cir., 186 Fed. (2d) 61, 66 [51-1 USTC ¶9118]; Lisansky v. United States, 4 Cir., 31 Fed. (2d) 846, 851 [1929 CCH D-9277]. Cf. Johnson v. United States , 318 U. S. 189 [43-1 USTC ¶9288].

[Dissenting Opinion]

FRANK, Circuit Judge (dissenting):

Holland v. U. S., 348 U. S. 121 [54-2 USTC ¶9714], and its companion decisions warn us that the net-worth method is a dangerous instrument, to be used with caution, lest it may have the effect of unconstitutionally putting on an accused the burden of proving his innocence. 1 Because of that warning, I have such doubts about affirming this conviction that I feel constrained to dissent.

[Jury Charge]

The trial judge, in the plainest terms, told the jury that it could not find defendant guilty, unless it found (1) that he had a "probable source of income" (other than his salary or interest on his bank account and bonds) and (2) that this probable source was graft. His charge, in this respect, reads: "To justify the use by the Government of this net-worth-expenditure method you must be satisfied on all the evidence in the case that the defendant has a probable source of income other than his salary and the interest on his bank accounts and the bond interest. You must be satisfied that the probable source of his income was in some way connected with his duties as head of the Vice Squad, with receiving money or things of value either in exchange for services rendered to people whom he came in contact with as an officer of the Vice Squad, or exchange for forbearing to do something he was supposed to do as an officer of the Vice Squad."

According, then, to the theory on which the case went to the jury, probable graft was an essential element of the government's case; and Holland v. U. S. teaches that every essential element must be proved beyond a reasonable doubt. Of course, such proof of any essential may be by circumstantial ("indirect") evidence. But I think that here the circumstantial evidence of probable graft--which Judge Hincks significantly calls proof of "the possibility of graft"--was much too meager to justify a jury finding of the existence of that element. For look at that evidence as Judge Hincks describes it:

(a) When defendant was on the vice squad, there was wide open illegal gambling.

(b) While on this squad, in 1948 defendant was told, by another policeman, of the sale of policy slips by one Passorelli, but "no action was taken" until two other officers, learning of this fact, made an arrest.

(c) The number of prosecutions for gambling increased when other policemen were assigned to the vice squad.

(d) Defendant was on "friendly terms" with O'Brien, a professional gambler; defendant and his wife patronized O'Brien's restaurant; twice, they visited at O'Brien's house and once at O'Brien's summer cottage. After defendant had left the police force, O'Brien phoned defendant two or three times to ask whether defendant was going back on the force.

(Another policeman, Irish, testified that while on the vice squad he (Irish) had "been offered bribes" several times. But this item of evidence was stricken.)

[Believes Evidence Insufficient]

I think a jury could not reasonably infer from this evidence that defendant had probably received graft. Observe that defendant was but a subordinate of the Chief of Police. Even assuming that defendant allowed too much gambling to go on unmolested when he was on the squad, it may well be that he did so under orders from the Chief; judicial notice informs us that experience in many cities shows the great likelihood of such a situation. The statistics as to the number of arrests are misleading: Winfield, the government witness who supplied these figures, testified that one single raid accounted for a very large number of arrests; that in a single raid in 1950 about 100 persons were arrested and that the figures did not show the number of raids as distinguished from the number of arrests.

The "Texas Ford case," Ford v. U. S., 210 Fed. (2d) 313, 318 (C. A. 5) [54-1 USTC ¶9233]--cited by Judge Hincks in another connection--was a pre-Holland decision. The defendant was Chief of Police. On its face, the court's opinion might seem to support Judge Hincks as to the proof of probable graft. But, in the instant case, the government in its brief itself says of that case: "While it does not appear in the court's opinion, the record in that case discloses that the defendant there had received gifts of clothing from the operators of some of the gambling establishments." 2 In the case at bar, there is not a syllable of such evidence.

It is this circuit's doctrine that, in a criminal case, there is no difference, when it comes to granting a judgment of acquittal, between a "preponderance" and "beyond a reasonable doubt," that the difference is for the jury only. I have recently said why I disagree with that doctrine. U. S. v. Masiello, -- Fed. (2d) -- (C. A. 2, July 18, 19 56). But in the instant case, I think the difference unimportant because I think that, if probable grafting was an indispensable element of the government's case, the government's proof of that fact was so flimsy that it did not approach anything remotely like a preponderance.

[Criticism of Majority View]

As I read Judge Hincks' opinion, he is not willing to hold that, if graft were an essential element, the evidence on that issue would be sufficient. For otherwise he would surely have simplified his opinion by affirming on the quite simple theory presented by the judge to the jury (which Judge Hincks mentions only in passing and then in a footnote). Judge Hincks sedulously avoids affirmance on that ground. Instead, he elaborately, over several pages, works out a different theory which is as follows:

(1) There was no need whatever here for the government to prove a "likely source," because the evidence was entirely adequate to support a finding that defendant had unreported receipts during the indictment years which must have derived from "some source" or other, without specifying any.

(2) Consequently, the government made a case for the jury without the evidence of probably graft, i.e., the jury could reasonably have found defendant guilty if no evidence of probable graft had been received.

(3) However, evidence of "possibility of graft" was properly received as "corroborative" of the evidence that the unreported taxable income derived from some unidentified source or other, corroborative in the sense that it added what was not essential, i.e., proof of a particular likely source.

I shall, for the moment, assume that Judge Hincks correctly says that no proof of a "likely source" was needed here, that it sufficed to prove "some source" without proof of any particular probable source. 3 If so, the evidence of possible grafting was admissible only if it tended to show (although unnecessarily) a particular likely source. But, as noted above, that evidence was so exceedingly slim that it could not tend to prove that fact.

Therefore, the reception of that evidence should have led to a mistrial or, at the very least, that evidence should have been stricken from the record. For it was most prejudicial since, on the basis of that flimsy evidence, a jury of Rochester citizens were allowed to hear arguments by the prosecutor that the accused had been a grafting Rochester policeman, and the judge's charge heavily underscored the importance of that evidence.

Judge Hincks attempts to get rid of this error by relegating to a footnote that part of the trial judge's charge which made probable graft a central issue, and by then saying in that footnote that that charge "was too favorable to the defendant." Surely the phrase "too favorable" is a quaint way of characterizing a charge centering on prejudicial evidence that should not have been in the case. Had the case gone to the jury without the evidence concerning graft and under a charge contrived in accord with Judge Hincks' theory, the jury might or might not have found defendant guilty. But I think we cannot properly affirm a conviction resulting from a conjectural verdict based on an imaginary charge with reference to an imaginary record, i.e., a record not containing the prejudicial evidence about graft. Judge Hincks seems to regard this error as "harmless," for he apparently seeks to exorcise it by stating that we must look to "the totality of proofs," their "overwhelming substantiality," and must avoid "irrelevant abstractions." I think the markedly prejudicial error in the reception of the graft evidence, emphasized by the judge's charge, is no "irrelevant abstraction." It is the very kind of error which could easily account for the verdict. Kotteakos v. U. S., 328 U. S. 750, admonishes us that such an error is not "harmless," that we may not affirm a conviction merely because, reading a cold record, we believe the defendant would have been convicted if the error had not occurred.

Moreover, I gravely doubt the validity of a basic postulate of Judge Hincks' theory. That is, I question whether Holland v. U. S., 348 U. S. 121 [54-2 USTC ¶9714], ever permits a conviction in a net-worth case without proof of a "likely source," which (to quote Judge Hincks) "the defendant had actually drawn upon." Cf. U. S. v. Costello, 221 Fed. (2d) 668, 670-671 (C. A. 2) [55-1 USTC ¶9342] True, in Holland, the Supreme Court said (137-138) that proof of such a source is "sufficient"; and one can argue that there is a difference between what is an essential and what is "sufficient."

But in Holland , the Court (at p. 137) carefully pointed out that there was a "likely source" in the income from the hotel. In discussing (at p. 138) U. S. v. Johnson, 319 U. S. 503 [43-1 USTC ¶9288], the Court said that there "the taxpayer was the owner of an undisclosed business capable of producing taxable income," and that in Holland there was such a "disclosed business" (i.e., the hotel). Also (at p. 126) the Court said: "In each of the four cases decided today the allegedly unreported income comes from the same disclosed sources as produced the taxpayer's reported income * * *"

[Interpretation of Authority Questioned]

Judge Hincks, I think, misinterprets Smith v. U. S., 348 U. S. 147 [54-2 USTC ¶9715]. I think it makes clear (1) that proof of a "likely source" is necessary and (2) that even a defendant's affirmative admissions, during a pre-indictment investigation, must be corroborated. In the Smith case, the evidence showed the following: The year before the indictment years, defendant had acquired a racing-news service, described by the Court as "a business producing unrecorded amounts of income." (See 348 U. S. at 149, 159.) In the course of a preindictment investigation, defendant had made a written statement affirmatively admitting what he called his "true net worth." The government relied, in large part, on this written admission. The Court said that, "whether we consider the statement an admission of one of the formal 'elements' of the crime or of a fact subsidiary to the proof of these 'elements,'" it was "crucial" to, "an element vital to," the government's case. As the admission was made after the commission of the alleged crime, the Court held it required corroboration because, though not "involuntary," still "its reliability" was "suspect," since it was "extracted from one * * * under pressure of" an investigation, "whose words may reflect rather the strain and confusion attending his predicament rather than a clear reflection of his past." In discussing (pp. 156-157) the "quantum of corroboration," the Court said, "all elements of the offense must be established by independent evidence or corroborated admissions," adding at once, "but one available mode of corroboration is for the independent evidence to bolster the confession itself and thereby prove the offense 'through' the statements of the accused. Under the above standard the Government may provide the necessary corroboration by introducing substantial evidence, apart from petitioner's admissions, tending to show the petitioner understated his taxable income." This entire discussion is, in its context, concerned exclusively with proof of corroboration of an affirmative admission. The same is true of the court's subsequent discussion (pp. 158-159). There the Court said, "But substantiating the opening net worth is just one method of corroborating these extra-judicial statements," and went on to state that the "admissions may also be corroborated by an entirely different line of proof--by independent evidence concerning petitioner's conduct during the prosecution period, which tends to establish the crime of tax evasion without resort to the net worth computations." The Court then summarized the evidence of his conduct "coincident with petitioner's opening of the racing-news service." This conduct, the Court concluded, "does corroborate the net worth statement by tending to show that petitioner was understating his income during the prosecution years." Here, again, the Court spoke of the necessity, in one way or another, of corroborating the defendant's admissions, and again referred to a business which was a "likely source."

However, let us assume, arguendo, that, in an appropriate case, it is not essential to prove a "likely source." Even so, I have these doubts about Judge Hincks' reasoning, which, as I understand it, runs thus:

For proof of a likely source, the government could substitute evidence, in the form of statements emanating from the defendant, which negated the possible existence of enough non-taxable sources to account for the apparently unreported taxable income. This substituted essential element of the government's case was not proved by defendant's testimony, since he did not take the stand. It was, says Judge Hincks, sufficiently proved by evidence of defendant's lies during the course of the pre-indictment investigation.

[Proof of Source of Income]

If, then, I understand Judge Hincks, these out-of-court lies became an essential part of the government's case. Judge Hincks' reasoning therefore disturbs me: Assuming arguendo, that proof of a likely source was not necessary, then, if defendant, out of court, had made affirmative admissions of facts tending to show unreported taxable income (or lack of a sufficient "cash hoard" or the like), such admissions, if corroborated, would have sufficed. But defendant's out-of-court statements were, at most, lies, by way of denying such affirmative facts. Do such negative statements measure up to admissions? To put it differently, assuming again that proof of a likely source was not needed, do these negative statements (falsehoods) suffice, even if corroborated, to support the verdict?

I think not. As above noted, the Smith case calls for corroboration of even an affirmative admission. The reason for such a requirement is also stated, in Holland, 348 U. S. 121 at 128-129 [54-2 USTC ¶9714], where the Court observed that, in the course of a pre-indictment investigation, the taxpayer "may be more concerned with a quick settlement than an honest search for truth," and said, "The problem of corroboration, dealt with in the companion case of Smith v. U. S., post 147, and U. S. v. Calderon, post 160, therefore becomes crucial." Note, then that (as in Smith) in U. S. v. Calderon (348 U. S. at 164) the defendant had made pre-indictment affirmative admissions, and that (pp. 165 ff.) there was evidence corroborating these admissions.

To be sure, if there were enough independent evidence, aside from pre-indictment lies (negative statements), then, of course, evidence of those lies would be admissible as cumulative evidence. Like flight, or a false alibi, or spoliation of documents, such lies are proof of a guilty mind. But, absent independent evidence otherwise sufficient to prove facts essential to a verdict of guilt, I doubt whether evidence of lies, flight, false alibis or spoliation will support such a verdict, especially in a net-worth case. The reason for not accepting such evidence as proof of an essential element was stated by Judge Shaw in Comm. v. Webster, 5 Cush. 295, 316: An "innocent man, when placed in a condition of suspicion and danger, may resort to deception." See also, Ayala v. U. S., 268 Fed. 296, 300 (C. A. 1); Vick v. U. S. , 216 Fed. (2d) 228, 232 (C. A. 5).

Judge Hincks apparently disagrees with what I said in the preceding paragraph. He cites, inter alia, Holland v. U. S. , 348 U. S. 121 [54-2 USTC ¶9714]; Friedberg v. U. S., 348 U. S. 142 [54-2 USTC ¶9713], and U. S. v. Calderon, 348 U. S. 160, 167 [54-2 USTC ¶9712]. I think my discussion of Holland and Smith, supra, shows that they do not bear him out. I see nothing on the subject in Friedberg: there the defendant took the stand and "vacillated" in his testimony (see 248 U. S. at 143). Speaking of the defendant's "false and misleading extra-judicial statements," Judge Hincks surprisingly remarks that the Supreme Court, "with regard to similar evidence," stated in U. S. v. Calderon, 348 U. S. 160, 167 [54-2 USTC ¶9712], "There could hardly be more conclusive independent evidence of the crime." Judge Hincks has overlooked the fact that this statement of the Supreme Court refers to "respondent's testimony at the trial" conflicting with his "testimony at a former trial." 4

[Authorities Distinguished]

Judge Hincks also cites several circuit court cases. All but one (i.e., U. S. v. Adonis, 221 Fed. (2d) 717 [55-1 USTC ¶9712]) are (1) unrelated to a net-worth problem and/or (2) ante-date the Supreme Court decision in Holland and its companion decisions:

(a) Sasser v. U. S. , 208 Fed. (2d) 535 (C. A. 5) [54-1 USTC ¶9118] was pre-Holland. Moreover, the evidence of the out-of-court lies was but one among several factors enumerated by the court, and not a factor essential to support the verdict.

(b) Gariepy v. U. S., 189 Fed. (2d) 459, 463 (C. A. 6) [51-1 USTC ¶9318] was pre-Holland. Moreover, the court said the defendant had made affirmative "admissions"; the court also said they were "admissible" because they "reinforced permissible inferences from evidence at the trial."

(c) U. S. v. Simone, 205 Fed. (2d) 480, 482 (C. A. 2) was not a net-worth case; also, it was pre-Holland. It relied on Smolin, 182 Fed. (2d) 782, 786 "and cases there cited." So turn to Smolin, 182 Fed. (2d) 782, 786 (C. A. 2). It, too, was not a net-worth case, and was pre-Holland. It cited and relied on Tucker v. U. S., 151 U. S. 164. But in Tucker the defendant testified at the trial, and the Supreme Court said that his out-of-court statement was used to "contradict his testimony upon the stand."

The one post-Holland net-worth case which seems to support Judge Hincks is U. S. v. Adonis, 221 Fed. (2d) 717 (C. A. 3) [55-1 USTC ¶9712]. If it does, I think it wrong. See McCormick, Evidence (1954) 538-539. See also Morgan, 59 Harvard L. Rev. (1946) 480 at 557 to the effect that the "greater number of cases hold that spoliation does not amount" to "evidence of necessary facts not otherwise appearing in the case"; and see Maguire and Vincent, Admissions from Spoliation or Related Conduct, 45 Yale L. J. (1935) 227.

So I think, that, even on Judge Hincks' theory, the judge should have granted defendant's motion for a judgment of acquittal at the close of the government's evidence. Defendant, however, did not stand on the denial of this motion, but introduced evidence in his defense. If this evidence had contained anything affirmative which supplied the missing essential of the government's case, the jury's verdict would have been proper, on Judge Hincks' theory. But there was no such evidence introduced by the defense. The testimony of Mrs. Ford, a witness for the defense, did not do the trick. To be sure, the jury may well have believed that she lied. However, as she was but a witness, not a defendant, her lies constituted a negative only. They cannot, I think, supply affirmative proof, for the government, of a missing essential. Even if a civil case in most jurisdictions, "disbelief of testimony is not the equivalent of proof of facts contrary to that testimony"; Boice-Perrine Co. v. Kelley, 243 Mass. 327, 137 N. E. 731, 733; Zarillo v. Stone, 317 Mass. 510, 58 N. E. (2d) 848, 849 (Mass.); Cruzan v. N. Y., N. H. & H. Rr. Co., 227 Mass. 594, 116 N. E. 879, 880; Pariso v. Towse, 45 Fed. (2d) 962, 964 (C. A. 2). Consequently, although the defense put in evidence, that evidence did not strengthen the government's case. Wherefore, even in Judge Hincks' theory, we should reverse. 5

1 See Holland v. U. S. , 348 U. S. at 128.

2 See also Davena v. U. S., 198 F. 2d 230, 231 (C. A. 9).

3 At one point, Judge Hincks says no "direct proof" of a particular likely source was necessary. If he means that "indirect" or circumstantial evidence of a particular likely source would do, I agree. But there was lacking any but the flimsiest "indirect" evidence on that score.

4 The complete passage reads as follows: "Even more conclusive corroboration, however, is respondent's testimony at the trial that he had $16,000 or $17,000 cash on hand at the starting point. This conflicted with the statements being corroborated ($500) and respondent's testimony at a prior trial ($2,000 to $9,000), but for the purpose of independently establishing the crime charged the jury could accept this testimony. Respondent further testified that he had $3,000 or $4,000 in cash at the end of the prosecution period. Taken together with the remainder of the net worth statement, which was stipulated or independently established, this testimony establishes a deficiency in reported income of more than $30,000. There could hardly be more conclusive independent evidence of the crime."

5 See Criminal Rule 29.

 

 

[56-2 USTC ¶10,055]Bill Corbett, Appellant v. United States of America , Appellee

(CA-9), U. S. Court of Appeals, 9th Circuit, No. 14,801, 238 F2d 557, 11/14/56, Affirming an unreported District Court decision

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

Crimes: Bank records and net worth increases: Jury trial: Expert witness.--The court sustained the conviction of taxpayer, a hotel operator, on an indictment which charged violations of 1939 Code Sec. 145(b) for wilful evasion of income tax. Taxpayer improperly contended the allowance of testimony of summaries invaded the province of the jury and that they were incorrect, since there was a careful compilation in court of the foundation material before reception of a summarization by the accountant. Also, taxpayer improperly claimed error in that the witness testified to the contents of bank records which were not in evidence. The use in the computation of bank deposit slips which had been destroyed before trial was proper, because secondary evidence of its contents could be admitted.

Little, LeSourd, Palmer, Scott & Slemmons, F. A. LeSourd, Brockman Adams, Seattle , Wash. , for appellant. Charles P. Moriarty, United States Attorney, John S. Obenour, Assistant United States Attorney, Tacoma, Wash, for appellee.

Before ORR and CHAMBERS, Circuit Judges, and TOLIN, District Judge.

TOLIN, District Judge:

After trial in the District Court defendant was convicted of Counts One and Two of a four-count Indictment which charged four separate violations of Title 26, U. S. C., Sec. 145(b) [wilful evasion of income tax]. The District Court dismissed Count Four, and the jury acquitted defendant of Count Three.

Among the grounds urged for reversal is the familiar one that the Court erred in denying defendant's motion for judgment of acquittal. The basis for the motion was insufficiency of the evidence. In asserting this ground, appellant urges a different view of his earnings than he related before indictment to prospective purchasers of his business. They, in turn, as witnesses, recalled defendant's narrative of current affluence during the indictment period.

Defendant's income during the years here in question 1 was derived principally from his operation of the Claremont Hotel in Seattle, Washington. Dewey Metzdorf, a prospective purchaser of the Claremont , testified that appellant had told him during 1946 that the hotel was netting $86,000.00 per year. Appellant reported on his tax return for 1945 (filed in 1946) that his net income for that year was $10,021.48, and for 1946 he reported $8,274.44. On another occasion appellant told a business visitor to the hotel of a technique relating to late night hotel rentals whereby, "I rent the rooms or my boy rents the rooms and we never make any accounting for tax purposes--it does amount to considerable."

The prosecution theory as to all counts was that the sum total of a large number of irregular practices in handling the finances of the hotel resulted in an understatement of income on the books of the hotel and that defendant knowingly and wilfully used the understatement as a correct one for tax purposes. The Government contended the true net income in 1945 had been $23,359.07 and the 1946 net income was actually $26,759.01. Summarizations of the evidence of income supported appellee's contention as to these amounts. Appellant's employees testified that it was their custom, at the oral direction of appellant, to enter records of allowances on the guests' accounts, whereas such allowances had not in fact been given the guests. In addition to a system of original false entry of such allowances on the books, there was testimony by employees that many records of the hotel were changed to convert original book entries showing payments of room rentals into entries showing allowances or credits to guests. These book alterations were made by use of erasures and ink eradicator, with new figures written in by, or at, the direction of appellant. By this method, that which originally had been recorded as "income" was changed to appear as "outgo". The testimony of the several witnesses to this method of falsely creating records of allowances or credits supports the Government's claim that the recorded income of the Claremont was reduced $14,595.00 in 1945, and $17,542.00 in 1946. Expert examination of the records, by use of a fuming process which partially restored and made visible the original entries, corroborated the employees' testimony of extensive entry alterations. One of the employees who assisted appellant in his changing of records testified extensively to what had been done, and further testified that appellant told her she was as guilty as he. In addition to large scale use of this system, many payments of room rentals went directly to appellant without having any book record made of the receipt of the money. Two clerks and a bookkeeper testified to operation of these systems.

Appellant claimed that the entires of "allowances" to guests correctly reflected the frequent granting of brief free rent as a good will gesture to a permanent guest or a courtesy to persons whose residence in the hotel would enhance its prestige.

Opposed to this exculpatory testimony of appellant was the testimony of many guests as to whom the records showed "allowances" but who testified that, on the contrary, there were no allowances in their cases but the accounts were paid in full.

Employees of appellant who testified that they had followed his instructions in such manipulations, segregated large numbers of the hotel records which they asserted were of this false character.

A night clerk also testified to withholding from any record whatever, those lodgings rented during late night hours. The monies collected from this class of rental were handed to appellant each day in an envelope. The same clerk testified to similar handling of rentals collected from servicemen who patronized a one-dollar per cot service for the use of sleeping facilities on the hotel mezzanine.

This testimony attributed considerable additional income to defendant. The exact amount is uncertain because the employee witness stated it by estimates. By any of the methods used by him to compute this sum, a substantial unreported income was related. Either the improper allowance method, or the failure to report night rentals would in itself establish an income higher than that reported.

[Summaries Admissible]

During the giving of testimony by Government agents in which written computations and summaries were used, there were frequent defense objections to the use of summaries, and the District Court as frequently pointed out to the jury that the agents' testimony in this field was not the primary evidence but a summary of other evidence.

In its very complete and readily understandable instructions, the Court referred to the agents' summaries in this way:

"There have been admitted in evidence certain exhibits, variously referred to here as schedules or summaries. Strictly speaking these exhibits are not received as evidence themselves, but are admitted as a summary of the evidence admitted in the case and the summaries are admitted only for your assistance and convenience in considering the other evidence which they purport to summarize. Exhibits of this nature are permitted where they are based upon voluminous books, records or documents, but you are reminded that it is the books, records and documents which are the evidence and the summaries are admitted only to assist you in considering the evidence, and for that purpose you are entitled to consider them."

Despite this formal instruction in the charge and appropriate cautionary comment by the Court while the summary evidence was being received, it was emphatically urged on this appeal that the allowance of testimony of summaries invaded the province of the jury. It is also claimed that the summaries are incorrect.

Computation and summaries by expert accountants has long been allowed for the use of juries in this type of case. 2 It was specifically approved by the Supreme Court in United States v. Johnson, 319 U. S. 503, 63 S. Ct. 1233, 87 L. Ed. 1546 [43-1 USTC ¶9470]. Among safeguards which must be applied are procedural methods which bring before the jury the basic evidence which is summarized; also that broad scope of cross-examination be permitted in order that the accuracy of the account's summary may be tested. It must be made clear to the jury that such testimony and charts are but summaries of other evidence and that the jury should examine the basis upon which summarization rests, for it is not primary evidence at all but, instead, a gathering together and accounting classification of primary evidence.

In United States v. Johnson, 319 U. S. 503 [43-1 USTC ¶9470], the Supreme Court, in upholding this type of evidence, said:

"* * * No issue was withdrawn from the jury. The correctness or credibility of no materials underlying the expert's answers was even remotely foreclosed by the expert's testimony or withdrawn from proper independent determination by the jury. The judge's charge was so clear and correct that no objection was made, though, of course, there were exceptions to the refusal to grant the usual requests for charges that were either redundant or unduly particularized items of testimony. * * *"

That language applies equally well to this case. The argument to this Court that the summaries were incorrect or were not supported by evidence, asks this Court to reassess what was, and always is, the jury's duty to examine and reject or accept. The record in this case shows a careful compilation in court of the foundation material before reception of a summarization by the accountant.

[Evidence of Destroyed Bank Deposit Slips]

Among the summaries was one by which the Government sought to trace some of the amounts of money from defendant's original records into deposits of equivalent amounts in his bank account. The investigating agent testified in part from an examination of bank deposit slips but all of the deposit slips relating to Count One were not in the mass of documentary evidence because a destruction of old records procedure had been employed by the bank in the usual course of disposition of old records. 3 The checking of bank deposits equal in amount to funds made available by the false hotel income recording system was also an enumeration of the details of false entries and alteration of the hotel records which were in evidence. Appellant overlooks this dual function of the expert witness testimony and claims error in that the witness testified to the content of bank records which were not in evidence. In actuality, this was a small portion of a considerably larger analysis. It related to no more than a small amount of a total which would have been impressive without this disputed item. However, the use in the computation of bank deposit slips which had been destroyed before trial, was not improper. It has long been recognized that when a record has been destroyed, secondary evidence of its contents may be admitted. 4 That is what occurred in this case.

Examination of the entire record convinces this Court that all required safeguards were applied in the reception of the expert summary testimony and that the basic evidence had been elaborately computed and accurately summarized.

The judgment should be, and is hereby, affirmed.

1 Count One, 1945; Count Two, 1946.

2 Barcott v. United States , 169 Fed. (2d) 929 [48-2 USTC ¶9377]; Gendelman v. United States, 191 Fed. (2d) 993 [51-2 USTC ¶9474]; Remmer v. United States, 205 Fed. (2d) 277 [53-1 USTC ¶9421].

3 This was true as to Count One only. The deposit slips as to Count Two were complete.

4 Goldsmith v. United States , 42 F. 2d 133; Callanan v. United States , 223 F. 2d 171; United States v. Phelan, 252 Fed. 891; United States v. White, 223 F. 2d 674; Wigmore, 3rd Edition, Sec. 1192.

 

 

[56-2 USTC ¶9936]Milton H. Olender, Appellant v. United States of America , Appellee

(CA-9), U. S. Court of Appeals, 9th Circuit, No. 14,916, 237 F2d 859, 9/24/56, Aff'g unreported DC

[1939 Code Sec. 145(b)--substantially unchanged in 1954 Code Sec. 7202]

Crimes: Willful evasion of income taxes: Net worth method: Admission of testimony.--The Government used the net worth method to reconstruct income for the taxable years 1945 and 1946. Conviction for tax evasion was affirmed on the grounds that the Government's evidence established with "reasonable certainty" the taxpayer's net worth as of December 31, 19 44 and that whatever evidence there was on the point was for the determination of the jury. Since the Government's figure was not completely corroborated, the jury was properly instructed to consider only the taxpayer's statements under oath as to the amount of cash in his safe deposit box. Furthermore, the admission of the testimony of a witness was not error where his testimony that clothing was sold and shipped to the taxpayer was based on shipping records made simultaneously with the sale and shipment in the regular course of business.

Leo R. Friedman, San Francisco , Calif. , for appellant. Lloyd H. Burke, United States Attorney, John Lockley, Assistant United States Attorney, San Francisco, Calif., for appellee.

Before: HEALY, CHAMBERS and BARNES, Circuit Judges.

BARNES, Circuit Judge:

This is a criminal prosecution for income tax evasion. Appellant was convicted on four counts charging him with wilfully attempting to defeat and evade federal income taxes by filing false and fraudulent returns. Counts 1 and 3 had reference to his own 1945 and 1946 income tax returns; counts 2 and 4 to his wife's 1945 and 1946 income tax returns, which he prepared.

[Net Worth Method]

The government relied on the "net worth method" of establishing guilt. This required the government to show "with reasonable certainty" the opening net worth of appellant as of December 31, 19 44, his net worth as of December 31, 19 45, and his closing net worth as of December 31, 19 46, Holland v. United States, 348 U. S. 121 [54-2 USTC ¶9714], and that appellant and his wife realized taxable income which they failed to report. According to the government's computations, appellant and his wife should have reported net taxable income of $87,999.24 in 1945, and $43,212.00 in 1946. Appellant had returned $41,067.61 in 1945, and $23,514.62 in 1946. The figures included the income of both the husband and the wife, who reported their income on a community propety basis.

The defense attempted to show that the net worth of appellant and his wife, as of December 31, 19 44, was higher than that computed by the government, that the increase in their net worth was less, and that the greater part of this increase did not represent taxable income because it belonged to someone else, or was obtained through nontaxable gifts.

Most of the facts on which the government based its calculations were contained in a stipulation between the parties and an amendment thereto. There were 1,000 pages of record, and many exhibits.

Appellant urges the conviction must be reversed because of insufficiency of the evidence as to net worth, and because the testimony of witness John Sanchirico was improperly admitted.

Insufficiency of Evidence

Appellant specified the evidence was insufficient to establish the offenses charged in that his net worth at the three critical dates was not established to a reasonable certainty. This was because:

(a) Appellant had $70,000 plus, in cash, in a safe deposit box on December 31, 19 44 , and not $50,000, as the government contended.

(b) The $20,000 in par value of government bonds in appellant's possession at the end of both 1945 and 1946 were the property of and had been purchased by appellant's mother, Mollie Olender, and were not his property, as the government contended.

(c) Appellant had $20,550 in merchandise (sailor suits) on hand at the end of 1944, which were not included by the government as assets.

(d) Appellant should not have been credited with $7,724 on hand at the end of 1945, which the government computation included.

In the previous appeal the decision of this court, Olender v. United States, 210 Fed. (2d) 295 [54-1 USTC ¶9254], emphasized that there was a decided conflict in the evidence, and "since the defense case rested primarily upon the testimony of appellant, it was his credibility which was principally at issue." The same may be said of the second trial.

A reading of the transcript quickly indicates that the methods used by appellant to keep track of his financial affairs, did little to inspire confidence in either his integrity or his truthfulness. Appellant was no untutored son of the soil. He was a university graduate with a bachelor of science degree, "with honors", in economics. He had studied principles of accounting, statistics, money and banking, cost accounting, corporation finance, business organization and admin istration, factors in industrial efficiency, and other comparable subjects. He was sufficiently well versed in income tax procedure to make out income tax returns for himself, his wife, his mother, and his friends. His memory of business transactions involving many thousands of dollars was, to put it charitably, not good.

Mr. Ringo, a certified public accountant hired by appellant, attempted to prepare a net worth statement for his client but ran into numerous difficulties. When one set of figures furnished by appellant had been worked out, some new expenditure would come to light, and throw the proposed statement "out of balance." As an example, Ringo, after coming to preliminary conclusions, discovered records showing appellant's purchase, theretofore undisclosed to the accountant, of a single premium, fully paid, life insurance policy costing $15,833.46, in 1945. It was then that appellant, for the first time, told his accountant about $10,500 in cash moneys his mother allegedly had given him. Appellant suggested to his accountant that no mention be made of a $5,000 investment in Asturia Export Corporation, made in 1944, because it was then worthless; that Ringo should "leave this out." His accountant explained this could not be done, because its then worthlessness bore no relationship to the net worth issue upon which the government's case was based.

On many other factual matters the appellant could not be considered a convincing witness. He could give no estimate of what his living expenses were in 1945; had no record of such expenses; no idea of what food cost for three people in 1945; no idea nor estimate as to such matters in 1946. He also testified that in 1945 he received $2,500 or $3,000 from his wife's mother, Mrs. Foote, although she had been on old age assistance for seven years.

Appellant claimed he lived frugally in 1945. The stipulated personal expenses deductible, i.e., the appellant's cost of living for himself, his wife and daughter for that year, was $2,739.38. This was some $230 less than the deduction he claimed that year for donations to charity.

Before trial appellant supplied certain information to his accountant, Ringo, explaining the extent of cash moneys kept by him in his safe deposit box. These were appellant's estimates only. These estimates showed (United States Exhibit 19) $50,000 on hand on December 31, 19 44; $7,000 on hand on December 31, 19 45; and zero on hand on December 31, 19 46. But these estimates were not haphazardly arrived at:

"Q. Did you go over that net worth statement with Mr. Olender after it was prepared?

"A. (By Mr. Ringo) Very much so, yes."

At the trial appellant claimed he had over $70,000 in cash on hand in his safe deposit box on December 31, 19 44. There is corroboration that in May of 1944 appellant did have $70,000 or $71,000 cash in his box. This corroborated evidence raised the preliminary question of the worth of United States Exhibit 10--the final product of appellant's accountant's efforts to establish valid net worth statements--and the subsequent question as to whether or not the government's evidence had been corroborated.

Appellant remembered with certainty that he had in the box in cash in the beginning of 1945, "over $70,000." At the end of 1945 he could approximate no figure. It was more than $5.00. But he had no positive recollection. At the beginning of 1946, defendant's answer was the same, and at the end of 1946, he couldn't approximate it, "it would only be a guess." "There was some money in there, I don't remember how much."

In the original net worth figures prepared by appellant's auditor from information supplied by the appellant (though only as estimates), appellant was hard put to explain how he accumulated large sums of cash he thereafter expended. So that appellant might rebut any inference that his expenditures in 1945 and 1946 were from unreported taxable income, appellant submitted to the government, through his auditor, an analysis of his net worth January 1, 19 42, to December 31, 19 47. (Olender's Exhibit 7, attached to his Exhibit 1, which was United States Exhibit 10 in this trial.) Appellant's Schedule A, attached to such Exhibit 7 (part of United States Exhibit 10), read as follows:

"MILTON H. OLENDER,

Gifts from Mrs. J. Olender--Mother (per Books of Mrs. J. Olender--Information from M. H. Olender)

"WITHDRAWALS FROM SAVINGS ACCOUNT IN FRESNO :

Date                                 Amount



February 3, 19
42
 .....           $ 1,000.00


March 31, 19
43 .......             1,000.00


January 6, 19
44 ......             2,000.00


July 5, 19
44 .........             2,500.00


December 15, 19
44 ....             1,000.00


January 2, 19
45 ......             3,000.00

                               $10,500.00"

 

At the first trial, appellant testified that these moneys were given him by his mother in cash. At the second trial, the government produced important testimony bearing on these alleged gifts. United States Exhibits 40 through 48, inclusive, were photostats of the records of the Bank of America, Fresno Branch. They showed Mollie Olender's savings accounts No. 3941 and No. 2146 (deposits and withdrawals) and Mollie Olender's commercial accounts. These records show that Mrs. Mollie Olender:

(1) Withdrew $1,000 from savings account No. 3941 on February 3, 19 42, and that she deposited the same in her savings account No. 2146 on the same day. She withdrew $200 of it from No. 2146 that day.

(2) Withdrew $1,000 from savings account No. 3941 on March 31, 19 43, and deposited it to her commercial account.

(3) Withdrew $2,000 on January 6, 19 44, from account No. 3941, and deposited it to savings account No. 126 of Terry Olender Gamborg. This had not been withdrawn up to June 30, 19 52.

(4) Withdrew $1,000 on December 15, 19 44, from No. 3941, and deposited it on the same day in her commercial account. No withdrawals of any similar sums had been made from the commercial account up to June, 1945.

(5) Withdrew $3,000 on January 2, 19 45, from No. 3941 and deposited it to Terence [sic] Olender Gamborg.

(6) Withdrew $2,500 on July 5, 19 44, from the First National Bank in Fresno . There was no evidence of redeposit of this money, and appellant testified it was given to him. See "some corroboration" in defendant's Exhibit Q, although appellant's oral testimony was unprecise.

Thus, as to five of the six gifts testified to by appellant under oath, this documentary evidence proved the falsity of his testimony.

A lack of certainty or an utter lack of recollection on the part of the taxpayer cannot tip the scales against the government, for "skillful concealment cannot be an invincible barrier to proof." United States v. Johnson, 319 U. S. 503, 517 [43-1 USTC ¶9470].

An inadequate system of recording income hardly places the taxpayer in a different class than one who keeps no book at all. "Both are receiving unrecorded amounts of income." United States v. Calderon, 348 U. S. 160 [54-2 USTC ¶9712]. In the Calderon case, where defendant relied on a "hoard" in his safe deposit box, a lesser increase in assets ($48,000 in four years) over and beyond income, plus receipt of unrecorded amounts of taxable income, was sufficient variance, compared to reported income, to support an inference of tax evasion. We think the same inference clearly exists here. That same case (Calderon) disposes of appellant's claim that each year's figures must be established to avoid fatal uncertainty. In Calderon, taxpayer's hoard was alleged to have been $16,000 or $17,000; the government's net worth computation started with $500.

"But one problem remains, the $17,000 hoard of cash could have absorbed the computed income deficiency for one or more of the prosecution years and respondent was convicted on all four counts. It might be argued that there must be evidence of a deficiency for each of the years here in issue. There is no merit in this contention. The evidence need not comply with the niceties of the annual accounting concept." Calderon v. United States, 348 U. S. 160, 168 [54-2 USTC ¶9712].

The $20,000.00 in Bonds

Appellant relies heavily on his contention that $20,000 of bearer bonds in his safe deposit box were purchased by him for his mother, with her money. Appellant had two safe deposit boxes, one in his name; one in the joint names of himself and his mother. The bonds were kept in the former box. In 1947, appellant returned as his own property the income from these bonds. In other years, his mother returned the interest, on returns prepared by appellant. Appellant testified he kept these bonds in an envelope at the time of the first trial, with his mother's name on the envelope. Appellant did not produce the envelope at either trial, although he had it at the time of the first trial, nor did he know what happened to it after the first trial, nor whether it had been destroyed, nor when he had last seen it.

On August 23, 19 46, appellant wrote in answer to a letter of inquiry from the government that the $20,000 in bonds were "purchased for the account of my mother, * * * on written instructions from her, which I have in my possession." Appellant apparently referred to two letters written by his mother. The first letter, dated November 23, 19 45, states:

"If you do buy the bonds, just put them in our box for safekeeping."

and the second letter, dated December 14, 19 55, reads:

"I have been forgetting to mention those bonds you bought for me last week." 1

No evidence was advanced to show any withdrawals from Mrs. Mollie Olender's bank accounts, with which the $20,000 in cash could have been advanced to appellant, which was the procedure appellant followed when the government questioned the $10,500 he claimed in gifts from his mother.

Mollie Olender died June 2, 19 51 . Nothing had been done by appellant prior to her death to obtain her version of this transaction, beyond his retaining the letters above described.

The federal estate tax return (United States Exhibit 52) filed December 15, 19 52, (by appellant's sister, not by appellant) shows that decedent, Mollie Olender, had purchased over $25,000 par value in government bonds and had them issued in joint tenancy with her daughter, and over $17,000 par value in government bonds, and had them issued in joint tenancy with her son, the appellant. The estate tax return further stated:

"The decedent may have had an interest in $20,000 United States Treasury Bonds * * * as for the past few years interest of $450 on bonds of this type was included as income in decedent's income tax returns Decedent's son was her accountant and prepared her income tax returns."

On March 30, 19 53, after the first trial, a supplemental inventory was filed by this appellant, as co-executor, in the estate of Mollie Olender, deceased, listing the $20,000 in bonds as part of the estate. On July 13, 19 53, the $20,000 were sold on order of "Estate of Mollie Olender, by Milton Olender," and the proceeds credited to the estate. Again, on the issue of his mother's ownership of $20,000 in bonds, there was ample conflicting evidence from which the trier of fact could come to a conclusion either way as to whether the appellant had used his mother's money or his own, to purchase these bonds.

 

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