Bank Records and Net Worth Increases
3 Page2
The
evidence as to the increase in the net worth during the year 1943
consisted largely in proofs of currency expenditures during that year in
amounts greatly in excess of the $90,131 income reported by appellant
for the year 1943, and of all his declared available resources. The
largest single expenditures was of $100,000, paid in two installments
for the purchase of a farm, $45,000 in currency of small denominations
up to $50 bills, the latter part of March, 1943, and the balance,
$34,000 of which was in currency, shortly thereafter. This farm was
carried on appellant's records at an original cost of $55,000 which
appellant told Loyd, upon inquiry by Loyd as to the discrepancy in the
figures, was all he paid. In addition, the evidence showed large
expenditures on the farm including $73,546 for improvements, $128,925
for cattle and hogs, $33,559 for feed, and $10,821 for miscellaneous
items.
[Black
Market Receipts]
Appellant
also told Loyd that the $71,000 miscellaneous income reported in his
1943 return was from "commissions" which he also said
constituted the source of the money paid for the farm and the large
expenditures thereon. These commissions he explained to Loyd as
"tips" paid to him for telling people where they could buy
meat. However, he said he could not remember the names of any such
persons, nor where he had sent them to procure the meat. When Loyd
pointed out to him that their investigations indicated that he had spent
two or three hundred thousand dollars more than he had available
according to his 1943 income tax return, and asked him to explain the
difference, where the money had come from, he replied that he could not
offer any explanation as to where it had come from.
In
addition to the large currency expenditures by appellant, amounting to
$283,455, the record also showed that appellant used two bank accounts
in the name of an agent, none of the transactions of which was entered
in his own books and records. The total of deposits in these two
accounts amounted to $91,971 for the year 1943, none of which was
reflected in appellant's books. In addition, appellant also had an
account in his own name in one bank, not shown in his books, and
deposits in this account aggregated $85,499. Loyd testified that he
questioned appellant about this latter account, and appellant denied
having any such account. The Government construed this as evidence of
appellant's concealment of his resources and transactions. The evidence
showed a total of $151,909 expenditures of which there was no record
whatever in appellant's books and records. As a further part of this
pattern of concealment, the evidence showed that appellant had on record
two mortgages aggregating $37,500 on properties owned by him which were
in fact dummy mortgages, representing no indebtedness on the part of
appellant. The evidence also showed that on several occasions he had his
agent purchase cashier's checks for him from several different banks,
aggregating $35,000, paying cash furnished by himself therefor.
To
establish the fact of a possible source of the income indicated by
appellant's huge expenditures, the Government introduced the evidence of
seven meat peddlers all of whom testified that during the year 1943,
they paid overceiling prices for meat purchased from the Empire Packing
Company, paying the excess in currency either to Chapman direct, or to
one of two salesmen both of whom testified that they received payments
for the excess which they turned over to appellant who directed them not
to keep any record of such payments. In each case, payment was made to
Empire for the regulation price. Only one of the peddler witnesses
testified as to exact amounts, and he stated that his overpayments
started in April, 1943, and continued through December of that year,
amounting to six or seven thousand dollars in all, paid to the two
salesmen who testified that they collected overceiling prices for
appellant. This evidence was not introduced to prove the amount of
appellant's receipts from illegal sources,--in fact the Government made
no attempt to prove the total of such receipts. It was only to establish
the possible source of the funds used for the expenditures which so
substantially exceeded appellant's declared available resources.
[Large
Personal Expenditures]
Appellant
contended that his admittedly large currency expenditures were made from
accumulations of currency over a period of years, kept by him in safety
deposit boxes. To establish this defense he introduced a witness,
Hirsch, who testified that early in 1943 he accompanied appellant to a
bank where the latter had a safety deposit box, and while there had
occasion to observe the contents of his deposit box. He said that he saw
a large amount of cash wrapped in bundles. His testimony regarding this
was as follows:
"I
said, 'Sam,'--I was rather shocked and I had mentioned this to him
before; I said, 'You know the bank across the street burned down, and it
seems you have at least $200,000, maybe $210,000 in cash, in here, get
rid of it, do not keep it in one place, am I not right in the amount?'
"He
said, 'I believe it is about $225,000. I recently counted it.'
*
* *
"I
said, 'Sam, you should do something; I have talked to you about this
before and after today I am just going to keep my mouth shut.'
"So
he said, 'I will take out $50,000,' and he proceeded to count it out and
put it in his pocket."
Appellant
also introduced the evidence of an accountant, Kulbarsh, who testified
that from his examination of appellant's records, the testimony of
witnesses, and the tax return for the year 1943, he determined that
appellant had cash available for the year 1943 in the amount of
$460,020. He also testified that from his examination of data for the
years 1913 to 1942, obtained from appellant's income tax returns and
information furnished by the Bureau of Internal Revenue, he ascertained
that, after payment of federal income taxes, appellant retained cash in
the amount of $368,186, through the years from 1913 to 1942. This total
apparently represented the difference between appellant's income and the
tax paid thereon for those years, as indicated by his tax returns or
data based thereon. However, on cross examination, after deducting
amounts expended for certain capital transactions, real estate
purchases, and estimated personal living expenses for the period from
1913 to 1942, Kulbarsh estimated the available cash to be only $12,156.
And eliminating the $225,000 item from the net worth estimate as of
January 1, 19
43, he computed the total net worth as $186,268, which was $230,518 less
than his estimate of appellant's net worth as of
December 31, 19
43. In reply to an inquiry of Government counsel, he stated that,
assuming that the excess of net worth on
December 31, 19
43, over that of
January 1, 19
43, was taxable income for 1943, there would be a tax due in excess of
the amount indicated on appellant's tax return for that year.
[Use
of Affidavits]
To
refute the evidence of the meat peddlers who testified that they had
paid overceiling prices for their meat either to appellant or his
agents, appellant introduced in evidence the affidavits of five of them
to the effect that they had paid only the amounts invoiced by Empire,
and had never paid Empire, appellant or any other employees any
additional sums of money, gratuities, or other consideration for the
meat purchased by them from Empire. The secretary of the Empire Company
testified that he was a notary public; that he knew each of the affiants
personally and had acknowledged the signature of each and that each had
signed in his presence. He stated that he had acknowledged about sixty
of the affidavits, and that he distinctly remembered in each instance
that he had told the affiant to read the instrument, sign it, and swear
to it. However, three of the peddlers who testified to the overceiling
prices stated that there had been no notary public present when they
signed; two of these said they had never read the affidavits before.
Appellant
contends that inasmuch as the Government did not have evidence of his
receipt of income from black market sales of meat in excess of the
$71,000 miscellaneous income reported by him, it was highly prejudicial
for it to introduce the evidence. The Government made no attempt to show
the exact amounts of unreported income on which it charged the evasion
of tax. Nor was it necessary that it should do so. United States v.
Johnson, 319
U. S.
503 [43-1 USTC ¶9470]. This case was based on the unexplained and
unreported increase in appellant's net worth during the year 1943 as
indicated by vast expenditures far in excess of his declared available
resources, in conjunction with proofs of a possible source of income as
indicated by the evidence of the group of dealers who testified to
paying him sums of money based on amounts of meat purchased by them from
the corporation of which he was the president and principal stockholder.
Government witness Loyd testified that appellant, who did not take the
stand, told him that the $71,000 "miscellaneous income"
reported on his 1943 return as well as the money with which he made his
large currency expenditures, was derived from "commissions,"
which he explained as "tips" paid to him for telling people
where they could buy meat. This was all substantial evidence to go to
the jury on the question of a source of the income on which he was
accused of evading the tax. Appellant was not entitled to have the
evidence suppressed on the ground that it was derived from an illegal
source. Cf. Spies v. United States, 317
U. S.
492 [43-1 USTC ¶9243].
[Establishment
of Net Worth]
Appellant
contends that, "In a 'net worth case,' the starting point must be
based upon a solid foundation and a Revenue Agent's statement of the
defendant's oral admission or confession when uncorroborated is not
sufficient to convict." We fully agree with this statement of the
law. However, we find no deviation from it in this case. The actual
starting point here was the net worth as established by appellant's
books and records. From these Loyd drew up a statement of appellant's
assets and liabilities as of January 1, and
December 31, 19
42. According to his testimony, he showed these to appellant on at least
two occasions and asked him if he had any other assets or liabilities,
and appellant replied that those were all he had, and, upon specific
inquiry as to whether he had any currency, cash on hand, besides an item
of $2,375 entered on his books, he replied that the records were
substantially correct as to that, and he had no other cash with the
exception of a little money in his pocket. We cannot agree with
appellant's designation of this as an "uncorroborated
admission." In the first place, we think the Government was
entitled to expect that books furnished for examination into a
taxpayer's fiscal affairs would be correct, and a verification of their
accuracy can scarcely be called an "uncorroborated admission."
We
find further corroboration of the Government's estimate of appellant's
net worth for the years in question in the evidence of appellant's own
accountant, Kulbarsh. He testified that he examined data derived from
appellant's tax records from 1913 to 1942. He found that during that
twenty-nine year period, appellant had income over and above federal
income taxes amounting to $368,186, or, as we compute it, an average of
twelve or thirteen thousand dollars a year. He stated that there might
have been additional income from nontaxable sources during that time,
increasing the amount of appellant's income, and that he had ascertained
that information from conversations with appellant. However, apart from
this purely speculative, unsubstantiated statement, there was no
evidence whatever that there actually was any such additional income.
Hence we think that the testimony of Kulbarsh may be considered as
additional evidence that appellant had no such resources as would
account for the accumulation of the vast amount of currency which Hirsch
testified he saw, and appellant told him amounted to $225,000. Under
these circumstances we find the cases relied upon by appellant in
support of his contention as to the "uncorroborated admission"
inapplicable. 1 We hold that
there was ample evidence apart from appellant's extrajudicial admissions
to furnish the starting point for establishing his net worth. See Warzower
v.
United States
, 312
U. S.
342.
[Embezzlement
Inapplicable]
Appellant
further contends that, assuming that there was evidence of black market
operations sufficient to sustain a charge of unreported income, such
income must be attributed to the corporation which sold the meat, and
not to himself. He relies upon the case, Commissioner v. Wilcox,
327
U. S.
404 [46-1 USTC ¶9188], involving the question whether embezzled money
constitutes taxable income to the embezzler. There, a bookkeeper who
retained moneys paid for services rendered by the corporation by whom he
was employed, was convicted of embezzlement, and the Court held that he
was not liable for income taxes on those embezzled funds. Here, there
was no question but that the corporation received full payment for all
meats sold by it, and the additional income to appellant resulted from
the collection of what was in effect a premium for such sales by the
corporation which he controlled as president and principal stockholder.
We need not decide whether the corporation was entitled to recover those
additional payments. However, even if it were shown that appellant
collected as agent for the corporation, it would not necessarily follow
that there would be no liability on his part for attempted evasion of
the taxes due on such collections. See
United States
v. Currier Lumber Co., 70 Fed. Supp. 219 [47-1 USTC ¶9172].
Hence we find the Wilcox case no authority for holding appellant
not liable for the tax evasion here charged.
We
think there is ample evidence of record to sustain the Government's
contention that appellant during the year 1943 made expenditures greatly
in excess of his declared available resources, and that he had available
for that year sources of income with which to make such expenditures,
even though appellant disputed that evidence and introduced his own
evidence to explain the facts otherwise. His mode of carrying on his
business operations, obviously calculated to conceal their magnitude and
prevent investigation thereof, amply justifies as inference of willful
attempt to evade payment of tax in violation of section 145(b) as
charged. Spies v.
United States
, 317
U. S.
492 [43-1 USTC ¶9243]; Gleckman v. United States, 80 Fed. (2d)
394 [35-2 USTC ¶9645]; Chadick v. United States, 77 Fed. (2d)
961 [35-2 USTC ¶9416].
JUDGMENT
AFFIRMED.
MINTON,
Circuit Judge, concurs in the result.
1
Naftzger v.
United States
, 200 Fed. 494; Gulotta v.
United States
, 113 Fed. (2d) 683; Pines v.
United States
, 123 Fed. (2d) 604; Tabor v.
United States
, 152 Fed. (2d) 254; Yost v.
United States
, 157 Fed. (2d) 147.
[55-1
USTC ¶9507]Jacob Strauch, Appellant v. United States of America,
Appellee Alex Strauch, Appellant v. United States of America, Appellee
Harry Benjamin Sher, Appellant v. United States of America, Appellee
(CA-6),
In the United States Court of Appeals for the Sixth Circuit, Nos. 11992,
11993, 11994, 223 F2d 377,
June 13, 19
55
On remand from the Supreme Court of the United States.
[1939 Code Sec. 145(b)--similar to 1954 Code Sec. 7201]
Tax evasion: Criminal prosecution: Net worth method of proof:
Reconsideration in light of Supreme Court cases: Reaffirmance.--The
conviction for criminal evasion of income taxes having been remanded for
reconsideration in the light of Supreme Court decisions on the issue of
reconstruction of income under the net worth increase method, the
District Court's judgment was again affirmed. The conviction in the
instant case was also supported independently by other evidence.
Bernard
J. Long, Washington, D. C. (John J. Hooker,
Nashville
,
Tenn.
, was with him on brief), for appellants. Marvin E. Frankel (H. Brian
Holland, Ellis N. Slack, John H. Mitchell, Marvin E. Frankel, Special
Assistant to the Attorney General, Richard B. Buhrman, Washington, D.
C., Fred Elledge, Jr., United States Attorney, Nashville, Tenn., on
brief) for appellee.
Before
SIMONS, Chief Judge; ALLEN and MCALLISTER, Circuit Judges.
ALLEN,
Circuit Judge:
The
judgments in these consolidated cases, Strauch v. United States,
213 Fed. (2d) 805 [54-1 USTC ¶9416] [54-2 USTC ¶9452], were vacated by
the Supreme Court of the United States in its order of
January 10, 19
55 [55-1 USTC ¶9139], and remanded to this court for re-examination in
light of the opinions of the United States Supreme Court in Holland
v. United States, 348 U. S. 121 [54-2 USTC ¶9714]; Friedberg v.
United States, 348 U. S. 142 [54-2 USTC ¶9713]; Smith v. United
States, 348 U. S. 147 [54-2 USTC ¶9715], and United States v.
Calderon, 348 U. S. 160 [54-2 USTC ¶9712].
Examination
has been made of the record and contentions of counsel in light of the
above decisions and in each case the court adheres to its original
conclusion. While testimony was introduced under the net worth method
against Jacob Strauch and under the bank deposit method as to all three
defendants, 1 in each case
ample independent evidence was presented sustaining the convictions.
[The
Facts]
Jacob
Strauch was charged with evasion of income taxes in an indictment which
contained three counts covering the taxable years 1944, 1945, and 1946.
The jury found him guilty under all three counts and the separate
sentences under each count were ordered to run concurrently. Alex
Strauch and Harry Sher were each charged in an indictment containing two
counts covering the taxable years of 1944 and 1945. Each defendant was
found guilty under both counts and the separate sentences imposed under
each count were ordered to run concurrently. If the conviction under any
one count is valid as to each defendant, the sentence must be sustained.
During
all the period involved Jacob Strauch conducted a wholesale jewelry
business of his own and also was a member of the partnership of Strauch
& Sher, the other two members being Alex Strauch and Harry Sher.
Strauch and Sher conducted a wholesale jewelry business from 1943 to
1946. The government presented evidence to the effect that the
partnership made profits of over $100,000 during this period and all
three partners in a written statement executed
December 12, 19
49, declared that the taxable income of the partnership during this
period was over $90,000. During the entire period of the partnership it
filed no return of partnership income. Jacob Strauch filed no return for
1944 showing income from the partnership, and filed no return whatever
for 1945.
As
to Count 1 in the indictment against Jacob Strauch, which covers the
calendar year of 1944, the government showed by direct evidence taken
from the partnership books that $19,859.80 was received by Jacob Strauch
from the partnership in 1944. The balance of unreported income for this
year, $2,674.02, was proved by the bank deposit method. For this year of
1944 Jacob Strauch reported income of $9,478.94.
[Evidence
Under Count II]
Count
II of the indictment against Jacob Strauch charges willful evasion of
income tax in 1946, by willful failure to file income tax return for
1945. Jacob Strauch's net taxable income for the year 1945 was shown to
be $49,018.91. Of this amount $14,008.93 was proved by direct evidence
taken from the books of the partnership and some $800.00 by proof of
Jacob Strauch's income from dividends and capital gains.
The
balance of $34,159.98 was proved by reconstructing Jacob Strauch's gross
income from his sole business on the bank deposit method allowing
deductions for cost of goods sold and expenses as shown by Jacob
Strauch's records, cancelled checks, and other evidence.
As
to Count II of the indictment Jacob Strauch contends that since he filed
no income tax return for 1945 he merely omitted an act required under
the statute, namely, the filing of a return, and cannot rightly be found
guilty of fraudulent evasion of income tax. However, ample evidence of
affirmative, fraudulent acts was presented justifying the verdict as to
Count II. Jacob Strauch made false statements to agents investigating
the case, declaring that there were no books or records of the
partnership, that these records were periodically destroyed. They were,
however, in existence and formed the basis of the reconstruction of the
partnership net income for the years involved of from $90,000 to
$100,000. Jacob Strauch kept no books in his individual business,
handling most of his transactions in cash. He was a partner in a firm
which filed no return. He filed a declaration of estimated tax for 1945
in the amount of $1,214.97, although the correct liability was about
$25,000.
[Evidence
Under Count III]
As
to the evidence under Count III the computation of Strauch's unreported
income for 1946 was made up from an analysis of his bank deposits. He
reported $16,922.27. The additional amount estimated was $18,078.09.
Jacob Strauch told the investigator that the origin of his bank deposits
was "receipts from the sale of jewelry" in the form of checks
and cash going directly into the bank account or first put in his safe
and then deposited in the bank. He stated that no money constituted
non-business receipts such as gifts, insurance proceeds, or prior
accumulations of money went into the bank account. The deposits during
1946 were made at regular intervals, never less than 5 and never more
than 11 in one month. The government agent carefully eliminated from the
estimate the proceeds of loans, of capital transactions, deposits
representing income from interest and dividends, and amounts drawn from
the partnership. Between 1939 and 1949 Jacob Strauch made loans at his
bank totalling $8,000. In 1940 he filed a financial statement with the
bank, listing a total net worth of $29,039. In 1942 he reported net
income of $4,420.38 and in 1943 $5,218.36, yet in 1944 and 1945 his bank
deposits were about $106,000 in excess of reported gross income. These
circumstances constituted substantial independent evidence sustaining
the government's estimate based upon bank deposits.
On
November 7, 19
46, Jacob Strauch made a sworn statement that his net worth for the
taxable year ended
November 1, 19
46, was $113,043.99. The pattern of Strauch's accounts and his course of
conduct during the period involved entitled the jury to take into
consideration his admission as to net worth in connection with other
evidence as to amounts of unreported income presented by the government.
These circumstances corroborate the admissions of Jacob Strauch and his
statements that his bank deposits reflected income. United States v.
Calderon, supra, 168; Smith v.
United States
, supra, 158, 159.
[Taxpayers'
Admissions]
The
convictions of Alex Strauch and Harry Sher each involved charges of
evasion of income tax with reference to the years 1944 and 1945, for
which years no partnership return was ever made. The written statement
heretofore referred to made by the partners
December 12, 19
49, listed in detail the total receipts of partnership income for the
taxable years together with the total expenses and costs of sales. This
statement with its calculation of over $90,000 profit for the years 1943
to 1946 was corroborated in every essential by the books of the
partnership. By defendants' written admission about 90% of the profits
of the enterprise was realized in 1944 and 1945. The books which were
made up ante litem motam fully corroborated the admissions. Warszower
v.
United States
, 312
U. S.
342.
The
government agent testified that "some five" sets of books,
single entry journals, which listed sales and expenditures of the
partnership were used in calculating the net earnings of the partnership
during the taxable years. No books recording capital accounts or
distribution of profits were found. For 1945 there was a book marked
"Diamond Book," and another book which covered watches, watch
bands, etc. The book of expenditures covered both overhead and
purchases. The records of purchases were given up to
August 19, 19
46, and the records of sales were kept until
November 7, 19
45. It was admitted that these books showed gross profits on each
transaction except in occasional cases where no profit was made. Sher
stated to the investigator that there was an oral agreement that the
profits should be divided equally. He kept the books and both he and an
expert accountant witness for defense testified to the effect that the
books were accurate.
The
unreported income of the three partners was estimated from the books as
follows:
Partner 1944 1945
Jacob Strauch .... $19,859.80 $14,008.93
Alex Strauch ..... 19,859.80 14,008.92
Harry Sher ....... 17,033.10 11,390.30
The government arrived at its estimate of income from the partnership by
totalling the entries for gross profits and subtracting all the
allowable business expenses, for 1944 and 1945, the profit for these
years being found to be $59,579.39 and $42,026.77, respectively. The
estimate of the government was relatively close to the statement signed
by the partners, which figured income for 1944 at $63,958.97, and for
1945 at $26,398.22. Jacob Strauch and Alex Strauch admitted that they
had reported none of this partnership income and Sher reported only
$2,326.69 in 1944 and $2,115.62 in 1945. That the partners actually
received substantial amounts from the partnership was shown by three
checks drawn
January 9, 19
45, to "cash" cashed by the three partners individually, and
totalling $30,000.
[Use of Inventories]
The
contention that the evidence of unreported partnership income was not
admissible because the government used defendants' accounting system
instead of making inventories has no merit. Section 22(c) of the
Internal Revenue Code of 1939, 26 U. S. C., Section 22(c), provides
that, whenever in the opinion of the Commissioner the use of inventories
is necessary in order clearly to determine the income of any taxpayer,
inventories shall be taken by such taxpayer upon such basis as the
Commissioner, with the approval of the Secretary, may prescribe as
conforming as nearly as may be to the best accounting practice in the
trade or business and as most clearly reflecting the income. Regulation
111, Section 29.22(c)-1 of the applicable regulations issued by the
Commissioner states that, in order to reflect the net income correctly,
inventories at the beginning and end of each taxable year are necessary
in every case in which the production, purchase, or sale of merchandise
is an income-producing factor.
Under
this statute and regulation the Commissioner had a discretionary
authority to require the taxpayer to take inventories. We are cited to
no section of the statute nor to any regulation requiring the
Commissioner to take an inventory and, as a practical matter, only the
taxpayer can take an inventory. Here the taxpayer took no inventories.
Defendants in effect contend that, because defendants failed in their
duty to keep proper records, merely recording gross sales and expenses,
the government cannot prove fraudulent evasion of income tax from
defendants' own books and accounts. The purpose of inventories, as
stated in Lucas v. Kansas City Structural Steel Co., 281 U. S.
261 [264] [2 USTC ¶520], 268, "is to assign to each period its
profits and losses." In this case Justice Brandeis observed that
whether in a particular business inventories are necessary for the
determination of income is a question left by the statute to the
judgment of the Commissioner. The Lucas case held that the
taxpayer should have taken inventories. But here the books disclosed the
gross profits on each sale which had a profit and disclosed instances
where there was no profit. They also disclosed the complete expense of
operation and thus assigned to each year its profits and losses. Under
26 U. S. C., Section 41, the method of accounting regularly employed in
keeping the books of the taxpayer is to be the basis of the computation
of the net income. This section was complied with in the computations
herein.
We
are cited to no decision in which a judgment for evasion of income tax
was reversed because the taxpayer failed to file inventories, and the
government in establishing income which was shown to have been received
in substantial amounts employed taxpayers' own books, which correctly
showed gross profits, made proper deductions for all expenses and
revealed substantial unreported income.
We
deem it unnecessary to discuss other questions previously raised before
this court, given extensive consideration on application for rehearing,
and not covered by the doctrine of the
Holland
, Friedberg, Smith, and Calderon cases.
[Conclusion]
The
trial judge charged the jury at considerable length upon issues
presented. Defendants' two special requests were allowed and, on being
given the opportunity to make further requests at the conclusion of the
charge, able counsel failed to take advantage of the opportunity. In
view of the uncontradicted evidence of the books and other direct
evidence supporting the verdict, we conclude that no prejudice resulted
from the charge and that no reversible error is shown. We adhere to our
conclusion originally announced that the verdicts of the jury are
sustained by overwhelming evidence. The government proved by testimony
independent of the statements used in evidence a consistent pattern of
underreporting large amounts of income and of defendants' failure to
include all of their income in their books and records. Holland v.
United States, supra, 139. Independent evidence was shown of the
likely source of unreported taxable income. Holland v. United States,
supra, 138. The independent evidence fortified the truth of the
admissions made. The tax returns and the failure to make returns
corroborated the admissions. Smith v. United States, supra. The
general history of defendants during the taxable years provided
sufficient independent evidence of the crime of tax evasion to
corroborate their written statements. United States v. Calderon,
supra.
The
judgments of the District Court are affirmed.
1
In order to avoid confusion the defendants will be denominated by their
individual names.
[54-2
USTC ¶9452]Jacob Strauch, Appellant v. United States, Appellee Alex
Strauch Appellant v. United States of America, Appellee Harry Benjamin
Sher, Appellant v. United States of America, Appellee
(CA-6),
In the United States Court of Appeals for the Sixth Circuit, Nos. 11992,
11993, 11994, 213 F2d 805,
June 17, 19
54
Criminal prosecution: Instructions to the jury.--In the criminal
trial of taxpayers for willful evasion of taxes, the trial judge charged
the jury with respect to penalties and instructed the jury that if the
taxpayers were acquitted the government could not appeal. The majority
of the Circuit Court found that the trial judge's instructions could not
be construed as asking the jury to convict, in view of the overwhelming
evidence of the taxpayers' guilt. Therefore the petition for a rehearing
was denied. One dissenting opinion.
John
J. Hooker, Nashville, Tenn. (Morris L. Strauch, Memphis, Tenn., William
S. Miller, Jr., Little Rock, Ark., were with him on brief), for
appellants. James L.
Rob
erts,
Nashville
,
Tenn.
(Fred Elledge, Jr., James M. Swiggart,
Nashville
,
Tenn.
, were on brief), for appellee.
Before
ALLEN, Circuit Judge, and STARR and GOURLEY, District Judges.
Memorandum
on Petition for Rehearing
ALLEN,
Circuit Judge:
This
case is before the court upon petition for rehearing. Appellants urge
(1) that the court erred in not holding the Ecklund case, 159
Fed. (2d) 81 (C. A. 6) controlling, and (2) that the judgment should be
reversed because of prejudicial error in the charge of the trial court.
The question whether the statement of income filed voluntarily by the
three appellants constituted an offer of compromise was fully considered
in connection with the hearing and we adhere to our conclusion that Ecklund
v.
United States
, supra, does not govern this controversy. Under this record the
statement filed was not an offer of compromise and was admissible.
The
question whether the District Court erred in charging upon the subject
of the penalty provided under §145(b) of Title 26 U. S. C. for willful
attempt to evade or defeat income taxes was not considered in the trial
but was raised at the hearing by one of the members of this court. This
portion of the charge was included in the general charge, was not
excepted to by able counsel nor attacked by them either in brief or
argument upon the hearing in this court. The majority of the court
thinks that the charge, the pertinent portion of which is given in the
margin, 1 was not
prejudicial. We think the statement by the court, "If your verdict
is not guilty then that is the end of the case. The Government can't
appeal from that verdict by the jury," was favorable to appellants
and under the facts of this case it could not have induced a conviction.
The three indictments set forth alleged income tax evasion for the
taxable years, two of the appellants being charged with falsifying the
income from a partnership of which all three appellants were members,
and the third appellant being charged with failure to declare income
from the partnership and also from an individual business which he
owned. After the investigation of possible tax evasion began the three
appellants voluntarily executed a statement setting forth material
variations from the taxes reported by them in the taxable years and
concerning these variations made the following statement:
"This
statement executed by Harry B. Sher, Alex Strauch and Jacob Strauch this
12th day of December, 1949:
"Having
re-examined, at the request of my counsel and auditors, the books and
records of Strauch & Sher, a partnership, and having, pursuant to
request, re-examined supporting memoranda with reference to sales and
expenditures of the said partnership,
"It
is the opinion and belief of the undersigned that a corrected statement
of income of the said partnership is properly reflected in the exhibit
hereto attached, entitled 'Restatement of Partnership Income,' and that
taxable income of the undersigned should be appropriately computed as a
result of the said restatement:
"Further,
that the variations resulting from the totals reflecting in the said
restatement from the income as reported by the individuals, or as set
forth in explanatory comments heretofore submitted are attributable to
error in maintenance of records and the classification of items of
income and expense and are not attributable to intent on the part of the
undersigned to defraud the government, or willfully, to evade the
payment of any income taxes as and when due.
"This
statement has been prepared at our request in conformance with
information furnished by ourselves.
"/s/
HARRY B. SHER,
/s/ ALEX STRAUCH,
/s/ JACOB STRAUCH."
It
was shown by this statement and the records of the partnership that all
three appellants in the years 1944 to 1946, inclusive, received income
on which they failed to pay a tax. The bank deposits of Jacob Strauch
showed that he had received income in 1944, 1945 and 1946 from an
individual jewelry business on which he did not pay a tax. The evidence
upon these points was overwhelming. In the face of this evidence, much
of it taken from appellants' own books of account, the jury found
appellants guilty. We see nothing in the court's statement which can be
construed as asking the jury to convict, and in addition we cannot
conceive that under this record this portion of the court's instructions
could have influenced the jury as to conviction. The lack of exception
by experienced counsel and the total failure to argue at the hearing in
this court the point now stressed strongly indicates that the error of
the trial court, which is not to be commended, was not prejudicial. None
of the cases relied upon are in point. In Lovely v.
United States
, 169 Fed. (2d) 386 (C. A. 4), serious error to the prejudice of the
defendant was committed in the admission of testimony. Also the court in
explaining that the sentence carried a life penalty stated that the
defendant was eligible to parole after fifteen years. In Demetrce v.
United States
, 207 Fed. (2d) 892 (C. A. 5) [53-2 USTC ¶9646], the jury
repeatedly reported that it was unable to agree upon a verdict and
finally asked the judge to state what the punishment would be. The judge
assured the jury that the maximum sentence would not be imposed. These
cases afford no assistance in solving the problem presented here.
The
majority of the court concludes that, as no prejudicial error existed in
the conduct of the trial nor in the charge of the court, the petition
for rehearing must be denied.
1
"These indictments, ladies and gentlemen of the jury, were returned
under Section 145(b) of Title 26 of the United States Code, which
provides, so far as it pertains to these charges, that any person who
wilfully attempts in any manner to evade or defeat any tax imposed by
this chapter, or the payment thereof, shall, in addition to other
penalties provided by law, be guilty of a felony and upon conviction
thereof be fined not more than $10,000, or imprisoned for not more than
five years, or both, together with the costs of prosecution.
"Now,
as the Court has charged you, your duties as jurors consist of a
fact-finding body, and when you have reached a verdict in the case,
either guilty or not guilty, then your duties are at an end. If your
verdict is not guilty then that is the end of the case. The Government
can't appeal from that verdict by the jury. If your verdict is guilty,
then of course it becomes the duty of the Court to pass sentence. You
have nothing whatever to do with the fixing of any sentence in any case,
but merely to hear the evidence in the case and determine from that
evidence whether or not the charges are sustained, whether or not the
defendant is guilty or not guilty.
"Now,
as to the matter of the punishment provided by the statute, that means
that the Court in passing sentence may fine the defendant any amount,
according to the discretion of the Court, from one cent up to ten
thousand dollars. There is not any definite amount fixed in the statute
that the Court must fine the defendant. The statute says that 'Upon
conviction thereof, the defendant may be fined not more than ten
thousand dollars.' That means that the Court could fine him any amount
from one cent to ten thousand dollars. 'Or imprisoned for not more than
five years.' That means the Court could order him imprisoned for any
length of time from one minute up to five years, according to the
punishment that the Court might think is justified in this case. That
does not mean that the Court has to impose a fine of ten thousand
dollars or a sentence of five years, but leaves it to the discretion of
the Court."
Dissenting
Opinion
GOURLEY,
District Judge:
In
these criminal appeals from a jury verdict of guilty, I joined in a per
curiam order affirming the judgments of the District Court since I
believed substantial evidence existed to support the verdicts. I was
also of the opinion, and continue to so believe, that no error existed
in the record to which objection was made or exception taken. There was
no basis to sustain any of the assignments of error presented by the
defendants in their appeal.
Nevertheless,
during the argument of the appeal, I noticed what I considered
"plain error" in the charge of the trial judge which I
believed affected substantial rights of the defendants.
The
following portion of the District Judge's charge to the jury, in my
judgment, poignantly poses the question of "plain error."
"These
indictments, ladies and gentlemen of the jury, were returned under
Section 145(b) of Title 26 of the United States Code, which provides, so
far as it pertains to these charges, that any person who wilfully
attempts in any manner to evade or defeat any tax imposed by this
chapter, or the payment thereof, shall, in addition to other penalties
provided by law, be guilty of a felony and upon conviction thereof be
fined not more than $10,000, or imprisoned for not more than five years,
or both, together with the costs of prosecution.
"Now,
as the Court has charged you, your duties as jurors consist of a
fact-finding body, and when you have reached a verdict in the case,
either guilty or not guilty, then your duties are at an end. If your
verdict is not guilty then that is the end of the case. The Government
can't appeal from that verdict by the jury. If your verdict is
guilty, then of course it becomes the duty of the Court to pass
sentence. You have nothing whatever to do with the fixing of any
sentence in any case, but merely to hear the evidence in the case and
determine from that evidence whether or not the charges are sustained,
whether or not the defendant is guilty or not guilty.
"Now,
as to the matter of the punishment provided by the statute, that means
that the Court in passing sentence may fine the defendant any amount,
according to the discretion of the Court, from one cent up to ten
thousand dollars. There is not any definite amount fixed in the statute
that the Court must fine the defendant. The statute says that 'Upon
conviction thereof, the defendant may be fined not more than ten
thousand dollars.' That means that the Court could fine him any amount
from one cent to ten thousand dollars. 'Or imprisoned for not more than
five years.' That means the Court could order him imprisoned for any
length of time from one minute up to five years, according to the
punishment that the Court might think is justified in this case. That
does not mean that the Court has to impose a fine of ten thousand
dollars or a sentence of five years, but leaves it to the discretion of
the Court." (Italics supplied.)
The
question of plain or substantial error was not argued and counsel for
the litigants were not prepared to enlighten the court on applicable
principles of law.
Opportunity
has now existed for an independent
research and more reflected judgment to be made of the law, and I am now
convinced that substantial or plain error does exist which materially
affected the rights of the defendants.
I
must, therefore, vacate my joinder in the per curiam order of
affirmation and respectfully dissent to the judgment of my learned
colleagues.
It
is incumbent upon this court to take notice of substantial or plain
error, whether or not such error was raised by counsel at time of trial
or laid as an assignment of error in appeal.
The
law provides an impenetrable cloak of protection about a defendant in a
criminal proceeding which requires the court of appeals, in cases of
serious criminal offenses to carefully check the record for error
prejudicial to defendant, whether such error had been urged upon the
court or not. Tatum v.
United States
, 3 Cir., 190 Fed. (2d) 612.
Undoubtedly,
as a matter of
admin
istrative policy, to avoid any unnecessary appeals and new trials, it is
important that errors, which inevitably will occur from time to time in
extemporaneous charges of the most competent judges, be pointed out
immediately by trial counsel with a view to their correction then and
there. That policy is enforced in many cases by refusal to review for
defects in a charge not challenged at the trial. Indeed, the silence of
counsel often suggests that errors seem trivial at that time. But where,
particularly in a criminal case, several errors appear, which in the
aggregate contain the potential of substantial damage to the accused,
the policy of sound and time saving trial
admin
istration which would penalize failure to point out error below may have
to yield to more important considerations of making sure that the
accused has been treated fairly.
United States
v.
Cumberland
, 3 Cir., 200 Fed. (2d) 609; Miller v.
Commonwealth
of
Ky.
, 6 Cir., 40 Fed. (2d) 820; Morris v.
United States
, 9 Cir., 156 Fed. (2d) 525;
United States
v. Raub, 7 Cir., 177 Fed. (2d) 312 [49-2 USTC ¶9422]; Logan
v. United States, 5 Cir., 192 Fed. (2d) 388; Wyche v.
United States
, CCA D. C., 193 Fed. (2d) 703; Apodaca v.
United States
, 10 Cir., 188 Fed. (2d) 932; Rose v.
United States
, 10 Cir., 128 Fed. (2d) 622 [42-2 USTC ¶9500]; Remmer v. United
States, 9 Cir., 205 Fed. (2d) 277 [53-1 USTC ¶9421].
Thus,
the question is resolved as to whether the error committed was of so
fundamental a nature that the court of appeals should exercise the power
provided by Rule 52(b) of the Federal Rules of Criminal Procedure, 18
U. S.
C. A.
I
believe the error below is "plain" within the meaning of the
rule, and that it affects "substantial rights." I can perceive
nothing more substantial than to have the members of the jury, in their
deliberation, consider the fact that if a verdict of not guilty is
returned, no right to appeal exists on the part of the Government, and
to further consider the nature or extent of the punishment that the
trial court could impose in the event of a verdict of guilty.
Criminal
jurisprudence has long recognized error and inherent danger to a fair
trial when a jury is charged on the subject of punishment, and
certainly, even more grievous error and peril to the impartial
admin
istration of justice would exist when reference is made to the
Government's inability to appeal from a verdict of not guilty. Ryan
v.
United States
, 8 Cir., 99 Fed. (2d) 864; Demetree v.
United States
, 5 Cir., 207 Fed. (2d) 892 [53-2 USTC ¶9646]; 23 C. J. S. §1290(b)
page 869; Housel and Walser, 2nd Ed., Defending and Prosecuting Federal
Criminal Cases.
When
instructions have been made to a jury which should not be made, it is a
question of judgment whether what was said was so prejudicial as to
justify a reversal where the evidence is sufficient to support the
conviction.
I
cannot conceive that the instructions made by the trial judge were not
considered with some weight in the determination of the guilt or
innocence of the defendant.
The
admin
istration of criminal justice in this democracy should not be subjected
to the remotest hazard that a person be deprived of his liberty on any
thoughts or ideas that do not relate directly to the facts as presented
to establish a defendant's guilt.
I
therefore, respectfully dissent from the judgment of my distinguished
colleagues and believe that a new trial should be awarded and the
proceeding remanded to the District Court.
Since
the formulation of the within dissent, defendants have made application
to the court for rehearing and for the reasons herein stated, I believe
rehearing should be granted.
[54-1
USTC ¶9416]Jacob Strauch, Appellant v. United States of America,
Appellee Alex Strauch, Appellant v. United States of America, Appellee
Harry Benjamin Sher, Appellant v. United States of America, Appellee
(CA-6),
In the United States Court of Appeals for the Sixth Circuit, Nos. 11992,
11993, 11994, 213 F2d 805,
April 21, 19
54
Criminal prosecution: Willful attempt to evade tax.--There were
no grounds for a reversal of the conviction by the lower court. The net
worth figures introduced by the Government were relevant, no proposition
to compromise their possible civil income tax liability was made by
appellants, the Restatement of Partnership Income admitted variations
between the Restatement and the income declared in the returns, no
exception was taken to the charge of the court, and the verdict was
supported by substantial evidence.
John
J. Hooker, Nashville, Tenn., Morris L. Strauch, Memphis, Tenn., Wm. S.
Miller, Jr., Little Rock, Ark., for appellants. Fred Elledge, James L.
Rob
erts,
Nashville
,
Tenn.
, for appellee.
Before
ALLEN, Circuit Judge, and STARR and GOURLEY, District Judges.
Order
ALLEN,
Circuit Judge:
This
case came on to be heard on the record and briefs and oral argument of
counsel;
And
it appearing that in these cases, consolidated for trial by agreement of
counsel, each case charging violations of 26 U. S. C. §145(b),
appellant Jacob Strauch was indicted for wilfully and knowingly
attempting to evade income taxes for the years 1944, 1945 and 1946, and
appellants Alex Strauch and Harry Benjamin Sher were indicted for
wilfully and knowingly attempting to evade income taxes for the years
1944 and 1945;
And
it appearing that the jury found each appellant guilty as charged in the
various indictments;
And
it appearing that the net worth figures introduced by the government
bearing on the charge against Jacob Strauch were relevant and
corroborated the government's contention that income not reported by
appellant Jacob Strauch was received in the taxable years;
And
it appearing that appellants made no proposition to compromise their
possible civil income tax liability and that Ecklund v. United
States, 159 Fed. (2d) 81 (C. A. 6) does not control;
And
it appearing that the Restatement of Partnership Income executed by all
appellants, prepared for appellants at their own request, admitted that
substantial variations existed between the Restatement and the income
declared by appellants as partners in their tax returns for the years
involved;
And
no exception being taken to the charge of the court, the verdict being
supported by substantial evidence and no reversible error existing in
the record;
IT
IS ORDERED that the judgments be and they hereby are affirmed.
[50-2
USTC ¶9499]Benjamin S. Bell, Appellant v.
United States of America
, Appellee
(CA-4),
In the United States Court of Appeals for the Fourth Circuit, No. 6121,
185 F2d 302,
November 8, 19
50
Appeal from the United States District Court for the District of
Maryland, at Baltimore.
False and fraudulent returns: Conviction based upon estimates of net
worth: Admissions.--Estimates of taxpayer's net income based upon
calculations of his net worth at the beginning and at the end of each of
thue taxable years in question and upon admissions by the taxpayer were
sufficient to sustain a conviction for making false and fraudulent
returns where it appeared that taxpayer kept no records of his income
from his individual business other than his bank deposit book, and where
it further appeared that the books of a corporation, of which he was
also sole owner, were inadequate to explain the transactions between the
corporation and the individual business.
G.
C. A. Anderson and George L. Hart, Jr., (Anderson & Barnes on brief)
for Appellant, and Norman P. Ramsey, Assistant U. S. Attorney, (Bernard
J. Flynn, U. S. Attorney, on brief) for Appellee.
Before
PARKER, SOPER and DOBIE, Circuit Judges.
SOPER,
Circuit Judge:
Benjamin
Bell was indicted in three counts under Section 145(b) of the Internal
Revenue Code, 26 U. S. C. A. §145(b), for attempting to defeat and
evade a large part of the income and victory tax owing by him to the
United States for the years 1943, 1944 and 1945 by filing false and
fraudulent returns for each year wherein he knowingly understated his
net income and the amount of the tax. It was charged that for the year
1943 he reported a net income of $11,135.39 and a tax of $2,912.28
whereas his income was $69,836.83 and his tax $41,125.84; and for the
year 1944 he reported a net income of $13,887.71 and a tax of $3,378.96
whereas the income was $41,115.81 and the tax $18,771.73; and for the
year 1945 he reported a net income of $18,667.14 and a tax of $5,593.57
whereas the income was $25,203.85 and the tax $8,940.28.
He
was tried and convicted in a jury trial in the District Court and
sentenced to a fine of $10,000 and imprisonment for six months on the
first count; $5,000 and six months imprisonment on the second count; and
$2,500 and six months imprisonment on the third count, the sentences of
imprisonment to run concurrently and the fines to be cumulative.
[Estimates
of Net Worth]
The
government's case consisted in part of estimates of the net income of
the defendant in the taxable years based upon calculations of his net
worth at the beginning and end of each year derived from available
records, and also the statements of the defendant to the revenue agents
who investigated the case. The defendant offered no evidence whatsoever
on his own behalf and bases his appeal mainly on the grounds (1) that a
conviction of tax evasion may not be based on a mere increase in net
worth and therefore the court erred in refusing the defendant's motion
for a directed verdict of not guilty; and (2) that the net worth
statements for the years in question were erroneously admitted in
evidence over the objection of the defendant because (a) they were
replete with errors; (b) because the agent in preparing them ignored the
records of the defendant and the records of a corporation controlled by
the defendant, which purported to show his income; and (c) because the
court made numerous errors in restricting the scope of the cross
examination of the government's agent, and in the charge to the jury.
[Inadequate
Records of Income]
Since
the defendant offered no witnesses on his behalf, although he employed
accountants who kept the books of the corporation and an auditor who
conferred with the revenue agents, the following resume of the facts is
necessarily based upon the evidence produced by the
United States
.
Bell
was an auctioneer. He had carried on the business since 1933 at
722 13th St., N. W.
,
Washington
, D. C., through a corporation called
Washington
Art
Galleries
and Auction Rooms, of which he was the virtual owner. He was also the
sole owner in his personal capacity of an auction business for used
furniture, which was carried on in
Alexandria
,
Va.
, under the name of Mt. Vernon Galleries. The business at this location
was closed and removed to the
13th Street
store of the corporation in
Washington
in November, 1942. During the years 1943 to 1945 under investigation,
Bell
continued to use the name of the Mt. Vernon Galleries to denominate his
personal business in his personal income tax return and reported the net
income therefrom in addition to the salary and dividends which he drew
from the corporation. Bell kept no books of account or records of the
income of his individual business except his bank deposit book, in which
some descriptive entries were made, his personal check book and certain
cancelled checks; but the corporation kept books which included a cash
book, a journal and a ledger; and the ledger contained separate accounts
which purported to show transactions between the corporation and Bell,
and between the corporation and the Mt. Vernon Galleries respectively.
There were, however, no records except in a minority of instances to
support the entries on the books of the corporation. There were only 50
or 60 invoices during the period 1943 to 1945 covering the consignment
of goods for sale and the commissions paid thereon, which varied in
amount from time to time; and except for certain cancelled checks there
were no other documents or cash register tapes to support the entries in
the books, Moreover, the entries in the books, except those in the cash
book, were not made daily; but the entries in the journal and ledger
were made some time during the year from the cash book, check books and
other data. 1
An
investigation of the income tax liabilities of the defendant during the
years in question was instituted in March, 1946 by Charles H. Knight, a
special internal revenue agent, who interviewed the defendant and
learned from him some things in respect to the nature of his business
and his investments. His business records were made available to the
agent. Knight had been connected with the Bureau of Internal Revenue in
the statistical section of the Corporation Tax Division since 1938, had
secured a degree in accountancy and had been working on books and
accounts in income tax matters since 1940. He concluded from his
investigation that the corporate books and other data submitted to him
by the defendant did not reveal the taxable income of the defendant
because the corporate books were kept on a fiscal year basis whereas
Bell's income was reported on the calendar year basis and especially
because of the deficiencies of the corporate records in support of the
entries on the corporate books above described.
[Examination
of All Records]
These
inadequacies led the agent to prepare a net worth statement to ascertain
Bell
's true income for the years in question. The defendant not only
conducted an auction business but also dealt in securities and in real
estate. Accordingly, the agent made an extended examination of real
estate records, bank records, stockbrokers' records, Treasury Department
records, Insurance Company records, mortgage and lending institution
records, in order to ascertain the defendant's assets and liabilities.
From this data he prepared a net worth statement showing the total
assets of the defendant, including cash in bank, 2 United
States bonds, stock, real estate, loans receivable, life insurance and
other investments amounting to a total of $129,991.17, and liabilities
consisting of mortgages on real estate and reserve for depreciation in
the aggregate sum of $47,722.20, or a net worth on
December 31, 19
42 of $82,218.97.
A
copy of this statement was made available to
Bell
's accountant.
Bell
made no claim at the time that he possessed other assets than those
shown on the statement and he offered no evidence at the trial to
contradict this statement of his net worth at the beginning of the
period under examination.
By
resort to similar records, the agent found
Bell
's net worth at the end of 1943, 1944 and 1945 to be $141,208.48,
$175,950.06 and $201,482.78 respectively; and by subtracting the net
worth of the preceding year the increases in net worth during the
taxable years were found to be $58,989.51, $34,741.58 and $25,532.72
respectively.
In
order to find the taxable income for these years, the disbursements of
the taxpayer for living expenses, taxes, insurance premiums and
miscellaneous expenses were added and the allowable deductions from
income and the non-taxable long term gains were subtracted so that the
taxable net income for the years in question was found to be $69,836.83,
$40,615.81 and $24,703.85 respectively.
[Increases
in Net Worth Due to Real Estate Holdings]
In
order to make certain that the increases in net worth during these years
constituted earnings of the taxpayer,
Bell
was questioned by the agent as to gifts or inheritances which he might
have received. He told the agent at his first interview that he had
received no gifts or inheritances. Six months later at a second
interview he told the agent that his mother customarily gave his wife
$4,000 on their wedding anniversaries and a like amount to each of the
three children on their respective birthdays during the years in
question. However, in his income tax returns
Bell
claimed his mother, his wife and his three children as dependents. At
the trial of the case no testimony was offered and no records were
produced by the defendant as to these gifts.
The
statement prepared by the agent showed that the greatest increase in net
worth during the period under examination was in real estate. At the end
of 1942
Bell
owned real estate in the sum of $77,546.57. This item was increased to
$138,761.20 at the end of 1943, $147,887.24 at the end of 1944, and
$219,220.91 at the end of 1945. The testimony as to the source of the
funds with which
Bell
increased his real estate holdings has an important bearing upon the
sufficiency of the proof to take the case to the jury. In 1943
Bell
purchased real estate in
Atlantic City
for the sum of $45,038.76 and paid for it with two checks on his
personal bank account in the aggregate sum of $5,188.76 and one check
for $39,850 on the bank account of his corporation which sum
Bell
had deposited to the corporation's credit. When asked as to the source
of this money Bell told the agent that he had gotten it in the form of a
loan from his mother who paid it to him in cash. No check or promissory
note or other record evidence of the loan was shown to the agent or
produced at the trial.
Bell
told the agents that no interest on the loan had been paid and he
continued to list his mother as a dependent in his tax returns for 1944
and 1945.
In
1943 the property
No. 9707 Georgetown Road
in
Washington
was purchased in the name of
Bell
's wife for $16,175.87 with funds taken from her account, and the title
was taken in her name. The money, however, was deposited in her account
by
Bell
. She was listed in his tax returns as a dependent and filed no tax
return herself. In 1944 the adjoining property was acquired under
similar circumstances for $9,126.04 and placed in the name of Mrs. Bell.
In
1945
Bell
sold the
Atlantic City
property for $75,000 and bought a building at
1808 Adams Mill Road
in
Washington
for $100,622.43, paying the difference from his personal and corporate
bank accounts. In 1945 he purchased a one-third interest in the property
No. 7101 Georgetown Road
for the sum of $15,750. The net worth statements show no reduction of
the other assets or increase of liabilities sufficient to cover the
increase in the taxpayer's real estate.
[Admissibility
of Evidence of Net Worth]
The
defendant makes the contentions that the evidence of net worth was
inaccurate and lacking in probative force, and was therefore
inadmissible, and that the prejudicial statements of the defendant
should not have been taken into consideration because a conviction of
crime cannot be sustained by extra judicial admissions alone without
independent proof of the corpus delicti. It is said in the first place
that the foundation statement at the beginning of the period on
December 31, 19
42 was inaccurate because it did not take into account currency in the
hands of Bell and his wife at the end of 1942, the amount due him by the
corporation on
December 31, 19
42, or debts due him at the end of the year; and also failed to include
a liquidating dividend of $3,708.49 received by him during the year, and
a credit of $3,021.72 due him by his stockbroker at the end of the year.
An
examination of the record indicates that the probative force of the
evidence relating to the net worth of the taxpayer at the beginning of
the period under examination is not undermined by these criticisms. The
amount of currency undeposited and in the hands of the defendant and his
wife on
December 31, 19
42 was small, according to
Bell
's statement, and could not be determined when the investigation started
in 1946. The charge that the amount due Bell by the corporation was
stated as of
October 31, 19
42 instead of
December 31, 19
42, springs from the fact that the earlier date was the end of the
corporation's tax year. This circumstance, however, tended to benefit
rather than injure the defendant because the books showed that the
amount of this item was decreased by debits in the defendant's account
in the subsequent two months. The evidence shows clearly that
Bell
was asked whether he owed any money and the net worth contained a
statement of all the liabilities which the agent could discover. With
respect to the two other debit and credit items it is sufficient to say
that the evidence shows that they did not relate to the year 1942. In
short, these criticisms of the basic opening statement, considered
separately or together, furnish no ground for its exclusion from the
jury. The agent testified that he had found no evidence or intimation of
other assets which he failed to include and his statement was furnished
to the defendant's accountant and was not challenged.
It
is further contended that the net worth statements at the end of the
years 1943, 1944 and 1945 are so replete with errors that no verdict
could be based upon them. All of these alleged defects have been
examined and found to be insufficient to justify the exclusion of the
statements from the jury. It is sufficient to say in this opinion that
in each instance there is evidence to support the government's figures,
or the inaccuracies are too insignificant to materially affect the final
result.
These
is no substance to the defendant's contention that the net worth
statement is so incredible as to be inadmissible because it discloses
profits that could not possibly have been earned upon the small
inventory of $8,650 shown on the corporation's books. The profits on an
auction business are made for the most part on the sale of goods of
other persons and not upon the profit to the auctioneer. If the
defendant had kept invoices of the goods consigned to him for sale, and
records of the commissions on the sales which, according to his
statement, varied from 18 per cent to all that the traffic would bear,
an accurate account of these profits from his auction business could
have been made, but no such records were available.
Bearing
this evidence in mind and the complete failure of the defendant to
controvert it, and having regard for the rule that evidence must be
taken in the light most favorable to the government in considering its
sufficiency, 3 we have no
doubt that the submission of the case on the comparison of the
taxpayer's net worth at the beginning and end of the tax years was
justified, and that the evidence was sufficient to support a verdict of
guilty. An estimate of the taxpayer's net worth as the means of
determining his income is resorted to in the absence of accurate records
which it is his duty under the statute to make and to preserve, and by
its very nature it is an approximation; but it has been held in this and
other jurisdictions to be an appropriate method to support a criminal
prosecution under the statute, 4 and the
absence of proof of the exact amounts of unreported income is not fatal
if there is substantial evidence tending to prove the defendant's guilt
beyond a reasonable doubt.
The
defendant, pointing out that the government's case against him consists
of the net worth statements and his own admissions, contends that the
case must fall on the ground that the net worth statements are
insufficient in themselves to prove his guilt and that in the absence of
proof of the corpus delicti, a conviction of crime may not be based
solely on the confessions or admissions of the defendant. This argument
assumes that the net worth statements in themselves furnish no
substantial evidence whatsoever of the corpus delicti in this case; but
is not true, as we have seen. Moreover, the rule does not require that
the corpus delicti be completely shown by evidence aliunde defendant's
confessions, but admits the confessions where other substantial evidence
of the crime is shown, and thereupon both the statements of the
defendant and the independent evidence must be taken into consideration
by the jury in determining whether guilt is proven beyond a reasonable
doubt. In Daeche v.
U. S.
, 2 Cir., 250 Fed. 566, 571, cited with approval in Warszower v.
U. S., 312
U. S.
342, 345, it was said:
"*
* * The corroboration must touch the corpus delicti in the sense of the
injury against whose occurrence the law is directed; in this case, an
agreement to attack or set upon a vessel. Whether it must be enough to
establish the fact independently and without the confession is not quite
settled. Not only does this seem to have been supposed in some cases,
but that the jury must be satisfied beyond a reasonable doubt of the
corpus delicti without using the confessions, before they may consider
the confessions at all. * * * But such is not the more general rule,
which we are free to follow, and under which any corroborating
circumstances will serve which in the judge's opinion go to fortify the
truth of the confession. Independently they need not establish the truth
of the corpus delicti at all, neither beyond a reasonable doubt nor by a
preponderance of proof."
See
also, Yost v. U. S., 4 Cir., 157 Fed. (2d) 147, 150; Forte v.
U. S.
, C. A. D. C., 94 Fed. (2d) 236.
[Substantiating Evidence]
In
this case there is substantial evidence outside of
Bell
's statements to indicate his guilt. It consists of the increase in his
net worth during the taxable years, the absence of personal records or
books of account, and the inadequacy of the corporate records to show
fully either its transactions or those of the defendant; and this body
of testimony derives support from the defendant's failure to offset or
explain the discrepancy through his employees either during the agent's
investigation or the trial in court. It is true that the burden of proof
resting upon the government does not shift during the progress of a
criminal case but when in the trial of charges of income tax evasion
discrepancies between the taxpayer's returns and his actual income are
indicated by the government's proof, the failure of the defendant to
offer explanation in any form may be considered by the jury in finding
its verdict. In Rossi v. U. S., 289
U. S.
89, 91, the court said:
"The
general principal, and we think the correct one, underlying the
foregoing decisions is that it is not incumbent on the prosecution to
adduce positive evidence to support a negative averment the truth of
which is fairly indicated by established circumstances and which if
untrue could be readily disproved by the production of documents or
other evidence probably within the defendant's possession or
control."
See
also, Jelaza v. U. S., 4 Cir., 179 Fed. (2d) 202 [50-1 USTC ¶9149]
U. S. v. Hornstein, 7 Cir., 176 Fed. (2d) 217, 220 [49-2 USTC ¶9326];
Bradford v. U. S., 5 Cir., 130 Fed. (2d) 630.
In
addition, when we come to determine the sufficiency of the evidence for
the submission of the case to the jury, we must take into consideration
defendant's statement that his mother, who was dependent on him for
support, furnished him with $39,850 in cash in 1943 to enable him to buy
the
Atlantic City
property.
[Net
Worth Theory]
The
defendant relies principally upon Bryan v. U. S., 5 Cir., 175
Fed. (2d) 223 [49-1 USTC ¶9272, 9322], and U. S. v. Fenwick, 7
Cir., 177 Fed. (2d) 488 [49-2 USTC ¶9448], in both of which it was held
that evidence based on the net worth theory was insufficient to support
a conviction of attempting fraudulently to evade the income tax, since
the government's case did not exclude the reasonable possibility that
the defendant had other assets at the beginning of the period than those
shown by the government's statement; and the court directed a verdict
saying that the evidence, being circumstantial, must exclude every
reasonable hypothesis except that of the defendant's guilt. But we
cannot follow these decisions since it is obvious that they are based
upon their particular facts and they do not relieve us from the duty of
appraising the sufficiency of the evidence in the case before us. That
responsibility does not include a finding as to whether the defendant is
guilty beyond a reasonable doubt. When a motion for a directed verdict
of acquittal is made in a criminal case, the sole duty of the trial
judge is to determine whether there is substantial evidence which, taken
in the light most favorable to the United States, tends to show that the
defendant is guilty beyond a reasonable doubt. The possibility that a
jury may have a reasonable doubt upon the evidence as to the guilt of
the defendant is not the criterion which determines the action of the
trial judge. The decision on that question is for the jury to make and
the rule is the same whether the evidence is direct or circumstantial. Curley
v.
U. S.
, C. A. D. C., 160 Fed. (2d) 229; Abrams v. U. S., 250 U. S.,
616, 619; Pierce v. U. S., 252 U. S. 239, 251; Yoffe v. U. S.,
1 Cir., 153 Fed. (2d) 570, 573 [46-1 USTC ¶9171];
Rob
erts v. U. S., 5 Cir., 151 Fed. (2d) 664;
U. S.
v. Manton, 2 Cir., 107 Fed. (2d) 834, 849. In Curley v. U. S.
the court said: (p. 232)
"The
true rule, therefore, is that a trial judge, in passing upon a motion
for a directed verdict of acquittal, must determine whether upon the
evidence, giving full play to the right of the jury to determine
credibility, weigh the evidence, and draw justifiable inferences of
fact, a reasonable mind might fairly conclude guilt beyond a reasonable
doubt."
[Scope
of Cross Examination]
The
defendant further contends that the District Judge made numerous errors
in ruling upon the admissibility of testimony. Most of these rulings
occurred during the examination of the government's agent, when the
defendant, having made no opening statement of his case to the jury and
having obviously decided to offer no evidence on his own behalf,
endeavored to prove his case through cross examination of the witnesses
and was not allowed, in a number of instances, to go outside the scope
of the direct examination. The net worth statement was objected to as
inadmissible because all of the persons who cooperated in setting it up
were not presented to the court; but the supporting evidence for the
items in the account were before the jury and the agent verified the
statement as an accurate summary of the figures. Other questions related
to such matters as what the agent found in the defendant's safe deposit
box, what the bank deposit book and certain check books and stubs showed
as to the defendant's income, the contents of an unanswered letter
written by the defendant to the agent, &c. &c.
Questions
of this kind must necessarily be left largely to the wise discretion of
the trial judge especially in a case involving many factual details that
may be easily confused or obscured in the minds of the jury. Of course
it is the duty of the judge in a criminal case to allow full and free
examination of the government's witnesses in order that all relevant
facts may be disclosed; but in the federal courts for over a hundred
years the rule has been that the scope of cross examination is limited
to subject matter referred to during the examination in chief; and if a
party wishes to examine a witness regarding other matters, he must do so
by making the witness his own and by calling him as such in the
subsequent progress of the trial. Phila. & Trenton R. R. Co. v.
Stimpson, 14 Pet. (39
U. S.
) 448, 461; Moyer v. Aetna Life Ins. Co., 3 Cir., 126 Fed. (2d)
141, 143; Kincade v. Mikles, 8 Cir., 144 Fed. (2d) 784, 787;
Wigmore on Evidence, (3rd Ed), §§ 1885-1888. See, Hider v. Gelback,
4 Cir., 135 Fed. (2d) 693, 695. This rule has been the subject of some
attack; and an attempt was made by Advisory Committee when formulating
the Rules of Civil Procedure in 1936 and 1937 to change the rule to
allow cross examination upon all the material and pertinent issues of
the action. The Supreme Court in rejecting these proposals and in
adopting Rule 43(b) of the Federal Rules of Civil Procedure, (26 U. S.
C. A. Rule 43(b), as it now stands) indicate that "the historic
limitation upon the scope of cross examination to the subject matter of
the direct examination is still to be enforced in the federal
courts." Moyer v. Aetna Life Ins. Co., 3 Cir., 126 F. 2d
141, 143; Wigmore on Evidence (3rd Ed.) §1888. Nothing to the contrary
appears in the Federal Rules of Criminal Procedure. 5
Our
examination of the record in this case shows that the District Judge
allowed much latitude in the cross examination of the government's
witnesses as to matters covered by direct testimony, and it was only
when the questions were improper as to form, or when they touched upon
subjects not brought out in direct examination or not within the purview
of the witness' knowledge that they were ruled out. At the same time the
defendant was reminded that he would have ample opportunity to offer any
evidence which he deemed favorable to him as part of his defense. We
find that the defendant was not impeded in making his defense and that
there was no error in the rulings of the trial judge upon the evidence.
A similar ruling was made under like circumstances in U. S. v.
Hornstein, 7 Cir., 176 Fed. (2d) 217, 220 [49-2 USTC ¶9326].
The
defendant further contends that the judge's charge contained certain
factual inaccuracies which were detrimental to his case. It is objected
that the judge attributed to the revenue agent statements as to the
inadequacy of the books more sweeping than the agent actually made; but
the charge was not misleading in this respect when considered in
relation to the whole and in connection with the judge's warning to the
jury that they should determine for themselves whether the agent's
rejection of the books was made upon a reasonable basis. Other charges
of inaccuracy relate to matters not called to the attention of the judge
before the jury retired to consider its verdict. We are satisfied from
our examination that they were not misleading, especially as the jury
were told at the outset that the comments of the judge upon the evidence
were advisory only and should be given only such attention as the jury
might think that they deserved.
We
find no error, and the judgment of the District Court is therefore.
Affirmed.
1
The entries in the cash book showed only disbursements and were quite
informal and devoid of explanation. Typical of the entries is the
following:
Jan. 2, 19
43 Johnson .... $ 50.00
Elizata .... 125.00
Rent ....... 652.30
Guest ...... 12.50
$839.80
2
The item of cash in banks included monies in the name of the wife and
children, since it appeared from the defendant's statement that they had
no independent source of income.
3
United States v. Manton, 2 Cir., 107 Fed. (2d)
834, 839; Jelaza v. U. S., 4 Cir., 179 Fed. (2d) 202, 204 [50-1
USTC ¶9149].
4 Jelaza v. U. S.,
4 Cir., 179 Fed. (2d) 202, 204 [50-1 USTC ¶9149]; U. S. v. Chapman,
7 Cir., 168 Fed. (2d) 997 [48-1 USTC ¶9312]; Bryan v. U. S., 5
Cir., 175 Fed. (id) 223 [49-1 USTC ¶9272, 9322]; U. S. v. Fenwick,
7 Cir., 177 Fed. (2d) 488
[49-2 USTC ¶9448]; U. S. v. Johnson, 319
U. S.
503, 517 [43-1 USTC ¶9470].
5
Rule 26 of the Federal Rules of Criminal Procedure, 18 U. S. C. A. Rule
26, states as follows: "* * * The admissibility of evidence and the
competency and privileges of witnesses shall be governed, except when an
act of Congress or these rules otherwise provide, by the principles of
the common law as they may be interpreted by the courts of the United
States in the light of reason and experience."
[50-1
USTC ¶9149]Jacob S. Jelaza, Appellant v.
United States of America
, Appellee
(CA-4),
In the United States Court of Appeals for the Fourth Circuit, No. 5973,
179 F2d 202,
January 4, 19
50
Appeal from the United States District Court for the Eastern District of
Virginia, at Norfolk. Criminal.
Penalties for tax evasion: Explanation of unreported income.--The
evidence was sufficient to sustain a conviction for income tax evasion,
where taxpayer's explanation of the discrepancies between expenditures,
bank deposits and increase in net worth, on the one hand, and the amount
of income reported on his tax returns, on the other, was contradictory
and evasive. Evidence that a loan had been repaid to taxpayer and that
his mother-in-law had made gifts to him in substantial sums was
unsatisfactory.
Russell
T. Bradford and Tazewell Taylor for appellant, and John P. Harper,
Assistant U. S. Attorney, (George R.
Humrickhouse
,
U. S.
Attorney, on brief) for appellee.
Before
PARKER, SOPER and DOBIE, Circuit Judges.
DOBIE,
Circuit Judge:
Jacob
Jelaza was indicted for violations of the Internal Revenue Laws of the
United States
, 26
U. S.
C. A. §145(b). The first count of the indictment charged that for the
year 1943 Jelaza reported a net income of $13,383.15 and paid a tax
thereon of $4,385.93, whereas his actual net income for that year was
$35,766.85, on which there was a tax due the Government of $16,149.92.
The second count of the indictment charged that the appellant reported a
net income for the year of 1944 of $15,024.45, and paid a tax thereon of
$4,046.24, whereas for that year his actual net income was $51,460.90,
on which amount he owned the Government an income tax of $27,585.68.
Jelaza entered a plea of not guilty and waived a trial by jury. The
District Court of the United States for the Eastern District of Virginia
found the appellant guilty on both counts and suspended the imposition
of sentence for a period of five years upon condition that the appellant
be of uniform good behavior, not violate any of the laws of the United
States or the State of Virginia, and that he pay a fine of $10,000.00 on
the first count of the indictment and a fine of $10,000 on the second
count of the indictment within one year as directed by the Probation
Officer. Jelaza has appealed. The only question before us is whether
there was sufficient evidence to sustain the District Court's finding of
guilt.
[Reconstruction
of Income]
The
Government introduced testimony which, it claimed, showed that, by using
three methods commonly employed in computing income in cases of this
kind, Jelaza's income for the two years in question was:
"Method of Computation Net Income
1943 1944
Expenditures Method ........ $35,766.85 $51,460.90
Bank Deposits Plus Cash
Expenditures ............... 36,221.83 59,704.12
Increases in Net Worth
Method ..................... 39,401.22 55,617.13"
These methods have, in many cases, been approved by the courts, and the
Government is not required, in order to support a conviction here, to
prove with mathematical certainty the precise amount of unreported,
taxable income.
Halle
v. Commissioner, 175 Fed. (2d) 500 [49-1 USTC ¶9295]; Stinnett
v. United States, 173 Fed. (2d) 129 [49-1 USTC ¶9217]; Gleckman
v. United States, 80 Fed. (2d) 394 [35-2 USTC ¶9645].
In
these (and other similar) cases, the courts have been careful to point
out that findings of fraud have been sustained if, but only if, the
taxpayer has offered no explanation, or no adequate explanation, of the
discrepancies between (on the one hand) expenditures and/or bank
deposits and/or increases in net worth and (on the other hand) the
amount of income reported by the taxpayer.
Thus,
in the Stinnett case, supra, our Court (173 Fed. (2d) at
pages 129, 130) mentioned:
"A
gross discrepancy between bank deposits and gross receipts, without
any adequate explanation by the taxpayer * * * Stinnett could offer
no adequate explanation of these gross discrepancies." (Italics
supplied.)
In
Halle
v. Commissioner, supra, Circuit Judge Dobie (speaking for the
Second Circuit) said (175 Fed. (2d) at page 503):
"Against
this background, taxpayer and his wife introduced little or no genuine
evidence to explain the large sums of money deposited in the bank and
brokerage accounts."
[Explanation
of Unreported Income]
In
the case before us, the taxpayer did offer an explanation of the alleged
unreported income (which we shall discuss later) as being gifts from
Mrs. Tish, the mother of taxpayer's wife, and the taxpayer testified
that his father had repaid to taxpayer a loan of $6,000.
Unquestionably
a very important figure in this case is Mrs. Tish. She lived with the
Jelaza's, after she sold her store. Mrs. Jelaza was her only child, the
apple of her eye, in whom she reposed the utmost confidence. The
Government contends that Mrs. Tish's financial resources could not have
been large enough for her to have made the gifts in question to Mrs.
Jelaza, that these gifts were not in fact made and that taxpayer, under
the guise of these gifts, is concealing, and failing to report, what was
actually income taxable to him. Mrs. Tish was illiterate, without the
ability to read and write. She kept practically no records and was
addicted to such strange practices as keeping substantial sums of money
hidden in various places in her little store. Yet she displayed no
little business acumen in the conduct of her second-hand clothing
business.
Voluminous
testimony was introduced on both sides as to the extent of the resources
of Mrs. Tish. According to the Government, the resources available to
Mrs. Tish up through the taxable years before us according to her own
testimony, did not exceed $79,000; the taxpayer introduced evidence to
show that these resources exceeded $102,000. The Government claims that
the expenditures made by Mrs. Jelaza out of her monther's assets
totalled over $103,000; taxpayer claims that these items should be just
over $93,000.
No
useful purpose would be served, and it would unduly prolong this
opinion, were we to attempt a detailed analysis of the extensive
evidence in this case. It seems crystal clear that bonds and real estate
were purchased, to both of which title was taken in the joint names of
Mr. and Mrs. Jelaza, and there were other expenditures by the taxpayer,
which were utterly impossible had the taxpayer's resources been limited
to the income that he reported. This discrepancy is filled, according to
taxpayer, by gifts made by Mrs. Tish to Mrs. Jelaza, which inured to the
economic benefit of the taxpayer, and the payment by taxpayer's father
of the land of $6,000.
The
Government naturally attacked the testimony of the Jelaza's and Mrs.
Tish. As to Mrs. Tish, it was shown that she failed to file returns for,
and pay, State taxes on her personal property, also any gift taxes on
the gifts to her daughter. Mrs. Tish filed no federal income tax return
prior to 1941. Many discrepancies appear in the computations and
calculations offered by the taxpayer as to the resources of Mrs. Tish,
and the testimony submitted by the taxpayer in this connection is
evasive and not conclusive. There is an inherent improbability that Mrs.
Tish could have realized, and saved, such large sums of money as those
claimed, from operation of a small second-hand clothing store.
Other
indications that the Jelaza evidence was, in many respects,
contradictory and evasive, may readily be found in this voluminous
record. For example, in April, 1945, the appellant admitted that he had
in the Tish safe deposit
box
1943
bonds in the sum of $18,112.50, and he told the Government agent that
these were all the bonds that he had. Subsequently the agent got
information to the contrary from
Chicago
, and when he taxed the appellant with it, the latter admitted that he
had an additional amount of bonds issued in 1944 in the sum of $17,400.
Again, when Jelaza and his wife and the agent went to the box, the wife
attempted to slip $1,000 cash found in an envelope in the box into her
pocketbook, stating that she did not know what the envelope contained.
Later she admitted that she did know that it contained $1,000.
Then,
there is the uncertain testimony of Jelaza concerning the sum of $6,000
which he claims he received from his father in repayment of a loan which
he made his father in 1927 or 1928. No note or other record of this
indebtedness was produced, nor was any record shown of the payment of
the loan and there was testimony indicating that before his death in
1945, the father was in an improverished condition and left no estate
for
admin
istration after his death.
The
existence of large sums of money in cash not deposited in the bank but
kept in a safe deposit box is a highly suspicious circumstance. It
cannot here be explained satisfactorily as the result of the
eccentricity of an ignorant old woman, because the evidence is
undisputed that Mrs. Jelaza, who worked in her husband's store, had
entire charge of her mother's affairs and complete access to the cash
and securities, while the taxpayer was an interested party, closely
concerned with all these transactions. And the circumstances surrounding
these deposits and withdrawals varied quite widely from commonly
accepted business practices.
A
stronger case against the taxpayer would undoubtedly have been made had
the Government proved the precise source of income not reported by the
taxpayer; though such a showing is not essential for conviction. The
Government did attempt such a showing by proof of the gross receipts
from the taxpayer's business and evidence as to the precentage of profit
from businesses similar to that conducted by the taxpayer. On the other
hand, on behalf of the taxpayer, evidence of a Government agent was
introduced to show that the books of taxpayer were, on their face,
apparently as well kept as the average of books kept by others in a
similar business; an employee of taxpayer testified that, to the best of
his knowledge, the sale price of all goods sold by taxpayer were clearly
marked and that all sales were run through the cash register, while the
Chairman of the local Ration Board testified that, during the tax years
in question, no reports or complaints were ever made that taxpayer
charged more than the ceiling price for goods which he sold.
The
big question in this case is whether the explanation offered by the
taxpayer of the large sums of money which he expended was so
unsatisfactory that the Court below was justified in rejecting it. This,
to a large extent, depends upon the credibility of the witnesses who
testified in this case. And questions of credibility are for the Trial
Judge who saw and heard the witnesses, not for the Appellate Court.
Obviously, the Trial Judge did not believe the explanation by the
taxpayer of excess income not mirrored in his tax return. Accordingly,
we must here accept the Trial Judge's conclusion and his verdict based
upon that conclusion.
No
provision is made in the Federal Rules of Criminal Procedure for
reviewing the sufficiency of the evidence to sustain a conviction in any
different manner where the trial is had by a judge than where it is by a
jury. The case comes to us, therefore, under the rule that the evidence
is to be considered in the light most favorable to the Government and
that we may reverse only if we can say that there is no substantial
evidence to support the verdict. We cannot say that there was no
substantial evidence to support the verdict. The judgment of the
District Court must, therefore, be affirmed.
Affirmed.
[56-2
USTC ¶9992]
United States of America
v. Harold John Adonis
U.
S. District Court, Dist. N. J., Criminal No. 373-52, 146 FSupp 56,
10/18/56
[1939 Code Sec. 145(a), (b)--similar to 1954 Code Secs. 7201-7203; 1939
Code Sec. 3616(a)--similar to 1954 Code Sec. 7207]
Criminal tax evasion: Felony v. misdemeanor: Conviction with greater
penalty.--Taxpayer was properly sentenced for fraud under 1939 Code
Sec. 145(b), rather than under 1939 Code Sec. 3616(a), which calls for a
lesser penalty. Taxpayer's motion to vacate and correct that part of a
sentence against him in U. S. v. Adonis, 55-1 USTC ¶9310, 221 F.
2d 717, was denied.
Raymond
Del Tufo, Jr., United States Attorney, Wilfred W. Hollander, Assistant
United States Attorney, for plaintiff. Milton, McNulty & Augelli,
Joseph Keane, for defendant.
Memorandum
Opinion
MODARELLI,
District Judge:
This
is a motion under 28
U. S.
C. §2255 and Rule 35, Fed. Rules Crim. Proc., to correct a sentence.
Harold John Adonis attacks this court's sentence of five-years
imprisonment imposed upon him on
April 2, 19
54, following a jury verdict of guilty of criminal income tax evasion in
violation of §145(b) of the Internal Revenue Code, 26 U. S. C. The
specific charge of the indictment in the usual form was that for the
calendar year 1948 Adonis filed a false and fraudulent income tax return
for himself and his wife "in violation of Section 145(b) Internal
Revenue Code; 26 USC Section 145(b)." An appeal followed which was
unsuccessful.
United States
v. Adonis, 221 Fed. (2d) 717 [55-1 USTC ¶9310]. He began
serving his sentence on
April 22, 19
55.
[Defendant's
Claim]
The
sole question presented by this motion is defendant's claim that he was
improperly sentenced under 26 U. S. C. §145(b) 1 rather than
under 26 U. S. C. §3616(a). 2 He asks for
an order vacating and correcting the sentence.
A
recent Supreme Court decision has encouraged challenges as to the
validity of sentences because of the assumed overlapping of §§ 145(b)
and 3616(a). In Berra v. United States, 351
U. S.
131 (1956) [56-1 USTC ¶9480], the Court held that it is not for the
jury to decide whether it would apply §3616(a) rather than §145(b).
But the Court noted at pages 133-4 that "No motions addressed to
the validity of the indictment, judgment of conviction or sentence under
§145(b) were made before, during, or after trial * * *;" and at
page 135: "Whatever other questions might have been raised as to
the validity of petitioner's conviction and sentences, because of the
assumed overlapping of §§ 145(b) and 3616(a), were questions of law
for the court. No such questions are presented here." 3 The Court of
Appeals, however, in affirming Berra's conviction, held that §3616(a)
did not apply to income tax returns and that any instruction to the jury
relating to that section would have been irrelevant under the evidence. Berra
v.
United States
, 221 Fed. (2d) 590, 598 (CA-8 1955) [55-1 USTC ¶9382]. 4 In the
Supreme Court, however, both parties agreed "* * * that §3616(a) was
applicable to income tax returns, and we shall assume, arguendo,
the correctness of that interpretation of the statute."
Consistent
with its position in the Berra case, here, the
United States
assumes that §3616(a) does apply to income tax returns. It argues,
however, that Adonis was properly indicted, convicted, and sentenced
under §145(b) for two reasons: (1) Where a single act violates more
than one statute, the United States may elect to prosecute under either,
especially when one section requires an element of proof not required by
the other section. 5 (2) If there
is a conflict between the two sections, §145(b) prevails. 6
[Recent
Decisions]
There
are two unreported decisions in addition to
United States
v. Cincotta, supra, wherein the same or an analogous question
was presented as here. In the United States District Court for this
District, Judge Hartshorne found--after an exhaustive history of both
sections involved--"Since §145(b) clearly applies to income taxes
and §3616(a) and its forerunners could not have applied to income
taxes--there being no income tax law--when §3616(a) was reenacted,
Congress could not have intended that it be applied to income taxes
which were already covered by §145(b)." Judge McGohey in the
United States District Court for the Southern District of New York, in
the case of United States v. Costello, held "The defendant
does not contend that the latter section [§3616(a)] repealed the former
[§145(b)]. His contention is that since both sections cover precisely
the same ground, 'the specific offense of filing a false return with
intent to evade taxes, under Sec. 3616(a) prevails over the general
denunciation of attempting to evade taxes denounced by Sec. 145(b)' and
therefore a sentence greater than one year and $1,000 fine on each count
is illegal.
"The
motion is denied on the authority of United States v. Moran in
which the Court of Appeals for this Circuit rejected a similar
contention."
Both
of these unreported decisions were filed in 1956.
[Conclusion]
There
is ample decisional law to support the conclusion that §145(b) is a
legal basis for prosecution of income tax evasions by means of filing a
false and fraudulent income tax return. I shall cite only the United
States Supreme Court case, Holland v. United States, 348 U. S.
121 (1954) [54-2 USTC ¶9714].
I
conclude, therefore, that the defendant was properly tried, convicted,
and sentenced under §145(b) of the Internal Revenue Code of 1939.
Motion
denied.
An
order may be submitted in conformity with the opinion herein expressed.
1
"§145. Penalties.
"(b)
Failure to collect and pay over tax, or attempt to defeat or evade
tax. Any person required under this chapter to collect, account for,
and pay over any tax imposed by this chapter, who willfully fails to
collect or truthfully account for and pay over such tax, and any person
who willfully attempts in any manner to evade or defeat any tax imposed
by this chapter or the payment thereof, shall, in addition to other
penalties provided by law, be guilty of a felony and, upon conviction
thereof, be fined not more than $10,000, or imprisoned for not more than
five years, or both, together with the costs of prosecution."
2
"§3616. Penalties.
"Whenever
any person--
"(a)
False returns. Delivers or discloses to the collector or deputy
any false or fraudulent list, return, account, or statement with intent
to defeat or evade the valuation, enumeration, or assessment intended to
be made * * * he shall be fined not exceeding $1,000, or be imprisoned
not exceeding one year, or both, at the discretion of the court, with
costs of prosecution."
3
Mr. Justice Black in a dissenting opinion, in which Mr. Justice Douglas
joined at p. 137, said:
"Apparently
the Court means by this [The majority's position that since in the lower
courts Berra had not properly challenged his sentence under the felony
statute, no such question was before the court.] to leave open to
petitioner the opportunity to challenge his sentence by a motion to
correct it under 28
U. S.
C. §2255. Of course I agree that a motion under that section would be
appropriate, but I think petitioner is entitled to have it settled
now."
4
In so holding, the Court of Appeals followed its earlier decision in Dillon
v. United States, 218 Fed. (2d) 97, 101-103 (CA-8 1955) [55-1 USTC
¶9131]. In addition to the two decisions by the Court of Appeals for
the 8th Circuit, there is United States v. Cincotta, Criminal No.
31842, D. C. N. D. N. Y., opinion filed
June 6, 19
56. It was a motion to dismiss the indictment "* * * upon the
ground that each count charges the defendant with a felony under Sec.
145(b) * * * alleging identical facts which constitute only a
misdemeanor as set forth in Title 26 U. S. C. A. Sec. 3616(a)." In
denying the motion the court relied on its interpretation of the Supreme
Court's Berra opinion as not "* * * requiring relief to the
defendant at this time." The court also decided to follow the
decisions holding 3616(a) inapplicable to income tax.
5
United States v. Gilliland, 312
U. S.
86 (1940) is cited as a "complete answer" to Adonis'
contention. Rosenberg v. United States, 346
U. S.
273, 294 (1952) is also cited. United States v. Beacon Brass Co.,
344
U. S.
43 (1952) [52-2 USTC ¶9528].
6
United States v. Tynen, 11 Wall 88 (1870), and United States
v. Yuginovich, 256
U. S.
450 (1921) are cited for the proposition that "Where, as here, a
statute is passed subsequent to one already enacted, the later enacted
statute controls and the older statute must give way."
United States
v. James J. Moran, -- Fed. (2d) -- (CA-2), decided
August 15, 19
56 [56-2 USTC ¶9836].
[55-1
USTC ¶9310]
United States of America
v. Harold John Adonis, Appellant
(CA-3),
In the United States Court of Appeals for the Third Circuit, No. 11,358,
221 F2d 717,
March 28, 19
55
Appeal from the United States District Court for the District of New
Jersey.
[1939 Code Sec. 145(b)--substantially similar to 1954 Code Sec. 7201]
Criminal tax evasion: Expenditures in excess of available funds:
Sufficiency of proof: Instructions.--The evidence was sufficient to
support the conviction of tax evasion under 1939 Code Sec. 145(b), where
the Government employed the net worth-expenditures method in proving
unreported income for 1948. The record showed (1) that no additional
income was derived from sources of reported income, that is, taxpayer's
salary and income from two other sources, (2) that his calculated net
worth at the end of 1947 was $3,342.85, (3) that he spent $44,627.61 in
1948 in the building and furnishing of a home, (4) that upon reasonable
inquiry by the Government no creditable evidence of substantial
nontaxable receipts of income in 1948 could be discovered, (5) that the
large receipts and expenditures concerned occurrences in 1948 and did
not represent acquisitions of any earlier year, and (6) that taxpayer
offered no evidence but stood on his contention that the Government's
proof was inadequate in law and in fact. The Court's instructions to the
jury were held proper.
Joseph
Keane, 40 Journal Square, Jersey City 6, N. J., for appellant, Frederick
B. Lacey, Assistant United States Attorney, U. S. Court House, Newark 1,
N. J., for appellee.
Before
GOODRICH, KALODNER and HASTIE, Circuit Judges.
Opinion
of the Court
HASTIE,
Circuit Judge:
A
jury has found the appellant, Harold Adonis, guilty of criminal income
tax evasion in violation of Section 145(b) of the Internal Revenue Code,
26 U. S. C. 145(b). The specific charge of the indictment is that for
the calendar year 1948 Adonis filed a false and fraudulent income tax
return for himself and his wife. The defense offered no evidence but
stood on its contention that the government's proof was inadequate in
law and in fact.
The
most difficult matter on this appeal is one of the problems
characteristic of tax evasion cases in which the net worth-expenditure
method of proof is employed. To make the present issue clear, we will
first state those elements of the government's case which were quite
adequately proved and then inquire what more, if anything, had to be
evidenced to complete a showing sufficient for jury consideration.
[The
Facts]
First,
it was shown, consistent with appellant's 1948 tax return, that he was a
salaried employee of the State of
New Jersey
and that he received small additional compensation from two other
sources. His total 1948 income as reported for tax purposes was
$7304.77. It is conceded that no additional income was derived from the
reported sources.
Second,
there was a showing of the appellant's expenditures in 1948. About $4000
of routine living expense was proved. In addition it was shown that
appellant bought a parcel of land in March, 1948 and, during the ensuing
months, built and furnished a home on the site, paying for this
enterprise during the taxable year amounts aggregating $44,627.61. The
evidence of the payment of this much money in 1948 for land, building
and furnishings was clear, precise and uncontroverted.
Third,
the government put in evidence the details of an elaborate investigation
by its agents into the life and financial history of the appellant
through
December 31, 19
47 for the purpose of determining what assets were available to him at
the beginning of the taxable year. This investigation resulted in a
calculation of the appellant's net worth on
December 31, 19
47 as $3,342.85. This conclusion was consistent with a history of small
salaried jobs, very modest living, very small bank accounts and such
exigency that as recently as 1946 appellant's wife found it expedient to
leave her baby in the custody of an aunt while she accepted employment
at a salary of $30 per week.
Fourth,
the government proved a diligent search for loans, inheritances, gifts
and any other potential sources of non-taxable receipts in 1948 which
might have supplied the large sums expended by appellant on his home
building project. In this connection, although appellant elected to stay
away from the investigators who sought to interrogate him about his 1948
income, the investigation covered all appellant had said or was reported
to have said from time to time to other people in explanation of his
ability to finance a very expensive 1948 project, so out of line with
his apparent circumstances. This line of evidence was such as to warrant
a conclusion by a jury that all reasonable inquiry had been made without
discovery of any credible evidence of substantial non-taxable receipts
during 1948.
[Issues
Defined]
This
brings us to the area of controversy. What more than the case already
outlined had to be shown as a matter of law, and what more was shown in
fact, to justify submitting to the jury the question whether the large
excess of appellant's 1948 expenditure over the aggregate of his
year-beginning net worth and reported 1948 income represented unreported
1948 taxable income?
In
the first three paragraphs of the opinion of this court in U. S. v.
Caserta, 1952, 199 Fed. (2d) 905, 906 [52-2 USTC ¶9540], Judge
Goodrich discussed cases relevant to this question and concluded that,
absent countervailing evidence, nothing more than such proof as has been
outlined above need be shown to make it a jury question whether proven
expenditures substantially greater than disclosed income and financial
resources included unreported current income. However, we can not rest
there because, in a series of cases decided
December 6, 19
54, the Supreme Court has given us new authoritative guidance which has
significance for this problem. Holland v. United States, 348
U. S.
121 [54-2 USTC ¶9714]; Friedberg v. United States, 348
U. S.
142 [54-2 USTC ¶9713]; Smith v. United States, 348
U. S.
147 [54-2 USTC ¶9715]; United States v. Calderon, 348
U. S.
160 [54-2 USTC ¶9712]. The appellant properly urges that for present
purposes the most important pronouncement in these very recent decisions
is the following language of the
Holland
case:
"Increases
in net worth, standing alone, cannot be assumed to be attributable to
currently taxable income. But proof of a likely source, from which the
jury could reasonably find that the net worth increases sprang, is
sufficient . . .; here the disclosed business of the petitioners was
proven to be capable of producing much more income than was reported and
in a quantity sufficient to account for the net worth increases."
348
U. S.
at 138.
The
Court seems to be saying that such proof as we already have described in
the present case, standing alone, is not enough. It is deemed unfair to
draw a decisive inference against the taxpayer solely from the
fruitlessness of the government's search for a source of the large sum
of money actually spent, even though on the evidence it seems clear that
the taxpayer must have obtained new funds from somewhere during the
taxable year. It may not be assumed merely from the government's
inability to find any source of non-taxable receipts that the funds
acquired during the taxable year are taxable income. However, under the
doctrine of the
Holland
case, "proof of a likely source", without evidence of how much
that source yielded, is sufficient additional evidence to justify the
inference the government seeks to create.
But
the Court does not say that such proof of a likely source is the only
additional evidence which will suffice to establish the government's
case in a situation of this kind. And we do not believe that the Court
intended such an implication. For, in logic, other items of proof may
have equal or greater probative value as circumstantial indication that
the newly available funds were taxable income.
[Other
Supporting Proof]
We
believe the additional evidence in this case had such probative value.
The government undertook to convince the jury, first, that the appellant
had made considered statements identifying particular sources from which
he claimed to have obtained specific large non-taxable sums during 1948
and, second, that he clearly had not received any such sums from those
sources. It is argued that if the jurors were convinced that the
taxpayer had thus wilfully fabricated an account of current non-taxable
receipts to explain his 1948 affluence they might reasonably infer that
such conduct was an effort to conceal the fact and real sources of
taxable gain in that year. It is this ligical inference from the
taxpayer's own wilful misrepresentation upon which the government relies
here to supply the evidentiary requirement which on other situations is
filled by an inference from an affirmative showing of some likely source
of income. 1 Accordingly,
we analyze the evidence to see whether there was a clear and impressive
showing that the appellant wilfully misrepresented the source from which
he obtained large amounts of money in 1948.
The
cornerstone of this proof was undisputed evidence of testimony given by
the appellant himself in a judicial proceeding in
Holland
in 1951. The nature of this proceeding was not identified, but only
because the appellant took the position that this information might
prejudice his case in the view of the jury. It was shown that in the
Dutch proceeding the appellant was asked the source of the large sum
which he expended for a home in 1948. He stated that the money for the
land was supplied by his mother as a contribution. He said that the
construction of the house cost about $38,000 of which $11,000 was
obtained from a friend named Lambrew and evidenced by a mortgage,
$21,000 was obtained from another friend, a Mrs. Navarro, and $1,700
represented his own savings available in 1948. He also spoke of $4,000
of savings in 1949, but that item is not relevant to the present
controversy over 1948 taxes.
[Misrepresentations]
The
government then offered a large amount of testimony calculated to
convince the jury that this entire accounting was a wilful fabrication.
As to appellant's mother, a widow, it was shown that she died at the age
of 79 in February 1948, about a month before appellant began
negotiations for the purchase of a home site. For several years this
elderly lady had lived first with a son, other than appellant, and, at
the time of her death, with a daughter. It was also shown that in her
advanced age she was supported by the child with whom she lived, and
made no contribution to household expenses. Inquiry addressed to the
members of her family, other than appellant, showed that they knew of no
income or substantial savings under her control. She reported no gifts
for tax purposes and left no estate. On such evidence it is difficult to
see how the jury could have avoided the conclusion that the appellant
was guilty of a deliberate falsehood in naming his mother as the source
of the $5,000 with which he purchased a home site.
The
evidence concerning the alleged loan of $11,000 by Lambrew was even
clearer. A mortgage purporting to secure construction advances of
$11,000 was executed by appellant in favor of Lambrew and duly recorded
in 1948. But witnesses, including both Lambrew's attorney and
appellant's attorney, testified that the mortgage had been executed in
contemplation of advances which never were made, and that it was later
released without ever having secured any indebtedness.
The
account of the Navarro transaction was a strange one which need not be
detailed here. It will suffice to say that this was a story of a woman,
employed as a salaried clerk both before and after the alleged
transaction, bringing $21,000 in currency upon her person from South
America in June 1948, and delivering the money to appellant in a taxicab
in return for a signed but unwitnessed agreement in which he undertook
that she should have a half interest in his home then under
construction. When asked in 1952 to produce the original paper in order
that the age of the writing might be tested, she stated that it had
disappeared, although counsel for appellant had been able to produce a
photostatic copy. There was even testimony which created serious doubt
whether the defendant had known Mrs. Navarro before 1950.
In
all, we think a strong case was made that the appellant's itemizing of
these supposed sources of non-taxable receipts was a calculated
misrepresentation designed to conceal current income.
We
have not mentioned the additional fact that the prosecution did make
some effort to show affirmatively a taxable source of 1948 income. One
witness testified that he met appellant in 1950, at a time when the
witness was interested in the possibility of utilizing appellant's
services in a business venture. At that time appellant explained that he
was a state employee with very good governmental connections and that
"he was a lobbyist or go-between for the pinball operators and the
government." If this evidence had been connected with the year 1948
is would have supplied a significant indication of a likely source of
unreported 1948 income. But we think that this unamplified statement of
what the appellant was doing in 1950 is too far removed in time from the
taxable year to provide any substantial support for an inference that he
received income from that source in 1948. Therefore, the case against
the appellant must stand or fall on the adequacy of the proof of a
calculated misrepresentation of source, as outlined above, to complete a
legally acceptable circumstantial showing that the expenditures in
question were derived from taxable income.
[Source
During Taxable Year]
A
second matter urged on this appeal is also the subject of comment in the
Holland
case. There, and in the companion Calderon case, Mr. Justice
Clark alludes to the necessity of showing that the unreported earnings
occurred in the tax year which the charge specifies. See Holland v.
United States, 348
U. S.
121, 129 [54-2 USTC ¶9714]; United States v. Calderon, 348
U. S.
160, 168 [54-2 USTC ¶9712]. Appellant here says that neither the charge
nor the evidence was clear enough on this point to permit the conviction
to stand. We think he is mistaken.
The
government made a strong showing of the taxpayer's very small net worth
at the end of 1947. All of his discoverable assets at the beginning of
the taxable year added to his admitted earnings during that year
amounted to only about 25% of what he actually spent in 1948. Thus, the
inference is clear and strong that for him some source of funds was very
productive in 1948. It is also relevant that appellant himself in
explaining his 1948 affluence attributed it to financial transactions in
that year. This is not a case of large transactions and receipts spread
over a number of years. All of the evidence of large receipts and large
expenditures concerns occurrences in 1948. If we are correct in our view
that the evidence sufficiently indicates that appellant's 1948
expenditure included unreported income, there was ample basis for
concluding that this gain was realized in that year, and no indication
that it might represent acquisitions of any earlier year.
In
his instructions to the jury the trial judge stated that appellant was
charged with reporting the 1948 income of himself and his wife in a
certain small amount knowing "that their joint net income for said
calendar year was the sum of $42,410.72". He later called to the
jury's attention that "the prosecution year in this indictment is
1948". He spoke of the efforts of the government "to find all
possible sources of income that this defendant had during the period in
question". He cautioned the jury "that evidence of spending
money is not in itself evidence of having taxable income in the year in
which the money was spent." The entire charge and the posture of
the evidence considered, we think the court made it clear to the jury
that appellant could be convicted only if they found that he had 1948
income which he wilfully failed to report.
We
have considered all other contentions of the appellant. In our judgment
they reveal no basis for setting aside this conviction.
The
judgment will be affirmed.
1
It is to be noted that this is not a situation in which the government
relies upon an admission, which may require corroboration. The statement
of the defendant is proved as a relavant fact. Independent evidence of
its falsity is then introduced to show the significance of the
statement.
[50-1
USTC ¶9320]
United States of America
v. Eugene Vassallo, Appellant
(CA-3),
In the United States Court of Appeals for the Third Circuit, No. 10,102,
181 F2d 1006,
May 11, 19
50
Appeal from the United States District Court for the District of
Delaware.
Penalties: Evidence: Willful attempt to evade or defeat tax.--Evidence
that taxpayer knowingly filed returns for himself and a corporation of
which he was the sole owner without reporting substantial items of
income, established by the Government through a net worth basis and the
"sources and application of funds" method, was sufficient to
support a finding of guilty under six counts of an information charging
a willful attempt to evade and defeat the income tax.
Francis
A. Reardon, Assistant United States Attorney,
Wilmington 99
,
Delaware
, for appellee. Stewart Lynch,
Equitable
Building
,
Wilmington
7,
Delaware
, for appellant.
Before
MARIS, KALODNER and HASTIE, Circuit Judges.
Opinion
of the Court
PER
CURIAM:
The
appellant was convicted under six counts of an information charging him
with violations of Section 145(b) of the Internal Revenue Code. The
defendant waived a jury trial and his case was accordingly tried by a
judge of the district court without a jury. The trial judge made special
findings in addition to a general finding of guilty.
On
this appeal the appellant urges that the evidence was insufficient to
sustain his conviction and that the special findings made by the trial
judge were inadequate and not in accordance with Criminal Procedure Rule
23(c). We have carefully considered the appellant's contention in this
regard but find them so wholly lacking in merit as to require no
extended discussion. It is enough to say that the evidence was quite
sufficient to support the trial judge's special findings and that those
special findings are adequate and fully support the general finding of
guilty on each of the six counts in question which the trial judge made.
The
judgment of the district court will be affirmed.
[54-2
USTC ¶9712]
United States of America
, Petitioner v. Edward B. Calderon
In
the Supreme Court of the
United States
, No. 25. October Term, 1954, 348 US 160, 75 SCt 186,
December 6, 19
54
On Writ of Certiorari to the United States Court of Appeals for the
Ninth Circuit.
[1939 Code Secs. 41 and 145--similar to 1954 Secs. 446 and 7201]
Evasion of income taxes: Proof of fraud: Net worth increase
inapplicable: Circumstantial evidence.--Taxpayer, an operator of a
legitimate coin-machine business, was convicted of wilful attempts to
evade and defeat his own and his wife's income taxes for the period 1946
through 1949. Conviction was based on the Government's computation of
net worth increases for these years, but the Ninth Circuit reversed
because proof of beginning cash was inadequate. The Supreme Court agreed
that the evidence was flimsy in this respect but, in the circumstances,
recourse could be had to independent evidence tending to establish the
crime directly, without recourse to the net worth method. Such evidence
established the fact that taxpayer's receipts from operations of his
business were tabulated from many receipt books, some of which were
numbered and some of which were not. Such a system placed taxpayer in
the position of one who kept no books at all and of receiving unrecorded
amounts of income. Thus, even though there may have been an
"error" as to cash on hand at the starting point for opening
net worth, the remainder of the net worth computation established a
deficiency on which a conviction for fraud could be based. Accordingly,
the Supreme Court sustained the conviction on the principle that
"an inference of tax evasion could be based on the fact that
taxpayer's visible assets greatly increased at a time when he was
receiving unrecorded amounts of taxable income."
Simon
E. Sobeloff, Solicitor General, H. Brian Holland, Assistant Attorney
General, Marvin E. Frankel, Ellis N. Slack, David L. Luce, Joseph M.
Howard, Fred G. Folsom, Dickenson Thatcher, Special Assistants to the
Attorney General, for petitioner. Norman Herring, 111 E. Broadway,
Tucson, Ariz., Joseph W. Burns, 30 Rockefeller Plaza, New York, N. Y.,
Fulton, Walter & Halley, of counsel, 30 Rockefeller Plaza, New York,
N. Y., for respondent.
CLARK,
Justice:
The
issue in this case is similar to the question presented in Smith v.
United States ante, p. -- [54-2 USTC ¶9715], decided this day, on
the corroboration of respondent's extrajudicial statements concerning
his "opening net worth." The admissibility of these statements
is not questioned.
Respondent,
an operator of a legitimate coin-machine business, was tried and
convicted on four counts charging him with willful attempts to evade and
defeat his own and his wife's income taxes for the years 1946 through
1949. The Government's case rested primarily on a net worth computation,
which showed net worth increases and nondeductible expenditures of
$62,993.47 for the prosecution period; during these same four years
respondent declared only $16,775.14 income. It was stipulated that the
computation was correct except as to the items "cash on hand"
and "cash in bank." Respondent's bank balances were proved by
introducing the bank records, and, with some minor adjustments, the
Government's net worth computation was amply verified in this respect.
As to "cash on hand," particularly the amount credited to the
taxpayer as of the beginning of the prosecution period, respondent
contends that the only evidence tending to substantiate the Government's
figures is the uncorroborated admissions of the accused. He argues that
lacking independent evidence of the corpus delicti, the
conviction cannot stand. The Court of Appeals agreed and reversed the
judgment of conviction, observing that, absent a starting item such as
cash on hand, "the remainder of the statement proves nothing."
207 Fed. (2d) 377 [53-2 USTC ¶9579]. We granted the Government's
petition for certiorari. 347
U. S.
1008.
The
Government credited the respondent with $500 cash on hand at the
starting point. One of the Government agents testified that the $500
figure was an approximation based on respondent's oral answer to a
request that he estimate his year-end balances of cash on hand.
According to the agent's notes, respondent replied that he had
"approximately $500.00 in cash in his pocket. He believes that
because it is his habit to carry about that much money in his pocket at
all times." It was admitted that the taxpayer might have had more
than this amount on hand at certain times, since he had frequently made
deposits in his bank accounts in sums of $1,000 and $2,000. It appears
that the agent did not inquire into how much money respondent had in his
safe or his business, as opposed to the funds in his pocket, maintaining
that he was justified in treating the taxpayer's statement regarding the
$500 as covering his total cash on hand. Respondent contended that this
figure failed to embrace a substantial sum in currency in his safe at
the starting date. Both the Government and the respondent adduced a
number of circumstances in support of their respective positions, and in
interpreting the meaning of respondent's statement the jury could
readily have found the Government's circumstantial proof more
persuasive. In our view, it could have concluded from the evidence that
respondent's statement as to the $500 referred to his total cash on hand
at the starting point.
Respondent
also signed a written statement admitting to the same opening cash on
hand. This document contained the over-all net worth computation relied
on by the Government at the trial. The Government's evidence tended to
show that it had been signed by the respondent after the usual warning
and after he and the agents had worked over the statement, item by item,
for some eight hours. Though admitting that both he and his accountant
had read the statement, the respondent sought to prove that he had not
understood the net worth computation as a whole or the individual item
of "cash on hand"; that before signing the statement he had
asked his accountant whether it was correct, intending to rely on the
latter's judgment; and that the accountant, in giving defendant the
go-ahead, had merely approved the method employed in compiling the
statement without passing on the accuracy of the particular figures.
Again it was for the jury to consider all these circumstances in
determining the weight to be given the signed statement; we cannot say
that the document should have been rejected as a matter of law.
But
all these factors are relevant in determining whether the independent
evidence provided adequate corroboration. As in Smith v. United
States, the circumstances surrounding defendant's admissions cast
some doubt on their reliability. The statements were made by a taxpayer
anxious to cooperate with the Government in the hope of limiting civil
liability and avoiding criminal prosecution. The oral statement, with
its "in the pocket" terminology, is certainly not clear. And
the Government's own witness, the respondent's accountant, testified
that he had not verified the particular figures in the written statement
when it was referred to him by respondent. Under these circumstances,
the trial judge and reviewing courts should exercise great care in
determining whether the statements of the accused were corroborated. The
reviewing courts, however, can seek corroborative evidence in the proof
of both parties where, as in this case, the defendant introduces
evidence in his own behalf after his motion for acquittal has been
overruled. Cf. Bogk v. Gassert, 149
U. S.
17. 1
Unlike
Smith, there is not sufficient evidence here of the taxpayer's
financial history to substantiate directly the opening net worth. Proof
that the taxpayer was impoverished by the depression, that he was
working for his meals and $8 a week in 1935, is too remote, absent proof
of the taxpayer's financial circumstances in the intervening years. The
respondent entered the coin-machine business in a modest way in 1935; he
discontinued his low-paying job in 1939; and, except for a short period
during the war, he devoted his entire efforts to his coin-machine
business until 1945, when he began to operate a café as well. The only
evidence of defendant's fortunes between 1935 and 1946, the first
prosecution year, consists of his tax returns for 1944 and 1945 and some
meager evidence with regard to his tax returns for 1941, 1942 and 1943.
The latter apparently was obtained from the respondent, and, standing
uncorroborated, cannot serve to corroborate respondent's other
admissions. The 1944 and 1945 returns show net taxable income of $4,162
and $7,328 respectively, with gross receipts from the coin machines of
$9,266 and $10,302. This sketchy background can hardly give rise to an
inference that defendant had no more cash at the starting date than the
Government gave him credit for.
Accordingly,
we must search for independent evidence which will tend to establish the
crime directly, without resort to the net worth method. There are
several evidentiary strands which merit inspection, the first of which
is very similar to one employed in Smith. We held there that an
inference of tax evasion could be based on the fact that the taxpayer's
visible assets greatly increased at a time when he was receiving
unrecorded amounts of taxable income. In Smith v. United States,
the taxpayer kept no records. Here the records were shown to be
incomplete. Receipts from the coin machines were tabulated from a number
of receipt books covering various locations. The receipt books were not
numbered; the taxpayer was unsure of how many machines he had in
operation; and there was considerable concern about receipt books being
lost or misplaced. The loss of one receipt book would make a difference
of from $1,000 to $1,500 in income. Eventually, on the advice of his
accountant, respondent began to number the books. 2 But, even
after this safeguard was employed, unnumbered books continued to
appear--and then disappear; two were lost, and subsequently recovered,
in a period of three or four months. A system of recording receipts
which rests on so unfirm a foundation hardly places the respondent in a
very different class--for this purpose--than the taxpayer who keeps no
books at all. Both are receiving unrecorded amounts of income.
The
increase in respondent's visible assets is considerably less than the
increase presented in the Smith case. There the increment over a
four-year period amounted to more than $196,000; the taxpayer's declared
income was less than $17,000; and his average personal living expenses
were $3,500 a year. In this case, also over a four-year span, the
figures are: increase in visible assets (excluding the cash item),
$47,594; declared income, $16,775; living expenses, $3,000 yearly (plus
some $1,900 in other nondeductible expenditures). The increase, though
less than in Smith, is far from insubstantial. While reporting
income only $4,775 in excess of his living expenses, the taxpayer
increased his bank balances by over $16,000; added $1,000 to his
holdings of United States Savings Bonds; increased his investments in
land and buildings by over $9,000; and poured some $22,000 net
additional capital into his business. These increments, when considered
in the light of respondent's receipt of unrecorded amounts of taxable
income, are sufficiently at variance with his reported income to support
an inference of tax evasion. The inference is buttressed in this case by
the peculiar relation between the reported gains from respondent's
coin-machine business and his investments in new equipment. In three of
the four prosecution years the respondent spondent reported a net loss
on his coinmachine operation, and in the fourth a net gain of only
$1,330. During the same period he made gross investments in new
equipment totaling $37,555. The jury could readily find defendant's
investment policy inconsistent with his claimed losses. Furthermore,
although respondent contends that the war years market the peak of his
business activity and that his apparent postwar increases came from
profits accumulated during that period, it was not until 1947, the
middle of the prosecution period, that his business became sufficiently
large to require the full time of his accountant. We hold that the
financial history of respondent and his business during the prosecution
years provides sufficient independent evidence of the crime of tax
evasion to corroborate his statements concerning cash on hand.
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. 3 There could
hardly be more conclusive independent evidence of the crime.
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, 4 and
respondent was convicted on all four counts. It might be argued that
independent evidence showing a $30,000 deficiency is not enough--that
there must be evidence that this sum resulted in a deficiency for each
of the years here in issue. There is no merit in this contention. In the
first place, this evidence is merely corroborating respondent's
cash-on-hand admissions and need not comply with the niceties of the
annual accounting concept. While the evidence as a whole must show a
deficiency for each of the prosecution years, the corroborative evidence
suffices if it shows a substantial deficiency for the over-all
prosecution period. Independent evidence that respondent understated his
income by $30,000 in the same four-year period for which respondent's
extrajudicial admissions tended to show a $46,000 deficiency is adequate
corroboration. It provides substantial evidence that the crime or crimes
of tax evasion have been committed; the corroboration rule requires no
more. Second, there is evidence in this case which tends to negate the
possibility that the alleged $17,000 hoard could have absorbed the
deficiency for any of the prosecution years. This money
supposedly went toward the purchase of equipment in 1946 and early 1947.
Almost $16,000 in equipment was purchased in 1946; this accounts for
nearly all of the cash hoard and still leaves a deficiency in 1946 of
over $5,000 in unreported income. 5 The funds
which remain are insufficient to absorb the income deficiencies of any
subsequent prosecution years. 6
As
we said, the circumstances surrounding respondent's admissions create
considerable doubt as to their reliability. We have therefore examined
the independent evidence with great care to insure that the accused will
not be convicted on the basis of a false admission alone. Although the
evidence was insufficient to corroborate the opening net worth directly,
we find the independent proof of tax evasion entirely adequate.
Accordingly, the decision of the Court of Appeals setting aside the
conviction is Reversed.
DOUGLAS,
Justice, dissents.
1
By introducing evidence, the defendant waives his objections to the
denial of his motion to acquit. Lii v.
United States
, 198 Fed. (2d) 109; Leeby v.
United States
, 192 Fed. (2d) 331 [51-2 USTC ¶9497]; Gaunt v.
United States
, 184 Fed. (2d) 284; Mosca v.
United States
, 174 Fed. (2d) 448; Hall v.
United States
, 168 Fed. (2d) 161. His proof may lay the foundation for otherwise
inadmissible evidence in the Government's initial presentation, Ladrey
v. United States, 155 Fed. (2d) 417, or provide corroboration for
essential elements of the Government's case, United States v.
Goldstein, 168 Fed. (2d) 666; Ercoli v.
United States
, 131 Fed. (2d) 354.
2
It is not clear from the record whether this numbering began during or
after the prosecution period. Compare R. 130-131 with R. 177-178.
3
The Government's net worth computation, based on $500 cash on hand at
the outset and $1,971.50 on hand at the conclusion of the prosecution
period, yields a four-year net worth increase (with expenditures) of
$62,993-$46,218 in excess of declared income. Eliminating the cash items
from the net worth statement, the deficiency is reduced by $1,471--to
$44,747. If the defendant's testimony is accepted, of $17,000 cash on
hand at the beginning and $3,000 at the end, the deficiency must be
reduced by another $14,000, leaving $30,747.
4
The computed deficiency for 1947 was $7,393, and for 1948, $3,284.
5
The computed deficiency for 1946 was $21,019.
6
See notes 3 and 4. The computed deficiency for 1949 was $14,523.
[59-2
USTC ¶9486]United States of America, Plaintiff v. David D. Beck, also
known as Dave Beck, Defendant United States of America, Plaintiff v.
David D. Beck, also known as Dave Beck; Nathan W. Shefferman; Shelton
Shefferman; Norman J. Gessert; Warren David Beck, also known as Dave
Beck, Jr., and Fred Verschueren, Sr., Defendants
U.
S. District Court, West. Dist.
Wash.
, So. Div., Nos. 16515, 16526, 2/19/59
[1939 Code Secs. 145(a) and 3793(b)--similar to 1954 Code Secs. 7201 and
7206(3)]
Wilful evasion of income tax: Filing of false information returns.--The
jury found the defendant guilty on all counts of an indictment charging
wilful evasion of income taxes for the years 1950-1953 and the
preparation of false Forms 990--information return of exempt
organization. The Commissioner had determined substantial omissions of
income by use of the net worth-expenditures method, treating union funds
used by the defendant for his own purposes as taxable income rather than
loans, although after the taxable years some restitution was made. The
Forms 990 showed amounts used for buildings and construction in excess
of amounts actually expended for those purposes. In some cases, they
were not signed by the defendant.
Charles
P. Moriarty, United States Attorney, 1020 United States Courthouse,
Seattle, Wash., John S. Obenour, Assistant United States Attorney,
United States Courthouse, Tacoma, Wash., Kinsey T. James and John J.
McGarvey, both of Department of Justice, Washington, D. C., for
plaintiff. Charles S. Burdell of Ferguson & Burdell, 1012 Northern
Life Tower, and William L. Dwyer, 1207 Hoge Building, all of Seattle,
Wash., for defendant David D. Beck.
BOLDT,
District Judge:
We
now come to the next to the last phase of the trial, the last being, of
course, your deliberations and determination of verdict. What now
follows is sometimes referred to as the Charge and sometimes as the
Instructions of the Court. In either case, it is the same part of the
trial; namely a statement to the jury by the judge of the applicable
principles of law that are to be followed in considering the verdict,
and in determining whether or not the verdict should be the one way or
the other.
[Criminal
Case]
You
have in mind, of course, that this is a criminal case, not a civil
proceedings. The fact that civil liability, if any, has not been
determined or satisfied should not be considered by the jury as in any
manner whatever bearing on the ultimate facts in the present case. There
are many factors both of fact and law pertaining to that matter, as to
which you are wholly uninformed, and for that reason if no other, it
would be entirely improper for you to give any thought whatever to that
subject.
[Wilful
Attempt to Evade Taxes]
The
only offenses under consideration are those named in the indictment;
namely, the wilful attempt to evade income taxes in 1950, '51, '52 and
'53, as charged in the counts pertaining to the personal tax returns of
the Defendant Beck and wife, and the wilful participation in the
preparation and presentation of Form 990 returns for the Joint Council
Building Association in 1950 and 1952 as charged in the counts
pertaining to the Form 990 returns.
Those
are the sole and only matters that you now ultimately must determine.
You must understand and clearly keep in mind that these charges relating
to the particular years I have specified are the sole and only offenses
upon which the defendant is being tried in this case.
Heretofore,
both at the time that you were qualified to serve as jurors in this
Court and again at the beginning of this particular trial, I called your
attention to the fact that under our system of
admin
istering justice, in those cases wherein a jury participates in the
trial, it is the function of the jury to find and determine facts, and
in that field, the jury are the final and ultimate and absolute
authority.
On
the other hand, it is the responsibility of the Judge to determine and
state to the jury the law, and when that has been done, it becomes the
duty of the jury to follow the law as the Judge states it to whatever
result that may bring, and without any regard whatsoever to the personal
inclinations of any particular juror as to the wisdom or unwisdom, or
the desirability or undesirability of the law in question.
In
this respect your duty is as mine, to follow and apply the law wherever
that may lead.
In
this court as in Federal Courts generally, the Judge is free to make
comment upon the evidence if he see fit, and to suggest to the jury, if
he think it appropriate, a summary of the evidence, or even to suggest
to the jury what the evidence indicates, but even if a Judge does that,
the jury are not obliged to follow the suggestions of the Judge. Indeed,
the jury are always obliged to follow their own intelligence, conscience
and judgment about what the facts of the case may be, even though it be
necessary to disagree with suggestions made by the Judge.
In
this particular case, I see no occasion either now nor have I seen any
throughout the trial for the Judge to make any comment about the
evidence or the facts to be derived from the evidence. In my judgment,
the controlling facts applicable to this case can as readily and
properly be drawn by the jury as by the Judge. Indeed, I think more so.
The combined experience in life that you twelve people who will
ultimately sit in deliberation on this case have, exceeds anything that
any single individual, however learned or experienced he might be, could
possibly have, and I am well satisfied that the intelligence, alertness
and attentiveness with which the jury has followed this evidence makes
it unnecessary for me to make any summary of the evidence or to comment
in any way upon it.
Now,
then, if it has appeared to you that at any time during the trial or in
the giving of these instructions that I have made comment about the
evidence or have suggested in some way or other what the facts of the
case are, I want to assure you that it has been unintentional, and you
have misinterpreted my actions or words, because I do not in any remote
way wish you to be influenced by anything than I may have said or done
in arriving at your conclusion about what the controlling facts in the
case are.
In
this Court the instructions or charge is given orally as I am giving it
to you now. It is given only once. You will not receive any transcript
or booklet or pamphlet containing the charge. You must hear the law now
as I give it to you this morning. Follow it closely, and be prepared to
apply it. This places a heavy responsibility upon me, ladies and
gentlemen, to do the utmost within my capacity to state the law and
these instructions understandably and clearly, and it places an equal
responsibility upon you to listen closely and intelligently in order
that you may understand the law applicable to the case.
In
general, I personally try to make the instructions as brief as the
subject matter of a particular case will permit. In this particular type
of case it is difficult, if not impossible, to make the instructions
very brief. I must cover a great variety of subjects, some of which
require some little telling, and for that reason, the instructions may
be more extended that otherwise might be desirable.
In
view of that, I intend to take a short break about midway in order to
give you an opportunity to relax for a few moments and come back
prepared to again listen closely and attentively to the charge.
At
the outset, I want to admonish you that the instructions are to be
considered as a whole. Each part or phase of the instructions is to be
considered and applied together with all other parts and phases of the
instructions. In other words, you must not pick out some particular
instruction or some particular thing I say and overemphasize it and
apply it without considering and keeping in mind all of the other
instructions given you as the whole law of the case. It is quite
important that you understand that the charge as now given is to be
treated as a whole, and everything covered therein is to be considered
in applying the law as a whole.
In
the present case, the evidence has covered a wide range and variety of
subjects and details. Any or all of these, however, ultimately are
important only as you may find they bear upon the following ultimate
questions of fact to be determined by the jury as to the personal return
counts:
[Income
Tax Return]
1.
Was there a greater tax due from the defendant and wife for the tax year
in question than was shown on the defendant's tax return for that year?
2.
Did the defendant know that there was a greater tax due than was shown
on the income tax return in question?
3.
Did the defendant wilfully attempt to evade tax known to be due by
preparing, authorizing or ratifying a signed income tax return which
understated the tax due for the tax year of the return?
Those
are the three ultimate questions to be considered with respect of the
personal return counts.
[Form
990]
As
to the Form 990 counts, the ultimate questions are:
1.
Was the return false or fraudulent in the particulars charged?
2.
Did the defendant know that the return was false in the particulars
charged?
3.
Did the defendant willfully and knowingly participate in the manner
charged in the preparation or presentation of the return?
Those
are the three ultimate questions of fact to be determined with respect
of the 990 counts.
Ladies
and gentlemen, the forgoing are the ultimate and basic facts to be
determined by the jury from the evidence. Further and more detailed
instructions will now be given to the jury concerning the principles of
law by which the jury must be guided in determining all pertinent facts
in the case and in reaching a verdict as to each of the counts on trial.
[Beck's
Personal Income Tax Return]
The
counts of the two indictments now on trial charge the defendant, Dave
Beck, with six separate and distinct criminal violations of the Federal
income tax laws. Four of these charge that in each of the years 1950,
1951, 1952 and 1953 the defendant, willfully and knowingly, attempted to
evade and defeat a substantial portion of his personal Federal income
tax, by filing false and fraudulent tax returns for himself and his wife
in each of the years referred to. These counts and the charges contained
therein, which will be more fully explained in a few minutes hereafter
in these instructions will be referred to as the "personal return
counts." Whenever I use that term, "personal return
counts," I will be referring to the four counts which relate to the
personal income tax returns of the defendant and his wife for the years
referred to.
[Form
990 Information Return]
The
other two counts on trial charge the defendant Dave Beck with aiding,
abetting, counseling, assisting and procuring the preparation and
presentation of a false and fraudulent Form 990 return, which is an
information return, for each of the years 1950 and 1952 for Joint
Council No. 28 Building Association. Filing of a Form 990 return by
Joint Council No. 28 Building Association in each of the years referred
to was required by law. Hereafter in explaining and dealing with these
two counts and the charges contained therein I will refer to them as the
"Form 990 counts."
To
all of these charges the defendant has entered a plea of not guilty,
which places upon the Government the burden of proving beyond a
reasonable doubt every fact essential to conviction of the offense
charged in each count of the indictment.
[Presumptions]
The
defendant is presumed to be innocent of the offenses charged. This
presumption attaches to and continues with the defendant throughout all
stages of the trial, is applicable to your consideration of every fact
issue in the case, and continues throughout all stages of your
deliberations, and until such time as you find, if you should so find,
that the presumption has been met and overcome by the evidence in the
case beyond a reasonable doubt.
This
defendant, as all other persons charged with criminal offenses, is
entitled to the presumption of innocence as a part of the law of the
land, and, unless the presumption is overcome by the evidence in the
case beyond a reasonable doubt, as to every element of the case
necessary for conviction, the defendant must be acquitted.
The
fact that the Grand Jury heretofore has returned indictments charging
the defendant, as I have just stated to you, is no evidence whatever of
his guilt, and must not in the slightest be so considered by you. An
indictment is merely the formal instrumentality or machinery provided by
the law for bringing a person to trial. Guilt can in no way be presumed
to arise because of the indictment; guilt must be provided by competent
evidence beyond a reasonable doubt. Therefore, in determinating your
verdict in this case, you must give no consideration whatever to the
fact that the defendant has been indicted by a Grand Jury.
[Personal
Income Tax]
The
four personal return counts are brought under a section of the Internal
Revenue Law of the
United States
which provides as follows:
"Any
person who attempts in any manner to evade or defeat any tax imposed by
the laws of the
United States
or the payment thereof" is guilty of the criminal offense with
which the defendant is charged in each of the personal return counts.
Count
1 of the indictment in Cause No. 16515 charges the defendant with
willfully and knowingly attempting to evade and defeat a substantial
amount of income tax which was due and owing by him and his wife to the
United States for the Calendar year 1950 by filing and causing to be
filed with the Collector of Internal Revenue at Tacoma a false and
fraudulent income tax return when he then and there well knew that his
taxable income and tax due thereon was substantially greater than that
reported. Count 1 of the indictment in Cause No. 16526 makes the same
charge as above except that the charge relates to the income tax of the
defendant for the year 1951. Likewise, Counts 2 and 3 of the second
indictment are the same except that they refer to the tax years 1952 and
1953 respectively. I will not detail the exact amounts of alleged
taxable income and tax specified by each of the "personal
return" counts as these figures appear in the indictments which you
will have with you in the juryroom.
The
word "attempt" as used in the law I have read to you, on which
the personal return counts are based, involves two essentials:
1.
An intent to evade or defeat income tax, and
2.
Some act by the taxpayer in furtherance of such intent.
There
must exist a union or joint operation of act with intent, and both act
and the intent to evade tax must be proven beyond a reasonable doubt.
An
attempt to evade tax contemplates that the defendant who is charged with
such attempt had knowledge that he had tax liability for a tax year in
question which was required by law to be reported on his tax return for
that year, and that he wilfully attempted and specifically intended to
evade and defeat such tax liability, or a substantial portion thereof,
by filing or causing to be filed a tax return which did not report tax
liability on taxable income which he knew he had received during the
particular year in question, and which he knew should be included in
such return.
The
three essential elements of the offense charged in each of the personal
return counts of the indictment are:
1.
That there was owing to the United States income tax in an amount
substantially greater than was shown on the tax return referred to; and
2.
That the defendant knew there was substantially more income tax owing
than was shown on the return referred to; and
3.
That the defendant filed, authorized or ratified the filing of such
return in a willful attempt and with the specific intent to evade or
defeat such income tax which the defendant knew he owed for the tax year
in question.
If
you find the existence of each and all of these elements beyond a
reasonable doubt as to any count or counts, then you must find the
defendant guilty as to such count or counts. On the other hand, if you
have a reasonable doubt as to the existence of any one or more of these
elements as to any count or counts, then it will be equally your duty to
find the defendant not guilty as to such count or counts.
Each
count of the indictments, whether it be a personal return count or a
Form 990 count, must be considered and determined separately although
the essential elements of the offense charged are the same as to each of
the personal return counts, and, likewise as to each of the Form 990
counts, to which I will more specifically allude a little later in the
charge.
[Government's
Burden of Proof]
The
Government is not obliged to prove, as to each particular count, an
attempted evasion of the entire amount of tax liability as alleged in
the indictment, but it is sufficient for the Government to prove beyond
a reasonable doubt as to each particular count that the defendant
attempted to evade a substantial amount of his tax liability for the
particular year in question. In this connection, it is not necessary
that the precise and exact amount of unreported taxable income, or tax
liability thereon, as charged or to the extent originally charged in the
indictments, be proved with mathematical certainty, but it is sufficient
if such items be proved to have existed in substantial amounts.