Bank Records and Net Worth Increases
2 Page4
The
Sailor Suit Inventory
Although
appellant claims he should be credited with having purchased $20,550
worth of sailor suits from one Goodman in 1945, he could, in 1947,
remember but one transaction with Goodman, involving $1,380 and had no
recollection of the $20,550 transaction involving the issuance and
transmission of nine cashier's checks. Even after being shown the
checks, and the applications therefor, bearing his signature, appellant
"could not recall the circumstances" under which he had issued
such checks and acquired this merchandise. This merchandise, though kept
in the store and later sold, was never listed as a part of appellant's
inventories, never entered on appellant's books as having been purchased
or sold, and never insured, because it was "worthless" or
"was to be returned" or because "no profit was made on
it." When appellant's own auditor, Mr. Ringo, attempted to
ascertain the facts about this merchandise, Ringo was told to take the
matter up with appellant's lawyer. It was not until after the first
trial of this matter that Mr. Ringo was told by appellant of
"merchandise on hand, not included in inventories."
The
$7,724 Item
Should $7,724
have been included as an asset of appellant at the end of 1945?
According to
one interpretation of the evidence, the $7,724 represented a part of the
$20,550 figure commented upon above. This was the transaction concerning
which, at first, the appellant had no memory. But he testified that
after he had received the suits from Goodman, through Levy, Levy in 1945
sold 200 suits for $5,000 which went into the Army and Navy books as a
capital investment. But, in 1945 when 280 more suits were sold for
$7,000, Levy kept the money. This, Levy gave to Moe Saraga, a dealer in
New York
. Appellant then gave Saraga $24,500 from his "store account".
Saraga could not deliver all the suits wanted, and so returned the
$7,000 plus $725 for 49 suits undelivered from the $24,800 advance,
which amount, less $1 for a bank charge, represents the $7,724 claimed.
Obviously, if
the trier of fact were to credit the appellant with the $20,500 in
sailor suits, it should not again credit the $7,000 representing cash
received through sale of some of those suits. And, whether or not the
$7,724 were included as an asset of appellant at the end of 1945, it
would have increased or reduced the amount of undeclared income, but it
would not have done so appreciably, nor to a degree decisive of the
issues herein.
The foregoing
recital of certain of the evidence is not exhaustive. It is merely to
highlight the reasons why the conclusion of the appellate court, after
the first trial, is equally pertinent after the second trial--that the
credibility of the appellant was the principal issue in the case. We
cannot say that the government did not establish "with reasonable
certainty" appellant's net worth as of
December 31, 19
44. When the government introduced proof of likely taxable sources from
which a jury can reasonably find that the net worth increases sprang, it
need not negative all possible non-taxable sources.
In criminal
prosecutions for federal income tax evasion, evidence corroborative of
defendant's admissions need not prove the offense beyond a reasonable
doubt, or by a preponderance of the evidence, but there must exist
substantial evidence, independent of the alleged admission, that the
offense has been committed, and the evidence as a whole must prove
defendant's guilt beyond a reasonable doubt. Smith v. United States,
348
U. S.
147, 156 [54-2 USTC ¶9715]; United States v. Calderon, 348
U. S.
160 [54-2 USTC ¶9712].
The care with
which the trial judge instructed the jury on this subject is of
importance. Among other instructions the jury received was this:
"In
order to safeguard the defendant, the law requires that these statements
(of defendant) relating to vital links in the government case be
corroborated. In this connection, the $50,000 cash item and $7,000 cash
item, used by the government in Exhibit 50 (i.e., amount of cash in safe
deposit box) cannot be considered by you in determining the opening or
closing net worth, because the government did not corroborate that. You
can use, however, whatever amounts the defendant said he had while he
was on the witness stand here under oath."
We conclude
the jury was properly and carefully instructed, and we will not
interfere with their decision on issues of fact, in view of the
conflicting testimony in this case.
This brings us
to the alleged error in admitting the testimony of John Sanchirico.
It should be
said that much of the criticism of the introduction of this testimony
goes to its weight, and not to its admissiblity. The witness, as
executive vice president of Seagoing Uniform Corporation, was capable of
identifying the records of that business. He had worked with the company
over 25 years, had been active in management of it over 15 years. His
firm had an account with the Army & Navy Store at 1926 Broadway,
Oakland
, the appellant's place of business. Sanchirico did not know appellant,
but did know Goodman, the man to whom defendant sent several thousand of
dollars with which to buy sailor's uniforms. Goodman paid the invoices.
Sanchirico's plan shipped uniforms in accordance with Mr. Goodman's
instructions, to the ultimate consignee. A shipping clerk would
hand-write a shipping memorandum which would indicate how many garments
were involved, and where they were shipped to, name of customer, and the
street number or city. Exhibits 66 to 71 inclusive, all indicated,
according to the witness, shipments of sailor suits to Olender. These
documents were kept by the company and were made simultaneously with the
transaction, in the regular course of business.
The only
objection made to Exhibits 66 to 71 was that they were "not proper
rebuttal." This objection was not well taken; nor, had an objection
been made upon grounds of hearsay, would it have been valid. Part
of each document did not purport to involve the appellant, but part
of each written document did. The objection on grounds of hearsay, not
having been made before the trial court, cannot be urged here as
reversible error. Sekinoff v.
United States
, 283 Fed. 38; Bank of
Italy
v. Romeo & Co., 287 Fed. 5.
We recently
ruled on this same evidentiary point in civil litigation, Batelli v.
Kagan et al., 9 Cir., No. 14,803, decided
August 6, 19
56
. In this criminal prosecution, Rule 26 of the Rules of Criminal
Procedure (Title 18 U. S. C. A.) applies, rather than Rule 43 of the
Rules of Civil Procedure (Title 28 U. S. C. A.). The "Act of
Congress" necessary to make the principle of the "Uniform
Business Records in Evidence Act" applicable is Title 28 U. S. C.
A. §1732. The very purpose of this section is to relax the common law
evidentiary rule, and permit introduction into evidence those
contemporaneous business records which once were inadmissible. Hartzog
v.
United States
, 1954, 217 Fed. (2d) 706 [55-1 USTC ¶9128]. And even if such
business records, such as bills of lading, are hearsay as to the
appellant, they are admissible as records made in the regular course of
business. Intermondale v.
North River
, 1951, 100 Fed. Supp. 128. Evidence disclosing a manufacturer's
practice relating to invoices establishing the contents of clothing
cartons, was held admissible in United States v. Garvey, 1945,
150 Fed. (2d) 767.
The judgment
of conviction on all four counts should be, and is, affirmed.
1
The pertinent portions of this letter, in appellant's opinion expressed
on the stand, continue as follows:
"When you
get them, keep them up there for me; as I wrote you previously before, I
still prefer that you put your money into government bonds instead of
stocks. I realize the Bank of America dividends are higher and what you
say about them is true. When you make your next payment to me, I may let
you convince me, but I still think the bonds are the safest
investment."
This reference
to "your money" is more consistent with the appellant buying
bonds with his own money than it is that the money belonged to his
mother.
[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.
The
Sailor Suit Inventory
Although
appellant claims he should be credited with having purchased $20,550
worth of sailor suits from one Goodman in 1945, he could, in 1947,
remember but one transaction with Goodman, involving $1,380 and had no
recollection of the $20,550 transaction involving the issuance and
transmission of nine cashier's checks. Even after being shown the
checks, and the applications therefor, bearing his signature, appellant
"could not recall the circumstances" under which he had issued
such checks and acquired this merchandise. This merchandise, though kept
in the store and later sold, was never listed as a part of appellant's
inventories, never entered on appellant's books as having been purchased
or sold, and never insured, because it was "worthless" or
"was to be returned" or because "no profit was made on
it." When appellant's own auditor, Mr. Ringo, attempted to
ascertain the facts about this merchandise, Ringo was told to take the
matter up with appellant's lawyer. It was not until after the first
trial of this matter that Mr. Ringo was told by appellant of
"merchandise on hand, not included in inventories."
The
$7,724 Item
Should $7,724
have been included as an asset of appellant at the end of 1945?
According to
one interpretation of the evidence, the $7,724 represented a part of the
$20,550 figure commented upon above. This was the transaction concerning
which, at first, the appellant had no memory. But he testified that
after he had received the suits from Goodman, through Levy, Levy in 1945
sold 200 suits for $5,000 which went into the Army and Navy books as a
capital investment. But, in 1945 when 280 more suits were sold for
$7,000, Levy kept the money. This, Levy gave to Moe Saraga, a dealer in
New York
. Appellant then gave Saraga $24,500 from his "store account".
Saraga could not deliver all the suits wanted, and so returned the
$7,000 plus $725 for 49 suits undelivered from the $24,800 advance,
which amount, less $1 for a bank charge, represents the $7,724 claimed.
Obviously, if
the trier of fact were to credit the appellant with the $20,500 in
sailor suits, it should not again credit the $7,000 representing cash
received through sale of some of those suits. And, whether or not the
$7,724 were included as an asset of appellant at the end of 1945, it
would have increased or reduced the amount of undeclared income, but it
would not have done so appreciably, nor to a degree decisive of the
issues herein.
The foregoing
recital of certain of the evidence is not exhaustive. It is merely to
highlight the reasons why the conclusion of the appellate court, after
the first trial, is equally pertinent after the second trial--that the
credibility of the appellant was the principal issue in the case. We
cannot say that the government did not establish "with reasonable
certainty" appellant's net worth as of
December 31, 19
44. When the government introduced proof of likely taxable sources from
which a jury can reasonably find that the net worth increases sprang, it
need not negative all possible non-taxable sources.
In criminal
prosecutions for federal income tax evasion, evidence corroborative of
defendant's admissions need not prove the offense beyond a reasonable
doubt, or by a preponderance of the evidence, but there must exist
substantial evidence, independent of the alleged admission, that the
offense has been committed, and the evidence as a whole must prove
defendant's guilt beyond a reasonable doubt. Smith v. United States,
348
U. S.
147, 156 [54-2 USTC ¶9715]; United States v. Calderon, 348
U. S.
160 [54-2 USTC ¶9712].
The care with
which the trial judge instructed the jury on this subject is of
importance. Among other instructions the jury received was this:
"In
order to safeguard the defendant, the law requires that these statements
(of defendant) relating to vital links in the government case be
corroborated. In this connection, the $50,000 cash item and $7,000 cash
item, used by the government in Exhibit 50 (i.e., amount of cash in safe
deposit box) cannot be considered by you in determining the opening or
closing net worth, because the government did not corroborate that. You
can use, however, whatever amounts the defendant said he had while he
was on the witness stand here under oath."
We conclude
the jury was properly and carefully instructed, and we will not
interfere with their decision on issues of fact, in view of the
conflicting testimony in this case.
This brings us
to the alleged error in admitting the testimony of John Sanchirico.
It should be
said that much of the criticism of the introduction of this testimony
goes to its weight, and not to its admissiblity. The witness, as
executive vice president of Seagoing Uniform Corporation, was capable of
identifying the records of that business. He had worked with the company
over 25 years, had been active in management of it over 15 years. His
firm had an account with the Army & Navy Store at 1926 Broadway,
Oakland
, the appellant's place of business. Sanchirico did not know appellant,
but did know Goodman, the man to whom defendant sent several thousand of
dollars with which to buy sailor's uniforms. Goodman paid the invoices.
Sanchirico's plan shipped uniforms in accordance with Mr. Goodman's
instructions, to the ultimate consignee. A shipping clerk would
hand-write a shipping memorandum which would indicate how many garments
were involved, and where they were shipped to, name of customer, and the
street number or city. Exhibits 66 to 71 inclusive, all indicated,
according to the witness, shipments of sailor suits to Olender. These
documents were kept by the company and were made simultaneously with the
transaction, in the regular course of business.
The only
objection made to Exhibits 66 to 71 was that they were "not proper
rebuttal." This objection was not well taken; nor, had an objection
been made upon grounds of hearsay, would it have been valid. Part
of each document did not purport to involve the appellant, but part
of each written document did. The objection on grounds of hearsay, not
having been made before the trial court, cannot be urged here as
reversible error. Sekinoff v.
United States
, 283 Fed. 38; Bank of
Italy
v. Romeo & Co., 287 Fed. 5.
We recently
ruled on this same evidentiary point in civil litigation, Batelli v.
Kagan et al., 9 Cir., No. 14,803, decided
August 6, 19
56
. In this criminal prosecution, Rule 26 of the Rules of Criminal
Procedure (Title 18 U. S. C. A.) applies, rather than Rule 43 of the
Rules of Civil Procedure (Title 28 U. S. C. A.). The "Act of
Congress" necessary to make the principle of the "Uniform
Business Records in Evidence Act" applicable is Title 28 U. S. C.
A. §1732. The very purpose of this section is to relax the common law
evidentiary rule, and permit introduction into evidence those
contemporaneous business records which once were inadmissible. Hartzog
v.
United States
, 1954, 217 Fed. (2d) 706 [55-1 USTC ¶9128]. And even if such
business records, such as bills of lading, are hearsay as to the
appellant, they are admissible as records made in the regular course of
business. Intermondale v.
North River
, 1951, 100 Fed. Supp. 128. Evidence disclosing a manufacturer's
practice relating to invoices establishing the contents of clothing
cartons, was held admissible in United States v. Garvey, 1945,
150 Fed. (2d) 767.
The judgment
of conviction on all four counts should be, and is, affirmed.
1
The pertinent portions of this letter, in appellant's opinion expressed
on the stand, continue as follows:
"When you
get them, keep them up there for me; as I wrote you previously before, I
still prefer that you put your money into government bonds instead of
stocks. I realize the Bank of America dividends are higher and what you
say about them is true. When you make your next payment to me, I may let
you convince me, but I still think the bonds are the safest
investment."
This reference
to "your money" is more consistent with the appellant buying
bonds with his own money than it is that the money belonged to his
mother.
[57-1 USTC ¶9675]
United States of America
v. Joseph Frank, Appellant
(CA-3),
U. S. Court of Appeals, 3rd Circuit, No. 12,146, 245 F2d 284, 5/15/57,
Aff'g Dist. Ct., 57-1 USTC ¶9254
Income tax evasion: Misrepresentations of examining officer:
Reconstructed income.--Although the court deplores the tone of
instructions given to revenue agents as to the method of approaching
taxpayers in a so-called "racket group", no fraud was
practiced by the government agents when they described their
investigation as routine, whereas they were contemplaing criminal
action. The government proved its case by the bank deposit expenditure
method corroborated by the net worth method by showing possible sources
of unreported income, and by showing that the defendant could not have
had the amount of opening cash he claimed to have had. The court finds
no reason for reversing the jury finding nor the sentence imposed by the
trial court.
Alexander
Cooper, 1318 Frick Bldg., Pittsburgh 19, Pa., and
Rob
ert M. Taylor, 1521 Walnut St., Philadelphia 2, Pa., for appellant.
Herbert I. Teitelbaum and Leonard J. Paletta, Assistant United States
Attorneys, Federal Bldg., Pittsburgh 19, Pa., for appellee.
Before
GOODRICH, STALEY and HASTIE, Circuit Judges.
Opinion
of the Court
GOODRICH,
Circuit Judge:
This is an
appeal from a judgment of the United States District Court for the
Western District of Pennsylvania convicting Joseph Frank of violation of
Section 145(b) of the Internal Revenue Code of 1939, 26 U. S. C. A. §145(b).
[Alleged
Violation of Rights]
The first
point raised by the appellant is his claim that his constitutional
rights under Amendments Four and Five were violated. On behalf of Frank
it is urged that papers, books and records belonging to him were turned
over to revenue agents by reason of their fraudulent representation to
him concerning the nature of the examination they were making or about
to make. Taxpayer says that he was led to believe that a routine audit
was to be made and if he had known there was a special agent also
assigned to his case he would not have given up his papers without
advice of counsel. Cf. Goulded v.
United States
, 255
U. S.
298 (1921).
[Instructions
to Revenue Agents]
He also brings
to our attention certain instructions which were given to the revenue
agents concerning investigation of a so-called "racket group"
case which this was. These instructions were as follows:
"When
the agent has completed the preliminary background on his taxpayer, he
should then contact the taxpayer, informing him that a routine
examination of his tax return is being made for the year, and that an
appointment would be desirable. The taxpayer may then inform the agent
that he has an accountant who has prepared the return. Your authority is
then complete to contact the accountant. It is advisable to review the
accountant's work papers used in the preparation of the tax return.
However, this should not be that basis of closing the investigation as
the accountant has used the information supplied by the taxpayer and it
