Bank Records and Net Worth Increases
3 Page3
The
meaning of the term "substantial" as here used depends upon
the facts, circumstances and conditions shown by the evidence in each
particular case. Any amounts of unreported taxable income or tax,
greater than sums relatively small under the particular circumstances
pertaining thereto, are substantial. Any amounts of unreported taxable
income or tax should be disregarded which reasonably may be accounted
for as due to error, oversight or as reasonably considered
inconsequential by a taxpayer.
The
intent of defendant required for conviction is what the law calls
"specific intent." Specific intent in this instance means more
than a mere general intention to perform an act or omit performance of
an act in violation of law or regulations made pursuant to law. Specific
intent to evade income tax liability is not to be presumed or inferred
merely from the filing of an incorrect or understated tax return. It
means that the acts charged must have been done wilfully and purposely.
A person who knowingly, wilfully and purposely either does an act which
the law forbids or fails to do an act which the law requires,
deliberately intending to violate the law with the intent to defraud,
acts with a specific intent.
An
act is done willfully if done voluntarily and purposely and with a
specific intent to do that which the law forbids. Wilfulness implies bad
faith and an evil motive. With regard to the offense charged in the four
personal return counts of this indictment, wilfully means a specific and
positive purpose and intent to evade a tax obligation known to be due.
An
act is done knowingly if done voluntarily and purposely and not because
of mistake, inadvertence or other innocent reasons.
It
is not necessary for the Government to prove that the defendant actually
knew that a particular act or failure to act is a violation of law.
However, whether or not defendant acted or failed to act because
ignorant of the law is a matter that may be considered in determining
whether or not the accused acted or failed to act with specific intent,
and thus knowingly and wilfully as charged.
If
you find that the defendant's tax returns, for either 1950, 1951, 1952
or 1953, did not fully and correctly report defendant's income and the
tax due thereon in such year or years, this fact standing alone will not
warrant a conviction; conviction of defendant will only be warranted if
you further find that the returns were filed in a willful and
intentional attempt to evade and defeat the payment of income tax. The
wilful attempt to evade and defeat the payment of income tax is an
essential element as to each year in question which must be proved
beyond a reasonable doubt just as any other fact in the case.
You
cannot, of course, look into the defendant's mind to see what his intent
was with respect of the tax returns in question. It would be difficult,
if not impossible, to establish the intent or wilfulness of any
individual by direct evidence. However, direct evidence of wilfulness
and intent is not necessary, for they may be found and determined by a
consideration of all the facts and circumstances disclosed by the
evidence in the case. In your own affairs in life, ladies and gentlemen,
you are constantly called upon to decide from the actions or omissions
of other people what their intentions and purposes are, and in so doing
you have probably discovered that in many instances what a person does
or does not do speaks more clearly as to his intent and purposes than
his spoken or written words.
Incorrect
or understated income tax returns which are the result of a taxpayer's
bona fide mistakes, negligence or carelessness, however great, or the
incompetence, negligence, mistakes or wilful errors of persons whom the
taxpayer in good faith relied on to prepare his returns, are not
sufficient to support conviction in a criminal case. If the taxpayer
acts without the wilful intent of evading tax, he is not guilty of the
crime here charged even though his income and tax due thereon was
understated on his tax returns. The taxpayer must have had actual
knowledge of the existence of an obligation to pay a greater tax and
wilfully attempted to evade or defeat such tax either by his
preparation, authorization or ratification of filed tax returns which
understated true income, or by withholding information from those
preparing the returns, knowing that such withholding would result in an
understatement in the returns of the taxpayer's income and tax due
thereon.
If,
after a consideration of all the evidence, you find beyond a reasonable
doubt a specific intent on the part of the defendant to wilfully and
knowingly attempt to evade taxes understated in the tax returns in
question, then you should find him guilty. On the other hand, if you do
not find such intent on the part of the defendant has been proved by the
government beyond a reasonable doubt, then you should find him not
guilty.
As
indicated, any understatement of taxable income in the personal income
tax return of the defendant and wife for any year, if you find that
there was such understatement, shall not be considered by you in
arriving at your verdict if you find that such understatement was the
result of negligence, or disregard of the applicable rules and
regulations, or the mistaken but honest belief in good faith that the
union entity funds constituted loans, in each instance as distinguished
from specific intent to defraud, which must be proved beyond a
reasonable doubt.
[Avoidance
v. Evasion]
You
are instituted that under the law there is an important distinction
between income tax avoidance and income tax evasion. Tax evasion is, in
brief, the wilful and fraudulent failure to pay income taxes which are
lawfully owing to the
United States
. Tax avoidance, on the other hand, is the practice of arranging one's
affairs so as to incur the lowest possible tax liability. There is
nothing whatever in the laws of the United States which is designed to
discourage or prevent a taxpayer from using every legitimate device to
minimize his tax liability. Tax avoidance, as distinguished from tax
evasion, is therefore a lawful and legitimate practice.
If
you find that defendant did not keep or provide for books and records
recording his financial activities and transactions, such fact, in and
of itself, will not sustain a finding of fraud or wilful attempt to
evade taxes. However, if you find such a failure to keep or provide for
books, it may be considered by you together with all of the other
evidence in the case in determining whether the offenses charged have
been proven beyond a reasonable doubt.
Evidence
has been received during the trial concerning the loss or destruction of
certain records of several persons and organizations, including the
Western Conference of Teamsters, Joint Council Building Association, and
records of certain banks. Such evidence was permitted for the purpose of
laying the basis for the presentation of certain matters by oral
testimony, and as a basis for allowing the use of the net worth method,
which I will explain to you later. Therefore, you are instructed that
the loss or destruction of any such records, in and of itself--that is,
standing alone, shall not be considered as a fact adverse to the
defendant.
[Taxable
Income]
Income,
as that term is used in the federal income tax laws, does not include
all money and property that may come into the possession of a taxpayer
or be applied to his use and benefit in a given tax year. Certain of
such items of money or property are not taxed under the federal tax laws
and therefore are designed "nontaxable." I will now define for
you what constitutes taxable income, and, in so doing, I will also
enumerate, as far as pertinent to this case, those receipts which are
nontaxable. This definition is of basic importance in the case and I
suggest you follow the definitions closely.
The
federal income tax is levied on the net gains, profit and income, of
whatever kind and in whatever form paid, derived from wages, salaries,
or compensation for personal services, or from professions, vocations,
trades, businesses, commerce, or sales or dealings in property, whether
real or personal; also from interest, rent dividends, securities, or the
transaction of any business carried on for gain or profit, or gains or
profits and income derived from any source whatever. The tax is imposed
on gains or income whether acquired in a lawful or in an unlawful
manner. That the taxpayer's mode of receipt may be illegal. or that his
freedom to dispose of a gain, may be assailable by someone with a better
title to it, his no bearing on whether the gain is income under the tax
laws. The law is that financial or monetary gain to a taxpayer, whether
lawfully or unlawfully acquired, constitutes taxable income to the
taxpayer in the year when the taxpayer has such control over it that, as
a practical matter, he derives readily realizable economic value from
it.
However,
all money or property received by a taxpayer is not taxable income,
within the meaning of the tax laws. The law provides that certain
receipts of property or money do not constitute taxable gain or income
within the meaning of the tax laws, and hence are nontaxable receipts.
In so far as pertinent to this case, nontaxable receipts may be defined
to include: The proceeds of loans, gifts or inheritances, money or
property which represents a return of capital, and the nontaxable
portion of capital gains. In this case the only nontaxable receipts
claimed to have been received by the defendant in the indictment years
and not credited to him by the Government in its computations presented
in evidence are sums which defendant claims he borrowed from union
entities.
[Borrowing
v. Diversion of Union Funds]
In
defining for you what constitutes taxable income, I want to point out
that a critical issue in this case is whether certain funds, which had
their source in union entities, and which were applied, or caused to be
applied, to the personal use and benefit of defendant during the years
covered by the indictments, were borrowed by defendant from the union
entities and hence constitute loans; or, whether the funds were applied
or caused to be applied by defendant to his personal use and benefit,
under circumstances and conditions not amounting to loans as that term
will be defined in a few moments. The defendant contends that these sums
in effect were borrowed from the union entities, and that the Government
failed to take such sums into account as liabilities in determining, by
use of the net worth method, defendant's income and tax liability for
the years in question. It is the Government's contention that the sums
referred to in fact were not loans from the union entities to the
defendant. The Government contends that defendant diverted these sums
from the union entitles and applied them, or caused them to be applied,
to his personal use and benefit under circumstances and conditions
inconsistent with a loan, and that, in so doing, he realized taxable
gain or income.
A
loan, as that term is used in law and in these instructions occurs when
a borrower receives a sum of money from a lender, pursuant to an
agreement or understanding, between the parties, whereby the borrower
promises to return a like amount of money to the lender at a future
time. No promissory note or other written document executed by the
parties, or either of them, is necessary to the creation of a loan. A
loan may be either written or oral, express or implied. An express
agreement, as that term is used in law, means that the agreement is
specifically stated either in writing or orally. An implied agreement is
one which need not be expressly stated by the parties, either in writing
or orally, but which may arise from the conduct and relationship of the
parties. In either instance, however, agreement or understanding of the
parties, is essential to the existence of a loan.
Now,
I want to emphasize that you must determine whether the union entity
funds were or were not loans as of the time defendant applied them, or
caused them to be applied, to his personal use and benefit during the
indictment years, namely, 1950, 1951, 1952, and 1953.
As
on all fact issues in the case, the Government has the burden of
establishing its contentions in the particulars just mentioned beyond a
reasonable doubt. It is for you to determine from all of the evidence
whether it has done so.
As
I have said, funds received as loans are not taxable income. Therefore,
if you find that any sum or sums which the defendant received from the
union entities were loans, then you are instructed that the defendant
was not required, and was under no duty, to report in his income tax
returns any funds so received as loans by him.
[Effect
of Later Repayment]
On
the other hand, (1) funds not received as loans or as any other
nontaxable receipt as previously defined, but which (2) are actually
received or applied or caused to be applied by a taxpayer to his
personal economic use or benefit, are taxable income to the taxpayer (3)
in the year in which as a practical matter he derives readily realizable
economic value from them, and must be reported as such by the taxpayer.
If each and all of the three factors just referred to are proven beyond
a reasonable doubt, it is immaterial whether such receipt or
application, of funds by the taxpayer, result from misappropriation, or
otherwise be lawful or unlawful. The evidence pertaining to payment of
certain sums of money to the union entities by defendant in 1954 and
thereafter, may be considered for such bearing as you may find it has,
on whether union funds were received by defendant, as loans, from the
union entities in the indictment years 1950-53. However, if you find
that said funds were not received as loans in the indictment years, the
later return thereof, in whole or in part, by defendant, acting
voluntarily or otherwise, should be disregarded since in such
circumstances, the later payments to the union entities by the
defendant, would be immaterial in determining whether defendant wilfully
attempted to evade income taxes in the years 1950-53 as charged in the
indictment. However, whether or not the defendant has returned, more or
less, than the sums derived from the union entities during the
indictment years is not relevant to any issue in the case and is not to
be considered by you in any connection whatever.
Therefore,
if you find that during any one or more of the four indictment years the
defendant diverted and applied or caused to be applied to his personal
use or benefit funds which had their source in union entities but which
were not loans or other nontaxable receipts, then you are instructed
that such sum or sums constitute taxable income to the defendant in the
year or years in which he derived readily realizable economic value from
such funds, and that the defendant was required by the law, and was
under a duty, to report such sum or sums on his income tax returns for
that year or years.
You
may consider the evidence pertaining to the accord and satisfaction
agreement and its amendments and of Mr. Beck's payments thereunder, as
bearing upon the question of whether the union funds were received or
used by the defendant as loans within the meaning of that terms as I
have defined it for you. An accord and satisfaction agreement is a
customary and proper way for parties to settle the amount of a debt
which is in doubt. Also it is lawful and proper thereafter to amend such
an agreement by the mutual consent of the parties thereto.
If
you find that the defendant, by virtue of his position as an officer of
any union organization involved herein, had authority to loan money to
himself, and if you find that he did so, then you shall treat such sums
as loans within the meaning of these instructions, whether or not such
loans were expressed by means of promissory notes or other formal
bookkeeping or accounting entries.
With
regard to any property which you may find that the defendant received as
a gift and subsequently sold, you are instructed that the proceeds of
such a sale would be taxable income to the defendant only to the extent,
if any, that the proceeds exceeded the cost basis of the property in the
hands of the donor or last preceding owner.
Evidence
has been admitted pertaining to the travel expenses of a trip which the
defendant took to
Europe
in 1949 in the company of his wife and Mr. and Mrs. Raymond F. Leheney.
This evidence, particularly that relating to the expenses of Mrs.
Leheney, was not offered as, or included in the government's computation
of defendant's taxable income for the indictment years, and you are not
to be concerned with whether such expenses were taxable income to
defendant or Mrs. Leheney in any year. The evidence referred to was
offered solely for such bearing as you may find that it may have upon
the essential issues pertaining to defendant's knowledge, good faith and
intent, with respect to the charges on trial.
To
establish the first element of the offense charged, namely, the receipt
by defendant of unreported income upon which a substantial amount of tax
was due and owing, the Government has presented evidence under two
methods of proof applicable to this type of case. One is called the
"net worth plus expenditures" method of proof and the other
"specific item" method of proof. The Government is not limited
to one or the other of these methods of proof, but may offer both. The
receipt by the defendant of unreported income, therefore, can be
established by either or both of these methods referred to. However,
whichever method of proof is followed, the elements of the offense, as I
have defined them for you previously remain the same.
The
"specific item" method simply consists of offering evidence of
particulir or specific amounts of taxable income received by defendant
taxpayer during a part cular tax period, with evidence that the taxpayer
did not include such amounts in his tax return for such period, together
with evidence concerning defendant taxpayer's knowledge of the omission
and his intent and wilfulness in attempting to evade payment of tax by
the omission.
[Travel
and Expense Money]
There
has been evidence of the receipt by the defendant from union entities of
specific amounts of travel and expense money about which I will now
instruct you. This travel and expense money is in no way related to, and
may be considered separate and apart from, the funds which the defendant
contends he borrowed from union entities. Therefore, if you find that
the defendant did receive loans from the union entities which the
Government failed to take into account in determining his income under
the net worth method for any of the years before you, and that the loans
were sufficient in amount to account for substantially all of the
alleged unreported income thus determined--in which event you should, of
course, be obligated to reject the Government's net worth contentions
for such year or years--you should go on to consider whether, in the
particular year or years, the defendant had unreported income in a
substantial amount from travel and expense allowances; and if so,
whether he wilfully attempted to evade the payment of the tax thereon,
as those terms are defined for you.
It
is the Government's contention that during the years 1950, 1951, 1952
and 1953, the defendant received travel or expense allowances in amounts
totaling seventy-six hundred odd dollars, eighty-three hundred odd
dollars, sixty-seven hundred odd dollars, and twelve thousand odd
dollars, respectively, which he did not report in his returns; that
these sums were not in fact expended by the defendant for travel in
connection with his business or employment; and that in failing to
report these sums in his returns for the years in question, defendant
wilfully attempted to defeat and evade the payment of the tax thereon.
Under
the law applicable here, if a taxpayer receives a salary and, in
addition, a daily allowance for travel or other expenses connected with
his business or employment, the amount of any such allowance is
includible in his gross income. However, the law allows a deduction from
gross income for the amounts actually expended by a taxpayer for the
ordinary and necessary expenses incurred by him in traveling in
connection with his business or employment.
Therefore,
if you find that the defendant received any travel or expense allowances
during any of the years in question which sums were not in fact spent by
him for such purposes, you are instructed that such sums constitute
taxable income to the defendant and that the defendant was required by
law and was under a duty to report such sums in his returns.
If
you find further that such sums were substantial in amount for any year
or years, as I have defined that term for you, and that the defendant
knowingly and wilfully failed to report this income in his returns, you
may find the defendant guilty without regard to the net worth proof.
In
this connection you are instructed that if an employee is authorized to
expend funds of his employer for any purpose which furthers, or is in
good faith thought to further, the business or other activities of the
employer, then the expenditure or use of such funds for such purposes by
the employee does not constitute wilful tax evasion. Similarly, if an
employee expends funds of his employer in the good faith belief that the
expenditure is a proper business expense of the employer, but if under
the law the use of the funds would constitute taxable income to the
employee, such an expenditure under such circumstances could not support
a charge of tax evasion for the reason that the element of wilfulness or
intent to defraud would be lacking.
If
the defendant, pursuant to his authority as an officer of any of the
union organizations involved herein, used any money of any union
organization or organizations, believing in good faith that the use of
such money was or would be an ordinary and necessary expense of such
union to further any legitimate union purpose or objective, then such
amount or amounts must not be considered in arriving at your verdict,
even though the defendant himself may have received some personal
benefit from the use of such money.
THE
COURT: Ladies and gentlemen, I think this is approximately midway of the
charge, and I, therefore, will now call a break and give you an
opportunity to relax a few moments, and we will have a break of fifteen
minutes.
(Thereupon,
at 10:22 o'clock, a.m., the jury withdrew from the courtroom.)
(Whereupon,
the Court declared a short recess.)
(Thereupon,
the Jury entered the courtroom at 10:45 o'clock a.m.)
[Net
Worth Plus Expenditures Method]
THE
COURT: In continuing with the charge, I will now instruct you concerning
the net worth plus expenditures method of proof. Because of the subject
matter this will require a somewhat extended statement, and you must pay
particularly close and careful attention.
In
simple terms, a person's net worth is the difference between his assets
and his liabilities at any given date. In other words, it is the
difference between what he owns and what he owes at that time. If a
person has more assets at the end of a given year than he had at the
beginning of the year, and if his liabilities remain the same throughout
the year, obviously his net worth has increased in that year.
I
should point out, however, that in determining the value of assets in a
net worth computation, only their cost to the taxpayer is to be
considered. Any increase or decrease in the value of an asset during any
year in question must not be taken into account unless the loss or gain
is actually realized in that year by a transfer or sale of the asset.
Under
the net worth plus expenditures method of proof there is added to the
increase in net worth for the year, if such be shown, the total of any
nondeductible personal expenditures made by the taxpayer during that
year.
Nondeductible
expenditures are those made by a taxpayer but which he is not entitled
to claim as deductions on his income tax return and which, because of
their nature do not result in the acquisition of any assets, are not
reflected in a person's net worth.
The
reason for taking such expenditures into account is, no doubt, apparent
to you. Practically every taxpayer, in addition to possibly acquiring
assets or reducing his liabilities during a particular year, will spend
part of his income or other receipts each year for such nondeductible
personal items as living expenses, income taxes, gifts, and the like,
which expenditures, of course, will not result in any increase in net
worth. The total of these nondeductible expenditures for the year when
added to the amount of the increase in net worth for that year should
reflect the total of the money or property received in that year by the
taxpayer.
From
this total, as a further step under the net worth method, there is then
subtracted any nontaxable funds, either money or property, received by
the taxpayer during the year, except where such receipts, like the
proceeds of loans, are reflected as a liability in the net worth
computation.
The
final figure, then, resulting from the several steps of the net worth
method is offered by the government in a case of this kind as reflecting
with substantial accuracy the taxpayer's correct taxable income for that
year.
The
theory of the net worth method of proof simply stated is this: If the
government establishes a taxpayer's net worth at the beginning of a
particular year with reasonable certainty and it then proves beyond a
reasonable doubt that the taxpayer's net worth increased during that
year, and that the amount of the net worth increase, plus any
nondeductible personal expenditures for the year, is substantially
greater than the taxpayer's reported income for the year, the inference
may be drawn that the taxpayer received money or property in that year
in excess of the amount of income reported by him in his tax return. In
other words, that he had unreported receipts to the extent that the
increase in his net worth plus any nondeductible personal expenditures
exceeded his reported income for the year in question.
That,
ladies and gentlemen, in brief is an explanation of the net worth plus
expenditures method of proving unreported income and the theory behind
it.
In
this case the government has undertaken to prove the defendant's net
worth at the beginning and at the end of each of the years before you;
namely, 1950, 1951, 1952, and 1953, and by so doing to establish that
defendant's net worth increased in each of the years. The defendant's
net worth at the end of any given year is, of course, his net worth as
of the beginning of the next succeeding year.
In
this connection I want to point out that approximately one hundred asset
and liability items included by the government in the net worth schedule
have been stipulated; that is to say, agreed to by both the defendant
and the government. As I have already instructed you, all facts
stipulated by the parties are to be accepted by you as the facts.
The
government has also undertaken to establish that during each of the
years in question the defendant paid out money for such nondeductible
personal items as living expenses, gifts, and income tax payments, which
expenditures, if you find they were made, would not be reflected in his
net worth. Again, I want to point out that certain of these
nondeductible personal expenditures have been stipulated in Court
Exhibit No. 3 and that you are obliged to accept the stipulated data as
the facts. Also evidence has been admitted of other expenditures not
covered by or included in the stipulation referred to.
The
government contends that the defendant's net worth increased
substantially during each of the years before you and that the amount of
the net worth increase for each year when added to the total of the
defendant's nondeductible personal expenditures for the same years
represents the defendant's correct net income for each of the years in
question. The government claims that these sums should have been
reported by the defendant in his income tax returns, and that his
failure to report them was due to a wilful attempt on his part to evade
and defeat the payment of the tax thereon.
On
the other hand, the defendant contends that certain sums, which had
their source in union entities which were received, applied or caused to
be applied to the personal use and benefit of defendant, were in effect
borrowed from the union entities, and the defense further urges that the
government failed to take such sums into account as liabilities in
determining, by use of the net worth method, defendant's income and tax
liability for the years in question.
In
support of its net worth computation, the government has presented
evidence which it contends establishes the receipt by defendant of
specific amounts or items of unreported income. The government has also
offered evidence in support of its net worth computation an analysis of
the bank accounts of the defendant and his wife. This evidence is
offered as showing that the defendant had a likely source of unreported
income, and that the alleged unreported income determined under the net
worth method is attributable to currently taxable income, rather than to
nontaxable receipts.
It
is for you to determine from this and all the other evidence in the case
whether the government has met its burden of proving beyond a reasonable
doubt the requirements of a net worth case as I have defined them to
you.
There
are certain requirements of law which the government must follow and
meet in the use of the net worth method. In order to sustain its burden
of proof in a net worth case, the government must satisfy you beyond a
reasonable boubt as to each and all of the following requirements:
First,
the government must establish the defendant's net worth at the beginning
of each year under consideration with reasonable certainty, although not
necessarily to a mathematical exactitude.
The
reason for this requirement is no doubt apparent to you. Since the net
worth method of proving unreported income involves a comparison of the
defendant's beginning and ending net worth for each year in question,
the result cannot be accurate unless the opening net worth--the starting
point--for each year is substantially accurate.
You
will readily appreciate that if the defendant had on hand at the
beginning of a particular year substantial assets in cash or in any
other form which were not included by the government in his opening net
worth, then what would appear to be an increase in his net worth for the
year, to the extent of the omitted assets, may be nothing more than the
disclosure of money or property acquired by the defendant in prior
years, or the result of a change in the form of assets owned by the
defendant at the beginning of the year.
Therefore,
in order to convict on the basis of the net worth proof for a particular
year, you must be satisfied that the government has established the
defendant's net worth at the beginning of the year with reasonable
certainty, although as I have said, not necessarily to a mathematical
exactit de.
However,
where there are no unexplored relevant leads as to prior acquired
assets, the Government is not required to refute all possible
speculation that the defendant might have had assets at the beginning of
a particular year which the investigation failed to disclose. Nor is it
necessary for the Government to prove the exact cost of the assets owned
by the defendant at the beginning of the year, or the exact or precise
amount of his undeposited cash on hand, if any, at that time.
Substantial accuracy and reasonable certainty are all the law requires.
Secondly,
the Government must satisfy you that there was an increase in the
defendant's net worth for the particular year, and that the amount of
the net worth increase, when added to the nondeductible personal
expenditures for the year, was substantially greater than the amount of
income reported by the defendant for the year. This must be established
beyond a reasonable doubt.
Thirdly,
the Government must present evidence from which you may find beyond a
reasonable doubt that a substantial part of any net worth increase plus
expenditures which is in excess of reported income is attributable to
taxable income, rather than to nontaxable receipts. To meet its burden
in this respect, the Government must either prove that the defendant had
a likely source of unreported income; or it must negative the
possibility of the receipt by defendant of nontaxable funds which could
account for the net worth increase and expenditures in excess of
reported income, or it may do both; namely, to show a likely source and
negative nontaxable income.
Finally,
to complete proof of the offense charged, the Government must establish
beyond a reasonable doubt that there was a wilful and knowing attempt on
the part of the defendant, as those terms have been defined for you, to
evade and defeat the payment of tax on the unreported income determined
by use of the net worth method.
If
you find that any one or more of these requirements has not been
established beyond a reasonable doubt with respect to any year in
question, then you must find that the Government's net worth contentions
have not been sustained as to such year or years.
On
the other hand, if you find that each of these requirements has been
established beyond a reasonable doubt with respect to any year before
you, then as to such year or years, you should find that the Government
has sustained its net worth contentions.
Now,
I want to point out to you that in a net worth case the Government has
the burden of showing an investigation into the validity of any apparent
or suggested relevant leads or plausible explanations concerning
defendant's financial history and data relating to his net worth, which
were reasonably susceptible of being verified, and, which, if true,
would establish the defendant's innocence. The Government may not
disregard such leads and explanations, if any, but must make a bona fide
check and verification thereof to the extent that the circumstances
reasonably permit.
Therefore,
you should consider whether there were any such apparent or suggested
relevant leads or explanations arising during the investigation or
otherwise; and, if so, whether they were investigated by the Government,
together with the results of any such investigation. I might add that a
good deal of the evidence, which you have heard in this case, has had to
do with that very subject. If you find that the Government has failed to
run down any relevant leads which were reasonably susceptible of being
checked, or that it has failed to effectively refute what seems to you
plausible explanations, such failure must be taken into account by you
in determining whether the Government has met its burden of proof under
the net worth method.
On
the other hand, if you are satisfied that the Government has exhausted
with negative results such leads and explanations as were apparent or
suggested during the investigation, then you may consider this as
evidence bearing on the validity of the Government's contentions.
However, you must bear in mind in this connection that the defendant is
not required under any circumstances to prove his innocence, and that
the burden rests with the Government to prove beyond a reasonable doubt
every element of the offense charged.
That
concludes the particular reference to net worth; although here, again, I
remind you that all that is said in the instructions is to be taken as a
whole and considered as the whole law of the case.
[Form
990]
The
two Form 990 Counts of the indictments are brought under a section of
the Internal Revenue Law of the
United States
which provides as follows:
"Any
person who wilfully aids or assists in, or procures, counsels, or
advises the preparation or presentation under the Internal Revenue Laws,
of a false or fraudulent return, shall be guilty . . ." of the
criminal offense with which the defendant is charged in these two Form
990 Counts.
Count
2 of the first indictment charges that the defendant did wilfully and
knowingly aid, assist in, counsel, procure, and advise the preparation
and presentation to the Collector of Internal Revenue at Tacoma a false
and fraudulent United States annual return of Organization Exempt from
Income Taxes called Form 990, for the calendar year 1950, of the Joint
Council No. 28 Building Association, in said return it being reported
that the Joint Council had expended some $16,700 odd for building
payments and alterations, whereas the said defendant then and there well
knew that the Joint Council had not expended said sum for this purpose,
but in truth and in fact had expended a substantially lesser sum.
Count
5 of the second indictment makes the same charge as to the 990 return
for 1952, it being alleged that the return falsely reported some $69,900
odd expended for building payments, alterations, new construction and
building equipment, supplies, services and repairs. The precise amounts
alleged appear in the indictments covering these two counts which you
will have with you in the juryroom.
The
essential elements of the offense charged in each of these two Form 990
counts are:
1.
That the return was false or fraudulent in the particulars charged;
2.
That the defendant knew that the return was false or fraudulent in such
particulars, and
3.
That the defendant, wilfully and knowingly, either aided or assisted, or
counseled, or procured, or advised the preparation of presentation of
the Form 990 tax return filed for Joint Council No. 28 Building
Association for the tax year in question.
If
you find the existence of each and all of these elements beyond a
reasonable doubt as to either Form 990 count, 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 either count, you must find the defendant not guilty as
to such count or counts.
An
information return of the type here involved does not involve any
liability for income taxes. With respect to these counts, therefore, you
are not concerned with any question of what constitutes taxable income,
but only with the three elements that I have just stated to you. The
fact that the defendant did not sign either of the 990 returns in
question, while not essential to the offense charged, is a factor to be
considered in determining whether the essential elements of the offense
have been proven beyond a reasonable doubt.
Each
Form 990 count must be considered and determined separately, although
the essential elements of the offense are the same as to both counts.
The
gist of the offense charged in these two counts is the wilful
participation in the manner charged in the preparing or presentation of
a false or fraudulent tax return, Form 990 return, knowing the same to
be false or fraudulent.
These
charges also require proof of specific intent as that term previously
has been defined in connection with the personal return counts.
Therefore, defendant may not be found guilty of either Form 990 count
unless the evidence proves beyond a reasonable doubt, not only that the
defendant aided or assisted, or procured, or counseled or advised in the
preparation or presentation of a false Form 990 return for the year in
question, but also, that in doing so, defendant specifically intended
the filing of a Form 990 return for the Joint Council Building
Association which defendant knew to be false or fraudulent.
[Admissibility
of Evidence]
During
the trial, the court has admitted evidence pertaining to incidents,
transactions and tax returns in years other than 1950 to 1953. In other
words, both before and after what I have explained to you we call the
indictment period. Such evidence can be considered only for the limited
purpose and to the extent that it may relate to transactions and tax
returns for the years charged in the indictment. You must strictly and
absolutely confine your deliberations in this case to whether or not
there was a wilful attempt on the part of the defendant to evade or
defeat income tax for either of the calendar years 1950, 1951, 1952 or
1953, or whether the defendant wilfully and knowingly participated in
the preparation and filing of a false or fraudulent 990 tax return for
the years 1950 and 1952.
You
are instructed that if a person who is not the payee of a check endorses
the payee's name on the check with the payee's consent, either express
or implied, such endorsement is not unlawful and does not constitute a
criminal offense of any kind. If you find that the defendant in one or
more instances so endorsed the name of another person, or that the
defendant's name as payee was so endorsed by some third party, you are
not to consider such facts in any way in your deliberations except as
they relate in some way to the receipt by the defendant of taxable
income.
[Returns
Proposed By Others]
The
duty to file income tax returns if personal to each particular taxpayer.
Bona fide mistakes in tax returns should not be treated as evidence of
fraud, but no person who is able to read and write and who signs and
files a tax return is permitted to escape the responsibility of at least
good faith as to the corr
